GLOBAL CUSTODY AGREEMENT
This
AGREEMENT is effective as of
December 21, 2006, and is between JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
("Bank") and The American Funds Tax-Exempt Series I – The Tax-Exempt fund of
Maryland ("Customer").
WHEREAS,
Customer is or may be organized with one or more series of shares, each of
which
shall represent an interest in a separate investment portfolio of cash,
securities and other assets; and
WHEREAS,
Customer desires to appoint, in accordance with the provisions of the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, Bank as custodian on behalf of itself or those of its existing
or
additional series of shares (each such listed investment portfolio being
referred to hereinafter as a “Portfolio”), and Bank has agreed to act as
custodian for the Portfolios under the terms and conditions hereinafter set
forth.
NOW
THEREFORE, Bank and Customer agree as follows:
|
Appointment
of Custodian; Customer
Accounts.
|
Customer
hereby appoints Bank as its
custodian for each Portfolio. Bank hereby accepts such
appointment. Bank, acting as “Securities Intermediary” (as defined in
Section 2 hereof) shall establish and maintain the following accounts in the
name of Customer on behalf of each Portfolio:
(a) a
Custody Account for Securities and other Financial Assets (as such terms are
defined in Section 2 hereof); and
(b) an
account (“Deposit Account”) for any and all cash in any currency received by
Bank or its Subcustodian for the account of the Portfolio, which cash shall
not
be subject to withdrawal by draft or check.
Customer
warrants its authority on
behalf of each Portfolio to: (i) deposit the Financial Assets and cash
(collectively, "Assets") received in the Custody Account or the Deposit Account,
as the case may be (collectively, “Accounts”) and (ii) give Instructions
concerning the Accounts and such Instructions shall be clear as to which
Portfolio they relate. Bank may deliver Financial Assets with
different certificate number(s) but which are otherwise identical in all
respects (including, without limitation, any related CUSIP, ISN, rights and
privileges) to Financial Assets deposited in the Custody Account.
Bank
shall be accountable under the
terms of this agreement to the Customer for all Assets held in the Accounts
and
shall take prompt and appropriate action to remedy any discrepancies with
respect to such Assets. Upon written agreement between Bank and Customer,
additional Accounts may be established and separately accounted for as
additional Accounts hereunder.
As
used herein, the following terms
shall have the following respective meanings:
(a) “Affiliate”
shall mean an entity controlling, controlled by, or under common control with,
another entity.
(b) “Authorized
Person" shall mean an employee or agent (including an investment manager)
designated by prior written notice from Customer or its designated agent to
act
on behalf of Customer hereunder. Such persons shall continue to be
Authorized Persons until such time as Bank receives Instructions from Customer
or its designated agent that any such employee or agent is no longer an
Authorized Person.
(c) “Certificated
Security” shall mean a Security that is represented by a
certificate.
(d) “Custody
Account” shall mean each custody account on Bank’s records to which Financial
Assets are or may be credited pursuant hereto.
(e) “Eligible
Foreign Custodian” shall have the meaning assigned thereto in Rule 17f-5 (and
shall include any entity qualifying as such pursuant to an exemption, rule
or other appropriate action of the U.S. Securities and Exchange
Commission).
(f) “Eligible
Securities Depository” shall have the meaning assigned thereto in Rule 17f-7
(and shall include any entity qualifying as such pursuant to an exemption,
rule
or other appropriate action of the U.S. Securities and Exchange
Commission).
(g) “Eligible
Contract” shall mean a currently effective written contract between Bank and a
Subcustodian satisfying the requirements of paragraph (c)(2) of Rule 17f-5
(including any amendments thereto or successor provisions).
(h) “Entitlement
Holder” shall mean the person on the records of a Securities Intermediary as the
person having a Securities Entitlement against the Securities
Intermediary.
(i) “Financial
Asset” shall have the meaning assigned thereto in Article 8 of the Uniform
Commercial Code, which, as of the date hereof, generally means:
(i) a
Security;
(ii) an
obligation of a person or a share, participation or other interest in a person
or property or enterprise of a person, which is, or is of a type, dealt in
or
traded on financial markets, or which is recognized in any area in which it
is
issued or dealt in as a medium for investment; or
(iii) any
property that is held by a Securities Intermediary for another person in a
Securities account if the Securities Intermediary has expressly agreed with
the
other person that the property is to be treated as a financial asset under
Article 8 of the Uniform Commercial Code. As the context requires,
the term means either the interest itself or the means by which a person’s claim
to it is evidenced, including a Certificated Security or an Uncertificated
Security, a Security certificate, or a Security
Entitlement. Financial Asset shall in no event mean
cash.
(j) “Foreign
Assets” shall have the meaning assigned thereto under Rule 17f-5, which, as of
the date hereof, means any investments (including foreign currencies) for which
the primary market is outside the United States, and any cash and cash
equivalents that are reasonably necessary to effect Customer’s transactions in
those investments.
(k) “Instructions"
shall mean instructions of any Authorized Person received by Bank, via
telephone, telex, facsimile transmission, bank wire or other teleprocess or
electronic instruction or trade information system (which may include
Internet-based systems involving appropriate testing and authentication)
acceptable to Bank which Bank believes in good faith to have been given by,
or
under the direction of, Authorized Persons. The term "Instructions"
includes, without limitation, instructions to sell, assign, transfer, deliver,
purchase or receive for the Custody Account, any and all stocks, bonds and
other
Financial Assets or to transfer funds in the Deposit Account.
(l) “Local
Practice” shall mean the customary securities trading or securities processing
practices and procedures generally accepted by Institutional Investors in the
jurisdiction or market in which the transaction occurs, including, without
limitation:
(i)
delivering Financial Assets to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) with the expectation of receiving later payment for such securities
from
such purchaser or dealer;
(ii)
delivering cash to a seller or a
dealer (or an agent for such seller or dealer) against expectation of receiving
later delivery of purchased Financial Assets; or
(iii)
in the case of a purchase or sale
effected through a securities system, in accordance with the rules governing
the
operation of such system.
(m) “Institutional
Investor” shall mean a major commercial bank, corporation, insurance company, or
substantially similar institution, which, as a substantial part of its business
operations, purchases and sells Financial Assets and makes use of global
custodial services.
(n) “Intermediary
Custodian” shall mean any Subcustodian that is a Securities Intermediary and is
qualified to act as a custodian.
(o) “Riders”
shall have the meaning assigned thereto in Section 16(f) of this
Agreement.
(p) “Rule
17f-5” shall mean rule 17f-5 under the 1940 Act, including any amendments
thereto or successor rules.
(q) “Rule
17f-7” shall mean rule 17f-7 under the 1940 Act, including any amendments
thereto or successor rules.
(r) “Security”
shall have the meaning assigned thereto in Article 8 of the Uniform Commercial
Code, which, as of the date hereof, generally means an obligation of an issuer
or a share, participation, or other interest in an issuer or in property or
an
enterprise of an issuer:
(i) which
is represented by a security certificate in bearer or registered form, or the
transfer of which may be registered upon books maintained for that purpose
by or
on behalf of the issuer;
(ii) which
is one of a class or series or by its terms is divisible into a class or series
of shares, participations, interests, or obligations; and
|
(iii)
|
which:
|
(A) is,
or is of a type, dealt in or traded on securities exchanges or securities
markets; or
(B) is
a medium for investment and by its terms expressly provides that it is a
security governed by Article 8 of the Uniform Commercial Code.
(s) “Securities
Depository” means a clearing corporation that is registered with the U.S.
Securities and Exchange Commission as a clearing agency under section 17A of
the
Securities Exchange Act of 1934; or a Federal Reserve Bank or other person
authorized to operate the federal book entry system described in the regulations
of the Department of Treasury codified at 31 CFR 357, Subpart B, or book-entry
systems operated pursuant to comparable regulations of other federal
agencies.
(t) “Securities
Entitlement” shall mean the rights and property interest of an Entitlement
Holder with respect to a Financial Asset as set forth in Part 5 of Article
8 of
the Uniform Commercial Code.
(u) “Securities
Intermediary” shall have the meaning assigned thereto in Article 8 of the
Uniform Commercial Code, which, as of the date hereof, means Bank, a
Subcustodian, a securities depository, clearing corporation or any other person,
including a bank or broker, that in the ordinary course of its business
maintains securities accounts for others and is acting in that
capacity.
(v) “Uncertificated
Security” shall mean a Security that is not represented by a
certificate.
(w) “Uniform
Commercial Code” shall mean the Uniform Commercial Code of the State of New
York, as amended from time to time.
|
3.
|
Maintenance
of Financial Assets and Cash at Bank and Subcustodian
Locations.
|
Unless
Instructions specifically
require another location reasonably acceptable to Bank:
(a) Financial
Assets shall be held in the country or other jurisdiction in which the principal
trading market for such Financial Assets is located, where such Financial Assets
are to be presented for payment or where such Financial Assets are acquired;
and
(b) Cash
shall be credited to an account in a country or other jurisdiction in which
such
cash may be legally deposited or is the legal currency for the payment of public
or private debts.
Cash
may be held pursuant to
Instructions in such accounts as may be available for the particular currency,
recognizing that accounts bearing commercially reasonable interest will be
used
to the extent such use does not violate applicable law. To the extent
Instructions are issued and Bank can comply with such Instructions, Bank is
authorized to maintain cash balances on deposit for Customer with itself (or
its
Affiliates, in accordance with applicable law and regulation), at such
commercially reasonable rates of interest as may from time to time be paid
on
such accounts, or in non-interest bearing accounts as Customer may direct,
if
acceptable to Bank.
If
Customer wishes to have any Foreign
Assets belonging to one or more Portfolios held in the custody of an institution
other than the established Subcustodians as defined in Section 4 (or an Eligible
Securities Depository listed on Schedule B hereto), such arrangement must be
authorized by a written agreement, signed by Bank and Customer.
