CUSTODIAN CONTRACT
Between
AFD EXCHANGE RESERVES
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be
Held By It........................................... 1
2. Duties of the Custodian with Respect to
Property of the Fund Held by the Custodian
in the United States................................. 2
2.1 Holding Securities............................. 2
2.2 Delivery of Securities......................... 3
2.3 Registration of Securities..................... 7
2.4 Bank Accounts.................................. 8
2.5 Availability of Federal Funds.................. 9
2.6 Collection of Income........................... 9
2.7 Payment of Fund Monies ........................ 10
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased................ 13
2.9 Appointment of Agents.......................... 13
2.10 Deposit of Securities in Securities
System......................................... 14
2.11 Fund Assets Held in the Custodian's
Direct Paper System............................ 17
2.12 Segregated Account............................. 18
2.13 Ownership Certificates for Tax
Purposes....................................... 20
2.14 Proxies........................................ 20
2.15 Communications Relating to Fund
Portfolio Securities........................... 20
3. Duties of the Custodian with Respect to
Property of the Fund Held Outside of the
United States........................................ 21
3.1 Appointment of Foreign Sub-Custodians.......... 21
3.2 Assets to be Held.............................. 22
3.3 Foreign Securities Depositories................ 22
3.4 Agreements with Foreign Banking
Institutions................................... 22
3.5 Access of Independent Accountants of
the Fund....................................... 23
3.6 Reports by Custodian........................... 24
3.7 Transactions in Foreign Custody
Account........................................ 24
3.8 Liability of Foreign Sub-Custodians............ 25
3.9 Liability of Custodian......................... 25
3.10 Reimbursement for Advances..................... 26
3.11 Monitoring Responsibilities.................... 27
3.12 Branches of U.S. Banks......................... 28
3.13 Tax Law........................................ 28
2
4. Payments for Repurchases or Redemptions and
Sales of Shares of the Fund.......................... 29
5. Proper Instructions.................................. 30
6. Actions Permitted Without Express Authority.......... 31
7. Evidence of Authority................................ 31
8. Duties of Custodian with Respect to the
Books of Account and Calculation of Net
Asset Value and Net Income........................... 32
9. Records.............................................. 32
10. Opinion of Fund's Independent Accountant............. 33
11. Reports to Fund by Independent Public
Accountants..........................................
12. Compensation of Custodian............................
13. Responsibility of Custodian..........................
14. Effective Period, Termination and Amendment..........
15. Successor Custodian..................................
16. Interpretive and Additional Provisions...............
17. Massachusetts Law to Apply...........................
18. Prior Contracts......................................
19. Shareholder Communications...........................
3
CUSTODIAN CONTRACT
This Contract between AFD Exchange Reserves, a business
trust organized and existing under the laws of Massachusetts,
having its principal place of business at 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx, 00000, hereinafter called the
"Fund", and State Street Bank and Trust Company, a Massachusetts
trust company, having its principal place of business at 000
Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx, 00000, hereinafter called
the "Custodian",
WITNESSETH: That in consideration of the mutual
covenants and agreements hereinafter contained, the parties
hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian
of its assets, including securities it desires to be held in
places within the United States ("domestic securities") and
securities it desires to be held outside the United States
("foreign securities") pursuant to the provisions of the
Declaration of Trust. The Fund agrees to deliver to the Custodian
all securities and cash owned by it, and all payments of income,
payments of principal or capital distributions received by it
with respect to all securities owned by the Fund from time to
time, and the cash consideration received by it for such new or
treasury shares of beneficial interest ("Shares") of the Fund as
4
may be issued or sold from time to time. The Custodian shall not
be responsible for any property of the Fund held or received by
the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the
meaning of Article 5), the Custodian shall from time to time
employ one or more sub-custodians located in the United States,
but only in accordance with an applicable vote by the Board of
Trustees of the Fund, and provided that the Custodian shall have
no more or less responsibility or liability to the Fund on
account of any actions or omissions of any sub-custodian so
employed than any such sub-custodian has to the Custodian. The
Custodian may employ as sub-custodians for the Fund's foreign
securities and other assets the foreign banking institutions and
foreign securities depositories designated in Schedule "A" hereto
but only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the
Fund Held By the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of the Fund all
non-cash property, to be held by it in the United
States, including all domestic securities owned by the
Fund, other than (a) securities which are maintained
pursuant to Section 2.10 in a clearing agency which acts
as a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury,
5
collectively referred to herein as "Securities System"
and (b) commercial paper of an issuer for which State
Street Bank and Trust Company acts as issuing and paying
agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of the Custodian
pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and
deliver domestic securities owned by the Fund held by
the Custodian or in a Securities System account of the
Custodian or in the Custodian's Direct Paper book-entry
system account ("Direct Paper System Account") only upon
receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, and
only in the following cases:
1) Upon sale of such securities for the account of the
Fund and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Fund;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of
Section 2.10 hereof;
4) To the depository agent in connection with tender
or other similar offers for portfolio securities of
the Fund;
6
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or
otherwise become payable; provided that, in any
such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Fund or into the name of any
nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to
Article 1; or for exchange for a different number
of bonds, certificates or other evidence
representing the same aggregate face amount or
number of units; provided that, in any such case,
the new securities are to be delivered to the
Custodian;
7) Upon the sale of such securities for the account.
of the Fund, to the broker or its clearing agent,
against a receipt, for examination in accordance
with "street delivery" custom; provided that in any
such case, the Custodian shall have no
responsibility or liability for any loss arising
from the delivery of such securities prior to
receiving payment for such securities except as may
7
arise from the Custodian's own negligence or
willful misconduct;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities
and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise
of such warrants, rights or similar securities or
the surrender of interim receipt:s or temporary
securities for definitive securities; provided
that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Fund, but only against
receipt of adequate collateral as agreed upon from
time to time by the Custodian and the Fund, which
may be in the form of cash or obligations issued by
the United States government, its agencies or
instrumentalities, except that in connection with
8
any loans for which collateral is to be credited to
the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury,
the Custodian will not be held liable or
responsible for the delivery of securities owned by
the Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any
borrowings by the Fund requiring a pledge of assets
by the Fund, but only against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of
any agreement among the Fund, the Custodian and a
broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a
member of The National Association of Securities
Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and
of any registered national securities exchange, or
of any similar organization or organizations,
regarding escrow or other arrangements in
connection with transactions by the Fund;
13) For delivery in accordance with the provisions of
any agreement among the Fund, the Custodian, and a
Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with
9
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;
14) Upon receipt of instructions from the transfer
agent ("Transfer Agent") for the Fund, for delivery
to such Transfer Agent or to the holders of shares
in connection with distributions in kind, as may be
described from time to time in the Fund's currently
effective prospectus and statement of additional
information ("prospectus"), in satisfaction of
requests by holders of Shares for repurchase or
redemption; and
15) For any other proper corporate purpose, but only
upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of
the Board of Trustees or of the Executive Committee
signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, specifying
the securities to be delivered, setting forth the
purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate
purpose, and naming the person or person; to whom
delivery of such securities shall be made.
