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AMENDMENT TO CUSTODIAN CONTRACT
This Amendment to the Custodian Contract is made as of June 23, 1998
by and between The Mainstay Funds (the "Fund") and State Street Bank and Trust
Company (the "Custodian"). Capitalized terms used in this Amendment without
definition shall have the respective meanings given to such terms in the
Custodian Contract referred to below.
WHEREAS, the Fund and the Custodian entered into a Custodian
Contract dated as of March 24, 1986 (as amended and in effect from time to time,
the or this "Contract"); and
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets, and the Fund has made each of its current series
listed on Schedule D hereto, which Schedule D may be amended from time to time,
subject to the Contract (each such series, together with all other series
subsequently established by the Fund and made subject to the Contract in
accordance with the terms thereof, a "Portfolio", and, collectively, the
"Portfolios"); and
WHEREAS, the Fund and the Custodian desire to amend certain
provisions of the Contract to reflect revisions to Rule 17f-5 ("Rule 17f-5")
promulgated under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Fund and the Custodian desire to amend and restate
certain other provisions of the Contract relating to the custody of assets of
each of the Portfolios held outside of the United States.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter contained, the parties hereby agree to
amend the Contract, pursuant to the terms thereof, as follows:
I. Article 3 of the Contract is hereby deleted, and Articles 4 through
16 of the Contract are hereby renumbered, as of the effective date
of this Amendment, as Articles 5 through 17, respectively.
II. The amendment to the Contract dated May 12, 1989 with respect to
maintenance of Fund securities in the custody of State Street London
Limited is hereby deleted.
III. New Articles 3 and 4 of the Contract are hereby added, as of the
effective date of this Amendment, as set forth below.
3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
3.1. DEFINITIONS.
Capitalized terms in this Article 3 shall have the following meanings:
"Country Risk" 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 any Mandatory Securities Depositories
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operating in the country); prevailing or developing custody and settlement
practices; and laws and regulations applicable to the safekeeping and recovery
of Foreign Assets held in custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the U.S. Securities and Exchange Commission (the "SEC")), or a foreign
branch of a Bank (as defined in Section 2(a)(5) of the 0000 Xxx) meeting the
requirements of a custodian under Section 17(f) of the 1940 Act, except that the
term does not include Mandatory Securities Depositories.
"Foreign Assets" means any of the Portfolios' 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 Portfolios'
transactions in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(2) of Rule
17f-5.
"Mandatory Securities Depository" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Fund determines to place Foreign Assets in a country outside the United States
(i) because required by law or regulation; (ii) because securities cannot be
withdrawn from such foreign securities depository or clearing agency; or (iii)
because maintaining or effecting trades in securities outside the foreign
securities depository or clearing agency is not consistent with prevailing or
developing custodial or market practices.
3.2. DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Fund, by resolution adopted by its Board of Trustees (the "Board"), or by
any other methodology permitted by applicable law and the Fund's Amended and
Restated Declaration of Trust and Bylaws, hereby delegates to the Custodian,
subject to Section (b) of Rule 17f-5, the responsibilities set forth in this
Article 3 with respect to Foreign Assets held outside the United States, and the
Custodian hereby accepts such delegation, as Foreign Custody Manager of each
Portfolio.
3.3. COUNTRIES COVERED.
The Foreign Custody Manager shall be responsible for performing the delegated
responsibilities defined below only with respect to the countries and custody
arrangements for each such country listed on Schedule A to this Contract, which
list of countries may be amended from time to time by the Fund with the
agreement of the Foreign Custody Manager. The Foreign Custody Manager shall list
on Schedule A the Eligible Foreign Custodians selected by the Foreign Custody
Manager to maintain the assets of each Portfolio, which list of Eligible Foreign
Custodians may be amended from time to time in the sole discretion of the
Foreign Custody Manager. Mandatory Securities Depositories are listed on
Schedule B to this Contract, which Schedule B may be amended front time to time
by the Foreign Custody Manager. The Foreign Custody Manager will provide amended
versions of Schedules A and B in accordance with Section 3.7 of this Article 3.
