Exhibit (g)(7)
CUSTODIAN AGREEMENT
Between
INVESTORS BANK AND TRUST
And
XXXXXX XXXXXX FUNDS II
CUSTODIAN AGREEMENT
AGREEMENT made as of September 15, 2003, between Xxxxxx Xxxxxx Funds II, a
Massachusetts business trust (the "Fund"), and INVESTORS BANK & TRUST COMPANY, a
Massachusetts trust company (the "Bank").
The Fund, an open-end management investment company on behalf of its series
listed on Appendix A hereto (as such Appendix A may be amended from time to time
by mutual agreement of the parties) (each a "Portfolio" and, collectively, the
"Portfolios"), desires to place and maintain all of its portfolio securities and
cash in the custody of the Bank. The Bank has at least the minimum
qualifications required by Section 17(f)(1) of the Investment Company Act of
1940, as amended (the "1940 Act"), to act as custodian of the portfolio
securities and cash of the Fund, and has indicated its willingness to so act,
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby appoints the Bank as custodian
of its portfolio securities and cash delivered to the Bank as hereinafter
described and the Bank agrees to act as such upon the terms and conditions
hereinafter set forth. For the services rendered pursuant to this Agreement the
Fund, on behalf of the Portfolios, agrees to pay to the Bank fees as may be
agreed to from time to time in writing between the parties.
2. Definitions. Whenever used herein, the terms listed below will have the
following meaning:
2.1 Authorized Person. Authorized Person will mean the President, any Vice
President, the Treasurer, the Secretary and any Assistant Secretary of the Fund
and any of the persons duly authorized to give Proper Instructions or otherwise
act on behalf of the Fund by appropriate resolution of its Board, and set forth
in a certificate as required by Section 4 hereof.
2.2 Board. Board will mean the Board of Trustees of the Fund.
2.3 Security. The term security as used herein will have the same meaning
assigned to such term in the 1940 Act, as amended, including, without
limitation, any note, stock, treasury stock, security future, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate, preorganization
certificate or subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a security, fractional
undivided interest in oil, gas, or other mineral rights, any put, call,
straddle, option, or privilege on any security (including a certificate of
deposit) or on any group or index of securities (including any interest therein
or based on the value thereof), or any put, call, straddle, option, or privilege
entered into on a national securities exchange relating to a foreign currency,
or, in general, any interest or instrument commonly known as a "security", or
any certificate of interest or participation in, temporary or interim
certificate for, receipt for, guarantee of, or warrant or right to subscribe to
or purchase any of the foregoing.
2.4 Portfolio Security. Portfolio Security will mean any security owned by
the Fund.
-2-
2.5 Officers' Certificate. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund.
2.6 Book-Entry System. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees, as described in Section
(b)(2) of Rule 17f-4 under the 1940 Act.
2.7 Depository. Depository shall mean The Depository Trust Company ("DTC"),
a clearing agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, as amended ("Exchange Act"),
its successor or successors and its nominee or nominees. The term "Depository"
shall further mean and include any other person authorized to act as a
depository under the 1940 Act, its successor or successors and its nominee or
nominees, specifically identified in a certified copy of a resolution of the
Board.
2.8 Proper Instructions. Proper Instructions shall mean (i) instructions
regarding the purchase or sale of Portfolio Securities, and payments and
deliveries in connection therewith, given by an Authorized Person, such
instructions to be given in such form and manner as the Bank and the Fund shall
agree upon from time to time, and (ii) instructions (which may be continuing
instructions) regarding other matters signed or initialed by an Authorized
Person. Except as otherwise set forth herein, oral instructions will be
considered Proper Instructions if the Bank reasonably believes them to have been
given by an Authorized Person. The Fund shall cause all oral instructions to be
promptly confirmed in writing. The Bank shall act upon and comply with any
subsequent Proper Instruction which modifies a prior instruction and the sole
obligation of the Bank with respect to any follow-up or confirming instruction
shall be to make reasonable efforts to detect any discrepancy between the
original instruction and such confirmation and to report such discrepancy to the
Fund. The Fund shall be responsible, at the Fund's expense, for taking any
action, including any reprocessing, necessary to correct any such discrepancy or
error, and to the extent such action requires the Bank to act, the Fund shall
give the Bank specific Proper Instructions as to the action required. Upon
receipt by the Bank of an Officers' Certificate as to the authorization by the
Board accompanied by a detailed description of procedures approved by the Fund,
Proper Instructions may include communication effected directly between
electro-mechanical or electronic devices provided that the Fund and the Bank
agree in writing that such procedures afford adequate safeguards for the Fund's
assets.
3. Separate Accounts. So long as the Fund has more than one Portfolio, the
Bank will segregate the assets of each Portfolio to which this Agreement relates
into a separate account for each such Portfolio containing the assets of such
Portfolio (and all investment earnings thereon). Unless the context otherwise
requires, any reference in this Agreement to any actions to be taken by the Fund
shall be deemed to refer to the Fund acting on behalf of one or more of its
Portfolios, any reference in this Agreement to any assets of the Fund,
including, without limitation, any Portfolio Securities and cash and earnings
thereon, shall be deemed to refer only to assets of the applicable Portfolio,
any duty or obligation of the Bank hereunder to the Fund shall be deemed to
refer to duties and obligations with respect to such individual Portfolio and
any obligation or liability of the Fund hereunder shall be binding only with
respect to such individual Portfolio, and shall be discharged only out of the
assets of such Portfolio.
4. Certification as to Authorized Persons. The Secretary or an Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of
-3-
the members of the Board, it being understood that upon the occurrence of any
change in the information set forth in the most recent certification on file
(including without limitation any person named in the most recent certification
who is no longer an Authorized Person as designated therein), the Secretary or
an Assistant Secretary of the Fund will sign a new or amended certification
setting forth the change and the new, additional or omitted names or signatures.
The Bank will be entitled to rely and act upon any Officers' Certificate given
to it by the Fund which has been signed by Authorized Persons named in the most
recent certification received by the Bank.
5. Custody of Cash. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the name
of the Bank, as Custodian of the Fund, and will deposit to the account of the
Fund all of the cash of the Fund, except for cash held by a subcustodian
appointed pursuant to Sections 14.2 or 14.3 hereof and cash maintained by the
Fund in a bank account established and used in accordance with Rule 17f-3 under
the 1940 Act, including borrowed funds, delivered to the Bank, subject only to
draft or order by the Bank acting pursuant to the terms of this Agreement. Upon
receipt by the Bank of Proper Instructions (which may be continuing
instructions) or, in the case of payments for redemptions and repurchases of
outstanding shares of common stock of the Fund, notification from the Fund's
transfer agent as provided in Section 7, requesting such payment, designating
the payee or the account or accounts to which the Bank will release funds for
deposit, and stating that it is for a purpose permitted under the terms of this
Section 5, specifying the applicable subsection, the Bank will make payments of
cash held for the accounts of the Fund, insofar as funds are available for that
purpose but only as permitted in subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities for the Fund,
against contemporaneous receipt of such securities by the Bank or, with respect
only to securities held outside the United States, against delivery of such
securities to the Bank in accordance with generally accepted settlement
practices and customs with respect to the assets of registered investment
companies in the jurisdiction or market in which the transaction occurs, or with
respect to transactions for which a written Proper Instruction specifically
instructs the Bank that it is not required to purchase securities against
contemporaneous receipt, registered in the name of the Fund or in the name of,
or properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of Book-Entry Paper (as
that term is defined in Section 6.6 hereof)) of purchase of the securities
received by the Bank before such payment is made, as confirmed in the Proper
Instructions received by the Bank before such payment is made.
5.2 Redemptions. In such amount as may be necessary for the repurchase or
redemption of shares of beneficial interest in the Fund offered for repurchase
or redemption in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. For the payment on the account of
the Fund, in each case in accordance with Proper Instructions, of dividends or
other distributions to shareholders as may from time to time be declared by the
Board, interest, taxes, management or supervisory fees, distribution fees, fees
of the Bank for its services hereunder and reimbursement of the expenses and
liabilities of the Bank, as provided hereunder, fees of any transfer agent, fees
for legal, accounting, and auditing services, or other operating expenses of the
Fund.
