CUSTODIAN AGREEMENT
AGREEMENT made as of this 21st day of January, 1998, between STATE FARM
VARIABLE PRODUCT TRUST, a business trust organized under the laws of the state
of Delaware (the "Trust"), and INVESTORS BANK & TRUST COMPANY, a Massachusetts
trust company (the "Bank").
The Trust, an open-end management investment company on behalf of the funds
listed on APPENDIX A hereto, as such APPENDIX A may be amended from time to
time, (each a "Fund" and collectively, the "Funds"), desires to place and
maintain all of its portfolio securities and cash in the custody of the Bank.
The Bank has at least the minimum qualifications required by Section 17(f)(1) of
the Investment Company Act of 1940 (the "1940 Act") to act as custodian of the
portfolio securities and cash of the Trust, and has indicated its willingness to
so act, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. BANK APPOINTED CUSTODIAN. The Trust hereby appoints the Bank as
custodian of the portfolio securities and cash of the Funds shown on Appendix A
delivered to the Bank as hereinafter described and the Bank agrees to act as
such upon the terms and conditions hereinafter set forth. For the services
rendered pursuant to this Agreement the Trust agrees to pay to the Bank the fees
set forth on APPENDIX B hereto.
2. DEFINITIONS. Whenever used herein, the terms listed below will have
the following meaning:
2.1 AUTHORIZED PERSON. Authorized Person will mean any of the persons
duly authorized to give Proper Instructions or otherwise act on behalf of the
Trust by appropriate resolution of its Board, and set forth in a certificate as
required by Section 4 hereof.
2.2 BOARD. Board will mean the Board of Trustees of the Trust.
2.3 SECURITY. The term security as used herein will have the same
meaning assigned to such term in the Securities Act of 1933, as amended,
including, without limitation, any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any profit
sharing agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign currency, or, in general, any interest or instrument commonly known as
a "security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.4 PORTFOLIO SECURITY. Portfolio Security will mean any security owned
by the Trust.
2.5 OFFICERS' CERTIFICATE. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Trust.
2.6 BOOK-ENTRY SYSTEM. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.7 DEPOSITORY. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 ("Exchange
Act"), its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor or successors and its nominee
or nominees, specifically identified in a certified copy of a resolution of the
Board.
2.8 PROPER INSTRUCTIONS. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized Person,
such instructions to be given in such form and manner as the Bank and the Trust
shall agree upon from time to time, and (ii) instructions (which may be
continuing instructions) regarding other matters signed or initialed by an
Authorized Person. Oral instructions will be considered Proper Instructions if
the Bank reasonably believes them to have been given by an Authorized Person.
The Trust shall cause all oral instructions to be promptly confirmed in writing.
The Bank shall act upon and comply with any subsequent Proper Instruction which
modifies a prior instruction and the sole obligation of the Bank with respect to
any follow-up or confirmatory instruction shall be to make reasonable efforts to
detect any discrepancy between the original instruction and such confirmation
and to report such discrepancy to the Trust. The Trust shall be responsible, at
the Trust's expense, for taking any action, including any reprocessing,
necessary to correct any such discrepancy or error, and to the extent such
action requires the Bank to act, the Trust shall give the Bank specific Proper
Instructions as to the action required. Upon receipt by the Bank of an
Officers' Certificate as to the authorization by the Board accompanied by a
detailed description of procedures approved by the Trust, Proper Instructions
may include communication effected directly between electro-mechanical or
electronic devices provided that the Board and the Bank agree in writing that
such procedures afford adequate safeguards for the Trust's assets.
3. SEPARATE ACCOUNTS. If the Trust has more than one Fund, the Bank
will segregate the assets of each Fund to which this Agreement relates into a
separate account for each such Fund containing the assets of such Fund (and all
investment earnings thereon). Unless the context otherwise requires, any
reference in this Agreement to any actions to be taken by the Trust shall be
deemed to refer to the Trust acting on behalf of one or more of its Funds, any
reference in this Agreement to any assets of the Trust, including, without
limitation, any portfolio securities and cash and earnings thereon, shall be
deemed to refer only to assets of the applicable Fund, any duty or obligation of
the Bank hereunder to the Trust shall be deemed to refer to duties and
obligations with respect to such individual Fund and any obligation or liability
of the Trust hereunder shall be binding only with respect to such individual
Fund, and shall be discharged only out of the assets of such Fund.
4. CERTIFICATION AS TO AUTHORIZED PERSONS. The Secretary or Assistant
Secretary of the Trust will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of
2
the members of the Board, it being understood that upon the occurrence of any
change in the information set forth in the most recent certification on file
(including without limitation any person named in the most recent certification
who is no longer an Authorized Person as designated therein), the Secretary or
Assistant Secretary of the Trust will sign a new or amended certification
setting forth the change and the new, additional or omitted names or signatures.
The Bank will be entitled to rely and act upon any Officers' Certificate given
to it by the Trust which has been signed by Authorized Persons named in the
most recent certification received by the Bank.
5. CUSTODY OF CASH. As custodian for the Trust, the Bank will open and
maintain a separate account or accounts in the name of the Trust or in the name
of the Bank, as Custodian of the Trust, and will deposit to the account of the
Trust all of the cash of the Trust, except for cash held by a subcustodian
appointed pursuant to Sections 14.2 or 14.3 hereof, including borrowed funds,
delivered to the Bank, subject only to draft or order by the Bank acting
pursuant to the terms of this Agreement. Pursuant to the Bank's internal
policies regarding the management of cash accounts, the Bank may segregate
certain portions of the cash of the Trust into a separate savings deposit
account upon which the Bank reserves the right to require seven (7) days notice
prior to withdrawal of cash from such an account. Upon receipt by the Bank of
Proper Instructions (which may be continuing instructions) or in the case of
payments for redemptions and repurchases of outstanding shares of common stock
of the Trust, notification from the Trust's transfer agent as provided in
Section 7, requesting such payment, designating the payee or the account or
accounts to which the Bank will release funds for deposit, and stating that it
is for a purpose permitted under the terms of this Section 5, specifying the
applicable subsection, the Bank will make payments of cash held for the accounts
of the Trust, insofar as funds are available for that purpose, only as permitted
in subsections 5.1-5.9 below.
5.1 PURCHASE OF SECURITIES. Upon the purchase of securities for the
Trust, against contemporaneous receipt of such securities by the Bank or against
delivery of such securities to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs registered in the name of the Trust or in the name of, or
properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of Book Entry Paper (as
that term is defined in Section 6.6 hereof)) of purchase of the securities
received by the Bank before such payment is made, as confined in the Proper
Instructions received by the Bank before such payment is made.
5.2 REDEMPTIONS. In such amount as may be necessary for the repurchase
or redemption of common shares of the Trust offered for repurchase or redemption
in accordance with Section 7 of this Agreement.
5.3 DISTRIBUTIONS AND EXPENSES OF TRUST. For the payment on the account
of the Trust of dividends or other distributions to shareholders as may from
time to time be declared by the Board, interest, taxes, management or
supervisory fees, distribution fees, fees of the Bank for its services hereunder
and reimbursement of the expenses and liabilities of the Bank as provided
hereunder, fees of any transfer agent, fees for legal, accounting, and auditing
services, or other operating expenses of the Trust.
5.4 PAYMENT IN RESPECT OF SECURITIES. For payments in connection with
the conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Trust held by or to be delivered to the Bank.
