EX-99.B8
Custodian Agreement
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This Agreement between Dodge & Xxx Balanced Fund, a common law trust
established under the laws of the State of California with its principal place
of business at Xxx Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
(the "FUND"), and State Street Bank and Trust Company, a Massachusetts trust
company with its principal place of business at 000 Xxxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000 (the "CUSTODIAN"), in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto agree as follows:
Section 1. Employment of Custodian and Property to be Held by It
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The Fund hereby employs the Custodian as the custodian of the assets of the of
the Fund, including securities which the Fund 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 Fund's Declaration of Trust. The Fund agrees to deliver to the Custodian
all of the Fund's securities and cash, 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 shares of beneficial interest of the Fund ("SHARES") as 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" (as such term is defined in Section 6
hereof), the Custodian shall on behalf of the Fund 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 (the "BOARD OF
TRUSTEES"), 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-custodian for the Fund's foreign
securities the foreign banking institutions and foreign securities depositories
designated in Schedules A and B hereto but only in accordance with the
applicable provisions of Sections 3 and 4.
Section 2. Duties of the Custodian with Respect to Property of the Fund Held
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By the Custodian in the United States
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Section 2.1 Holding Securities. The Custodian shall hold and
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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 2.8 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 (each, a "U.S.
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 (the "DIRECT PAPER SYSTEM") pursuant to Section
2.9.
Section 2.2 Delivery of Securities. The Custodian shall release and
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deliver domestic securities owned by the Fund held by the Custodian or in a U.S.
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 from the Fund, which may be continuing instructions when
deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities 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 U.S. Securities System, in
accordance with the provisions of Section 2.8 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Fund;
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 2.7 or into the name or nominee name of any
sub-custodian appointed pursuant to Section 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
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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 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;
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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 receipts 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
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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 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
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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 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 for the Fund
(the "TRANSFER AGENT") 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 currently effective
prospectus and statement of additional information of the Fund
(the "PROSPECTUS"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper trust purpose, but only upon receipt of, in
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addition to Proper Instructions from the Fund, a copy of a
resolution of the Board of Trustees or of the Executive Committee
thereof signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary thereof (a "CERTIFIED
RESOLUTION"), specifying the securities of the Fund to be
delivered, setting forth the purpose for which such
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delivery is to be made, declaring such purpose to be a proper
trust purpose, and naming the person or persons to whom delivery
of such securities shall be made.
Section 2.3 Registration of Securities. Domestic securities held by
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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
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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 2.7 or in the name or nominee name of any sub-custodian
appointed pursuant to Section 1. All securities accepted by the Custodian on
behalf of the Fund under the terms of this Agreement 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.
Section 2.4 Bank Accounts. The Custodian shall open and maintain a
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separate bank account or accounts in the United States in the name of Fund,
subject only to draft or order by the Custodian acting pursuant to the terms of
this Agreement, 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,
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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 on behalf of the Fund be approved by vote of a majority of the Board of
Trustees. Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that capacity.
Section 2.5 Collection of Income. Subject to the provisions of
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Section 2.3, the Custodian shall collect on a timely basis all income and other
payments with respect to registered domestic securities held hereunder to which
each 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 bearer domestic 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 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
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assist the Fund in arranging for the timely delivery to the Custodian of the
income to which the Fund is properly entitled.
Section 2.6 Payment of Fund Monies. Upon receipt of Proper
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Instructions from the Fund, 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 U.S. Securities System, in accordance
with the conditions set forth in Section 2.8 hereof; (c) in the
case of a purchase involving the Direct Paper System, in accordance
with the conditions set forth in Section 2.9; (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 herein;
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 as set forth in
Section 5 hereof;
4) For the payment of any expense or liability incurred by the Fund,
including but not limited to 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 on Shares declared pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
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7) For any other proper trust purpose, but only upon receipt of, in
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addition to Proper Instructions from the Fund, a copy of a
Certified Resolution specifying the amount of such payment, setting
forth the purpose for which such payment is to be made, declaring
such purpose to be a proper trust purpose, and naming the person or
persons to whom such payment is to be made.
Section 2.7 Appointment of Agents. The Custodian may at any time or
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times in its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified 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 Section 2 as the Custodian may from time to time direct;
provided, however, that the appointment of any agent shall not relieve the
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Custodian of its responsibilities or liabilities hereunder.
Section 2.8 Deposit of Fund Assets in U.S. Securities Systems. The
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Custodian may deposit and/or maintain securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission under Section 17A
of the Exchange Act, 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 "U.S. SECURITIES SYSTEMS" in
accordance 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 securities of the Fund in a U.S. Securities
System provided that such securities are represented in an account
of the Custodian in the U.S. Securities System account (the "U.S.
SECURITIES SYSTEM ACCOUNT") which account 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 securities of the Fund
which are maintained in a U.S. Securities System shall identify by
book-entry those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the account of
the Fund upon (i) receipt of advice from the U.S. Securities System
that such securities have been transferred to the U.S. Securities
System 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 securities sold for the
account of the Fund upon (i) receipt of advice from the U.S.
Securities System that payment for such securities has been
transferred to the U.S. Securities System 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 U.S. Securities System of transfers of 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
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and shall furnish to the Fund copies of daily transaction sheets
reflecting each day's transactions in the U.S. Securities System for
the account of the Fund;
4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the U.S. Securities System's accounting system,
internal accounting control and procedures for safeguarding securities
deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund the initial or
annual certificate, as the case may be, required by Section 15 hereof;
6) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to the
Fund resulting from use of the U.S. 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 U.S. 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 U.S. 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 for any such loss or damage.
Section 2.9 Fund Assets Held in the Custodian's Direct Paper System.