10
2.3 Registration of Securities. Domestic securities held by
the Custodian (other than bearer securities) shall be
registered in the name of the Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian
which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the
appointment of a nominee to be used in common with other
registered investment companies having the same
investment adviser as the Fund, or in the name or
nominee name of any agent appointed pursuant to Section
2.9 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted
by the Custodian on behalf of the Fund under the terms
of this Contract shall be in "street name" or other good
delivery form. If, however, the Fund directs the
Custodian to maintain securities in "street name", the
Custodian shall utilize its best efforts only to timely
collect income due the Fund on such securities and to
notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation,
pendency of calls, maturities, tender or exchange
offers.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the United States
in the name of the Fund, subject only to draft or order
11
by the Custodian acting pursuant to the terms of this
Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by
it from or for the account of the Fund, other than cash
maintained by the Fund in a bank account established and
used in accordance with Rule 17f-3 under the Investment
Company Act of 1940. Funds held by the Custodian for the
Fund may be deposited by it to its credit as Custodian
in the Banking Department of the Custodian or in such
other banks or trust companies as it may in its
discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment
Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such
bank or trust company shall be approved by vote of a
majority of the Board of Trustees of the Fund. Such
funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement
between the Fund and the Custodian, the Custodian shall,
upon the 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 Custodian in
12
the amount of checks received in payment for Shares of
the Fund which are deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of
Section 2.3, the Custodian shall collect on a timely
basis all income and other payments with respect to
United States registered securities held hereunder to
which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall
collect on a timely basis all income and other payments
with respect to United States bearer securities if, on
the date of payment by the issuer, such securities are
held by the Custodian or its agent thereof and shall
credit such income, as collected, to the Fund's
custodian account. Without limiting the generality of
the foregoing, the Custodian shall detach and present
for payment all coupons and other income items requiring
presentation as and when they become due and shall
collect interest when due on securities held hereunder.
Income due the Fund on United States securities loaned
pursuant to the provisions of Section 2.2 (10) shall be
the responsibility of the Fund. The Custodian will have
no duty or responsibility in connection therewith, other
than to provide the Fund with such information or data
as may be necessary to assist the Fund in arranging for
13
the timely delivery to the Custodian of the income to
which the Fund is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper
Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall
pay out monies of the Fund in the following cases only:
1) Upon the purchase of domestic securities, options,
futures contracts or options on futures contracts
for the account of the Fund but only (a) against
the delivery of such securities, or evidence of
title to such options, futures contracts or options
on futures contracts, to the Custodian (or any
bank, banking firm or trust company doing business
in the United States or abroad which is qualified
under the Investment Company Act of 1940, as
amended, to act as a custodian and has been
designated by the Custodian as its agent for this
purpose) registered in the name of the Fund or in
the name of a nominee of the Custodian referred to
in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected
through a Securities System, in accordance with the
conditions set forth in Section 2.10 hereof; (c) in
the case of a purchase involving the Direct Paper
System, in accordance with the conditions set forth
14
in Section 2.11; (d) in the case of repurchase
agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer
which is a member of NASD, (i) against delivery of
the securities either in certificate form or
through an entry crediting the Custodian's account
at the Federal Reserve Bank with such securities or
(ii) against delivery of the receipt evidencing
purchase by the Fund of securities owned by the
Custodian along with written evidence of the
agreement by the Custodian to repurchase such
securities from the Fund or (e) for transfer to a
time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be
effected prior to receipt of a confirmation from a
broker and/or the applicable bank pursuant to
Proper Instructions from the Fund as defined in
Article 5;
2) In connection with conversion, exchange or
surrender of securities owned by the Fund as set
forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued
by the Fund as set forth in Article 4 hereof;
4) For the payment of any expense or liability
incurred by the Fund, including but not limited to
15
the following payments for the account of the Fund:
interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the
Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends declared pursuant
to the governing documents of the Fund;
6) For payment of the amount of dividends received in
respect of securities sold short;
7) For any other proper purpose, but only upon receipt
of, in addition to Property Instructions, a
certified copy of a resolution of the Board of
Trustees or of the Executive Committee of the Fund
signed by an officer of the Fund and certified by
its Secretary or an Assistant Secretary, specifying
the amount of such payment, setting forth the
purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment
is to be made.
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased. Except as specifically stated
otherwise in this Contract, in any and every case where
payment for purchase of domestic securities for the
16
account of the Fund is made by the Custodian in advance
of receipt of the securities purchased in the absence of
specific written instructions from the Fund to so pay in
advance, the Custodian shall be absolutely liable to the
Fund for such securities to the same extent as if the
securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time
remove) any other bank or trust company which is itself
qualification under the Investment Company Act of 1940,
as amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the
Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or
liabilities hereunder.