3
5.5 REPAYMENT OF LOANS. To repay loans of money made to the Trust, but,
in the case of final payment, only upon redelivery to the Bank of any Portfolio
Securities pledged or hypothecated therefor and upon surrender of documents
evidencing the loan;
5.6 REPAYMENT OF CASH. To repay the cash delivered to the Trust for
the purpose of collateralizing the obligation to return to the Trust
certificates borrowed from the Trust representing Portfolio Securities, but
only upon redelivery to the Bank of such borrowed certificates. -
5.7 FOREIGN EXCHANGE TRANSACTIONS.
(a) For payments in connection with foreign exchange contracts
or options to purchase and sell foreign currencies for spot and future delivery
(collectively, "Foreign Exchange Agreements") which may be entered into by the
Bank on behalf of the Trust upon the receipt of Proper Instructions, such Proper
Instructions to specify the currency broker or banking institution (which may be
the Bank, or any other subcustodian or agent hereunder, acting as principal)
with which the contract or option is made, and the Bank shall have no duty with
respect to the selection of such currency brokers or banking institutions with
which the Trust deals or for their failure to comply with the terms of any
contract or option.
(b) In order to secure any payments in connection with Foreign
Exchange Agreements which may be entered into by the Bank pursuant to Proper
Instructions, the Trust agrees that the Bank shall have a continuing lien and
security interest, to the extent of any payment due under any Foreign Exchange
Agreement, in and to any property at any time held by the Bank for the Trust's
benefit or in which the Trust has an interest and which is then in the Bank's
possession or control (or in the possession or control of any third party acting
on the Bank's behalf). The Trust authorizes the Bank, in the Bank's sole
discretion, at any time to charge any such payment due under any Foreign
Exchange Agreement against any balance of account standing to the credit of the
Trust on the Bank's books.
5.8 OTHER AUTHORIZED PAYMENTS. For other authorized transactions of the
Trust, or other obligations of the Trust incurred for proper Trust purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Trust, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper corporate purpose.
5.9 TERMINATION: Upon the termination of this Agreement as hereinafter
set forth pursuant to Section 8 and Section 16 of this Agreement.
6. SECURITIES.
6.1 SEGREGATION AND REGISTRATION. Except as otherwise provided herein,
and except for securities to be delivered to any subcustodian appointed pursuant
to Sections 14.2 or 14.3 hereof, the Bank as custodian will receive and hold
pursuant to the provisions hereof, in a separate account or
4
accounts and physically segregated at all times from those of other persons, any
and all Portfolio Securities which may now or hereafter be delivered to it by or
for the account of the Trust. All such Portfolio Securities will be held or
disposed of by the Bank for, and subject at all times to, the instructions of
the Trust pursuant to the terms of this Agreement. Subject to the specific
provisions herein relating to Portfolio Securities that are not physically held
by the Bank, the Bank will register all Portfolio Securities (unless otherwise
directed by Proper Instructions or an Officers' Certificate), in the name of a
registered nominee of the Bank as defined in the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, and will execute and
deliver all such certificates in connection therewith as may be required by such
laws or regulations or under the laws of any state.
The Trust will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any Portfolio Securities which
may from time to time be registered in the name of the Trust.
6.2 VOTING AND PROXIES. Neither the Bank nor any nominee of the Bank
will vote any of the Portfolio Securities held hereunder, except in accordance
with Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Trust all notices,
proxies and proxy soliciting materials delivered to the Bank with respect to
such Securities, such proxies to be executed by the registered holder of such
Securities (if registered otherwise than in the name of the Trust), but without
indicating the manner in which such proxies are to be voted.
6.3 CORPORATE ACTION. If at any time the Bank is notified that an
issuer of any Portfolio Security has taken or intends to take a corporate action
(a "Corporate Action") that affects the rights, privileges, powers, preferences,
qualifications or ownership of a Portfolio Security, including without
limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or stock
dividend, which Corporate Action requires an affirmative response or action on
the part of the holder of such Portfolio Security (a "Response"), the Bank shall
notify the Trust promptly of the Corporate Action, the Response required in
connection with the Corporate Action and the Bank's deadline for receipt from
the Trust of Proper Instructions regarding the Response (the "Response
Deadline"). The Bank shall forward to the Trust via telecopier and/or overnight
courier all notices, information statements or other materials relating to the
Corporate Action promptly after receipt of such materials by the Bank.
(a) The Bank shall act upon a required Response only after
receipt by the Bank of Proper Instructions from the Trust no later than 5:00
p.m. on the date specified as the Response Deadline and only if the Bank (or its
agent or subcustodian hereunder) has actual possession of all necessary
Securities, consents and other materials no later than 5:00 p.m. on the date
specified as the Response Deadline.
(b) The Bank shall have no duty to act upon a required Response
if Proper Instructions relating to such Response and all necessary Securities,
consents and other materials are not received by and in the possession of the
Bank no later than 5:00 p.m. on the date specified as the Response Deadline.
Notwithstanding, the Bank may, in its sole discretion, use its best efforts to
act upon a Response for which Proper Instructions and/or necessary Securities,
consents or other materials are received by the Bank after 5:00 p.m. on the date
specified as the Response Deadline, it being acknowledged and agreed by the
parties that any undertaking by the Bank to use its best efforts in such
circumstances shall in no way create any duty upon the Bank to complete such
Response prior to its expiration.
5
(c) In the event that the Trust notifies the Bank of a Corporate
Action requiring a Response and the Bank has received no other notice of such
Corporate Action, the Response Deadline shall be 48 hours prior to the Response
expiration time set by the depository processing such Corporate Action.
(d) Section 14.3(e) of this Agreement shall govern any Corporate
Action involving Foreign Portfolio Securities held by a Selected Foreign
Sub-Custodian.
6.4 BOOK-ENTRY SYSTEM. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits of Trust
assets in the Book-Entry System, and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry
System provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect to
the Trust's participation in the Book-Entry System through the Bank (or any such
agent) will identify by book entry the Portfolio Securities which are included
with other securities deposited in the Account and shall at all times during the
regular business hours of the Bank (or such agent) be open for inspection by
duly authorized officers, employees or agents of the Trust. Where securities
are transferred to the Trust's account, the Bank shall also, by book entry or
otherwise, identify as belonging to the Trust a quantity of securities in a
fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities purchased
for the account of the Trust or shall pay cash collateral against the return of
Portfolio Securities loaned by the Trust upon (i) receipt of advice from the
Book-Entry System that such Securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Bank (or its agent) to reflect
such payment and transfer for the account of the Trust. The Bank (or its agent)
shall transfer securities sold or loaned for the account of the Trust upon
(i) receipt of advice from the Book-Entry System that
payment for securities sold or payment of the initial cash collateral against
the delivery of securities loaned by the Trust has been transferred to the
Account; and
(ii) the making of an entry on the records of the Bank (or
its agent) to reflect such transfer and payment for the account of the Trust.