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Upon the receipt by the Foreign Custody Manager of Proper Instructions to open
an account, or to place or maintain Foreign Assets, in a country listed on
Schedule A, and the fulfillment by the Fund of the applicable account opening
requirements for such country, the Foreign Custody Manager shall be deemed to
have been delegated by the Board responsibility as Foreign Custody Manager with
respect to that country and to have accepted such delegation. Execution of this
Amendment by the Fund shall be deemed to be a Proper Instruction to open an
account, or to place or maintain Foreign Assets, in each country listed on
Schedule A in which the Custodian has previously placed or currently maintains
Foreign Assets pursuant to the terms of the Contract. Following the receipt of
Proper Instructions directing the Foreign Custody Manager to close the account
of a Portfolio with the Eligible Foreign Custodian selected by the Foreign
Custody Manager in a designated country, the delegation by the Board to the
Custodian as Foreign Custody Manager for that country shall be deemed to have
been withdrawn and the Custodian shall immediately cease to be the Foreign
Custody Manager of the Portfolio with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer period as to which the parties agree in
writing) after receipt of any such notice by the Fund, the Custodian shall have
no further responsibility as Foreign Custody Manager to a Portfolio with respect
to the country as to which the Custodian's acceptance of delegation is
withdrawn.
3.4. SCOPE OF DELEGATED RESPONSIBILITIES.
3.4.1. SELECTION OF ELIGIBLE FOREIGN CUSTODIANS.
Subject to the provisions of this Article 3, the Foreign Custody Manager may
place and maintain the Foreign Assets in the care of the Eligible Foreign
Custodian selected by the Foreign Custody Manager in each country listed on
Schedule A, as amended from time to time.
In performing its delegated responsibilities as Foreign Custody Manager to place
or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign
Custody Manager shall determine that the Foreign Assets will be subject to
reasonable care, based on the standards applicable to custodians in the country
in which the Foreign Assets will be held by that Eligible Foreign Custodian,
after considering all factors relevant to the safekeeping of such assets,
including, without limitation the factors specified in Rule 17f-5(c)(1).
3.4.2. CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS.
The Foreign Custody Manager shall determine that the contract (or the rules or
established practices or procedures in the case of an Eligible Foreign Custodian
that is a foreign securities depository or clearing agency) governing the
foreign custody arrangements with each Eligible Foreign Custodian selected by
the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
3.4.3. MONITORING.
In each case in which the Foreign Custody Manager maintains Foreign Assets with
an Eligible Foreign Custodian selected by the Foreign Custody Manager, the
Foreign Custody Manager shall
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establish a system to monitor (i) the appropriateness of maintaining the
Foreign Assets with such Eligible Foreign Custodian and (ii) the contract
governing the custody arrangements established by the Foreign Custody Manager
with the Eligible Foreign Custodian (or the rules or established practices and
procedures in the case of an Eligible Foreign Custodian selected by the Foreign
Custody Manager which is a foreign securities depository or clearing agency
that is not a Mandatory Securities Depository). In the event the Foreign
Custody Manager determines that the custody arrangements with an Eligible
Foreign Custodian it has selected are no longer appropriate, the Foreign
Custody Manager shall notify the Board in accordance with Section 3.7
hereunder.
3.5. GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY.
The Fund, on behalf of the Portfolios, and the Custodian each expressly
acknowledge that the Foreign Custody Manager shall not be delegated any
responsibilities under this Article 3 with respect to Mandatory Securities
Depositories and the Fund, on behalf of each Portfolio, expressly acknowledges
that the Foreign Custody Manager shall not consider any Country Risk in its
determinations and monitoring obligations hereunder and any selection of any
Eligible Foreign Custodian hereunder.
3.6. STANDARD OF CARE AS FOREIGN CUSTODY MANNER OF A PORTFOLIO.
In performing the responsibilities delegated to it, the Foreign Custody Manager
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.
3.7. REPORTING REQUIREMENTS.
The Foreign Custody Manager shall report the withdrawal of the Foreign Assets
from an Eligible Foreign Custodian and the placement of such Foreign Assets with
another Eligible Foreign Custodian by providing to the Board amended Schedules A
or B at the end of the calendar quarter in which an amendment to either Schedule
has occurred. The Foreign Custody Manager shall make written reports notifying
the Board of any other material change in the foreign custody arrangements of
the Portfolios described in this Article 3 after the occurrence of the material
change.
3.8. REPRESENTATIONS WITH RESPECT TO RULE 17f-5.
The Foreign Custody Manager represents to the Fund that it is a U.S. Bank as
defined in section (a)(7) of Rule 17f-5.
