FIRST AMENDMENT
TO CUSTODY AGREEMENT
This instrument dated __________________, 1998, is a First Amendment to
that certain Custody Agreement dated December 29, 1993, by and between XXXXXX
XXXXXXXX INVESTMENT TRUST, a business trust organized under the laws of the
State of Delaware, having its principal office and place of business at 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Trust"), on behalf of each series
of the Trust listed on Schedule I, or later added to Schedule I and made a party
to this agreement (each a "Portfolio") and THE NORTHERN TRUST COMPANY (the
"Custodian"), an Illinois company with its principal place of business at 00
Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000.
WHEREAS, the Trust is a registered open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Trust has retained the Custodian to furnish custodial
services;
WHEREAS, the Board of Trustees of the Trust (the "Board") wishes to
delegate to the Custodian certain responsibilities with respect to the Trust's
foreign custody arrangements in accordance with Rule 17f-5 under the 1940 Act;
WHEREAS, the Board has determined that it is reasonable to rely on the
Custodian to perform the responsibilities delegated to it under this Amendment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree to amend the Custody Agreement, pursuant to the terms
thereof, as follows:
1. Section 1(n) of the Custody Agreement is amended to read as follows:
(n) "Sub-Custodian" shall mean and include (i) any branch of the
Custodian, (ii) any bank which qualifies to serve as a custodian of assets
of investment companies under Section 17(f) of the 1940 Act, and (iii) any
"eligible foreign custodian," as that term is defined in Section (a)(1) of
Rule 17f-5 under the 1940 Act.
2. The following definitions are added to Section 1:
(r) "Delegate" of the Trust shall mean and include any entity to whom the
Board has delegated any responsibility pursuant to Section (b) of Rule
17f-5 of the 1940 Act.
(s) "Country Risks" means all factors reasonably related to the systemic
risk of holding Foreign Assets in a particular country including, but not
limited to, such country's political environment; economic and financial
infrastructure (including financial institutions such as any Mandatory
Securities Depositories operating in the country); prevailing custody and
settlement practices; and laws and regulations applicable to the
safekeeping and recovery of Foreign Assets held in custody in that
country.
(t) "Foreign Assets" means the investments (including foreign currencies)
of any Portfolio for which the primary market is outside the United States
and such cash and cash equivalents as are reasonably necessary to effect
the Portfolio's transactions in such investments.
(u) "Mandatory Securities Depository" means a Securities Depository that
the Delegate and the Trust agree, either as a legal or practical matter,
must be used if a Portfolio determines to place Foreign Assets in a
country outside the United States (i) because required by law or
regulations; (ii) because securities cannot be withdrawn from such
Securities Depository; or (iii) because maintaining or effecting trades in
securities outside the Securities Depository is not consistent with
prevailing custodial or market practices of U.S. investment companies
investing in securities of the type held by the Securities Depository.
(v) "Securities Depository" has the same meaning as set forth in Section
(a)(6)of Rule 17f-5.
3. Section 3 of the Custody Agreement is amended to read as follows:
"3. Appointment and Removal of Sub-Custodians.
(a) The Custodian may appoint one or more sub-custodians to act as
Depository or Depositories or as Sub-Custodian or Sub-Custodians of
Securities and moneys at any time held in any Portfolio, upon the terms
and conditions specified in this Agreement. The Custodian shall oversee
the maintenance by any Sub-Custodian of any Securities or moneys of any
Portfolio.
(b) Prior to the Custodian's use of any Sub-Custodian described in Section
1
(n), the Board or its Delegate must approve such Sub-Custodian and the
agreement between the Custodian and such Sub-Custodian in the manner
required
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by Rule 17f-5 and provide the Custodian with satisfactory
evidence of such approval.
(c) The Custodian shall promptly take such steps as may be required to
remove any Sub-Custodian that has ceased to be an "eligible foreign
custodian" or has otherwise ceased to meet the requirements of Section 17
(f) of the 1940 Act or Rule 17f-5 thereunder. If the Custodian intends to
remove any Sub-Custodian previously approved by the Board or its Delegate
pursuant to paragraph 3(b), and the Custodian proposes to replace such
Sub-Custodian with a Sub-Custodian that has not yet been approved by the
Board or its Delegate, it will so notify the Board or its Delegate and
provide it with information reasonably necessary to determine such
proposed Sub-Custodian's eligibility under Rule 17f-5, including a copy of
the proposed agreement with such Sub-Custodian. The Board shall at its
meeting next following receipt of such notice and information, or a
Delegate shall promptly, determine whether to approve the proposed
Sub-Custodian and will promptly thereafter give written notice of the
approval or disapproval of the proposed action.