Copies of all advices from the Book-Entry System of transfers of securities for
the account of the Trust shall identify the Trust, be maintained for the Trust
by the Bank and shall be provided to the Trust at its request. The Bank shall
send the Trust a confirmation, as defined by Rule 17f-4 of the 1940 Act, of any
transfers to or from the account of the Trust;
6
(d) The Bank will promptly provide the Trust with any report
obtained by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Book-Entry System;
6.5 USE OF A DEPOSITORY. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits in DTC or
other such Depository and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and remit
to the Bank on behalf of the Trust all income and other payments thereon and to
take all steps necessary and proper in connection with the collection thereof;
(b) Registration of Portfolio Securities may be made in the name
of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made
through the clearing medium employed by such Depository for transactions of
participants acting through it. Upon any purchase of Portfolio Securities,
payment will be made only upon delivery of the securities to or for the account
of the Trust and the Trust shall pay cash collateral against the return of
Portfolio Securities loaned by the Trust only upon delivery of the Securities to
or for the account of the Trust; and upon any sale of Portfolio Securities,
delivery of the Securities will be made only against payment therefor or, in the
event Portfolio Securities are loaned, delivery of Securities will be made only
against receipt of the initial cash collateral to or for the account of the
Trust; and
(d) The Bank shall use its best efforts to provide that:
(i) The Depository obtains replacement of any
certificated Portfolio Security deposited with it in the event such Security is
lost, destroyed, wrongfully taken or otherwise not available to be returned to
the Bank upon its request;
(ii) Proxy materials received by a Depository with respect
to Portfolio Securities deposited with such Depository are forwarded immediately
to the Bank for prompt transmittal to the Trust;
(iii) Such Depository promptly forwards to the Bank
confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Trust's account;
(iv) Such Depository prepares and delivers to the Bank
such records with respect to the performance of the Bank's obligations and
duties hereunder as may be necessary for the Trust to comply with the
recordkeeping requirements of Section 31 (a) of the 1940 Act and Rule 31 (a)
thereunder; and
7
(v) Such Depository delivers to the Bank all internal
accounting control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Trust may reasonably request in
order to verify the Portfolio Securities held by such Depository.
6.6 USE OF BOOK-ENTRY SYSTEM FOR COMMERCIAL PAPER. Provided (i) the
Bank has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Trust has purchased such Issuer's Book-Entry
Paper, the Bank shall issue and hold in book-entry form, on behalf of the Trust,
commercial paper issued by issuers with whom the Bank has entered into a
book-entry agreement (the "Issuers"). In maintaining procedures for Book-Entry
Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by the
Trust in an account of the Bank that includes only assets held by it for
customers;
(b) The records of the Bank with respect to the Trust's purchase
of Book-Entry Paper through the Bank will identify, by book-entry, commercial
paper belonging to the Trust which is included in the Book-Entry System and
shall at all times during the regular business hours of the Bank be open for
inspection by duly authorized officers, employees or agents of the Trust;
(c) The Bank shall pay for Book-Entry Paper purchased for the
account of the Trust upon contemporaneous (i) receipt of advice from the Issuer
that such sale of Book-Entry Paper has been effected, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for the
account of the Trust;
(d) The Bank shall cancel such Book-Entry Paper obligation upon
the maturity thereof upon contemporaneous (i) receipt of advice that payment for
such Book-Entry Paper has been transferred to the Trust, and (ii) the making of
an entry on the records of the Bank to reflect such payment for the account of
the Trust; and
(e) The Bank will send to the Trust such reports on its system
of internal accounting control with respect to the Book-Entry Paper as the Trust
may reasonably request from time to time.
6.7 USE OF IMMOBILIZATION PROGRAMS. Provided (i) the Bank has received
a certified copy of a resolution of the Board specifically approving the
maintenance of Portfolio Securities in an immobilization program operated by a
bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and (ii)
for each year following such approval the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a subcustodian hereunder.
6.8 EURODOLLAR CDS. Any Portfolio Securities which are Eurodollar CDS
may be physically held by the European branch of the U.S. banking institution
that is the issuer of such Eurodollar CD (a "European Branch"), provided that
such Portfolio Securities are identified on the books of the Bank as belonging
to the Trust and that the books of the Bank identify the European Branch holding
such Portfolio Securities. Notwithstanding any other provision of this
Agreement to the contrary, except as
8
stated in the first sentence of this subsection 6.8, the Bank shall be under no
other duty with respect to such Eurodollar CDS belonging to the Trust.
6.9 OPTIONS AND FUTURES TRANSACTIONS.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
(i) The Bank shall take action as to put options ("puts")
and call options ("calls") purchased or sold (written) by the Trust regarding
escrow or other arrangements (i) in accordance with the provisions of any
agreement entered into upon receipt of Proper Instructions among the Bank, any
broker-dealer registered with the National Association of Securities Dealers,
Inc. (the "NASD"), and, if necessary, the Trust, relating to the compliance with
the rules of the Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or organizations.
(ii) Unless another agreement requires it to do so, the
Bank shall be under no duty or obligation to see that the Trust has deposited or
is maintaining adequate margin, if required, with any broker in connection with
any option, nor shall the Bank be under duty or obligation to present such
option to the broker for exercise unless it receives Proper Instructions from
the Trust. The Bank shall have no responsibility for the legality of any put or
call purchased or sold on behalf of the Trust, the propriety of any such
purchase or sale, or the adequacy of any collateral delivered to a broker in
connection with an option or deposited to or withdrawn from a Segregated Account
(as defined in subsection 6.10 below). The Bank specifically, but not by way of
limitation, shall not be under any duty or obligation to: (i) periodically check
or notify the Trust that the amount of such collateral held by a broker or held
in a Segregated Account is sufficient to protect such broker or the Trust
against any loss; (ii) effect the return of any collateral delivered to a
broker; or (iii) advise the Trust that any option it holds, has or is about to
expire. Such duties or obligations shall be the sole responsibility of the
Trust.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action as to puts, calls and
futures contracts ("Futures") purchased or sold by the Trust in accordance with
the provisions of any agreement entered into upon the receipt of Proper
Instructions among the Trust, the Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract Market, or
any similar organization or organizations, regarding account deposits in
connection with transactions by the Trust.
(ii) The responsibilities of the Bank as to futures, puts
and calls traded on commodities exchanges, any Futures Commission Merchant
account and the Segregated Account shall be limited as set forth in subparagraph
(a)(ii) of this Section 6.9 as if such subparagraph referred to Futures
Commission Merchants rather than brokers, and Futures and puts and calls thereon
instead of options.
6.10 SEGREGATED ACCOUNT. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Trust.
(a) Cash and/or Portfolio Securities may be transferred into a
Segregated Account upon receipt of Proper Instructions in the following
circumstances:
9
(i) in accordance with the provisions of any agreement
among the Trust, the Bank and a broker-dealer registered under the Exchange Act
and a member of the NASD or any Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Options
Clearing Corporation and of any registered national securities exchange or the
Commodity Futures Trading Commission or any registered Contract Market, or of
any similar organizations regarding escrow or other arrangements in connection
with transactions by the Trust;
(ii) for the purpose of segregating cash or securities in
connection with options purchased or written by the Trust or commodity futures
purchased or written by the Trust;
(iii) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Trust's then
outstanding forward commitment or "when-issued" agreements relating to the
purchase of Portfolio Securities and all the Trust's then outstanding
commitments under reverse repurchase agreements entered into with broker-dealer
firms;
(iv) for the purposes of compliance by the Trust with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies;
(v) for other proper corporate purposes, but only, in the
case of this clause (v), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, or of the executive committee of
the Board signed by an officer of the Trust and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of such Segregated
Account and declaring such purposes to be proper corporate purposes.
