exhibit j.1
CUSTODIAN AGREEMENT
THIS AGREEMENT, dated as of , 2005, between NFJ DIVIDEND,
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INTEREST AND PREMIUM STRATEGY FUND (the Fund), a closed-end management
investment company organized under the laws of the and
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registered with the Securities and Exchange Commission under the Investment
Company Act of 1940 Act, as amended, and XXXXX BROTHERS XXXXXXXX & CO., a
limited partnership formed under the laws of the State of New York (BBH&Co. or
the Custodian),
WITNESSETH:
WHEREAS, the Fund wishes to employ BBH&Co. to act as custodian for the Fund
and to provide related services, all as provided herein, and BBH&Co. is willing
to accept such employment, subject to the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Fund and BBH&Co. hereby agree, as follows:
1. Appointment of Custodian. The Fund hereby appoints BBH&Co. as the Fund's
custodian, and BBH&Co. hereby accepts such appointment. All Investments of the
Fund delivered to the Custodian or its agents or Subcustodians shall be dealt
with as provided in this Agreement. The duties of the Custodian with respect to
the Fund's Investments shall be only as set forth expressly in this Agreement
which duties are generally comprised of safekeeping and various administrative
duties that will be performed in accordance with Instructions and as reasonably
required to effect Instructions.
2. Representations, Warranties and Covenants of the Fund. The Fund hereby
represents, warrants and
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covenants each of the following:
2.1 This Agreement has been, and at the time of delivery of each
Instruction such Instruction will have been, duly authorized, executed and
delivered by the Fund. This Agreement does not violate any Applicable Law
or conflict with or constitute a default under the Fund's prospectus or
other organic document, agreement, judgment, order or decree to which the
Fund is a party or by which it or its Investments is bound.
2.2 By providing an Instruction with respect to the first acquisition
of an Investment in a jurisdiction other than the United States of America,
the Fund shall be deemed to have confirmed to the Custodian that the Fund
has (a) assessed and accepted all material Country or Sovereign Risks and
accepted responsibility for their occurrence, (b) made all determinations
required to be made by the Fund under the 1940 Act, and (iii) appropriately
and adequately disclosed to its shareholders, other investors and all
persons who have rights in or to such Investments, all material investment
risks, including those relating to the custody and settlement
infrastructure or the servicing of securities in such jurisdiction.
2.3 The Fund shall safeguard and shall solely be responsible for the
safekeeping of any testkeys, identification codes, passwords, other
security devices or statements of account with which the Custodian provides
it. In furtherance and not limitation of the foregoing, in the event the
Fund utilizes any on-line service offered by the Custodian, the Fund and
the Custodian shall be fully responsible for the security of each party's
connecting terminal, access thereto and the proper and authorized use
thereof and the initiation and application of continuing effective
safeguards in respect thereof. Additionally, if the Fund uses any on-line
or similar communications service made available by the Custodian, the Fund
shall be solely responsible for ensuring the security of its access to the
service and for the use of the service, and shall only attempt to access
the service and the Custodian's computer systems as directed by the
Custodian. If the Custodian provides any computer software to the Fund
relating to the services described in this Agreement, the Fund will only
use the software for the purposes for which the Custodian provided the
software to the Fund, and will abide by the license agreement accompanying
the software and any other security policies which the Custodian provides
to the Fund.
3. Representation and Warranty of BBH&Co. BBH&Co. hereby represents and warrants
that this Agreement has been duly authorized, executed and delivered by BBH&Co.
and does not and will not violate any Applicable Law or conflict with or
constitute a default under BBH&Co.'s limited partnership agreement or any
agreement, instrument, judgment, order or decree to which BBH&Co. is a party or
by which it is bound.
4. Instructions. Unless otherwise explicitly indicated herein, the Custodian
shall perform its duties pursuant to Instructions. As used herein, the term
Instruction shall mean a directive initiated by the Fund, acting directly or
through its board of directors, officers or other Authorized Persons, which
directive shall conform to the requirements of this Section 4.
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4.1 Authorized Persons. For purposes hereof, an Authorized Person
shall be a person or entity authorized to give Instructions for or on
behalf of the Fund by written notices to the Custodian or otherwise in
accordance with procedures delivered to and acknowledged by the Custodian,
including without limitation the Fund's Investment Adviser or Foreign
Custody Manager. The Custodian may treat any Authorized Person as having
full authority of the Fund to issue Instructions hereunder unless the
notice of authorization contains explicit limitations as to said authority.
The Custodian shall be entitled to rely upon the authority of Authorized
Persons until it receives appropriate written notice from the Fund to the
contrary.
4.2 Form of Instruction. Each Instruction shall be transmitted by such
secured or authenticated electro-mechanical means as the Custodian shall
make available to the Fund from time to time unless the Fund shall elect to
transmit such Instruction in accordance with Subsections 4.2.1 through
4.2.3 of this Section.
4.2.1 Fund Designated Secured-Transmission Method. Instructions
may be transmitted through a secured or tested electro-mechanical
means identified by the Fund or by an Authorized Person entitled to
give Instruction and acknowledged and accepted by the Custodian; it
being understood that such acknowledgment shall authorize the
Custodian to receive and process such means of delivery but shall not
represent a judgment by the Custodian as to the reasonableness or
security of the method determined by the Authorized Person.
4.2.2 Written Instructions. Instructions may be transmitted in a
writing that bears the manual signature of Authorized Persons.
4.2.3 Other Forms of Instruction. Instructions may also be
transmitted by another means determined by the Fund or Authorized
Persons and acknowledged and accepted by the Custodian (subject to the
same limits as to acknowledgements as is contained in Subsection
4.2.1, above) including Instructions given orally or by SWIFT, telex
or telefax (whether tested or untested).
When an Instruction is given by means established under
Subsections 4.2.1 through 4.2.3 above, it shall be the responsibility of the
Custodian to use reasonable care to adhere to any security or other procedures
established in writing between the Custodian and the Authorized Person with
respect to such means of Instruction, but such Authorized Person shall be solely
responsible for determining that the particular means chosen is reasonable under
the circumstances. Oral Instructions shall be binding upon the Custodian only if
and when the Custodian takes action with respect thereto. With respect to
telefax instructions, the parties agree and acknowledge that receipt of legible
instructions cannot be assured, that the Custodian cannot verify that authorized
signatures on telefax instructions are original or properly affixed, and that
the Custodian shall not be liable for losses or expenses incurred through
actions taken in reliance on inaccurately stated, illegible or unauthorized
telefax instructions. The provisions of Section 4A of the Uniform Commercial
Code shall apply to Funds Transfers performed in accordance with Instructions.
The Funds Transfer Services Schedule and the Electronic and Online Services
Schedule to this
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Agreement shall each comprise a designation of form of a means of delivering
Instructions for purposes of this Section 4.2.
4.3 Completeness and Contents of Instructions. The Authorized Person
shall be responsible for assuring the adequacy and accuracy of
Instructions. Particularly, upon any acquisition or disposition or other
dealing in the Fund's Investments and upon any delivery and transfer of any
Investment or moneys, the person initiating such Instruction shall give the
Custodian an Instruction with appropriate detail, including, without
limitation:
4.3.1 The transaction date and the date and location of
settlement;
4.3.2 The specification of the type of transaction;
4.3.3 A description of the Investments or moneys in question,
including, as appropriate, quantity, price per unit, amount of money
to be received or delivered and currency information. Where an
Instruction is communicated by electronic means, or otherwise where an
Instruction contains an identifying number such as a CUSIP, SEDOL or
ISIN number, the Custodian shall be entitled to rely on such number as
controlling notwithstanding any inconsistency contained in such
Instruction, particularly with respect to Investment description; and
4.3.4 The name of the broker or similar entity concerned with
execution of the transaction.
If the Custodian shall determine that an Instruction is either
unclear or incomplete, the Custodian may give prompt notice of such
determination to the Fund, and the Fund shall thereupon amend or otherwise
reform such Instruction. In such event, the Custodian shall have no obligation
to take any action in response to the Instruction initially delivered until the
redelivery of an amended or reformed Instruction
4.4 Timeliness of Instructions. In giving an Instruction, the Fund
shall take into consideration delays which may occur due to the involvement
of a Subcustodian or agent, differences in time zones, and other factors
particular to a given market, exchange or issuer. When the Custodian has
established specific timing requirements or deadlines with respect to
particular classes of Instruction, or when an Instruction is received by
the Custodian at such a time that it could not reasonably be expected to
have acted on such instruction due to time zone differences or other
factors beyond its reasonable control, the execution of any Instruction
received by the Custodian after such deadline or at such time (including
any modification or revocation of a previous Instruction) shall be at the
risk of the Fund.
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5. Safekeeping of Fund Assets. The Custodian shall hold Investments delivered to
it or Subcustodians for the Fund in accordance with the provisions of this
Section. The Custodian shall not be responsible for (a) the safekeeping of
Investments not delivered or that are not caused to be issued to it or its
Subcustodians; or, (b) pre-existing faults or defects in Investments that are
delivered to the Custodian, or its Subcustodians. The Custodian is hereby
authorized to hold with itself or a Subcustodian, and to record in one or more
accounts, all Investments delivered to and accepted by the Custodian, any
Subcustodian or their respective agents pursuant to an Instruction or in
consequence of any corporate action. The Custodian shall hold Investments for
the account of the Fund and shall segregate Investments from assets belonging to
the Custodian and shall cause its Subcustodians to segregate Investments from
assets belonging to the Subcustodian in an account held for the Fund or in an
account maintained by the Subcustodian generally for non-proprietary assets of
the Custodian.
5.1 Use of Securities Depositories. The Custodian may deposit and maintain
Investments in any Securities Depository, either directly or through one or more
Subcustodians appointed by the Custodian. Investments held in a Securities
Depository shall be held (a) subject to the agreement, rules, statement of terms
and conditions or other document or conditions effective between the Securities
Depository and the Custodian or the Subcustodian, as the case may be, and (b) in
an account for the Fund or in bulk segregation in an account maintained for the
non-proprietary assets of the entity holding such Investments in the Depository.
If market practice or the rules and regulations of the Securities Depository
prevent the Custodian, the Subcustodian or (any agent of either) from holding
its client assets in such a separate account, the Custodian, the Subcustodian or
other agent shall as appropriate segregate such Investments for benefit of the
Fund or for benefit of clients of the Custodian generally on its own books.
5.2 Certificated Assets. Investments which are certificated may be held in
registered or bearer form: (a) in the Custodian's vault; (b) in the vault of a
Subcustodian or agent of the Custodian or a Subcustodian; or (c) in an account
maintained by the Custodian, Subcustodian or agent at a Securities Depository;
all in accordance with customary market practice in the jurisdiction in which
any Investments are held.