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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 from the Fund;
2) The Custodian may keep securities of the Fund in the Direct Paper
System only if such securities are represented in the Direct Paper
System Account, which account shall not include any assets of the
Custodian other than 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;
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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 Direct Paper System
for the account of the Fund;
6) The Custodian shall provide the Fund with any report on its system
of internal accounting control as the Fund may reasonably request from
time to time.
Section 2.10 Segregated Account. The Custodian shall upon receipt of
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Proper Instructions from the Fund establish and maintain a segregated account or
accounts 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 2.8 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 the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or releases
of the Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for other proper
trust purposes, but only, in the case of clause (iv), upon receipt of, in
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addition to Proper Instructions from the Fund, a copy of a Certified Resolution
setting forth the purpose or purposes of such segregated account and declaring
such purpose(s) to be a proper trust purpose.
Section 2.11 Ownership Certificates for Tax Purposes. The Custodian
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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 securities.
Section 2.12 Proxies. The Custodian shall, with respect to the
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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 such proxies, all proxy soliciting materials and
all notices relating to such securities.
Section 2.13 Communications Relating to Portfolio Securities. Subject
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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
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by the Fund and the maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers of the 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 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.
Section 2.14 Availability of Federal Funds. Upon mutual agreement
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between the Fund and the Custodian, the Custodian shall, upon the receipt of
Proper Instructions from the Fund, make federal funds available to the Fund as
of specified times agreed upon from time to time by the Fund and the Custodian
in the amount of checks received in payment for Shares of the Fund which are
deposited into the Fund's account.
Section 3. The Custodian as Foreign Custody Manager of the Fund
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Section 3.1. Definitions. The following capitalized terms, as used in
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this Agreement, shall have the indicated meanings:
"COUNTRY RISK" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment; economic and financial infrastructure
(including financial institutions such as any Mandatory Securities Depositories
operating in the country); prevailing or developing custody and settlement
practices; and laws and regulations applicable to the safekeeping and recovery
of Foreign Assets held in custody in that country.
"ELIGIBLE FOREIGN CUSTODIAN" has the meaning set forth in section (a)(1) of Rule
17f-5 promulgated under Section 17(f) of the Investment Company Act of 1940, as
amended ("RULE 17F-5"), except that the term does not include Mandatory
Securities Depositories.
"FOREIGN ASSETS" means any of the Fund'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 Fund's
transactions in such investments.
"FOREIGN CUSTODY MANAGER" has the meaning set forth in section (a)(2) of Rule
17f-5.
"MANDATORY SECURITIES DEPOSITORY" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Fund determines to place Foreign Assets in a country outside the United States
(i) because required by law or regulation; (ii) because securities cannot be
withdrawn from such foreign securities depository or clearing agency; or (iii)
because maintaining or effecting trades in securities outside the foreign
securities depository or clearing agency is not consistent with prevailing or
developing custodial or market practices.
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Section 3.2. Delegation to the Custodian as Foreign Custody Manager.
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The Fund, by resolution adopted by the Board of Trustees, hereby delegates to
the Custodian subject to Section (b) of Rule 17f-5, the responsibilities as
Foreign Custody Manager set forth in this Section 3 with respect to Foreign
Assets held outside the United States, and the Custodian hereby accepts such
delegation as the Fund's Foreign Custody Manager.
Section 3.3. Countries Covered. The Foreign Custody Manager shall be
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responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A of this Contract, which may be amended from time to time by
the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule
A the Eligible Foreign Custodians selected by the Foreign Custody Manager to
maintain the assets of the Fund. Mandatory Securities Depositories are listed
on Schedule B to this Contract, which Schedule B may be amended from time to
time by the Foreign Custody Manager. The Foreign Custody Manager will provide
amended versions of Schedules A and B in accordance with Section 3.7 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open
an account or to place or maintain Foreign Assets in a country listed on
Schedule A, and the fulfillment by the Fund of the account opening requirements
for the country (if any), the Foreign Custody Manager shall be deemed to have
been appointed by the Board of Trustees as Foreign Custody Manager with respect
to that country and to have accepted the delegation. Following the receipt of
Proper Instructions directing the Foreign Custody Manager to close the account
of the Fund with the Eligible Foreign Custodian selected by the Foreign Custody
Manager in a designated country, the delegation by the Board of Trustees to the
Custodian as Foreign Custody Manager for that country shall be deemed to have
been withdrawn and the Custodian shall immediately cease to be the Foreign
Custody Manager with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer period as to which the parties agree in
writing) after receipt of any such notice by the Fund, the Custodian shall have
no further responsibility as Foreign Custody Manager to the Fund with respect to
the country as to which the Custodian's acceptance of delegation is withdrawn.
Section 3.4. Scope of Delegated Responsibilities.
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3.4.1. Selection of Eligible Foreign Custodians. Subject to the provisions
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of this Section 3, the Fund's Foreign Custody Manager may place and maintain the
Foreign Assets in the care of the Eligible Foreign Custodians selected by the
Foreign Custody Manager in each country listed on Schedule A, as amended from
time to time.
In performing its delegated responsibilities as Foreign Custody Manager to
place or maintain the Foreign Assets with an Eligible Foreign Custodian, the
Foreign Custody Manager shall determine that the Foreign Assets will be subject
to reasonable care, based on the standards applicable to custodians in the
country in which the Foreign Assets will be held by that Eligible
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Foreign Custodian, after considering all factors relevant to the safekeeping of
such assets, including, without limitation:
(i) 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, and its security and data protection
practices;
(ii) whether the Eligible Foreign Custodian has the financial strength to
provide reasonable care for Foreign Assets;
(iii) the Eligible Foreign Custodian's general reputation and standing
and, in the case of a foreign securities depository or clearing agency
which is not a Mandatory Securities Depository, the foreign securities
depository's or clearing agency's operating history and the number of
participants in the foreign securities depository or clearing agency;
and
(iv) whether the Fund will have jurisdiction over and be able to enforce
judgments against the Eligible Foreign Custodian, such as by virtue of
the existence of any offices of the Eligible Foreign Custodian in the
United States or the Eligible Foreign Custodian's consent to service
of process in the United States.
