FORM OF CUSTODIAN AGREEMENT
CUSTODIAN AGREEMENT ("Agreement") made as of this ___ day of September,
1999, between X.XXX FUNDS, a business trust organized under the laws of the
State of Delaware (the "Trust"), and INVESTORS BANK & TRUST COMPANY, a
Massachusetts trust company (the "Bank").
WHEREAS, the Trust is a registered investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), consisting of each of the
separate series listed on Appendix A hereto (as such Appendix A may be amended
from time to time) (each a "Fund" and collectively, the "Funds");
WHEREAS, pursuant to an Investment Advisory Agreement between the Trust and
X.xxx Asset Management, Inc (the "Adviser"), dated September __, 1999, the
Adviser has agreed to provide or procure custodial services for the Trust;
WHEREAS, the Adviser desires to appoint the Bank as the Trust's custodian,
and the Trust desires to place and maintain all of its portfolio securities and
cash in the custody of the Bank; and.
WHEREAS, the Bank has at least the minimum qualifications required by
Section 17(f)(1) of the Investment Company Act of 1940, as amended, ("1940 Act")
to act as custodian of the portfolio securities and cash of the Trust, and has
indicated its willingness to so act, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Adviser hereby appoints the Bank as
custodian of the portfolio securities and cash of each of its Funds delivered to
the Bank as hereinafter described, and the Trust hereby approves such
appointment. The Bank agrees to act as custodian upon the terms and conditions
hereinafter set forth. For the services rendered pursuant to this Agreement the
Adviser agrees to pay to the Bank the fees set forth on Appendix B hereto.
2. Definitions. Whenever used herein, the terms listed below will have the
following meaning:
2.1 Authorized Person. "Authorized Person" will mean any of the persons
duly authorized to give Proper Instructions or otherwise act on behalf of the
Trust by appropriate resolution of its Board, and set forth in a certificate as
required by Section 4 hereof.
2.2 Board. "Board" will mean the Board of Trustees of the Trust.
2.3 Security. The term "security" as used herein will have the same meaning
assigned to such term in the Securities Act of 1933, as amended ("1933 Act"),
including, without limitation, any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any profit
sharing agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange or in the
over-the-counter market relating to a foreign currency, or, in general, any
interest or instrument commonly known as a "security", or any certificate of
interest or participation in, temporary or interim certificate for, receipt for,
guarantee of, or warrant or right to subscribe to, or option contract to
purchase or sell any of the foregoing, and futures contracts, forward contracts
and options thereon.
2.4 Portfolio Security. "Portfolio Security" will mean any security owned
by any Fund.
2.5 Officers' Certificate. "Officers' Certificate" will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any Authorized Person of the Trust.
2.6 Book-Entry System. "Book-Entry System" shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.7 Depository. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 ("1934
Act"), its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor or successors and its nominee
or nominees, specifically identified in a certified copy of a resolution of the
Board.
2.8 Proper Instructions. "Proper Instructions" shall mean (i) instructions
regarding the purchase or sale of Portfolio Securities, and payments and
deliveries in connection therewith, given by an Authorized Person, such
instructions to be given in such form and manner as the Bank and the Trust shall
agree upon from time to time, and (ii) instructions (which may be continuing
instructions) regarding other matters signed or initialed by an Authorized
Person. Oral instructions will be considered Proper Instructions if the Bank
reasonably believes them to have been given by an Authorized Person. The Trust
shall cause all oral instructions to be promptly confirmed in writing. The Bank
shall act upon and comply with any subsequent Proper Instruction which modifies
a prior Proper Instruction and the sole obligation of the Bank with respect to
any follow-up or confirmatory Proper Instruction shall be to make reasonable
efforts to detect any discrepancy between the original Proper Instruction and
such confirming Proper Instruction and to report such discrepancy to the Trust.
The Trust shall be responsible, at the Trust's expense, for taking any action,
including any reprocessing, necessary to correct any such discrepancy or error
which has resulted because of an error or omission on the part of the Trust, and
to the extent such action requires the Bank to act, the Trust shall give the
Bank specific Proper Instructions as to the action required. Upon receipt by the
Bank of an Officers' Certificate as to the authorization by the Board to utilize
the services of the Bank for the purposes set forth herein accompanied by a
detailed description of procedures approved by the Trust, Proper Instructions
may include communication effected directly between electro-mechanical or
electronic devices provided that the Board and the Bank agree in writing that
such procedures afford adequate safeguards for the Trust's assets.
3. Separate Accounts. The Bank will segregate the assets of each Fund to
which this Agreement relates into a separate account for each such Fund
containing the assets of such Fund (and all investment earnings thereon). Unless
the context otherwise requires, any reference in this Agreement to any actions
to be taken by the Trust shall be deemed to refer to the Trust acting on behalf
of one or more of its Funds, any reference in this Agreement to any assets of
the Trust, including, without limitation, any portfolio securities and cash and
earnings thereon, shall be deemed to refer only to assets of the applicable
Fund, any duty or obligation of the Bank hereunder to the Trust shall be deemed
to refer to duties and obligations with respect to such individual Fund and any
obligation or liability of the Trust hereunder shall be binding only with
respect to such individual Funds, and shall be discharged only out of the assets
of such Funds.
4. Certification as to Authorized Persons. The Secretary or Assistant
Secretary of the Trust will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
members of the Board, it being understood that upon the occurrence of any change
in the information set forth in the most recent Officers' Certificate on file
(including without limitation any person named in the most recent Officers'
Certificate who is no longer an Authorized Person as designated therein), the
Secretary or Assistant Secretary of the Trust will sign a new or amended
Officers' Certificate setting forth the change and the new, additional or
omitted names or signatures. The Bank will be entitled to rely and act upon any
Officers' Certificate given to it by the Trust which has been signed by
Authorized Persons named in the most recent Officers' Certificate received by
the Bank.
5. Custody of Cash. As Custodian for the Trust, the Bank will open and
maintain a separate account or accounts in the name of the Trust or in the name
of the Bank, as Custodian of the Trust, and will deposit to the account of the
Trust all of the cash of the Trust, except for cash held by a subcustodian
appointed pursuant to Sections 14.2 hereof, including borrowed funds, delivered
to the Bank, subject only to draft or order by the Bank acting pursuant to the
terms of this Agreement. Pursuant to the Bank's internal policies regarding the
management of cash accounts, the Bank may segregate certain portions of the cash
of the Trust into a separate savings deposit account upon which the Bank
reserves the right to require seven (7) days notice prior to withdrawal of cash
from such an account. Upon receipt by the Bank of Proper Instructions (which may
be continuing instructions) or in the case of payments for redemptions and
repurchases of outstanding shares of common stock of the Trust, notification
from the Trust's transfer agent as provided in Section 7, requesting such
payment, designating the payee or the account or accounts to which the Bank will
release funds for deposit, and stating that it is for a purpose permitted under
the terms of this Section 5, specifying the applicable subsection, the Bank will
make payments of cash held for the accounts of the Trust, insofar as funds are
available for that purpose, only as permitted in subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities for the Trust,
against contemporaneous receipt of such securities by the Bank or against
delivery of such securities to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs, registered in the name of the Trust or in the name of, or
properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation of purchase of the securities received by the Bank or
transaction report in the case of Book Entry Paper (as that term is defined in
Section 6.6 hereof) before such payment is made, as confirmed in the Proper
Instructions received by the Bank before such payment is made.
5.2 Redemptions. In such amount as may be necessary for the repurchase or
redemption of shares of the Trust offered for repurchase or redemption in
accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Trust. For the payment on the account of
the Trust of dividends or other distributions to shareholders as may from time
to time be declared by the Board, interest, taxes, management or supervisory
fees, distribution fees, fees of the Bank for its services hereunder and
reimbursement of the expenses and liabilities of the Bank as provided hereunder,
fees of any transfer agent, fees for legal, accounting, and auditing services,
or other operating expenses of the Trust.
5.4 Payment in Respect of Securities. For payments in connection with the
conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Trust, which are held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the Trust, but, in
the case of final payment, only upon redelivery to the Bank of any Portfolio
Securities pledged or hypothecated therefor and upon surrender of documents
evidencing the loan;
5.6 Repayment of Cash. To repay the cash delivered to the Trust for the
purpose of collateralizing the obligation to return to the Trust certificates
borrowed from the Trust representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions.