5.4 Payment in Respect of Securities. For payments in connection with the
conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Fund held by or to be delivered to the Bank.
-4-
5.5 Repayment of Loans. To repay loans of money made to the Fund, but, in
the case of final payment, only upon redelivery to the Bank of any Portfolio
Securities pledged or hypothecated therefor and upon surrender of documents
evidencing the loan.
5.6 Repayment of Cash. To repay the cash delivered to the Fund for the
purpose of collateralizing the obligation to return to the Fund securities
borrowed from the Fund representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed securities.
5.7 Foreign Exchange Transactions.
(a) For payments in connection with foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future delivery
(collectively, "Foreign Exchange Agreements") which may be entered into by the
Bank on behalf of the Fund upon the receipt of Proper Instructions, such Proper
Instructions to specify the currency broker or banking institution (which may be
the Bank, or any other subcustodian or agent hereunder, acting as principal)
with which the contract or option is made, and the Bank shall have no duty with
respect to the selection of such currency brokers or banking institutions with
which the Fund deals or for their failure to comply with the terms of any
contract or option.
(b) In order to secure any payments in connection with Foreign
Exchange Agreements which may be entered into by the Bank with or on behalf of
the Fund pursuant to Proper Instructions, the Fund agrees that the Bank shall
have a continuing lien and security interest, to the extent of any payment due
under any Foreign Exchange Agreement, in and to any property at any time held by
the Bank for the Fund's benefit or in which the Fund has an interest and which
is then in the Bank's possession or control (or in the possession or control of
any third party acting on the Bank's behalf). The Fund authorizes the Bank, in
the Bank's sole discretion, at any time to charge any such payment due under any
Foreign Exchange Agreement against any balance of account standing to the credit
of the Fund on the Bank's books.
5.8 Other Authorized Payments. For other authorized transactions of the
Fund, or other obligations of the Fund incurred for proper Fund purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or an Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Fund, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper trust or corporate purpose.
5.9 Termination. Upon the termination of this Agreement as hereinafter set
forth pursuant to Section 16 of this Agreement and upon (i) the merger of any
Portfolio or Portfolios into or the consolidation of any Portfolio or Portfolios
with any investment company or series thereof or (ii) the liquidation or
dissolution of any Portfolio or Portfolios.
5.10 Availability of Federal Funds. Upon mutual agreement between the Fund
and the Bank, the Bank shall, upon receipt of Proper Instructions, make federal
funds available to the Fund as of specified times agreed upon from time to time
by the Fund and the Bank in the amount of checks received in payment for shares
of beneficial interest in the Fund which are deposited into an account of the
Fund.
-5-
6. Securities.
6.1 Segregation and Registration. Except as otherwise provided herein, and
except for securities to be delivered to any subcustodian appointed pursuant to
Sections 14.2 or 14.3 hereof, the Bank as custodian will receive and hold
pursuant to the provisions hereof, in a separate account or accounts and
physically segregated at all times from those of other persons, any and all
Portfolio Securities which may now or hereafter be delivered to it by or for the
account of the Fund. All such Portfolio Securities will be held or disposed of
by the Bank for, and subject at all times to, the instructions of the Fund
pursuant to the terms of this Agreement. Subject to the specific provisions
herein relating to Portfolio Securities that are not physically held by the
Bank, the Bank will register all Portfolio Securities (unless otherwise directed
by Proper Instructions or an Officers' Certificate), in the name of a registered
nominee of the Bank in which name are held no securities or other property in
which the Bank or any affiliate of the Bank has any direct or indirect interest,
and will execute and deliver all such certificates in connection therewith as
may be required by such laws or regulations or under the laws of any state.
The Fund will from time to time furnish to the Bank appropriate instruments
to enable it to hold or deliver in proper form for transfer, or to register in
the name of its registered nominee, any Portfolio Securities which may from time
to time be registered in the name of the Fund.
6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank will
vote any of the Portfolio Securities held hereunder, except in accordance with
Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Fund all notices, proxies
and proxy soliciting materials delivered to the Bank with respect to such
Portfolio Securities, such proxies to be executed by the registered holder of
such Portfolio Securities (if registered otherwise than in the name of the
Fund), but without indicating the manner in which such proxies are to be voted.
6.3 Corporate Action and Information. The Bank shall promptly notify the
Fund of all written information (including, without limitation, pendency of
calls and maturities of securities and expirations of rights in connection
therewith and notices of exercise of call and put options written by the Fund
and maturity of futures contracts purchased or sold by the Fund) received by the
Bank from issuers of Portfolio Securities. If at any time the Bank is notified
that an issuer of any Portfolio Security has taken or intends to take a
corporate action (a "Corporate Action") that affects the rights, privileges,
powers, preferences, qualifications or ownership of a Portfolio Security
(including, without limitation, liquidation, consolidation, merger,
recapitalization, reorganization, reclassification, subdivision, combination,
stock split or stock dividend) which Corporate Action requires an affirmative
response or action on the part of the holder of such Portfolio Security (a
"Response"), the Bank shall notify the Fund promptly of the Corporate Action,
the Response required in connection with the Corporate Action and the Bank's
deadline for receipt from the Fund of Proper Instructions regarding the Response
(the "Response Deadline"), which shall not be more than 48 hours prior to the
Response expiration set by the depository processing such Corporate Action. The
Bank shall forward to the Fund via Telecopier and/or overnight courier all
notices, information statements or other materials relating to the Corporate
Action promptly after receipt of such materials by the Bank.
(a) The Bank shall act upon a required Response only after receipt by
the Bank of Proper Instructions from the Fund no later than 5:00 p.m. on the
date specified as the Response Deadline and only if the Bank (or its agent or
subcustodian hereunder) has actual possession of all necessary Portfolio
Securities, consents and other materials no later than 5:00 p.m. on the date
specified as the Response Deadline.
-6-
(b) The Bank shall have no duty to act upon a required Response if
Proper Instructions relating to such Response and all necessary Portfolio
Securities, consents and other materials are not received by and in the
possession of the Bank no later than 5:00 p.m. on the date specified as the
Response Deadline. Notwithstanding the foregoing, the Bank may, in its sole
discretion, use its best efforts to act upon a Response for which Proper
Instructions and/or necessary Portfolio Securities, consents or other materials
are received by the Bank after 5:00 p.m. on the date specified as the Response
Deadline, it being acknowledged and agreed by the parties that any undertaking
by the Bank to use its best efforts in such circumstances shall in no way create
any duty upon the Bank to complete such Response prior to its expiration.
(c) In the event that the Fund notifies the Bank of a Corporate
Action requiring a Response and the Bank has received no other notice of such
Corporate Action, the Response Deadline shall be 48 hours prior to the Response
expiration time set by the depository processing such Corporate Action.
(d) Section 14.3(e) of this Agreement shall govern any Corporate
Action involving Foreign Portfolio Securities held by an Eligible Foreign
Custodian (as defined below).