3.4.2. Contracts With Eligible Foreign Custodians. The Foreign Custody
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Manager shall determine that the contract (or the rules or established practices
or procedures in the case of an Eligible Foreign Custodian that is a foreign
securities depository or clearing agency) governing the foreign custody
arrangements with each Eligible Foreign Custodian selected by the Foreign
Custody Manager will provide reasonable care for the Foreign Assets held by that
Eligible Foreign Custodian based on the standards applicable to custodians in
the particular country. Each such contract shall include provisions that
provide:
(i) for indemnification or insurance arrangements (or any combination of
the foregoing) such that the Fund will be adequately protected against
the risk of loss of the Foreign Assets held in accordance with such
contract;
(ii) that the Foreign Assets will not be subject to any right, security
interest, or lien or claim of any kind in favor of the Eligible
Foreign Custodian or its creditors except a claim of payment for their
safe custody or administration or, in the case of cash deposits, liens
or rights in favor of creditors of the Eligible Foreign Custodian
arising under bankruptcy, insolvency, or similar laws;
(iii) that beneficial ownership of the Foreign Assets will be freely
transferable without the payment of money or value other than for safe
custody or administration;
(iv) that adequate records will be maintained identifying the Foreign
Assets as belonging to the Fund or as being held by a third party for
the benefit of the Fund;
11
(v) that the independent public accountants for the Fund will be given
access to those records or confirmation of the contents of those
records; and
(vi) 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
Fund's account or a third party account containing the Foreign Assets
held for the benefit of the Fund,
or, in lieu of any or all of the provisions set forth in (i) through (vi) above,
such other provisions that the Foreign Custody Manager determines will provide,
in their entirety, the same or greater level of care and protection for the
Foreign Assets as the provisions set forth in (i) through (vi) above, in their
entirety.
3.4.3. Monitoring. In each case in which the Foreign Custody Manager
----------
maintains Foreign Assets with an Eligible Foreign Custodian selected by the
Foreign Custody Manager, the Foreign Custody Manager shall establish a system to
monitor (i) the appropriateness of maintaining the Foreign Assets with such
Eligible Foreign Custodian, and (ii) the contract governing the custody
arrangements established by the Foreign Custody Manager with the Eligible
Foreign Custodian. In the event the Foreign Custody Manager determines that the
custody arrangements with an Eligible Foreign Custodian that it has selected are
no longer appropriate, the Foreign Custody Manager shall notify the Board of
Trustees in accordance with Section 3.7 hereunder.
Section 3.5. Guidelines for the Exercise of Delegated Authority. For
--------------------------------------------------
purposes of this Section 3, the Board of Trustees shall be deemed to have
considered and determined to accept such Country Risk as is incurred by placing
and maintaining the Foreign Assets in each country for which the Custodian is
serving as Foreign Custody Manager of the Fund. The Fund and the Custodian each
expressly acknowledge that the Foreign Custody Manager shall not be delegated
any responsibilities under this Section 3 with respect to Mandatory Securities
Depositories.
Section 3.6. Standard of Care as Foreign Custody Manager of the Fund.
-------------------------------------------------------
In performing the responsibilities delegated to it, the Foreign Custody Manager
agrees to exercise reasonable care, prudence and diligence such as a person
having responsibility for the safekeeping of assets of management investment
companies registered under the Investment Company Act of 1940, as amended, would
exercise.
Section 3.7. Reporting Requirements. The Foreign Custody Manager shall
----------------------
report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian
and the placement of such Foreign Assets with another Eligible Foreign Custodian
by providing to the Board of Trustees amended Schedules A or B at the end of the
calendar quarter in which an amendment to either Schedule has occurred. The
Foreign Custody Manager will make written reports notifying the Board of
Trustees of any other material change in the foreign custody arrangements of the
12
Fund set forth in this Section 3 within a reasonable period of time after the
occurrence of such material change.
Section 3.8. Representations with respect to Rule 17f-5. The Foreign
------------------------------------------
Custody Manager represents to the Fund that it is a U.S. Bank as defined in
section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the
Board of Trustees has determined that it is reasonable for the Board of Trustees
to rely on the Custodian to perform the responsibilities delegated pursuant to
this Agreement to the Custodian as the Foreign Custody Manager of the Fund.
Section 3.9. Effective Date and Termination of the Custodian as Foreign
----------------------------------------------------------
Custody Manager. The Board of Trustees' delegation to the Custodian as Foreign
---------------
Custody Manager of the Fund shall be effective as of the date of execution of
this Agreement and shall remain in effect until terminated at any time, without
penalty, by written notice from the terminating party to the non-terminating
party. Termination will become effective thirty (30) days after receipt by the
non-terminating party of such notice. The provisions of Section 3.3 hereof
shall govern the delegation to and termination of the Custodian as Foreign
Custody Manager of the Fund with respect to designated countries.
Section 4. Duties of the Custodian with Respect to Property of the Fund Held
-----------------------------------------------------------------
Outside of the United States
----------------------------
Section 4.1 Definitions. The following capitalized terms, as used
-----------
throughout this Section 4, shall have the following meanings:
"FOREIGN SECURITIES SYSTEM" means either a clearing agency or a securities
depository which is listed on Schedule A hereto or a Mandatory Securities
Depository.
"FOREIGN SUB-CUSTODIAN" means a foreign banking institution serving as an
Eligible Foreign Custodian or a Permissible Foreign Custodian.