(a) For payments in connection with foreign exchange contracts or options
to purchase and sell foreign currencies for spot and future delivery
(collectively, "Foreign Exchange Agreements") which may be entered into by the
Bank on behalf of the Trust upon the receipt of Proper Instructions, such Proper
Instructions to specify the currency broker or banking institution (which may be
the Bank, or any other subcustodian or agent hereunder, acting as principal)
with which the contract or option is made, and the Bank shall have no duty with
respect to the selection of such currency brokers or banking institutions with
which the Trust deals or for their failure to comply with the terms of any
Foreign Exchange Agreement.
(b) In order to secure any payments in connection with Foreign Exchange
Agreements which may be entered into by the Bank, pursuant to Proper
Instructions, the Trust agrees that the Bank shall have a continuing lien and
security interest, to the extent of any payment due under any Foreign Exchange
Agreement, in and to any property at any time held by the Bank for the Trust's
benefit or in which the Trust has an interest and which is then in the Bank's
possession or control (or in the possession or control of any third party acting
on the Bank's behalf). The Trust authorizes the Bank, in the Bank's sole
discretion, at any time to charge any such payment due under any Foreign
Exchange Agreement against any balance of account standing to the credit of the
Trust on the Bank's books.
5.8 Other Authorized Payments. For other authorized transactions of the
Trust or other obligations of the Trust incurred for proper Trust purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person and
certified by its Secretary or Assistant Secretary, naming the person or persons
to whom such payment is to be made, and either describing the transaction for
which payment is to be made and declaring it to be an authorized transaction of
the Trust, or specifying the amount of the obligation for which payment is to be
made, setting forth the purpose for which such obligation was incurred and
declaring such purpose to be a proper corporate purpose.
5.9 Termination: Upon the termination of this Agreement as hereinafter set
forth pursuant to Section 8 and Section 16 of this Agreement.
6. Securities.
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6.1 Segregation and Registration. Except as otherwise provided herein, the
Bank as custodian will receive and hold pursuant to the provisions hereof, in a
separate account or accounts and physically segregated at all times from those
of other persons, any and all Portfolio Securities which may now or hereafter be
delivered to it by or for the account of each Fund. All such Portfolio
Securities will be held or disposed of by the Bank for, and subject at all times
to, the instructions of the Trust pursuant to the terms of this Agreement.
Subject to the specific provisions herein relating to Portfolio Securities that
are not physically held by the Bank, the Bank will register all Portfolio
Securities (unless otherwise directed by Proper Instructions or an Officers'
Certificate), in the name of a registered nominee of the Bank as defined in the
Internal Revenue Code of 1986, as amended and any Regulations of the U.S.
Treasury Department or Internal Revenue Service issued thereunder, and will
execute and deliver all such certificates in connection therewith as may be
required by such laws or regulations or under the laws of any state.
The Trust will, from time to time, furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any Portfolio Securities which
may from time to time be registered in the name of each appropriate Fund of the
Trust.
6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank will
vote any of the Portfolio Securities held hereunder, except in accordance with
Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Trust all notices,
proxies and proxy soliciting materials delivered to the Bank with respect to
such Portfolio Securities, such proxies to be executed by the registered holder
of such Portfolio Securities (if registered otherwise than in the name of the
Trust), but without indicating the manner in which such proxies are to be voted.
6.3 Corporate Action. If at any time the Bank is notified that an issuer of
any Portfolio Security has taken or intends to take a corporate action (a
"Corporate Action") that affects the rights, privileges, powers, preferences,
qualifications or ownership of a Portfolio Security, including without
limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or stock
dividend, which Corporate Action requires an affirmative response or action on
the part of the holder of such Portfolio Security (a "Response"), the Bank shall
notify the Trust promptly of the Corporate Action, the Response requested in
connection with the Corporate Action and the Bank's deadline for receipt from
the Trust of Proper Instructions regarding the Response (the "Response
Deadline"). The Bank shall forward to the Trust via telecopier and/or overnight
courier all notices, information statements or other materials relating to the
Corporate Action promptly after receipt of such materials by the Bank.
(a) The Bank shall act upon a requested Response only after receipt by the
Bank of Proper Instructions from the Trust no later than 5:00 p.m. on the date
specified as the Response Deadline and only if the Bank (or its agent or
subcustodian hereunder) has actual possession of all Portfolio Securities,
consents and other materials needed in order to provide a Response no later than
5:00 p.m. on the date specified as the Response Deadline.
(b) The Bank shall have no duty to act upon a requested Response if Proper
Instructions relating to such Response and all necessary Portfolio Securities,
consents and other materials needed in order to provide a Response are not
received and in the possession of the Bank by no later than 5:00 p.m. on the
date specified as the Response Deadline. Notwithstanding, the Bank may, in its
sole discretion, use its best efforts to act upon a Response for which Proper
Instructions and/or necessary Portfolio Securities, consents or other materials
are received by the Bank after 5:00 p.m. on the date specified as the Response
Deadline, it being acknowledged and agreed by the parties that any undertaking
by the Bank to use its best efforts in such circumstances shall in no way create
any duty upon the Bank to complete such Response prior to the Response Deadline.
(c) In the event that the Trust notifies the Bank of a Corporate Action
requiring a Response and the Bank has received no other notice of such Corporate
Action, the Response Deadline shall be 48 hours prior to the Response expiration
time set by the Depository processing such Corporate Action.
6.4 Book-Entry System. Provided (i) the Bank has received a certified copy
of a resolution of the Board specifically approving deposits of Trust assets in
the Book-Entry System, and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry System
provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect to the
Trust's participation in the Book-Entry System through the Bank (or any such
agent) will identify by book entry the Portfolio Securities which are included
with other securities deposited in the Account and shall at all times during the
regular business hours of the Bank (or such agent) be open for inspection by
duly authorized officers, employees or agents of the Trust. Where securities are
transferred to the Trust's account, the Bank shall also, by book entry or
otherwise, identify as belonging to the Trust a quantity of securities in a
fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities purchased for the
account of the Trust or shall pay cash collateral against the return of
Portfolio Securities loaned by the Trust upon (i) receipt of advice from the
Book-Entry System that such Portfolio Securities have been transferred to the
Account, and (ii) the making of an entry on the records of the Bank (or its
agent) to reflect such payment and transfer for the account of the Trust. The
Bank (or its agent) shall transfer securities sold or loaned for the account of
the Trust upon
(i) receipt of advice from the Book-Entry System that payment for
securities sold or payment of the initial cash collateral against the
delivery of Portfolio Securities loaned by the Trust has been transferred
to the Account; and
(ii) the making of an entry on the records of the Bank (or its agent)
to reflect such transfer and payment for the account of the Trust. Copies
of all advices from the Book-Entry System of transfers of Portfolio
Securities for the account of the Trust shall identify the Trust, be
maintained for the Trust by the Bank and shall be provided to the Trust at
its request. The Bank shall send the Trust a confirmation, as defined by
Rule 17f-4 of the 1940 Act, of any transfers to or from the account of the
Trust;
(d) The Bank will promptly provide the Trust with any report obtained by
the Bank or its agent on the Book-Entry System's accounting system, internal
accounting control and procedures for safeguarding Portfolio Securities
deposited in the Book-Entry System;
6.5 Use of a Depository. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits in DTC or
other such Depository and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange, release,
lend, deliver and otherwise deal with Portfolio Securities including stock
dividends, rights and other items of like nature, and to receive and remit to
the Bank on behalf of the Trust all income and other payments thereon and to
take all steps necessary and proper in connection with the collection thereof;
(b) Registration of Portfolio Securities may be made in the name of any
nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made through the
clearing medium employed by such Depository for transactions of participants
acting through it. Upon any purchase of Portfolio Securities, payment will be
made only upon delivery of the Portfolio Securities to or for the account of the
Trust and the Trust shall pay cash collateral against the return of Portfolio
Securities loaned by the Trust only upon delivery of the Portfolio Securities to
or for the account of the Trust; and upon any sale of Portfolio Securities,
delivery of the Portfolio Securities will be made only against payment therefor
or, in the event Portfolio Securities are loaned, delivery of Portfolio
Securities will be made only against receipt of the initial cash collateral to
or for the account of the Trust; and
(d) The Bank shall use its best efforts to provide that:
(i) The Depository obtains replacement of any certificated Portfolio
Security deposited with it in the event such Portfolio Security is lost,
destroyed, wrongfully taken or otherwise not available to be returned to
the Bank upon its request;
(ii) Proxy materials received by a Depository with respect to
Portfolio Securities deposited with such Depository are forwarded
immediately to the Bank for prompt transmittal to the Trust;
(iii) Such Depository promptly forwards to the Bank confirmation of
any purchase or sale of Portfolio Securities and of the appropriate book
entry made by such Depository to the Trust's account;
(iv) Such Depository prepares and delivers to the Bank such records
with respect to the performance of the Bank's obligations and duties
hereunder as may be necessary for the Trust to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act and Rule 31(a)
thereunder; and
(v) Such Depository delivers to the Bank all internal accounting
control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Trust may reasonably
request in order to verify the Portfolio Securities held by such
Depository.