2.10 Deposit of Securities in Securities Systems. The
Custodian may deposit and/or maintain domestic
securities owned by the Fund in a clearing agency
registered with the Securities and Exchange Commission
under Section 17A of the Securities Exchange Act of
1934, which acts as a securities depository, or in the
book~entry system authorized by the U.S. Department of
the Treasury and certain federal agencies, collectively
referred to herein as "Securities System" in accordance
17
with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and
subject to the following provisions:
1) The Custodian may keep domestic securities of the
Fund in a Securities System provided that such
securities are represented in an account
("Account") of the Custodian in the Securities
System which shall not include any assets of the
Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to
domestic securities of the Fund which are
maintained in a Securities System shall identify by
book-entry those securities belonging to the Fund;
3) The Custodian shall pay for domestic securities
purchased for the account of the Fund upon (i)
receipt of advice from the Securities System that
such securities have been transferred to the
Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment
and transfer for the account of the Fund. The
Custodian shall transfer domestic securities sold
for the account of the Fund upon (i) receipt of
advice from the Securities System that payment for
such securities has been transferred to the
18
Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer
and payment for the account of the Fund. Copies of
all advices from the Securities System of transfers
of domestic securities for the account of the Fund
shall identify the Fund, be maintained for the Fund
by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish
the Fund confirmation of each transfer to or from
the account of the Fund in the form of a written
advice or notice and shall furnish to the Fund
copies of daily transaction sheets reflecting each
day's transactions in the Securities System for the
account of the Fund.
4) The Custodian shall provide the Fund with any
report obtained by the Custodian on the Securities
System's accounting system, internal accounting
control and procedures for safeguarding domestic
securities deposited in the Securities System;
5) The Custodian shall have received the initial or
annual certificate, as the case may be, required by
Article 15 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to
the Fund for any loss or damage to the Fund
19
resulting from use of the Securities System by
reason of any negligence, misfeasance or misconduct
of the Custodian or any of its agents or of any of
its or their employees or from failure of the
Custodian or any such agent to enforce effectively
such rights as it may have against the Securities
System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the
Custodian with respect to any claim against the
Securities System or any other person which the
Custodian may have as a consequence of any such
loss or damage if and to the extent that the Fund
has not been made whole or any such loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System
The Custodian may deposit and/or maintain securities
owned by the Fund in the Direct Paper System of the
Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct
Paper System will be effected in the absence of
Proper Instructions;
2) The Custodian may keep securities of the Fund in
the Direct Paper System only if such securities are
represented in an account ("Account") of the
Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than
20
assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to
securities of the Fund which are maintained in the
Direct Paper System shall identify by book-entry
those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased
for the account of the Fund upon the making of an
entry on the records of the Custodian to reflect
such payment and transfer of securities to the
account of the Fund. The Custodian shall transfer
securities sold for the account of the Fund upon
the making of an entry on the records of the
Custodian to reflect such transfer and receipt of
payment for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation
of each transfer to or from the account of the
Fund, in the form of a written advice or notice, of
Direct Paper on the next business day following
such transfer and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's
transaction in the Securities System for the
account of the Fund;
6) The Custodian shall provide the Fund with any
report on its system of internal accounting control
21
as the Fund may reasonably request from time to
time;
2.12 Segregated Account. The Custodian shall upon receipt of
Proper Instructions establish and maintain a segregated
account or account; for and on behalf of the Fund, into
which account or accounts may be transferred cash and/or
securities, including securities maintained in an
account by the Custodian pursuant to Section 2.10
hereof, (i) in accordance with the provisions of any
agreement among the Fund, the Custodian 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
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or
government securities in connection with options
purchased, sold or written by the Fund or commodity
futures contracts or options thereon purchased or sold
by the Fund, (iii) for the purposes of compliance by the
Fund with t]he procedures required by Investment Company
22
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 and (iv) for other
proper corporate purposes, but only, in the case of
clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee signed
by an officer of the Fund and certified by the Secretary
or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to domestic securities of the Fund held by it
and in connection with transfers of such securities.
2.14 Proxies. The Custodian shall, with respect to the
domestic securities held hereunder, cause to be promptly
executed by the registered holder of such securities, if
the securities are registered otherwise than in the name
of the Fund or a nominee of the Fund, all proxies,
without indication of the manner in which such proxies
are to be voted, and shall promptly deliver to the Fund
23
such proxies, all proxy soliciting materials and all
notices relating to such securities.
2.15 Communications Relating to Fund Portfolio Securities
Subject to the provisions of Section 2.3, the Custodian
shall transmit promptly to the Fund all written
information (including, without limitation, pendency of
calls and maturities of domestic securities and
expirations of rights in connection therewith and
notices of exercise of call and put options written by
the Fund and the maturity of futures contracts purchased
or sold by the Fund) received by the Custodian from
issuers of the domestic securities being held for the
Fund. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Fund all
written information received by the Custodian from
issuers of the domestic securities whose tender or
exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Fund desires
to take action with respect to any tender offer,
exchange offer or any other similar transaction, the
Fund shall notify the Custodian at least three business
days prior to the date on which the Custodian is to take
such action.
24
3. Duties of the Custodian with Respect to Property of the
Fund Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians
The Fund hereby authorizes and instructs the Custodian
to employ as sub-custodians for the Fund's securities
and other assets maintained outside the United States
the foreign banking institutions and foreign securities
depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper Instructions",
as defined in Section 5 of this Contract, together with
a certified resolution of the Fund's Board of Trustees,
the Custodian and the Fund may agree to amend Schedule A
hereto from time to time to designate additional foreign
banking institutions and foreign securities depositories
to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to
cease the employment of any one or more such sub-
custodians for maintaining custody of the Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the custody of
the foreign sub-custodians to: (a) "foreign securities",
as defined in paragraph (c)(l) of Rule 17f-5 under the
Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund
may determine to be reasonably necessary to effect the
25
Fund's foreign securities transactions. The Custodian
shall identify on its books as belonging to the Fund,
the foreign securities of the Fund held by each foreign
sub-custodian.
3.3 Foreign Securities Depositories. Except as may
otherwise be agreed upon in writing by the Custodian and
the Fund, assets of the Fund shall be maintained in
foreign securities depositories only through
arrangements implemented by the foreign banking
institutions serving as sub-custodians pursuant to the
terms hereof. Where possible, such arrangements shall
include entry into agreements containing the provisions
set forth in Section 3.4 hereof.