"PERMISSIBLE FOREIGN CUSTODIAN" means any person with whom property of the Fund
may be placed and maintained outside of the United States under (i) section
17(f) or 26(a) of the Investment Company Act of 1940, as amended, without regard
to Rule 17f-5 or (ii) an order of the Securities and Exchange Commission.
Section 4.2. Holding Securities. The Custodian shall identify on its
------------------
books as belonging to the Fund the foreign securities held by each Foreign Sub-
Custodian or Foreign Securities System. The Custodian may hold foreign
securities for all of its customers, including the Fund, with any Foreign Sub-
Custodian in an account that is identified as belonging to the Custodian for the
benefit of its customers, provided however, that (i) the records of the
----------------
Custodian with respect to foreign securities of the Fund which are maintained in
such account shall identify those securities as belonging to the Fund and (ii)
the Custodian shall require that securities so
13
held by the Foreign Sub-Custodian be held separately from any assets of such
Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
Section 4.3. Foreign Securities Systems. Foreign securities shall be
--------------------------
maintained in a Foreign Securities System in a designated country only through
arrangements implemented by the Foreign Sub-Custodian in such country pursuant
to the terms of this Agreement.
Section 4.4. Holding of Foreign Assets With Permissible Foreign
--------------------------------------------------
Custodians. Subject to the requirements of Sections 17(f) and 26(a) of the
Investment Company Act of 1940, as amended (and any other applicable law or
order), the Custodian may place and maintain Foreign Assets in the care of any
Permissible Foreign Custodian. Section 3 hereof shall not apply to placement of
Foreign Assets by the Custodian with a Permissible Custodian.
Section 4.5. Transactions in Foreign Custody Account.
---------------------------------------
4.5.1. Delivery of Foreign Securities. The Custodian or a Foreign Sub-
------------------------------
Custodian shall release and deliver foreign securities of the Fund held by such
Foreign Sub-Custodian, or in a Foreign Securities 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:
(i) upon sale of such foreign securities for the Fund in accordance with
reasonable market practice in the country where such foreign
securities are held or traded, including, without limitation: (A)
delivery against expectation of receiving later payment; or (B) in the
case of a sale effected through a Foreign Securities System in
accordance with the rules governing the operation of the Foreign
Securities System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other similar
offers for foreign securities of the Fund;
(iv) to the issuer thereof or its agent when such foreign securities are
called, redeemed, retired or otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer into the name of the
Custodian (or the name of the respective Foreign Sub-Custodian or of
any nominee of the Custodian (or such Foreign Sub-Custodian) or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units;
(vi) to brokers, clearing banks or other clearing agents for examination or
trade execution in accordance with market custom; provided that in any
--------
such case the Foreign Sub-Custodian shall have no responsibility or
liability for any loss arising from the delivery of such securities
prior to receiving payment for such securities
14
except as may arise from the Foreign Sub-Custodian's own negligence or
willful misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any
deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities, the
surrender thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary
securities for definitive securities;
(ix) for delivery as security in connection with any borrowings by the Fund
requiring a pledge of assets by the Fund;
(x) in connection with trading in options and futures contracts, including
delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other proper trust purpose, but only upon receipt of, in
--- ----
addition to Proper Instructions, a copy of a Certified Resolution
specifying the foreign securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring such purpose
to be a proper trust purpose, and naming the person or persons to whom
delivery of such securities shall be made.
4.5.2. 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, or direct the respective Foreign Sub-Custodian or the
respective Foreign Securities System to pay out, moneys of the Fund in the
following cases only:
(i) upon the purchase of foreign securities for the Fund, unless otherwise
directed by Proper Instructions, by (A) delivering money to the seller
thereof or to a dealer therefor (or an agent for such seller or
dealer) against expectation of receiving later delivery of such
foreign securities; or (B) in the case of a purchase effected through
a Foreign Securities System, in accordance with the rules governing
the operation of such Foreign Securities System;
(ii) in connection with the conversion, exchange or surrender of foreign
securities of the Fund;
(iii) for the payment of any expense or liability of the Fund, including
but not limited to the following payments: interest, taxes,
investment advisory fees, transfer agency fees, fees under this
Agreement, legal fees, accounting fees, and other operating expenses;
15
(iv) for the purchase or sale of foreign exchange or foreign exchange
contracts for the Fund, including transactions executed with or
through the Custodian or its Foreign Sub-Custodians;
(v) in connection with trading in options and futures contracts, including
delivery as original margin and variation margin;
(vii) in connection with the borrowing of foreign securities; and
(viii) for any other proper trust purpose, but only upon receipt of, in
--- ----
addition to Proper Instructions, a copy of a Certified Resolution
specifying the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose to be a
proper trust purpose, and naming the person or persons to whom such
payment is to be made.
4.5.3. Market Conditions. Notwithstanding any provision of this Agreement
-----------------
to the contrary, settlement and payment for Foreign Assets received for the
account of the Fund and delivery of Foreign Assets maintained for the account of
the Fund may be effected in accordance with the customary established securities
trading or processing practices and procedures in the country or market in which
the transaction occurs, including, without limitation, delivering Foreign Assets
to the purchaser thereof or to a dealer therefor (or an agent for such purchaser
or dealer) against a receipt with the expectation of receiving later payment for
such Foreign Assets from such purchaser or dealer.
Section 4.6. Registration of Foreign Securities. The foreign securities
----------------------------------
maintained in the custody of a Foreign Custodian (other than bearer securities)
shall be registered in the name of the Fund or in the name of the Custodian or
in the name of any Foreign Sub-Custodian or in the name of any nominee of the
foregoing, and the Fund agrees to hold any such nominee harmless from any
liability as a holder of record of such foreign securities. The Custodian or a
Foreign Sub-Custodian shall not be obligated to accept securities on behalf of
the Fund under the terms of this Agreement unless the form of such securities
and the manner in which they are delivered are in accordance with reasonable
market practice.