6.6 Use of Book-Entry System for Commercial Paper. Provided (i) the Bank
has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has reapproved the arrangements, the Bank,
upon receipt of Proper Instructions and upon receipt of confirmation from an
"Issuer" (as defined below) that the Trust has purchased such Issuer's
Book-Entry Paper, shall issue and hold in book-entry form, on behalf of the
Trust and each of its Funds, commercial paper issued by issuers with whom the
Bank has entered into a book-entry agreement ("Issuers"). In maintaining
procedures for Book-Entry Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by the Trust in
an account of the Bank that includes only assets held by it for customers;
(b) The records of the Bank with respect to the Trust's purchase of
Book-Entry Paper through the Bank will identify, by book-entry, commercial
paper belonging to the Trust and each of its Funds which is included in the
Book-Entry System and shall at all times during the regular business hours
of the Bank be open for inspection by duly authorized officers, employees
or agents of the Trust;
(c) The Bank shall pay for Book-Entry Paper purchased for the account
of the Trust contemporaneous with (i) receipt of advice from the Issuer
that such sale of Book-Entry Paper has been effected, and (ii) the making
of an entry on the records of the Bank to reflect such payment and transfer
for the account of the Trust;
(d) The Bank shall cancel such Book-Entry Paper obligation upon the
maturity thereof contemporaneous with (i) receipt of advice that payment
for such Book-Entry Paper has been transferred to the Trust, and (ii) the
making of an entry on the records of the Bank to reflect such payment for
the account of the Trust; and
(e) The Bank will send to the Trust such reports on its system of
internal accounting control with respect to the Book-Entry Paper as the
Trust may reasonably request from time to time.
6.7 Use of Immobilization Programs. Provided (i) the Bank has
received a certified copy of a resolution of the Board specifically approving
the maintenance of Portfolio Securities in an immobilization program operated by
a bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and
(ii) for each year following such approval the Board has reapproved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a subcustodian hereunder.
6.8 Eurodollar CDs. Any Portfolio Securities which are Eurodollar CDs
may be physically held by the European branch of the U.S. banking institution
that is the issuer of such Eurodollar CD (a "European Branch"), provided that
such Portfolio Securities are identified on the books of the Bank as belonging
to the Trust and that the books of the Bank identify the European Branch holding
such Portfolio Securities. Notwithstanding any other provision of this Agreement
to the contrary, except as stated in the first sentence of this subsection 6.8,
the Bank shall be under no other duty with respect to such Eurodollar CDs
belonging to the Trust.
6.9 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
(i) The Bank shall take action as to put options ("puts") and
call options ("calls") purchased or sold (written) by the Trust
regarding escrow or other arrangements (i) in accordance with the
provisions of any agreement entered into upon receipt of Proper
Instructions among the Bank, any broker-dealer which is a member of
the National Association of Securities Dealers, Inc. (the "NASD"), and
registered with the Securities and Exchange Commission ("SEC") under
the 1934 Act and, if necessary, the Trust, relating to the compliance
with the rules of the Options Clearing Corporation and of any
applicable registered national securities exchange or of any similar
organization.
(ii) Unless another agreement requires the Bank to do so, the
Bank shall be under no duty or obligation to see that the Trust has
deposited or is maintaining adequate margin, if required, with any
broker in connection with any option, nor shall the Bank be under duty
or obligation to present such option to the broker for exercise unless
it receives Proper Instructions from the Trust. The Bank shall have no
responsibility for the legality of any put or call purchased or sold
on behalf of the Trust, the propriety of any such purchase or sale, or
the adequacy of any collateral delivered to a broker in connection
with an option or deposited to or withdrawn from a Segregated Account
(as defined in subsection 6.10 below). The Bank specifically, but not
by way of limitation, shall not be under any duty or obligation to:
(i) periodically check or notify the Trust that the amount of such
collateral held by a broker or held in a Segregated Account is
sufficient to protect such broker or the Trust against any loss; (ii)
effect the return of any collateral delivered to a broker; or (iii)
advise the Trust that any option it holds, has or is about to expire.
Such duties or obligations shall be the sole responsibility of the
Trust.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Trust in accordance
with the provisions of any agreement entered into upon the receipt of
Proper Instructions among the Trust, the Bank and a futures commission
merchant ("FCM") registered under the Commodity Exchange Act, relating
to compliance with the rules of the Commodity Futures Trading
Commission ("CFTC") and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Trust.
(ii) The responsibilities of the Bank as to Futures, puts and
calls traded on commodities exchanges, any FCM account and the
Segregated Account as defined below shall be limited as set forth in
subparagraph (a)(ii) of this Section 6.9 as if such subparagraph
referred to FCMs rather than brokers, and Futures and puts and calls
thereon instead of options.
6.10 Segregated Account. The Bank shall, upon receipt of Proper
Instructions, establish and maintain a Segregated Account or Accounts for and on
behalf of the Trust.
(a) Cash and/or Portfolio Securities may be transferred into a
Segregated Account upon receipt of Proper Instructions in the
following circumstances:
(i) in accordance with the provisions of any agreement among the
Trust, the Bank and a broker-dealer registered with the SEC under the
1934 Act and a member of the NASD or any FCM registered under the
Commodity Exchange Act, relating to compliance with the rules of the
Options Clearing Corporation and of any registered national securities
exchange or the Commodity Futures Trading Commission or any registered
Contract Market, or of any similar organizations regarding escrow or
other arrangements in connection with transactions by the Trust;
(ii) for the purpose of segregating cash or Portfolio Securities
in connection with options purchased or written by the Trust or
commodity Futures purchased or written by the Trust;
(iii) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a
market value (marked to market on a daily basis) at all times equal to
not less than the aggregate purchase price due on the settlement dates
of all the Trust's then outstanding forward commitment or
"when-issued" agreements relating to the purchase of Portfolio
Securities and all the Trust's then outstanding commitments under
reverse repurchase agreements entered into with broker-dealer firms;
(iv) for the purposes of compliance by the Trust with the
procedures required by Investment Company Act Release No. 10666, or
any subsequent release of the SEC or written interpretation by the SEC
or its Staff relating to the maintenance of Segregated Accounts by
registered investment companies;
(v) for other proper corporate purposes, but only, in the case of
this clause (v), upon receipt of, in addition to Proper Instructions,
a certified copy of a resolution of the Board, or of the executive
committee of the Board signed by an officer of the Trust 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.
(b) Cash and/or Portfolio Securities may be withdrawn from a Segregated
Account pursuant to Proper Instructions in the following circumstances:
(i) with respect to assets deposited in accordance with the
provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (a)(iii) or
(a)(iv) above, for sale or delivery to meet the Trust's obligations
under outstanding forward commitment or when-issued agreements for the
purchase of Portfolio Securities and under reverse repurchase
agreements;
(iii) for exchange for other liquid assets of equal or greater
value deposited in the Segregated Account;
(iv) to the extent that the Trust's outstanding forward
commitment or when-issued agreements for the purchase of Portfolio
Securities or reverse repurchase agreements are sold to other parties
or the Trust's obligations thereunder are satisfied by using assets of
the Trust other than those in the Segregated Account or otherwise;
(v) for delivery upon settlement of a forward commitment or
when-issued agreement for the sale of Portfolio Securities; or
(vi) with respect to assets deposited pursuant to (a)(v) above,
in accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 Interest Bearing Call or Time Deposits. The Bank shall, upon receipt
of Proper Instructions relating to the purchase by the Trust of interest-bearing
fixed-term and call deposits, transfer cash, by wire or otherwise, in such
amounts and to such bank or banks as shall be indicated in such Proper
Instructions. The Bank shall include in its records with respect to the assets
of the Trust appropriate notation as to the amount of each such deposit, the
banking institution with which such deposit is made ("Deposit Bank"), and shall
retain such forms of advice or receipt evidencing the deposit, if any, as may be
forwarded to the Bank by the Deposit Bank. Such deposits shall be deemed
Portfolio Securities of the Trust and the responsibility of the Bank therefor
shall be the same as and no greater than the Bank's responsibility in respect of
other Portfolio Securities of the Trust and its Funds.