5.3 Registered Assets. Investments which are registered may be registered
in the name of the Custodian, a Subcustodian, or in the name of the Fund or a
nominee for any of the foregoing, and may be held in any manner set forth in
Section 5.2 above with or without any identification of fiduciary capacity in
such registration.
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5.4 Book Entry Assets. Investments which are represented by book-entry may
be so held in an account maintained by the Book-entry Agent on behalf of the
Custodian, a Subcustodian or another agent of the Custodian, or a Securities
Depository.
5.5 Replacement of Lost Investments. In the event of a loss of Investments
for which the Custodian is responsible under the terms of this Agreement, the
Custodian shall replace such Investment, or in the event that such replacement
cannot be effected, the Custodian shall pay to the Fund the fair market value of
such Investment based on the last available price as of the close of business in
the relevant market on the date that a claim was first made to the Custodian
with respect to such loss, or, if less, such other amount as shall be agreed by
the parties as the date for settlement.
6. Administrative Duties of the Custodian. The Custodian shall perform the
following administrative duties with respect to Investments of the Fund.
6.1 Purchase of Investments. Pursuant to Instruction, Investments purchased
for the account of the Fund shall be paid for (a) against delivery thereof to
the Custodian or a Subcustodian, as the case may be, either directly or through
a Clearing Corporation or a Securities Depository (in accordance with the rules
of such Securities Depository or such Clearing Corporation), or (b) otherwise in
accordance with an Instruction, Applicable Law, generally accepted trade
practices, or the terms of the instrument representing such
6.2 Sale of Investments. Pursuant to Instruction, Investments sold for the
account of the Fund shall be delivered (a) against payment therefor in cash, by
check or by bank wire transfer, (b) by credit to the account of the Custodian or
the applicable Subcustodian, as the case may be, with a Clearing Corporation or
a Securities Depository (in accordance with the rules of such Securities
Depository or such Clearing Corporation), or (c) otherwise in accordance with an
Instruction, Applicable Law, generally accepted trade practices, or the terms of
the instrument representing such Investment.
6.3 Delivery and Receipt in Connection with Borrowings of the Fund or other
Collateral and Margin Requirements. Pursuant to Instruction, the Custodian may
deliver or receive Investments or cash of the Fund in connection with borrowings
or loans by the Fund and other collateral and margin requirements.
6.4 Futures and Options. If, pursuant to an Instruction, the Custodian
shall become a party to an agreement with the Fund and a futures commission
merchant regarding margin (Tri-Party Agreement), the
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Custodian shall (a) receive and retain, to the extent the same are provided to
the Custodian, confirmations or other documents evidencing the purchase or sale
by the Fund of exchange-traded futures contracts and commodity options, (b) when
required by such Tri-Party Agreement, deposit and maintain in an account opened
pursuant to such Agreement (Margin Account), segregated either physically or by
book-entry in a Securities Depository for the benefit of any futures commission
merchant, such Investments as the Fund shall have designated as initial,
maintenance or variation "margin" deposits or other collateral intended to
secure the Fund's performance of its obligations under the terms of any
exchange-traded futures contracts and commodity options; and (c) thereafter pay,
release or transfer Investments into or out of the margin account in accordance
with the provisions of such Agreement. Alternatively, the Custodian may deliver
Investments, in accordance with an Instruction, to a futures commission merchant
for purposes of margin requirements in accordance with Rule 17f-6. The Custodian
shall in no event be responsible for the acts and omissions of any futures
commission merchant to whom Investments are delivered pursuant to this Section;
for the sufficiency of Investments held in any Margin Account; or, for the
performance of any terms of any exchange-traded futures contracts and commodity
options.
6.5 Contractual Obligations and Similar Investments. From time to time, the
Fund's Investments may include Investments that are not ownership interests as
may be represented by certificate (whether registered or bearer), by entry in a
Securities Depository or by book entry agent, registrar or similar agent for
recording ownership interests in the relevant Investment. If the Fund shall at
any time acquire such Investments, including without limitation deposit
obligations, loan participations, repurchase agreements and derivative
arrangements, the Custodian shall (a) receive and retain, to the extent the same
are provided to the Custodian, confirmations or other documents evidencing the
arrangement; and (b) perform on the Fund's account in accordance with the terms
of the applicable arrangement, but only to the extent directed to do so by
Instruction. The Custodian shall have no responsibility for agreements running
to the Fund as to which it is not a party other than to retain, to the extent
the same are provided to the Custodian, documents or copies of documents
evidencing the arrangement and, in accordance with Instruction, to include such
arrangements in reports made to the Fund.
6.6 Exchange of Securities. Unless otherwise directed by Instruction, the
Custodian shall: (a) exchange securities held for the account of the Fund for
other securities in connection with any reorganization, recapitalization,
conversion, split-up, change of par value of shares or similar event, and (b)
deposit any such securities in accordance with the terms of any reorganization
or protective plan.
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6.7 Surrender of Securities. Unless otherwise directed by Instruction, the
Custodian may surrender securities: (a) in temporary form for definitive
securities; (b) for transfer into the name of an entity allowable under Section
5.3 above; and (c) for a different number of certificates or instruments
representing the same number of shares or the same principal amount of
indebtedness.
6.8 Rights, Warrants, Etc. Pursuant to Instruction, the Custodian shall (a)
deliver warrants, puts, calls, rights or similar securities to the issuer or
trustee thereof, or to any agent of such issuer or trustee, for purposes of
exercising such rights or selling such securities, and (b) deposit securities in
response to any invitation for the tender thereof.
6.9 Mandatory Corporate Actions. Unless otherwise directed by Instruction,
the Custodian shall: (a) comply with the terms of all mandatory or compulsory
exchanges, calls, tenders, redemptions or similar rights of securities ownership
affecting securities held on the Fund's account and promptly notify the Fund of
such action; and (b) collect all stock dividends, rights and other items of like
nature with respect to such securities.
6.10 Income Collection. Unless otherwise directed by Instruction, the
Custodian shall collect any amount due and payable to the Fund with respect to
Investments and promptly credit the amount collected to a Principal or Agency
Account; provided, however, that the Custodian shall not be responsible for: (a)
the collection of amounts due and payable with respect to Investments that are
in default; or (b) the collection of cash or share entitlements with respect to
Investments that are not registered in the name of the Custodian or its
Subcustodians. The Custodian is hereby authorized to endorse and deliver any
instrument required to be so endorsed and delivered to effect collection of any
amount due and payable to the Fund with respect to Investments.
6.11 Ownership Certificates and Disclosure of the Fund's Interest. The
Custodian is hereby authorized to execute on behalf of the Fund ownership
certificates, affidavits or other disclosure required under Applicable Law or
established market practice in connection with the receipt of income, capital
gains or other payments by the Fund with respect to Investments, or in
connection with the sale, purchase or ownership of Investments.
With respect to securities issued in the United States of America, the
Custodian [ ] may [ ] may not release the identity of the Fund to an issuer
which requests such information pursuant to the Shareholder Communications
Act of 1985 for the specific purpose of direct communications between such
issuer and the Fund. IF NO BOX IS CHECKED, THE CUSTODIAN SHALL RELEASE SUCH
INFORMATION UNTIL IT RECEIVES CONTRARY INSTRUCTIONS FROM THE FUND. With
respect to securities issued outside of the United States of America,
information shall be released in accordance with law or custom of the
particular country in which such security is located.
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6.12 Proxy Materials. The Custodian shall deliver, or cause to be
delivered, to the Fund proxy forms, notices of meeting, and any other notices or
announcements materially affecting or relating to Investments received by the
Custodian or any nominee.
6.13. Taxes. The Custodian shall, where applicable, assist the Fund in the
reclamation of taxes withheld on dividends and interest payments received by the
Fund. In the performance of its duties with respect to tax withholding and
reclamation, the Custodian shall be entitled to rely on the advice of counsel
and upon information and advice regarding the Fund's tax status that is received
from or on behalf of the Fund without duty of separate inquiry.
6.14 Other Dealings. The Custodian shall otherwise act as directed by
Instruction, including without limitation effecting the free payments of moneys
or the free delivery of securities, provided that such Instruction shall
indicate the purpose of such payment or delivery and that the Custodian shall
record the party to whom such payment or delivery is made.
The Custodian shall attend to all nondiscretionary details in
connection with the sale or purchase or other administration of Investments,
except as otherwise directed by an Instruction, and may make payments to itself
or others for minor expenses of administering Investments under this Agreement;
provided that the Fund shall have the right to request an accounting with
respect to such expenses.
In fulfilling the duties set forth in Sections 6.6 through 6.10 above, the
Custodian shall provide to the Company all material information pertaining to a
corporate action which the Custodian actually receives; provided that the
Custodian shall not be responsible for the completeness or accuracy of such
information. Information relative to any pending corporate action made available
to the Company via any of the services described in the Electronic and Online
Services Schedule shall constitute the delivery of such information by the
Custodian hereunder. Any advance credit of cash or shares expected to be
received as a result of any corporate action shall be subject to actual
collection and may, when the Custodian deems collection unlikely, be reversed by
the Custodian.
The Custodian may at any time or times in its discretion appoint (and may
at any time remove) agents (other than Subcustodians) to carry out some or all
of the administrative provisions of this Agreement (Agents), provided, however,
that the appointment of such agent shall not relieve the Custodian of its
administrative obligations under this Agreement.
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7. Cash Accounts, Deposits and Money Movements. Subject to the terms and
conditions set forth in this Section 7, the Fund hereby authorizes the Custodian
to open and maintain, with itself or with Subcustodians, cash accounts in United
States Dollars, in such other currencies as are the currencies of the countries
in which the Fund maintains Investments or in such other currencies as the Fund
shall from time to time request by Instruction.
7.1 Types of Cash Accounts. Cash accounts opened on the books of the
Custodian (Principal Accounts) shall be opened in the name of the Fund. Such
accounts collectively shall be a deposit obligation of the Custodian and shall
be subject to the terms of this Section 7 and the general liability provisions
contained in Section 9. Cash accounts opened on the books of a Subcustodian may
be opened in the name of the Fund or the Custodian or in the name of the
Custodian for its customers generally (Agency Accounts). Such deposits shall be
obligations of the Subcustodian and shall be treated as an Investment of the
Fund. Accordingly, the Custodian shall be responsible for exercising reasonable
care in the administration of such accounts but shall not be liable for their
repayment in the event such Subcustodian, by reason of its bankruptcy,
insolvency or otherwise, fails to make repayment.