If
Bank
places and maintains Customer’s Financial Assets, corresponding to a Securities
Entitlement, with a Securities Depository or Intermediary Custodian, Bank
must:
(x) at
a minimum exercise due care in accordance with reasonable commercial standards
in discharging its duty as a Securities Intermediary to obtain and thereafter
maintain such Financial Assets;
(y) provide,
promptly upon request by Customer, such reports as are available concerning
the
internal accounting controls and financial strength of Bank; and
(z) require
any Intermediary Custodian at a minimum to exercise due care in accordance
with
reasonable commercial standards in discharging its duty as a Securities
Intermediary to obtain and thereafter maintain Financial Assets corresponding
to
the Securities Entitlements of its Entitlement Holders.
(a) Bank
may act under the Agreement through the subcustodians with which Bank has
entered into Eligible Contracts and which are listed on Schedule A attached
hereto (“Subcustodians”). Bank reserves the right, exercising
reasonable care, prudence and diligence, to amend Schedule A from time to
time. Any such amendment shall be effective upon 45 calendar days’
written notice to Customer in accordance with the Agreement or such shorter
period as Bank reasonably believes is necessary, with due regard to the
continuing reasonable care of the Customer’s Foreign Assets in accordance with
Rule 17f-5.
(b) Bank
hereby represents to Customer that each Subcustodian is an Eligible Foreign
Custodian. If Schedule A is amended to add one or more Subcustodians,
this representation shall be effective as to the amended Schedule on the date
of
such amendment. Bank shall promptly advise Customer if any Subcustodian ceases
to be an Eligible Foreign Custodian.
(c) Customer
authorizes Bank to hold Assets belonging to each Portfolio in accounts that
Bank
has established with one or more of its branches or such Subcustodians,
provided that, in the case of an Eligible Foreign Custodian, Customer’s Foreign
Custody Manager has made the determinations required by Rule 17f-5 with respect
to the Portfolio’s Foreign Assets to be held by such Subcustodian. If
Bank is not acting as Foreign Custody Manager for the relevant Portfolio at
such
time, Customer shall give Bank appropriate notice of such
determinations.
|
5.
|
Appointment
as Foreign Custody
Manager.
|
Customer
hereby appoints Bank as its Foreign Custody Manager for each Portfolio in
accordance with Rule 17f-5. Bank hereby accepts such
appointment. Customer and Bank shall act in conformity with such rule
(including any amendments thereto or successor provisions) for as long as Bank
acts as Customer’s Foreign Custody Manager. Bank’s appointment as
Foreign Custody Manager for a Portfolio (or for a particular country or other
political or geographical jurisdiction) may be terminated at any time by
Customer or Bank, regardless of whether Bank serves as custodian for such
Portfolio hereunder. Any such termination as to one or more
Portfolios (or jurisdictions) shall be effected in a manner consistent with
the
provisions for notice and termination set forth elsewhere in this
Agreement. Bank shall not be obligated to serve in this capacity for
a Portfolio if Bank no longer acts as Customer’s custodian for such
Portfolio.
As
of the
date hereof, Rule 17f-5 provides that Customer may from time to time place
or
maintain in the care of an Eligible Foreign Custodian any of Customer’s Foreign
Assets, provided that:
|
|
(a)
|
Customer’s
Foreign Custody Manager determines that Customer’s assets will be subject
to reasonable care, based on the standards applicable to custodians
in the
relevant market, if maintained with the Eligible Foreign Custodian,
after
considering all factors relevant to the safekeeping of such assets,
including, without limitation:
|
|
|
(i)
|
The
Eligible Foreign Custodian’s practices, procedures, and internal controls,
including, but not limited to, the physical protections available
for
Certificated Securities (if applicable), the method of keeping custodial
records, and the security and data protection
practices;
|
|
|
(ii)
|
Whether
the Eligible Foreign Custodian has the requisite financial strength
to
provide reasonable care for Foreign
Assets;
|
|
|
(iii)
|
The
Eligible Foreign Custodian’s general reputation and standing;
and
|
|
|
(iv)
|
Whether
Customer will have jurisdiction over and be able to enforce judgments
against the Eligible Foreign Custodian, such as by virtue of the
existence
of any offices of the custodian in the United States or the custodian’s
consent to service of process in the United
States.
|
|
|
(b)
|
The
arrangement with the Eligible Foreign Custodian is governed by a
written
contract that Customer’s Foreign Custody Manager, has determined will
provide reasonable care for Customer’s assets based on the standards set
forth in paragraph (a) above.
|
|
|
(i)
|
Such
contract must provide:
|
|
|
(A)
|
For
indemnification or insurance arrangements (or any combination of
the
foregoing) that will adequately protect Customer against the risk
of loss
of Foreign Assets held in accordance with such
contract;
|
|
|
(B)
|
That
Foreign Assets will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the Eligible Foreign
Custodian or its creditors, except a claim of payment for their safe
custody or administration or, in the case of cash deposits, liens
or
rights in favor of creditors of the custodian arising under bankruptcy,
insolvency, or similar laws;
|
|
|
(C)
|
That
beneficial ownership of the Foreign Assets will be freely transferable
without the payment of money or value other than for safe custody
or
administration;
|
|
|
(D)
|
That
adequate records will be maintained identifying the assets as belonging
to
Customer or as being held by a third party for the benefit of
Customer;
|
|
|
(E)
|
That
Customer’s independent public accountants will be given access to those
records or confirmation of the contents of those records;
and
|
|
|
(F)
|
That
Customer will receive periodic reports with respect to the safekeeping
of
Customer’s assets, including, but not limited to, notification of any
transfer to or from Customer’s account or a third party account containing
assets held for the benefit of
Customer.
|
|
|
(ii)
|
Such
contract may contain, in lieu of any or all of the provisions specified
in
paragraph (b)(i) above, such other provisions that Customer’s Foreign
Custody Manager, reasonably determines will provide, in their entirety,
the same or a greater level of care and protection for the Foreign
Assets
as the specified provisions, in their
entirety.
|
|
|
(c)
|
(i)
|
Customer’s
Foreign Custody Manager, has established a system to monitor the
appropriateness of maintaining Customer’s assets with a particular
custodian under paragraph (a) above, and to monitor performance of
the
contract under paragraph (b) above.
|
|
|
(ii)
|
If
an arrangement no longer meets these requirements, Customer must
withdraw
its assets from the Eligible Foreign Custodian as soon as reasonably
practicable.
|
Customer’s
Foreign Custody Manager will
provide written reports in a form reasonably acceptable to Customer (or an
Authorized Person) notifying Customer’s Board of Directors (or equivalent body;
hereinafter, “Board”) of the placement of Customer’s Foreign Assets with a
particular custodian and of any material change in Customer’s non-U.S. custody
arrangements, with the reports to be provided to the Board at such times as
the
Board deems reasonable and appropriate based on the circumstances of Customer’s
non-U.S. custody arrangements.
Customer
hereby confirms that Customer
will withdraw its Foreign Assets from any non-U.S. custodian as soon as
reasonably practicable upon written notification from Customer’s Foreign Custody
Manager that custody arrangements with such custodian no longer meet the
requirements of Rule 17f-5 (an “Adverse Notification”). Customer also
confirms that, if Bank is acting as Customer’s Foreign Custody Manager and has
delivered an Adverse Notification to Customer, Bank, as Foreign Custody Manager,
shall have no further responsibility under this Agreement in relation to
Customer’s Foreign Assets held under any custody arrangement covered by such
Adverse Notification following the Adverse Notification. (However,
the existence of an Adverse Notification shall not affect the scope of
responsibilities, or the standard of care, applicable to Bank in relation to
such Assets under other provisions of this Agreement.)
6. Securities
Depositories.
(a) Bank
hereby represents to Customer that each securities depository listed on Schedule
B is an Eligible Securities Depository. If Schedule B is amended,
this representation shall be effective as to the amended Schedule on the date
of
such amendment. Bank shall promptly advise Customer if any securities
depository listed on Schedule B ceases to be an Eligible Securities
Depository.
(b) Bank
shall provide Customer an analysis of the custody risks (which analyses may
be
provided to Customer electronically) associated with maintaining Customer’s
Foreign Assets with each Eligible Securities Depository used by Bank and at
which any Foreign Assets of Customer are held or are expected to be
held. Bank shall use reasonable efforts to provide such analysis at
least annually on March 31st of each
calendar
year (or, in the case of an Eligible Securities Depository not used by Bank
as
of the agreed upon date, prior to the initial placement of Customer’s Foreign
Assets at such Depository after such date). Bank shall monitor the
custody risks associated with maintaining Customer’s Foreign Assets at each
such Eligible Securities Depository on a continuing basis, and shall promptly
notify Customer or its investment adviser of any material changes in such
risks.
(c) Bank
shall, upon Customer’s reasonable request from time to time, provide certain
additional information (“Additional Information”) to Customer beyond the scope
of the information Bank is otherwise obligated to provide to Customer under
this
Agreement, or any other agreement between the parties relating to Customer’s
Foreign Assets. For example, Additional Information may relate to a
country’s financial infrastructure, prevailing custody and settlement practices,
laws applicable to the safekeeping and recovery of Foreign Assets held in
custody, and the likelihood of nationalization, currency controls and similar
risks, but shall not include information required to be provided under this
Agreement or any other agreement between the parties relating to Customer’s
Foreign Assets.
(d) Bank’s
obligation to provide Customer with Additional Information shall be limited
to
the extent Additional Information is (i) already in the possession of Bank,
or
(ii) available to Bank using commercially reasonable means. Customer
hereby acknowledges that: (i) Additional Information is designed
solely to inform Customer of certain market conditions and procedures and is
not
intended as a recommendation to invest or not invest in particular markets;
and
(ii) Bank has gathered the information from sources it considers reliable,
but
does not assume responsibility for inaccuracies or incomplete information
attributable to actions or omissions of third parties. (For this
purpose, “third parties” shall not include any of the Subcustodians listed on
Schedule A, except to the extent that, in a given case, a Subcustodian
accurately transmitted information it had itself received from a third party
(such as from a regulator or securities depository) rather than information
it
had generated itself.)
