1
FORM OF
CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
THIS AGREEMENT is made effective the --- day of ----------, 19--, by and
between INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under
the laws of the state of Missouri, having its principal office and place of
business at 000 Xxxxxxxxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxxxxxx 00000 ("IFTC"),
and FFP New Horizons Fund, Inc., a Maryland corporation having its principal
office and place of business at 00000 Xxxxxx Xxxx, Xxxxxxxxxxxx, XX 00000
("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint IFTC as custodian of the assets of the
Fund's investment portfolio or portfolios (each a "Portfolio", and
collectively the "Portfolios") and as its agent to perform certain investment
accounting and record keeping functions; and
WHEREAS, IFTC is willing to accept such appointment on the terms and
conditions hereinafter set forth;
NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant
and agree as follows:
1. APPOINTMENT OF CUSTODIAN AND AGENT. Fund hereby constitutes and
----------------------------------
appoints IFTC as:
A. Custodian of the investment securities, interests in loans and
other non-cash investment property, and monies at any time owned by
each of the Portfolios and delivered to IFTC as custodian hereunder
("Assets"); and
B. Agent to perform certain accounting and record keeping functions
relating to portfolio transactions required of a duly registered
investment company under Rule 31a of the Investment Company Act of
1940, as amended (the "1940 Act") and to calculate the net asset value
of the Portfolios.
2. REPRESENTATIONS AND WARRANTIES.
------------------------------
A. Fund hereby represents, warrants and acknowledges to IFTC:
1. That it is a corporation duly organized and existing and in
good standing under the laws of its state of organization, and
that it is registered under the 1940 Act; and
1
2
2. That it has the requisite power and authority under
applicable law and its articles of incorporation and its bylaws
to enter into this Agreement; it has taken all requisite action
necessary to appoint IFTC as custodian and investment accounting
and record keeping agent; this Agreement has been duly executed
and delivered by Fund; and this Agreement constitutes a legal,
valid and binding obligation of Fund, enforceable in accordance
with its terms.
B. IFTC hereby represents, warrants and acknowledges to Fund:
1. That it is a trust company duly organized and existing and in
good standing under the laws of the State of Missouri; and
2. That it has the requisite power and authority under applicable
law, its charter and its bylaws to enter into and perform this
Agreement; this Agreement has been duly executed and delivered by IFTC;
and this Agreement constitutes a legal, valid and binding obligation of
IFTC, enforceable in accordance with its terms.
3. DUTIES AND RESPONSIBILITIES OF THE PARTIES.
------------------------------------------
A. Delivery of Assets. Except as permitted by the 1940 Act, Fund
------------------
will deliver or cause to be delivered to IFTC on the effective date
hereof, or as soon thereafter as practicable, and from time to time
thereafter, all Assets acquired by, owned by or from time to time
coming into the possession of each of the Portfolios during the term
hereof. IFTC has no responsibility or liability whatsoever for or on
account of assets not so delivered.
B. Delivery of Accounts and Records. Fund will turn over or cause
--------------------------------
to be turned over to IFTC all accounts and records needed by IFTC to
perform its duties and responsibilities hereunder fully and properly.
IFTC may rely conclusively on the completeness and correctness of such
accounts and records.
C. Delivery of Assets to Third Parties. IFTC will receive delivery
-----------------------------------
of and keep safely the Assets of each Portfolio segregated in a
separate account. Upon delivery of any such Assets to a subcustodian
appointed pursuant hereto (hereinafter referred to as "Subcustodian"),
IFTC will create and maintain records identifying such Assets as
belonging to the applicable Portfolio. IFTC is responsible for the
safekeeping of the Assets only until they have been transmitted to and
received by other persons as permitted under the terms hereof, except
for Assets transmitted to Subcustodians, for which IFTC remains
responsible to the extent provided herein. IFTC may participate
directly or indirectly through a subcustodian in the Depository Trust
Company (DTC), Treasury/Federal Reserve Book Entry System (Fed System),
Participant Trust Company (PTC) or other depository approved by Fund
(as such entities are defined at 17 CFR Section 270.17f-4(b)) (each a
"Depository" and collectively the "Depositories"). IFTC will be
responsible to Fund for any loss, damage or expense suffered or
incurred by Fund resulting from the actions or omissions of any
Depository only to the same extent such Depository is responsible to
IFTC.
2
3
D. Registration. IFTC will at all times hold registered Assets in
------------
the name of IFTC as custodian, the applicable Portfolio, or a nominee
of either of them, unless specifically directed by Instructions, as
hereinafter defined, to hold such registered Assets in so-called
"street name," provided that, in any event, IFTC will hold all such
Assets in an account of IFTC as custodian containing only Assets of the
applicable Portfolio, or only assets held by IFTC as a fiduciary or
custodian for customers; and provided further, IFTC's records will at
all times indicate the Portfolio or other customer for which such
Assets are held and the respective interests therein. If, however,
Fund directs IFTC to maintain Assets in "street name", notwithstanding
anything contained herein to the contrary, IFTC will be obligated only
to utilize its best efforts to timely collect income due the Portfolio
on such Assets and to notify the Portfolio of relevant information,
such as maturities and pendency of calls, and corporate actions
including, without limitation, calls for redemption, tender or exchange
offers, declaration, record and payment dates and amounts of any
dividends or income, reorganization, recapitalization, merger,
consolidation, split-up of shares, change of par value, or conversion
("Corporate Actions"). All Assets and the ownership thereof by
Portfolio will at all times be identifiable on the records of IFTC.
Fund agrees to hold IFTC and its nominee harmless for any liability as
a shareholder of record of securities held in custody.