(b) Cash and/or Portfolio Securities may be withdrawn from a
Segregated Account pursuant to Proper Instructions in the following
circumstances:
(i) with respect to assets deposited in accordance with
the provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (a)(iii)
or (a)(iv) above, for sale or delivery to meet the Trust's obligations under
outstanding forward commitment or when-issued agreements for the purchase of
Portfolio Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or
greater value deposited in the Segregated Account;
(iv) to the extent that the Trust's outstanding forward
commitment or when-issued agreements for the purchase of portfolio securities or
reverse repurchase agreements are sold to
10
other parties or the Trust's obligations thereunder are met from assets of the
Trust other than those in the Segregated Account;
(v) for delivery upon settlement of a forward commitment
or when-issued agreement for the sale of Portfolio Securities; or
(vi) with respect to assets deposited pursuant to (a)(v)
above, in accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 INTEREST BEARING CALL OR TIME DEPOSITS. The Bank shall, upon receipt
of Proper Instructions relating to the purchase by the Trust of interest-bearing
fixed-term and call deposits, transfer cash, by wire or otherwise, in such
amounts and to such bank or banks as shall be indicated in such Proper
Instructions. The Bank shall include in its records with respect to the assets
of the Trust appropriate notation as to the amount of each such deposit, the
banking institution with which such deposit is made (the "Deposit Bank"), and
shall retain such forms of advice or receipt evidencing the deposit, if any, as
may be forwarded to the Bank by the Deposit Bank. Such deposits shall be deemed
Portfolio Securities of the Trust and the responsibility of the Bank therefore
shall be the same as and no greater than the Bank's responsibility in respect of
other Portfolio Securities of the Trust.
6.12 TRANSFER OF SECURITIES. The Bank will transfer, exchange, deliver
or release Portfolio Securities held by it hereunder, insofar as such Securities
are available for such purpose, provided that before making any transfer,
exchange, delivery or release under this Section only upon receipt of Proper
Instructions. The Proper Instructions shall state that such transfer, exchange
or delivery is for a purpose permitted under the terms of this Section 6.12, and
shall specify the applicable subsection, or describe the purpose of the
transaction with sufficient particularity to permit the Bank to ascertain the
applicable subsection. After receipt of such Proper Instructions, the Bank will
transfer, exchange, deliver or release Portfolio Securities only in the
following circumstances:
(a) Upon sales of Portfolio Securities for the account of the
Trust, against contemporaneous receipt by the Bank of payment therefor in full,
or against payment to the Bank in accordance with generally accepted settlement
practices and customs in the jurisdiction or market in which the transaction
occurs, each such payment to be in the amount of the sale price shown in a
broker's confirmation of sale received by the Bank before such payment is made,
as confirmed in the Proper Instructions received by the Bank before such payment
is made;
(b) In exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan of merger,
consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise, upon exercise of subscription,
purchase or sale or other similar rights represented by such Portfolio
Securities, or for the purpose of tendering shares in the event of a tender
offer therefor, provided, however, that in the event of an offer of exchange,
tender offer, or other exercise of rights requiring the physical tender or
delivery of Portfolio Securities, the Bank shall have no liability for failure
to so tender in a timely manner unless such Proper Instructions are received by
the Bank at least two business days prior to the date required for tender, and
unless the Bank (or its agent or subcustodian hereunder) has actual possession
of such Security at least two business days prior to the date of tender;
(c) Upon conversion of Portfolio Securities pursuant to their
terms into other securities;
11
(d) For the purpose of redeeming in-kind shares of the Trust
upon authorization from the Trust;
(e) In the case of option contracts owned by the Trust, for
presentation to the endorsing broker;
(f) When such Portfolio Securities are called, redeemed or
retired or otherwise become payable;
(g) For the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Trust by
any bank, including the Bank; provided, however, that such Portfolio Securities
will be released only upon payment to the Bank for the account of the Trust of
the moneys borrowed, provided further, however, that in cases where additional
collateral is required to secure a borrowing already made, and such fact is made
to appear in the Proper Instructions, Portfolio Securities may be released for
that purpose without any such payment. In the event that any pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Trust from the lender in accordance with the
normal procedures of the lender and any loan agreement between the fund and the
lender that an event of deficiency or default on the loan has occurred, the Bank
may deliver such pledged Portfolio Securities to or for the account of the
lender;
(h) for the purpose of releasing certificates representing
Portfolio Securities, against contemporaneous receipt by the Bank of the fair
market value of such security, as set forth in the Proper Instructions received
by the Bank before such payment is made;
(i) for the purpose of delivering securities lent by the Trust
to a bank or broker dealer, but only against receipt in accordance with street
delivery custom except as otherwise provided herein, of adequate collateral as
agreed upon from time to time by the Trust and the Bank, and upon receipt of
payment in connection with any repurchase agreement relating to such securities
entered into by the Trust;
(j) for other authorized transactions of the Trust or for other
proper corporate purposes; provided that before making such transfer, the Bank
will also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Trust (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Trust or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 16 of this Agreement.
As to any deliveries made by the Bank pursuant to this Section 6.12,
securities or cash receivable in exchange therefor shall be delivered to the
Bank.
7. REDEMPTIONS. In the case of payment of assets of the Trust held by
the Bank in connection with redemptions and repurchases by the Trust of
outstanding common shares, the Bank will rely on notification by the Trust's
transfer agent of receipt of a request for redemption and certificates, if
issued, in proper form for redemption before such payment is made. Payment
shall be made in
12
accordance with the Articles of Incorporation or Declaration of Trust and
By-laws of the Trust (the "Articles"), from assets available for said purpose.
8. MERGER, DISSOLUTION, ETC. OF TRUST OR FUNDS. In the case of the
following transactions, not in the ordinary course of business, namely, the
merger of the Trust or Funds into or the consolidation of the Trust or Funds
with another investment company, the sale by the Trust or Funds of all, or
substantially all, of its assets to another investment company, or the
liquidation or dissolution of the Trust or Funds and distribution of its assets,
the Bank will deliver the Portfolio Securities held by it under this, Agreement
and disburse cash only upon the order of the Trust set forth in an Officers'
Certificate, accompanied by a certified copy of a resolution of the Board
authorizing any of the foregoing transactions. Upon completion of such delivery
and disbursement and the payment of the fees, disbursements and expenses of the
Bank, this Agreement will terminate and the Bank shall be released from any and
all obligations hereunder.
9. ACTIONS OF BANK WITHOUT PRIOR AUTHORIZATION. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, the Bank will take the following actions without
prior authorization or instruction of the Trust or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name of
the Trust all checks, drafts, or other negotiable or transferable instruments or
other orders for the payment of money received by it for the account of the
Trust and hold for the account of the Trust all income, dividends, interest and
other payments or distributions of cash with respect to the Portfolio Securities
held thereunder;
9.2 Present for payment all coupons and other income items held by it
for the account of the Trust which call for payment upon presentation and hold
the cash received by it upon such payment for the account of the Trust;
9.3 Receive and hold for the account of the Trust all securities
received as a distribution on Portfolio Securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
9.4 Execute as agent on behalf of the Trust all necessary ownership and
other certificates and affidavits required by the Internal Revenue Code or the
regulations of the Treasury Department issued thereunder, or by the laws of any
state, now or hereafter in effect, inserting the Trust's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof.
The Bank will execute and deliver such certificates in connection with Portfolio
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any State;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it
upon payment for the account of the Trust; and
9.6 Exchange interim receipts or temporary securities for definitive
securities.