6.4 Book-Entry System. Provided (i) the Bank has received a certified copy
of a resolution of the Board specifically approving deposits of Fund assets in
the Book-Entry System, and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement and
the Fund has not delivered an Officer's Certificate to the Bank indicating that
the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry System
provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect to the
Fund's participation in the Book-Entry System through the Bank (or any such
agent) will identify by book entry the Portfolio Securities which are included
with other securities deposited in the Account and shall at all times during the
regular business hours of the Bank be open for inspection by duly authorized
officers, employees or agents of the Fund. Where securities are transferred to
the Fund's account, the Bank shall also, by book entry or otherwise, identify as
belonging to the Fund a quantity of securities in a fungible bulk of securities
(i) registered in the name of the Bank or its nominee, or (ii) shown on the
Bank's account on the books of the Federal Reserve Bank;
(c) The Bank shall pay for securities purchased for the account of
the Fund or shall pay cash collateral against the return of Portfolio Securities
loaned by the Fund upon (i) receipt of advice from the Book-Entry System that
such Securities have been transferred to the Account, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for the
account of the Fund. The Bank shall transfer securities sold or loaned for the
account of the Fund upon
(i) receipt of advice from the Book-Entry System that payment for
securities sold or payment of the initial cash collateral against the
delivery of securities loaned by the Fund has been transferred to the
Account; and
(ii) the making of an entry on the records of the Bank to reflect
such transfer and payment for the account of the Fund. Copies of all
advices from the Book-Entry System of
-7-
transfers of securities for the account of the Fund shall identify the
Fund, be maintained for the Fund by the Bank and shall be provided to the
Fund at its request. The Bank shall send the Fund a confirmation, as
defined by Rule 17f-4 of the 1940 Act, of any transfers to or from the
account of the Fund;
(d) The Bank will promptly provide the Fund with any report obtained
by the Bank or its agent on the Book-Entry System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Book-Entry System;
(e) Upon request, the Bank shall furnish the Fund confirmation of each
transfer to or from an account of the Fund in the form of a written advice or
notice to the Fund copies of daily transaction sheets reflecting each day's
transactions in the Book-Entry System for any account of the Fund; and
(f) The Bank shall use commercially reasonable efforts to enforce
effectively such rights as it may have against the Book-Entry System; at the
election of the Fund, the Fund shall be entitled to be subrogated to the rights
of the Bank with respect to any claim against the Book-Entry System or any other
person that the Bank may have as a consequence of any such loss or damage if and
to the extent that the Fund has not been made whole for any such loss or damage.
6.5 Use of a Depository. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits in DTC or
other such Depository and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange, release,
lend, deliver and otherwise deal with Portfolio Securities including stock
dividends, rights and other items of like nature, and to receive and remit to
the Bank on behalf of the Fund all income and other payments thereon and to take
all steps necessary and proper in connection with the collection thereof;
(b) Registration of Portfolio Securities may be made in the name of
any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made through the
clearing medium employed by such Depository for transactions of participants
acting through it. Upon any purchase of Portfolio Securities, payment will be
made only upon delivery of the securities to or for the account of the Fund and
the Fund shall pay cash collateral against the return of Portfolio Securities
loaned by the Fund only upon delivery of the securities to or for the account of
the Fund; and upon any sale of Portfolio Securities, delivery of the Portfolio
Securities will be made only against payment therefor or, in the event Portfolio
Securities are loaned, delivery of Portfolio Securities will be made only
against receipt of the initial cash collateral to or for the account of the
Fund; and
(d) The Bank shall use its best efforts to provide that:
(i) The Depository obtains replacement of any certificated
Portfolio Security deposited with it in the event such Security is lost,
destroyed, wrongfully taken or otherwise not available to be returned to
the Bank upon its request;
-8-
(ii) Proxy materials received by a Depository with respect to
Portfolio Securities deposited with such Depository are forwarded
immediately to the Bank for prompt transmittal to the Fund;
(iii) Such Depository promptly forwards to the Bank confirmation
of any purchase or sale of Portfolio Securities and of the appropriate book
entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the Bank such
records with respect to the performance of the Bank's obligations and
duties hereunder as may be necessary for the Fund to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act and the
regulations thereunder; and
(v) Such Depository delivers to the Bank all internal accounting
control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Fund may reasonably
request in order to verify the Portfolio Securities held by such
Depository.
6.6 Use of Book-Entry System for Commercial Paper. Provided (i) the Bank
has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Fund has purchased such Issuer's Book-Entry
Paper, the Bank shall issue and hold in book-entry form, on behalf of the Fund,
commercial paper issued by issuers with whom the Bank has entered into a
book-entry agreement (the "Issuers"). In maintaining procedures for Book-Entry
Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by the Fund in an
account of the Bank that includes only assets held by it as a fiduciary or
custodian for customers;
(b) The records of the Bank with respect to the Fund's purchase of
Book-Entry Paper through the Bank will identify, by book-entry, commercial paper
belonging to the Fund which is included in the Book-Entry System and shall at
all times during the regular business hours of the Bank be open for inspection
by duly authorized officers, employees or agents of the Fund;
(c) The Bank shall pay for Book-Entry Paper purchased for the
account of the Fund upon contemporaneous (i) receipt of advice from the Issuer
that such sale of Book-Entry Paper has been effected, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for the
account of the Fund;
(d) The Bank shall cancel such Book-Entry Paper obligation upon the
maturity thereof upon contemporaneous (i) receipt of advice that payment for
such Book-Entry Paper has been transferred to the Fund, and (ii) the making of
an entry on the records of the Bank to reflect such payment for the account of
the Fund; and
(e) The Bank will send to the Fund such reports on its system of
internal accounting control with respect to the Book-Entry Paper as the Fund may
reasonably request from time to time.
6.7 Use of Immobilization Programs. Provided the Bank has received Proper
Instructions, the Bank shall enter into immobilization programs with any bank
acting as a subcustodian hereunder.
-9-
6.8 Eurodollar CDs. Any Portfolio Securities which are Eurodollar CDs may
be physically held by the European branch of the U.S. banking institution that
is the issuer of such Eurodollar CD (a "European Branch"), provided that such
Portfolio Securities are identified on the books of the Bank as belonging to the
Fund and that the books of the Bank identify the European Branch holding such
Portfolio Securities. Notwithstanding any other provision of this Agreement to
the contrary, except as stated in the first sentence of this subsection 6.8, the
Bank shall be under no other duty with respect to such Eurodollar CDs belonging
to the Fund.
6.9 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
(i) The Bank shall take action as to put options ("puts") and
call options ("calls") purchased or sold (written) by the Fund regarding
escrow or other arrangements (i) in accordance with the provisions of any
agreement entered into upon receipt of Proper Instructions among the Bank,
any broker-dealer registered with the National Association of Securities
Dealers, Inc. (the "NASD"), and, if necessary, the Fund, relating to the
compliance with the rules of the Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations.
(ii) Unless another agreement requires it to do so, the Bank
shall be under no duty or obligation to see that the Fund has deposited or
is maintaining adequate margin, if required, with any broker in connection
with any option, nor shall the Bank be under any duty or obligation to
present such option to the broker for exercise unless it receives Proper
Instructions from the Fund. The Bank shall have no responsibility for the
legality of any put or call purchased or sold on behalf of the Fund, the
propriety of any such purchase or sale, or the adequacy of any collateral
delivered to a broker in connection with an option or deposited to or
withdrawn from a Segregated Account (as defined in subsection 6.10 below).
The Bank specifically, but not by way of limitation, shall not be under any
duty or obligation to: (i) periodically check or notify the Fund that the
amount of such collateral held by a broker or held in a Segregated Account
is sufficient to protect such broker or the Fund against any loss; (ii)
effect the return of any collateral delivered to a broker; or (iii) advise
the Fund that any option it holds, has or is about to expire. Such duties
or obligations shall be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Fund in accordance with the
provisions of any agreement entered into upon the receipt of Proper
Instructions among the Fund, the Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with
the rules of the Commodity Futures Trading Commission and/or any contract
market, or any similar organization or organizations, regarding account
deposits in connection with transactions by the Fund.
(ii) The responsibilities of the Bank as to futures, puts and
calls traded on commodities exchanges, any Futures Commission Merchant
account and the Segregated Account shall be limited as set forth in
subparagraph (a)(ii) of this Section 6.9 as if such subparagraph referred
to Futures Commission Merchants rather than brokers, and Futures and puts
and calls thereon instead of options.
-10-
6.10 Segregated Account. The Bank shall upon receipt of Proper Instructions
establish and maintain a segregated account or accounts for and on behalf of the
Fund (each a "Segregated Account").