7.2 Payments and Credits with Respect to the Cash Accounts. The Custodian
shall make payments from or deposits to any of said accounts in the course of
carrying out its administrative duties, including but not limited to income
collection with respect to the Fund's Investments, and otherwise in accordance
with Instructions. The Custodian and its Subcustodians shall be required to
credit amounts to the cash accounts only when moneys are actually received in
cleared funds in accordance with banking practice in the country and currency of
deposit. Any credit made to any Principal or Agency Account before actual
receipt of cleared funds shall be provisional and may be reversed by the
Custodian in the event such payment is not actually collected. Unless otherwise
specifically agreed in writing by the Custodian or any Subcustodian, all
deposits shall be payable only at the branch of the Custodian or Subcustodian
where the deposit is made or carried.
7.3 Currency and Related Risks. The Fund bears risks of holding or
transacting in any currency. The Custodian shall not be liable for any loss or
damage arising from the applicability of any law or regulation now or hereafter
in effect, or from the occurrence of any event, which may delay or affect the
transferability, convertibility or availability of any currency in the country
(a) in which such Principal or Agency Accounts are maintained or (b) in which
such currency is issued, and in no event shall the Custodian be obligated to
make payment of a deposit denominated in a currency during the period during
which its transferability, convertibility or availability has been
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affected by any such law, regulation or event. Without limiting the generality
of the foregoing, neither the Custodian nor any Subcustodian shall be required
to repay any deposit made at a foreign branch of either the Custodian or
Subcustodian if such branch cannot repay the deposit due to a cause for which
the Custodian would not be responsible in accordance with the terms of Section 9
of this Agreement unless the Custodian or such Subcustodian expressly agrees in
writing to repay the deposit under such circumstances. All currency transactions
in any account opened pursuant to this Agreement are subject to exchange control
regulations of the United States and of the country where such currency is the
lawful currency or where the account is maintained. Any taxes, costs, charges or
fees imposed on the convertibility of a currency held by the Fund shall be for
the account of the Fund.
7.4 Foreign Exchange Transactions. The Custodian shall, subject to the
terms of this Section, settle foreign exchange transactions (including
contracts, futures, options and options on futures) on behalf and for the
account of the Fund with such currency brokers or banking institutions,
including Subcustodians, as the Fund may direct pursuant to Instructions. The
Custodian may act as principal in any foreign exchange transaction with the Fund
in accordance with Section 7.4.2 of this Agreement. The obligations of the
Custodian in respect of all foreign exchange transactions (whether or not the
Custodian shall act as principal in such transaction) shall be contingent on the
free, unencumbered transferability of the currency transacted on the actual
settlement date of the transaction.
7.4.1 Third Party Foreign Exchange Transactions. The Custodian
shall process foreign exchange transactions (including without
limitation contracts, futures, options, and options on futures), where
any third party acts as principal counterparty to the Fund on the same
basis it performs duties as agent for the Fund with respect to any
other of the Fund's Investments. Accordingly the Custodian shall only
be responsible for delivering or receiving currency on behalf of the
Fund in respect of such contracts pursuant to Instructions. The
Custodian shall not be responsible for the failure of any counterparty
(including any Subcustodian) in such agency transaction to perform its
obligations thereunder. The Custodian (a) shall transmit cash and
Instructions to and from the currency broker or banking institution
with which a foreign exchange contract or option has been executed
pursuant hereto, (b) may make free outgoing payments of cash in the
form of Dollars or foreign currency without receiving confirmation of
a foreign exchange contract or option or confirmation that the
countervalue currency completing the foreign exchange contract has
been delivered or received or that the option has been delivered or
received, and (c) shall hold all confirmations, certificates and other
documents and agreements received by the Custodian and evidencing or
relating to such foreign exchange transactions in safekeeping. The
Fund accepts full responsibility for its use of third-party foreign
exchange dealers and for execution of said foreign exchange contracts
and options and understands that the Fund shall be responsible for any
and all costs and interest charges which may be incurred by the Fund
or the Custodian as a result of the failure or delay of third parties
to deliver foreign exchange.
7.4.2 Foreign Exchange with the Custodian as Principal. The
Custodian may undertake foreign exchange transactions with the Fund as
principal as the Custodian and the Fund may agree from time to time.
In such event, the foreign exchange transaction will be performed in
accordance with the particular agreement of the parties, or in the
event a principal foreign
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exchange transaction is initiated by Instruction in the absence of
specific agreement, such transaction will be performed in accordance
with the usual commercial terms of the Custodian.
7.5 Delays. If no event of Force Majeure shall have occurred and be
continuing and in the event that a delay shall have been caused by the
negligence or willful misconduct of the Custodian in carrying out an Instruction
to credit or transfer cash, the Custodian shall be liable to the Fund: (a) with
respect to Principal Accounts, for interest to be calculated at the rate
customarily paid on such deposit and currency by the Custodian on overnight
deposits at the time the delay occurs for the period from the day when the
transfer should have been effected until the day it is in fact effected; and,
(b) with respect to Agency Accounts, for interest to be calculated at the rate
customarily paid on such deposit and currency by the Subcustodian on overnight
deposits at the time the delay occurs for the period from the day when the
transfer should have been effected until the day it is in fact effected. The
Custodian shall not be liable for delays in carrying out such Instructions to
transfer cash which are not due to the Custodian's own negligence or willful
misconduct.
7.6 Advances. If, for any reason in connection with this Agreement the
Custodian or any Subcustodian makes an Advance to facilitate settlement or
otherwise for the benefit of the Fund (whether or not any Principal or Agency
Account shall be overdrawn either during, or at the end of, any Business Day),
the Fund hereby does:
7.6.1 acknowledge that the Fund shall have no right, title or
interest in or to any Investments purchased with such Advance or
proceeds of such Investments, and that any credit to an account of
Fund shall be provisional, until: (a) the debit of the Principal or
Agency Account by Custodian for an amount equal to Advance Costs;
and/or (b) if such debit produces an overdraft in such account,
reimbursement to the Custodian or Subcustodian for the amount of such
overdraft;
7.6.2 acknowledge that the Custodian has an automatically
perfected statutory security interest in Investments purchased with
any such Advance pursuant to Section 9-206 of the Uniform Commercial
Code as in effect in the State of New York from time to time;
7.6.3 in addition, in order to secure the obligations of the Fund
to pay or perform any and all obligations of the Fund pursuant to this
Agreement, including without limitation to repay any Advance made
pursuant to this Agreement, grant to the Custodian a security interest
in all Investments and proceeds thereof (as defined in the Uniform
Commercial Code as currently in effect in the State of New York); and
agree to take, and agree that the Custodian may take, in respect of
the security interest referenced above, any further actions that the
Custodian may reasonably require.
7.7 Custodian's Rights Neither the Custodian nor any Subcustodian shall be
obligated to make any
12
Advance or to allow an Advance to occur to the Fund, and in the event that the
Custodian or any Subcustodian does make or allow an Advance, any such Advance
and any transaction giving rise to such Advance shall be for the account and
risk of the Fund and shall not be deemed to be a transaction undertaken by the
Custodian for its own account and risk. If such Advance shall have been made or
allowed by a Subcustodian or any other person, the Custodian may assign all or
part of its security interest referenced above and any other rights granted to
the Custodian hereunder to such Subcustodian or other person. If the Fund shall
fail to repay the Advance Costs when due, the Custodian or its assignee, as the
case may be, shall be entitled to a portion of the available cash balance in any
Agency or Principal Account equal to such Advance Costs, and the Fund authorizes
the Custodian, on behalf of the Fund, to pay an amount equal to such Advance
Costs irrevocably to such Subcustodian or other person, and to dispose of any
property in such Account to the extent necessary to make such payment. Any
Investments and funds credited to accounts subject to this Agreement created
pursuant hereto shall be treated as financial assets credited to securities
accounts under Articles 8 and 9 of the Uniform Commercial Code as in effect in
the State of New York from time to time. Accordingly, the Custodian and any
Subcustodian shall have the rights and benefits of a secured creditor that is a
securities intermediary under such Articles 8 and 9.
7.8 Integrated Account. For purposes hereof, deposits maintained in all
Principal Accounts (whether or not denominated in Dollars) shall collectively
constitute a single and indivisible current account with respect to the Fund's
obligations to the Custodian, or its assignee, and balances in such Principal
Accounts shall be available for satisfaction of the Fund's obligations under
this Section 7. The Custodian shall further have a right of offset against the
balances in any Agency Account maintained hereunder to the extent that the
aggregate of all Principal Accounts is overdrawn.
8. Subcustodians and Securities Depositories. Subject to the provisions
hereinafter set forth in this Section 8, the Fund hereby authorizes the
Custodian to utilize Securities Depositories to act on behalf of the Fund and to
appoint from time to time and to utilize Subcustodians. With respect to
securities and funds held by a Subcustodian, either directly or indirectly
(including by a Securities Depository or Clearing Corporation), notwithstanding
any provisions of this Agreement to the contrary, payment for securities
purchased and delivery of
13
securities sold may be made prior to receipt of securities or payment,
respectively, and securities or payment may be received in a form, in accordance
with (a) governmental regulations, (b) rules of Securities Depositories and
clearing agencies, (c) generally accepted trade practice in the applicable local
market, (d) the terms and characteristics of the particular Investment, or (e)
the terms of Instructions.
8.1 Domestic Subcustodians and Securities Depositories. The Custodian may
deposit and/or maintain, either directly or through one or more agents appointed
by the Custodian, Investments of the Fund in any Securities Depository in the
United States, including The Depository Trust Company, provided such Depository
meets applicable requirements of the Federal Reserve Bank or of the Securities
and Exchange Commission. The Custodian may, at any time and from time to time,
appoint any bank as defined in Section 2(a)(5) of the 1940 Act meeting the
requirements of a custodian under Section 17(f) of the 1940 Act and the rules
and regulations thereunder, to act on behalf of the Fund as a Subcustodian for
purposes of holding Investments of the Fund in the United States.
8.2 Foreign Subcustodians and Securities Depositories. Unless instructed
otherwise by the Fund, the Custodian may deposit and/or maintain non-U.S.
Investments of the Fund in any non-U.S. Securities Depository provided such
Securities Depository meets the requirements of an "eligible securities
depository" under Rule 17f-7 promulgated under the 1940 Act, or any successor
rule or regulation ("Rule 17f-7") or which by order of the Securities and
Exchange Commission is exempted therefrom. Prior to the time that securities are
placed with such depository, but subject to the provisions of Section 8.2.4
below, the Custodian shall have prepared an assessment of the custody risks
associated with maintaining assets with the Securities Depository and shall have
established a system to monitor such risks on a continuing basis in accordance
with subsection 8.2.3 of this Section. Additionally, the Custodian may, at any
time and from time to time, appoint (a) any bank, trust company or other entity
meeting the requirements of an "eligible foreign custodian" under Rule 17f-5 or
which by order of the Securities and Exchange Commission is exempted therefrom,
or (b) any bank as defined in Section 2(a)(5) of the 1940 Act meeting the
requirements of a custodian under Section 17(f) of the 1940 Act and the rules
and regulations thereunder, to act on behalf of the Fund as a Subcustodian for
purposes of holding Investments of the Fund outside the United States. Such
appointment of foreign Subcustodians shall be subject to approval of the Fund in
accordance with Subsections 8.2.1 and 8.2.2 hereof, and use of non-U.S.