Section 4.7. Bank Accounts. A bank account or bank accounts opened and
-------------
maintained outside the United States in a Foreign Sub-Custodian shall be subject
only to draft or order by the Custodian or such Foreign Sub-Custodian, acting
pursuant to the terms of this Agreement to hold cash received by or from or for
the account of the Fund.
Section 4.8. Collection of Income. The Custodian shall use reasonable
--------------------
endeavors to collect all income and other payments in due course with respect to
the Foreign Assets held hereunder to which the Fund shall be entitled and shall
credit such income, as collected, to the Fund. In the event that extraordinary
measures are required to collect such income, the Fund and the Custodian shall
consult as to such measures and as to the compensation and expenses of the
Custodian attendant thereto.
16
Section 4.9. Proxies. The Custodian will generally with respect to the
-------
foreign securities held under this Section 4 use its reasonable endeavors to
facilitate the exercise of voting and other shareholder proxy rights, subject
always to the laws, regulations and practical constraints that may obtain in the
country where such securities are issued. The Fund acknowledges that local
conditions, including lack of regulation, onerous procedural obligations, lack
of notice and other factors may have the effect of severely limiting the ability
of the Fund to exercise shareholder rights.
Section 4.10. Communications Relating to Foreign Securities. The
---------------------------------------------
Custodian shall transmit promptly to the Fund written information (including,
without limitation, pendency of calls and maturities of foreign securities and
expirations of rights in connection therewith) received by the Custodian via the
Foreign Sub-Custodians from issuers of the foreign securities being held for the
account of the Fund. With respect to tender or exchange offers, the Custodian
shall transmit promptly to the Fund written information so received by the
Custodian from issuers of the foreign securities whose tender or exchange is
sought or from the party (or its agents) making the tender or exchange offer.
The Custodian shall not be liable for any untimely exercise of any tender,
exchange or other right or power in connection with foreign securities or other
property of the Fund at any time held by it unless (i) the Custodian or the
respective Foreign Sub-Custodian is in actual possession of such foreign
securities or property and (ii) the Custodian receives Proper Instructions with
regard to the exercise of any such right or power, and both (i) and (ii) occur
at least three (3) New York business days prior to the date on which such right
or power is to be exercised.
Section 4.11. Liability of Foreign Sub-Custodians and Foreign Securities
----------------------------------------------------------
Systems. Each agreement pursuant to which the Custodian employs as a Foreign
-------
Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian
to exercise reasonable care in the performance of its duties and, to the extent
possible, to indemnify, and hold harmless, the Custodian from and against any
loss, damage, cost, expense, liability or claim arising out of or in connection
with the institution's performance of such obligations. At the election of the
Fund, the Fund shall be entitled to be subrogated to the rights of the Custodian
with respect to any claims against a Foreign Sub-Custodian as a consequence of
any such loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost, expense,
liability or claim.
Section 4.12. Tax Law. Except to the extent that imposition of any tax
-------
liability arises from the Custodian's failure to perform in accordance with the
terms of this Section 4.12, 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 of the United States or of any
state or political subdivision thereof. It shall be the responsibility of the
Custodian to use reasonable efforts and due care to perform such ministerial
steps as are required to collect any tax refund, to ascertain the appropriate
rate of tax withholding and to provide such documents as may be required to
enable the Fund to receive appropriate tax treatment under applicable tax laws
and any applicable treaty provisions. Unless otherwise informed by the Fund,
the Custodian, in performance of its duties under this Section, shall be
entitled to apply categorical treatment to the
17
Fund according to the nationality of the Fund, the particulars of its
organization and other relevant details that shall be supplied to the Custodian
by the Fund. The Custodian shall be entitled to rely on any information
supplied by the Fund. The Custodian may engage reasonable professional advisors
disclosed to the Fund by the Custodian, which may include attorneys, accountants
or financial institutions in the regular business of investment administration
and may rely upon advice received therefrom. It shall be the duty of the Fund
to inform the Custodian of any change in the organization, domicile or other
relevant fact concerning tax treatment of the Fund and further to inform the
Custodian if the Fund is or becomes the beneficiary of any special ruling or
treatment not applicable to the general nationality and category of entity of
which the Fund is a part under general laws and treaty provisions.
Section 4.13. Conflict. If the Custodian is delegated the
--------
responsibilities of Foreign Custody Manager pursuant to the terms of Section 3
hereof, in the event of any conflict between the provisions of Sections 3 and 4
hereof, the provisions of Section 3 shall prevail.
Section 5. Payments for Sales or Repurchases or Redemptions of Shares
----------------------------------------------------------
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent and deposit into the account of the Fund such payments as are
received for Shares thereof 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.
From such funds as may be available for the purpose but subject to the
limitations of the Fund's Declaration of Trust and any applicable votes of the
Board of Trustees 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, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial bank designated
by the redeeming shareholders. In connection with the redemption or repurchase
of Shares, 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.
Section 6. Proper Instructions
-------------------
Proper Instructions as used throughout this Agreement means a writing signed
or initialed by two or more 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 Proper Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Proper Instructions may include
18
communications effected directly between electro-mechanical or electronic
devices. 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 2.10.
Section 7. 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
Agreement, 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
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.
Section 8. 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 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 Fund's 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.
Section 8A. Representations and Warranties
------------------------------
Section 8A.1. Representations and Warranties of Custodian
-------------------------------------------
The Custodian represents and warrants to the Fund that:
1) it is a trust company duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts;
2) it is duly qualified to carry on its business in The Commonwealth of
Massachusetts;
19
3) it is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement;
4) all requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement;
5) it has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement; and
6) it is a qualified custodian under the Investment Company Act of 1940, as
amended.