10. COLLECTIONS AND DEFAULTS. The Bank will use reasonable efforts to
collect any funds which
13
may to its knowledge become collectible arising from Portfolio Securities,
including dividends, interest and other income, and to transmit to the Trust
notice actually received by it of any call for redemption, offer of exchange,
right of subscription, reorganization or other proceedings affecting such
Securities. If Portfolio Securities upon which such income is payable are in
default or payment is refused after due demand or presentation, the Bank will
notify the Trust in writing of any default or refusal to pay within two business
days from the day on which it receives knowledge of such default or refusal.
11. MAINTENANCE OF RECORDS AND ACCOUNTING SERVICES. The Bank will
maintain records with respect to transactions for which the Bank is responsible
pursuant to the terms and conditions of this Agreement, and in compliance with
the applicable rules and regulations of the 1940 Act. The books and records of
the Bank pertaining to its actions under this Agreement and reports by the Bank
or its independent accountants concerning its accounting system, procedures for
safeguarding securities and internal accounting controls will be open to
inspection and audit at reasonable times by officers of or auditors employed by
the Trust and will be preserved by the Bank in the manner and in accordance with
the applicable rules and regulations under the 1940 Act.
The Bank shall perform fund accounting and shall keep the books of account
and render statements or copies from time to time as reasonably requested by the
Treasurer or any executive officer of the Trust.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
12. FUND EVALUATION AND YIELD CALCULATION
12.1 FUND EVALUATION. The Bank shall compute and, unless otherwise
directed by the Board, determine as of the close of regular trading on the New
York Stock Exchange on each day on which said Exchange is open for unrestricted
trading and as of such other days, or hours, if any, as may be authorized by the
Board, the net asset value and the public offering price of a share of capital
stock of the Funds, such determination to be made in accordance with the
provisions of the Articles and By-laws of the Trust and the Prospectus and
Statement of Additional Information relating to the Trust, as they may from time
to time be amended, and any applicable resolutions of the Board at the time in
force and applicable; and promptly to notify the Trust, the proper exchange and
the NASD or such other persons as the Trust may request of the results of such
computation and determination. In computing the net asset value hereunder, the
Bank may rely in good faith upon information furnished to it by any Authorized
Person in respect of (i) the manner of accrual of the liabilities of the Trust
and in respect of liabilities of the Trust not appearing on its books of account
kept by the Bank, (ii) reserves, if any, authorized by the Board or that no such
reserves have been authorized, (iii) the source of the quotations to be used in
computing the net asset value, (iv) the value to be assigned to any security for
which no price quotations are available, and (v) the method of computation of
the public offering price on the basis of the net asset value of the shares, and
the Bank shall not be responsible for any loss occasioned by such reliance or
for any good faith reliance on any quotations received from a source pursuant to
(iii) above.
12.2. YIELD CALCULATION. The Bank will compute the performance results of
the Funds (the "Yield Calculation") in accordance with the provisions of Release
No. 33-6753 and Release No. IC-16245 (February 2, 1988) (the "Releases")
promulgated by the Securities and Exchange Commission, and any subsequent
amendments to, published interpretations of or general conventions accepted by
the staff
14
of the Securities and Exchange Commission with respect to such releases or the
subject matter thereof ("Subsequent Staff Positions"), subject to the terms set
forth below:
(a) The Bank shall compute the Yield Calculation for the Funds
for the stated periods of time as shall be mutually agreed upon, and communicate
in a timely manner the result of such computation to the Trust.
(b) In performing the Yield Calculation, the Bank will derive
the items of data necessary for the computation from the records it generates
and maintains for the Trust pursuant Section 11 hereof. The Bank shall have no
responsibility to review, confirm, or otherwise assume any duty or liability
with respect to the accuracy or correctness of any such data supplied to it by
the Trust, any of the Trust's designated agents or any of the Trust's designated
third party providers.
(c) At the request of the Bank, the Trust shall provide, and the
Bank shall be entitled to rely on, written standards and guidelines to be
followed by the Bank in interpreting and applying the computation methods set
forth in the Releases or any Subsequent Staff Positions as they specifically
apply to the Trust. In the event that the computation methods in the Releases
or the Subsequent Staff Positions or the application to the Trust of a standard
or guideline is not free from doubt or in the event there is any question of
interpretation as to the characterization of a particular security or any aspect
of a security or a payment with respect thereto (e.g., original issue discount,
participating debt security, income or return of capital, etc.) or otherwise or
as to any other element of the computation which is pertinent to the Trust, the
Trust or its designated agent shall have the full responsibility for making the
determination of how the security or payment is to be treated for purposes of
the computation and how the computation is to be made and shall inform the Bank
thereof on a timely basis. The Bank shall have no responsibility to make
independent determinations with respect to any item which is covered by this
Section, and shall not be responsible for its computations made in accordance
with such determinations so long as such computations are mathematically
correct.
(d) The Trust shall keep the Bank informed of all publicly
available information and of any non-public advice, or information obtained by
the Trust from its independent auditors or by its personnel or the personnel of
its investment adviser, or Subsequent Staff Positions related to the
computations to be undertaken by the Bank pursuant to this Agreement and the
Bank shall not be deemed to have knowledge of such information (except as
contained in the Releases) unless it has been furnished to the Bank in writing.
13. ADDITIONAL SERVICES. The Bank shall perform the additional services
for the Trust as are set forth on APPENDIX C hereto. APPENDIX C may be amended
from time to time upon agreement of the parties to include further additional
services to be provided by the Bank to the Trust, at which time the fees set
forth in APPENDIX B shall be appropriately increased.
14. DUTIES OF THE BANK.
14.1 PERFORMANCE OF DUTIES AND STANDARD OF CARE. In performing its
duties hereunder and any other duties listed on any Schedule hereto, if any, the
Bank will be entitled to receive and act upon the advice of independent counsel
of its own selection, which may be counsel for the Trust, and will be without
liability for any action taken or thing done or omitted to be done in accordance
with this Agreement in good faith in conformity with such advice.
15
The Bank will be under no duty or obligation to inquire into and will not
be liable for:
(a) the validity of the issue of any Portfolio Securities
purchased by or for the Trust, the legality of the purchases thereof or the
propriety of the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or
for the Trust or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of the
Trust or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of the
Trust or the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the Trust
or the legality of the distribution of any Portfolio Securities as payment in
kind of such dividend; and
(f) any property or moneys of the Trust unless and until
received by it, and any such property or moneys delivered or paid by it pursuant
to the terms hereof
Moreover, the Bank will not be under any duty or obligation to ascertain
whether any Portfolio Securities at any time delivered to or held by it for the
account of the Trust are such as may properly be held by the Trust under the
provisions of its Articles, By-laws, any federal or state statutes or any rule
or regulation of any governmental agency.
14.2 AGENTS AND SUBCUSTODIANS WITH RESPECT TO PROPERTY OF THE TRUST HELD
IN THE UNITED STATES. The Bank may employ agents of its own selection in the
performance of its duties hereunder and shall be responsible for the acts and
omissions of such agents as if performed by the Bank hereunder. Without
limiting the foregoing, certain duties of the Bank hereunder may be performed by
one or more affiliates of the Bank.
Upon receipt of Proper Instructions, the Bank may employ subcustodians
selected by or at the direction of the Trust, provided that any such
subcustodian meets at least the minimum qualifications required by Section
17(f)(1) of the 1940 Act to act as a custodian of the Trust's assets with
respect to property of the Trust held in the United States. The Bank shall have
no liability to the Trust or any other person by reason of any act or omission
of any such subcustodian and the Trust shall indemnify the Bank and hold it
harmless from and against any and all actions, suits and claims, arising
directly or indirectly out of the performance of any subcustodian. Upon request
of the Bank, the Trust shall assume the entire defense of any action, suit, or
claim subject to the foregoing indemnity. The Trust shall pay all fees and
expenses of any subcustodian.