Securities Depositories shall be subject to the terms of Subsections 8.2.3
14
and 8.2.4 hereof. An Instruction to open an account in a given country shall
comprise authorization of the Custodian to hold assets in such country in
accordance with the terms of this Agreement. The Custodian shall not be required
to make independent inquiry as to the authorization of the Fund to invest in
such country.
8.2.1 Board Approval of Foreign Subcustodians. Unless and except
to the extent that the Board has delegated to and the Custodian has
accepted delegation of review of certain matters concerning the
appointment of Subcustodians pursuant to Subsection 8.2.2, the
Custodian shall, prior to the appointment of any Subcustodian for
purposes of holding Investments of the Fund outside the United States,
obtain written confirmation of the approval of the Board of Trustees
or Directors of the Fund with respect to (a) the identity of a
Subcustodian, and (b) the Subcustodian agreement which shall govern
such appointment, such approval to be signed by an Authorized Person.
8.2.2 Delegation of Board Review of Subcustodians. From time to
time, the Custodian may agree to perform certain reviews of
Subcustodians and of Subcustodian Contracts as delegate of the Fund's
Board. In such event, the Custodian's duties and obligations with
respect to this delegated review will be performed in accordance with
the terms of the attached 17f-5 Delegation Schedule to this Agreement.
8.2.3 Monitoring and Risk Assessment of Securities Depositories.
Prior to the placement of any assets of the Fund with a non-U.S.
Securities Depository, the Custodian: (a) shall provide to the Fund or
its authorized representative an assessment of the custody risks
associated with maintaining assets within such Securities Depository;
and (b) shall have established a system to monitor the custody risks
associated with maintaining assets with such Securities Depository on
a continuing basis and to promptly notify the Fund or its Investment
Adviser of any material changes in such risk. In performing its duties
under this subsection, the Custodian shall use reasonable care and may
rely on such reasonable sources of information as may be available
including but not limited to: (i) published ratings; (ii) information
supplied by a Subcustodian that is a participant in such Securities
Depository; (iii) industry surveys or publications; (iv) information
supplied by the depository itself, by its auditors (internal or
external) or by the relevant Foreign Financial Regulatory Authority.
It is acknowledged that information procured through some or all of
these sources may not be independently verifiable by the Custodian and
that direct access to Securities Depositories is limited under most
circumstances. Accordingly, the Custodian shall not be responsible for
errors or omissions in its duties hereunder provided that it has
performed its monitoring and assessment duties with reasonable care.
The risk assessment shall be provided to the Fund or its Investment
Advisor by such means as the Custodian shall reasonably establish.
Advices of material change in such assessment may be provided by the
Custodian in the manner established as customary between the Fund and
the Custodian for transmission of material market information.
8.3 Responsibility for Subcustodians. Except as provided in the last
sentence of this Section 8.3, the Custodian shall be liable to the Fund for any
loss or damage to the Fund caused by or resulting from the acts or omissions of
any Subcustodian to the extent that such acts or omissions would be deemed to be
negligence, gross negligence or willful misconduct in accordance with the terms
of the relevant subcustodian agreement under the
15
laws, circumstances and practices prevailing in the place where the act or
omission occurred. The liability of the Custodian in respect of the countries
and subcustodians so designated by the Custodian, from time to time, on the
Global Custody Network Listing, shall be subject to the additional condition
that the Custodian actually recovers such loss or damage from the Subcustodian.
8.4 New Countries. The Fund shall be responsible for informing the
Custodian sufficiently in advance of a proposed investment which is to be held
in a country in which no Subcustodian is authorized to act in order that the
Custodian shall, if it deems appropriate to do so, have sufficient time to
establish a subcustodial arrangement in accordance herewith. In the event,
however, the Custodian is unable to establish such arrangements prior to the
time such investment is to be acquired, the Custodian is authorized to designate
at its discretion a local safekeeping agent, and the use of such local
safekeeping agent shall be at the sole risk of the Fund, and accordingly the
Custodian shall be responsible to the Fund for the actions of such agent if and
only to the extent the Custodian shall have recovered from such agent for any
damages caused the Fund by such agent.
9. Responsibility of the Custodian. In performing its duties and obligations
hereunder, the Custodian shall use reasonable care under the facts and
circumstances prevailing in the market where performance is effected. Subject to
the specific provisions of this Section, the Custodian shall be liable for any
direct damage incurred by the Fund in consequence of the Custodian's negligence,
bad faith or willful misconduct. In no event shall the Custodian be liable
hereunder for any special, indirect, punitive or consequential damages arising
out of, pursuant to or in connection with this Agreement even if the Custodian
has been advised of the possibility of such damages. It is agreed that the
Custodian shall have no duty to assess the risks inherent in the Fund's
Investments or to provide investment advice with respect to such Investments and
that the Fund as principal shall bear any risks attendant to particular
Investments such as failure of counterparty or issuer.
9.1 Limitations of Performance. The Custodian shall not be responsible
under this Agreement for any failure to perform its duties, and shall not liable
hereunder for any loss or damage in association with such failure to perform,
for or in consequence of the following causes:
16
9.1.1 Force Majeure. Force Majeure shall mean any circumstance or
event which is beyond the reasonable control of the Custodian, a
Subcustodian or any agent of the Custodian or a Subcustodian and which
adversely affects the performance by the Custodian of its obligations
hereunder, by the Subcustodian of its obligations under its Subcustody
Agreement or by any other agent of the Custodian or the Subcustodian,
including any event caused by, arising out of or involving (a) an act
of God, (b) accident, fire, water damage or explosion, (c) any
computer, system or other equipment failure or malfunction caused by
any computer virus or the malfunction or failure of any communications
medium, (d) any interruption of the power supply or other utility
service, (e) any strike or other work stoppage, whether partial or
total, (f) any delay or disruption resulting from or reflecting the
occurrence of any Sovereign Risk, (g) any disruption of, or suspension
of trading in, the securities, commodities or foreign exchange
markets, whether or not resulting from or reflecting the occurrence of
any Sovereign Risk, (h) any encumbrance on the transferability of a
currency or a currency position on the actual settlement date of a
foreign exchange transaction, whether or not resulting from or
reflecting the occurrence of any Sovereign Risk, or (i) any other
cause similarly beyond the reasonable control of the Custodian.
9.1.2 Country Risk. Country Risk shall mean, with respect to the
acquisition, ownership, settlement or custody of Investments in a
jurisdiction, all risks relating to, or arising in consequence of,
systemic and markets factors affecting the acquisition, payment for or
ownership of Investments including (a) the prevalence of crime and
corruption, (b) the inaccuracy or unreliability of business and
financial information, (c) the instability or volatility of banking
and financial systems, or the absence or inadequacy of an
infrastructure to support such systems, (d) custody and settlement
infrastructure of the market in which such Investments are transacted
and held, (e) the acts, omissions and operation of any Securities
Depository, (f) the risk of the bankruptcy or insolvency of banking
agents, counterparties to cash and securities transactions, registrars
or transfer agents, and (g) the existence of market conditions which
prevent the orderly execution or settlement of transactions or which
affect the value of assets.
9.1.3 Sovereign Risk. Sovereign Risk shall mean, in respect of
any jurisdiction, including the United States of America, where
Investments is acquired or held hereunder or under a Subcustody
Agreement, (a) any act of war, terrorism, riot, insurrection or civil
commotion, (b) the imposition of any investment, repatriation or
exchange control restrictions by any Governmental Authority, (c) the
confiscation, expropriation or nationalization of any Investments by
any Governmental Authority, whether de facto or de jure, (iv) any
devaluation or revaluation of the currency, (d) the imposition of
taxes, levies or other charges affecting Investments, (vi) any change
in the Applicable Law, or (e) any other economic or political risk
incurred or experienced.
9.2. Limitations on Liability. The Custodian shall not be liable for any
loss, claim, damage or other liability arising from the following causes:
9.2.1 Failure of Third Parties. The failure of any third party
including: (a) any issuer of Investments or book-entry or other agent
of and issuer; (b) any counterparty with respect to any Investment,
including any issuer of exchange-traded or other futures, option,
derivative or commodities contract; (c) failure of an Investment
Advisor, foreign custody manager or other agent of the Fund; or (d)
failure of other third parties similarly beyond the control or choice
of the Custodian.
9.2.2 Information Sources. The Custodian may rely upon
information received from issuers of Investments or agents of such
issuers, information received from Subcustodians and from other
commercially reasonable sources such as commercial data bases and the
like, but shall not be responsible for specific inaccuracies in such
information, provided that the Custodian has
17
relied upon such information in good faith, or for the failure of any
commercially reasonable information provider.
9.2.3 Reliance on Instruction. Action by the Custodian or the
Subcustodian in accordance with an Instruction, even when such action
conflicts with, or is contrary to any provision of, the Fund's
declaration of trust, certificate of incorporation or by-laws,
Applicable Law, or actions by the trustees, directors or shareholders
of the Fund.
9.2.4 Restricted Securities. The limitations inherent in the
rights, transferability or similar investment characteristics of a
given Investment of the Fund.
10. Indemnification. The Fund hereby indemnifies the Custodian and each
Subcustodian, and their respective agents, nominees and the partners, employees,
officers and directors, and agrees to hold each of them harmless from and
against all claims and liabilities, including counsel fees and taxes, incurred
or assessed against any of them in connection with the performance of this
Agreement and any Instruction. If a Subcustodian or any other person indemnified
under the preceding sentence, gives written notice of claim to the Custodian,
the Custodian shall promptly give written notice to the Fund. Not more than
thirty days following the date of such notice, unless the Custodian shall be
liable under Section 8 hereof in respect of such claim, the Fund will pay the
amount of such claim or reimburse the Custodian for any payment made by the
Custodian in respect thereof.
11. Reports and Records. The Custodian shall:
11.1 create and maintain records relating to the performance of its
obligations under this Agreement;
11.2 make available to the Fund, its auditors, agents and employees,
during regular business hours of the Custodian, upon reasonable request and
during normal business hours of the Custodian, all records maintained by
the Custodian pursuant to Section 11.1 above, subject, however, to all
reasonable security requirements of the Custodian then applicable to the
records of its custody customers generally; and
11.3 make available to the Fund all Electronic Reports; it being
understood that the Custodian shall not be liable hereunder for the
inaccuracy or incompleteness thereof or for errors in any information
included therein.