(e) Customer
and Bank hereby acknowledge and agree that the decision to place Customer's
Foreign Assets with an Eligible Securities Depository shall be made by
Customer's investment adviser (subject to the Board's oversight) or the
Customer, after consideration of the information provided by Bank and other
information Customer deems relevant, and based on standards of care that are
generally applicable to investment advisers and the Board. Further,
the parties understand that the decision to place Customer’s Foreign Assets with
an Eligible Securities Depository does not have to be made separately, but
may
be made in the overall context of the decision to invest in a particular
country.
|
Use
of Subcustodians and Securities
Depositories.
|
(a) Bank
shall identify the Assets on its books as belonging to Customer and identify
the
Portfolio to which such Assets belong.
(b) A
Subcustodian shall hold such Assets together with assets belonging to other
customers of Bank in accounts identified on such Subcustodian's books as custody
accounts for the exclusive benefit of customers of Bank, such that it is readily
apparent that the Assets do not belong to Bank or the Subcustodian.
(c) Any
Financial Assets in the Accounts held by a Subcustodian shall be subject only
to
the instructions of Bank or its agent. Any Financial Assets held in a
securities depository for the account of a Subcustodian shall be subject only
to
the instructions of such Subcustodian or its agent.
(d) Where
Securities are deposited by a Subcustodian with a securities depository, Bank
shall cause the Subcustodian to identify on its books as belonging to Bank,
as
agent, the Securities shown on the Subcustodian’s account on the books of such
securities depository, such that it is readily apparent that the Securities
do
not belong to Bank or the Subcustodian.
(e) Bank
shall supply periodically, as mutually agreed upon, a statement in respect
of
any Securities and cash, including identification of the foreign entities having
custody of the Securities and cash and descriptions thereof.
(a) Bank
(or the applicable Subcustodian) shall make payments from the Deposit Account
upon receipt of Instructions which include all information reasonably required
by Bank.
(b) In
the event that any payment to be made under this Section 8 exceeds the funds
available in the Deposit Account, Bank, in its discretion, may advance Customer
such excess amount which shall be deemed a loan payable on demand, bearing
interest at the rate customarily charged by Bank on similar loans.
(c) Bank
shall, or shall cause the applicable Subcustodian to: (i) subject to
the last sentence hereof, collect all amounts due and payable to Customer with
respect to Financial Assets and other assets held in the Accounts; (ii) promptly
notify Customer of the collection of income or other payments in a currency
other than US dollars that relate to Financial Assets or other Assets held
by
Bank (or the applicable Subcustodian’s receipt) in a manner mutually agreeable
to Bank and Customer; (iii) promptly credit to the account of Customer all
income and other payments relating to Financial Assets or other Assets held
by
Bank hereunder upon Bank’s receipt (or the applicable Subcustodian’s receipt) of
such income or payments or as otherwise agreed in writing by Customer and Bank;
and (iv) promptly endorse and deliver instruments required to effect such
collections. If Bank credits the Deposit Account on a payable date,
or at any time prior to actual collection and reconciliation to the Deposit
Account, with interest, dividends, redemptions or any other amount due, Customer
shall promptly return any such amount upon oral or written notification: (i)
that such amount has not been received in the ordinary course of business or
(ii) that such amount was incorrectly credited. If Customer does not
promptly return any amount upon such notification, Bank shall be entitled,
upon
oral or written notification to Customer, to reverse such credit by debiting
the
Deposit Account for the amount previously credited. Bank shall
furnish regular overdue income reports to Customer in writing (or by any means
by which Instructions may be transmitted hereunder, other than by telephone)
of
any amounts payable with respect to Financial Assets or other Assets of Customer
if such amounts are not received by Bank (or the applicable Subcustodian) when
due (or otherwise in accordance with Local Practice). Bank or its
Subcustodian shall have no duty or obligation to institute legal proceedings,
file a claim or a proof of claim in any insolvency proceeding or take any other
action with respect to the collection of such amount, but will reasonably notify
Customer of any such proceedings known to Bank and may act for Customer upon
Instructions after consultation with Customer.
(a) Financial
Assets shall be transferred, exchanged or delivered by Bank or its Subcustodian
upon receipt by Bank of Instructions which include all information reasonably
required by Bank. Settlement and payment for Financial Assets
received for, and delivery of Financial Assets out of, the Custody Account
shall
be made in accordance with Local Practice. In connection with the
foregoing, where Bank believes in good faith that use of a reasonably available
alternative practice to Local Practice would be more protective of Financial
Assets than Local Practice, Bank shall advise Customer of such practice and
Customer may authorize its use solely in such instance or consent that such
practice shall thereafter be deemed to be Local Practice.
(b) Bank
shall effect book entries on a contractual settlement date accounting
basis with respect to the settlement of trades in those markets where Bank
generally offers contractual settlement day accounting and shall notify Customer
of these markets from time to time. On the contractual settlement
date for a sale, Bank shall credit the Cash Account with the sales proceeds
of
the sale and transfer the relevant Financial Assets to an account pending
settlement of the trade if not already delivered. On the contractual
settlement date for the purchase (or earlier if market practice requires
delivery of the purchase price before the contractual settlement date), Bank
shall debit the Cash Account with the settlement monies and credit a separate
account. Bank then shall post the Securities Account as awaiting
receipt of the expected Financial Assets. Customer shall not be
entitled to the delivery of Financial Assets that are awaiting receipt until
Bank or a Subcustodian actually receives them. Bank reserves the
right to restrict in good faith the availability of contractual date settlement
accounting for credit reasons. Bank, whenever reasonably possible,
will notify Customer prior to imposing such restrictions.
(i) Bank
may reverse credits or debits made to the Accounts in its discretion if the
related transaction fails to settle within a reasonable period, determined
by
Bank in its discretion, after the contractual settlement date for the related
transaction; provided however that prior to taking action, Bank will use every
reasonable effort to give Customer written notice of any such reversal which
may
include back valuation.
(ii) If
any Financial Assets delivered pursuant to this Section 9 are returned by the
recipient thereof, Bank may reverse the credits and debits of the particular
transaction at any time.
Bank
shall follow Instructions received
regarding Assets held in the Accounts. However, until it receives
Instructions to the contrary, Bank shall:
(a) Present
for payment any Financial Assets which are called, redeemed or retired or
otherwise become payable and all coupons and other income items which call
for payment upon presentation, to the extent that Bank or Subcustodian is
actually aware of such opportunities.
(b) Execute
in the name of Customer such ownership and other certificates as may be required
to obtain payments in respect of Financial Assets.
(c) Exchange
interim receipts or temporary Financial Assets for definitive Financial
Assets.
(d) Appoint
brokers and agents for any transaction involving the Financial Assets,
including, without limitation, Affiliates of Bank or any
Subcustodian.
(e) Issue
statements to Customer, at times and in a form mutually agreed upon, identifying
the Assets in the Accounts.
Bank
shall promptly send Customer an
advice or notification of any transfers of Assets to or from the
Accounts. Such statements, advices or notifications shall indicate
the identity of the entity having custody of the Assets.
All
collections of funds or other
property paid or distributed in respect of Financial Assets in the Custody
Account shall be made at the risk of Customer until such funds or other property
have been received by Bank (or the applicable Subcustodian). Bank
shall have no liability for any loss occasioned by delay (other than its own)
in
the actual receipt of notice by Bank or by its Subcustodians of any payment,
redemption or other transaction regarding Financial Assets in the Custody
Account in respect of which Bank has agreed to take any action
hereunder.
(a) Corporate
Actions. Bank shall transmit promptly to Customer on behalf of each
Portfolio summary notification of corporate action information received on
a
timely basis by Bank (including, without limitation, pendency of calls and
maturities of Financial Assets and expirations of rights in connection therewith
and notices of exercise of call and put options written by Customer on behalf
of
a Portfolio and the maturity of futures contracts (and options thereon)
purchased or sold by Customer on behalf of a Portfolio) from issuers of the
Financial Assets being held for a Portfolio. Bank shall transmit
promptly to Customer on behalf of each Portfolio notice of the filing of any
registration statement with respect to Financial Assets held for a Portfolio
if
such information is received by Bank or Bank’s central corporate actions
department has actual knowledge of the filing. With respect to tender
or exchange offers, Bank shall transmit promptly to Customer on behalf of each
Portfolio notice of corporate action information received on a timely basis
by
Bank from issuers of the Financial Assets whose tender or exchange is sought
and
from the party (or its agents) making the tender or exchange
offer. If Customer desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, Customer shall notify
Bank within such period as will give Bank (including any Subcustodian)
reasonably sufficient time to take such action. Bank shall inform
Customer of pertinent deadlines in each case.
When
a rights entitlement or a
fractional interest resulting from a rights issue, stock dividend, stock split
or similar corporate action is received which bears an expiration date, Bank
shall use reasonable efforts to obtain Instructions from Customer or its
Authorized Person, even if its own deadlines for receiving instructions have
passed; however, if Instructions are not received in time for Bank to take
timely action, or actual notice of such corporate action was received too late
to seek Instructions, Bank will notify Customer of the corporate action but
shall not be required to take further action.
(b) Proxy
Voting.
(i) Bank
shall, with respect to Financial Assets that are not Foreign Assets, cause
to be
promptly executed by the registered holder of such Financial Assets, if the
Financial Assets are registered otherwise than in the name of Customer on behalf
of a Portfolio or a nominee thereof, all proxies, without indication of the
manner in which such proxies are to be voted, and shall promptly deliver to
Customer such proxies, all proxy soliciting materials and all notices relating
to such Financial Assets.