(a) Cash and/or Portfolio Securities may be transferred into a
Segregated Account upon receipt of Proper Instructions in the following
circumstances:
(i) in accordance with the provisions of any agreement among the
Fund, the Bank and a broker-dealer registered under the Exchange Act and a
member of the NASD or any Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the
Options Clearing Corporation and of any registered national securities
exchange or the Commodity Futures Trading Commission or any registered
contract market, or of any similar organizations regarding escrow or other
arrangements in connection with transactions by the Fund;
(ii) for the purpose of segregating cash or securities in
connection with options purchased or written by the Fund or commodity
futures purchased or written by the Fund;
(iii) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to but not
less than the aggregate purchase price due on the settlement dates of all
the Fund's then outstanding forward commitment or "when-issued" agreements
relating to the purchase of Portfolio Securities and all the Fund's then
outstanding commitments under reverse repurchase agreements entered into
with broker-dealer firms;
(iv) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies; or
(v) for other proper trust or corporate purposes, but only, in
the case of this clause (v), upon receipt of Proper Instructions.
(b) Cash and/or Portfolio Securities may be withdrawn from a
Segregated Account pursuant to Proper Instructions in the following
circumstances:
(i) with respect to assets deposited in accordance with the
provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (a)(iii) or
(a)(iv) above, for sale or delivery to meet the Fund's obligations under
outstanding forward commitment or when-issued agreements for the purchase
of Portfolio Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or greater
value deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding forward commitment
or when-issued agreements for the purchase of portfolio securities or
reverse repurchase agreements are
-11-
sold to other parties or the Fund's obligations thereunder are met from
assets of the Fund other than those in the Segregated Account;
(v) for delivery upon settlement of a forward commitment or
when-issued agreement for the sale of Portfolio Securities; or
(vi) with respect to assets deposited pursuant to (a)(v) above,
in accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 Interest Bearing Call or Time Deposits. The Bank shall, upon receipt
of Proper Instructions relating to the purchase by the Fund of interest-bearing
fixed-term and call deposits, transfer cash, by wire or otherwise, in such
amounts and to such bank or banks as shall be indicated in such Proper
Instructions. The Bank shall include in its records with respect to the assets
of the Fund appropriate notation as to the amount of each such deposit, the
banking institution with which such deposit is made (the "Deposit Bank"), and
shall retain such forms of advice or receipt evidencing the deposit, if any, as
may be forwarded to the Bank by the Deposit Bank. Such deposits shall be deemed
Portfolio Securities of the Fund and the responsibility of the Bank therefore
shall be the same as and no greater than the Bank's responsibility in respect of
other Portfolio Securities of the Fund.
6.12 Transfer of Securities. The Bank will transfer, exchange, deliver or
release Portfolio Securities held by it hereunder, insofar as such Portfolio
Securities are available for such purpose, provided that the Bank will allow any
transfer, exchange, delivery or release under this Section only upon receipt of
Proper Instructions. The Proper Instructions shall state that such transfer,
exchange or delivery is for a purpose permitted under the terms of this Section
6.12, and shall specify the applicable subsection, or describe the purpose of
the transaction with sufficient particularity to permit the Bank to ascertain
the applicable subsection. After receipt of such Proper Instructions, the Bank
will transfer, exchange, deliver or release Portfolio Securities only in the
following circumstances:
(a) Upon sales of Portfolio Securities for the account of the Fund,
against contemporaneous receipt by the Bank of payment therefor in full, or,
with respect only to securities held outside the United States, against payment
to the Bank in accordance with generally accepted settlement practices and
customs with respect to the assets of registered investment companies in the
jurisdiction or market in which the transaction occurs, or, with respect to
transactions for which a written Proper Instruction specifically instructs the
Bank that it is not required to purchase securities against contemporaneous
receipt, in accordance with such written Proper Instructions, each such payment
to be in the amount of the sale price shown in a broker's confirmation of sale
received by the Bank before such payment is made, as confirmed in the Proper
Instructions received by the Bank before such payment is made;
(b) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan of merger, consolidation,
reorganization, share split-up, change in par value, recapitalization or
readjustment or otherwise, upon exercise of subscription, purchase or sale or
other similar rights represented by such Portfolio Securities, or for the
purpose of tendering shares in the event of a tender offer therefor, provided,
however, that in the event of an offer of exchange, tender offer, or other
exercise of rights requiring the physical tender or delivery of Portfolio
Securities, the Bank shall have no liability for failure to so tender in a
timely manner unless such Proper Instructions are received by the Bank at least
two business days prior to the date required for tender, and unless the Bank (or
its agent or subcustodian hereunder) has actual possession of such Portfolio
Security at least two business days prior to the date of tender;
-12-
(c) Upon conversion of Portfolio Securities pursuant to their terms
into other securities;
(d) For the purpose of redeeming in-kind shares of the Fund upon
authorization from the Fund;
(e) In the case of option contracts owned by the Fund, for
presentation to the endorsing broker;
(f) When such Portfolio Securities are called, redeemed or retired or
otherwise become payable;
(g) For the purpose of effectuating the pledge of Portfolio Securities
held by the Bank in order to collateralize loans made to the Fund by any bank,
including the Bank; provided, however, that such Portfolio Securities will be
released only upon payment to the Bank for the account of the Fund of the moneys
borrowed, provided further, however, that in cases where additional collateral
is required to secure a borrowing already made, and such fact is made to appear
in the Proper Instructions, Portfolio Securities may be released for that
purpose without any such payment. In the event that any pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Fund from the lender in accordance with the
normal procedures of the lender and any loan agreement between the fund and the
lender that an event of deficiency or default on the loan has occurred, the Bank
may deliver such pledged Portfolio Securities to or for the account of the
lender;
(h) For the purpose of releasing certificates representing Portfolio
Securities, against contemporaneous receipt by the Bank of the fair market value
of such security, as set forth in the Proper Instructions received by the Bank
before such payment is made;
(i) For the purpose of delivering securities lent by the Fund to a
bank or broker dealer, but only against receipt in accordance with street
delivery custom except as otherwise provided herein, of adequate collateral as
agreed upon from time to time by the Fund and the Bank, and upon receipt of
payment in connection with any repurchase agreement relating to such securities
entered into by the Fund;
(j) For other authorized transactions of the Fund or for other proper
trust or corporate purposes; provided that before making such transfer, the Bank
will also receive Proper Instructions specifying the Portfolio Securities to be
delivered, setting forth the transaction in or purpose for which such delivery
is to be made, declaring such transaction to be an authorized transaction of the
Fund or such purpose to be a proper trust or corporate purpose, and naming the
person or persons to whom delivery of such securities shall be made; and
(k) Upon termination of this Agreement as hereinafter set forth
pursuant to Section 16 of this Agreement and upon (i) the merger of any
Portfolio or Portfolios into or the consolidation of any Portfolio or Portfolios
with any investment company or series thereof or (ii)the liquidation or
dissolution of any Portfolio or Portfolios
As to any deliveries made by the Bank pursuant to this Section 6.12,
securities or cash receivable in exchange therefor shall be delivered to the
Bank.
7. Redemptions. In the case of payment of assets of the Fund held by the
Bank in connection with redemptions and repurchases by the Fund of outstanding
shares of beneficial interest, the Bank will
-13-
rely on notification by the Fund's distributor or transfer agent of receipt of a
request for redemption and certificates, if issued, in proper form for
redemption before such payment is made. Payment shall be made in accordance with
the Agreement and Declaration of Trust and By-laws of the Fund, as in effect
from time to time (the "Articles"), from assets available for said purpose.
8. [Reserved]
9. Actions of Bank Without Prior Authorization. Notwithstanding anything
herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, the Bank will take the following actions without
prior authorization or instruction of the Fund or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name of the
Fund on a timely basis all checks, drafts, or other negotiable or transferable
instruments or other orders for the payment of money received by it for the
account of the Fund and collect on a timely basis and hold for the account of
the Fund all income, dividends, interest and other payments or distributions of
cash with respect to the Portfolio Securities held thereunder;
9.2 Present for payment all coupons and other income items held by it for
the account of the Fund which call for payment upon presentation as and when
they become due and take reasonable action to collect interest when due on
securities held hereunder and hold the cash received by it upon such payment for
the account of the Fund;
9.3 Receive and hold for the account of the Fund all securities received as
a distribution on Portfolio Securities as a result of a stock dividend, share
split-up, reorganization, recapitalization, merger, consolidation, readjustment,
distribution of rights and similar securities issued with respect to any
Portfolio Securities held by it hereunder;
9.4 Execute as agent on behalf of the Fund all necessary ownership and
other certificates and affidavits required by the Internal Revenue Code or the
regulations of the Treasury Department issued thereunder, or by the laws of any
state, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof.