The Fund shall examine all records, howsoever produced or
transmitted, promptly upon receipt thereof and notify the Custodian promptly of
any discrepancy or error therein. Unless the Fund delivers written notice of any
such discrepancy or error within a reasonable time after its receipt thereof,
such records shall be deemed to be true and accurate. It is understood that the
Custodian now obtains and will in the future obtain
18
information on the value of assets from outside sources which may be utilized in
certain reports made available to the Fund. The Custodian deems such sources to
be reliable but it is acknowledged and agreed that the Custodian does not verify
nor represent nor warrant as to the accuracy or completeness of such information
and accordingly shall be without liability in selecting and using such sources
and furnishing such information.
12. Miscellaneous.
12.1 Proxies, etc. The Fund will promptly execute and deliver, upon
request, such proxies, powers of attorney or other instruments as may be
necessary or desirable for the Custodian to provide, or to cause any
Subcustodian to provide, custody services.
12.2 Entire Agreement. Except as specifically provided herein, this
Agreement constitutes the entire agreement between the Fund and the Custodian
with respect to the subject matter hereof. Accordingly, this Agreement
supersedes any custody agreement or other oral or written agreements heretofore
in effect between the Fund and the Custodian with respect to the custody of the
Fund's Investments.
12.3 Waiver and Amendment. No provision of this Agreement may be waived,
amended or modified, and no addendum to this Agreement shall be or become
effective, or be waived, amended or modified, except by an instrument in writing
executed by the party against which enforcement of such waiver, amendment or
modification is sought; provided, however, that an Instruction shall, whether or
not such Instruction shall constitute a waiver, amendment or modification for
purposes hereof, shall be deemed to have been accepted by the Custodian when it
commences actions pursuant thereto or in accordance therewith.
12.4 GOVERNING LAW AND JURISDICTION. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND BE GOVERNED BY THE LAWS OF, THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAW OF SUCH STATE. THE PARTIES HERETO
IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK AND THE FEDERAL COURTS LOCATED IN NEW YORK CITY IN THE BOROUGH OF
MANHATTAN.
12.5 Notices. Notices and other writings contemplated by this Agreement,
other than Instructions, shall be delivered (a) by hand, (b) by first class
registered or certified mail, postage prepaid, return receipt requested, (c) by
a nationally recognized overnight courier, or (d) by facsimile transmission,
provided that any notice or other
19
writing sent by facsimile transmission shall also be mailed, postage prepaid, to
the party to whom such notice is addressed. All such notices shall be addressed,
as follows:
If to the Fund:
NFJ Dividend, Interest and Premium Strategy Fund
0000 Xxxxxx xx xxx Xxxxxxxx,
Xxx Xxxx, Xxx Xxxx 00000
Attn
----------------------------------------
Telephone: (000) 000-0000.
Facsimile
----------------
If to the Custodian:
Xxxxx Brothers Xxxxxxxx & Co.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Manager, Securities Department
Telephone: (000) 000-0000
Facsimile: (000) 000-0000,
or such other address as the Fund or the Custodian may have designated in
writing to the other.
12.6 Headings. Paragraph headings included herein are for convenience of
reference only and shall not modify, define, expand or limit any of the terms or
provisions hereof.
12.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
the Fund and the Custodian.
12.8 Confidentiality. The parties hereto agree that each shall treat
confidentially the terms and conditions of this Agreement and all information
provided by each party to the other regarding its business and operations. All
confidential information provided by a party hereto shall be used by any other
party hereto solely for the purpose of rendering or obtaining services pursuant
to this Agreement and, except as may be required in carrying out this Agreement,
shall not be disclosed to any third party without the prior consent of such
providing party. The
20
foregoing shall not be applicable to any information that is publicly available
when provided or thereafter becomes publicly available other than through a
breach of this Agreement, or that is required to be disclosed by or to any bank
examiner of the Custodian or any Subcustodian, any Regulatory Authority, any
auditor of the parties hereto, or by judicial or administrative process or
otherwise by Applicable Law.
12.9 Counsel. In fulfilling its duties hereunder, the Custodian shall be
entitled to receive and act upon the advice of (i) counsel regularly retained by
the Custodian in respect of such matters, (ii) counsel for the Fund or (iii)
such counsel as the Fund and the Custodian may agree upon, with respect to all
matters, and the Custodian shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
12.10 Conflict. Nothing contained in this Agreement shall prevent the
Custodian and its associates from (i) dealing as a principal or an intermediary
in the sale, purchase or loan of the Fund's Investments to, or from the
Custodian or its associates; (ii) acting as a custodian, a subcustodian, a
trustee, an agent, securities dealer, an investment manager or in any other
capacity for any other client whose interests may be adverse to the interest of
the Fund; or (iii) buying, holding, lending, and dealing in any way in any
assets for the benefit of its own account, or for the account of any other
client whose interests may be adverse to the Fund notwithstanding that the same
or similar assets may be held or dealt in by, or for the account of the Fund by
the Custodian. The Fund hereby voluntarily consents to, and waives any potential
conflict of interest between the Custodian and/or its associates and the Fund,
and agrees that:
(a) the Custodian's and/or its associates' engagement in any such
transaction shall not disqualify the Custodian from continuing to
perform as the custodian of the Fund under this Agreement;
(b) the Custodian and/or its associates shall not be under any duty
to disclose any information in connection with any such
transaction to the Fund;
(c) the Custodian and/or its associates shall not be liable to
account to the Fund for any profits or benefits made or derived
by or in connection with any such transaction; and
(d) the Fund shall use all reasonable efforts to disclose this
provision, among other provisions in this Agreement, to its
shareholders.
21
13. Definitions. The following defined terms will have the respective meanings
set forth below.
13.1 Advance(s) shall mean any extension of credit by or through the
Custodian or by or through any Subcustodian and shall include, without
limitation, amounts due to the Custodian as the principal counterparty to any
foreign exchange transaction with the Fund as described in Section 7.4.2 hereof,
or paid to third parties for account of the Fund or in discharge of any expense,
tax or other item payable by the Fund.
13.2 Advance Costs shall mean any Advance, interest on the Advance and any
related expenses, including without limitation any xxxx to market loss of the
Custodian or Subcustodian on any Investment to which Section 7.6.1 applies.
13.3 Agency Account(s) shall mean any deposit account opened on the books
of a Subcustodian or other banking institution in accordance with Section 7.1
hereof.
13.4 Agent(s) shall have the meaning set forth in the last sentence of
Section 6 hereof.
13.5 Applicable Law shall mean with respect to each jurisdiction, all (a)
laws, statutes, treaties, regulations, guidelines (or their equivalents); (b)
orders, interpretations licenses and permits; and (c) judgments, decrees,
injunctions writs, orders and similar actions by a court of competent
jurisdiction; compliance with which is required or customarily observed in such
jurisdiction.
13.6 Authorized Person(s) shall mean any person or entity authorized to
give Instructions on behalf of the Fund in accordance with Section 4.1 hereof.
13.7 Book-entry Agent(s) shall mean an entity acting as agent for the
issuer of Investments for purposes of recording ownership or similar entitlement
to Investments, including without limitation a transfer agent or registrar.
13.8 Clearing Corporation shall mean any entity or system established for
purposes of providing securities settlement and movement and associated
functions for a given market.
13.9 Delegation Schedule shall mean any separate schedule entered into
between the Custodian and the Fund or its authorized representative with respect
to certain matters concerning the appointment and administration of
Subcustodians delegated to the Custodian pursuant to Rule 17f-5.
13.10 Electronic and Online Services Schedule shall mean any separate
agreement entered into between the Custodian and the Company or its authorized
representative with respect to certain matters concerning
22
certain electronic and online services as described therein and as may be made
available from time to time by the Custodian to the Company.
13.11 Electronic Reports shall mean any reports prepared by the Custodian
and remitted to the Fund or its authorized representative via the internet or
electronic mail.
13.12 Foreign Custody Manager shall mean the Fund's foreign custody manager
appointed pursuant to Rule 17f-5 of the 1940 Act.
13.13 Foreign Financial Regulatory Authority shall have the meaning given
by Section 2(a)(50) of the 0000 Xxx.
13.14 Funds Transfer Services Schedule shall mean any separate schedule
entered into between the Custodian and the Fund or its authorized representative
with respect to certain matters concerning the processing of payment orders from
Principal Accounts of the Fund.
13.15 Global Custody Network Listing shall mean the Countries and
Subcustodians approved for Investments in non-U.S. Markets.
13.16 Instruction(s) shall have the meaning assigned in Section 4 hereof.
13.17 Investment Advisor shall mean any person or entity who is an
Authorized Person to give Instructions with respect to the investment and
reinvestment of the Fund's Investments.
13.18 Investment(s) shall mean any investment asset of the Fund, including
without limitation securities, bonds, notes, and debentures as well as
receivables, derivatives, contractual rights or entitlements and other
intangible assets.
13.19 Margin Account shall have the meaning set forth in Section 6.4
hereof.
13.20 Principal Account(s) shall mean deposit accounts of the Fund carried
on the books of BBH&Co. as principal in accordance with Section 7 hereof.
13.21 Safekeeping Account shall mean an account established on the books of
the Custodian or any Subcustodian for purposes of segregating the interests of
the Fund (or clients of the Custodian or Subcustodian) from the assets of the
Custodian or any Subcustodian.
13.22 Securities Depository shall mean a central or book entry system or
agency established under
23
Applicable Law for purposes of recording the ownership and/or entitlement to
investment securities for a given market that, if a foreign Securities
Depository, meets the definitional requirements of Rule 17f-7 under the 1940
Act.
13.23 Subcustodian(s) shall mean each foreign bank appointed by the
Custodian pursuant to Section 8 hereof, but shall not include Securities
Depositories.
13.24 Tri-Party Agreement shall have the meaning set forth in Section 6.4
hereof.
13.25 1940 Act shall mean the Investment Company Act of 1940.
14. Compensation. The Fund agrees to pay to the Custodian (a) a fee in an amount
set forth in the fee letter between the Fund and the Custodian in effect on the
date hereof or as amended from time to time, and (b) all out-of-pocket expenses
incurred by the Custodian, including the fees and expenses of all Subcustodians,
and payable from time to time. Amounts payable by the Fund under and pursuant to
this Section 14 shall be payable by wire transfer to the Custodian at BBH&Co. in
New York, New York.
15. Termination. This Agreement may be terminated by either party in accordance
with the provisions of this Section. The provisions of this Agreement and any
other rights or obligations incurred or accrued by any party hereto prior to
termination of this Agreement shall survive any termination of this Agreement.