6.12 Transfer of Securities. The Bank will transfer, exchange, deliver or
release Portfolio Securities held by it hereunder, insofar as such Portfolio
Securities are available for such purpose, provided that before making any
transfer, exchange, delivery or release under this provision of the Agreement
only upon receipt of Proper Instructions. The Proper Instructions shall state
that such transfer, exchange or delivery is for a purpose permitted under the
terms of this Section 6.12, and shall specify the applicable subsection, or
describe the purpose of the transaction with sufficient particularity to permit
the Bank to ascertain the applicable subsection. After receipt of such Proper
Instructions, the Bank will transfer, exchange, deliver or release Portfolio
Securities only in the following circumstances:
(a) Upon sales of Portfolio Securities for the account of the Trust,
against contemporaneous receipt by the Bank of payment therefor in full, or
against payment to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs, each such payment to be in the amount of the sale price
shown in a broker's confirmation of sale received by the Bank before such
payment is made, as confirmed in the Proper Instructions received by the
Bank before such payment is made;
(b) In exchange for or upon conversion into other Portfolio Securities
alone or other Portfolio Securities and cash pursuant to any plan of
merger, consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise, upon exercise of
subscription, purchase or sale or other similar rights represented by such
Portfolio Securities, or for the purpose of tendering shares in the event
of a tender offer therefor, provided, however, that in the event of an
offer of exchange, tender offer, or other exercise of rights requiring the
physical tender or delivery of Portfolio Securities, the Bank shall have no
liability for failure to so tender in a timely manner unless such Proper
Instructions are received by the Bank at least two business days prior to
the date required for tender, and unless the Bank (or its agent or
subcustodian hereunder) has actual possession of such Portfolio Security at
least two business days prior to the date of tender;
(c) Upon conversion of Portfolio Securities pursuant to their terms
into other securities;
(d) For the purpose of redeeming in-kind shares of the Trust upon
authorization from the Trust;
(e) In the case of option contracts owned by the Trust, for
presentation to the endorsing broker;
(f) When such Portfolio Securities are called, redeemed or retired or
otherwise become payable;
(g) For the purpose of effectuating the pledge of Portfolio Securities
held by the Bank in order to collateralize loans made to the Trust by any
bank, including the Bank; provided, however, that such Portfolio Securities
will be released only upon payment to the Bank for the account of the Trust
of the moneys borrowed; provided further, however, that in cases where
additional collateral is required to secure a borrowing already made, and
such fact is made to appear in the Proper Instructions, Portfolio
Securities may be released for that purpose without any such payment. In
the event that any pledged Portfolio Securities are held by the Bank, they
will be so held for the account of the lender, and after prior written
notice to the Trust from the lender, in accordance with the normal
procedures of the lender and any loan agreement between the Trust and the
lender, that an event of deficiency or default on the loan has occurred,
the Bank may deliver such pledged Portfolio Securities to or for the
account of the lender;
(h) for the purpose of releasing certificates representing Portfolio
Securities, against contemporaneous receipt by the Bank of the fair market
value of such Portfolio Securities, as set forth in the Proper Instructions
received by the Bank before such payment is made;
(i) for the purpose of delivering Portfolio Securities lent by the
Trust to a bank or broker dealer, but only against receipt in accordance
with street delivery custom except as otherwise provided herein, of
adequate collateral as agreed upon from time to time by the Trust and the
Bank, and upon receipt of payment in connection with any repurchase
agreement relating to such Portfolio Securities entered into by the Trust;
(j) for other authorized transactions of the Trust or for other proper
corporate purposes; provided that before making such transfer, the Bank
will also receive a certified copy of resolutions of the Board, signed by
an authorized officer of the Trust and certified by its Secretary or
Assistant Secretary, specifying the Portfolio Securities to be delivered,
setting forth the transaction in or purpose for which such delivery is to
be made, declaring such transaction to be an authorized transaction of the
Trust or such purpose to be a proper corporate purpose, and naming the
person or persons to whom delivery of such securities shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 16 of this Agreement.
As to any deliveries made by the Bank pursuant to this Section 6.12,
securities or cash receivable in exchange therefor shall be delivered to the
Bank.
7. Redemptions. In the case of payment of assets of the Trust held by the
Bank in connection with redemptions and repurchases by the Trust of outstanding
shares, the Bank will rely on notification by the Trust's transfer agent of
receipt of a request for redemption and certificates, if issued, in proper form
for redemption before such payment is made. Payment shall be made in accordance
with the Declaration of Trust and By-laws of the Trust ("Declaration"), from
assets available for said purpose.
8. Merger, Dissolution, etc. of Trust. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Trust into or the consolidation of the Trust with another investment company,
the sale by the Trust of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Trust and
distribution of its assets, the Bank will deliver the Portfolio Securities held
by it under this Agreement and disburse cash only upon the order of the Trust
set forth in an Officers' Certificate, accompanied by a certified copy of a
resolution of the Board authorizing any of the foregoing transactions. Upon
completion of such delivery and disbursement and the payment of the fees,
disbursements and expenses of the Bank, this Agreement will terminate and the
Bank shall be released from any and all obligations hereunder.
9. Actions of Bank Without Prior Authorization. Notwithstanding anything
herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, the Bank will take the following actions without
prior authorization or instruction of the Trust or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name of the
Trust all checks, drafts, or other negotiable or transferable instruments or
other orders for the payment of money received by it for the account of the
Trust and hold for the account of the Trust all income, dividends, interest and
other payments or distributions of cash with respect to the Portfolio Securities
held thereunder;
9.2 Present for payment all coupons and other income items held by it for
the account of the Trust which call for payment upon presentation and hold the
cash received by it upon such payment for the account of the Trust;
9.3 Receive and hold for the account of the Trust all securities received
as a distribution on Portfolio Securities as a result of a stock dividend, share
split-up, reorganization, recapitalization, merger, consolidation, readjustment,
distribution of rights and similar securities issued with respect to any
Portfolio Securities held by it hereunder.
9.4 Execute as agent on behalf of the Trust all necessary ownership and
other certificates and affidavits required by the Internal Revenue Code of 1986,
as amended or the regulations of the U.S. Treasury Department or the Internal
Revenue Service issued thereunder, or by the laws of any state, now or hereafter
in effect, inserting the Trust's name on such certificates as the owner of the
securities covered thereby, to the extent it may lawfully do so and as may be
required to obtain payment in respect thereof. The Bank will execute and deliver
such certificates in connection with Portfolio Securities delivered to it or by
it under this Agreement as may be required under the provisions of the Internal
Revenue Code of 1986, as amended and any regulations issued thereunder, or under
any applicable laws of any State;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it upon
payment for the account of the Trust; and
9.6 Exchange interim receipts or temporary securities for definitive
securities.
10. Collections and Defaults. The Bank will use reasonable efforts to
collect any funds which may, to its knowledge, become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Trust notice actually received by it of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such Portfolio Securities. If Portfolio Securities upon which such
income is payable are in default or payment is refused after due demand or
presentation, the Bank will promptly notify the Trust in writing of any default
or refusal to pay within two business days from the day on which it receives
knowledge of such default or refusal.
11. Maintenance of the Trust's Records and Accounting Services. The Bank
will maintain the Trust's records with respect to transactions for which the
Bank is responsible pursuant to the terms and conditions of this Agreement, and
in compliance with the applicable rules and regulations under the 1940 Act. The
books and records of the Trust maintained by the Bank pertaining to its actions
under this Agreement and reports by the Bank or its independent accountants
concerning its accounting system, procedures for safeguarding securities and
internal accounting controls will be open to inspection and audit at reasonable
times by officers of or auditors employed by the Trust and will be preserved by
the Bank in the manner and in accordance with the applicable rules and
regulations under the 1940 Act.