The Bank will execute and deliver such certificates in connection with Portfolio
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any State;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable as and when due, and hold cash
received by it upon payment for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for definitive
securities.
10. Collections and Defaults. The Bank will use reasonable efforts to
collect on a timely basis any funds which may to its knowledge become
collectible arising from Portfolio Securities, including dividends, interest and
other income, and to transmit to the Fund notice actually received by it of any
call for redemption, offer of exchange, right of subscription, reorganization or
other proceedings affecting such Securities. If Portfolio Securities upon which
such income is payable are in default or payment is refused after due demand or
presentation, the Bank will notify the Fund in writing of any default or refusal
to pay within two business days from the day on which it receives knowledge of
such default or refusal.
-14-
11. Maintenance of Records and Accounting Services. The Bank will maintain
records with respect to transactions for which the Bank is responsible pursuant
to the terms and conditions of this Agreement, and in compliance with the
applicable rules and regulations of the 1940 Act, with particular attention to
Section 31 thereof and the Rules thereunder. The books and records of the Bank
pertaining to its actions under this Agreement and reports by the Bank or its
independent accountants concerning its accounting system, procedures for
safeguarding securities and internal accounting controls will be the property of
the Fund, will be open to inspection and audit at all times during regular
business hours by officers of or auditors employed by the Fund and employees or
agents of the Securities and Exchange Commission and will be preserved by the
Bank in the manner and in accordance with the applicable rules and regulations
under the 1940 Act.
The Bank shall perform fund accounting and shall keep the books of account
and render statements or copies from time to time as reasonably requested by the
Treasurer or any executive officer of the Fund.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
The Bank shall provide the Fund, at such times as the Fund may reasonably
require, with reports by its independent public accountants on the accounting
system, internal controls and procedures for safeguarding securities, and any
other issues for which such reports are generally available to clients of the
Bank. The Bank shall take all reasonable actions as may be necessary or prudent
to obtain from year to year favorable opinions from the Bank's independent
public accountants with respect to its accounting system, internal controls and
procedures for safeguarding securities and any other issues for which such
reports are generally available to clients of the Bank.
The Bank shall take all reasonable action, as the Fund may from time to
time request, to assist the Fund in obtaining from its independent accountants
with respect to its activities hereunder in connection with the preparation of
the Fund's Form N-1A, Form N-SAR and other annual reports filed with the
Securities and Exchange Commission and with respect to any other requirements of
the Securities and Exchange Commission.
12. Fund Evaluation and Yield Calculation
12.1 Fund Evaluation. The Bank shall compute and, unless otherwise directed
by the Board, determine as of the close of regular trading on the New York Stock
Exchange on each day on which said Exchange is open for unrestricted trading and
as of such other days, or hours, if any, as may be authorized by the Board, the
net asset value and the public offering price of a share of capital stock of the
Fund, such determination to be made in accordance with the provisions of the
Articles and By-laws of the Fund and the Prospectus and Statement of Additional
Information relating to the Fund, as they may from time to time be amended, and
any applicable resolutions of the Board at the time in force and applicable; and
promptly to notify the Fund, the proper exchange and the NASD or such other
persons as the Fund may request of the results of such computation and
determination. In computing the net asset value hereunder, the Bank may rely in
good faith upon information furnished to it by any Authorized Person in respect
of (i) the manner of accrual of the liabilities of the Fund and in respect of
liabilities of the Fund not appearing on its books of account kept by the Bank,
(ii) reserves, if any, authorized by the Board or that no such reserves have
been authorized, (iii) the source of the quotations to be used in computing the
net asset value, (iv) the value to be assigned to any security for which no
price quotations are available, and (v) the method of computation of the public
offering price on the basis of the net asset value of the
-15-
shares, and the Bank shall not be responsible for any loss occasioned by such
reliance or for any good faith reliance on any quotations received from a source
pursuant to (iii) or (iv) above.
12.2. Yield Calculation. The Bank will compute the performance results of
the Fund (the "Yield Calculation") in accordance with the provisions of Release
No. 33-6753 and Release No. IC-16245 (February 2, 1988) (the "Releases")
promulgated by the Securities and Exchange Commission, and any subsequent
amendments to, published interpretations of or general conventions accepted by
the staff of the Securities and Exchange Commission with respect to such
releases or the subject matter thereof ("Subsequent Staff Positions"), subject
to the terms set forth below:
(a) The Bank shall compute the Yield Calculation for the Fund for the
stated periods of time as shall be mutually agreed upon, and communicate in a
timely manner the result of such computation to the Fund.
(b) In performing the Yield Calculation, the Bank will derive the
items of data necessary for the computation from the records it generates and
maintains for the Fund pursuant Section 11 hereof. The Bank shall have no
responsibility to review, confirm, or otherwise assume any duty or liability
with respect to the accuracy or correctness of any such data supplied to it by
the Fund, any of the Fund's designated agents or any of the Fund's designated
third party providers.
(c) At the request of the Bank, the Fund shall provide, and the Bank
shall be entitled to rely on, written standards and guidelines to be followed by
the Bank in interpreting and applying the computation methods set forth in the
Releases or any Subsequent Staff Positions as they specifically apply to the
Fund. In the event that the computation methods in the Releases or the
Subsequent Staff Positions or the application to the Fund of a standard or
guideline is not free from doubt or in the event there is any question of
interpretation as to the characterization of a particular security or any aspect
of a security or a payment with respect thereto (e.g., original issue discount,
participating debt security, income or return of capital, etc.) or otherwise or
as to any other element of the computation which is pertinent to the Fund, the
Fund or its designated agent shall have the full responsibility for making the
determination of how the security or payment is to be treated for purposes of
the computation and how the computation is to be made and shall inform the Bank
thereof on a timely basis. The Bank shall have no responsibility to make
independent determinations with respect to any item which is covered by this
Section, and shall not be responsible for its computations made in accordance
with such determinations so long as such computations are mathematically
correct.
(d) The Fund shall keep the Bank informed of all publicly available
information and of any non-public advice, or information obtained by the Fund
from its independent auditors or by its personnel or the personnel of its
investment adviser, and the Bank shall not be deemed to have knowledge of such
information (except as contained in the Releases) unless it has been furnished
to the Bank in writing.
13. Additional Services. The Bank shall perform the additional services for
the Fund as are set forth on Appendix B hereto. Appendix B may be amended from
time to time upon agreement of the parties to include further additional
services to be provided by the Bank to the Fund.
14. Duties of the Bank.
14.1 Performance of Duties and Standard of Care. In performing its duties
hereunder and any other duties listed on any Schedule or Appendix hereto, the
Bank shall be held to the exercise of reasonable care, shall act in good faith
and shall act without negligence or willful misfeasance. In
-16-
performing its duties hereunder and any other duties listed on any Schedule or
Appendix hereto, if any, the Bank will be entitled to receive and act upon the
advice of independent counsel of national standing of its own selection, which
may be counsel for the Fund, and will be without liability for any action taken
or thing done or omitted to be done in accordance with this Agreement in good
faith in conformity with such advice.
The Bank will be under no duty or obligation to inquire into and will not
be liable for:
(a) the validity of the issue of any Portfolio Securities purchased
by or for the Fund, the legality of the purchases thereof or the propriety of
the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or for
the Fund or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of the Fund
or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of the Fund
or the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the Fund or the
legality of the distribution of any Portfolio Securities as payment in kind of
such dividend; and
(f) except as otherwise specifically contemplated hereby, any property
or moneys of the Fund unless and until received by it, and any such property or
moneys delivered or paid by it pursuant to the terms hereof.