E. Exchange. Upon receipt of Instructions, IFTC will exchange, or
--------
cause to be exchanged, Assets held for the account of a Portfolio for
other Assets issued or paid in connection with any Corporate Action or
otherwise, and will deposit any such Assets in accordance with the
terms of any such Corporate Action. Without Instructions, IFTC is
authorized to exchange Assets in temporary form for Assets in
definitive form, to effect an exchange of shares when the par value of
stock is changed, and, upon receiving payment therefor, to surrender
bonds or other Assets at maturity or when advised of earlier call for
redemption, except that IFTC will receive Instruction prior to
surrendering any convertible security.
F. Purchases of Investments -- Other Than Options and Futures. On
----------------------------------------------------------
each business day on which a Portfolio makes a purchase of Assets other
than options and futures, Fund will deliver to IFTC Instructions
specifying with respect to each such purchase:
1. If applicable, the name of the Portfolio making such
purchase;
2. The name of the issuer and description of the Asset;
3. The number of shares and the principal amount purchased,
and accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission,
taxes and other expenses payable in connection with the purchase;
7. The total amount payable upon such purchase;
8. The name of the person from whom or the broker or dealer
through whom the purchase was made; and
3
4
9. Whether the Asset is to be received in certificated form or
via a specified Depository.
In accordance with such Instructions, IFTC will pay for out of monies
held for the purchasing Portfolio, but only insofar as such monies are
available for such purpose, and receive the Assets so purchased by or
for the account of such Portfolio, except that IFTC, or a Subcustodian,
may in its sole discretion advance funds to such Portfolio which may
result in an overdraft because the monies held on behalf of such
Portfolio are insufficient to pay the total amount payable upon such
purchase. Except as otherwise instructed by Fund, IFTC will make such
payment only upon receipt of Assets: (a) by IFTC; (b) by a clearing
corporation of a national exchange of which IFTC is a member; or (c) by
a Depository. Notwithstanding the foregoing, (i) IFTC may release
funds to a Depository prior to the receipt of advice from the
Depository that the Assets underlying a repurchase agreement have been
transferred by book-entry into the account maintained with such
Depository by IFTC on behalf of its customers; provided that IFTC's
instructions to the Depository require that the Depository make payment
of such funds only upon transfer by book-entry of the Assets underlying
the repurchase agreement in such account; (ii) IFTC may make payment
for time deposits, call account deposits, currency deposits and other
deposits, foreign exchange transactions, futures contracts or options,
before receipt of an advice or confirmation evidencing said deposit or
entry into such transaction; and (iii) IFTC may make, or cause a
Subcustodian to make, payment for the purchase of Assets the settlement
of which occurs outside of the United States of America in accordance
with generally accepted local custom and market practice.
G. Sales and Deliveries of Investments -- Other Than Options and
-------------------------------------------------------------
Futures. On each business day on which a Portfolio makes a sale of
-------
Assets other than options and futures, Fund will deliver to IFTC
Instructions specifying with respect to each such sale:
1. If applicable, the name of the Portfolio making such sale;
2. The name of the issuer and description of the Asset;
3. The number of shares and principal amount sold, and accrued
interest, if any;
4. The date on which the Assets sold were purchased or other
information identifying the Assets sold and to be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission, taxes
or other expenses payable in connection with such sale;
8. The total amount to be received by the Portfolio upon such
sale; and
9. The name and address of the broker or dealer through whom
or person to whom the sale was made.
IFTC will deliver or cause to be delivered the Assets thus designated
as sold for the account of the selling Portfolio as specified in the
Instructions. Except as otherwise
4
5
instructed by Fund, IFTC will make such delivery upon receipt of: (a)
payment therefor in such form as is satisfactory to IFTC; (b) credit to
the account of IFTC with a clearing corporation of a national securities
exchange of which IFTC is a member; or (c) credit to the account
maintained by IFTC on behalf of its customers with a Depository.
Notwithstanding the foregoing: (i) IFTC will deliver Assets held in
physical form in accordance with "street delivery custom" to a broker or
its clearing agent; or (ii) IFTC may make, or cause a Subcustodian to
make, delivery of Assets the settlement of which occurs outside of the
United States of America upon payment therefor in accordance with
generally accepted local custom and market practice.
H. Purchases or Sales of Options and Futures. On each business day
-----------------------------------------
on which a Portfolio makes a purchase or sale of the options and/or
futures listed below, Fund will deliver to IFTC Instructions specifying
with respect to each such purchase or sale:
1. If applicable, the name of the Portfolio making such
purchase or sale;
2. In the case of security options:
a. The underlying security;
b The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or dealer through whom
the sale or purchase was made.
3. In the case of options on indices:
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising,
expiring or closing transaction;
h. Whether the transaction involves a put or call;
5
6
i. Whether the option is written or purchased; and
j. The name and address of the broker or dealer through
whom the sale or purchase was made, or other applicable
settlement instructions.
4. In the case of security index futures contracts:
a. The last trading date specified in the contract and,
when available, the closing level, thereof;
b. The index level on the date the contract is entered
into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in addition
to Instructions, and if not already in the possession of
IFTC, Fund will deliver a substantially complete and
executed custodial safekeeping account and procedural
agreement, incorporated herein by reference); and
f. The name and address of the futures commission
merchant through whom the sale or purchase was made, or
other applicable settlement instructions.
5. In the case of options on index future contracts:
a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased; and
i. The market on which the option is traded.
I. Assets Pledged or Loaned. If specifically allowed for in the
------------------------
prospectus of a Portfolio, and subject to such additional terms and
conditions as IFTC may require:
1. Upon receipt of Instructions, IFTC will release or cause to
be released Assets to the designated pledgee by way of pledge or
hypothecation to secure any loan incurred by a Portfolio;
provided, however, that IFTC will release Assets only upon
payment to IFTC of the monies borrowed, except that in cases
where additional collateral is required to secure a borrowing
already made, further Assets may be released or caused to be
released for that purpose. Upon receipt of Instructions, IFTC
will pay, but only from funds available for such purpose, any
6
7
such loan upon redelivery to it of the Assets pledged or
hypothecated therefor and upon surrender of the note or notes
evidencing such loan.