15.1 Notice and Effect. This Agreement may be terminated by either party by
written notice effective no sooner than seventy-five (75) consecutive calendar
days following the date that notice to such effect shall be delivered to other
party at its address set forth in Section 12.5 hereof.
15.2 Successor Custodian. In the event of the appointment of a successor
custodian, it is agreed that the Investments of the fund held by the Custodian
or any Subcustodian shall be delivered to the successor custodian in accordance
with reasonable Instructions. The Custodian agrees to cooperate with the Fund in
the execution of documents and performance of other actions necessary or
desirable in order to facilitate the succession of the new custodian. If no
successor custodian shall be appointed, the Custodian shall in like manner
transfer the Fund's
24
Investments in accordance with Instructions.
15.3 Delayed Succession. If no Instruction has been given as of the
effective date of termination, Custodian may at any time on or after such
termination date and upon ten (10) consecutive calendar days written notice to
the Fund either (a) deliver the Investments of the Fund held hereunder to the
Fund at the address designated for receipt of notices hereunder; or (b) deliver
any investments held hereunder to a bank or trust company having a
capitalization of $2,000,000 USD equivalent and operating under the Applicable
law of the jurisdiction where such Investments are located, such delivery to be
at the risk of the Fund. In the event that Investments or moneys of the Fund
remain in the custody of the Custodian or its Subcustodians after the date of
termination owing to the failure of the Fund to issue Instructions with respect
to their disposition or owing to the fact that such disposition could not be
accomplished in accordance with such Instructions despite diligent efforts of
the Custodian, the Custodian shall be entitled to compensation for its services
with respect to such Investments and moneys during such period as the Custodian
or its Subcustodians retain possession of such items and the provisions of this
Agreement shall remain in full force and effect until disposition in accordance
with this Section is accomplished.
25
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
duly executed as of the date first above written.
I/we acknowledge receipt of a copy of this Agreement.
XXXXX BROTHERS XXXXXXXX & CO. NFJ DIVIDEND, INTEREST AND PREMIUM
STRATEGY FUND
By: By:
-------------------------------- ------------------------------------
Name: Xxxxxxx X. Xxxxxxxx Name: Xxxxx Xxxxxxxx
Title: Partner Title: President
Date: Date:
26
FUNDS TRANSFER SERVICES SCHEDULE TO CUSTODIAN AGREEMENT
1. Execution of Payment Orders. Xxxxx Brothers Xxxxxxxx & Co. (the Custodian) is
hereby instructed by NFJ DIVIDEND, INTEREST AND PREMIUM STRATEGY FUND (the
Company) to execute each payment order, whether denominated in United States
dollars or other applicable currencies, received by the Custodian in the
Company's name as sender and authorized and confirmed by an Authorized Person as
defined in a Custodian Agreement dated as of , 2005 by and between
--------------
the Custodian and the Company, as amended or restated from time thereafter (the
Agreement), provided that the Company has sufficient available funds on deposit
in a Principal Account as defined in the Agreement and provided that the order
(i) is received by the Custodian in the manner specified in this Funds Transfer
Services Schedule or any amendment hereafter; (ii) complies with any written
instructions and restrictions of the Company as set forth in this Funds Transfer
Services Schedule or any amendment hereafter; (iii) is authorized by the Company
or is verified by the Custodian in compliance with a security procedure set
forth in Paragraph 2 below for verifying the authenticity of a funds transfer
communication sent to the Custodian in the name of the Company or for the
detection of errors set forth in any such communication; and (iv) contains
sufficient data to enable the Custodian to process such transfer.
2. Security Procedure. The Company hereby elects to use the procedure selected
below as its security procedure (the Security Procedure). The Security Procedure
will be used by the Custodian to verify the authenticity of a payment order or a
communication amending or canceling a payment order. The Custodian will act on
instructions received provided the instruction is authenticated by the Security
Procedure. The Company agrees and acknowledges in connection with (i) the size,
type and frequency of payment orders normally issued or expected to be issued by
the Company to the Custodian, (ii) all of the security procedures offered to the
Company by the Custodian, and (iii) the usual security procedures used by
customers and receiving banks similarly situated, that authentication through
the Security Procedure shall be deemed commercially reasonable for the
authentication of all payment orders submitted to the Custodian. The Company
hereby elects (please choose one) the following Security Procedure as described
below:
[ ] BIDS and BIDS Worldview Payment Products. BIDS and BIDS Worldview
Payment Products, are on-line payment order authorization facilities
with built-in authentication procedures. The Custodian and the Company
shall each be responsible for maintaining the confidentiality of
passwords or other codes to be used by them in connection with BIDS.
The Custodian will act on instructions received through BIDS without
duty of further confirmation unless the Company notifies the Custodian
that its password is not secure.
[ ] SWIFT. The Custodian and the Company shall comply with SWIFT's
authentication procedures. The Custodian will act on instructions
received via SWIFT provided the instruction is authenticated by the
SWIFT system.
[ ] Tested Telex. The Custodian will accept payment orders sent by tested
telex, provided the test key matches the algorithmic key the Custodian
and Company have agreed to use.
[ ] Computer Transmission. The Custodian is able to accept transmissions
sent from the Company's computer facilities to the Custodian's
computer facilities provided such transmissions are encrypted and
digitally certified or are otherwise authenticated in a reasonable
manner based on available technology. Such procedures shall be
established in an operating protocol between the Custodian and the
Company.
[ ] Telefax Instructions. A payment order transmitted to the Custodian by
telefax transmission shall transmitted by the Company to a telephone
number specified from time to time by the Custodian for such purposes.
If it detects no discrepancies, the Custodian will then either:
27
1. If the telefax requests a repetitive payment order, the
Custodian may call the Company at its last known telephone
number, request to speak to the Company or Authorized
Person, and confirm the authorization and the details of the
payment order (a Callback); or
2. If the telefax requests a non-repetitive order, the
Custodian will perform a Callback.
All faxes must be accompanied by a fax cover sheet which indicates the
sender's name, company name, telephone number, fax number, number of
pages, and number of transactions or instructions attached.
[ ] Telephonic. A telephonic payment order shall be called into the
Custodian at the telephone number designated from time to time by the
Custodian for that purpose. The caller shall identify herself/himself
as an Authorized Person. The Custodian shall obtain the payment order
data from the caller. The Custodian shall then:
1. If a telephonic repetitive payment order, the Custodian may
perform a Callback; or
2. If a telephonic non-repetitive payment order, the Custodian
will perform a Callback.
In the event the Company chooses a procedure which is not a Security Procedure
as described above, the Company agrees to be bound by any payment order (whether
or not authorized) issued in its name and accepted by the Custodian in
compliance with the procedure selected by the Company.
3. Rejection of Payment Orders. The Custodian shall give the Company
timely notice of the Custodian's rejection of a payment order. Such
notice may be given in writing or orally by telephone, each of which
is hereby deemed commercially reasonable. In the event the Custodian
fails to execute a properly executable payment order and fails to give
the Company notice of the Custodian's non-execution, the Custodian
shall be liable only for the Company's actual damages and only to the
extent that such damages are recoverable under UCC 4A (as defined in
Paragraph 7 below). Notwithstanding anything in this Funds Transfer
Services Schedule and the Agreement to the contrary, the Custodian
shall in no event be liable for any consequential or special damages
under this Funds Transfer Services Schedule, whether or not such
damages relate to services covered by UCC 4A, even if the Custodian
has been advised of the possibility of such damages. Whenever
compensation in the form of interest is payable by the Custodian to
the Company pursuant to this Funds Transfer Services Schedule, such
compensation will be payable as specified in UCC 4A.
4. Cancellation of Payment Orders. The Company may cancel a payment
order but the Custodian shall have no liability for the Custodian's
failure to act on a cancellation instruction unless the Custodian has
received such cancellation instruction at a time and in a manner
affording the Custodian reasonable opportunity to act prior to the
Custodian's execution of the order. Any cancellation shall be sent and
confirmed in the manner set forth in Paragraph 2 above.
28
5. Responsibility for the Detection of Errors and Unauthorized Payment Orders.
Except as may be provided, the Custodian is not responsible for detecting any
Company error contained in any payment order sent by the Company to the
Custodian. In the event that the Company's payment order to the Custodian either
(i) identifies the beneficiary by both a name and an identifying or bank account
number and the name and number identify different persons or entities, or (ii)
identifies any bank by both a name and an identifying number and the number
identifies a person or entity different from the bank identified by name,
execution of the payment order, payment to the beneficiary, cancellation of the
payment order or actions taken by any bank in respect of such payment order may
be made solely on the basis of the number. The Custodian shall not be liable for
interest on the amount of any payment order that was not authorized or was
erroneously executed unless the Company so notifies the Custodian within thirty
(30) business days following the Company's receipt of notice that such payment
order had been processed. If a payment order in the name of the Company and
accepted by the Custodian was not authorized by the Company, the liability of
the parties will be governed by the applicable provisions of UCC 4A.
6. Laws and Regulations. The rights and obligations of the Custodian and the
Company with respect to any payment order executed pursuant to this Funds
Transfer Services Schedule will be governed by any applicable laws, regulations,
circulars and funds transfer system rules, the laws and regulations of the
United States of America and of other relevant countries including exchange
control regulations and limitations on dealings or other sanctions, and
including without limitation those sanctions imposed under the law of the United
States of America by the Office of Foreign Assets Control. Any taxes, fines,
costs, charges or fees imposed by relevant authorities on such transactions
shall be for the account of the Company.
7. Miscellaneous. All accounts opened by the Company or its authorized agents at
the Custodian subsequent to the date hereof shall be governed by this Funds
Transfer Schedule. All terms used in this Funds Transfer Services Schedule shall
have the meaning set forth in Article 4A of the Uniform Commercial Code as
currently in effect in the State of New York (UCC 4A) unless otherwise set forth
herein. The terms and conditions of this Funds Transfer Services Schedule are in
addition to, and do not modify or otherwise affect, the terms and conditions of
the Agreement and any other agreement or arrangement between the parties hereto.
8. Indemnification. The Custodian does not recommend the sending of instructions
by telefax or telephonic means as provided in Paragraph 2. BY ELECTING TO SEND
INSTRUCTIONS BY TELEFAX OR TELEPHONIC MEANS, THE COMPANY AGREES TO INDEMNIFY THE
CUSTODIAN AND ITS PARTNERS, OFFICERS AND EMPLOYEES FOR ALL LOSSES THEREFROM.
