AMENDMENT TO THE CUSTODIAN AGREEMENT
AMENDMENT, dated [_____] to the August 12, 1991 custody agreement
(Agreement) between The Advisors' Inner Circle Fund (Fund), a Massachusetts
business trust and First Union National Bank, a National Bank (First Union)
(formerly, Corestates Bank, N.A.).
WHEREAS, the Fund desires to appoint First Union to provide custodian
services related to maintaining the Fund's assets outside of the United States
(Foreign Assets) on the terms and conditions contained herein to the Portfolios
listed on Exhibit A, as may be amended from time to time;
WHEREAS, First Union desires to provide custodian services related to
maintaining the Fund's assets outside of the United States (Foreign Assets) and
perform the duties set forth herein on the terms and conditions contained
herein.
NOW THEREFORE, in consideration of the mutual premises hereinafter
contained in this Agreement, the Fund and First Union hereby agree as follows:
Section 1. Except as modified hereby, the Agreement is confirmed in all
respects. Capitalized terms used herein without definition
shall have the meanings ascribed to them in the Agreement.
Section 2. The Agreement is amended by adding a new Section 18 as
follows:
COMPLIANCE WITH SEC RULE 17F-5.
a. APPOINTMENT. The Fund hereby appoints First Union as Foreign Custody
Manager to perform the responsibilities set forth in this Section 18 with
respect to Foreign Assets, and First Union hereby accepts such appointment
as a Foreign Custody Manager of the Fund. First Union agrees to fulfill its
duties and perform its responsibilities hereunder in accordance with SEC
Rule 17f-5.
b. STANDARD OF CARE. First Union shall use the reasonable care, prudence, and
diligence a person having responsibility for the safekeeping of the assets
of an investment company registered
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under the 1940 Act would exercise in performing the responsibilities set forth
in this Section 18.
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c. SCOPE OF RESPONSIBILITIES AS FOREIGN CUSTODY MANAGER.
(i) SELECTION. Subject to the provisions of this Section 18, First Union
shall place and maintain Foreign Assets in the care of one or more
Eligible Foreign Custodians. In performing its responsibilities to
place and maintain Foreign Assets with an Eligible Foreign Custodian,
First Union shall determine that the Eligible Foreign Custodian will
hold Foreign Assets in the exercise of reasonable care, based on the
standards applicable to custodians in the jurisdiction or market 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:
(A) the Eligible Foreign Custodian's practices, procedures, and
internal controls, including, but not limited to, the physical
protections available for certificated securities (if
applicable), its methods of keeping custodial records, its
security and data protection practices, settlement practices, and
its Year 2000 and Euro conversion safeguards, preparations and
precautions;
(B) whether the Eligible Foreign Custodian has the financial strength
to provide reasonable care for Foreign Assets and to protect
Foreign Assets against the Eligible Foreign Custodian's
insolvency;
(C) the Eligible Foreign Custodian's general reputation and standing;
and
(D) whether the Fund will have jurisdiction over, and be able to
enforce judgments against, the Eligible Foreign Custodian in the
United States.
(ii) CONTRACTS. First Union shall ensure that the Fund's foreign custody
arrangements with each Eligible Foreign Custodian are governed by a
written contract with such Eligible Foreign Custodian. First Union
shall determine that the written contract governing the foreign
custody arrangements with each Eligible Foreign Custodian First Union
selects will provide reasonable care for Foreign Assets held by that
Eligible Foreign Custodian. Each written contract will include terms
that provide:
(A) for indemnification and/or insurance arrangements such that the
Fund will be adequately protected against the risk of loss of the
Foreign Assets held in accordance with such contract;
(B) that the Foreign Assets will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the
Eligible Foreign Custodian or its creditors, except a claim for
the Eligible Foreign Custodian's services under the contract or,
in the case of cash deposits, liens or rights in favor of
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creditors of such Eligible Foreign Custodian arising under
bankruptcy, insolvency or similar laws;
(C) that beneficial ownership of the Foreign Assets will be freely
transferable without the payment of money or value, other than
payments for the Eligible Foreign Custodian's services under the
contract;
(D) that the Eligible Foreign Custodian will maintain adequate
records identifying the Foreign Assets held under the contract as
belonging to a Portfolio or as being held by a third party for
the benefit of a Portfolio;
(E) that the Fund's independent public accountants will be given
access to those records or confirmation of the contents of those
records; and
(F) that the Fund will receive periodic reports with respect to the
safekeeping of the Foreign Assets, including, but not limited to,
notification of any transfer of the Foreign Assets to or from the
account of a Portfolio or a third party account containing the
Foreign Assets held for the benefit of a Portfolio.
or, in lieu of any or all of the terms set forth in (A) through (F)
above, such other terms that First Union determines will provide, in
their entirety, the same or greater level of care and protection for
the Foreign Assets as the provisions set forth in (A) through (F)
above in their entirety.