3.4 Agreements with Foreign Banking Institutions. Each
agreement with a foreign banking institution shall be
substantially in the form set forth in Exhibit 1 hereto
and shall provide that: (a) the Fund's assets will not
be subject to any right, charge, security interest, lien
or claim of any kind in favor of the foreign banking
institution or its creditors or agent, except a claim of
payment for their safe custody or administration; (b)
beneficial ownership of the Fund~s assets will be freely
transferable without the payment of money or value other
than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging
26
to the Fund; (d) officers of or auditors employed by, or
other representatives of the Custodian, including to the
extent permitted under applicable law the independent
public accountants for the Fund, will be given access to
the books and records of the foreign banking institution
relating to its actions under its agreement with the
Custodian; and (e) assets of the Fund held by the
foreign sub-custodian will be subject only to the
instructions of the Custodian or its agents.
3.5 Access of Independent Accountants of the Fund. Upon
request of the Fund, the Custodian 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 a foreign
sub-custodian insofar as such books and records relate
to the performance of such foreign banking institution
under its agreement with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the
Fund from time to time, as mutually agreed upon,
statements in respect of the securities and other assets
of the Fund held by foreign sub-custodians, including
but not limited to an identification of entities having
possession of the Fund's securities and other assets and
advices or notifications of any transfers of securities
to or from each custodial account maintained by a
27
foreign banking institution, for the Custodian on behalf
of the Fund indicating, as to securities acquired for
the Fund,the identity of the entity having physical
possession of such securities.
3.7 Transactions in Foreign Custody Account (a) Except as
otherwise provided in paragraph (b) of this Section 3.7,
the provision of Sections 2.2 and 2.7 of this Contract
shall apply, mutatis mutandis to the foreign securities
of the Fund held outside the United States by foreign
sub-custodians.(b) Notwithstanding any provision of this
Contract to the contrary, settlement and payment for
securities received for the account of the Fund and
delivery of securities maintained for the account of the
Fund may be effected in accordance with the customary
established securities trading or securities processing
practices and procedures 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.(c) Securities
maintained in the custody of a foreign sub-custodian may
be maintained in the name of such entity's nominee to
the same extent as set forth in Section 2.3 of this
28
Contract, and the Fund agrees to hold any such nominee
harmless from any liability as a holder of record of
such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement
pursuant to which the Custodian employs a foreign
banking institution as a foreign sub-custodian shall
require the institution to exercise reasonable care in
the performance of its duties and to indemnify, and hold
harmless, the Custodian and the Fund from and against
any loss, damage, cost, expense, liability or claim
arising out of or in connection with the institution's
performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims
against a foreign banking institution as a consequence
of any such loss, damage, cost, expense, liability or
claim if and to the extent that the Fund has not been
made whole for any such loss, damage, cost, expense,
liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable
for the acts or omissions of a foreign banking
institution to the same extent as set forth with respect
to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the
custody of a foreign banking institution, a foreign
29
securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.12 hereof, the Custodian
shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization,
expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the
foregoing provisions of this paragraph 3.9, in
delegating custody duties to State Street London Ltd.,
the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such
delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange
control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed
hostilities) or (b) other losses (excluding a bankruptcy
or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or
other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the
Custodian to advance cash or securities for any purpose
including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the
Custodian or its nominee shall incur or be assessed any
30
taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this
Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act
or willful misconduct, any property at any time held for
the account of the Fund shall be security therefor and
should the Fund fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available
cash and to dispose of the Fund assets to the extent
necessary to obtain reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall furnish
annually to the Fund, during the month of June,
information concerning the foreign sub-custodians
employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund
"in connection with the initial approval of this
Contract. In addition, the Custodian will promptly
inform the Fund in the event that the Custodian learns
of a material adverse change in the financial condition
of a foreign sub-custodian or any material loss of the
assets of the Fund or in the case of any foreign sub-
custodian not the subject of an exemptive order from the
Securities and Exchange Commission is notified by such
foreign sub-custodian that there appears to be a
substantial likelihood that its shareholders' equity
31
will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has
declined below $200 million (in each case computed in
accordance with generally accepted U.S. accounting
principles).
3.12 Branches of U.S. Banks
(a) Except as otherwise set forth in this Contract, the
provisions hereof shall not apply where the custody of
the Fund assets are! maintained in a foreign branch of a
banking institution which is a "bank" as defined by
Section 2(a)(5) of the Investment Company Act of 1940
meeting the qualification set forth in Section 26(a) of
said Act. The appointment of any such branch as a sub-
custodian shall be governed by paragraph 1 of this
Contract. (b) Cash held for the Fund in the United
Kingdom shall be maintained in an interest bearing
account established for the Fund with the Custodian's
London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or
both.
3.13 Tax Law
The Custodian shall have no responsibility or liability
for any obligations now or hereafter imposed on the Fund
or the Custodian as custodian of the Fund by the tax law
32
of the United States of America or any state or
political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of
the obligations imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of jurisdictions
other than those mentioned in the above sentence,
including responsibility for withholding and other
taxes, assessments or other governmental charges,
certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax
law shall be to use reasonable efforts to assist the
Fund with respect to any claim for exemption or refund
under the tax law of jurisdictions for which the Fund
has provided such information.
4. Payments for Repurchases or Redemptions and Sales of
Shares of the Fund
From such funds as may be available for the purpose but
subject to the limitations of the Declaration of Trust and any
applicable votes of the Board of Trustees of the Fund pursuant
thereto, the Custodian shall, upon receipt of instructions from
the Transfer Agent, make funds available for payment to holders
of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the
redemption or repurchase of Shares of the Fund, the Custodian is
authorized upon receipt of instructions from the Transfer Agent
33
to wire funds to or through a commercial bank designated by the
redeeming shareholders. In connection with the redemption or
repurchase of Shares of the Fund, the Custodian shall honor
checks drawn on the Custodian by a holder of Shares, which checks
have been furnished by the Fund to the holder of Shares, when
presented to the Custodian in accordance with such procedures and
controls as are mutually agreed upon from time to time between
the Fund and the Custodian.
The Custodian shall receive from the distributor for the
Fund's Shares or from the Transfer Agent of the Fund and deposit
into the Fund's account such payments as are received for Shares
of the Fund issued or sold from time to time by the Fund. The
Custodian will provide timely notification to the Fund and the
Transfer Agent of any receipt by it of payments for Shares of the
Fund.