2. Upon receipt of Instructions, IFTC will release Assets to
the designated borrower; provided, however, that the Assets will
be released only upon deposit with IFTC of full cash collateral
as specified in such Instructions, and that the lending Portfolio
will retain the right to any dividends, interest or distribution
on such loaned Assets. Upon receipt of Instructions and the
loaned Assets, IFTC will release the cash collateral to the
borrower.
J. Routine Matters. IFTC will, in general, attend to all routine
---------------
and mechanical matters in connection with the sale, exchange,
substitution, purchase, transfer, or other dealings with the Assets
except as may be otherwise provided herein or upon Instruction from
Fund.
K. Deposit Accounts. IFTC will open and maintain one or more
----------------
special purpose deposit accounts for each Portfolio in the name of IFTC
in such banks or trust companies (including, without limitation,
affiliates of IFTC) as may be designated by it or Fund in writing
("Accounts"), subject only to draft or order by IFTC upon receipt of
Instructions. IFTC will deposit all monies received by IFTC from or
for the account of a Portfolio in an Account maintained for such
Portfolio. Subject to Section 5 hereof, IFTC agrees:
1. To make Fed Funds available to the applicable Portfolio at
9:00 a.m., Kansas City time, on the second business day after
deposit of any check into an Account, in the amount of the check;
2. To make funds available immediately upon a deposit made by
Federal Reserve wire; and
3. To make funds available on the next business day after
deposit of ACH wires.
L. Income and Other Payments. IFTC will:
-------------------------
1. Collect, claim and receive and deposit for the account of
the applicable Portfolio all income (including income from the
Accounts) and other payments which become due and payable on or
after the effective date hereof with respect to the Assets, and
credit the account of such Portfolio in accordance with the
schedule attached hereto as Exhibit A. If, for any reason, a
Portfolio is credited with income that is not subsequently
collected, IFTC may reverse that credited amount. If monies are
collected after such reversal, IFTC will credit the Portfolio in
that amount;
2. Execute ownership and other certificates and affidavits for
all federal, state and local tax purposes in connection with the
collection of bond and note coupons; and
3. Take such other action as may be necessary or proper in
connection with
7
8
a. the collection, receipt and deposit of such income
and other payments, including but not limited to the
presentation for payment of all coupons and other
income items requiring presentation; and all other
Assets which may mature or be called, redeemed,
retired or otherwise become payable and regarding
which IFTC has actual knowledge, or should reasonably
be expected to have knowledge; and
b. the endorsement for collection, in the name of Fund
or a Portfolio, of all checks, drafts or other
negotiable instruments.
IFTC, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon
receipt of Instructions and upon being indemnified to its
satisfaction against the costs and expenses of such suit or other
actions. IFTC will receive, claim and collect all stock
dividends, rights and other similar items and will deal with the
same pursuant to Instructions.
M. Proxies and Notices. IFTC will promptly deliver or mail or have
-------------------
delivered or mailed to Fund all proxies properly signed, all notices of
meetings, all proxy statements and other notices, requests or
announcements affecting or relating to Assets and will, upon receipt of
Instructions, execute and deliver or mail (or cause its nominee to
execute and deliver or mail) such proxies or other authorizations as
may be required. Except as provided herein or pursuant to Instructions
hereafter received by IFTC, neither it nor its nominee will exercise
any power inherent in any such Assets, including any power to vote the
same, or execute any proxy, power of attorney, or other similar
instrument voting any of such Assets, or give any consent, approval or
waiver with respect thereto, or take any other similar action.
N. Disbursements. IFTC will pay or cause to be paid, insofar as
-------------
funds are available for the purpose, bills, statements and other
obligations of each Portfolio (including but not limited to obligations
in connection with the conversion, exchange or surrender of Assets,
interest charges, dividend disbursements, taxes, management fees,
custodian fees, legal fees, auditors' fees, transfer agents' fees,
brokerage commissions, compensation to personnel, and other operating
expenses of such Portfolio) pursuant to Instructions setting forth the
name of the person to whom payment is to be made, and the amount and
purpose of the payment.
O. Daily Statement of Accounts. IFTC will, within a reasonable
---------------------------
time, render to Fund a detailed statement of the amounts received or
paid and of Assets received or delivered for the account of each
Portfolio during each business day. IFTC will maintain such books and
records as are necessary to enable it to render, from time to time
upon request by Fund, a detailed statement of the Assets. IFTC will
permit, and upon Instruction will cause any Subcustodian to permit,
such persons as are authorized by Fund, including Fund's independent
public accountants, reasonable access to such records or will provide
reasonable confirmation of the contents of such records, and if
demanded, IFTC will permit, and will cause any Subcustodian to permit,
federal and state regulatory agencies to examine the Assets, books and
records of the Portfolio.
8
9
P. Appointment of Subcustodians. Notwithstanding any other
----------------------------
provisions hereof:
1. All or any of the Assets may be held in IFTC's own custody
or in the custody of one or more other banks or trust companies
(including, without limitation, affiliates of IFTC) acting as
Subcustodians as may be selected by IFTC. Any such Subcustodian
selected by IFTC must have the qualifications required for a
custodian under the 1940 Act. IFTC will be responsible to the
applicable Portfolio for any loss, damage or expense suffered or
incurred by such Portfolio resulting from the actions or
omissions of any Subcustodians selected and appointed by IFTC
(except Subcustodians appointed at the request of Fund and as
provided in Subsection 2 below) to the same extent IFTC would be
responsible to Fund hereunder if it committed the act or omission
itself.