The Bank shall perform fund accounting and shall keep the Trust's books of
account and render statements or copies from time to time as reasonably
requested by the Trust's Treasurer or any other executive officer of the Trust.
The Bank shall assist generally in the preparation of reports to
shareholders of each Fund of the Trust and others, audits of accounts, and other
ministerial matters of like nature.
12. Trust Evaluation and Yield Calculations
12.1 Trust Evaluation. The Bank shall compute and, unless otherwise
directed by the Board, determine as of the close of regular trading on the New
York Stock Exchange on each day on which said exchange is open for unrestricted
trading and as of such other days, or hours, if any, as may be authorized by the
Board, the net asset value and the public offering price of a share of stock of
the Trust, such determination to be made in accordance with the provisions of
the Declaration of the Trust and the Prospectus and Statement of Additional
Information relating to the Trust, as they may from time to time be amended, and
any applicable resolutions of the Board at the time in force and applicable; and
promptly to notify the Trust, the proper exchange and the NASD or such other
persons as the Trust may request of the results of such computation and
determination. In computing the net asset value hereunder, the Bank may rely in
good faith upon information furnished to it by any Authorized Person in respect
of (i) the manner of accrual of the liabilities of the Trust and in respect of
liabilities of the Trust not appearing on its books of account kept by the Bank,
(ii) reserves, if any, authorized by the Board or that no such reserves have
been authorized, (iii) the source of the quotations to be used in computing the
net asset value, (iv) the value to be assigned to any security for which no
readily available market price can be obtained, and (v) the method of
computation of the public offering price on the basis of the net asset value of
the shares. The Bank shall not be responsible for any loss occasioned by such
reliance or for any good faith reliance on any quotations received from a source
pursuant to (iii) above.
12.2. Yield and Average Total Return Calculation. The Bank will compute the
yield and average annual total return performance results of the Trust ("Return
Calculation") in accordance with the provisions of Release No. 33-6753 and
Release No. IC-16245 (February 2, 1988) (the "Releases") promulgated by the
Securities and Exchange Commission, and any subsequent amendments thereto,
published interpretations of or general conventions accepted by the staff of the
SEC with respect to such releases or the subject matter thereof ("Subsequent
Staff Positions"), subject to the terms set forth below:
(a) The Bank shall compute the Return Calculations for each Fund of
the Trust for the stated periods of time as shall be mutually agreed upon,
and communicate to the Trust in a timely manner the results of each
computation.
(b) In performing the Return Calculations, the Bank will derive the
items of data necessary for the computation from the records it generates
and maintains for each Fund of the Trust pursuant Section 11 hereof. The
Bank shall have no responsibility to review, confirm, or otherwise assume
any duty or liability with respect to the accuracy or correctness of any
such data supplied to it by the Trust, any of the Trust's designated agents
or any of the Trust's designated third party providers.
(c) At the request of the Bank, the Trust shall provide, and the Bank
shall be entitled to rely on, written standards and guidelines to be
followed by the Bank in interpreting and applying the computation methods
set forth in the Releases or any Subsequent Staff Positions as they
specifically apply to each Fund of the Trust. In the event that the
computation methods in the Releases or the Subsequent Staff Positions or
the application to each Fund of the Trust of a standard or guideline is not
free from doubt or in the event there is any question of interpretation as
to the characterization of a particular security or any aspect of a
security or a payment with respect thereto (e.g., original issue discount,
participating debt security, income or return of capital, etc.) or
otherwise or as to any other element of the computation which is pertinent
to the Trust, the Trust or its designated agent shall have the full
responsibility for making the determination of how the security or payment
is to be treated for purposes of the computation and how the computation is
to be made and shall inform the Bank thereof on a timely basis. The Bank
shall have no responsibility to make independent determinations with
respect to any item which is covered by this Section, and shall not be
responsible for its computations made in accordance with such
determinations so long as such computations are mathematically correct.
(d) The Trust shall keep the Bank informed of all publicly available
information and of any non-public advice, or information obtained by the
Trust from its independent auditors or by its personnel or the personnel of
its investment adviser, or Subsequent Staff Positions related to the
computations to be undertaken by the Bank pursuant to this Agreement and
the Bank shall not be deemed to have knowledge of such information (except
as contained in the Releases) unless it has been furnished to the Bank in
writing.
13. Additional Services. The Bank shall perform the additional services for
the Trust as are set forth on Appendix C hereto. Appendix C may be amended from
time to time upon agreement of the parties to include further additional
services to be provided by the Bank to the Trust, at which time the fees set
forth in Appendix B shall be appropriately increased as agreed to in writing by
the Bank and the Trust.
14. Duties of the Bank.
14.1 Performance of Duties and Standard of Care. The Bank will perform all
of its duties hereunder in a timely manner as determined by industry standards
in the relevant market as applied to the specific transaction, taking into
account relevant facts and circumstances.
In performing its duties hereunder and any other duties listed on any
Schedule hereto, if any, the Bank will be entitled to receive and act upon the
advice of independent counsel of its own selection, which may be counsel for the
Trust, and will be without liability for any action taken or thing done or
omitted to be done in accordance with this Agreement in good faith in conformity
with such advice.
The Bank will be under no duty or obligation to inquire into and will not
be liable for:
(a) the validity of the issue of any Portfolio Securities purchased by
or for each Fund of the Trust, the legality of the purchases thereof or the
propriety of the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or for
each Fund of the Trust or the propriety of the amount for which the same
are sold;
(c) the legality of an issue or sale of any shares of each Fund of the
Trust or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any shares of each Fund of the
Trust or the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by each Fund of
the Trust or the legality of the distribution of any Portfolio Securities
as payment in kind of such dividend; and
(f) any property or moneys of each Fund of the Trust unless and until
received by it, and any such property or moneys delivered or paid by it
pursuant to the terms hereof.
Moreover, the Bank will not be under any duty or obligation to ascertain
whether any Portfolio Securities at any time delivered to or held by it for the
account of the Trust are such as may properly be held by the Trust under the
provisions of its Articles any federal or state statutes or any rule or
regulation of any governmental agency.
14.2 Agents and Subcustodians with Respect to Property of the Trust Held in
the United States. The Bank may employ agents of its own selection in the
performance of its duties hereunder and shall be responsible for the acts and
omissions of such agents as if performed by the Bank hereunder. Without limiting
the foregoing, certain duties of the Bank hereunder may be performed by one or
more affiliates of the Bank.
Upon receipt of Proper Instructions, the Bank may employ subcustodians
selected by or at the direction of the Trust, provided that any such
subcustodian meets at least the minimum qualifications required by Section
17(f)(1) of the 1940 Act to act as a custodian of the Trust's assets with
respect to property of the Trust held in the United States. The Bank shall have
no liability to the Trust or any other person by reason of any act or omission
of any such subcustodian and the Trust shall indemnify the Bank and hold it
harmless from and against any and all actions, suits and claims, arising
directly or indirectly out of the performance of any subcustodian. Upon request
of the Bank, the Trust shall assume the entire defense of any action, suit, or
claim subject to the foregoing indemnity. The Trust shall pay all fees and
expenses of any subcustodian as agreed to in writing by the Trust.
14.3 Insurance. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Trust held by it as it uses
in respect of its own similar property, including the maintenance of fidelity
bond insurance. The Bank intends to maintain fidelity bond insurance at all
times during the term of the Agreement. Upon reasonable request, the Bank will
provide a description of the Bank's safeguards and procedures including specific
insurance policy information.
14.4 Fees and Expenses of the Bank. The Adviser will pay or reimburse the
Bank from time to time for any transfer taxes payable upon transfer of Portfolio
Securities made hereunder, and for all necessary proper disbursements, expenses
and charges made or incurred by the Bank in the performance of this Agreement
(including any duties listed on any Schedule hereto, if any) including any
indemnities for any loss, liabilities or expense to the Bank as provided above.
For the services rendered by the Bank hereunder, the Adviser will pay to the
Bank such compensation or fees at such rate and at such times as shall be agreed
upon in writing by the parties from time to time. The Bank will also be entitled
to reimbursement by the Adviser for all reasonable expenses incurred in
conjunction with termination of this Agreement.
14.5 Advances by the Bank. The Bank may, in its sole discretion, advance
funds on behalf of the Trust to make any payment permitted by this Agreement
upon receipt of any proper authorization required by this Agreement for such
payments by the Trust. Should such a payment or payments, with advanced funds,
result in an overdraft (due to insufficiencies of the Trust's account with the
Bank, or for any other reason) this Agreement deems any such overdraft or
related indebtedness a loan made by the Bank to the Trust payable on demand.