5. Proper Instructions
Proper Instructions as used herein means a writing
signed or initialed by one or more person or persons as the Board
of Trustees shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of
transaction involved, including a specific statement of the
purpose for which such action is requested. Oral instructions
will be considered Property Instructions if the Custodian
reasonably believes them to have been given by a person
authorized to give such instructions with respect to the
34
transaction involved. The Fund shall cause all oral instructions
to be confirmed in writing. Upon receipt of a certificate of the
Secretary or an Assistant Secretary as to the authorization by
the Board of Trustees of the Fund accompanied by a detailed
description of procedures approved by the Board of Trustees,
Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that
the Board of Trustees and the Custodian are satisfied that such
procedures afford adequate safeguards for the Fund's assets. For
purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-
party agreement which requires a segregated asset account in
accordance with Section 2.12.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express
authority from the Fund:
1) make payments to itself or others for minor
expenses of handling securities or other similar items relating
to its duties under this Contract, provided that all such
payments shall be accounted for to the Fund;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the Fund,
checks, drafts and other negotiable instruments; and
35
4) in general, attend to all non-discretionary details
in connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property of
the Fund except as otherwise directed by the Board of Trustees of
the Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any
instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been
properly executed by or on behalf of the Fund. The Custodian may
receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority
of any person to act in accordance with such vote or (b) of any
determination or of any action by the Board of Trustees pursuant
to the Declaration of Trust as described in such vote, and such
vote may be considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board of
Trustees of the Fund to keep the books of account of the Fund
and/or compute the net asset value per share of the outstanding
shares of the Fund or, if directed in writing to do so by the
Fund, shall itself keep such books of account and/or compute such
36
net asset value per share. If so directed, the Custodian shall
also calculate daily the net income of the Fund as described in
the Fund's currently effective prospectus and shall advise the
Fund and the Transfer Agent daily of the total amounts of such
net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of
the division of such net income among its various components. The
calculations of the net asset value per share and the daily
income of the Fund shall be made at the time or times described
from time to time in the Fund's currently effective prospectus.
9. Records
The Custodian shall create and maintain all records
relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the
Investment Company Act of 1940, with particular attention to
Section.31 thereof and Rules 31a-1 and 31a-2 thereunder. All such
records shall be the property of the Fund and shall at all times
during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of
the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply
the Fund with a tabulation of securities owned by the Fund and
held by the Custodia.n and shall, when requested to do so by the
Fund and for such compensation as shall be agreed upon between
37
the Fund and the Custodian, include certificate numbers in such
tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the
Fund may from time to time request, to obtain from year to year
favorable opinions from the Fund's independent accountants with
respect to its activities hereunder in connection with the
preparation of the Fund's Form N-1A, and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, at such times as
the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including domestic
securities deposited and/or maintained in a Securities System,
relating to the services provided by the Custodian under this
Contract; such reports shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Fund to
provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such
inadequacies, the reports shall so state.
38
12. Compensation of Custodian
The Custodian shall. be entitled to reasonable
compensation for its services and expenses as Custodian, as
agreed upon from time to time between the Fund and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise
of reasonable care, the Custodian shall not be responsible for
the title, validity or genuineness of any property or evidence of
title thereto received by it or delivered by it pursuant to this
Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party
or parties, including any futures commission merchant acting
pursuant to the terms of a three-party futures or options
agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability
to the Fund for any action taken or omitted by it in good faith
without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
The Custodian shall be liable for the acts or omissions
of a foreign banking institution appointed pursuant to the
provisions of Article 3 to the same extent as set forth in
39
Article 1 hereof with respect to sub-custodians located in the
United States (except as specifically provided in Article 3.9)
and, regardless of whether assets are maintained in the custody
of a foreign banking institution, a foreign securities depository
or a branch of a U.S. bank as contemplated by paragraph 3.12
hereof, the Custodian shall not be liable for any loss, damage,
cost, expense, liability or claim resulting from, or caused by,
the direction of or authorization by the Fund to maintain custody
or any securities or cash of the Fund in a foreign country
including, but not limited to, losses resulting from
nationalization, expropriation, currency restrictions, or acts of
war or terrorism.
If the Fund requires the Custodian to take any action
with respect to securities, which action involves the payment of
money or which action may, in the opinion of the Custodian,
result in the Custodian or its nominee assigned to the Fund being
liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates,
subsidiaries or agents, to advance cash or securities for any
purpose (including but not limited to securities settlements,
foreign exchange contracts and assumed settlement) or in the
event that the Custodian or its nominee shall incur or be
40
assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any
property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available
cash and to dispose of the Fund assets to the extent necessary to
obtain reimbursement.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its
execution, shall continue in full force and effect until
terminated as hereinafter provided, may be amended at any time by
mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take
effect not sooner than thirty (30) days after the date of such
delivery or mailing; provided, however that the Custodian shall
not act under Section 2.10 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary
that the Board of Trustees of the Fund has approved the initial
use of a particular Securities System and the receipt of an
annual certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has reviewed the use by the Fund of
such Securities System, as required in each case by Rule 17f-4
41
under the Investment Company Act of 1940, as amended and that the
Custodian shall not act under Section 2.11 hereof in the absence
of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has approved the
initial use of the Direct Paper System and the receipt of an
annual certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has reviewed the use by the Fund of
the Direct Paper System; provided further, however, that the Fund
shall not amend or terminate this Contract in contravention of
any applicable federal or state regulations, or any provision of
the Declaration of Trust, and further provided, that the Fund may
at any time by action of its Board of Trustees (i) substitute
another bank or trust company for the Custodian by giving notice
as described above to the Custodian, or (ii) immediately
terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of
the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of
competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to
the Custodian such compensation as may be due as of the date of
such termination and shall likewise reimburse the Custodian for
its costs, expenses and disbursements.
42
15. Successor Custodian
If a successor custodian shall be appointed by the Board
of Trustees of the Fund, the Custodian shall, upon termination,
deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities
held in a Securities System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified copy
of a vote of the Board of Trustees of the Fund, deliver at the
office of the Custodian and transfer such securities, funds and
other properties in accordance with such vote.