2. Upon request of Fund, IFTC will contract with other
Subcustodians reasonably acceptable to IFTC for purposes of (a)
effecting third-party repurchase transactions with banks,
brokers, dealers, or other entities through the use of a common
custodian or subcustodian, or (b) providing depository and
clearing agency services with respect to certain variable rate
demand note securities, or (c) for other reasonable purposes
specified by Fund; provided, however, that IFTC will be
responsible to Fund for any loss, damage or expense suffered or
incurred by Fund resulting from the actions or omissions of any
such Subcustodian only to the same extent such Subcustodian is
responsible to IFTC. Fund may review IFTC's contracts with such
Subcustodians.
Q. Foreign Custody Manager.
-----------------------
1. Delegation to IFTC as FCM. The Fund, pursuant to
-------------------------
resolution adopted by its Board of Trustees or Directors (the
"Board"), hereby delegates to IFTC, subject to Section (b) of
Rule 17f-5, the responsibilities set forth in this Section Q
with respect to Foreign Assets held outside the United States,
and IFTC hereby accepts such delegation, as FCM of each
Portfolio. It is understood and agreed that IFTC will
sub-contract the performance of its responsibilities hereunder
with State Street Bank & Trust Company. IFTC will be responsible
to the applicable Portfolio for any loss, damage or expense
suffered or incurred by such Portfolio resulting from the actions
or omissions of State Street Bank & Trust Company to the same
extent IFTC would be responsible to Fund hereunder if it
committed the act or omission itself. References herein to
Foreign Custody Manager ("FCM") shall include IFTC and State
Street Bank & Trust Company.
2. Definitions. Capitalized terms in this Section Q have the
-----------
following 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
9
10
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, except that the term does not include
Mandatory Securities Depositories.
"Foreign Assets" means any of the Portfolios' investments
(including foreign currencies) for which the primary market is
outside the United States and such cash and cash equivalents in
amounts deemed by Fund to be reasonably necessary to effect the
Portfolios' transactions in such investments.
"Foreign Custody Manager" or "FCM" 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.
3. Countries Covered. The FCM is responsible for performing
-----------------
the delegated responsibilities defined below only with respect to
the countries and custody arrangements for each such country
listed on Exhibit D hereto, which may be amended from time to
time by the FCM. The FCM will list on Exhibit D the Eligible
Foreign Custodians selected by the FCM to maintain the assets of
each Portfolio. Mandatory Securities Depositories are listed on
Exhibit E hereto, which Exhibit E may be amended from time to
time by the FCM. The FCM will provide amended versions of
Exhibits D and E in accordance with subsection 7 of this Section Q.
Upon the receipt by the FCM of Instructions to open an account,
or to place or maintain Foreign Assets, in a country listed on
Exhibit D, and the fulfillment by the Fund of the applicable
account opening requirements for such country, the FCM is deemed
to have been delegated by the Board responsibility as FCM with
respect to that country and to have accepted such delegation.
Following the receipt of Instructions directing the FCM to close
the account of a Portfolio with the Eligible Foreign Custodian
selected by the FCM in a designated country, the delegation by
the Board to IFTC as FCM for that country is deemed to have been
withdrawn and IFTC will immediately cease to be the FCM of the
Portfolio with respect to that country.
The FCM 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
10
11
notice by the Fund, IFTC will have no further responsibility as FCM
to a Portfolio with respect to the country as to which IFTC's
acceptance of delegation is withdrawn.
4. Scope of Delegated Responsibilities.
-----------------------------------
a. Selection of Eligible Foreign Custodians. Subject to
----------------------------------------
the provisions of this Section Q, the FCM may place and
maintain the Foreign Assets in the care of the Eligible
Foreign Custodian selected by the FCM in each country listed
on Exhibit D, as amended from time to time.
In performing its delegated responsibilities as FCM to place
or maintain Foreign Assets with an Eligible Foreign Custodian,
the FCM will 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 Foreign Custodian, after considering
all factors relevant to the safekeeping of such assets,
including, without limitation, those set forth in
Rule 17f-5(c)(1)(i) through (iv).
b. Contracts With Eligible Foreign Custodians. The FCM
------------------------------------------
will 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 FCM 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 will
include the provisions set forth in Rule 17f-5(c)(2)(I)(A)
through (F), or, in lieu of any or all of the provisions set
forth in said (A) through (F), such other provisions that the
FCM 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 said (A) through (F) in their
entirety.
c. Monitoring. In each case in which the FCM maintains
----------
Foreign Assets with an Eligible Foreign Custodian selected by
the FCM, the FCM will establish a system to monitor (a) the
appropriateness of maintaining the Foreign Assets with such
Eligible Foreign Custodian and (b) the contract governing the
custody arrangements established by the FCM with the Eligible
Foreign Custodian. In the event the FCM determines that the
custody arrangements with an Eligible Foreign Custodian it has
selected are no longer appropriate, the FCM will notify the
Board in accordance with subsection 7 of this Section Q.
5. Guidelines for the Exercise of Delegated Authority. For
--------------------------------------------------
purposes of this Section Q, the Board will be solely responsible
for considering and determining to accept such Country Risk as is
incurred by placing and maintaining the Foreign
11
12
Assets in each country for which IFTC is serving as FCM of a
Portfolio, and the Board will be solely responsible for monitoring
on a continuing basis such Country Risk to the extent that the
Board considers necessary or appropriate. The Fund, on behalf of
the Portfolios, and IFTC each expressly acknowledge that the FCM
will not be delegated any responsibilities under this Section Q
with respect to Mandatory Securities Depositories.
6. Standard of Care as FCM of a Portfolio. In performing the
--------------------------------------
responsibilities delegated to it, the FCM 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 1940 Act would
exercise.