Section 8A.2. Representation and Warranties of the Fund
-----------------------------------------
The Fund represents and warrants to the Custodian that:
1) it is a common law trust duly organized and existing and in good standing
under the laws of the State of California;
2) it is empowered under applicable laws and by its Declaration of Trust to
enter into and perform this Agreement;
3) all proceedings required by said Declaration of Trust have been taken to
authorize it to enter into and perform this Agreement;
4) it is an open-end, diversified management investment company registered
under the Investment Company Act of 1940, as amended; and
5) a registration statement under the Securities Act of 1933, as amended is,
currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made,
with respect to all Shares of the Fund being offered for sale and all
Shares sold.
Section 9. Duties of Custodian with Respect to the Books of Account and
------------------------------------------------------------
Calculation of Net Asset Value and Net Income
---------------------------------------------
The Custodian agrees to provide the following mutual fund accounting services
to the Funds.
Section 9A. Portfolio Accounting Services
-----------------------------
20
1) maintain portfolio records on a trade date +1 basis using security
trade information communicated from the investment adviser of the
Fund on a timely basis;
2) for each valuation date of the Fund as stated in the Prospectus
("VALUATION DATE"), obtain prices from a pricing source selected
by the Fund or the investment adviser to the Fund except in the
case of those categories of securities or individual securities
which the Fund or the investment adviser to the Fund chooses to
price itself, as indicated on the Price Source Authorization Form
attached hereto as Exhibit 1 (the "PRICE SOURCE AUTHORIZATION") or
pursuant to the valuation policies adopted by the Board of
Trustees from time to time, and approved by the Board of Trustees
and apply those prices to the portfolio positions. For those
securities for which market quotations are not readily available,
the Board of Trustees shall approve, in good faith, the method for
determining the fair value for such securities;
3) identify interest and dividend accrual balances as of each
Valuation Date and calculate gross earnings on investments for the
accounting period;
4) account for and post to the Fund's accounting records all relevant
bond maturities, calls and paydowns, stock dividends, splits and
other corporate action activity;
5) supply, upon request, the investment adviser of the Fund or other
tax accounting agent of the Fund with any available book
accounting information which may help such tax accounting agent
(i) determine gain/loss on security sales and identify them as
short, medium or long-term status; (ii) account for periodic
distributions of gains or losses to shareholders; and (iii)
maintain undistributed gain or loss balances as of each Valuation
Date;
6) maintain all accounting books and records in accordance with GAAP
as applied in the mutual fund industry; and
7) prepare 30 day SEC yields for the Fund.
Section 9A.1. Expense Accrual and Payment Services
------------------------------------
1) for each Valuation Date, calculate the expense accrual amounts as
directed by the Fund, pursuant to a methodology which is agreeable
to both the Fund and the Custodian;
2) record payments for Fund expenses upon receipt of written
authorization from the Fund;
21
3) account for fund expenditures and maintain expense accrual
balances as instructed by the Fund pursuant to a methodology which
is agreeable to both the Custodian and the Fund; and
4) provide expense accrual reports and reports of recorded payments.
Section 9A.2. Fund Valuation and Financial Reporting Services
-----------------------------------------------
1) account for Fund share purchases, sales, exchanges, transfers,
dividend reinvestments, and other Fund share activity as reported
by the Transfer Agent on a timely basis;
2) determine net investment income (earnings ) for the Fund as of
each Valuation Date. Provide book accounting for use by the Fund
in determining periodic distributions of earnings to shareholders
and maintaining undistributed net investment income balances as of
each Valuation Date;
3) maintain a general ledger for the Fund which will include (i)
daily cash reconciliations to custodian records with documentation
of exception items; (ii) monthly (or more frequently as
appropriate) reconciliations of security positions held to custody
records; and (iii) tie-out the Fund's net cash in- or outflows and
net share in-flows or out-flows generated by shareholder
transactions to the records of the Transfer Agent, so long as
State Street Bank and Trust Company or an affiliate is the
transfer agent of the Fund; (iv) assist the Transfer Agent in
resolving any unusual shareholder transaction data; and (v) report
results of any of the above reconciliations or tie-outs to the
Fund;
4) for each Valuation Date, determine the net asset value according
to the accounting policies and procedures set forth in the Price
Source Authorization and fair valuation procedures established by
the Board of Trustees, in each case as instructed by the Fund.
Further, the Custodian will review changes in the value of
individual securities and the Fund's net asset value per share
pursuant to the tolerance testing as described on the Price Source
Authorization;
5) calculate the per share net asset value of the Fund;
6) communicate, at an agreed upon time, the per share price and
periodic book accounting distribution data for each Valuation Date
to parties as agreed upon from time to time; and
22
7) prepare monthly reports which document the adequacy of accounting
detail to support month-end ledger balances.
Section 9A.3. Support to Tax Accounting Agent
-------------------------------
1) maintain book accounting records for the Fund to support the tax
reporting required by the Internal Revenue Service for regulated
investment companies;
2) maintain book accounting security lot detail for the Fund; and
3) provide the necessary book accounting financial information to
support the tax accounting agent's determination of the taxable
components of income and capital gain distributions reportable to
shareholders.
Section 9A.4. Regulatory Reporting Assistance
-------------------------------
1) support reporting to regulatory bodies and support financial
statement preparation and other Fund administration tasks by
making the Fund book accounting records maintained by the
Custodian available to the Fund, the Securities and Exchange
Commission, and the Fund's independent public auditors; and
2) maintain book accounting records of the Fund according to the
Investment Company Act of 1940, as amended, and regulations
provided thereunder.
Section 9.A.5. Fund Override of Price Source Authorization.