In the event that no written order designating a
successor custodian or certified copy of a vote of the Board of
Trustees shall have been delivered to the Custodian on or before
the date when such termination shall become effective, then the
Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company
Act of 1940, doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by
the Custodian and all instruments held by the Custodian relative
thereto and all other property held by it under this Contract and
43
to transfer to an account of such successor custodian all of the
Fund's securities held in any Securities System. Thereafter, such
bank or trust company shall be the successor of the Custodian
under this Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to procure the
certified copy or the vote referred to or of the Board of
Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period
as the Custodian retains possession of such securities, funds and
other properties and the provisions of this Contract relating to
the duties and obligations of the Custodian shall remain in full
force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Fund may from time to time agree on such
provisions interpretive of or in addition to the provisions of
this Contract as may in their joint opinion be consistent with
the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Declaration of Trust of the Fund. No interpretive or additional
44
provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Contract.
17. Massachusetts Law to Apply
This Contract shall be construed and the provisions
thereof interpreted under and in accordance with laws of the
Commonwealth of Massachusetts.
18. Prior Contracts
This Contract supersedes and terminates, as of the date
hereof, all prior contracts between the Fund and the Custodian
relating to the custody of the Fund's assets.
19. Shareholder Communications
Securities and Exchange Commission Rule 14b-2 requires
banks which hold securities for the account of customers to
respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that
issuer held by the bank unless the beneficial owner has expressly
objected to disclosure of this information. In order to comply
with the rule, the Custodian needs the Fund to indicate whether
it authorizes the Custodian to provide the Fund's name, address,
and share position to requesting companies whose securities the
Fund owns. If the Fund tells the Custodian "no", the Custodian
will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or
"no" below, the Custodian is required by the rule to treat the
Fund as consenting to disclosure of this information for all
45
securities owned by the Fund or any funds or accounts established
by the Fund. For the Fund's protection, the Rule prohibits the
requesting company from using the Fund's name and address for any
purpose other than corporate communications. Please indicate
below whether the Fund consents or objects by checking one of the
alternatives below.
YES [ ] The Custodian is authorized to release the
Fund's name, address, and share positions.
NO [ ] The Custodian is not authorized to release the
Fund's name, address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the 18 day of January , 1994.
ATTEST AFD EXCHANGE RESERVES
/s/ Xxxxxx X. Xxxxx /s/ Xxxxx X. Xxxxx
___________________ _____________________
Xxxxxx X. Xxxxx Xxxxx X. Xxxxx
Assistant Secretary Senior Vice President
ATTEST STATE STREET BANK AND TRUST
COMPANY
/s/ By /s/ Xxxxxx X. Xxxxx
___________________ _________________________
Assistant Secretary Executive Vice President
46
Schedule A
The following foreign banking institutions and foreign
securities depositories have been approved by the Board of
Trustees of AFD Exchange Reserves for use as sub-custodians for
the Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
/s/
____________________________
Fund's Authorized Officer
Date: January 18, 1994
47
EXHIBIT 1
SUBCUSTODIAN AGREEMENT
AGREEMENT made this ______________; between State Street
Bank and Trust Company, A Massachusetts Trust Company
(hereinafter referred to as the "Custodian"), having its
principal place of business at 000 Xxxxxxxx Xxxxxx, Xxxxxx, XX,
and __________________ (hereinafter referred to as the
"Subcustodian"), a bank organized under the laws of
________________ and having its registered office at ____________
________________________________________________________________.
WHEREAS, Custodian has been appointed to act as Trustee,
Custodian or Subcustodian of securities and monies on behalf of
certain of its customers including, without limitation,
collective investment undertakings, investment companies subject
to the U.S. Investment Company Act of 1940, as amended, and
employee benefit plans subject to the U.S. Employee Retirement
Income Security Act of 1974, as amended;
WHEREAS, Custodian wishes to establish Accounts (the
"Accounts") with the Subcustodian to hold and maintain certain
property for which Custodian is responsible as custodian; and
WHEREAS, Subcustodian agrees to establish the Accounts
and to hold and maintain all Property in the Accounts in
accordance with the terms and conditions herein set forth.
NOW THEREFORE, in consideration of the mutual covenants
and agreements hereinafter contained, the Custodian and the
Subcustodian agree as follows:
I. The Account
A. Establishment of the Account
Custodian hereby, requests that subcustodian establish
for each client of the Custodian an Account which shall be
composed of:
1. A Custody Account for any and all Securities (as
hereinafter defined) from time to time received by Subcustodian
therefor, and
2. A Deposit Account for any and all Cash (as
hereinafter defined) from time to time received by Subcustodian
therefor.
48
B. Use of the Account
The Account shall be used exclusively to hold, acquire,
transfer or otherwise care for, on behalf of Custodian as
custodian and the customers of Custodian and not for custodian's
own interest, Securities, and such Cash or cash equivalents as
are transferred to subcustodian or as are received in payment of
any transfer of, or as payment on, or interest on, or dividend
from, any such Securities (herein collectively called "Cash").
C. Transfer of Property in the Account
Beneficial ownership of the Securities and Cash in the
Account shall be freely transferable without payment of money or
value other than for safe custody and administration.
D. Ownership and Segregation of Property in Account
The ownership of the property in the Account, whether
Securities, Cash or both, and whether any such property is held
by Subcustodian in an Eligible Depository, shall be clearly
recorded on Subcustodian's books as belonging to custodian on
behalf of Custodian's customers, and not for custodian' S own
interest and, to the extent that Securities are physically held
in the Account, such Securities shall also be physically
segregated from the general assets of Subcustodian, the assets of
Custodian in its individual capacity and the assets of
Subcustodian's other customers. In addition, Subcustodian shall
maintain such other records as may be necessary to identify the
property hereunder as belonging to each Account.
E. Registration of Securities in the Account
Securities which are eligible for deposit in a
depository as provided for in Paragraph III may be maintained
with the depository in an account for Subcustodian's customers.
Securities which are not held in a depository and that are
ordinarily held in registered form will be registered in the name
of the Sub-custodian or in the name of Sub-custodian's nominee,
unless alternate Instructions are furnished by custodian.
II. Services to be Provided by the Subcustodian
The Services Subcustodian will provide to Custodian and
the manner in which such services will be performed will be as
set forth below in this Agreement.