The Fund represents to the Custodian that the Board has determined that it is
reasonable for the Board to rely on the Custodian to perform the
responsibilities delegated pursuant to this Contract to the Custodian as the
Foreign Custody Manager of each Portfolio.
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3.9. EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Board's delegation to the Custodian as Foreign Custody Manager of a
Portfolio shall be effective as of the date hereof 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 thirty days after receipt by the non-terminating party of such notice.
The provisions of Section 3.3 hereof shall govern the delegation to and
termination of the Custodian as Foreign Custody Manager of the Fund with respect
to designated countries.
4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS HELD
OUTSIDE THE UNITED STATES.
4.1. DEFINITIONS.
Capitalized terms in this Article 4 shall have the following meanings:
"Foreign Securities System" means either a clearing agency or a securities
depository listed on Schedule A hereto or a Mandatory Securities Depository
listed on Schedule B hereto.
"Foreign Sub-Custodian" means a foreign banking institution serving as an
Eligible Foreign Custodian.
4.2. HOLDING SECURITIES.
The Custodian shall identify on its books as belonging to the Portfolios the
foreign securities held by each Foreign Sub-Custodian or Foreign Securities
System. The Custodian may hold foreign securities for all of its customers,
including the Portfolios, with any Foreign Sub-Custodian in an account that is
identified as belonging to the Custodian for the benefit of its customers,
provided however, that (i) the records of the Custodian with respect to foreign
securities of the Portfolios which are maintained in such account shall identify
those securities as belonging to the Portfolios and (ii), to the extent
permitted and customary in the market in which the account is maintained, the
Custodian shall require that securities so held by the Foreign Sub-Custodian be
held separately front any assets of such Foreign Sub-Custodian or of other
customers of such Foreign Sub-Custodian.
4.3. FOREIGN SECURITIES SYSTEMS.
Foreign securities shall be maintained in a Foreign Securities System in a
designated country only through arrangements implemented by the Foreign
Sub-Custodian in such country pursuant to the terms of this Contract.
4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. DELIVERY OF FOREIGN ASSETS.
The Custodian or a Foreign Sub-Custodian shall release and deliver foreign
securities of a Portfolio held by such Foreign Sub-Custodian, or in a Foreign
Securities System account, only
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upon receipt of Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, and only in the following cases:
(i) upon the sale of such foreign securities for the
Portfolio in accordance with commercially reasonable
market practice in the country where such Foreign Assets
are held or traded, including, without limitation: (A)
delivery against expectation of receiving later payment;
or (B) in the case of a sale effected through a Foreign
Securities System, in accordance with the rules
governing the operation of the Foreign Securities
System;
(ii) in connection with any repurchase agreement related to
foreign securities;
(iii) to the depository agent in connection with tender or
other similar offers for foreign securities of the
Portfolio;
(iv) to the issuer thereof or its agent when such foreign
securities are called, redeemed, retired or otherwise
become payable;
(v) to the issuer thereof, or its agent, for transfer into
the name of the Custodian (or the name of the respective
Foreign Sub-Custodian or of any nominee of the Custodian
or such Foreign Sub-Custodian) or for exchange for a
different number of bonds, certificates or other
evidence representing the same aggregate face amount or
number of units;
(vi) to brokers, clearing banks or other clearing agents for
examination or trade execution in accordance with market
custom; provided that in any such case the Foreign
Sub-Custodian shall have no responsibility or liability
for any loss arising from the delivery of such
securities prior to receiving payment for such
securities except as may arise from the Foreign
Sub-Custodian's own negligence or willful misconduct;
(vii) for exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization
or readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement;
(viii) in the case of warrants, rights or similar foreign
securities, the surrender thereof in the exercise of
such warrants, rights or similar securities or the
surrender of interim receipts or temporary securities
for definitive securities;
(ix) for delivery as security in connection with any
borrowing by the Fund requiring a pledge of assets by
the Portfolio;
(x) in connection with trading in options and futures
contracts, including delivery as original margin and
variation margin;
(xi) in connection with the lending of foreign securities;
and
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(xii) for any other proper purpose, but only upon receipt of,
in addition to Proper Instructions, a copy of a
resolution of the Board or of an Executive Committee of
the Board so authorized by the Board, signed by an
officer of the Fund and certified by its Secretary or an
Assistant Secretary that the resolution was duly adopted
and is in full force and effect (a "Certified
Resolution"), specifying the Foreign Assets to be
delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a
proper trust purpose, and naming the person or persons
to whom delivery of such Foreign Assets shall be made.