(d) The Custodian hereby warrants to the Trust that in its opinion, after
due inquiry, the established procedures to be followed by each
Sub-Custodian in connection with the safekeeping of property of a
Portfolio pursuant to this Agreement afford reasonable care for the
safekeeping of assets of an investment company registered under the 1940
Act based on the standards of custody applicable in the relevant market.
4. The following is added as Section 3A to the Custody Agreement:
"3A. Delegation to Act as Foreign Custody Manager.
(a) Delegation to the Custodian. The Trust, by resolution of the
Board, hereby appoints the Custodian as its Delegate for each
Portfolio and delegates to the Custodian the responsibilities set
forth in this Section 3A with respect to Foreign Assets held outside
the United States.
(b) Countries Covered. The Delegate shall be responsible for
performing the delegated responsibilities defined below only with
respect to the countries listed on Schedule II of this Agreement,
which may be amended from time to time if such amendment is accepted
in writing by the Trust and the Delegate. Mandatory Securities
Depositories are listed on Schedule III to this Agreement, which may
be amended from time to time if such amendment is accepted in
writing by the Trust and the Delegate.
(c) Scope of Delegated Responsibilities.
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(1) Selection of Sub-Custodians. For each Portfolio, the Delegate shall
place and maintain the Foreign Assets in the care of a Sub-Custodian
selected by the Delegate in each country listed on Schedule II, as amended
in accordance with this Agreement; provided that for each such
Sub-Custodian that is not a Mandatory Securities Depository the Delegate
shall have determined that the Foreign Assets will be subject to
reasonable care if held by that Sub-Custodian, 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 Sub-Custodian's practices, procedures and internal
controls, including, but not limited to, the physical protections
available for certified securities (if applicable), its method of
keeping custodial records, and its security and data protection
practices;
(ii) whether the Sub-Custodian has the requisite financial
strength to provide reasonable care for the Foreign Assets;
(iii) the Sub-Custodian's general reputation and standing and,
in the case of a Securities Depository which is not a Mandatory
Securities Depository, the Securities Depository's operating history
and the number of participants in the Securities Depository; and
(iv) whether the Trust or the relevant Portfolio will have
jurisdiction over and be able to enforce judgments against the
Sub-Custodian, such as by virtue of the existence of any officers of
the Sub-Custodian in the United States or the Sub-Custodian's
consent to service of process in the United States.
Although the Delegate shall place and maintain the Foreign Assets
with Mandatory Securities Depositories upon receipt of Written
Instructions from the Portfolio's representatives, the Delegate shall not
be responsible for, or liable for any loss in connection with, the
selection of any such Depository.
(2) Contracts with Sub-Custodians. For each Sub-Custodian selected
by the Delegate, the Delegate shall (or, in the case of a Securities
Depository which is not a Mandatory Securities Depository, may under the
rules of established practices or procedures of the Securities Depository
enter into a written contract governing each Portfolio's foreign custody
arrangements with such Sub-Custodian. The Delegate shall determine that
each such contract will provide reasonable care for the Foreign Assets
held by that Sub-Custodian that is not a Mandatory Securities Depository
based on the standards specified in Section 3A(c)(1) of this Agreement.
Each such contract shall include provisions that provide:
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(i) for indemnification or insurance arrangements (or any
combination of the foregoing) such that the relevant Portfolio will
be adequately protected against the risk of loss of the Foreign
Assets held in accordance with such contract;
(ii) that the Foreign Assets will not be subject to any right,
security interest, lien or claim of any kind in favor of the
Sub-Custodian or its creditors except the claim or payment for their
safe custody or administration or, in the case of cash deposits,
liens or rights in favor of creditors of the Sub-Custodian arising
under bankruptcy, insolvency, or similar laws;
(iii) that beneficial ownership of the Foreign 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
Foreign Assets as belonging to the relevant Portfolio or as being
held by a third party for the benefit of the relevant Portfolio;
(v) that the Trust's independent public accountants will be
given access to those records or confirmation of the contents of
those records; and
(vi) that the Trust on behalf of each Portfolio will receive
periodic reports with respect to the safekeeping of the Foreign
Assets, including, but not limited to, notification of any transfer
of the Foreign Assets to or from a Portfolio's account or a third
party containing the Foreign Assets held for the benefit of the
Portfolio,
or, in lieu of any or all of the provisions set forth in (i) through (vi)
above, such other provisions that the Delegate determines will provide, in
their entirety, the same or greater level of care and protection for the
Foreign Assets as the provisions set forth in (i) through (vi) above in
their entirety. It is understood that the responsibility for establishing
and maintaining arrangements with Securities Depositories in each foreign
jurisdiction rests with the Sub-Custodian for such jurisdiction.