49
A. Services Performed Pursuant to Instructions
All transactions involving the Securities and Cash in
the Account shall be ~executed solely in accordance with
custodian's Instructions as that term is defined in Paragraph IV
hereof, except those described in Paragraph B below.
B. Services to be Performed without Instructions
Subcustodian will, unless it receives Instructions from
custodian to the contrary:
1. Collect Cash
Promptly collect and receive all dividends, income,
principal, proceeds from transfer and other payments with respect
to property held in the Account, and present for payment all
Securities held in the Account which are called, redeemed or
retired or otherwise become payable and all coupons and other
income items which call for payment upon presentation, and credit
Cash receipts therefrom to the Deposit Account.
2. Exchange Securities
Promptly exchange Securities where the exchange is
purely ministerial including, without limitation, the exchange of
temporary Securities for those in definitive form and the
exchange of warrants, or other documents of entitlement to
Securities, for the Securities themselves.
3. Sale of Rights and Fractional Interests
Whenever notification of a rights entitlement or a
fractional interest resulting from a rights issue, stock dividend
or stock split is received for the Account and such rights
entitlement or fractional interest bears an expiration date,
Subcustodian will promptly endeavor to obtain Custodian's
Instructions, but should these not be received in time for
Subcustodian to take timely action, subcustodian is authorized to
sell such rights entitlement or fractional interest and to credit
the Account.
4. Execute Certificates
Execute in Custodians name for the Account, whenever
subcustodian deems it appropriate, such ownership and other
certificates as may be required to obtain the payment of income
from the Securities held in the Account.
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5. Pay Taxes and Receive Refunds
To pay or cause to be paid from the Account any and all
taxes and levies in the nature of taxes imposed on the property
in the Account by any governmental authority, and to take all
steps necessary to obtain all tax exemptions, privileges or other
benefits, including reclaiming and recovering any withholding
tax, relating to the Account and to execute any declarations,
affidavits, or certificates of ownership which may be necessary
in connection therewith.
6. Prevent Losses
Take such steps as may be reasonably necessary to
secure, or otherwise ]prevent the loss of, entitlements attached
to or otherwise relating to property held in the Account.
C. Additional Services
1. Transmission of Notices of Corporate Action
By such means as will permit custodian to take timely
action with respect thereto, Subcustodian will promptly notify
Custodian upon receiving notices or reports, or otherwise
becoming aware, of corporate action affecting Securities held in
the Account (including, but not limited to, calls for redemption,
mergers, consolidations, reorganizations, recapitalizations,
tender offers, rights offerings, exchanges, subscriptions and
other offerings) and dividend, interest and other income payments
relating to such Securities.
2. Communications Regarding the Exercise of
Entitlements
Upon request by Custodian, subcustodian will promptly
deliver, or cause any Eligible Depository authorized and acting
hereunder to deliver, to Custodian all notices, proxies, proxy
soliciting materials and other communications that call for
voting or the exercise of rights or other specific action
(including material relative to legal proceedings intended to be
transmitted to security holders) relating to Securities held in
the Account to the extent received by Subcustodian or said
Eligible Depository, such proxies or any voting instruments to be
executed by the registered holder of the Securities, but without
indicating the manner in which such Securities are to be voted.
3. Monitor Financial Service
In furtherance of its obligations under this Agreement,
Subcustodian will monitor a leading financial service with
respect to announcements and other information respecting
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property held in the Account, including announcements and other
information with respect to corporate actions and dividend,
interest and other income payments.
III. Use of Securities Depository
Subcustodian may, with the prior written approval of
custodian, maintain all or any part of the Securities in the
Account with a securities depository or clearing agency which is
incorporated or organized under the laws of a country other than
the United States of America and is supervised or regulated by a
government agency or regulatory authority in the foreign
jurisdiction having authority over such depositories or agencies,
and which operates (a) the central system for handling of
designated securities or equivalent book entries in or (b) a
transnational system for the central handling of securities or
equivalent book entries (herein called "Eligible Depository"),
provided however, that, while so maintained, such Securities
shall be subject only to the directions of Subcustodian, and that
Subcustodian duties, obligations and responsibilities with regard
to such Securities shall be the same as if such Securities were
held by subcustodian on its premises.
IV. Claims Against Property in the Account
The property in the account shall not be subject to any
right, charge, security interest, lien or claim of any kind
(collectively "Charges") in favor of Subcustodian or any Eligible
Depository or any creditor of Subcustodian or of any Eligible
Depository except a claim for payment by Subcustodian for such
property's safe custody or administration in accordance with the
terms of this Agreement. Subcustodian will immediately notify
Custodian of any attempt by any party to assert any Charge
against the property held in the Account and shall take all
lawful actions to protect such property from such Charges until
custodian has had reasonable time to respond to such notice.
V. Subcustodian's Warranty
Subcustodian Represents and Warrants That:
(A) It is a branch of a "qualified U.S. bank" or it is an
"eligible foreign custodian" as those terms are defined in Rule
17f-5 of the investment Company Act of 1940, a copy of which is
attached hereto as Attachment A (the "Rule"), and Subcustodian
shall immediately notify Custodian, in writing or by other
authorized means, in the event that there appears to be a
substantial likelihood that Subcustodian will cease to qualify
under the Rule as currently in effect or as hereafter amended, or
(b) It is the subject of an exemptive order issued by the
United States Securities and Exchange Commission which order
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permits Custodian to employ Subcustodian notwithstanding the fact
that Subcustodian fails to qualify under the terms of the Rule,
and Subcustodian shall immediately notify Custodian, in writing
or by other authorized means, if for any reason it is no longer
covered by such exemptive order.
Upon receipt of any such notification required under (A)
or (B) of this section, Custodian may terminate this Agreement
immediately without prior notice to Subcustodian.
VI. Definitions
A. Instructions
The term "Instructions" means
1. instructions in writing signed by authorized
individuals designated as such by custodian;
2. telex or tested telex instructions of Custodian;
3. other forms of instructions in computer readable
form as shall customarily be used for the transmission of like
information, and
4. such other forms of communication as from time to
time may be agreed upon by Custodian and Subcustodian, which
Subcustodian believes in good faith to have been given by
custodian or which are transmitted with proper testing or
authentication pursuant to terms and conditions which custodian
may specify.
Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until canceled or
superseded. Subcustodian shall act in accordance with
Instructions and shall not be liable for any act or omission in
respect of any Instruction except in the case of willful default,
negligence, fraud, bad faith, willful misconduct, or reckless
disregard of duties on the part of Subcustodian. Subcustodian in
executing all Instructions will take relevant action in
accordance with accepted industry practice and local settlement
practices.
B. Account
The term "Account" means collectively the Custody
Account, and the Deposit Account.
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C. Securities
The term "Securities" includes, without limitation,
stocks, shares, bonds, debentures, debt securities (convertible
or non-convertible), notes, or other obligations or securities
and any certificates, receipts, futures contracts, foreign
exchange contracts, options, warrants, scrip or other instruments
representing rights to receive, purchase or subscribe for the
same, or evidencing or representing any other rights or interests
therein, or in any property or assets.
VII. Miscellaneous Provisions
A. Statements Regarding the Account
Subcustodian will supply custodian with such statements
regarding the Account as Custodian may request, including the
identity and location of any Eligible Depository authorized and
acting hereunder. In addition, Subcustodian will supply custodian
an advice or notification of any transfers of Securities to or
from the Account indicating, as to Securities acquired for the
Account, if applicable, the Eligible Depository having physical
possession of such securities.
B. Examination of Books and Records
Subcustodian agrees that its books and records relating
to the Account and Sub-custodian's actions under this agreement
shall be open to the physical, on-premises inspection and audit
at reasonable times by officers of, auditors employed by, or
other representatives of Custodian including (to the extent
permitted under the laws of ________________) the independent
public accountants for any customer of subcustodian whose
property is being held hereunder) and such books and records
shall be retained for such period as shall be agreed upon by
Custodian and Subcustodian.
As Custodian may reasonably request from time to time,
subcustodian will furnish its auditor's reports on its system of
internal controls, and subcustodian will use its best efforts to
obtain and furnish similar reports of any Eligible Depository
authorized and acting hereunder.
C. Standard of Care
In holding, maintaining, servicing and disposing of
Property under this Agreement, and in fulfilling any other
obligations hereunder, Subcustodian shall exercise the same
standard of care that it exercises over its own assets, provided
that Subcustodian shall exercise at least the degree of care and
maintain adequate insurance as expected of a prudent professional
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Subcustodian for hire and shall assume the burden of proving that
it has exercised such care in its maintenance of Property held by
Subcustodian in its Accounts. The maintenance of the Property in
an Eligible Depository shall not affect Subcustodian's standard
of care, and Subcustodian will remain as fully responsible for
any loss or damage to such securities as if it had itself
retained physical possession of them. Subcustodian shall
indemnify and hold harmless Custodian and each of custodian's
customers from and against any loss, damage, cost, expense,
liability or claim (including reasonable attorney's fees) arising
out of or in connection with the improper or negligent
performance or the nonperformance of the duties of Subcustodian.
Subcustodian shall be responsible for complying with all
provisions of the laws of _ , or any other law, applicable to
Subcustodian in connection with its duties hereunder, including
(but not limited to) the payment of all transfer taxes or other
taxes and compliance with any currency restrictions and
securities laws in connection with its duties as Subcustodian.
D. Loss of Cash or Securities
Subcustodian agrees that, in the event of any loss of
Securities or Cash in the Account, subcustodian will use its best
efforts to ascertain the circumstances relating to such loss and
will promptly report the same to Custodian and shall use every
legal means available to it to effect the quickest possible
recovery.
E. Compensation of Subcustodian
Custodian agrees to pay to subcustodian from time to
time such compensation for its services and such out-of-pocket or
incidental expenses of Subcustodian pursuant to this Agreement as
may be mutually agreed upon in writing from time to time.
F. Operating Requirements
The Subcustodian agrees to follow such Operating
Requirements as the Custodian may establish from time to time. A
copy of the current custodian Operating Requirements is attached
as Attachment B to this Agreement.
G. Termination
This Agreement may be terminated by Subcustodian or
custodian on 60 days' written notice to the other party, sent by
registered mail, provided that any such notice, whether given by
Subcustodian or custodian, shall be followed within 60 days by
instructions specifying the names of the persons to whom
Subcustodian shall deliver the Securities in the Account and to
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whom the Cash in the Account shall be paid. If within 60 days
following the giving of such notice of termination, Subcustodian
does not receive such Instructions, Subcustodian shall continue
to hold such Securities and Cash subject to this Agreement until
such Instructions are given. The obligations of the parties under
this Agreement shall survive the termination of this Agreement.
H. Notices
Unless otherwise specified in this Agreement, all
notices and communications with respect to matters contemplated
by this Agreement shall be in writing, and delivered by mail,
postage prepaid, telex, SWIFT, or other mutually agreed
telecommunication methods to the following addresses (or to such
other address as either party hereto may from time to time
designate by notice duly given in accordance with this
paragraph):
To Subcustodian:
To Custodian: State Street Bank and Trust
Company
Securities Operations/Network
Administration
X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
I. Confidentiality
Subcustodian and Custodian shall each use its best
efforts to maintain the confidentiality of the property in the
Account and the beneficial owners thereof, subject, however, to
the provisions of any laws requiring disclosure. In addition,
Subcustodian shall safeguard any test keys, identification codes
or other security devices which custodian shall make available to
it. The Subcustodian further agrees it will not disclose the
existence of this Agreement or any current business relationship
unless compelled by applicable law or regulation or unless it has
secured the Custodian's written consent.
J. Assignment
This Agreement shall not be assignable by either party
but shall bind any successor in interest of Custodian and
Subcustodian respectively.
K. Governing Law
This Agreement shall be governed by and construed in
accordance with the laws of ___________________________. To the
extent inconsistent with this Agreement or Custodian's Operating
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Requirements as attached hereto, Subcustodian's rules and
conditions regarding accounts generally or custody accounts
specifically shall not apply.
CUSTODIAN: STATE STREET BANK AND TRUST COMPANY
By:________________________
Date:______________________
AGREED TO BY SUBCUSTODIAN:
By:_______________________
Date:_____________________
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00250163.AM2