14.3 DUTIES OF THE BANK WITH RESPECT TO PROPERTY OF THE TRUST HELD
OUTSIDE OF THE UNITED, STATES.
(a) APPOINTMENT OF FOREIGN CUSTODY MANAGER.
(i) If the Trust has appointed the Bank Foreign Custody
Manager (as that term is defined in Rule 17f-5 under the 1940 Act), the Bank's
duties and obligations with respect to the
16
Trust's Portfolio Securities and other assets maintained outside the United
States shall be, to the extent not set forth herein, as set forth in the
Delegation Agreement between the Trust and the Bank (the "Delegation
Agreement").
(ii) If the Trust has appointed any other person or entity
Foreign Custody Manager, the Bank shall act only upon Proper Instructions from
the Trust with regard to any of the Trust's Portfolio Securities or other assets
held or to be held outside of the United States, and the Bank shall be without
liability for any Claim (as that term is defined in Section 15 hereof) arising
out of maintenance of the Trust's Portfolio Securities or other assets outside
of the United States. The Trust also agrees that it shall enter into a written
agreement with such Foreign Custody Manager that shall obligate such Foreign
Custody Manager to provide to the Bank in a timely manner all information
required by the Bank in order to complete its obligations hereunder. The Bank
shall not be liable for any Claim arising out of the failure of such Foreign
Custody Manager to provide such information to the Bank.
(b) SEGREGATION OF SECURITIES. The Bank shall identify on its
books as belonging to the Trust the Foreign Portfolio Securities held by each
foreign sub-custodian (each an "Eligible Foreign Custodian") selected by the
Foreign Custody Manager, subject to receipt by the Bank of the necessary
information from such Eligible Foreign Custodian if the Foreign Custody Manager
is not the Bank.
(c) ACCESS OF INDEPENDENT ACCOUNTANTS OF THE TRUST. If the Bank
is the Trust's Foreign Custody Manager, upon request of the Trust, the Bank will
use its best efforts to arrange for the independent accountants of the Trust to
be afforded access to the books and records of any foreign banking institution
employed as an Eligible Foreign Custodian insofar as such books and records
relate to the performance of such foreign banking institution with regard to the
Trust's Portfolio Securities and other assets.
(d) REPORTS BY BANK. If the Bank is the Trust's Foreign Custody
Manager, the Bank will supply to the Trust the reports required under the
Delegation Agreement.
(e) TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. Transactions with
respect to the assets of the Trust held by an Eligible Foreign Custodian shall
be effected pursuant to Proper Instructions from the Trust to the Bank and shall
be effected in accordance with the applicable agreement between the Foreign
Custody Manager and such Eligible Foreign Custodian. If at any time any Foreign
Portfolio Securities shall be registered in the name of the nominee of the
Eligible Foreign Custodian, the Trust agrees to hold any such nominee harmless
from any liability by reason of the registration of such securities in the name
of such nominee.
Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for Foreign Portfolio Securities received for
the account of the Trust and delivery of Foreign Portfolio Securities maintained
for the account of the Trust may be effected in accordance with the customary
established securities trading or securities processing practices and procedures
in the jurisdiction or market in which the transaction occurs, including,
without limitation, delivering securities to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) against a receipt
with the expectation of receiving later payment for such securities from such
purchaser or dealer.
In connection with any action to be taken with respect to
the Foreign Portfolio Securities held hereunder, including, without limitation,
the exercise of any voting rights, subscription rights, redemption rights,
exchange rights, conversion rights or tender rights, or any other action in
17
connection with any other right, interest or privilege with respect to such
Securities (collectively, the "Rights"), the Bank shall promptly transmit to the
Trust such information in connection therewith as is made available to the Bank
by the Eligible Foreign Custodian, and shall promptly forward to the applicable
Eligible Foreign Custodian any instructions, forms or certifications with
respect to such Rights, and any instructions relating to the actions to be taken
in connection therewith, as the Bank shall receive from the Trust pursuant to
Proper Instructions. Notwithstanding the foregoing, the Bank shall have no
further duty or obligation with respect to such Rights, including, without
limitation, the determination of whether the Trust is entitled to participate in
such Rights under applicable U.S. and foreign laws, or the determination of
whether any action proposed to be taken with respect to such Rights by the Trust
or by the applicable Eligible Foreign Custodian will comply with all applicable
terms and conditions of any such Rights or any applicable laws or regulations,
or market practices within the market in which such action is to be taken or
omitted.
(f) TAX LAW. The Bank shall have no responsibility or liability
for any obligations now or hereafter imposed on the Trust or the Bank as
custodian of the Trust by the tax laws of any jurisdiction, and it shall be the
responsibility of the Trust to notify the Bank of the obligations imposed on the
Trust or the Bank as the custodian of the Trust by the tax law of any non-U.S.
jurisdiction, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The sole responsibility of the Eligible Foreign Custodian with
regard to such tax law shall be to use reasonable efforts to assist the Trust
with respect to any claim for exemption or refund under the tax law of
jurisdictions for which the Trust has provided such information.
14.4 INSURANCE. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Trust held by it as it uses
in respect of its own similar property but it need not maintain any special
insurance for the benefit of the Trust.
14.5. FEES AND EXPENSES OF THE BANK. The Trust will pay or reimburse the
Bank from time to time for any transfer taxes payable upon transfer of Portfolio
Securities made hereunder, and for all necessary proper disbursements, expenses
and charges made or incurred by the Bank in the performance of this Agreement
(including any duties listed on any Schedule hereto, if any) including any
indemnities for any loss, liabilities or expense to the Bank as provided above.
For the services rendered by the Bank hereunder, the Trust will pay to the Bank
such compensation or fees at such rate and at such times as shall be agreed upon
in writing by the parties from time to time. The Bank will also be entitled to
reimbursement by the Trust for all reasonable expenses incurred in conjunction
with termination of this Agreement.
14.6 ADVANCES BY THE BANK. The Bank may, in its sole discretion, advance
funds on behalf of the Trust to make any payment permitted by this Agreement
upon receipt of any proper authorization required by this Agreement for such
payments by the Trust. Should such a payment or payments, with advanced funds,
result in an overdraft (due to insufficiencies of the Funds' account with the
Bank, or for any other reason) this Agreement deems any such overdraft or
related indebtedness a loan made by the Bank to the Trust payable on demand.
Such overdraft shall bear interest at the current rate charged by the Bank for
such loans unless the Trust shall provide the Bank with agreed upon compensating
balances. The Trust agrees that the Bank shall have a continuing lien and
security interest to the extent of any overdraft or indebtedness or to the
extent required by law, whichever is greater, in and to any property at any time
held by it for the Trust's benefit or in which the Trust has an interest and
which is then in the Bank's possession or control (or in the possession or
control of any third party acting on the Bank's behalf). The Trust authorizes
the Bank, in the Bank's sole discretion, at any time to charge any overdraft
18
or indebtedness, together with interest due thereon, against any balance of
account standing to the credit of the Trust on the Bank's books.