(ii) Bank
shall, with respect to Financial Assets that are Foreign Assets, use
commercially reasonable efforts (including the use of third party
representatives) to facilitate the exercise of voting and other shareholder
proxy rights; it being understood and agreed that (A) proxy voting may not
be
available in all markets (it being understood that Bank shall make proxy voting
services available to Customer in a given market where Bank offers such services
to any other custody client), and (B) apart from voting, Bank will, upon request
and in its discretion, assist customer in exercising other shareholder rights
such as attending shareholder meetings, nominating directors and proposing
agenda items. In particular, and without limiting the generality of
the foregoing, Bank may provide written summaries of proxy materials in lieu
of
providing original materials (or copies thereof) and while Bank shall attempt
to
provide accurate summaries, whether or not translated, Bank shall not be liable
for any losses or other consequences that may result from reliance by Customer
upon the same where Bank prepared the same in good faith and with reasonable
efforts. Bank shall use reasonable efforts to notify Customer in
cases where, due to various circumstances beyond control of Bank, voting cannot
be exercised. Customer acknowledges that local conditions, including
lack of regulation, onerous procedural obligations, lack of notice, practical
constraints and other facts, may have the effect of severely limiting the
ability of Customer to exercise shareholder rights. In addition,
Customer acknowledges that: (A) in certain countries Bank may be unable to
vote
individual proxies but shall only be able to vote proxies on a net basis
(e.g., a net yes or no vote given the voting instructions received from
all customers); and (B) proxy voting may be precluded or restricted in a variety
of circumstances, including, without limitation, where the relevant Financial
Assets are: (1) on loan; (2) at registrar for registration or reregistration;
(3) the subject of a conversion or other corporate action; (4) not held in
a
name subject to the control of Bank or its Subcustodian or are otherwise held
in
a manner which precludes voting; (5) held in a margin or collateral account;
and
(6) American Depository Receipts.
(iii)
Customer and each Authorized
Person shall respect the proprietary nature of information developed exclusively
through the efforts of Bank (or Subcustodians or other parties acting under
Bank’s direction) in relation to proxy voting services.
(c) Taxes.
(i) Customer
confirms that Bank is authorized to deduct from any cash received or credited
to
the Deposit Account any taxes or levies required to be deducted by any revenue
or other governmental authority for whatever reason in respect of the
Custody Account.
(ii) Customer
shall provide Bank with all required tax-related documentation and other
information relating to Assets held hereunder (“Tax
Information”). Tax Information shall include, but shall not be
limited to, information necessary for submission to revenue or other
governmental authorities to establish taxable amounts or reduce tax burdens
that
would otherwise be borne by a Portfolio. Upon receipt of Instructions
and all required Tax Information from Customer, Bank shall (A) execute ownership
and other certificates and affidavits for all tax purposes (within and outside
of the United States) in connection with receipt of income and other payments
with respect to Assets held hereunder, or in connection with the purchase,
sale
or transfer of such Assets, and (B) where appropriate, file any certificates
or
other affidavits for the refund or reclaim of non-U.S. taxes paid with respect
to such Assets. Customer warrants that, when given, Tax Information
shall be true and correct in all material respects. Customer shall
notify Bank promptly if any Tax Information requires updating or amendment
to correct misleading information.
(iii) Bank
shall have no responsibility or liability for any tax obligations (including
both taxes and any and all penalties, interest or additions to tax) now or
hereafter imposed on Customer, its Portfolio, or Bank as Customer’s custodian,
by any revenue or governmental authority, or penalties or other costs or
expenses arising out of the delivery of, or failure to deliver, Tax Information
by Customer
(iv) Bank
shall perform tax reclaim services only with respect to taxation levied by
the
revenue authorities of the countries notified to Customer from time to time
and
Bank may, by notification in writing, in Bank’s absolute discretion, supplement
or amend the markets in which tax reclaim services are offered; provided that,
Bank shall make tax reclaim services available to Customer in a given country
where Bank offers such services to any other custody client having the same
tax
status. Other than as expressly provided in this sub-clause, Bank
shall have no responsibility with regard to Customer’s tax position or status in
any jurisdiction.
(v) Tax
reclaim services may be provided by Bank or, in whole or in part, by one or
more
third parties appointed by Bank (which may be Bank’s affiliates); provided that
Bank shall be liable for the performance of any such third party to the same
extent as Bank would have been if Bank had performed such services.
(vi) If
Bank does not receive appropriate declarations, documentation and
information then any applicable United States withholding tax shall be
deducted from income received from Financial Assets.
(d) Class
Actions.
(i) Upon
receipt of a settled securities class action notification by its corporate
actions department, Bank shall research its records for each Custody Account
to
endeavour to identify Customer’s interest, if any, with respect to any such
class action notification. Customer acknowledges that identifying its interest
may involve manually researching historic records and that Bank does not warrant
that the review will be error free.
(ii) Bank
will provide Customer with a summary of each class action notification that
it
has identified as being pertinent to Customer (together with the information
discovered with regard to the applicable securities holding of Customer) and
the
cut-off time by which Customer is required to inform Bank if it disagrees with
Bank’s record of such securities holdings and/or securities transactions or
wishes to instruct Bank not to file a claim on Customer’s behalf.
(iii) Unless
Customer instructs Bank not to do so by the applicable cut-off time, Bank shall
complete and file the required claim forms for the particular class action
insofar as they relate to transactions or holdings for which Bank acted as
custodian. Bank shall present with the claim any supporting information that
it
has in its possession and that is required as part of the filing as set out
in
the class action notification. Bank shall be authorized to disclose such
information as may be reasonably required to complete and file such
claims. Customer acknowledges that Bank is acting in a clerical
capacity in completing and filing such claim forms and that Bank will not be
using legal expertise in providing this service.
Financial
Assets which are ordinarily
held in registered form may be registered in a nominee name of Bank,
Subcustodian or Eligible Securities Depository, as the case may
be. Bank may without notice to Customer cause any such Financial
Assets to cease to be registered in the name of any such nominee and to be
registered in the name of Customer. Bank shall, or shall cause the
applicable Subcustodian or Eligible Securities Depository to use commercially
reasonable efforts to promptly register such Financial Assets that are or may
be
subject to ownership limitations. In the event that any Financial
Assets registered in a nominee name are called for partial redemption by the
issuer, Bank may allot the called portion to the respective beneficial holders
of such class of security in any manner Bank deems to be fair and
equitable. Customer shall hold Bank, Subcustodians, and their
respective nominees harmless from any liability arising directly or indirectly
from their status as a mere record holder of Financial Assets in the Custody
Account. Financial Assets accepted by Custodian on behalf of a
Portfolio under this Agreement shall be in a form and delivered in a manner
consistent with Local Practice.
Unless
otherwise expressly provided,
all Instructions shall continue in full force and effect until canceled or
superseded. Any Instructions delivered to Bank by telephone shall
promptly thereafter be confirmed in writing by an Authorized Person (which
confirmation may bear the facsimile signature of such Person), but Customer
shall hold Bank harmless for the failure of an Authorized Person to send such
confirmation in writing, the failure of such confirmation to conform to the
telephone instructions received or Bank's failure to produce such confirmation
at any subsequent time. Bank shall notify Customer as soon as
reasonably practicable if Bank does not receive written confirmation or if
such
written confirmation fails to conform to the telephone Instructions
received. Either party may electronically record any Instructions
given by telephone, and any other telephone discussions with respect to the
Custody Account. Customer shall be responsible for safeguarding any
testkeys, identification codes or other security devices which Bank shall make
available to Customer or its Authorized Persons.
(a) Bank
shall exercise reasonable care and diligence in carrying out all of its duties
and obligations under this Agreement, and shall be liable to Customer for any
and all claims, liabilities, losses, damages, fines, penalties, and expenses,
including out-of-pocket and incidental expenses and reasonable attorneys’ fees
(“Losses”) suffered or incurred by Customer resulting from failure of Bank
(including any branch thereof, regardless of location) to exercise such
reasonable care and diligence. Bank shall be liable to Customer in
respect of such Losses to the same extent that Bank would be liable to Customer
if Bank were holding the affected Assets in New York City, but only to the
extent of Customer’s direct damages, to be determined based on the market value
of the property which is the subject of the Loss at the date of discovery of
such Loss by Customer and without reference to any special conditions or
circumstances. Nevertheless, under no circumstances will Bank be
liable for any indirect, incidental, consequential, or special damages
(including, without limitation, lost profits) of any form incurred by any person
or entity, whether or not foreseeable and regardless of the type of action
in
which such a claim may be brought, with respect to the Accounts, Bank’s
performance hereunder, or Bank’s role as custodian.
(b) Bank
shall be liable to Customer for all Losses resulting from the failure of any
Subcustodian to use reasonable care in the provisions of custodial services
in
accordance with the standards prevailing in the relevant market or from the
fraud or willful misconduct of such Subcustodian in the provisions of custodial
services.
(c) As
long as and to the extent that it has exercised reasonable care and acted in
good faith, Bank shall not be responsible for:
(i) the
title, validity or genuineness of any property or evidence of title thereto
received by it or delivered by it pursuant to this Agreement; it being
understood that Bank shall be deemed to have exercised reasonable care in
respect of this subparagraph (i) if Financial Assets are received by Bank in
accordance with Local Practice for the particular Financial Asset in
question;
(ii) any
act, omission, default or for the solvency of any broker or agent which it
or a
Subcustodian appoints and which is not a branch or Affiliate of the Bank; it
being understood that Bank or a Subcustodian shall be deemed to have exercised
reasonable care in respect of this subparagraph (ii) if it exercised reasonable
care in the selection and continued retention of any such broker or agent;
or
(iii) the
insolvency of any Subcustodian which is not a branch or Affiliate of Bank;
it
being understood that Bank shall be deemed to have exercised reasonable care
in
respect of this subparagraph (iii) where Bank used reasonable care in the
monitoring of a Subcustodian’s financial condition as reflected in its most
recently published financial statements and other publicly available financial
information.
(d)
Neither Bank nor any Subcustodian
shall be liable for the acts or omissions of any Eligible Securities Depository
(or, for purposes of clarity, any domestic securities depository). In
the event Customer incurs a loss due to the negligence, bad faith, willful
misconduct or insolvency of an Eligible Securities Depository, Bank shall make
reasonable endeavors to seek recovery from the Eligible Securities
Depository.