(d) Monitoring. In each case in which the Delegate maintains Foreign
Assets with a Sub-Custodian selected by the Delegate, the Delegate shall
establish a system to monitor at reasonable intervals the initial and
continued appropriateness of (i) maintaining the Foreign Assets with such
Sub-Custodian and (ii) the contract governing the custody arrangements
established by the Delegate with the Sub-Custodian.
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(e) Withdrawal of Foreign Assets. If the Delegate determines that an
arrangement with a specific Sub-Custodian selected by the Delegate under
Section 3A of this Agreement no longer meets the requirements of said
Section, the Delegate shall withdraw the Foreign Assets from the care of
such Sub-Custodian 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 Foreign Assets or would materially
impair the liquidity, value or other investment characteristics of the
Foreign Assets, it shall be the duty of the Delegate to provide
information regarding the particular circumstances and to act only in
accordance with Written Instructions of the Board or its investment
adviser with respect to such liquidation or other withdrawal.
(f) Guidelines for the Exercise of Delegated Authority. The Trust
and the Custodian each expressly acknowledge that the Delegate shall not
be delegated any responsibility under this Section 3A with respect to
Mandatory Securities Depositories; provided, however, that should the
Securities and Exchange Commission amend Rule 17f-5 under the 1940 Act or
issue an interpretative position on the Rule requiring the Delegate to
assume any responsibility with respect to Mandatory Securities
Depositories or should it become the prevailing industry practice for
global custodians to assume any responsibilities with respect to Mandatory
Securities Depositories, the Delegate agrees to negotiate an amendment to
this Custody Agreement in good faith setting forth the terms under which
the Delegate will assume such responsibilities.
(g) Standard of Care as Delegate of the Trust. In performing the
responsibilities delegated to it, the Delegate agrees to exercise
reasonable care, prudence and diligence such as a person having
responsibility for the safekeeping of assets of management investment
companies registered under the 1940 Act would exercise. The Delegate
agrees to notify immediately the Board if, the Delegate believes it cannot
perform, in accordance with the foregoing standard of care, its duties
hereunder generally or with respect to any country specified in Schedule
II.
(h) Reporting Requirements. The Delegate shall provide to the Board
and each Portfolio's investment adviser written reports specifying
placement of Foreign Assets with each Sub-Custodian selected by the
Delegate and of any material changes in a Portfolio's foreign custody
arrangements effected by the Delegate pursuant to this Section 3A. Such
reports shall be provided to the Board at its regularly scheduled meeting
next following the event being reported provided that, if the Delegate
determines that any matter should be reported sooner, it shall promptly
following the occurrence of the event direct such report to the Trust's
Secretary for forwarding to the Board. At least annually, the Delegate
shall provide the Board a written statement as may be reasonably required
to enable the Board to determine that it is reasonable to rely on the
Delegate to perform its delegated duties under this Section 3A and that
the foreign custody arrangements
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delegated to the Delegate continue to meet the requirements of Rule 17f-5
under the 1940 Act.
(i) Effective Date and Termination of the Custodian as Delegate. The
Board's delegation to the Custodian as its Delegate shall be effective as
of the date of execution of this Amendment and shall remain in effect
until terminated at any time, without penalty, by written notice from the
terminating party to the non-terminating party. Termination will become
effective ninety (90) days (or such other period as agreed by the parties)
after receipt by the non-terminating party of such notice.
5. The following is added as Section 3B to the Custody Agreement:
"3B. Provision by Custodian of Services Relating to Country Risk.
With respect to the countries listed in Schedule II, or added thereto, the
Custodian agrees, on a best efforts basis, to provide annually to the
Board and each Portfolio's investment adviser, such information, if
available, relating to the Country Risks of holding Foreign Assets in such
countries, including, but not limited to, the Mandatory Securities
Depositories, if any, operating in the country. The Custodian further
agrees to monitor the political, economic and financial conditions
relating to each Mandatory Securities Depository and, on a best efforts
basis, to promptly notify each Portfolio's investment adviser in the event
of any material adverse change in any such condition.