15. LIMITATION OF LIABILITY.
15.1 Notwithstanding anything in this Agreement to the contrary, in no
event shall the Bank or any of its officers, directors, employees or agents
(collectively, the "Indemnified Parties") be liable to the Trust or any third
party, and the Trust shall indemnify and hold the Bank and the Indemnified
Parties harmless from and against any and all loss, damage, liability, actions,
suits, claims, costs and expenses, including legal fees, (a "Claim") arising as
a result of any act or omission of the Bank or any Indemnified Party under this
Agreement, except for any Claim resulting from the negligence, willful
misfeasance or bad faith of the Bank or any Indemnified Party. Without limiting
the foregoing, neither the Bank nor the Indemnified Parties shall be liable for,
and the Bank and the Indemnified Parties shall be indemnified against, any Claim
arising as a result of.
(a) Any act or omission by the Bank or any Indemnified Party in
good faith reliance upon the terms of this Agreement, any Officer's Certificate,
Proper Instructions, resolution of the Board, telegram, telecopier, notice,
request, certificate or other instrument reasonably believed by the Bank to
genuine;
(b) Any act or omission of any subcustodian selected by or at
the direction of the Trust;
(c) Any act or omission of any Foreign Custody Manager other
than the Bank or any act or omission of any Eligible Foreign Custodian if the
Bank is not the Foreign Custody Manager;
(d) Any Corporate Action, distribution or other event related to
Portfolio Securities which, at the direction of the Trust, have not been
registered in the name of the Bank or its nominee;
(e) Any Corporate Action requiring a Response for which the Bank
has not received Proper Instructions or obtained actual possession of all
necessary Securities, consents or other materials by 5:00 p.m. on the date
specified as the Response Deadline,
(f) Any act or omission of any European Branch of a U.S. banking
institution that is the issuer of Eurodollar CDS in connection with any
Eurodollar CDS held by such European Branch;
(g) Information relied on in good faith by the Bank and supplied
by any Authorized Person in connection with the calculation of (i) the net asset
value and public offering price of the shares of capital stock of the Trust or
(ii) the Yield Calculation; or
(h) Any acts of God, earthquakes, fires, floods, storms or other
disturbances of nature, epidemics, strikes, riots, nationalization,
expropriation, currency restrictions, acts of war, civil war or terrorism,
insurrection, nuclear fusion, fission or radiation, the interruption, loss or
malfunction of utilities, the unavailability of energy sources and other similar
happenings or events.
(i) IBT shall have in place reasonable business continuity and
disaster recovery procedures and systems. Neither IBT or the Indemnified
Parties shall be liable for, and IBT and the Indemnified Parties shall be
indemnified against, any Claim arising as a result of the nonperformance of
19
computers (hardware and software) and computer facilities, provided that such
business continuity and disaster recovery procedures and systems operate as
intended.
15.2 Notwithstanding anything to the contrary in this Agreement, in no
event shall any party hereto be liable to the other party or any third party for
lost profits or lost revenues or any special, consequential, punitive or
incidental damages of any kind whatsoever in connection with this Agreement or
any activities hereunder, unless such damages arise out of the willful
misconduct or bad faith of such party hereto.
16. TERMINATION.
16.1 The term of this Agreement shall be three years commencing upon the
date hereof (the "Initial Term"), unless earlier terminated as provided herein.
After the expiration of the Initial Term, the term of this Agreement shall
automatically renew for successive one-year terms (each a "Renewal Term") unless
notice of non-renewal is delivered by the non-renewing party to the other party
no later than ninety days prior to the expiration of the Initial Term or any
Renewal Term, as the case may be.
(a) Either party hereto may terminate this Agreement prior to
the expiration of the Initial Term in the event the other party violates any
material provision of this Agreement, provided that the non-violating party
gives written notice of such violation to the violating party and the violating
party does not cure such violation within 90 days of receipt of such notice.
(b) Either party may terminate this Agreement during any Renewal
Term upon ninety days written notice to the other party. Any termination
pursuant to this paragraph 16.1(b) shall be effective upon expiration of such
ninety days, provided, however, that the effective date of such termination may
be postponed to a date not more than one hundred twenty days after delivery of
the written notice: (i) at the request of the Bank, in order to prepare for the
transfer by the Bank of all of the assets of the Trust held hereunder; or (ii)
at the request of the Trust, in order to give the Trust an opportunity to make
suitable arrangements for a successor custodian.
16.2 In the event of the termination of this Agreement, the Bank will
immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Portfolio Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Trust. The obligation of the Bank to deliver and transfer over the assets of
the Trust held by it directly to such successor custodian will commence as soon
as such successor is appointed and will continue until completed as aforesaid.
If the Trust does not select a successor custodian within ninety (90) days from
the date of delivery of notice of termination the Bank may, subject to the
provisions of subsection 16.3, deliver the Portfolio Securities and cash of the
Trust held by the Bank to a bank or trust company of the Bank's own selection
which meets the requirements of Section 17(f)(1) of the 1940 Act and has a
reported capital, surplus and undivided profits aggregating not less than
$2,000,000, to be held as the property of the Trust under terms similar to those
on which they were held by the Bank, whereupon such bank or trust company so
selected by the Bank will become the successor custodian of such assets of the
Trust with the same effect as though selected by the Board. Thereafter, the
Bank shall be released from any and all obligations under this Agreement.
16.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Trust may furnish the Bank with an order of the
Trust advising that a successor custodian cannot be found willing and able to
act upon reasonable and customary terms and that there has been submitted to
20
the shareholders of the Trust the question of whether the Trust will be
liquidated or will function without a custodian for the assets of the Trust held
by the Bank. In that event the Bank will deliver the Portfolio Securities and
cash of the Trust held by it, subject as aforesaid, in accordance with one of
such alternatives which may be approved by the requisite vote of shareholders,
upon receipt by the Bank of a copy of the minutes of the meeting of shareholders
at which action was taken, certified by the Trust's Secretary and an opinion of
counsel to the Trust in form and content satisfactory to the Bank. Thereafter,
the Bank shall be released from any and all obligations under this Agreement.
16.4 The Trust shall reimburse the Bank for any reasonable expenses
incurred by the Bank in connection with the termination of this Agreement.
16.5 At any time after the termination of this Agreement, the Trust may,
upon written request, have reasonable access to the records of the Bank
relating to its performance of its duties as custodian.
17. CONFIDENTIALITY. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed without the consent of the other party, except as may be
required by applicable law or at the request of a governmental agency. The
parties further agree that a breach of this provision would irreparably damage
the other party and accordingly agree that each of them is entitled, in addition
to all other remedies at law or in equity to an injunction or injunctions
without bond or other security to prevent breaches of this provision.
18. NOTICES. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered via (i) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, (iii) hand delivery with signature to such party at its office at
the address set forth below, namely:
(a) In the case of notices sent to the Trust or Funds to:
State Farm Variable Product Trust
Xxx Xxxxx Xxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
with a copy to:
Barclays Global Fund Advisors
00 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
000 Xxxxxxxxx Xxxxxx, X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx, Director - Client Management
21
With a copy to: Xxxx X. Xxxxx, General Counsel
or at such other place as such party may from time to time designate
in writing.
19. AMENDMENTS. This Agreement may not be altered or amended, except by
an instrument in writing, executed by both parties.
20. PARTIES. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Trust
without the written consent of the Bank or by the Bank without the written
consent of the Trust, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 16 hereof will not be deemed to
be an assignment within the meaning of this provision.
21. GOVERNING LAW. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.
22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
23. ENTIRE AGREEMENT. This Agreement, together with its Appendices,
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any conflicting
terms or provisions of any other instrument and terminates and supersedes any
and all prior agreements and undertakings between the parties relating to the
subject matter herein.