----------
OPTIONAL: The Custodian will perform a Callback if instructions are
sent by telefax or telephonic means as provided in Paragraph 2 above. THE
COMPANY MAY, AT ITS OWN RISK AND BY HEREBY AGREEING TO INDEMNIFY THE
CUSTODIAN AND ITS PARTNERS, OFFICERS AND EMPLOYEES FOR ALL LOSSES
THEREFROM, ELECT TO WAIVE A CALLBACK BY THE CUSTODIAN BY INITIALLING
HERE:
----
----------
I/we acknowledge receipt of a copy of this Schedule.
Accepted and agreed:
XXXXX BROTHERS XXXXXXXX & CO. NFJ DIVIDEND, INTEREST AND PREMIUM
STRATEGY FUND
29
By: By:
-------------------------------- ------------------------------------
Name: Xxxxxxx X. Xxxxxxxx Name: Xxxxx Xxxxxxxx
Title: Partner Title: President
Date: Date:
30
ELECTRONIC AND ON-LINE SERVICES
SCHEDULE
This Electronic and On-Line Services Schedule (this Schedule) to a Custodian
Agreement dated as of (as amended from time to time
---------------------
hereafter, the Agreement) by and between Xxxxx Brothers Xxxxxxxx & Co. (we, us
our) and NFJ DIVIDEND, INTEREST AND PREMIUM STRATEGY FUND (you, your), provides
general provisions governing your use of and access to the Services (as
hereinafter defined) provided to you by us via the Internet (at xxx.xxxxx.xxx or
such other URL as we may instruct you to use to access our products) and via a
direct dial-up connection between your computer and our computers, as of
, , 2005 (the Effective Date). Use of the Services
---------------- -----
constitutes acceptance of the terms and conditions of this Schedule, any
Appendices hereto, the Terms and Conditions posted on our web site, and any
terms and conditions specifically governing a particular Service or our other
products, which may be set forth in the Agreement or in a separate related
agreement (collectively, the Related Agreements).
1. General Terms.
You will be granted access to our suite of online products, which may
include, but shall not be limited to the following services via the
Internet or dial-up connection (each separate service is a Service;
collectively referred to as the Services):
1.1. BIDS(R) and BIDS WorldView, a system for effectuating securities and
fund trade instruction and execution, processing and handling
instructions, and for the input and retrieval of other information;
1.2. F/X WorldView, a system for executing foreign exchange trades;
1.3. Fund WorldView, a system for receiving fund and prospectus
information;
1.4. BBHCOnnect, a system for placing securities trade instructions and
following the status and detail of trades;
1.5. ActionView(SM), a system for receiving certain corporate action
information;
1.6. Risk View, an interactive portfolio risk analysis tool; and
1.7. Such other services as we shall from time to time offer.
2. Security / Passwords.
2.1. A digital certificate and/or an encryption key may be required to
access certain Services. You may apply for a digital certificate
and/or an encryption key by following the procedures set forth at
xxxx://xxx.xxx.xxx/xxxxx/. You also will need an identification code
(ID) and password(s) (Password) to access the Services.
2.2. You agree to safeguard your digital certificate and/or encryption key,
ID, and Password and not to give or make available, intentionally or
otherwise, your digital certificate, ID, and/or Password to any
unauthorized person. You must immediately notify us in writing if you
believe that your digital certificate and/or encryption key, Password,
or ID has been compromised or if you suspect unauthorized access to
your account by means of the Services or otherwise, or when a person
to whom a digital certificate and/or an encryption key, Password, or
ID has been assigned leaves or is no longer permitted to access the
Services.
2.3. We will not be responsible for any breach of security, or for any
unauthorized trading or theft by any third party, caused by your
failure (be it intentional, unintentional, or negligent) to maintain
the confidentiality of your ID and/or Password and/or the security of
your digital certificate and/or encryption key.
31
3. Instructions.
3.1. Proper instructions under this Schedule shall be provided as
designated in the Related Agreements (Instructions).
3.2. The following additional provisions apply to Instructions provided via
the Services:
a. Instructions sent by electronic mail will not be accepted or
acted upon.
b. You authorize us to act upon Instructions received through the
Services utilizing your digital certificate, ID, and/or Password
as though they were duly authorized written instructions, without
any duty of verification or inquiry on our part, and agree to
hold us harmless for any losses you experience as a result.
c. From time to time, the temporary unavailability of third party
telecommunications or computer systems required by the Services
may result in a delay in processing Instructions. In such an
event, we shall not be liable to you or any third party for any
liabilities, losses, claims, costs, damages, penalties, fines,
obligations, or expenses of any kind (including without
limitation, reasonable attorneys', accountants', consultants', or
experts' fees and disbursements) that you experience due to such
a delay.
4. Electronic Documents.
We may make periodic statements, disclosures, notices, and other documents
available to you electronically, and, subject to any delivery and receipt
verification procedures required by law, you agree to receive such
documents electronically and to check the statements for accuracy. If you
believe any such statement contains incorrect information, you must follow
the procedures set forth in the Related Agreement(s).
5. Malicious Code.
You understand and agree that you will be responsible for the introduction
(by you, your employees, agents, or representatives) into the Services,
whether intentional or unintentional, of (i) any virus or other code,
program, or sub-program that damages or interferes with the operation of
the computer system containing the code, program or sub-program, or halts,
disables, or interferes with the operation of the Services themselves; or
(ii) any device, method, or token whose knowing or intended purpose is to
permit any person to circumvent the normal security of the Services or the
system containing the software code for the Services (Malicious Code). You
agree to take all necessary actions and precautions to prevent the
introduction and proliferation of any Malicious Code into those systems
that interact with the Services.
6. Indemnification.
For avoidance of doubt, you hereby agree that the provisions in the Related
Agreement(s) related to your indemnification of us and any limitations on
our liability and responsibilities to you shall be applicable to this
Agreement, and are hereby expressly incorporated herein. You agree that the
Services are comprised of telecommunications and computer systems, and that
it is possible that Instructions, information, transactions, or account
reports might be added to, changed, or omitted by electronic or programming
malfunction, unauthorized access, or other failure of the systems which
comprise the Services, despite the security features that have been
designed into the Services. You agree that we will not be liable for any
action taken or not taken in complying with the terms of this Schedule,
except for our willful misconduct or gross negligence. The provisions of
this paragraph shall survive the termination of this Schedule and the
Related Agreements.
7. Payment.
You may be charged for services hereunder as set forth in a fee schedule
from time to time agreed by us.
8. Term/Termination.
32
8.1. This Schedule is effective as of the date you sign it or first use the
Services, whichever is first, and continues in effect until such time
as either you or we terminate the Schedule in accordance with this
Section 8 and/or until your off-line use of the Services is
terminated.
8.2. We may terminate your access to the Services at any time, for any
reason, with five (5) business days prior notice; provided that we may
terminate your access to the Services with no prior notice (i) if your
account with us is closed, (ii) if you fail to comply with any of the
terms of this Agreement, (iii) if we believe that your continued
access to the Services poses a security risk, or (iv) if we believe
that you are violating or have violated applicable laws, and we will
not be liable for any loss you may experience as a result of such
termination. You may terminate your access to the Services at any time
by giving us ten (10) business days notice. Upon termination, we will
cancel all your Passwords and IDs and any in-process or pending
Instructions will be carried out or cancelled, at our sole discretion.
9. Miscellaneous.
9.1. Notices. All notices, requests, and demands (other than routine
operational communications, such as Instructions) shall be in such
form and effect as provided in the Related Agreement(s).
9.2. Inconsistent Provisions. Each Service may be governed by separate
terms and conditions in addition to this Schedule and the Related
Agreement(s). Except where specifically provided to the contrary in
this Schedule, in the event that such separate terms and conditions
conflict with this Schedule and the Related Agreement(s), the
provisions of this Schedule shall prevail to the extent this Schedule
applies to the transaction in question.
9.3. Binding Effect; Assignment; Severability. This Schedule shall be
binding on you, your employees, officers and agents. We may assign or
delegate our rights and duties under this Schedule at any time without
notice to you. Your rights under this Schedule may not be assigned
without our prior written consent. In the event that any provision of
this Schedule conflicts with the law under which this Schedule is to
be construed or if any such provision is held invalid or unenforceable
by a court with jurisdiction over you and us, such provision shall be
deemed to be restated to effectuate as nearly as possible the purposes
of the Schedule in accordance with applicable law. The remaining
provisions of this Schedule and the application of the challenged
provision to persons or circumstances other than those as to which it
is invalid or unenforceable shall not be affected thereby, and each
such provision shall be valid and enforceable to the full extent
permitted by law.
9.4. Choice of Law; Jury Trial. This Schedule shall be governed by and
construed, and the legal relations between the parties shall be
determined, in accordance with the laws of the State of New York,
without giving effect to the principles of conflicts of laws. Each
party agrees to waive its right to trial by jury in any action or
proceeding based upon or related to this Agreement. The parties agree
that all actions and proceedings based upon or relating to this
Schedule shall be litigated exclusively in the federal and state
courts located within New York City, New York.
I/we acknowledge receipt of a copy of this Schedule.
NFJ DIVIDEND, INTEREST AND PREMIUM
STRATEGY FUND
By:
------------------------------------
Name: Xxxxx Xxxxxxxx
Title: President
Date:
33
17F-5 DELEGATION SCHEDULE
By its execution of this Delegation Schedule dated as of
, 2005, NFJ DIVIDEND, INTEREST AND PREMIUM STRATEGY FUND, a
-------------------
management investment company registered with the Securities and Exchange
Commission (the Commission) under the Investment Company Act of 1940, as
amended, (the 1940 Act), acting through its Board of Directors/Trustees or its
duly appointed representative (the Fund), hereby appoints XXXXX BROTHERS
XXXXXXXX & CO., a New York limited partnership with an office in Boston,
Massachusetts (the Delegate) as its delegate to perform certain functions with
respect to the custody of Fund's Assets outside the United States.
1. Maintenance of Fund's Assets Abroad. The Fund, acting through its Board or
its duly authorized representative, hereby instructs Delegate pursuant to the
terms of the Custodian Agreement dated as of the date hereof executed by and
between the Fund and the Delegate (the Custodian Agreement) to place and
maintain the Fund's Assets in countries outside the United States in accordance
with Instructions received from the Fund's Investment Advisor. Such instruction
shall represent an Instruction under the terms of the Custodian Agreement. The
Fund acknowledges that (a) the Delegate shall perform services hereunder only
with respect to the countries where it accepts delegation as Foreign Custody
Manager as indicated on your Global Custody Network Listing; (b) depending on
conditions in the particular country, advance notice may be required before the
Delegate shall be able to perform its duties hereunder in or with respect to
such country (such advance notice to be reasonable in light of the specific
facts and circumstances attendant to performance of duties in such country); and
(c) nothing in this Delegation Schedule shall require the Delegate to provide
delegated or custodial services in any country, and there may from time to time
be countries as to which the Delegate determines it will not provide delegation
services.