7. Reporting Requirements. The FCM will 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 amended Exhibits D and E at
the end of the calendar quarter in which an amendment to either
Schedule has occurred. The FCM will make written reports
notifying the Board of any other material change in the foreign
custody arrangements of a Portfolio described in this Section Q
after the occurrence of the material change.
8. Representations with Respect to Rule 17f-5. The FCM
------------------------------------------
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 IFTC that the Board has determined that it
is reasonable for the Board to rely on IFTC and State Street Bank
& Trust Company to perform the responsibilities delegated
pursuant to this Contract to IFTC and State Street Bank & Trust
Company as the FCM of each Portfolio and that IFTC has been
granted the authority by Fund to delegate to State Street Bank &
Trust Company the FCM functions to which IFTC has been appointed
by Fund.
9. Effective Date and Termination of IFTC as FCM. The Board's
---------------------------------------------
delegation to IFTC as FCM of a Portfolio will be effective as of
the date hereof and will 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 days after receipt by the non-terminating party
of such notice. The provisions of subsection 3 of this Section Q
govern the delegation to and termination of IFTC as FCM of the
Fund with respect to designated countries.
R. Accounts and Records. IFTC will prepare and maintain, under the
--------------------
direction of and as interpreted by Fund, Fund's or Portfolio's
accountants and/or other advisors, in complete, accurate and current
form such accounts and records: (1) required to be maintained by Fund
with respect to portfolio transactions under Section 31(a) of the 1940
Act and the rules and regulations from time to time adopted thereunder;
(2) required as a basis for calculation of each Portfolio's net asset
value; and (3) as otherwise agreed upon by the parties. Fund will
advise IFTC in writing of all applicable record retention requirements,
other than those set forth in the 1940 Act. IFTC will preserve such
12
13
accounts and records in the manner and for the periods prescribed in
the 1940 Act or for such longer period as is agreed upon by the
parties. Fund will furnish, in writing or its electronic or digital
equivalent, accurate and timely information needed by IFTC to complete
such accounts and records, including Corporate Actions, when such
information is not readily available from generally accepted securities
industry services or publications.
S. Accounts and Records Property of Fund. IFTC acknowledges that
-------------------------------------
all of the accounts and records maintained by IFTC pursuant hereto are
the property of Fund, and will be made available to Fund for inspection
or reproduction within a reasonable period of time, upon demand. IFTC
will assist Fund's independent auditors, or upon the prior written
approval of Fund, or upon demand, any regulatory body, in any requested
review of Fund's accounts and records, provided that Fund will
reimburse IFTC for all expenses and employee time invested in any such
review outside of routine and normal periodic reviews. Upon receipt
from Fund of the necessary information or instructions, IFTC will
supply information from the books and records it maintains for Fund
that Fund may reasonably request for tax returns, questionnaires,
periodic reports to shareholders and such other reports and information
requests as Fund and IFTC may agree upon from time to time.
T. Adoption of Procedures. IFTC and Fund hereby adopt the Funds
----------------------
Transfer Operating Guidelines attached hereto as Exhibit B. IFTC and
Fund may from time to time adopt such additional procedures as they
agree upon, and IFTC may conclusively assume that no procedure approved
or directed by Fund, Fund's or Portfolio's accountants or other
advisors conflicts with or violates any requirements of the prospectus,
the articles of incorporation, bylaws, any applicable law, rule or
regulation, or any order, decree or agreement by which Fund may be
bound. Fund will be responsible for notifying IFTC of any changes in
statutes, regulations, rules, requirements or policies which may impact
IFTC's responsibilities or procedures under this Agreement.
U. Valuation of Assets. IFTC will value the Assets in accordance
-------------------
with Fund's Instructions utilizing the pricing sources designated by
Fund ("Pricing Sources"). In the event that Fund specifies Reuters
America, Inc., it will enter into the Agreement attached hereto as
Exhibit C. IFTC will calculate each Portfolio's net asset value in
accordance with the Portfolio's prospectus.
V. Advances. Fund will pay on demand any advance of cash or
--------
securities made by IFTC or any Subcustodian, in its sole discretion,
for any purpose (including but not limited to securities settlements,
purchase or sale of foreign exchange or foreign exchange contracts and
assumed settlement) for the benefit of any Portfolio. Any such cash
advance will be subject to an overdraft charge at the rate set forth in
the then-current fee schedule from the date advanced until the date
repaid. As security for each such advance, Fund hereby grants IFTC and
such Subcustodian a lien on and security interest in all Assets at any
time held for the account of the applicable Portfolio, including
without limitation all Assets acquired with the amount advanced.
Should Fund fail to promptly repay the advance, IFTC and such
Subcustodian may utilize available cash and dispose of such Portfolio's
Assets pursuant to applicable law to the extent necessary to obtain
reimbursement of the amount advanced and any related overdraft charges.
13
14
W. Exercise of Rights; Tender Offers. Upon receipt of Instructions,
---------------------------------
IFTC will: (1) deliver warrants, puts, calls, rights or similar
securities to the issuer or trustee thereof, or to the agent of such
issuer or trustee, for the purpose of exercise or sale, provided that
the new Assets, if any, are to be delivered to IFTC; and (2) deposit
securities upon invitations for tenders thereof, provided that the
consideration for such securities is to be paid or delivered to IFTC or
the tendered securities are to be returned to IFTC.
X. Fund Shares.
-----------
1. Fund will deliver to IFTC Instructions with respect to the
declaration and payment of any dividend or other distribution on
the shares of capital stock of a Portfolio ("Fund Shares") by a
Portfolio. On the date specified in such Instruction, IFTC will
pay out of the monies held for the account of the Portfolio,
insofar as it is available for such purposes, and credit to the
account of the Dividend Disbursing Agent for the Portfolio, the
amount specified in such Instructions.