(iii) MONITORING. First Union will establish and maintain a system to
monitor: (i) the appropriateness of maintaining assets with each
Eligible Foreign Custodian; (ii) each Eligible Foreign Custodian's
continuing compliance with the standards set forth in Rule 17f-5, and
this Amendment; and (iii) Material Changes to the Fund's foreign
custody arrangements, as defined in paragraph (d) below (the
Monitoring System).
(iv) WITHDRAWING FUND ASSETS. In the event that a foreign custody
arrangement no longer meets the terms and conditions set forth in SEC
Rule 17f-5 or this Agreement, and place such foreign assets with
another eligible foreign custodian. First Union will promptly notify
the Fund as described in Section 18(c)(v). First Union is authorized
to withdraw Foreign Assets.
(v) REPORTING REQUIREMENTS. First Union shall report the placement of
Foreign Assets with an Eligible Foreign Custodian and non-Material
Changes by providing a written report to the Board at the end of each
calendar quarter. With respect to Material Changes, First Union shall
provide the Board with a written report promptly after the occurrence
of the Material Change. Material Changes include: a decision to remove
all Foreign Assets from a particular sub-custodian; any event that may
adversely and
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materially affect an Eligible Foreign Custodian's financial or
operational strength; First Union's inability to perform its duties in
accordance with a standard of care under this Amendment; a change in
control of an Eligible Foreign Custodian; the failure of an Eligible
Foreign Custodian to comply with the standards in the Guidelines, the
terms of Rule 17f-5, its contract governing the Fund's foreign custody
arrangements or the established practices or procedures of a
Securities Depository; any material change in any contract governing
the Fund's foreign custody arrangements; any material change in the
established practices or procedures of a Securities Depository; the
failure of First Union or a foreign custody arrangement to meet the
standards in Rule 17f-5 or this Amendment; any event that may
adversely affect First Union's ability to comply with Rule 17f-5 or
this Amendment; and a material change in any information provided to
the Board regarding First Union's expertise in foreign custody issues
and risks, First Union's use of third party experts to perform its
foreign custody responsibilities, the Board's ability to monitor First
Union's performance, First Union's financial strength or its ability
to indemnify the Fund.
(vi) PROVISION OF INFORMATION. First Union shall provide to the Fund (or
its investment manager) such information as is specified in Appendix
1-B hereto, as may be amended from time to time by the parties. The
Fund hereby acknowledges that such information is solely designed to
inform the Fund (or its investment manager) of market conditions and
procedures, but is not intended to influence the Fund's investment
decisions. First Union must use reasonable care in gathering such
information. First Union agrees to promptly notify the Fund's
investment adviser at the time that First Union becomes aware of a
material change to the information provided or if First Union learns
that any information previously provided is incomplete or inaccurate.
At least annually, First Union will provide to the Fund a written
statement as may reasonably be required to document its compliance
with the terms of this Agreement, as well as information regarding the
following factors: (i) First Union's expertise in foreign custody
issues and risks; (ii) First Union's use of third party experts to
perform its foreign custody responsibilities; (iii) the Board's
ability to monitor First Union's performance; and (iv) First Union's
financial strength and its ability to indemnify the Fund if necessary.
With respect to each Eligible Foreign Custodian employed by the Fund
under this Section 18(c)(vi), First Union agrees to provide to the
Fund or its investment adviser any information it possesses regarding
Country Risk or the risks associated with placing or maintaining
Foreign Assets with the Eligible Foreign Custodian.
d. REPRESENTATIONS. The Fund hereby represents to First Union that (i) this
Agreement has been duly authorized, executed and delivered by the Fund,
constitutes a valid and legally binding obligation of the Fund enforceable
in accordance with its terms, and no statute, regulation, rule, order,
judgment or contract binding on the Fund prohibits the Fund's execution or
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performance under this Agreement. First Union hereby represents to the Fund
that (i) it is a U.S. Bank with the full power to carry on its businesses
as now conducted, and to enter into this Agreement and to perform its
obligations hereunder; (ii) this Agreement has been duly authorized,
executed and delivered by First Union, constitutes a valid and legally
binding obligation of First Union enforceable in accordance with its terms,
and no statute, regulation, rule, order, judgment or contract binding on
First Union prohibits First Union's execution or performance of this
Agreement; and (iii) First Union has established, and agrees to maintain
during the term of this Agreement, the Monitoring System.