Such overdraft shall bear interest at the current rate charged by the Bank for
such loans unless the Trust shall provide the Bank with agreed upon compensating
balances. The Trust agrees that the Bank shall have a continuing lien and
security interest to the extent of any overdraft or indebtedness or to the
extent required by law, whichever is greater, in and to any property at any time
held by it for the Trust's benefit or in which the Trust has an interest and
which is then in the Bank's possession or control (or in the possession or
control of any third party acting on the Bank's behalf). The Trust authorizes
the Bank, in the Bank's sole discretion, at any time to charge any overdraft or
indebtedness, together with interest due thereon, against any balance of account
standing to the credit of the Trust on the Bank's books.
15. Limitation of Liability and Indemnification.
15.1 Notwithstanding anything in this Agreement to the contrary, in no
event shall the Bank or any of its officers, directors, employees or agents
(collectively, the "Indemnified Parties") be liable to the Trust, the Adviser or
any third party, and the Trust and Adviser shall indemnify and hold the Bank and
the Indemnified Parties harmless from and against any and all loss, damage,
liability, actions, suits, claims, costs and expenses, including legal fees, (a
"Claim") arising as a result of any act or omission of the Bank or any
Indemnified Party under this Agreement, except for any Claim resulting from the
willful misconduct, bad faith or negligence of the Bank or any Indemnified Party
in the performance of its obligations and duties under this Agreement, or by
reason of the Bank's or any Indemnified Party's reckless disregard thereof.
Without limiting the foregoing, neither the Bank nor the Indemnified Parties
shall be liable for, and the Bank and the Indemnified Parties shall be
indemnified against, any Claim arising as a result of:
(a) Any act or omission by the Bank or any Indemnified Party in good
faith reliance upon the terms of this Agreement, any Officer's Certificate,
Proper Instructions, resolution of the Board, telegram, telecopier, notice,
request, certificate or other instrument reasonably believed by the Bank to
genuine;
(b) Any act or omission of any subcustodian selected by or at the
direction of the Trust, except that the Bank will be liable as described in
paragraph 14.2 of this Agreement;
(c) Any Corporate Action, distribution or other event related to
Portfolio Securities which, at the direction of the Trust, have not been
registered in the name of the Bank or its nominee;
(d) Any Corporate Action requiring a Response for which the Bank has
not received Proper Instructions or obtained actual possession of all
necessary Portfolio Securities, consents or other materials by 5:00 p.m. on
the date specified as the Response Deadline;
(e) Any act or omission of any European Branch of a U.S. banking
institution that is the issuer of Eurodollar CDs in connection with any
Eurodollar CDs held by such European Branch;
(f) Information relied on in good faith by the Bank and supplied by
any Authorized Person in connection with the calculation of (i) the net
asset value and public offering price of the shares of stock of the Trust
or (ii) the Return Calculation; or
(g) Any acts of God, earthquakes, fires, floods, storms or other
disturbances of nature, epidemics, strikes, riots, nationalization,
expropriation, currency restrictions, acts of war, civil war or terrorism,
insurrection, nuclear fusion, fission or radiation, the interruption, loss
or malfunction of utilities, transportation or computers (hardware or
software) and computer facilities, the unavailability of energy sources and
other similar happenings or events.
15.2 The Bank will indemnify each of the Trust and the Adviser, and its
directors officers, employees and agents against and hold it and them harmless
from any and all losses, claims, damages, liabilities or expenses (including
legal fees and expenses) resulting from the willful misconduct, bad faith or
negligence of the Bank or any Indemnified Party in the performance of its
obligations and duties under this Agreement, or by reason of the Bank's or any
Indemnified Party's reckless disregard thereof.
15.3 Notwithstanding anything to the contrary in this Agreement, in no
event shall the Bank or the Indemnified Parties be liable to the Trust, the
Adviser or any third party for any special, consequential, or punitive damages
of any kind whatsoever in connection with this Agreement or any activities
hereunder.
16. Termination.
16.1 The term of this Agreement shall be three years commencing upon the
date hereof (the "Initial Term"), unless earlier terminated as provided herein.
After the expiration of the Initial Term, the term of this Agreement shall
automatically renew for successive one-year terms (each a "Renewal Term") unless
notice of non-renewal is delivered by the non-renewing party to the other party
no later than sixty (60) days prior to the expiration of the Initial Term or any
Renewal Term, as the case may be.
(a) Either party hereto may terminate this Agreement prior to the
expiration of the Initial Term (i) in the event the other party violates
any material provision of this Agreement or is unable to continue to
fulfill its obligation and duties under the Agreement; provided that a
violating party shall for its first material violation of this Agreement
have the opportunity to cure such violation within forty-five (45) days of
receipt of written notice from the non-violating party of such violation,
or (ii) after the second anniversary hereof, upon ninety (90) days written
notice to the other party.
(b) Either party may terminate this Agreement during any Renewal Term
upon sixty (60) days written notice to the other party. Any termination
pursuant to this paragraph 16.1(b) shall be effective upon expiration of
such sixty (60) days, provided, however, that the effective date of such
termination may be postponed to a date not more than one hundred twenty
(120) days after delivery of the written notice: (i) at the request of the
Bank, in order to prepare for the transfer by the Bank of all of the assets
of the Trust held hereunder; or (ii) at the request of the Trust, in order
to give the Trust an opportunity to make suitable arrangements for a
successor custodian.
16.2 In the event of the termination of this Agreement, the Bank will
immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Portfolio Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Trust. The obligation of the Bank to deliver and transfer over the assets of the
Trust held by it directly to such successor custodian will commence as soon as
such successor is appointed and will continue until completed as aforesaid. If
the Trust does not select a successor custodian within sixty (60) days from the
date of delivery of notice of termination, the Bank may, subject to the
provisions of subsection 16.3, deliver the Portfolio Securities and cash of the
Trust held by the Bank to a bank or trust company of the Bank's own selection,
with approval by the Trust, which meets the requirements of Section 17(f)(1) of
the 1940 Act and has a reported capital, surplus and undivided profits
aggregating not less than $2,000,000, to be held as the property of the Trust
under terms similar to those on which they were held by the Bank, whereupon such
bank or trust company so selected by the Bank will become the successor
custodian of such assets of the Trust with the same effect as though selected by
the Board. Thereafter, the Bank shall be released from any and all obligations
under this Agreement.
16.3 Prior to the expiration of sixty (60) days after notice of termination
has been given, the Trust may furnish the Bank with an order of the Trust
advising that a successor custodian cannot be found willing and able to act upon
reasonable and customary terms and that there has been submitted to the
shareholders of the Trust the question of whether the Trust will be liquidated
or will function without a custodian for the assets of the Trust held by the
Bank. In that event the Bank will deliver the Portfolio Securities and cash of
the Trust held by it, subject as aforesaid, in accordance with one of such
alternatives which may be approved by the requisite vote of shareholders, upon
receipt by the Bank of a copy of the minutes of the meeting of shareholders at
which action was taken, certified by the Trust's Secretary and an opinion of
counsel to the Trust in form and content satisfactory to the Bank. Thereafter,
the Bank shall be released from any and all obligations under this Agreement.
16.4 The party initiating a termination of this Agreement shall reimburse
the other party for any reasonable expenses incurred by the other party in
connection with the termination of this Agreement.
16.5 At any time after the termination of this Agreement, the Trust may,
upon written request, have reasonable access to the records of the Bank relating
to its performance of its duties as custodian.
17. Year 2000 Readiness Disclosure. The Bank represents that the occurrence
in or use by the Bank's own proprietary internal systems (the "Systems") of
dates on or after January 1, 2000 (the "Millennial Dates") will not adversely
affect the performance of the Systems with respect to date dependent data,
computations, output or other functions (including, without limitation,
calculating, computing and sequencing) and that the Systems will create, store
and generate output data related to or including Millennial Dates without errors
or omissions ("Year 2000 Compliance"). The Bank shall promptly notify the Trust
of any lack of Year 2000 Compliance of which it becomes aware that impact the
Bank's services hereunder.