2. Whenever Fund Shares are repurchased or redeemed by a
Portfolio, Portfolio or its agent will give IFTC Instructions
regarding the aggregate dollar amount to be paid for such shares.
Upon receipt of such Instruction, IFTC will charge such aggregate
dollar amount to the account of the Portfolio and either deposit
the same in the account maintained for the purpose of paying for
the repurchase or redemption of Fund Shares or deliver the same
in accordance with such Instruction. IFTC has no duty or
responsibility to determine that Fund Shares have been removed
from the proper shareholder accounts or that the proper number of
Fund Shares have been canceled and removed from the shareholder
records.
3. Whenever Fund Shares are purchased from Fund, Fund will
deposit or cause to be deposited with IFTC the amount received
for such shares. IFTC has no duty or responsibility to determine
that Fund Shares purchased from Fund have been added to the
proper shareholder account or that the proper number of such
shares have been added to the shareholder records.
4. INSTRUCTIONS.
------------
A. The term "Instructions", as used herein, means written (including
telecopied, telexed, or electronically transmitted) or oral
instructions which IFTC reasonably believes were given by a designated
representative of Fund. Fund will deliver to IFTC, prior to delivery
of any Assets to IFTC and thereafter from time to time as changes
therein are necessary, written Instructions naming one or more
designated representatives to give Instructions in the name and on
behalf of Fund, which Instructions may be received and accepted by IFTC
as conclusive evidence of the authority of any designated
representative to act for Fund and may be considered to be in full
force and effect until receipt by IFTC of notice to the contrary.
Unless such written Instructions delegating authority to any person to
give Instructions specifically limit such authority to specific matters
or require that the approval of anyone else will first have been
obtained, IFTC will be under no obligation to inquire into the right of
such person, acting alone, to give
14
15
any Instructions whatsoever. If Fund fails to provide IFTC any such
Instructions naming designated representatives, any Instructions received
by IFTC from a person reasonably believed to be an appropriate
representative of Fund will constitute valid and proper Instructions
hereunder. The term "designated representative" may include Fund's or a
Portfolio's employees and agents, including investment managers and their
employees.
B. No later than the next business day immediately following each
oral Instruction, Fund will send IFTC written confirmation of such oral
Instruction. At IFTC's sole discretion, IFTC may record on tape, or
otherwise, any oral Instruction whether given in person or via
telephone, each such recording identifying the date and the time of the
beginning and ending of such oral Instruction.
C. Fund will provide, upon IFTC's request, a certificate signed by
an officer or designated representative of Fund, as conclusive proof of
any fact or matter required to be ascertained from Fund hereunder.
Fund will also provide IFTC Instructions with respect to any matter
concerning this Agreement requested by IFTC. If IFTC reasonably
believes that it could not prudently act according to the Instructions,
or the instruction or advice of Fund's or a Portfolio's accountants or
counsel, it may in its discretion, with notice to Fund, not act
according to such Instructions.
5. LIMITATION OF LIABILITY OF IFTC. IFTC is not responsible or liable for,
-------------------------------
and Fund will indemnify and hold IFTC harmless from and against, any and all
costs, expenses, losses, damages, charges, counsel fees (including without
limitation, disbursements and the allocable cost of in-house counsel),
payments and liabilities which may be asserted against or incurred by IFTC or
for which IFTC may be held to be liable, arising out of or attributable to:
A. IFTC's action or failure to act pursuant hereto; provided that
IFTC has acted in good faith and with reasonable care; and provided
further, that in no event is IFTC liable for consequential, special, or
punitive damages;
B. IFTC's payment of money as requested by Fund, or the taking of
any action which might make it or its nominee liable for payment of
monies or in any other way; provided, however, that nothing herein
obligates IFTC to take any such action or expend its own monies in its
sole discretion;
C. IFTC's action or failure to act hereunder upon any Instructions,
advice, notice, request, consent, certificate or other instrument or
paper appearing to it to be genuine and to have been properly executed,
including any Instruction, communications, data or other information
received by IFTC by means of the Systems, as hereinafter defined, or
any electronic system of communication;
D. IFTC's action or failure to act in good faith reliance on the
advice or opinion of counsel for Fund or of its own counsel with
respect to questions or matters of law, which advice or opinion may be
obtained by IFTC at the expense of Fund, or on the Instruction, advice
or statements of any officer or employee of Fund, or Fund's accountants
or other authorized individuals, and other persons believed by it in
good faith to be expert in matters upon which they are consulted;
15
16
E. The purchase or sale of any securities or foreign currency
positions. Without limiting the generality of the foregoing, IFTC is
under no duty or obligation to inquire into:
1. The validity of the issue of any securities purchased by or
for any Portfolio, or the legality of the purchase thereof or of
foreign currency positions, or evidence of ownership required by
Fund to be received by IFTC, or the propriety of the decision to
purchase or the amount paid therefor;
2. The legality of the sale of any securities or foreign
currency positions by or for any Portfolio, or the propriety of
the amount for which the same are sold; or
3. The legality of the issue or sale of any Fund Shares, or
the sufficiency of the amount to be received therefor, the
legality of the repurchase or redemption of any Fund Shares, or
the propriety of the amount to be paid therefor, or the legality
of the declaration of any dividend by Fund, or the legality of
the issue of any Fund Shares in payment of any stock dividend.