4.4.2. PAYMENT OF PORTFOLIO MONIES.
Upon receipt of Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out, or direct the
respective Foreign Sub-Custodian or the respective Foreign Securities System to
pay out, monies of a Portfolio in the following cases only:
(i) upon the purchase of foreign securities for the
Portfolio, unless otherwise directed by Proper
Instructions, by (A) delivering money to the seller
thereof or to a dealer therefor (or an agent for such
seller or dealer) against expectation of receiving later
delivery of such foreign securities; or (B) in the case
of a purchase effected through a Foreign Securities
System, in accordance with the rules governing the
operation of such Foreign Securities System;
(ii) in connection with the conversion, exchange or surrender
of foreign securities of the Portfolio;
(iii) for the payment of any expense or liability of the
Portfolio including but not limited to the following
payments: interest, taxes, investment advisory fees,
transfer agency fees, fees under this Contract, legal
fees, accounting fees, and other operating expenses;
(iv) for the purchase or sale of foreign exchange or foreign
exchange contracts for the Portfolio, including
transactions executed with or through the Custodian or
its Foreign Sub-Custodians;
(v) in connection with trading in options and futures
contracts, including delivery as original margin and
variation margin;
(vi) in connection with the payment of dividends received
from securities sold short;
(vii) in connection with the borrowing or lending of foreign
securities; and
(viii) for any other proper purpose, but only upon receipt of,
in addition to Proper Instructions, a Certified
Resolution specifying the amount of such payment,
setting forth the purpose for which such payment is to
be made, declaring such purpose to be a proper trust
purpose, and naming the person or persons to whom such
payment is to be made.
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4.4.3. MARKET CONDITIONS; MARKET INFORMATION.
Notwithstanding any provision of this Contract to the contrary, settlement and
payment for Foreign Assets received for the account of a Portfolio and delivery
of Foreign Assets maintained for the account of a Portfolio may be effected in
accordance with the customary established securities trading or processing
practices and procedures in the country or market in which the transaction
occurs, including, without limitation, delivering Foreign Assets to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) with the expectation of receiving later payment for such Foreign Assets
from such purchaser or dealer.
The Custodian shall provide to the Board the information with respect to custody
and settlement practices in countries in which the Custodian employs a Foreign
Sub-Custodian, including without limitation information relating to Foreign
Securities Systems, described on Schedule C hereto at the time or times set
forth on such Schedule. The Custodian may revise Schedule C from time to time,
provided that no such revision shall result in the Board being provided with
substantively less information than had been previously provided hereunder.
4.5. REGISTRATION OF FOREIGN SECURITIES.
The foreign securities maintained in the custody of a Foreign Sub-Custodian
(other than bearer securities) shall be registered in the name of the Fund (on
behalf of the applicable Portfolio) or in the name of the Custodian or in the
name of any Foreign Sub-Custodian or in the name of any nominee of the
foregoing, and the Fund agrees to hold any such nominee harmless from any
liability as a holder of record of such foreign securities. The Custodian or a
Foreign Sub-Custodian shall not be obligated to accept securities on behalf of
the Fund (on behalf of the applicable Portfolio) under the terms of this
Contract unless the form of such securities and the manner in which they are
delivered are in accordance with reasonable market practice.
4.6. BANK ACCOUNTS.
The Custodian shall identify on its books as belonging to a Portfolio cash
(including cash denominated in foreign currencies) deposited with the Custodian.
Where the Custodian is unable to maintain, or market practice does not
facilitate the maintenance of, cash on the books of the Custodian, a bank
account or bank accounts opened and maintained outside the United States on
behalf of a Portfolio with a Foreign Sub-Custodian shall be subject only to
draft or order by the Custodian or such Foreign Sub-Custodian, acting pursuant
to the terms of this Contract to hold cash received by or from or for the
account of the Portfolio.
4.7. COLLECTION OF INCOME.
The Custodian shall use reasonable commercial efforts to collect all income and
other payments with respect to the Foreign Assets held hereunder to which a
Portfolio shall be entitled and shall credit such income, as collected, to the
Portfolio. In the event that extraordinary measures are required to collect such
income, the Fund and the Custodian shall consult as to such measures and as to
the compensation and expenses of the Custodian relating to such measures.