(e) In
no event shall Bank incur liability hereunder if Bank or any Subcustodian,
or
any nominee of Bank or any Subcustodian (each a “Person”), is prevented,
forbidden or delayed from performing, or omits to perform, any act or thing
which this Agreement provides shall be performed or omitted to be performed,
by
reason of:
(i)
any provision of any present or
future law or regulation or order of the United States of America, or any state
thereof, or any other country, or political subdivision thereof or of any court
of competent jurisdiction; or
(ii)
events or circumstances beyond the
reasonable control of the applicable Person, including, without limitation,
the
interruption, suspension or restriction of trading on or the closure of any
securities market, power or other mechanical or technological failures or
interruptions, computer viruses or communications disruptions, work stoppages,
natural disasters, or other similar events or acts, unless, in each case, such
delay or nonperformance is caused by (A) the negligence, misfeasance or
misconduct of the applicable Person, or (B) a malfunction or failure of
equipment operated or utilized by the applicable Person other than a malfunction
or failure beyond such Person’s control and which could not be reasonably
anticipated or prevented by such Person (each such provision, event or
circumstance being a “Force Majeure Event”).
Bank
shall notify Customer as soon as reasonably practicable of any material
performance delay or non-performance in accordance with this clause
(e).
(f) In
no event shall Customer incur liability to Bank if it is prevented, forbidden
or
delayed from performing, or omits to perform, any act or thing which this
Agreement provides shall be performed or omitted to be performed, by reason
of a
Force Majeure Event.
(g) Customer
shall indemnify and hold Bank and its directors, officers, agents and employees
(collectively the “Indemnitees”) harmless from and against any and all Losses
that may be imposed on, incurred by, or asserted against, the Indemnitees or
any
of them for following any Instructions or other directions upon which Bank
is
authorized to rely pursuant to the terms of this Agreement, or for any
action taken or omitted by it in good faith, provided that such action or
omission is consistent with the standard of care applicable to Bank under this
Agreement and the Indemnitees have not acted with negligence or bad faith or
engaged in fraud or willful misconduct in connection with the Losses in
question.
(h) In
performing its obligations hereunder, Bank may rely on the genuineness of any
document which it believes in good faith to have been validly executed, and,
subject to the following sentence, shall be entitled to rely on and may act
upon
advice of counsel (which may be counsel for Customer) on all matters, and shall
be without liability for action reasonably taken or omitted pursuant to such
advice. If Customer disputes an action or omission by Bank within 45
days of when Customer became aware or reasonably should have become aware of
such action or omission, Bank shall be entitled to rely on and may act upon
advice of “independent legal counsel” (as defined by rule 0-1(6) of the
Investment Company Act of 1940) to Customer or such other counsel that is
mutually acceptable to Customer and Bank and shall be without liability for
action reasonably taken or omitted pursuant to such advice.
(i) Customer
shall pay for and hold Bank harmless from any liability or loss resulting from
the imposition or assessment of any taxes or other governmental charges, and
any
related expenses (including, without limitation, penalties, interest or
additions to tax due), with respect to income from or Assets in the Accounts,
provided that Bank has complied with the standard of care set forth in Section
14(a) of this Agreement (it being understood that while Bank’s failure to comply
with such standard of care shall constitute a breach of this Agreement, Bank
shall have no liability for taxes or governmental charges and related expenses
imposed or assessed with respect to such Assets prior to such breach or that
would have been imposed or assessed even absent such breach).
(j) Bank
need not maintain any insurance for the benefit of Customer.
(k) Without
limiting the foregoing, Bank shall not be liable for any Loss which results
from
(i) the general risk of investing, or (ii) investing or holding Assets in a
particular country including, but not limited to, losses resulting from
nationalization, expropriation or other governmental actions; regulation of
the
banking or securities industry; currency restrictions, devaluations or
fluctuations; and market conditions which prevent the orderly execution of
securities transactions or affect the value of Assets.
(l) Consistent
with and without limiting the application of the foregoing paragraphs of this
Section 14, it is specifically acknowledged that Bank shall have no duty or
responsibility to:
(i) question
Instructions or make any suggestions to Customer or an Authorized Person
regarding such Instructions that Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions the Bank may
specify;
(ii) supervise
or make recommendations with respect to investments or the retention of
Financial Assets;
(iii) advise
Customer or an Authorized Person regarding any default in the payment of
principal or income of any security other than as provided in Section 8(c)
hereof;
(iv) evaluate
or report to Customer or an Authorized Person regarding the financial condition
of any broker, agent or other party to which Bank receives an Instruction to
deliver Financial Assets;
(v) except
for trades settled at DTC where the broker provides DTC trade confirmation
and
Customer provides for Bank to receive the trade instruction, review or reconcile
trade confirmations received from brokers. Customer or its Authorized
Persons issuing Instructions shall bear any responsibility to review such
confirmations against Instructions issued to and statements issued by
Bank;
(vi) advise
Customer or an Authorized Person regarding information (i) held on a
confidential basis by an officer, director or employee of Bank (or any Affiliate
of Bank) and (ii) obtained by such person in connection with the provision
of
services or other activities unrelated to global custody; and
(vii) advise
Customer or an Authorized Person promptly regarding corporate action information
obtained by an officer, director or employee of Bank (or any Affiliate of Bank)
who is not engaged directly in the provision of global custody
services.
(m) Customer
authorizes Bank to act hereunder notwithstanding that Bank or any of its
divisions or Affiliates may have a material interest in a transaction, or
circumstances are such that Bank may have a potential conflict of duty or
interest including the fact that Bank or any of its Affiliates may provide
brokerage services to other customers, act as financial advisor to the
issuer of Financial Assets, act as a lender to the issuer of Financial Assets,
act in the same transaction as agent for more than one customer, have a material
interest in the issue of Financial Assets, or earn profits from any of the
activities listed herein; provided that none of such services or actions would
violate applicable laws or regulations.
(n) Upon
the occurrence of any event which causes or may cause any Loss to the other
party, each of Customer and Bank shall (and Bank shall cause each applicable
Subcustodian to) use all commercially reasonable efforts and take all reasonable
steps under the circumstances to mitigate the effects of such event and to
avoid
continuing harm to the other party. For this purpose, the obligations
of Customer and Bank to mitigate Losses (or potential Losses) hereunder shall
include (but shall not be limited to) the periodic review and reconciliation
by
Bank and Customer (or Authorized Persons) of statements provided to Customer
under Section 10 of this Agreement; provided, however, that Bank's obligations
to Customer with respect to any transaction covered by a given statement shall
be reduced to the extent that Bank's ability to mitigate damages related to
such
transaction has been compromised by Customer’s failure to object to such
statement within 180 days of Customer’s receipt thereof.
Customer
agrees to pay Bank for its
services under this Agreement such amount as may be mutually agreed upon in
writing. Customer agrees to reimburse Bank for its reasonable
out-of-pocket or incidental expenses (including, without limitation, legal
fees)
incurred on behalf of Customer, provided that, in respect of such expenses,
Bank
has acted in conformity with the standard of care set forth in Section 14
hereof. Bank shall obtain Customer’s prior approval, which approval
shall not be unreasonably withheld, of out-of-pocket or incidental expenses
that
Bank reasonably expects to exceed $10,000 or that approaches $10,000 during
the
process of incurring such expenses. In the latter case, Customer
shall not withhold its approval on the ground that Bank had not obtained
Customer’s approval prior to beginning to incur such expenses if Bank believed
in good faith that the subject expenses would not exceed
$10,000. Subject to the foregoing, Bank shall have a lien on and is
authorized to charge or otherwise enforce its rights as lienholder against
Assets in any Accounts of the Customer for any amount owing in respect of such
Account by the Customer to the Bank under any provision of this
Agreement.
(a) Foreign
Exchange Transactions Other Than as Principal. Upon receipt of
Instructions, Bank shall settle foreign exchange contracts or options to
purchase and sell foreign currencies for spot and future delivery on behalf
of
and for the account of a Portfolio with such currency brokers or banking
institutions as Customer may determine and direct pursuant to
Instructions. Bank shall be responsible for the transmission of cash
and instructions to and from the currency broker or banking institution with
which the contract or option is made, the safekeeping of all certificates and
other documents and agreements evidencing or relating to such foreign exchange
transactions and the maintenance of proper records in accordance with this
Agreement. Bank shall have no duty with respect to the selection of
currency brokers or banking institutions with which Customer deals on behalf
of
its Portfolio or, as long as Bank acts in accordance with Instructions, for
the
failure of such brokers or banking institutions to comply with the terms of
any
contract or option.
(b) Foreign
Exchange Transactions as Principal. Bank shall not be obligated
to enter into foreign exchange transactions as principal. However, if
and to the extent that Bank makes available to Customer its services as
principal in foreign exchange transactions, upon receipt of Instructions, Bank
shall enter into foreign exchange contracts or options to purchase and sell
foreign currencies for spot and future delivery on behalf of and for the account
of Customer on behalf of its Portfolio with Bank as
principal. Instructions may be issued with respect to such contracts
but Bank may establish rules or limitations concerning any foreign exchange
facility made available. Bank shall be responsible for the selection
of currency brokers or banking institutions (which may include Affiliates of
Bank and Subcustodians) and the failure of such currency brokers or banking
institutions to comply with the terms of any contract or option.
(c) Certification
of Residency, etc. Customer certifies that it is a resident of
the United States and shall notify Bank of any changes in
residency. Bank may rely upon this certification or the certification
of such other facts as may be required to administer Bank's obligations
hereunder. Customer shall indemnify Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.