In addition to any express or implied warranties made in the Agreement,
First Union hereby represents and warrants that each and every commercial
and noncommercial hardware, software, firmware, mechanical, or electrical
product (Product(s)) utilized, created, assembled, manufactured, developed,
or modified in connection with any goods or services offered or provided
under this Amendment shall, at no additional costs to the Fund, be able to
store and process accurately any and all data reflected in the currency
unit of the European Monetary Union, the Euro, and related to the Euro
(including, but not limited to, calculating, comparing, storing,
processing, recording, valuing, recognizing, validating, presenting, and
sequencing). The Fund may, at no additional cost, require First Union to
demonstrate compliance and/or compliance techniques and test procedures it
intends to follow, or evidence of compliance by First Union and relevant
third party vendors, consistent with the Euro-related representations,
warranties, and obligations contained herein. These representations and
warranties shall be in effect so long as the service(s) or Product(s)
provided under this agreement are used by First Union or provided by First
Union for the benefit of the Fund.
e. CONDITION PRECEDENT. As a condition precedent to First Union's performance
under this Amendment, the Fund shall deliver to First Union a certificate
from the Fund's secretary containing the resolution of the Board regarding
the Board's determination that it is reasonable to rely on First Union to
perform the delegated responsibilities provided for herein.
f. COUNTRY RISK. First Union's responsibilities under this Section 18 shall
not include, or be deemed to include, any evaluation of Country Risks
associated with investment in a particular country.
g. BEST CUSTOMER. If at any time First Union is or becomes a party to an
agreement to serve as Foreign Custody Manager to an investment company that
provides for either: (a) a standard of care with respect to the selection
of Eligible Foreign Custodians in any jurisdiction higher than that set
forth in Section 18(c) (i) or (ii) a standard of care with respect to
exercise of First Union's duties other than that set forth in Section
18(b), First Union agrees to notify the Fund of this fact and to raise the
applicable standard of care hereunder to the standard specified in such
other agreement.
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h. DIRECTION OF ELIGIBLE FOREIGN CUSTODIANS. The Fund may direct First Union
to place and maintain Foreign Assets with a particular Eligible Foreign
Custodian. In such event, First Union will have no duties under this
Section 18 with respect to such arrangement, except those included under
Section 18(c) (vi) and those that it may undertake specifically in writing.
i. COMPLIANCE WITH RULE 17F-7. First Union shall provide an analysis of the
custody risks associated with maintaining the Fund's Foreign Assets with
each Eligible Securities Depository used by Custodian prior to the initial
placement of the Fund's Foreign Assets at such Depository and at which any
Foreign Assets of Principal are held or are expected to be held. First
Union shall monitor the custody risks associated with maintaining the
Fund's Foreign Assets at each such Eligible Securities Depository on a
continuing basis and shall promptly notify the Fund or its adviser of any
material changes in such risks. First Union shall exercise reasonable care,
prudence and diligence in performing the requirements set forth in this
Paragraph. Based on the information available to it in the exercise of
diligence, First Union shall determine the eligibility under Rule 17f-7 of
each Depository before including it on Appendix 1-A hereto and shall
promptly advise the Fund if any Eligible Securities Depository ceases to be
eligible.
j. TAX SERVICES.
(i) First Union shall apply for a reduction of withholding tax and any
refund of any tax paid or tax credits that apply in each market in
respect of income payments on Assets for the benefit of the Fund which
First Union believes may be available to the Fund. If the Fund is
eligible, pursuant to applicable law or to the provisions of any tax
treaty, for a reduced rate of, or exemption from, any tax which is
otherwise required to be withheld or paid on behalf of the Fund under
any applicable law, First Union shall, or shall instruct the
applicable Eligible Foreign Custodian or withholding agent to, either
withhold or pay such tax at such reduced rate or refrain from
withholding or paying such tax, as appropriate. In the event that a
reduced rate of, or exemption from, any tax is obtainable only by
means of an application for refund, First Union shall, or shall
instruct the applicable Eligible Foreign Custodian or withholding
agent to, apply for such refund. The provision of tax services is
conditional upon the Fund's provision to First Union of all
documentary evidence as First Union shall reasonably require in
connection with taxation, and the Fund warrants that when given, this
information shall be true and correct in every material respect. The
Fund undertakes to notify First Union immediately if any such
information requires updating or amendment.
(ii) First Union and the applicable Eligible Foreign Custodian shall have
no responsibility for the accuracy or validity of any forms or
documentation the Fund
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provides to First Union hereunder, and the Fund hereby indemnifies and
agrees to hold harmless First Union and each Eligible Foreign
Custodian in respect of any liability arising from any
underwithholding or underpayment of any tax which results from the
inaccuracy or invalidity of any such forms or other documentation.
(iii) First Union and the applicable Eligible Foreign Custodian shall not
be liable to the Fund or any third party for any taxes, fines or
penalties payable by the Fund or First Union, and shall be indemnified
accordingly, whether these result form the Fund's or any third party's
inaccurate completion of documents, or as a result of the Fund's or
any third party's provision of inaccurate or misleading information or
the withholding of material information, or as a result of any delay
of any revenue authority or any other event beyond the control of
First Union or any Eligible Foreign Custodian.