24. LIMITATION OF LIABILITY. The Bank agrees that the obligations
assumed by the Trust hereunder shall be limited in all cases to the assets of
the Trust and that the Bank shall not seek satisfaction of any such obligation
from the officers, agents, employees, trustees, or shareholders of the Trust.
[Remainder of Page Intentionally Left Blank]
22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
STATE FARM VARIABLE PRODUCT
TRUST
By: /s/ Xxxxx X. Xxxxxx
---------------------------------------
Assistant Vice President and
Secretary
INVESTORS BANK & TRUST COMPANY
By: /s/ Xxxxxx Xxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxx
Title: Director, Client Management
23
APPENDICES
Appendix A........................................ Funds
Appendix B........................................ Fee Schedule
Appendix C........................................ Additional Services
24
Appendix A
Funds
International Equity Index Fund
25
APPENDIX B
STATE FARM
FEE SCHEDULE*
FOR ONE INTERNATIONAL INDEX FUND
June 2, 1997
CUSTODY, FUND ACCOUNTING & CALCULATION OF X.X.X.
X. FUND ACCOUNTING AND CALCULATION OF N.A.V.
The following annual fee will be charged for each fund that we are fund
accountant. This fee does not include transactions or custody fees.
DOMESTIC FUND
GLOBAL FUND
26
ANNUAL FEE
----------
$32,000
$50,000
B. DOMESTIC CUSTODY
In addition to the transaction charges below, there will be a basis point
charge per fund on domestic assets as follows:
First $200 million in assets
Assets in excess of $200 million
27
1.5 BASIS POINTS
1.0 BASIS POINTS
C. TRANSACTIONS
- DTC
- Fed Book Entry
- Physical Securities
- Options and Futures
- GNMA Securities
- Principal Paydown
- Foreign Currency
- Outgoing Wires
- Incoming Wires
28
- $ 8**
$ 9**
35
18
40
5
18***
7
5
** Trade information will be sent to Investors Bank electronically by Barclays
Global Investors. If the trades are not sent to Investors Bank
electronically there will be a $3 per trade surcharge.
*** There are no transaction charges for F/X contracts executed by Investors
Bank.
D. GLOBAL CUSTODY
- Incremental basis point and transaction fees will be charged for all
foreign assets for which we are custodian. The asset based fees and
transaction fees vary by country, based upon the attached global custody
fee schedule. Local duties, script fees, registration, reclaims, exchange
fees, and other market charges are out-of-pocket.
- Investors Bank will require the fund to hold all international assets at
the subcustodian of our choice.
MISCELLANEOUS
A. OUT-OF-POCKET
- These charges consist of:
-Printing, Delivery & Postage -Extraordinary Travel Expenses
-InvestView -Micro Rental
-Legal Expenses -Forms and Supplies
-Customized Systems Development/Reporting
-Pricing& Verification Services -Data Transmissions
-Third Party Review -Telecommunications
-Non-Standard Extracts -Support Equipment
B. DOMESTIC BALANCE CREDIT
- We allow use of balance credit against fees (excluding out-of-pocket
charges) for
29
fund balances arising out of the custody relationship. The credit is based
on collected balances reduced by balances required to support the activity
charges of the accounts. The monthly earnings allowance is equal to 75% of
the 90-day T-xxxx rate.
C. SECURITIES LENDING, FOREIGN EXCHANGE & CASH MANAGEMENT
- This proposal is based upon Investors Bank performing securities lending,
foreign exchange and cash management for the portfolios, if applicable.
Securities Lending revenue is split with the funds and Investors Bank on a
60/40% basis: 60% going to the funds.
D. PAYMENT
- The above fees will be charged against the fund's custodian checking
account five business days after the invoice is mailed.
E. SYSTEMS
- The details of any systems work will be determined after a thorough
business analysis. System's work will be billed on a time and material
basis.
* This fee schedule assumes the execution of our standard contractual agreements
for a minimum of three years.
30
INVESTORS BANK & TRUST COMPANY
GLOBAL CUSTODY FEE SCHEDULE - STATE FARM
Country BP Charge Trade Charge
Argentina* 22.00 $75.00
Australia 4.00 $60.00
Austria 6.00 $60.00
Bangladesh 41.00 $150.00
Belgium 6.00 $60.00
Bahrain 41.00 $140.00
Botswana 50.00 $175.00
Brazil** 29.00 $80.00
Canada 4.00 $30.00
Chile** 45.00 $100.00
China 20.00 $75.00
Colombia*** 45.00 $140.00
Croatia 45.00 $125.00
Cyprus 50.00 $150.00
Czech Republic 20.00 $75.00
Denmark 4.00 $60.00
Ecuador 45.00 $100.00
Egypt 41.00 $100.00
Estonia 30.00 $125.00
Euroclear Internal 4.00 $20.00
Euroclear Cross Border 4.00 $60.00
Finland 6.00 $70.00
France 4.00 $60.00
Germany 4.00 $30.00
Ghana 50.00 $200.00
Greece 45.00 $130.00
Hong Kong 9.00 $65.00
Hungary 50.00 $200.00
India**** 50.00 00XX
Xxxxxxxxx 13.00 $65.00
Ireland 6.00 $60.00
Israel 20.00 $60.00
Italy 4.00 $50.00
Japan 4.00 $30.00
Jordan 41.00 $120.00
INVESTORS BANK CONFIDENTIAL
Page 1
31
Country BP Charge Trade Charge
Kenya 50.00 $200.00
Korea 13.00 $65.00
Latvia 30.00 $125.00
Lebanon 41.00 $140.00
Lithuania 20.00 $75.00
Lithuania T Bills 25.00 $75.00
Luxembourg 6.00 $60.00
Malaysia 10.00 $70.00
Mauritius 41.00 $140.00
Mexico 9.00 $40.00
Morocco 40.00 $150.00
Namibia 50.00 $200.00
Netherlands 4.00 $40.00
New Zealand 4.00 $60.00
Norway 6.00 $90.00
Oman 41.00 $140.00
Pakistan 41.00 $140.00
Peru 50.00 $150.00
Philippines 13.00 $65.00
Poland 50.00 $150.00
Poland T Bills 29.00 $110.00
Portugal 20.00 $125.00
Romania 45.00 $125.00
Russia Equities 41.00 $250.00
Russia Min Fins 35.00 $140.00
Singapore 10.00 $65.00
Slovakia 20.00 $75.00
Slovenia 41.00 $100.00
South Africa 6.00 $40.00
Spain Eq & Corp Debt 6.00 $60.00
Spain Gvt Debt 4.00 $60.00
Sri Lanka 13.00 $65.00
Swaziland 50.00 $200.00
Sweden 4.00 $40.00
Sweden Debt 4.00 $40.00
Switzerland 4.00 $60.00
Taiwan 13.00 $65.00
Thailand 10.00 $65.00
Turkey 15.00 $100.00
INVESTORS BANK CONFIDENTIAL
Page 2
32
Country BP Charge Trade Charge
UK 4.00 $50.00
Uruguay 50.00 $150.00
Venezuela** 45.00 $140.00
Zambia 50.00 $200.00
Zimbabwe 50.00 $175.00
* Bonds billed at Residual Value
** Local Administrator Fees included in Custody fee
*** 20 BP Local Administration Charge Applied to Trades
**** Trades billed at 50 BP
Out-of Pocket Charges are passed through as actuals in all markets
INVESTORS BANK CONFIDENTIAL
Page 3
33
Appendix C
Additional Services
None
34