F. Any error, omission, inaccuracy or other deficiency in any
Portfolio's accounts and records or other information provided to IFTC
by or on behalf of a Portfolio, including the accuracy of the prices
quoted by the Pricing Sources or for the information supplied by Fund
to value the Assets, or the failure of Fund to provide, or provide in a
timely manner, any accounts, records, or information needed by IFTC to
perform its duties hereunder;
G. Fund's refusal or failure to comply with the terms hereof
(including without limitation Fund's failure to pay or reimburse IFTC
under Section 5 hereof), Fund's negligence or willful misconduct, or
the failure of any representation or warranty of Fund hereunder to be
and remain true and correct in all respects at all times;
H. The use or misuse, whether authorized or unauthorized, of the
Systems or any electronic system of communication used hereunder, by
Fund or by any person who acquires access to the Systems or such other
systems through the terminal device, passwords, access instructions or
other means of access to such Systems or such other system which are
utilized by, assigned to or otherwise made available to Fund, except to
the extent attributable to any negligence or willful misconduct by
IFTC;
I. Any money represented by any check, draft, wire transfer,
clearinghouse funds, uncollected funds, or instrument for the payment
of money to be received by IFTC on behalf of a Portfolio until actually
received; provided, however, that IFTC will advise Fund promptly if it
fails to receive any such money in the ordinary course of business and
will cooperate with Fund toward the end that such money is received;
J. Except as provided in Section 3.P hereof, loss occasioned by the
acts, omissions, defaults or insolvency of any broker, bank, trust
company, securities system or any other person with whom IFTC may deal;
and
16
17
K. The failure or delay in performance of its obligations hereunder,
or those of any entity for which it is responsible hereunder, arising
out of or caused, directly or indirectly, by circumstances beyond the
affected entity's reasonable control, including, without limitation:
any interruption, loss or malfunction of any utility, transportation,
computer (hardware or software) or communication service; inability to
obtain labor, material, equipment or transportation, or a delay in
mails; governmental or exchange action, statute, ordinance,
rulings,regulations or direction, war, strike, riot, emergency, civil
disturbance, terrorism, vandalism, explosions, labor disputes, freezes,
floods, fires, tornadoes, acts of God or public enemy, revolutions, or
insurrection.
6. COMPENSATION. In consideration for its services hereunder, Fund will
------------
pay to IFTC the compensation set forth in a separate fee schedule,
incorporated herein by reference, to be agreed to by Fund and IFTC from time
to time, and upon demand, reimbursement for IFTC's cash disbursements and
reasonable out-of-pocket costs and expenses, including attorney's fees and
disbursements, incurred by IFTC in connection with the performance of
services hereunder. IFTC may charge such compensation against monies held by
it for the account of the Portfolios. IFTC will also be entitled to charge
against any monies held by it for the account of the Portfolios the amount of
any loss, damage, liability, advance, overdraft or expense for which it is
entitled to reimbursement from Fund, including but not limited to fees and
expenses due to IFTC for other services provided to Fund by IFTC. IFTC will
be entitled to reimbursement by Fund for the losses, damages, liabilities,
advances, overdrafts and expenses of Subcustodians only to the extent that
(a) IFTC would have been entitled to reimbursement hereunder if it had
incurred the same itself directly, and (b) IFTC is obligated to reimburse the
Subcustodian therefor.
7. TERM AND TERMINATION. The initial term of this Agreement is for a
--------------------
period of one (1) year. Thereafter, either Fund or IFTC may terminate this
Agreement by notice in writing, delivered or mailed, postage prepaid, to the
other party and received not less than ninety (90) days prior to the date
upon which such termination will take effect. Upon termination hereof:
A. Fund will pay IFTC its fees and compensation due hereunder and
its reimbursable disbursements, costs and expenses paid or incurred to
such date;
B. Fund will designate a successor investment accounting and record
keeping agent (which may be Fund) by Instruction to IFTC;
C. Fund will designate a successor custodian by Instruction to IFTC.
In the event no such Instruction has been delivered to IFTC on or
before the date when such termination becomes effective, then IFTC may,
at its option, (i) choose as successor custodian a bank or trust
company meeting the qualifications for custodian set forth in the 1940
Act and having not less than Two Million Dollars ($2,000,000) aggregate
capital, surplus and undivided profits, as shown by its last published
report, or (ii) apply to a court of competent jurisdiction for the
appointment of a successor or other proper relief, or take any other
lawful action under the circumstances; provided, however, that Fund
will reimburse IFTC for its costs and expenses, including reasonable
attorney's fees, incurred in connection therewith; and
17
18
D. IFTC will, upon payment of all sums due to IFTC from Fund
hereunder or otherwise, deliver at IFTC's office (i) all accounts and
records to the successor investment accounting and record keeping agent
or, if none, to Fund; and (ii) all Assets, duly endorsed and in form
for transfer, to the successor custodian, or as specified by the court.
IFTC will cooperate in effecting changes in book-entries at all
Depositories. Upon delivery to a successor or as specified by the
court, IFTC will have no further obligations or liabilities hereunder.
Thereafter such successor will be the successor hereunder and will be
entitled to reasonable compensation for its services.
In the event that accounts, records or Assets remain in the possession
of IFTC after the date of termination hereof for any reason other than
IFTC's failure to deliver the same, IFTC is entitled to compensation as
provided in the then-current fee schedule for its services during such
period, and the provisions hereof relating to the duties and
obligations of IFTC will remain in full force and effect.
8. NOTICES. Notices, requests, instructions and other writings addressed
-------
to Fund at the address set forth above, or at such other address as Fund may
have designated to IFTC in writing, will be deemed to have been properly
given to Fund hereunder. Notices, requests, Instructions and other writings
addressed to IFTC at the address set forth above, Attention: Custody
Department, or to such other address as it may have designated to Fund in
writing, will be deemed to have been properly given to IFTC hereunder.
9. THE SYSTEMS; CONFIDENTIALITY.
----------------------------
A. If IFTC provides Fund direct access to the computerized
investment portfolio custody, record keeping and accounting systems
used by IFTC ("Systems") or if IFTC and Fund agree to utilize any
electronic system of communication, Fund agrees to implement and
enforce appropriate security policies and procedures to prevent
unauthorized or improper access to or use of the Systems or such other
system.