Moreover, the Bank will not be under any duty or obligation to ascertain
whether any Portfolio Securities at any time delivered to or held by it for the
account of the Fund are such as may properly be held by the Fund under the
provisions of its Articles, any federal or state statutes or any rule or
regulation of any governmental agency.
14.2 Agents and Subcustodians with Respect to Property of the Fund Held in
the United States. The Bank may employ agents of its own selection in the
performance of its duties hereunder and shall be responsible for the acts and
omissions of such agents as if performed by the Bank hereunder. Without limiting
the foregoing, certain duties of the Bank hereunder may be performed by one or
more affiliates of the Bank.
Upon receipt of Proper Instructions, the Bank may employ subcustodians
selected by or at the direction of the Fund (each a "Fund-Selected
Subcustodian"), provided that any such Fund-Selected Subcustodian meets at least
the minimum qualifications required by Section 17(f)(1) of the 1940 Act to act
as a custodian of the Fund's assets with respect to property of the Fund held in
the United States. The Bank shall have no more or less responsibility or
liability to the Fund or any other person by reason of any act or omission of
any such Fund-Selected Subcustodian than any such Fund-Selected Subcustodian has
to the Bank, and the Fund shall indemnify the Bank and hold it harmless from and
against any and all actions, suits and claims arising directly or indirectly out
of the performance of any such Fund-Selected Subcustodian. Upon request of the
Bank, the Fund shall assume the entire defense of any action, suit, or claim
subject to the foregoing indemnity. The Fund shall pay all fees and expenses of
any Fund-Selected Subcustodian.
-17-
14.3 Duties of the Bank with Respect to Property of the Fund Held Outside
of the United States.
(a) Appointment of Foreign Custody Manager.
(i) If the Fund has appointed the Bank Foreign Custody Manager
(as that term is defined in Rule 17f-5 under the 1940 Act), the Bank's
duties and obligations with respect to the Fund's Portfolio Securities and
other assets maintained outside the United States (the "Foreign Portfolio
Securities") shall be, to the extent not set forth herein, as set forth in
the Delegation Agreement between the Fund and the Bank (the "Delegation
Agreement").
(ii) If the Fund has appointed any person or entity Foreign
Custody Manager other than the Bank, the Bank shall act only upon Proper
Instructions from the Fund with regard to any of the Fund's Portfolio
Securities or other assets held or to be held outside of the United States,
and the Bank shall be without liability for any Claim (as that term is
defined in Section 15 hereof) arising out of maintenance of the Fund's
Portfolio Securities or other assets outside of the United States. The Fund
also agrees that it shall enter into a written agreement with such Foreign
Custody Manager that shall obligate such Foreign Custody Manager to provide
to the Bank in a timely manner all information required by the Bank in
order to complete its obligations hereunder. The Bank shall not be liable
for any Claim arising out of the failure of such Foreign Custody Manager to
provide such information to the Bank.
(b) Segregation of Securities. The Bank shall identify on its books as
belonging to the Fund the Foreign Portfolio Securities held by each foreign
sub-custodian (each an "Eligible Foreign Custodian") selected by the Foreign
Custody Manager, subject to receipt by the Bank of the necessary information
from such Eligible Foreign Custodian if the Foreign Custody Manager is not the
Bank.
(c) Access of Independent Accountants of the Fund. If the Bank is the
Fund's Foreign Custody Manager, upon request of the Fund, the Bank will use its
best efforts to arrange for the independent accountants of the Fund to be
afforded access to the books and records of any foreign banking institution
employed as an Eligible Foreign Custodian insofar as such books and records
relate to the performance of such foreign banking institution with regard to the
Fund's Portfolio Securities and other assets.
(d) Reports by Bank. If the Bank is the Fund's Foreign Custody
Manager, the Bank will supply to the Fund the reports required under the
Delegation Agreement.
(e) Transactions in Foreign Custody Account. Transactions with respect
to the assets of the Fund held by an Eligible Foreign Custodian shall be
effected pursuant to Proper Instructions from the Fund to the Bank and shall be
effected in accordance with the applicable agreement between the Foreign Custody
Manager and such Eligible Foreign Custodian. If at any time any Foreign
Portfolio Securities shall be registered in the name of the nominee of the
Eligible Foreign Custodian, the Fund agrees to hold any such nominee harmless
from any liability by reason of the registration of such securities in the name
of such nominee (other than liability arising from the negligence, willful
misfeasance or bad faith of the Eligible Foreign Custodian or the Bank or any of
their officers, employees, agents, including when such officers, employees or
agents are acting on behalf of the nominee).
Notwithstanding any provision of this Agreement to the contrary, settlement
and payment for Foreign Portfolio Securities received for the account of the
Fund and delivery of Foreign Portfolio Securities maintained for the account of
the Fund may be effected in accordance with the
-18-
customary established securities trading or securities processing practices and
procedures with respect to the assets of registered investment companies in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivering securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such purchaser
or dealer.
In connection with any action to be taken with respect to the Foreign
Portfolio Securities held hereunder, including, without limitation, the exercise
of any voting rights, subscription rights, redemption rights, exchange rights,
conversion rights or tender rights, or any other action in connection with any
other right, interest or privilege with respect to such Foreign Portfolio
Securities (collectively, the "Rights"), the Bank shall promptly transmit to the
Fund such information in connection therewith as is made available to the Bank
by the Eligible Foreign Custodian, and shall promptly forward to the applicable
Eligible Foreign Custodian any instructions, forms or certifications with
respect to such Rights, and any instructions relating to the actions to be taken
in connection therewith, as the Bank shall receive from the Fund pursuant to
Proper Instructions. Notwithstanding the foregoing, the Bank shall have no
further duty or obligation with respect to such Rights, including, without
limitation, the determination of whether the Fund is entitled to participate in
such Rights under applicable U.S. and foreign laws, or the determination of
whether any action proposed to be taken with respect to such Rights by the Fund
or by the applicable Eligible Foreign Custodian will comply with all applicable
terms and conditions of any such Rights or any applicable laws or regulations,
or market practices within the market in which such action is to be taken or
omitted.
(f) Tax Law. Except to the extent the Bank acts or fails to act in
contravention of its obligations under this Agreement, the Bank shall have no
responsibility or liability for any obligations now or hereafter imposed on the
Fund or the Bank as custodian of the Fund by the tax laws of any jurisdiction,
and it shall be the responsibility of the Fund to notify the Bank of the
obligations imposed on the Fund or the Bank as the custodian of the Fund by the
tax law of any non-U.S. jurisdiction, including responsibility for withholding
and other taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Eligible Foreign
Custodian with regard to such tax law shall be to use reasonable efforts to
assist the Fund with respect to any claim for exemption or refund under the tax
law of jurisdictions for which the Fund has provided such information.
(g) Contracts with Eligible Foreign Custodians. The Bank shall use its
best efforts to ensure that each contract with an Eligible Foreign Custodian
shall provide indemnification rights that match the indemnification rights of
the Fund hereunder, including indemnification for any Claim (as defined below)
arising as a result of the negligence, willful misfeasance or bad faith of the
Eligible Foreign Custodian.
14.4 Insurance. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Fund held by it as it uses
in respect of its own similar property but it need not maintain any special
insurance for the benefit of the Fund.
14.5 Advances by the Bank. The Bank may, in its sole discretion, advance
funds on behalf of the Fund to make any payment permitted by this Agreement upon
receipt of any Proper Instructions for such payments by the Fund. Should such a
payment or payments, with advanced funds, result in an overdraft (due to
insufficiencies of the Fund's account with the Bank, or for any other reason)
this Agreement deems any such overdraft or related indebtedness a loan made by
the Bank to the Fund payable on demand. Such overdraft shall bear interest at
the current rate charged by the Bank for such loans unless the Fund shall
provide the Bank with agreed upon compensating balances. The Fund agrees that
the Bank shall have a continuing lien and security interest to the extent of any
overdraft or indebtedness and to the
-19-
extent required by law, in and to any property at any time held by it for the
Fund's benefit or in which the Fund has an interest and which is then in the
Bank's possession or control (or in the possession or control of any third party
acting on the Bank's behalf). The Fund authorizes the Bank, in the Bank's sole
discretion, at any time to charge any overdraft or indebtedness, together with
interest due thereon, against any balance of account standing to the credit of
the Fund on the Bank's books.