(d) Custodian’s
Records; Access to Records. Bank shall provide any assistance
reasonably requested by Customer in the preparation of reports to Customer’s
shareholders and others, audits of accounts, and other ministerial matters
of
like nature. Bank shall maintain complete and accurate records with
respect to Financial Assets and other Assets held for the account of Customer
as
required by the rules and regulations of the U.S. Securities and Exchange
Commission applicable to investment companies registered under the 0000
Xxx. All such books and records maintained by Bank shall be made
available to Customer upon request and shall, where required to be maintained
by
Rule 31a-1 under the 1940 Act, be preserved for the periods prescribed in Rule
31a-2 under the 1940 Act. Bank shall allow Customer's independent
public accountant reasonable access to the records of Bank relating to Financial
Assets as is required in connection with their examination of books and records
pertaining to Customer's affairs. Subject to restrictions under
applicable law, Bank shall also obtain an undertaking to permit Customer's
independent public accountants reasonable access to the records of any
Subcustodian which has physical possession of any Financial Assets as may be
required in connection with the examination of Customer's books and
records. Upon reasonable request of Customer, Bank shall provide
Customer with a copy of Bank’s reports prepared in compliance with the
requirements of Statement of Auditing Standards No. 70 issued by the American
Institute of Certified Public Accountants, as it may be amended from time to
time (commonly referred to as a “SAS 70 report”). Bank shall use
commercially reasonable efforts to obtain and furnish Customer with such similar
reports as Customer may reasonably request with respect to each Subcustodian
holding Assets of Customer. Except as respects Bank’s SAS 70 Report,
as to which there shall be no charge, the Customer shall pay reasonable expenses
of the Bank and any Subcustodians under this provision. Bank shall
use commercially reasonable efforts to provide Customer and agents with such
reports as the Customer may reasonably request or otherwise reasonably require
to fulfill its duties under rule 38a-1 of the 1940 Act, and, in any case,
provide Customer with at least the same level of such reporting as Bank
furnishes to its other mutual fund clients.
(e) Confidential
Information. The parties hereto agree that each shall treat
confidentially all confidential information provided by each party to the other
regarding its business and operations in accordance with this Agreement and
represent that each has implemented controls that are reasonably designed to
achieve the purposes of this section. All confidential information provided
by a
party hereto shall be used by the other party hereto solely for the purpose
of
rendering services pursuant to this Agreement and, except as may be required
in
carrying out this Agreement, shall not be disclosed to any affiliated division
or entity or third party in any form without the prior written consent of such
providing party. Confidential information for purposes hereof shall
include information traditionally recognized as confidential, such as financial
information, strategies, security practices, portfolio holdings, portfolio
trades, product and business proposals, business plans, and the
like. The foregoing shall not be applicable to any
information that is publicly available when provided or thereafter becomes
publicly available other than through a breach of this Agreement, that is
generally furnished to third parties by the providing party without
confidentiality restriction, or that is required to be disclosed by any bank
examiner of Bank or any Subcustodian, any auditor of the parties hereto, by
judicial or administrative process or otherwise by applicable law or
regulation. For this purpose, Customer and any Authorized Person
shall be permitted to disclose any information provided by Bank hereunder to
the
U.S. Securities and Exchange Commission (or its staff) in connection with any
inspection or examination or other action or proceeding. If a party
becomes aware that it or its agents have breached the confidentiality
obligations under this Section 16(e), it will promptly notify the other party
in
writing of the nature and extent of such breach.
(f) Governing
Law; Successors and Assigns; Immunity; Captions. THIS AGREEMENT
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED IN NEW YORK and shall not be assigned by either party,
but shall bind the successors in interest of Customer and Bank. To
the extent that in any jurisdiction Customer or Bank may now or hereafter be
entitled to claim, for itself or its assets, immunity from suit, execution,
attachment (before or after judgment) or other legal process, Customer or Bank,
as the case may be, irrevocably shall not claim, and it hereby waives, such
immunity. The captions given to the sections and subsections of this
Agreement are for convenience of reference only and are not to be used to
interpret this Agreement.
(g) Entire
Agreement. This Agreement sets out the entire Agreement among the
parties. There are no other provisions hereof and this Agreement
supersedes any other agreements, whether written or oral, between the
parties. Any amendment hereto must be in writing, executed by both
parties.
(h) Severability. In
the event that one or more provisions hereof are held invalid, illegal or
unenforceable in any respect on the basis of any particular circumstances or
in
any jurisdiction, the validity, legality and enforceability of such provision
or
provisions under other circumstances or in other jurisdictions and of the
remaining provisions shall not in any way be affected or impaired.
(i) Waiver. Except
as otherwise provided herein, no failure or delay on the part of either party
in
exercising any power or right hereunder operates as a waiver, nor does any
single or partial exercise of any power or right preclude any other or further
exercise, or the exercise of any other power or right. No waiver by a
party of any provision hereof, or waiver of any breach or default, is effective
unless in writing and signed by the party against whom the waiver is to be
enforced.
(j) Representations
and Warranties.
(i) Customer
hereby represents and warrants to Bank that: (A) it has full power and authority
to deposit and control the Financial Assets and cash deposited in the Accounts;
(B) it has all necessary authority to use Bank as its custodian; (C) this
Agreement constitutes its legal, valid and binding obligation, enforceable
in
accordance with its terms; (D) it has taken all necessary action to authorize
the execution and delivery hereof.
(ii) Bank
hereby represents and warrants to Customer that: (A) it has the full power
and
authority to perform its obligations hereunder, (B) this Agreement constitutes
its legal, valid and binding obligation, enforceable in accordance with its
terms; and (C) that it has taken all necessary action to authorize the execution
and delivery hereof.
(k) Notices. All
notices hereunder shall be effective when actually received. Any
notices or other communications which may be required hereunder are to be sent
to the parties at the following addresses or such other addresses as may
subsequently be given to the other party in writing: (a) Bank: JPMorgan Chase
Bank, N.A., 0 Xxxxx Xxxxxxxxx Xxxxx, Xxx Xxxx, X.X. 00000, Attention:
Xxxxxx Xxxxxxxx, Vice President, Worldwide Securities Services, Global Client
Group; and (b) Customer: The American Funds Tax-Exempt
Series I – The Tax-Exempt Fund of Maryland c/o Washington Management
Corporation, Attention: Xxxxxxx Xxxxxxxx, Senior Vice President, 0000 Xxxxxxx
Xxx., X.X. Xxxxx 000, Xxxxxxxxxx X.X. 00000 with a copy to Xxxxxxx X. Xxxxxx,
President, Washington Management Corporation 0000 Xxxxxxx Xxx., X.X. Xxxxx
000,
Xxxxxxxxxx X.X. 0000.
(l) Termination. This
Agreement may be terminated as to one or more Portfolios by Customer or Bank
by
giving sixty (60) days’ written notice to the other, provided that such notice
to Bank shall specify the names of the persons to whom Bank shall deliver the
Assets belonging to the affected Portfolios in the Accounts. If
notice of termination is given by Bank, Customer shall, within sixty (60) days
following receipt of the notice, deliver to Bank Instructions specifying the
names of the persons to whom Bank shall deliver the Assets belonging to the
affected Portfolios. In either case Bank shall deliver the Assets
belonging to the affected Portfolios to the persons so specified, after
deducting any uncontested amounts which Bank determines in good faith to be
owed
to it under Section 15. Customer shall reimburse Bank promptly for
all reasonable out-of-pocket expenses it incurs in delivering Assets upon
termination by Customer. Termination shall not affect any of the
liabilities either party owes to the other arising under this Agreement prior
to
such termination. If within sixty (60) days following receipt of a
notice of termination by Bank, Bank does not receive Instructions from Customer
specifying the names of the persons to whom Bank shall deliver the Assets
belonging to the affected Portfolios, Bank, at its election, may deliver such
Assets to a bank or trust company doing business in the State of New York to
be
held and disposed of pursuant to the provisions hereof, or to Authorized
Persons, or may continue to hold such Assets until Instructions are provided
to
Bank. For avoidance of doubt, each Customer, Portfolio or the Bank
may terminate this Agreement pursuant to its provisions and the Agreement shall
survive such termination in respect of the remaining Customers and Portfolios
that have not so terminated or been terminated.
(m) Representative
Capacity; Non-recourse Obligations. A COPY OF THE DECLARATION OF
TRUST OR OTHER ORGANIZATIONAL DOCUMENT OF CUSTOMER IS ON FILE WITH THE SECRETARY
OF STATE OF THE STATE OF THE CUSTOMER’S FORMATION, AND NOTICE IS HEREBY GIVEN
THAT THIS AGREEMENT IS NOT EXECUTED ON BEHALF OF THE TRUSTEES OF CUSTOMER
INDIVIDUALLY, AND THE OBLIGATIONS OF THIS AGREEMENT ARE NOT BINDING UPON ANY
OF
THE TRUSTEES, OFFICERS, SHAREHOLDERS OR PARTNERS OF CUSTOMER INDIVIDUALLY,
BUT
ARE BINDING ONLY UPON THE ASSETS AND PROPERTY OF CUSTOMER’S
PORTFOLIOS. BANK AGREES THAT NO SHAREHOLDER, TRUSTEE, OFFICER OR
PARTNER OF ANY CUSTOMER MAY BE HELD PERSONALLY LIABLE OR RESPONSIBLE FOR ANY
OBLIGATIONS OF ANY PORTFOLIO ARISING OUT OF THIS AGREEMENT.
(n) Several
Obligations of Portfolios. WITH RESPECT TO ANY OBLIGATIONS OF
CUSTOMER ON BEHALF OF ANY OF ITS PORTFOLIOS ARISING OUT OF THIS AGREEMENT,
BANK
SHALL LOOK FOR PAYMENT OR SATISFACTION OF ANY SUCH OBLIGATION SOLELY TO THE
ASSETS AND PROPERTY OF THE PORTFOLIO TO WHICH SUCH OBLIGATION RELATES AS THOUGH
CUSTOMER HAD SEPARATELY CONTRACTED WITH BANK BY SEPARATE WRITTEN AGREEMENT
WITH
RESPECT TO EACH OF ITS PORTFOLIOS. THE RIGHTS AND BENEFITS TO WHICH A
GIVEN PORTFOLIO IS ENTITLED HEREUNDER SHALL BE SOLELY THOSE OF SUCH PORTFOLIO
AND NO OTHER PORTFOLIO HEREUNDER SHALL RECEIVE SUCH BENEFITS.
(o) Information
Concerning Deposits at Bank. Bank’s London Branch is a member of
the United Kingdom Deposit Protection Scheme (the “Scheme”) established under
Banking Xxx 0000 (as amended). The Scheme provides that in the event
of Bank’s insolvency, payments may be made to certain customers of Bank’s London
Branch. Payments under the Scheme are limited to 90% of a depositor’s
total cash deposits subject to a maximum payment to any one depositor of £18,000
(or euro 20,000 if greater). Most deposits denominated in sterling
and other European Economic Area Currencies and euros made with Bank within
the
United Kingdom are covered. Further details of the Scheme are
available on request. Any cash so deposited with Bank’s London Branch
will be payable exclusively by Bank’s London Branch in the applicable currency,
subject to compliance with applicable law, including, without limitation, any
restrictions on transactions in the applicable currency imposed by the country
of the applicable currency.