6. Sections 14(b)1 and 14(b)2 of the Custody Agreement are amended to
read as follows:
"1. The Custodian will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of property of the
Portfolios. The Custodian shall be liable to, and shall indemnify and hold
harmless the Trust from and against any loss which shall occur as the
result of the failure of the Custodian or a Sub-Custodian (other than a
Mandatory Securities Depository) to exercise reasonable care with respect
to their respective obligations under this Agreement and the safekeeping
of such property. The determination of whether the Custodian or
Sub-Custodian has exercised reasonable care in connection with their
obligations under this Agreement shall be made in light of prevailing
standards applicable to professional custodians in the jurisdiction in
which such custodial services are performed. In the event of any loss to
the Trust by reason of the failure of the Custodian or a Sub-Custodian
(other than a Mandatory Securities Depository) to exercise reasonable
care, the Custodian shall be liable to the Trust only to the extent of the
Trust's direct damages and expenses, which damages, for purposes of
property only, shall be determined based on the market value of the
property which is the subject of the loss at the date of discovery of such
loss and without reference to any special condition or circumstances.
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2. The Custodian will not be responsible for any act, omission,
or default of, or for the solvency of, any Mandatory Securities
Depository approved by the Board or its Delegate pursuant to Section 3
hereof."
Except as set forth above, all terms of the Custody Agreement as in effect
immediately prior to this amendment shall remain in full force and effect. In
the event of any conflict between the terms of the Agreement prior to this
Amendment and this Amendment, the terms of this Amendment shall prevail.
Executed this ____ day of _______________, 1998.
THE NORTHERN TRUST COMPANY XXXXXX XXXXXXXX
INVESTMENT TRUST
By: _____________________________ By: __________________________
Name: ___________________________ Name: ________________________
Title: ____________________________ Title: _________________________
29453/1-8
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SCHEDULE I
Portfolios of Xxxxxx Xxxxxxxx
Investment Trust Subject to This Agreement
Portfolio
Xxxxxx Xxxxxxxx International Equity Fund
Xxxxxx Xxxxxxxx Global Equity Fund
Xxxxxx Xxxxxxxx European Equity Fund
Xxxxxx Xxxxxxxx Pacific Basin Equity Fund
Xxxxxx Xxxxxxxx International Small Cap Equity Fund
Xxxxxx Xxxxxxxx Japanese Small Cap Equity Fund
Xxxxxx Xxxxxxxx European Small Cap Equity Fund
Xxxxxx Xxxxxxxx Emerging Markets Equity Fund
Xxxxxx Xxxxxxxx Core Global Fixed Income Fund (effective February 25, 1998)
Xxxxxx Xxxxxxxx Global Fixed Income Fund
Xxxxxx Xxxxxxxx International Fixed Income Fund
Xxxxxx Xxxxxxxx Emerging Markets Fixed Income Fund
Xxxxxx Xxxxxxxx Emerging Local Currency Debt Fund (effective February 25, 1998)
Xxxxxx Xxxxxxxx Short-Term Fixed Income Fund
Xxxxxx Xxxxxxxx Short-Term Municipal Bond Fund
Xxxxxx Xxxxxxxx Large Cap Growth Fund
Xxxxxx Xxxxxxxx Smaller Companies Fund
Xxxxxx Xxxxxxxx Microcap Fund
Xxxxxx Xxxxxxxx Total Return Bond Fund (effective February 25, 1998)
Xxxxxx Xxxxxxxx High Yield Bond Fund (effective February 25, 1998)
SCHEDULE II
The Northern Trust Company
Countries Included in
Network of Global Sub-Custodians
--------------------------------
Country
Agentina India Slovenia
Australia Indonesia South Africa
Austria Ireland South Korea
Bangladesh Israel Spain
Belgium Italy Sri Lanka
Botswana Japan Sweden
Brazil Jordan Switzerland
Canada Latvia Taiwan
Chile Luxembourg Thailand
China Malaysia Turkey
Colombia Mexico United Kingdom
Cyprus Morocco United States
Czech Republic Netherlands Uruguay
Denmark New Zealand Venezuela
Estonia Norway Zimbabwe
Finland Pakistan
France Philippines
Germany Xxxxxx
Xxxxxx Xxxxxxxx
Xxxx Xxxx Xxxxxx
Xxxxxxx Singapore
SCHEDULE III
GLOBAL CUSTODY NETWORK
MANDATORY SECURITIES* DEPOSITORIES
Country Mandatory Securities Depositories
Argentina -Caja de Valores S.A.;
-CRYL
Australia -Austraclear Limited;
-Reserve Bank Information and
Transfer System (RITS)
-Clearing House Electronic
Sub-register System(CHESS)
Austria -Oesterreichische Kontrollbank AG
(Wertpapiersammelbank Division)
Belgium -Caisse Interprofessionnelle de Depots
et de Virements de Titres S.A. (CIK);
-Banque Nationale de Belgique
Brazil -Bolsa de Valores de Sao Paulo
(Bovespa)[CALISPA];
Canada -The Canadian Depository for
Securities Limited (CDS); West Canada
Depository Trust Company [depositories
linked]
People's Republic -Shanghi Securities Central Clearing
of China and Registration Corporation (SSCCRC);
-Shenzhen Securities Central
Co., Ltd. (SSCC)
Czech Republic -Stredisko cennych papiru (SCP);
-Czech National Bank (CNB)
Denmark -Vaerdipapircentralen - The Danish
Securities Center (VP)
Egypt -Misr Company for Clearing, Settlement
and Central Depository (MCSD)
*Mandatory securities depositories include entities for which use is mandatory
as a matter of law or effectively mandatory as a matter of market practice.