14.6. Fees and Expenses of the Bank. For the services rendered by the Bank
hereunder, the Fund will pay to the Bank such fees at such rate as shall be
agreed upon in writing by the parties from time to time. The Fund will also pay
or reimburse the Bank from time to time for any transfer taxes payable upon any
transfers made hereunder, and for all reasonable and necessary proper
disbursements, expenses and charges made or incurred by the Bank in the
performance of this Agreement (including any duties listed on any Schedule
hereto, if any) including any indemnities for any loss, liabilities or expense
to the Bank as provided herein. The Bank will also be entitled to reimbursement
by the Fund for any reasonable conversion or transfer work done in connection
with the termination of this Agreement by the Fund.
Fees and expenses will be calculated and invoiced monthly. Fees and
expenses owed to the Bank for any month may be charged against any cash balance
held by the Fund beginning on the first (1st) business day after the end of such
month based on information then available, provided that any such charges are
subject to adjustment after the Fund reviews the applicable invoice. Fees
charged to an account may result in an overdraft that will be subject to normal
interest charges.
15. Limitation of Liability.
15.1 Notwithstanding anything in this Agreement to the contrary, in no
event shall the Bank or any of its officers, directors, employees or agents
(collectively, the "Indemnified Parties") be liable to the Fund or any third
party, and the Fund shall indemnify and hold the Bank and the Indemnified
Parties harmless from and against any and all loss, damage, liability, actions,
suits, claims, costs and expenses, including legal fees, (a "Claim") arising as
a result of any act or omission of the Bank or any Indemnified Party under this
Agreement, except for any Claim arising from the negligence, willful misfeasance
or bad faith of the Bank or any Indemnified Party. Without limiting the
foregoing, neither the Bank nor the Indemnified Parties shall be liable for, and
the Bank and the Indemnified Parties shall be indemnified against, any Claim
(other than Claims arising from the negligence, willful misfeasance or bad faith
of the Bank or the Indemnified Party) arising as a result of:
(a) Any act or omission by the Bank or any Indemnified Party in good
faith reliance upon the terms of this Agreement, any Officer's Certificate,
Proper Instructions, resolution of the Board, telegram, telecopier, notice,
request, certificate or other instrument reasonably believed by the Bank to
genuine;
(b) Any act or omission of any Fund-Selected Subcustodian;
(c) Any act or omission of any Foreign Custody Manager other than the
Bank or any act or omission of any Eligible Foreign Custodian if the Bank is not
the Foreign Custody Manager;
(d) Any Corporate Action, distribution or other event related to
Portfolio Securities which, at the direction of the Fund, have not been
registered in the name of the Bank or its nominee;
-20-
(e) Any Corporate Action requiring a Response for which the Bank has
not received Proper Instructions or obtained actual possession of all necessary
Portfolio Securities, consents or other materials by 5:00 p.m. on the date
specified as the Response Deadline;
(f) Any act or omission of any European Branch of a U.S. banking
institution that is the issuer of Eurodollar CDs in connection with any
Eurodollar CDs held by such European Branch;
(g) Information relied on in good faith by the Bank and supplied by
any Authorized Person in connection with the calculation of (i) the net asset
value and public offering price of the shares of capital stock of the Fund or
(ii) the Yield Calculation; or
(h) Any acts of God, earthquakes, fires, floods, storms or other
disturbances of nature, epidemics, strikes, riots, nationalization,
expropriation, currency restrictions, acts of war, civil war or terrorism,
insurrection, nuclear fusion, fission or radiation, the interruption, loss or
malfunction of utilities or transportation, the unavailability of energy sources
and other similar happenings or events that cannot be controlled or contained by
the Bank, its agents or subcustodians. This paragraph shall not relieve the Bank
from its responsibility to provide and maintain appropriate backup and disaster
recovery facilities and shall not limit the liability of the Bank if the Bank,
its agents or any subcustodian has failed to provide and maintain appropriate
backup and disaster recovery facilities.
15.2 Notwithstanding anything in this Agreement to the contrary, in no
event shall the Fund be liable to the Bank or any third party, and the Bank
shall indemnify and hold harmless the Fund and its officers, trustees, employees
or agents (the "Fund Indemnified Parties") from and against any and all Claims
arising from the negligence, willful misfeasance or bad faith by the Bank
hereunder, provided that the Bank's indemnification obligation with respect to
the acts or omissions of its Eligible Foreign Custodians hereunder shall not
exceed the indemnification that the Bank may obtain from the applicable
subcustodian by the law of the governing jurisdiction
15.3 Notwithstanding anything to the contrary in this Agreement, in no
event shall the Fund or the Fund Indemnified Parties be liable to the Bank or
the Indemnified Parties or the Bank or the Indemnified Parties be liable to the
Fund or any of them liable to any third party for lost profits or lost revenues
or any special, consequential, punitive or incidental damages of any kind
whatsoever in connection with this Agreement or any activities hereunder.
15.4 The Fund will not be liable to the Bank for any Claim arising as a
result of any acts of God, earthquakes, fires, floods, storms or other
disturbances of nature, epidemics, strikes, riots, nationalization,
expropriation, currency restrictions, acts of war, civil war or terrorism,
insurrection, nuclear fusion, fission or radiation, the interruption, loss or
malfunction of utilities, transportation or computers (hardware or software) and
computer facilities, the unavailability of energy sources and other similar
happenings or events that cannot be controlled or contained by the Fund. This
paragraph shall not relieve the Fund from its responsibility to provide and
maintain appropriate backup and disaster recovery facilities, or appropriately
delegate any obligation to provide and maintain such facilities, and shall not
limit the liability of the Fund if the Fund or its agents (other than the Bank,
its affiliates or any subcustodian that is not a Fund-Selected Subcustodian) has
failed to provide and maintain appropriate backup and disaster recovery
facilities.
15.5 In order that the indemnification provisions contained in this Article
15 shall apply, upon the assertion of a claim for which a party may be required
to indemnify the other, the party seeking the indemnification shall promptly
notify the other party of such assertion, and shall keep the other party advised
with respect to all developments concerning such claim. The party seeking
indemnification shall
-21-
give the indemnifying party full and complete authority, information and
assistance to defend such claim or proceeding, and the indemnifying party shall
have, at its option, sole control of the defense of such claim or proceeding and
all negotiations for its compromise or settlement. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent, which consent shall not be unreasonably
withheld.
15.6 The obligations set forth in this Section 15 shall survive the
termination of this Agreement.
15.7 Except as specifically stated otherwise in this Agreement, in any and
every case in which payment for purchases of securities for an account of the
Fund is made by the Bank in advance of receipt of the securities purchased in
the absence of Proper Instructions on behalf of the Fund to so pay in advance,
the Bank shall be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Bank.
16. Termination.
16.1 The term of this Agreement shall be from the date first noted above
through April 30, 2005 (the "Initial Term"), unless earlier terminated as
provided herein. After the expiration of the Initial Term, the term of this
Agreement shall automatically renew for successive one-year terms (each a
"Renewal Term") unless notice of non-renewal is delivered by the non-renewing
party to the other party no later than ninety days prior to the expiration of
the Initial Term or any Renewal Term, as the case may be.
If a majority of the Board of Trustees reasonably determines that the
performance of the Bank under this Agreement or the Delegation Agreement, dated
as of the date hereof, by and between the Bank and the Fund does not meet
industry standards, written notice of such determination setting forth the
reasons for such determination shall be provided to the Bank. In the event the
Bank shall not, within thirty (30) days (sixty (60) days for those deficiencies
that the parties hereto agree may not reasonably be cured within thirty (30)
days after receipt of such notice) thereafter, cure identified deficiencies to
the reasonable satisfaction of the Board of Trustees, the Fund, with the
authorization of the Board, may terminate this Agreement.