2. Delegation. Pursuant to the provisions of Rule 17f-5 under the 1940 Act as
amended, the Board hereby delegates to the Delegate, and the Delegate hereby
accepts such delegation and agrees to perform, only those duties set forth in
this Delegation Schedule concerning the safekeeping of the Fund's Assets in each
of the countries as to which it acts as the Board's delegate. The Delegate is
hereby authorized to take such actions on behalf of or in the name of the Fund
as are reasonably required to discharge its duties under this Delegation
Schedule, including, without limitation, to cause the Fund's Assets to be placed
with a particular Eligible Foreign Custodian in accordance herewith. The Fund
confirms to the Delegate that the Fund or its investment adviser has considered
the Sovereign Risk and prevailing Country Risk as part of its continuing
investment decision process, including such factors as may be reasonably related
to the systemic risk of maintaining the Fund's Assets in a particular country,
including, but not limited to, financial infrastructure, prevailing custody and
settlement systems and practices (including the use of any Securities Depository
in the context of information provided by the Custodian in the
1
performance of its duties as required under Rule 17f-7 and the terms of the
Custodian Agreement governing such duties), and the laws relating to the
safekeeping and recovery of the Fund's Assets held in custody pursuant to the
terms of the Custodian Agreement.
3. Selection of Eligible Foreign Custodian and Contract Administration. The
Delegate shall perform the following duties with respect to the selection of
Eligible Foreign Custodians and administration of certain contracts governing
the Fund's foreign custodial arrangements:
(a) Selection of Eligible Foreign Custodian. The Delegate shall place
and maintain the Fund's Assets with an Eligible Foreign Custodian; provided that
the Delegate shall have determined that the Fund's Assets will be subject to
reasonable care based on the standards applicable to custodians in the relevant
market after considering all factors relevant to the safekeeping of such assets
including without limitation:
(i) The Eligible Foreign Custodian's practices, procedures, and
internal controls, including, but not limited to, the physical protections
available for certificated securities (if applicable), the controls and
procedures for dealing with any Securities Depository, the method of
keeping custodial records, and the security and data protection practices;
(ii) Whether the Eligible Foreign Custodian has the requisite
financial strength to provide reasonable care for the Fund's Assets;
(iii) The Eligible Foreign Custodian's general reputation and
standing; and
(iv) Whether the Fund will have jurisdiction over and be able to
enforce judgments against the Eligible Foreign Custodian, such as by virtue
of the existence of any offices of such Eligible Foreign Custodian in the
United States or such Eligible Foreign Custodian's appointment of an agent
for service of process in the United States or consent to jurisdiction in
the United States.
The Delegate shall be required to make the foregoing determination to the best
of its knowledge and belief based only on information reasonably available to
it.
(b) Contract Administration. The Delegate shall cause that the foreign
custody arrangements with an Eligible Foreign Custodian shall be governed by a
written contract that the Delegate has determined will provide reasonable care
for Fund assets based on the standards applicable to custodians in the relevant
market. Each such contract shall, except as set forth in the last paragraph of
this subsection (b), include provisions that provide:
(i) For indemnification or insurance arrangements (or any combination
of the foregoing) such
2
that the Fund will be adequately protected against the risk of loss of
assets held in accordance with such contract;
(ii) That the Fund's Assets will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the Eligible
Foreign Custodian or its creditors except a claim of payment for their safe
custody or administration or, in the case of cash deposits, liens or rights
in favor of creditors of such Custodian arising under bankruptcy,
insolvency or similar laws;
(iii) That beneficial ownership of the Fund's Assets will be freely
transferable without the payment of money or value other than for safe
custody or administration;
(iv) That adequate records will be maintained identifying the Fund's
Assets as belonging to the Fund or as being held by a third party for the
benefit of the Fund;
(v) That the Fund's independent public accountants will be given
access to those records described in (iv) above or confirmation of the
contents of such records; and
(vi) That the Delegate will receive sufficient and timely periodic
reports with respect to the safekeeping of the Fund's Assets, including,
but not limited to, notification of any transfer to or from the Fund's
account or a third party account containing the Fund's Assets.
Such contract may contain, in lieu of any or all of the provisions
specified in this Section 3(b), such other provisions that the Delegate
determines will provide, in their entirety, the same or a greater level of
care and protection for the Fund's Assets as the specified provisions, in
their entirety.
(c) Limitation to Delegated Selection. Notwithstanding anything in
this Delegation Schedule to the contrary, the duties under this Section 3 shall
apply only to Eligible Foreign Custodians selected by the Delegate and shall not
apply to Securities Depositories or to any Eligible Foreign Custodian that the
Delegate is directed to use pursuant to Section 7 of this Delegation Schedule.
4. Monitoring. The Delegate shall establish a system to monitor at reasonable
intervals (but at least annually) the appropriateness of maintaining the Fund's
Assets with each Eligible Foreign Custodian that has been selected by the
Delegate pursuant to Section 3 of this Delegation Schedule. The Delegate shall
monitor the continuing appropriateness of placement of the Fund's Assets in
accordance with the criteria established under Section 3(a) of this Delegation
Schedule. The Delegate shall monitor the continuing appropriateness of the
contract governing the Fund's arrangements in accordance with the criteria
established under Section 3(b) of this Delegation Schedule.
3
5. Reporting. At least annually and more frequently as mutually agreed between
the parties, the Delegate shall provide to the Board written reports specifying
placement of the Fund's Assets with each Eligible Foreign Custodian selected by
the Delegate pursuant to Section 3 of this Delegation Schedule and shall
promptly report as to any material changes to such foreign custody arrangements.
Delegate will prepare such a report with respect to any Eligible Foreign
Custodian that the Delegate has been instructed to use pursuant to Section 7 of
this Delegation Schedule only to the extent specifically agreed with respect to
the particular situation.
6. Withdrawal of Fund's Assets. If the Delegate determines that an arrangement
with a specific Eligible Foreign Custodian selected by the Delegate under
Section 3 of this Delegation Schedule no longer meets the requirements of said
Section, Delegate shall withdraw the Fund's Assets from the non-complying
arrangement as soon as reasonably practicable; provided, however, that if in the
reasonable judgment of the Delegate, such withdrawal would require liquidation
of any of the Fund's Assets or would materially impair the liquidity, value or
other investment characteristics of the Fund's Assets, it shall be the duty of
the Delegate to provide information regarding the particular circumstances and
to act only in accordance with Instructions of the Fund or its Investment
Advisor with respect to such liquidation or other withdrawal.
7. Direction as to Eligible Foreign Custodian. Notwithstanding this Delegation
Schedule, the Fund, acting through its Board, its Investment Advisor or its
other authorized representative, may direct the Delegate to place and maintain
the Fund's Assets with a particular Eligible Foreign Custodian, including
without limitation with respect to investment in countries as to which the
Custodian will not provide delegation services. In such event, the Delegate
shall be entitled to rely on any such instruction as an Instruction under the
terms of the Custodian Agreement and shall have no duties under this Delegation
Schedule with respect to such arrangement save those that it may undertake
specifically in writing with respect to each particular instance.
8. Standard of Care. In carrying out its duties under this Delegation Schedule,
the Delegate agrees to exercise reasonable care, prudence and diligence such as
a person having responsibility for safekeeping the Fund's Assets would exercise.
9. Representations. The Delegate hereby represents and warrants that it is a
U.S. Bank and that this Delegation Schedule has been duly authorized, executed
and delivered by the Delegate and is a legal, valid and binding agreement of the
Delegate.
The Fund hereby represents and warrants that its Board of Directors has
determined that it is
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reasonable to rely on the Delegate to perform the delegated responsibilities
provided for herein and that this Delegation Schedule has been duly authorized,
executed and delivered by the Fund and is a legal, valid and binding agreement
of the Fund.
10. Effectiveness; termination. This Delegation Schedule shall be effective as
of the date on which this Delegation Schedule shall have been accepted by the
Delegate, as indicated by the date set forth below the Delegate's signature.
This Delegation Schedule may be terminated at any time, without penalty, by
written notice from the terminating party to the non-terminating party. Such
termination shall be effective on the 30th calendar day following the date on
which the non-terminating party shall receive the foregoing notice. The
foregoing to the contrary notwithstanding, this Delegation Schedule shall be
deemed to have been terminated concurrently with the termination of the
Custodian Agreement.
11. Notices. Notices and other communications under this Delegation Schedule are
to be made in accordance with the arrangements designated for such purpose under
the Custodian Agreement unless otherwise indicated in a writing referencing this
Delegation Schedule and executed by both parties.
12. Definitions. Capitalized terms in this Delegation Schedule have the
following meanings:
a. Eligible Foreign Custodian - shall have the meaning set forth in
Rule 17f-5(a)(1) and shall also include a U.S. Bank.
b. Fund's Assets - shall mean any of the Fund's investments (including
foreign currencies) for which the primary market is outside the United
States, and such cash and cash equivalents as are reasonably necessary
to effect the Fund's transactions in such investments.
c. Instructions - shall have the meaning set forth in the Custodian
Agreement.
d. Securities Depository - shall have the meaning set forth in Rule
17f-7.
e. Sovereign Risk - shall have the meaning set forth in Section 9.1.3
of the Custodian Agreement.
f. U.S. Bank - shall mean a bank which qualifies to serve as a
custodian of assets of investment companies under Section 17(f) of the
Act.
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13. Governing Law and Jurisdiction. This Delegation Schedule shall be construed
in accordance with the laws of the State of New York. The parties hereby submit
to the exclusive jurisdiction of the Federal courts sitting in the State of New
York or the Commonwealth of Massachusetts or of the state courts of either such
State or such Commonwealth.
14. Fees. Delegate shall perform its functions under this Delegation Schedule
for the compensation determined under the Custodian Agreement.
15. Integration. This Delegation Schedule sets forth all of the Delegate's
duties with respect to the selection and monitoring of Eligible Foreign
Custodians, the administration of contracts with Eligible Foreign Custodians,
the withdrawal of assets from Eligible Foreign Custodians and the issuance of
reports in connection with such duties. The terms of the Custodian Agreement
shall apply generally as to matters not expressly covered in this Delegation
Schedule, including dealings with the Eligible Foreign Custodians in the course
of discharge of the Delegate's obligations under the Custodian Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
duly executed as of the date first above written.
I/we acknowledge receipt of a copy of this Schedule.
XXXXX BROTHERS XXXXXXXX & CO. NFJ DIVIDEND, INTEREST AND PREMIUM
STRATEGY FUND
By:
------------------------- ----------------------------------
Name: Xxxxxxx X. Xxxxxxxx Name: Xxxxx Xxxxxxxx
Title: Partner Title: President
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