(iv) First Union shall perform tax reclaim services only for taxation
levied by the revenue authorities of the countries notified to First
Union from time to time, and First Union may, after notifying the Fund
in writing, supplement or amend the markets in which it offers tax
reclaim services. Other than as expressly provided in this clause
(iv), First Union shall have no responsibility for the Fund's tax
position or status in any jurisdiction.
(v) First Union is authorized to deduct from any Property in the form of
cash any taxes or levies required by any revenue or governmental
authority under applicable law in respect of the Account.
k. DEFINITIONS.
"Board" means the board of trustees or board of directors, as applicable,
of the Fund.
"Country Risk" means the systemic risks arising from holding assets in a
particular country, including those arising from a country's financial
infrastructure, prevailing custody and settlement practices; expropriation,
nationalization or other governmental actions; and laws applicable to the
safekeeping and recovery of assets held in custody in such country.
"Eligible Foreign Custodian" means an Eligible Foreign Custodian as defined
in SEC Rule 17f-5(a)(1) and any other entity that the SEC qualifies as such
by exemptive order, no-action relief, rule or other appropriate SEC action.
"Foreign Assets" means any Portfolio's investments (including foreign
currencies) for which the primary market is outside the United States and
such cash and cash equivalents as are reasonably necessary to effect the
Portfolio's transactions in such investments.
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"Foreign Custody Manager" means a Foreign Custody Manager as defined in SEC
Rule 17f-5(a)(3).
"Portfolio" means each separate series of shares offered by the Fund
representing interests in a separate portfolio of securities and other
assets.
"SEC" means the U.S. Securities and Exchange Commission.
"Eligible Securities Depository" means any securities depository or
clearing agency within the meaning of SEC Rule 17f-7(b)(1).
"U.S. Bank" means a U.S. bank as defined in SEC Rule 17f-5(a)(7).
"1940 Act" means the Investment Company Act of 1940.
l. AUTHORIZATION. Subject to the terms and conditions herein, First Union is
hereby authorized to: (i) place and maintain Foreign Assets on behalf of
the Fund with Eligible Foreign Custodians pursuant to a written contract
determined appropriate by First Union in accordance with the terms and
conditions herein and (ii) withdraw Foreign Assets from Eligible Foreign
Custodians in accordance with the terms and conditions herein.
m. CONCERNING FIRST UNION
(i) For its services hereunder, the Fund agrees to pay to First Union such
compensation and out-of-pocket expenses as shall be mutually agreed.
(ii) First Union shall have only such duties as are expressly set forth
herein. In no event shall First Union be liable for any Country Risks
associated with investments in a particular country.
n. 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.
IN WITNESS WHEREOF, the Fund and First Union have caused this Agreement to
be executed by their respective officers, thereunto duly authorized, as of the
date first above written.
[_________________] FUND
By:
Title:
Tax Identification No.
FIRST UNION NATIONAL BANK
By:
Title:
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EXHIBIT A
PORTFOLIOS
FMC Select Fund
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APPENDIX 1-B
INFORMATION REGARDING COUNTRY RISK
1. To aid the Fund or its delegate in its consideration of Country Risks,
First Union shall furnish the Fund annually and prior to the initial
placing of Foreign Assets into a country, the following information:
a. Opinions of local counsel, both internal and concerning whether
applicable foreign law would restrict the: (i) access afforded the
Fund's independent public accountants to books and records kept by an
Eligible Foreign Custodian located in that country; (ii) Fund"s
ability to recover its Foreign Assets in the event of the bankruptcy
of an Eligible Foreign Custodian in that country; or (iii) Fund's
ability to recover Foreign Assets that are lost while under the
control of an Eligible Foreign Custodian located in that country.
b. Written information concerning: (i) the likelihood of expropriation,
nationalization, freezes, or confiscation of the Fund's Foreign Assets
and (ii) whether difficulties in converting the Fund"s cash and cash
equivalents to U.S. dollars are reasonably foreseeable.
c. A market report with respect to the following topics: (i) securities
regulatory environment; (ii) foreign ownership restrictions; (iii)
foreign exchange; (iv) securities settlement and registration; (v)
taxation; and (vi) compulsory depositories.
2. To aid the Fund in monitoring Country Risk, First Union shall furnish the
Fund with the following information: [Market flashes], including with
respect to changes in the information contained in the above market
reports.
3. First Union shall furnish additional information customarily provided to
other investment companies registered under the Investment Company Act of
1940 for which First Union provides foreign custody services.
4. First Union shall furnish additional information regarding Country Risks as
the Fund may reasonably request from time to time.
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