IN
WITNESS WHEREOF, Customer and Bank have executed this Agreement as of the date
first-written above.
THE
AMERICAN FUNDS TAX-EXEMPT SERIES I – THE TAX-EXEMPT FUND OF
MARYLAND.
By:____________________________________
Name:
Title:
JPMORGAN
CHASE BANK, NATIONAL ASSOCIATION
By:________________________________________
Name:
Title:
- -
|
27 |
This
AGREEMENT is effective as of
December 21, 2006, and is between JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
("Bank") and The American Funds Tax-Exempt Series I – The Tax-Exempt fund of
Virginia ("Customer").
WHEREAS,
Customer is or may be organized with one or more series of shares, each of
which
shall represent an interest in a separate investment portfolio of cash,
securities and other assets; and
WHEREAS,
Customer desires to appoint, in accordance with the provisions of the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, Bank as custodian on behalf of itself or those of its existing
or
additional series of shares (each such listed investment portfolio being
referred to hereinafter as a “Portfolio”), and Bank has agreed to act as
custodian for the Portfolios under the terms and conditions hereinafter set
forth.
NOW
THEREFORE, Bank and Customer agree as follows:
|
1.
|
Appointment
of Custodian; Customer
Accounts.
|
Customer
hereby appoints Bank as its
custodian for each Portfolio. Bank hereby accepts such
appointment. Bank, acting as “Securities Intermediary” (as defined in
Section 2 hereof) shall establish and maintain the following accounts in the
name of Customer on behalf of each Portfolio:
(a) a
Custody Account for Securities and other Financial Assets (as such terms are
defined in Section 2 hereof); and
(b) an
account (“Deposit Account”) for any and all cash in any currency received by
Bank or its Subcustodian for the account of the Portfolio, which cash shall
not
be subject to withdrawal by draft or check.
Customer
warrants its authority on
behalf of each Portfolio to: (i) deposit the Financial Assets and cash
(collectively, "Assets") received in the Custody Account or the Deposit Account,
as the case may be (collectively, “Accounts”) and (ii) give Instructions
concerning the Accounts and such Instructions shall be clear as to which
Portfolio they relate. Bank may deliver Financial Assets with
different certificate number(s) but which are otherwise identical in all
respects (including, without limitation, any related CUSIP, ISN, rights and
privileges) to Financial Assets deposited in the Custody Account.
Bank
shall be accountable under the
terms of this agreement to the Customer for all Assets held in the Accounts
and
shall take prompt and appropriate action to remedy any discrepancies with
respect to such Assets. Upon written agreement between Bank and Customer,
additional Accounts may be established and separately accounted for as
additional Accounts hereunder.
2. Definitions.
As
used herein, the following terms
shall have the following respective meanings:
(a) “Affiliate”
shall mean an entity controlling, controlled by, or under common control with,
another entity.
(b) “Authorized
Person" shall mean an employee or agent (including an investment manager)
designated by prior written notice from Customer or its designated agent to
act
on behalf of Customer hereunder. Such persons shall continue to be
Authorized Persons until such time as Bank receives Instructions from Customer
or its designated agent that any such employee or agent is no longer an
Authorized Person.
(c) “Certificated
Security” shall mean a Security that is represented by a
certificate.
(d) “Custody
Account” shall mean each custody account on Bank’s records to which Financial
Assets are or may be credited pursuant hereto.
(e) “Eligible
Foreign Custodian” shall have the meaning assigned thereto in Rule 17f-5 (and
shall include any entity qualifying as such pursuant to an exemption, rule
or other appropriate action of the U.S. Securities and Exchange
Commission).
(f) “Eligible
Securities Depository” shall have the meaning assigned thereto in Rule 17f-7
(and shall include any entity qualifying as such pursuant to an exemption,
rule
or other appropriate action of the U.S. Securities and Exchange
Commission).
(g) “Eligible
Contract” shall mean a currently effective written contract between Bank and a
Subcustodian satisfying the requirements of paragraph (c)(2) of Rule 17f-5
(including any amendments thereto or successor provisions).
(h) “Entitlement
Holder” shall mean the person on the records of a Securities Intermediary as the
person having a Securities Entitlement against the Securities
Intermediary.
(i) “Financial
Asset” shall have the meaning assigned thereto in Article 8 of the Uniform
Commercial Code, which, as of the date hereof, generally means:
(i) a
Security;
(ii) an
obligation of a person or a share, participation or other interest in a person
or property or enterprise of a person, which is, or is of a type, dealt in
or
traded on financial markets, or which is recognized in any area in which it
is
issued or dealt in as a medium for investment; or
(iii) any
property that is held by a Securities Intermediary for another person in a
Securities account if the Securities Intermediary has expressly agreed with
the
other person that the property is to be treated as a financial asset under
Article 8 of the Uniform Commercial Code. As the context requires,
the term means either the interest itself or the means by which a person’s claim
to it is evidenced, including a Certificated Security or an Uncertificated
Security, a Security certificate, or a Security
Entitlement. Financial Asset shall in no event mean
cash.
(j) “Foreign
Assets” shall have the meaning assigned thereto under Rule 17f-5, which, as of
the date hereof, means any investments (including foreign currencies) for which
the primary market is outside the United States, and any cash and cash
equivalents that are reasonably necessary to effect Customer’s transactions in
those investments.
(k) “Instructions"
shall mean instructions of any Authorized Person received by Bank, via
telephone, telex, facsimile transmission, bank wire or other teleprocess or
electronic instruction or trade information system (which may include
Internet-based systems involving appropriate testing and authentication)
acceptable to Bank which Bank believes in good faith to have been given by,
or
under the direction of, Authorized Persons. The term "Instructions"
includes, without limitation, instructions to sell, assign, transfer, deliver,
purchase or receive for the Custody Account, any and all stocks, bonds and
other
Financial Assets or to transfer funds in the Deposit Account.
(l) “Local
Practice” shall mean the customary securities trading or securities processing
practices and procedures generally accepted by Institutional Investors in the
jurisdiction or market in which the transaction occurs, including, without
limitation:
(i)
delivering Financial Assets to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) with the expectation of receiving later payment for such securities
from
such purchaser or dealer;
(ii)
delivering cash to a seller or a
dealer (or an agent for such seller or dealer) against expectation of receiving
later delivery of purchased Financial Assets; or
(iii)
in the case of a purchase or sale
effected through a securities system, in accordance with the rules governing
the
operation of such system.
(m) “Institutional
Investor” shall mean a major commercial bank, corporation, insurance company, or
substantially similar institution, which, as a substantial part of its business
operations, purchases and sells Financial Assets and makes use of global
custodial services.
(n) “Intermediary
Custodian” shall mean any Subcustodian that is a Securities Intermediary and is
qualified to act as a custodian.
(o) “Riders”
shall have the meaning assigned thereto in Section 16(f) of this
Agreement.
(p) “Rule
17f-5” shall mean rule 17f-5 under the 1940 Act, including any amendments
thereto or successor rules.
(q) “Rule
17f-7” shall mean rule 17f-7 under the 1940 Act, including any amendments
thereto or successor rules.
(r) “Security”
shall have the meaning assigned thereto in Article 8 of the Uniform Commercial
Code, which, as of the date hereof, generally means an obligation of an issuer
or a share, participation, or other interest in an issuer or in property or
an
enterprise of an issuer:
(i) which
is represented by a security certificate in bearer or registered form, or the
transfer of which may be registered upon books maintained for that purpose
by or
on behalf of the issuer;
(ii) which
is one of a class or series or by its terms is divisible into a class or series
of shares, participations, interests, or obligations; and
|
(iv)
|
which:
|
(A) is,
or is of a type, dealt in or traded on securities exchanges or securities
markets; or
(B) is
a medium for investment and by its terms expressly provides that it is a
security governed by Article 8 of the Uniform Commercial Code.
(s) “Securities
Depository” means a clearing corporation that is registered with the U.S.
Securities and Exchange Commission as a clearing agency under section 17A of
the
Securities Exchange Act of 1934; or a Federal Reserve Bank or other person
authorized to operate the federal book entry system described in the regulations
of the Department of Treasury codified at 31 CFR 357, Subpart B, or book-entry
systems operated pursuant to comparable regulations of other federal
agencies.
(t) “Securities
Entitlement” shall mean the rights and property interest of an Entitlement
Holder with respect to a Financial Asset as set forth in Part 5 of Article
8 of
the Uniform Commercial Code.
(u) “Securities
Intermediary” shall have the meaning assigned thereto in Article 8 of the
Uniform Commercial Code, which, as of the date hereof, means Bank, a
Subcustodian, a securities depository, clearing corporation or any other person,
including a bank or broker, that in the ordinary course of its business
maintains securities accounts for others and is acting in that
capacity.
(v) “Uncertificated
Security” shall mean a Security that is not represented by a
certificate.
(w) “Uniform
Commercial Code” shall mean the Uniform Commercial Code of the State of New
York, as amended from time to time.
|
3.
|
Maintenance
of Financial Assets and Cash at Bank and Subcustodian
Locations.
|
Unless
Instructions specifically
require another location reasonably acceptable to Bank:
(a) Financial
Assets shall be held in the country or other jurisdiction in which the principal
trading market for such Financial Assets is located, where such Financial Assets
are to be presented for payment or where such Financial Assets are acquired;
and
(b) Cash
shall be credited to an account in a country or other jurisdiction in which
such
cash may be legally deposited or is the legal currency for the payment of public
or private debts.
Cash
may be held pursuant to
Instructions in such accounts as may be available for the particular currency,
recognizing that accounts bearing commercially reasonable interest will be
used
to the extent such use does not violate applicable law. To the extent
Instructions are issued and Bank can comply with such Instructions, Bank is
authorized to maintain cash balances on deposit for Customer with itself (or
its
Affiliates, in accordance with applicable law and regulation), at such
commercially reasonable rates of interest as may from time to time be paid
on
such accounts, or in non-interest bearing accounts as Customer may direct,
if
acceptable to Bank.