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4.8. SHAREHOLDER RIGHTS.
With respect to the foreign securities held under this Article 4, the Custodian
will use reasonable commercial efforts to facilitate the exercise of voting and
other shareholder rights, subject always to the laws, regulations and practical
constraints that may exist in the country where such securities are issued. The
Fund acknowledges that local conditions, including lack of regulation, onerous
procedural obligations, lack of notice and other factors may have the effect of
severely limiting the ability of the Fund to exercise shareholder rights.
4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES.
The Custodian shall transmit promptly to the Fund written information
(including, without limitation, pendency of calls and maturities of foreign
securities and expirations of rights in connection therewith) received by the
Custodian via the Foreign Sub-Custodians from issuers of the foreign securities
being held for the account of a Portfolio. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund written information so
received by the Custodian from issuers of the foreign securities whose tender or
exchange is sought or from the party (or its agents) making the tender or
exchange offer. The Custodian shall not be liable for any untimely exercise of
any tender, exchange or other right or power in connection with foreign
securities or other property of the Portfolio at any time held by it unless (i)
the Custodian or the respective Foreign Sub-Custodian is in actual possession of
such foreign securities or property and (ii) the Custodian receives Proper
Instructions with regard to the exercise of any such right or power, and both
(i) and (ii) occur at least three business days prior to the date on which the
Custodian is to take action to exercise such right or power.
4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES SYSTEMS.
Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian
shall, to the extent possible, require the Foreign Sub-Custodian to exercise
reasonable care in the performance of its duties and, to the extent possible, to
indemnify, and hold harmless, the Custodian from and against any loss, damage,
cost, expense, liability or claim arising out of or in connection with such
Foreign Sub-Custodian's performance of such obligations. At the election of the
Fund, the Fund shall be entitled to be subrogated to the rights of the Custodian
with respect to any claims against a Foreign Sub-Custodian as a consequence of
any such loss, damage, cost, expense, liability or claim if and to the extent
that the Fund and any applicable Portfolio has not been made whole for any such
loss, damage, cost, expense, liability or claim.
4.11. TAX LAW.
The Custodian shall have no responsibility or liability for any obligations now
or hereafter imposed on the Fund or the Custodian as custodian of the Portfolios
by the tax law of the United States or of any state or political subdivision
thereof. It shall be the responsibility of the Fund to notify the Custodian of
the obligations imposed on the Fund with respect to the Portfolios or the
Custodian as custodian of such Portfolios by the tax law of countries other than
those mentioned in the above sentence, including responsibility for withholding
and other taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with regard to
such tax law shall be to use reasonable efforts to assist the Fund
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with respect to any claim for exemption or refund under the tax law of
countries for which the Fund has provided such information.
4.12. LIABILITY OF CUSTODIAN.
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian to the same extent as set forth with respect to sub-custodians
generally in the Contract and, regardless of whether assets are maintained in
the custody of a Foreign Sub-Custodian or a Foreign Securities Depository, the
Custodian shall not be liable for any loss, damage, cost, expense, liability or
claim resulting from nationalization, expropriation, currency restrictions, or
acts of war or terrorism, or any other loss where the Sub-Custodian has
otherwise acted with reasonable care.
IV. Except as specifically superseded or modified herein, the terms and
provisions of the Contract shall continue to apply with full force
and effect. In the event of any conflict between the terms of the
Contract prior to this Amendment and this Amendment, the terms of
this Amendment shall prevail. If the Custodian is delegated the
responsibilities of Foreign Custody Manager pursuant to the terms of
Article 3 hereof, in the event of any conflict between the
provisions of Articles 3 and 4 hereof, the provisions of Article 3
shall prevail.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to
be executed in its name and behalf by its duly authorized representative as of
the date first above written.
WITNESSED BY STATE STREET BANK AND TRUST COMPANY
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Xxxx X. Xxxxxxx By:
Associate Counsel ----------------------------------
Name: Xxxxxx X. Xxxxx
Title: Executive Vice President
WITNESSED BY STATE STREET BANK AND TRUST COMPANY
----------------------
Name: By:
Title: ----------------------------------
Name:
Title:
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WITNESSED BY THE MAINSTAY FUNDS
-----------------------
Name: By:
Title: ----------------------------------
Name:
Title:
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