--------------------------------------------
If the Fund desires to provide a valuation for any security which varies from
the valuation determined by the authorized pricing source pursuant to the Price
Source Authorization, the Fund shall promptly notify and supply the Custodian
with the valuation of any such security on each Valuation Date. All such
pricing overrides made by the Fund will be in writing and must specifically
identify the securities for which the valuations are to be adjusted by CUSIP,
name of security, new price or rate to be applied, and, if applicable, the time
period for which the new price(s) is/are effective.
Section 9.2. Changes in Accounting Procedures. Any resolution passed by the
---------------------------------
Board of Trustees that affects accounting practices and procedures under this
agreement shall be effective upon written receipt and acceptance by the
Custodian.
Section 9.3. Confidentiality. The Custodian shall handle in confidence all
----------------
information relating to the Fund's business which is received by the Custodian
during the course of rendering any service hereunder. The Custodian shall not
release any Fund information to any other party (other than the Fund's
independent auditors and NASDAQ) without the express written permission of the
Fund, except that which is required by state or federal law.
23
Section 9.4. Data Necessary to Perform Services. The Fund or its agents
-----------------------------------
shall furnish to the Custodian the data necessary to perform the services
described herein at times and in such form as mutually agreed upon.
Section 9.5. Notification of Error. The Fund will notify the Custodian of
----------------------
any balancing or control error caused by the Custodian within thirty (30)
business days after receipt of any reports rendered by the Custodian to the
Fund, or within thirty (30) business days after discovery of any error or
omission not covered in the balancing or control procedure, or within thirty
(30) business days of receiving notice from any shareholder.
Section 10. Records
-------
The Custodian shall create and maintain all records required by law relating
to its activities and obligations under this Agreement including in such manner
as will meet the obligations of the Fund under the Investment Company Act of
1940, as amended, 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 Custodian and shall, when requested to do so
by the Fund and for such compensation as shall be agreed upon between the Fund
and the Custodian, include certificate numbers in such tabulations.
Section 11. 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 registration statement on Form N-1A, the
Fund's annual report on Form N-SAR or other material required to be filed with
the Securities and Exchange Commission and with respect to any other
requirements of such Commission.
Section 12. 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 securities
deposited and/or maintained in a U.S. Securities System or a Foreign Securities
System (collectively referred to herein as the "SECURITIES SYSTEMS"), relating
to the services provided by the Custodian under this Agreement; such reports
shall be of sufficient scope and in sufficient detail, as may reasonably be
required by the Fund to provide reasonable assurance
24
that any material inadequacies would be disclosed by such examination, and, if
there are no such inadequacies, the reports shall so state.
Section 13. 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.
Section 14. 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 Agreement 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 Agreement, 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 without liability to
the Fund for any loss, liability, claim or expense resulting from or caused by
anything which is part of Country Risk, including without limitation
nationalization, expropriation, currency restrictions, or acts of war,
revolution, riots or terrorism.
If in any case the Fund is asked to indemnify and hold the Custodian harmless,
the Custodian shall use all reasonable care to identify and promptly inform the
indemnifying party of the facts, in the Custodian's actual knowledge, from which
the claim arises. The Fund shall be entitled, at its own expense, to
participate in the investigation and to be consulted as to the defense of any
such claim, and in such event, the Custodian shall keep the Fund fully and
currently informed of all developments relating to such investigation or
defense. At any time, the Fund shall be entitled at its own expense to conduct
the defenses of any such claim, provided that the Fund: (i) reasonably
demonstrates to the other party its ability to pay the full amount of potential
liability in connection with such claim and (ii) first admits in writing to the
other party that such claims are in respect of which the Fund is obligated to
indemnify the Custodian. Upon satisfaction of the foregoing conditions, the
Fund shall take over complete defense of the claim, and the Custodian shall
initiate no further legal or other expenses for which it shall seek
indemnification unless the possible liabilities or penalties to the Custodian
involve other than money damages. The Custodian shall in no case confess any
claim or make any compromise in any case in which the Fund may be asked to
indemnify the Custodian, except with the Fund's prior written consent.
25
Except as may arise from the Custodian's own negligence or willful misconduct
or the negligence or willful misconduct of a sub-custodian or agent, the
Custodian shall be without liability to the Fund for any loss, liability, claim
or expense resulting from or caused by; (i) events or circumstances beyond the
reasonable control of the Custodian or any sub-custodian or Securities System or
any agent or nominee of any of the foregoing, including, without limitation, the
interruption, suspension or restriction of trading on or the closure of any
securities market, power or other mechanical or technological failures or
interruptions, computer viruses or communications disruptions, work stoppages,
natural disasters, or other similar events or acts; (ii) errors by the Fund or
the investment adviser of the Fund in its instructions to the Custodian provided
such instructions have been in accordance with this Agreement; (iii) the
insolvency of or acts or omissions by a Securities System; (iv) any delay or
failure of any broker, agent or intermediary, central bank or other commercially
prevalent payment or clearing system to deliver to the Custodian's sub-custodian
or agent securities purchased or in the remittance or payment made in connection
with securities sold; (v) any delay or failure of any company, corporation, or
other body in charge of registering or transferring securities in the name of
the Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or
any consequential losses arising out of such delay or failure to transfer such
securities including non-receipt of bonus, dividends and rights and other
accretions or benefits; (vi) delays or inability to perform its duties due to
any disorder in market infrastructure with respect to any particular security or
Securities System; and (vii) compliance with any change in any provision of any
present law or regulation or order of the United States of America, or any state
thereof, or any other country, or political subdivision thereof or of any court
of competent jurisdiction.