Either party hereto may terminate this Agreement prior to the expiration of
the Initial Term or any Renewal Term in the event the other party violates any
material provision of this Agreement provided that the non-violating party gives
written notice of such violation to the violating party and the violating party
does not cure such violation within 60 days of receipt of such notice.
16.2 In the event of the termination of this Agreement, the Bank will
immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Portfolio Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Fund. The obligation of the Bank to deliver and transfer over the assets of the
Fund held by it directly to such successor custodian will commence as soon as
such successor is appointed and will continue until completed as aforesaid. If
the Fund does not select a successor custodian within ninety (90) days from the
date of delivery of notice of termination the Bank may, subject to the
provisions of subsection 16.3, deliver the Portfolio Securities and cash of the
Fund held by the Bank to a bank or trust company of the Bank's own selection
which meets the requirements of Section 17(f)(1) of the 1940 Act and has a
reported capital, surplus and undivided profits aggregating not less than
$2,000,000, to be held as the property of the Fund under terms similar to those
on which they were held by the Bank, whereupon such
-22-
bank or trust company so selected by the Bank will become the successor
custodian of such assets of the Fund with the same effect as though selected by
the Board. Thereafter, the Bank and the Fund shall be released from any and all
obligations under this Agreement, except for those obligations under Section 15
hereof.
16.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of the
Fund advising that a successor custodian cannot be found willing and able to act
upon reasonable and customary terms and that there has been submitted to the
shareholders of the Fund the question of whether the Fund will be liquidated or
will function without a custodian for the assets of the Fund held by the Bank.
In that event the Bank will deliver the Portfolio Securities and cash of the
Fund held by it, subject as aforesaid, in accordance with one of such
alternatives which may be approved by the requisite vote of shareholders, upon
receipt by the Bank of a copy of the minutes of the meeting of shareholders at
which action was taken, certified by the Fund's Secretary and an opinion of
counsel to the Fund in form and content satisfactory to the Bank. Thereafter,
the Bank and the Fund shall be released from any and all obligations under this
Agreement, except for those obligations under Section 15 hereof.
16.4 The Fund shall reimburse the Bank for any reasonable expenses for any
reasonable conversion or transfer work done in connection with the termination
of this Agreement by the Fund.
16.5 All records of the Bank relating to its performance of its duties as
custodian (the "Records") shall be the property of the Fund, and the Fund or its
agents shall have the right of access to the Records upon reasonable notice to
the Bank. The Bank shall, upon request, deliver to the Fund all Records upon
termination of this Agreement, and the Bank hereby agrees that, whether such
termination is due to breach of this Agreement by the Fund or otherwise, the
Bank shall have no right to claim any interest in the Records and shall make
reasonable efforts to comply with any request for delivery of the Records to the
Fund or its designated agent upon termination of this Agreement.
17. Confidentiality.
17.1 Both parties hereto agree than any non-public information obtained
hereunder concerning the other party is confidential and may not be disclosed
without the consent of the other party, except as may be required by applicable
law or at the request of a governmental agency or self-regulatory organization.
The parties further agree that a breach of this provision would irreparably
damage the other party and accordingly agree that each of them is entitled, in
addition to all other remedies at law or in equity to an injunction or
injunctions without bond or other security to prevent breaches of this
provision.
17.2 The parties further agree that any Nonpublic Personal Information, as
defined under Section 248.3(t) of Regulation S-P ("Regulation S-P"), promulgated
under the Xxxxx-Xxxxx-Xxxxxx Act (the "Act"), disclosed by a party hereunder is
for the specific purpose of permitting the other party to perform the services
set forth in this Agreement. Each party agrees that, with respect to such
information, it will comply with Regulation S-P and the Act and that it will not
disclose any Nonpublic Personal Information received in connection with this
Agreement, to any other party, except as necessary to carry out the services set
forth in this Agreement or as otherwise permitted by Regulation S-P or the Act.
Each party hereto agrees that the requirements of this Section 17.2 are in
addition to and not in limitation of its responsibilities under Section 17.1
above.
18. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be effective
upon actual receipt thereof, which may be conclusively demonstrated by (i)
signed receipt from United States Postal Service registered mail, (ii) with
telecopier
-23-
written confirmation, or (iii) hand delivery with signature to such party at its
office at the address set forth below, namely:
(a) In the case of notices sent to the Fund to:
c/o CDC IXIS Asset Management Services, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Fund Administration Department Head
With a copy to: General Counsel
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
000 Xxxxxxxxx Xxxxxx, X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxxxx X'Xxxxxxx, Senior Director-Client Management
With a copy to: Xxxx X. Xxxxx, General Counsel
or at such other place as such party may from time to time designate
in writing.
19. Amendments. This Agreement may not be altered or amended, except by an
instrument in writing, executed by both parties.
20. Parties. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written consent of the Bank or by the Bank without the written
consent of the Fund, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 16 hereof will not be deemed to
be an assignment within the meaning of this provision.
21. Governing Law. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.
22. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
23. Entire Agreement. This Agreement, together with its Appendices and any
agreements dated as of the date hereof between the parties hereto and relating
hereto, constitute the sole and entire agreement between the parties relating to
the subject matter herein and does not operate as an acceptance of any
conflicting terms or provisions of any other instrument and terminate and
supersede any and all prior agreements and undertakings between the parties
relating to the subject matter herein.
24. Limitation of Liability. The Bank agrees that the obligations assumed
by the Fund hereunder shall be limited in all cases to the assets of the Fund
and that the Bank shall not seek satisfaction of any such obligation from the
officers, agents, employees, trustees, or shareholders of the Fund.
25. Several Obligations of the Portfolios; Additional Portfolios. This
Agreement is an agreement entered into between the Bank and the Fund with
respect to each Portfolio. With respect to
-24-
any obligation of the Fund on behalf of any Portfolio arising out of this
Agreement, the Bank shall look for payment or satisfaction of such obligation
solely to the assets of the Portfolio to which such obligation relates as though
the Bank had separately contracted with the Fund by separate written instrument
with respect to each Portfolio. In the event the Fund establishes one or more
additional series with respect to which the Fund wishes to employ the Bank to
act as custodian hereunder, the Fund shall notify the Bank in writing. Upon
written acceptance by the Bank, such series shall be deemed a "Portfolio"
hereunder and shall become subject to, and shall enjoy the benefits of, the
provisions of this Agreement to the same extent as the existing Portfolios,
except to the extent that such provisions (including those relating to
compensation and expenses payable by the Fund and its Portfolios) may be
modified with respect to each additional Portfolio in writing by the Fund and
the Bank at the time of the addition of the Portfolio.
26. Trust Notice. A copy of the Agreement and Declaration of Trust
establishing the Fund is on file with the Secretary of State of The Commonwealth
of Massachusetts, and notice is hereby given that this Agreement is executed on
behalf of the Fund by the officers of the Fund as officers and not individually
and that the obligations of or arising out of this Agreement are not binding
upon any of the trustees, officers or shareholders individually but are binding
only upon the assets and property belonging respectively to each Portfolio.
[Remainder of Page Intentionally Left Blank]
-25-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
XXXXXX XXXXXX FUNDS II
By: /s/ Xxxxxxxx X. Xxxxxxxxx
------------------------------
Name: Xxxxxxxx X. Xxxxxxxxx
Title: Treasurer
INVESTORS BANK & TRUST COMPANY
By: /s/ Xxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
-26-
Appendices
Appendix A ............................... Series of the Fund
Appendix B................................ Additional Services
-27-
Appendix A: Series of the Fund
Series of Xxxxxx Xxxxxx Funds II covered under this Agreement:
Xxxxxx Xxxxxx High Income Fund
Xxxxxx Xxxxxx Strategic Income Fund
Xxxxxx Xxxxxx Limited Term U.S. Government Fund
Xxxxxx Xxxxxx Municipal Income Fund
-00-
Xxxxxxxx X
Additional Services
None
-29-