The parties to this Agreement acknowledge that the Bank can make no
certification as to the Year 2000 Compliance of third-party systems utilized by
the Bank in its day to day operations or with which the Systems interact or
communicate, from which the Systems receive data or to which the Systems send
data. The parties further acknowledge that while the Bank has contacted such
third-party providers regarding Year 2000 Compliance and will use reasonable
efforts to monitor the status of such third-party providers' Year 2000
Compliance, failure by such third-party providers to achieve timely Year 2000
Compliance could adversely affect the Bank's performance of its obligations
hereunder. The Bank shall promptly notify the Trust of any lack of Year 2000
Compliance of any third-party provider of which it becomes aware that impact the
Bank's services hereunder.
18. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed without the consent of the other party, except as may be
required by applicable law or at the request of a governmental agency. The
parties further agree that a breach of this provision would irreparably damage
the other party and accordingly agree that each of them is entitled, in addition
to all other remedies at law or in equity to an injunction or injunctions
without bond or other security to prevent breaches of this provision.
19. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered via (I) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, (iii) hand delivery with signature to such party at its office at
the address set forth below, namely:
(a) In the case of notices sent to the Trust to:
X.XXX Funds
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxx X. Story
Facsimile: (000) 000-0000
With a copy to: Xxxxx X. Xxxxxx, Dechert Price & Xxxxxx
Facsimile: (000) 000-0000
(b) In the case of notices sent to the Adviser to:
X.XXX Asset Management, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxx X. Story
Facsimile: (000) 000-0000
With a copy to: Xxxxx X. Xxxxxx, Xxxxxxx Price & Xxxxxx
Facsimile: (000) 000-0000
(c) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
000 Xxxxxxxxx Xxxxxx, X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx, Director - Client Management
Facsimile: (000) 000-0000
With a copy to: Xxxxxx X. Xxxxx, Assistant General Counsel
Facsimile: (000) 000-0000
or at such other place as such party may from time to time designate
in writing.
20. Amendments. This Agreement may not be altered or amended, except by an
instrument in writing, executed by both parties.
21. Parties. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Trust
without the written consent of the Bank or by the Bank without the written
consent of the Trust, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 16 hereof will not be deemed to
be an assignment within the meaning of this provision.
22. Governing Law. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.
23. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
24. Entire Agreement. This Agreement, together with its Appendices,
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any conflicting
terms or provisions of any other instrument and terminates and supersedes any
and all prior agreements and undertakings between the parties relating to the
subject matter herein.
25. Limitation of Liability. The Bank agrees that the obligations assumed
by the Trust hereunder shall be limited in all cases to the assets of the Trust
and that the Bank shall not seek satisfaction of any such obligation from the
officers, agents, employees, trustees, or shareholders of the Trust.
26. Several Obligations of the Funds. This Agreement is an agreement
entered into between the Bank and the Trust with respect to each Fund. With
respect to any obligation of the Trust on behalf of any Fund arising out of this
Agreement, the Bank shall look for payment or satisfaction of such obligation
solely to the assets of the Fund to which such obligation relates as though the
Bank had separately contracted with the Trust by separate written instrument
with respect to each Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
X.XXX FUNDS
By:
--------------------------------------
Name:
Title:
X.XXX ASSET MANAGEMENT, INC.
By:
--------------------------------------
Name:
Title:
INVESTORS BANK & TRUST COMPANY
By:
--------------------------------------
Name:
Title:
Appendices
----------
Appendix A............................................... Funds
Appendix B............................................... Fee Schedule
Appendix C.......................................... .... Additional Services
Appendix A
FUNDS OF X.XXX FUNDS
1) X.xxx Premier S&P 500 Fund
2) X.xxx U.S.A. Bond Fund
3) X.xxx U.S.A. Money Market Fund
Appendix B
X.Xxx Funds
Annual Fee Schedule
________________, 1999
A. Trust Accounting, Custody and Calculation of N.A.V.
The Annual Fee for Trust Accounting, Custody and Calculation of N.A.V. for
three Feeder Trusts will be charged according to the following schedule.
The following schedule is exclusive of transaction costs and out-of-pocket
expenses.
Annual
------
Fee
---
Annual Fee per feeder fund $12,000
For each additional class added beyond the first one class there will be an
annual fee of $6,000 for the above services.
B. Trust Administration, Compliance, Financial Statement Preparation, Legal
Administration, and Blue Sky.
The Annual Fee for Trust Administration, Financial Statement Preparation,
Legal Administration, and Blue Sky for three Feeder Trusts will be charged
according to the following schedule.
Annual
------
Fee
---
Annual Fee per feeder fund $50,000
For each additional class added beyond the first one class there will be an
annual fee of $10,000 for the above services.
C. Miscellaneous
1. Out-of-Pocket
For purposes of this Agreement, out-of-pocket charges consist of: -
Telephone - Ad Hoc Reporting - Third Party Review - Forms and Supplies -
Printing/Postage/Delivery - Systems Development/Reports/Transmissions -
Equipment Rental - Legal costs associated with substantial alterations of
IBT's standard agreements
2. Balance Credits
We allow use of balance credit against fees (excluding out-of-pocket
charges) for collected fund balances arising out of the custody
relationship. The monthly earnings allowance is equal to 75% of the 90-day
T-xxxx rate.
3. Systems
The details of any systems work required to service this fund will be
determined after a thorough business analysis. All systems work, including
creating customized reports and establishing systems/communications
interfaces with X.Xxx, other providers, etc., will be billed on a time and
materials basis.
4. Billing and Payment
The above fees will be charged against the Funds' custodian checking
account five business days after the invoice is mailed to the fund.
All charges will be billed monthly. The fee schedule will be effective upon
start-up of the Funds.
26
Appendix C
SERVICES
Function X.XXX Suggested Fund Auditor or
Counsel
---------------------------------- ------------------------------ ----------------------------- ------------------------------
----------------------------------
MANAGEMENT REPORTING
& TREASURY ADMINISTRATION
----------------------------------
Monitor portfolio compliance in Perform tests of certain Oversee BGI's continuous A/C - Provide consultation as
accordance with the current specific portfolio activity monitoring of portfolio needed on compliance issues.
Prospectus and SAI. designed from provisions of activity and Fund
the Fund's Prospectus and operations in conjunction
Frequency: Bi-monthly SAI. Follow-up on potential with 1940 Act, Prospectus,
violations. SAI and any other
applicable laws and
regulations. Monitor
testing results and approve
resolution of compliance
issues.
Provide compliance summary Provide a report of Review report. A/C - Provide consultation as
package. compliance testing results. needed.
Frequency: Monthly
Perform asset diversification Perform asset Oversee BGI's continuous A - Provide consultation as
testing to establish diversification tests at monitoring of portfolio needed in establishing
qualification as a RIC. each tax quarter end. activity in conjunction positions to be taken in tax
Follow-up on issues. with IRS requirements. treatment of particular issues.
Frequency: Quarterly Review test results and Review quarter end tests on a
take any necessary action. current basis.
Approve tax positions taken.
Perform qualifying income Perform qualifying income Oversee BGI's continuous A- Consult as needed on tax
testing to establish testing (on book basis monitoring of portfolio accounting positions to be
qualification as a RIC. income, unless material activity in conjunction taken. Review in conjunction
differences are anticipated) with IRS requirements. with year-end audit.
Frequency: Quarterly on quarterly basis and as Review test results and
may otherwise be take any necessary action.
necessary. Follow-up on Approve tax positions taken.
issues.
Prepare the Fund's annual Prepare preliminary expense Provide asset level
expense budget. Establish daily budget. Notify fund projections. Approve
accruals. accounting of new accrual expense budget.
rates.
Frequency: Annually
Monitor the Fund's expense Monitor actual expenses Provide asset level C/A - Provide consultation as
budget. updating budgets/ expense projections quarterly. requested.
accruals. Provide vendor information
Frequency: Quarterly as necessary. Review
expense analysis and
approve budget revisions.
Receive and coordinate payment Propose allocations of Approve invoices and
of fund expenses. invoice among Funds and allocations of payments.
obtain authorized approval Send invoices to IBT in a
Frequency: As necessary to process payment. timely manner.
Calculate periodic dividend Calculate amounts available Establish and maintain C - Review dividend
rates and capital gains for distribution. dividend and distribution resolutions in conjunction with
distributions to be declared in Coordinate review by policies. Approve Board approval.
accordance with management management and/or auditors. distribution rates per
guidelines. Notify custody and transfer share and aggregate A - Review and concur with
agent of authorized dividend amounts. Obtain Board proposed distributions, annual
Frequency: Quarterly/Annually rates in accordance with approval when required. and excise only.