B. Fund will preserve the confidentiality of the Systems and the
tapes, books, reference manuals, instructions, records, programs,
documentation and information of, and other materials relevant to, the
Systems and the business of IFTC or its affiliates ("Confidential
Information"). Fund agrees that it will not voluntarily disclose any
such Confidential Information to any other person other than its own
employees who reasonably have a need to know such information pursuant
hereto. Fund will return all such Confidential Information to IFTC upon
termination or expiration hereof.
C. Fund has been informed that the Systems are licensed for use by
IFTC and its affiliates from one or more third parties ("Licensors"),
and Fund acknowledges that IFTC and Licensors have proprietary rights
in and to the Systems and all other IFTC or Licensor programs, code,
techniques, know-how, data bases, supporting documentation, data
formats, and procedures, including without limitation any changes or
modifications made at the request or expense or both of Fund
(collectively, the "Protected Information"). Fund acknowledges that
the Protected Information constitutes confidential material and trade
secrets of IFTC and Licensors. Fund will preserve the confidentiality
of the Protected Information, and Fund hereby acknowledges that any
18
19
unauthorized use, misuse, disclosure or taking of Protected
Information, residing or existing internal or external to a computer,
computer system, or computer network, or the knowing and unauthorized
accessing or causing to be accessed of any computer, computer system,
or computer network, may be subject to civil liabilities and criminal
penalties under applicable law. Fund will so inform employees and
agents who have access to the Protected Information or to any computer
equipment capable of accessing the same. Licensors are intended to be
and are third party beneficiaries of Fund's obligations and
undertakings contained in this Section.
D. Fund hereby represents and warrants to IFTC that it has
determined to its satisfaction that the Systems are appropriate and
suitable for its use. THE SYSTEMS ARE PROVIDED ON AN AS IS, AS
AVAILABLE BASIS. IFTC EXPRESSLY DISCLAIMS ALL WARRANTIES, INCLUDING,
BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, EXCEPT THOSE WARRANTIES STATED
EXPRESSLY HEREIN.
10. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio,
-------------------
the following provisions apply:
A. Each Portfolio will be regarded for all purposes hereunder as a
separate party apart from each other Portfolio. Unless the context
otherwise requires, with respect to every transaction covered hereby,
every reference herein to Fund is deemed to relate solely to the
particular Portfolio to which such transaction relates. Under no
circumstances will the rights, obligations or remedies with respect to
a particular Portfolio constitute a right, obligation or remedy
applicable to any other Portfolio. The use of this single document to
memorialize the separate agreement as to each Portfolio is understood
to be for clerical convenience only and will not constitute any basis
for joining the Portfolios for any reason.
B. Fund may appoint IFTC as its custodian and investment accounting
and record keeping agent for additional Portfolios from time to time by
written notice, provided that IFTC consents to such addition. Rates or
charges for each additional Portfolio will be as agreed upon by IFTC
and Fund in writing.
11. MISCELLANEOUS.
-------------
A. This Agreement will be construed according to, and the rights and
liabilities of the parties hereto will be governed by, the laws of the
State of Missouri without reference to the choice of laws principles
thereof.
B. All terms and provisions hereof will be binding upon, inure to
the benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns.
C. The representations and warranties, the indemnification extended
hereunder, and the provisions of Section 9 hereof are intended to and
will continue after and survive the expiration, termination or
cancellation hereof.
19
20
D. No provisions hereof may be amended or modified in any manner
except by a written agreement properly authorized and executed by each
party hereto.
E. The failure of either party to insist upon the performance of any
terms or conditions hereof or to enforce any rights resulting from any
breach of any of the terms or conditions hereof, including the payment
of damages, will not be construed as a continuing or permanent waiver
of any such terms, conditions, rights or privileges, but the same will
continue and remain in full force and effect as if no such forbearance
or waiver had occurred. No waiver, release or discharge of any party's
rights hereunder will be effective unless contained in a written
instrument signed by the party sought to be charged.
F. The captions herein are included for convenience of reference
only, and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
G. This Agreement may be executed in two or more counterparts, each
of which is deemed an original but all of which together constitute one
and the same instrument.
H. If any provision hereof is determined to be invalid, illegal, in
conflict with any law or otherwise unenforceable, the remaining
provisions hereof will be considered severable and will not be affected
thereby, and every remaining provision hereof will remain in full force
and effect and will remain enforceable to the fullest extent permitted
by applicable law.
I. The benefits of this Agreement may not be assigned by either
party nor may either party delegate all or a portion of its duties
hereunder without the prior written consent of the other party.
Notwithstanding the foregoing, Fund agrees that IFTC may delegate all
or a portion of its duties to an affiliate of IFTC, provided that such
delegation will not reduce the obligations of IFTC under this
Agreement.
J. Neither the execution nor performance hereof will be deemed to
create a partnership or joint venture by and between IFTC and Fund or
any Portfolio.
K. Except as specifically provided herein, this Agreement does not
in any way affect any other agreements entered into among the parties
hereto and any actions taken or omitted by either party hereunder will
not affect any rights or obligations of the other party hereunder.
L. Notice is hereby given that a copy of Fund's Trust Agreement and
all amendments thereto is on file with the Secretary of State of the
state of its organization; that this Agreement has been executed on
behalf of Fund by the undersigned duly authorized representative of
Fund in his/her capacity as such and not individually; and that the
obligations of this Agreement are binding only upon the assets and
property of Fund and not upon any trustee, officer of shareholder of
Fund individually.
20
21
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST FFP NEW HORIZONS FUND, INC.
COMPANY
By:------------------------------- By:----------------------------
Title:---------------------------- Title:-------------------------
Attest:--------------------------- Attest:------------------------
21