The Custodian has a reasonable disaster recovery and safekeeping plan given
its services hereunder. The Custodian shall maintain commercially reasonable
amounts of (a) comprehensive general liability insurance coverage and (b) errors
and omissions insurance coverage and notify the Fund in the event that such
insurance is canceled
In the event of equipment failures beyond the Custodian's control, the
Custodian shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. The Custodian shall enter into and shall
maintain in effect with appropriate parties one or more agreements making
reasonable provision for (i) periodic back-up of the computer files and data
with respect to the Fund and (ii) emergency use of electronic data processing
equipment to provide services under this Agreement and the Data Access Services
Addendum between State Street Bank and Trust Company and the Fund.
The Custodian shall be liable for the acts or omissions of a Foreign Sub-
Custodian to the same extent as set forth with respect to sub-custodians
generally in this Agreement.
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.
26
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 assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Agreement, 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's assets
to the extent necessary to obtain reimbursement.
In no event shall the Custodian or the Fund be liable for indirect, special or
consequential damages.
Section 15. Effective Period, Termination and Amendment
-------------------------------------------
This Agreement 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 ninety (90)
days after the date of such delivery or mailing; provided, however that the
--------
Custodian shall not act under Section 2.8 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary of the Fund that
the Board of Trustees has approved the initial use of a particular Securities
System by the Fund, as required by Rule 17f-4 under the Investment Company Act
of 1940, as amended, and that the Custodian shall not act under Section 2.9
hereof in the absence of receipt of an initial certificate of the Secretary or
an Assistant Secretary of the Fund that the Board of Trustees has approved the
initial use of the Direct Paper System by the Fund; provided further, however,
-------- -------
that the Fund shall not amend or terminate this Agreement in contravention of
any applicable federal or state regulations, or any provision of the Fund's
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 Agreement 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 Agreement, 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 actual costs, expenses and disbursements
incurred.
Section 16. Successor Custodian
-------------------
27
If a successor custodian for the Fund shall be appointed by the Board of
Trustees, 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 of the Fund then held by the Custodian hereunder and
shall transfer to an account of the successor custodian all of the securities of
the Fund held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a copy of a Certified Resolution of the Board of
Trustees, deliver at the office of the Custodian and transfer such securities,
funds and other properties in accordance with such resolution.
In the event that no written order designating a successor custodian or copy
of a Certified Resolution 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, as
amended, 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 on behalf of the Fund and all instruments held
by the Custodian relative thereto and all other property held by it under this
Agreement and to transfer to an account of such successor custodian all of the
securities of the Fund held in any Securities System. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Agreement.
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 copy of the Certified Resolution 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 Agreement relating to the duties and obligations of
the Custodian shall remain in full force and effect.
Section 17. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Agreement, the Custodian and the Fund
may from time to time agree on such provisions interpretive of or in addition to
the provisions of this Agreement as may in their joint opinion be consistent
with the general tenor of this Agreement. 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
Fund's Declaration of Trust. No interpretive or additional provisions made as
provided in the preceding sentence shall be deemed to be an amendment of this
Agreement.
Section 19. Massachusetts Law to Apply
--------------------------
28
This Agreement shall be construed and the provisions thereof interpreted under
and in accordance with laws of The Commonwealth of Massachusetts.
Section 20. Prior Agreements
----------------
This Agreement supersedes and terminates, as of the date hereof, all prior
Agreements between the Fund and the Custodian relating to the custody of the
Fund's assets.
Section 21. Notices.
-------
Any notice, instruction or other instrument required to be given hereunder may
be delivered in person to the offices of the parties as set forth herein during
normal business hours or delivered prepaid registered mail or by telex, cable or
telecopy to the parties at the following addresses or such other addresses as
may be notified by any party from time to time.
To the Fund: Dodge & Xxx Balanced Fund
Xxx Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: W. Xxxxxxx Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
To the Custodian: State Street Bank and Trust Company
0000 Xxxxxxxx Xxxxx, XXX 0X
Xxxxx Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Such notice, instruction or other instrument shall be deemed to have been
served in the case of a registered letter at the expiration of five business
days after posting, in the case of cable twenty-four hours after dispatch and,
in the case of telex, immediately on dispatch and if delivered outside normal
business hours it shall be deemed to have been received at the next time after
delivery when normal business hours commence and in the case of cable, telex or
telecopy on the business day after the receipt thereof. Evidence that the
notice was properly addressed, stamped and put into the post shall be conclusive
evidence of posting.
Section 22. Reproduction of Documents
-------------------------
29
This Agreement and all schedules, exhibits, attachments and amendments hereto
may be reproduced by any photographic, photostatic, microfilm, micro-card,
miniature photographic or other similar process. The parties hereto all/each
agree that any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or not the original
is in existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
30
Section 23. Shareholder Communications Election
-----------------------------------
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 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 [X] The Custodian is not authorized to release the Fund's name,
address, and share positions.
Section 24. Reorganization.
---------------
The reorganization of the Fund as a Delaware business trust shall not
constitute a termination of this Agreement, and the successor Delaware business
trust and the Custodian shall enter into a new contract with substantially the
same terms and conditions.
Section 25. Limitations of Liability of the Trustees and Shareholders.
----------------------------------------------------------
Notice is hereby given that this instrument is executed on behalf of the
Trustees of the Fund as Trustees and not individually and that the obligations
of this instrument and are not binding upon any of the Trustees or shareholders
of the Fund individually but are binding only upon the assets and property of
the Fund.
31
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 November , 1997.
Attest Dodge & Xxx Balanced Fund
By:
--------------------------------- -------------------------------------
Name: Name:
--------------------------------- -------------------------------------
Title: Title:
--------------------------------- -------------------------------------
Attest State Street Bank and Trust Company
By:
--------------------------------- -------------------------------------
Name: Xxxxxx X. Xxxxx
--------------------------------- Executive Vice President
Title:
---------------------------------
32