Board approved policy.
Report dividends to Board as
required.
Calculate total return Provide total return Review total return
information on Funds as defined calculations. Returns information.
in the current Prospectus and consist of monthly,
SAI. quarterly, YTD, since
inception and average annual
Frequency: Monthly since inception.
Prepare responses to major Prepare, coordinate as Identify the services to
industry questionnaires. necessary, and submit which the Funds report.
responses to the appropriate Provide information as
Frequency: As often as necessary agency. requested.
Prepare disinterested trustee Summarize amounts paid to Provide social security
Form 1099-Misc. trustees during the calendar numbers and current mailing
year. Prepare and mail Form address for trustees.
Frequency: Annually 1099-Misc. Review and approve
information provided for
Form 1099-Misc.
----------------------------------
FINANCIAL REPORTING
----------------------------------
Prepare financial information Prepare information as Review financial
for presentation to Fund required. information.
Management and Board of
Directors.
Frequency: As needed
Coordinate the annual audit and Coordinate the creation of Provide information A - Perform audit and issue
semi-annual preparation and templates reflecting required to create opinion on annual financial
printing of financial statements client-selected standardized templates, including report statements.
and notes with management, fund appearance and text of style and graphics.
accounting and the fund auditors. financial statements and Approve format and text as A/C - Review reports.
footnotes. Draft and manage standard. Approve
Frequency: production cycle. production cycle and assist
Annually/semi-annually Coordinate with IBT fund in managing to the cycle.
accounting the electronic Coordinate review and
receipt of portfolio and approval by portfolio
general ledger information. managers of portfolio
Assist in resolution of listings to be included in
accounting issues. Using financial statements.
templates, draft financial Prepare appropriate
statements, coordinate management letter and
auditor and management coordinate production of
review, and clear comments. Management Discussion and
Coordinate printing of Analysis. Review and
reports and XXXXX conversion approve entire report.
with outside printer and Make appropriate
filing with the SEC via representations in
XXXXX. conjunction with audit.
----------------------------------
LEGAL
----------------------------------
Prepare and file Form N-SAR. Prepare form for filing. Provide appropriate C - Review initial filing.
Obtain any necessary responses. Provide A - Provide annual audit
Frequency: Semi-annually supporting documents. File applicable Exhibits to internal control letter to
with SEC via XXXXX. attach to filing. Review accompany the annual filing.
and authorize filing.
Assist the preparation and Accumulate capital stock Review and approve capital A/C - Review informally when
filing of Form 24f-2 Notice. information. stock worksheet. requested.
Frequency: Annually
Respond to regulatory or auditor Compile and provide Coordinate with regulatory C - Provide consultation as
examinations and requests. documentation pursuant to authorities and auditors to needed.
examinations, audits and provide requested
Frequency: As needed (at least requests from regulators or documentation and
annually) auditors. Assist client and resolutions to inquiries.
legal counsel in resolution
of regulatory and audit
inquiries.
Proxy material/shareholder Prepare drafts of proxy Review and approve proxy. C - Review and approve proxy.
meetings. material for review, file
materials or coordinate
Frequency: As needed filing with the SEC and
coordinate printing. Assist
proxy solicitation firm and
prepare scripts. Attend
meeting and prepare minutes.
Prepare amendments to Coordinate the preparation Review and approve. C - Review and approve filings.
Registration Statement. and filing of post-effective
amendments. Coordinate with A/C - Provide consents as
Frequency: Annual updates outside printers the XXXXX appropriate.
(includes updating financial conversion, filing with the
highlights, expense tables, SEC and printing of
ratios) plus one additional prospectus.
filing per fiscal year.
Prepare prospectus/SAI Coordinate the preparation Review and approve. C - Review and approve filings.
supplements. and filing of prospectus and
SAI supplements. File with A/C - Provide consents as
Frequency: As often as required the SEC via XXXXX. appropriate.
Prepare agenda and board Maintain annual calendar of Review and approve board C - Review agenda, board
materials for quarterly board required quarterly and materials. material and board and
meetings. annual approvals. Prepare committee minutes. Ensure
agenda, resolutions and board material contains all
Frequency: Quarterly other board materials for required information that the
quarterly board meetings. members of the board must
Prepare supporting review and/or approve to
information and materials perform their duties as
when necessary. Assemble, directors/trustees.
check and distribute books
in advance of meeting.
Attend board and committee
meetings and prepare minutes.
Furnish Trust officers. Furnish appropriate Furnish appropriate
personnel as officers of the personnel as officers of
Frequency: As needed Trust. the Trust.
Assist in updating of fidelity Make annual filing of Obtain required fidelity
bond insurance coverage. fidelity bond insurance bond insurance coverage.
material with the SEC. Monitor level of fidelity
Frequency: Annually bond insurance maintained
in accordance with required
coverage.
----------------------------------
TAX
----------------------------------
Prepare income tax provisions. Calculate investment company Provide transaction A - Provide consultation as
taxable income, net tax information as requested. needed in establishing
Frequency: Annually exempt interest, net capital Approve tax accounting positions to be taken in tax
gain and spillback dividend positions to be taken. treatment of particular
requirements. Identify Approve provisions. PFIC's issues. Perform review in
book-tax accounting to be identified at the conjunction with the year-end
differences. Track required Portfolio (HUB) level. audit.
information relating to
accounting differences.
Calculate excise tax Calculate required Provide transaction A - Provide consultation as
distributions. distributions to avoid information as requested. needed in establishing
imposition of excise tax. Passive Foreign Investment positions to be taken in tax
Frequency: Annually - Calculate capital gain Companies (PFICs) to be treatment of particular
net income and foreign identified at the Portfolio issues. Review and concur with
currency gain/loss (HUB) level. Approve tax proposed distributions.
through October 31. accounting positions to be
- Calculate ordinary taken. Review and approve
income and all income and distribution
distributions through a calculations, including
specified cut off date . projected income and
- Project ordinary dividend shares. Approve
income from cut off distribution rates per
date to December 31. share and aggregate
- Ascertain dividend amounts. Obtain Board
shares. approval when required.
Identify book-tax accounting differences.
Track required information relating to
accounting differences. Coordinate review
by management and fund auditors. Notify
custody and transfer agent of authorized
dividend rates in accordance with Board
approved policy. Report dividends to Board
as required.
Prepare tax returns. Prepare excise and RIC tax Review and sign tax return. A - Review and sign tax return
returns. as preparer.
Frequency: Annually
Prepare Form 1099. Obtain yearly distribution Review and approve
information. Calculate 1099 information provided for
reclasses and coordinate Form 1099.
with transfer agent.
Frequency: Annually
Prepare other year-end Obtain yearly income Review and approve
tax-related disclosures. distribution information provided.
information. Calculate
Frequency: Annually disclosures
(i.e., dividend received
deductions,
foreign tax credits,
tax-exempt
income, income by
jurisdiction) and
coordinate with transfer
agent.
----------------------------------
BLUE SKY
----------------------------------
Maintain effective Blue Sky Maintain records of fund Identify states in which C- Provide consultation as
notification filings for states sales for client designated filings are to be made. needed on Blue Sky issues.
in which Fund Management intends states via PW Blue2
to solicit sales of fund shares. compliance system. File Identify exempt C- Provide consultation on
annual notification renewal transactions to transfer product and institutional
Frequency: On-going documents and annual sales agent for appropriate exemptions.
reports. File amendments to exclusion from blue sky
increase dollar amounts reporting.
authorized for sales by
funds, based upon client
instruction. File
notifications to states for
new funds and/or classes,
mergers and liquidations. Provide periodic
reports on state authorization amounts and
slaes amounts. Determine state filing
requirements by using CCH Blue Sky Law
Reporter, ICI memoranda and state
securities commission directives (both
written and oral).
File amendments to registration File updated registration Inform IBT of filings prior C- Provide consultation as
statement with the applicable statements, prospectus, to SEC filing. needed on Blue Sky filing
state securities commissions in SAIs, supplements thereto, issues.
coordination with SEC filing. and annual reports to
shareholders upon
Frequency: Annual updates approval/authorization by
(includes registration client.
statement, prospectus, SAI) plus
an additional filing per fiscal
year