SCHEDULE III
GLOBAL CUSTODY NETWORK
MANDATORY SECURITIES* DEPOSITORIES
Country Mandatory Securities Depositories
Estonia -Estonia Central Depository for
Securities (ECDS)
Finland -The Finnish Central Securities
Depository (CSD)
France -Societe Interprofessionnelle
pour la Compensation des
Valeurs Mobilieres (SICOVAM);
-Banque de France,
Saturne System
Germany -The Deutscher Kassenverein AG
Greece -The Central Securities Depository
(Apothetirion Titlon A.E.);
Hong Kong -The Central Clearing and
Settlement System (CCASS);
Hungary -The Central Depository and Clearing
House (Budapest) Ltd. (KELER Ltd.)
India -The National Securities Depository
Limited (NSDL)
Ireland -The Central Bank of Ireland, The Gilt
Settlement Office (GSO)
-CREST
Italy -Monte Titoli S.p.A.;
-Banca d'Italia
Japan -Bank of Japan Net System
-Japan Securities Depository Center
(JASDEC)
Republic of Korea -Korea Securities Depository (KSD)
Latvia Latvian Central Depository (LCD)
*Mandatory securities depositories include entities for which use is mandatory
as a matter of law or effectively mandatory as a matter of market practice.
SCHEDULE III
GLOBAL CUSTODY NETWORK
MANDATORY SECURITIES* DEPOSITORIES
Country Mandatory Securities Depositories
Malaysia -Malaysian Central Depository Sdn.
Bhd. (MCD);
Mexico -S.D. INDEVAL, S.A. de C.V.
(Instituto para el Deposito de
Valores);
Netherlands -Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V. (NECIGEF);
-AEX Clearing and Depository (ACD)
(Note:the NECIGEF entry in H&D's
listing became a unit of the ACD on
January 1, 1997.)
New Zealand -New Zealand Central Securities
Depository Limited (NZCSD)
Norway -Verdipapisentralen - The Norwegian
Registry of Securities (VPS)
Pakistan -Central Depository Company Pakistan
Ltd. (CDC)
Poland -The National Depository of Securities
(Krajowy Depozyt Papierow
Wartos`ciowych);
Portugal -Xxxxxxx xx Xxxxxxx Xxxxxxxxxxx
(Xxxxxxx)
Xxxxxxxxx -The Central Depository (Pte)
Limited (CDP);
Slovenia Central Securities Clearing
Corp. (KDD)
Spain -Servicio Compensacion y
Liquidacion de Valores, S.A. (SCLV);
Sri Lanka -Central Depository System
(Pvt) Limited (CDS)
Sweden -Vardepapperscentralen VPC AB- The
Swedish Central Securities Depository
*Mandatory securities depositories include entities for which use is mandatory
as a matter of law or effectively mandatory as a matter of market practice.
SCHEDULE III
GLOBAL CUSTODY NETWORK
MANDATORY SECURITIES* DEPOSITORIES
Country Mandatory Securities Depositories
Switzerland -Schweizerische Effekten - Giro AG
(SEGA);
Taiwan - R.O.C. -The Taiwan Securities Central
Depository Companyk, Ltd. (TSCD)
Tunisia -STICODEVAM;
-Central Bank of Tunisia;
-Tunisian Treasury
United Kingdom -The Bank of England,
The Central Gilts Office (CGO);
-CREST
-First Chicago Clearing Centre
Uruguay -Central Bank of Uruguay
*Mandatory securities depositories include entities for which use is mandatory
as a matter of law or effectively mandatory as a matter of market practice.