If
Customer wishes to have any Foreign
Assets belonging to one or more Portfolios held in the custody of an institution
other than the established Subcustodians as defined in Section 4 (or an Eligible
Securities Depository listed on Schedule B hereto), such arrangement must be
authorized by a written agreement, signed by Bank and Customer.
If
Bank
places and maintains Customer’s Financial Assets, corresponding to a Securities
Entitlement, with a Securities Depository or Intermediary Custodian, Bank
must:
(x) at
a minimum exercise due care in accordance with reasonable commercial standards
in discharging its duty as a Securities Intermediary to obtain and thereafter
maintain such Financial Assets;
(y) provide,
promptly upon request by Customer, such reports as are available concerning
the
internal accounting controls and financial strength of Bank; and
(z) require
any Intermediary Custodian at a minimum to exercise due care in accordance
with
reasonable commercial standards in discharging its duty as a Securities
Intermediary to obtain and thereafter maintain Financial Assets corresponding
to
the Securities Entitlements of its Entitlement Holders.
4. Subcustodians.
(a) Bank
may act under the Agreement through the subcustodians with which Bank has
entered into Eligible Contracts and which are listed on Schedule A attached
hereto (“Subcustodians”). Bank reserves the right, exercising
reasonable care, prudence and diligence, to amend Schedule A from time to
time. Any such amendment shall be effective upon 45 calendar days’
written notice to Customer in accordance with the Agreement or such shorter
period as Bank reasonably believes is necessary, with due regard to the
continuing reasonable care of the Customer’s Foreign Assets in accordance with
Rule 17f-5.
(b) Bank
hereby represents to Customer that each Subcustodian is an Eligible Foreign
Custodian. If Schedule A is amended to add one or more Subcustodians,
this representation shall be effective as to the amended Schedule on the date
of
such amendment. Bank shall promptly advise Customer if any Subcustodian ceases
to be an Eligible Foreign Custodian.
(c) Customer
authorizes Bank to hold Assets belonging to each Portfolio in accounts that
Bank
has established with one or more of its branches or such Subcustodians,
provided that, in the case of an Eligible Foreign Custodian, Customer’s Foreign
Custody Manager has made the determinations required by Rule 17f-5 with respect
to the Portfolio’s Foreign Assets to be held by such Subcustodian. If
Bank is not acting as Foreign Custody Manager for the relevant Portfolio at
such
time, Customer shall give Bank appropriate notice of such
determinations.
|
6.
|
Appointment
as Foreign Custody
Manager.
|
Customer
hereby appoints Bank as its Foreign Custody Manager for each Portfolio in
accordance with Rule 17f-5. Bank hereby accepts such
appointment. Customer and Bank shall act in conformity with such rule
(including any amendments thereto or successor provisions) for as long as Bank
acts as Customer’s Foreign Custody Manager. Bank’s appointment as
Foreign Custody Manager for a Portfolio (or for a particular country or other
political or geographical jurisdiction) may be terminated at any time by
Customer or Bank, regardless of whether Bank serves as custodian for such
Portfolio hereunder. Any such termination as to one or more
Portfolios (or jurisdictions) shall be effected in a manner consistent with
the
provisions for notice and termination set forth elsewhere in this
Agreement. Bank shall not be obligated to serve in this capacity for
a Portfolio if Bank no longer acts as Customer’s custodian for such
Portfolio.
As
of the
date hereof, Rule 17f-5 provides that Customer may from time to time place
or
maintain in the care of an Eligible Foreign Custodian any of Customer’s Foreign
Assets, provided that:
|
|
(a)
|
Customer’s
Foreign Custody Manager determines that Customer’s assets will be subject
to reasonable care, based on the standards applicable to custodians
in the
relevant market, if maintained with the Eligible Foreign Custodian,
after
considering all factors relevant to the safekeeping of such assets,
including, without limitation:
|
|
|
(i)
|
The
Eligible Foreign Custodian’s practices, procedures, and internal controls,
including, but not limited to, the physical protections available
for
Certificated Securities (if applicable), the method of keeping custodial
records, and the security and data protection
practices;
|
|
|
(ii)
|
Whether
the Eligible Foreign Custodian has the requisite financial strength
to
provide reasonable care for Foreign
Assets;
|
|
|
(iii)
|
The
Eligible Foreign Custodian’s general reputation and standing;
and
|
|
|
(iv)
|
Whether
Customer will have jurisdiction over and be able to enforce judgments
against the Eligible Foreign Custodian, such as by virtue of the
existence
of any offices of the custodian in the United States or the custodian’s
consent to service of process in the United
States.
|
|
|
(b)
|
The
arrangement with the Eligible Foreign Custodian is governed by a
written
contract that Customer’s Foreign Custody Manager, has determined will
provide reasonable care for Customer’s assets based on the standards set
forth in paragraph (a) above.
|
|
|
(i)
|
Such
contract must provide:
|
|
|
(A)
|
For
indemnification or insurance arrangements (or any combination of
the
foregoing) that will adequately protect Customer against the risk
of loss
of Foreign Assets held in accordance with such
contract;
|
|
|
(B)
|
That
Foreign Assets will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the Eligible Foreign
Custodian or its creditors, except a claim of payment for their safe
custody or administration or, in the case of cash deposits, liens
or
rights in favor of creditors of the custodian arising under bankruptcy,
insolvency, or similar laws;
|
|
|
(C)
|
That
beneficial ownership of the Foreign Assets will be freely transferable
without the payment of money or value other than for safe custody
or
administration;
|
|
|
(D)
|
That
adequate records will be maintained identifying the assets as belonging
to
Customer or as being held by a third party for the benefit of
Customer;
|
|
|
(E)
|
That
Customer’s independent public accountants will be given access to those
records or confirmation of the contents of those records;
and
|
|
|
(F)
|
That
Customer will receive periodic reports with respect to the safekeeping
of
Customer’s assets, including, but not limited to, notification of any
transfer to or from Customer’s account or a third party account containing
assets held for the benefit of
Customer.
|
|
|
(ii)
|
Such
contract may contain, in lieu of any or all of the provisions specified
in
paragraph (b)(i) above, such other provisions that Customer’s Foreign
Custody Manager, reasonably determines will provide, in their entirety,
the same or a greater level of care and protection for the Foreign
Assets
as the specified provisions, in their
entirety.
|
|
|
(c)
|
(i)
|
Customer’s
Foreign Custody Manager, has established a system to monitor the
appropriateness of maintaining Customer’s assets with a particular
custodian under paragraph (a) above, and to monitor performance of
the
contract under paragraph (b) above.
|
|
|
(ii)
|
If
an arrangement no longer meets these requirements, Customer must
withdraw
its assets from the Eligible Foreign Custodian as soon as reasonably
practicable.
|
Customer’s
Foreign Custody Manager will
provide written reports in a form reasonably acceptable to Customer (or an
Authorized Person) notifying Customer’s Board of Directors (or equivalent body;
hereinafter, “Board”) of the placement of Customer’s Foreign Assets with a
particular custodian and of any material change in Customer’s non-U.S. custody
arrangements, with the reports to be provided to the Board at such times as
the
Board deems reasonable and appropriate based on the circumstances of Customer’s
non-U.S. custody arrangements.
Customer
hereby confirms that Customer
will withdraw its Foreign Assets from any non-U.S. custodian as soon as
reasonably practicable upon written notification from Customer’s Foreign Custody
Manager that custody arrangements with such custodian no longer meet the
requirements of Rule 17f-5 (an “Adverse Notification”). Customer also
confirms that, if Bank is acting as Customer’s Foreign Custody Manager and has
delivered an Adverse Notification to Customer, Bank, as Foreign Custody Manager,
shall have no further responsibility under this Agreement in relation to
Customer’s Foreign Assets held under any custody arrangement covered by such
Adverse Notification following the Adverse Notification. (However,
the existence of an Adverse Notification shall not affect the scope of
responsibilities, or the standard of care, applicable to Bank in relation to
such Assets under other provisions of this Agreement.)
6. Securities
Depositories.
(a) Bank
hereby represents to Customer that each securities depository listed on Schedule
B is an Eligible Securities Depository. If Schedule B is amended,
this representation shall be effective as to the amended Schedule on the date
of
such amendment. Bank shall promptly advise Customer if any securities
depository listed on Schedule B ceases to be an Eligible Securities
Depository.
(b) Bank
shall provide Customer an analysis of the custody risks (which analyses may
be
provided to Customer electronically) associated with maintaining Customer’s
Foreign Assets with each Eligible Securities Depository used by Bank and at
which any Foreign Assets of Customer are held or are expected to be
held. Bank shall use reasonable efforts to provide such analysis at
least annually on March 31st of each
calendar
year (or, in the case of an Eligible Securities Depository not used by Bank
as
of the agreed upon date, prior to the initial placement of Customer’s Foreign
Assets at such Depository after such date). Bank shall monitor the
custody risks associated with maintaining Customer’s Foreign Assets at each
such Eligible Securities Depository on a continuing basis, and shall promptly
notify Customer or its investment adviser of any material changes in such
risks.
(c) Bank
shall, upon Customer’s reasonable request from time to time, provide certain
additional information (“Additional Information”) to Customer beyond the scope
of the information Bank is otherwise obligated to provide to Customer under
this
Agreement, or any other agreement between the parties relating to Customer’s
Foreign Assets. For example, Additional Information may relate to a
country’s financial infrastructure, prevailing custody and settlement practices,
laws applicable to the safekeeping and recovery of Foreign Assets held in
custody, and the likelihood of nationalization, currency controls and similar
risks, but shall not include information required to be provided under this
Agreement or any other agreement between the parties relating to Customer’s
Foreign Assets.
(d) Bank’s
obligation to provide Customer with Additional Information shall be limited
to
the extent Additional Information is (i) already in the possession of Bank,
or
(ii) available to Bank using commercially reasonable means. Customer
hereby acknowledges that: (i) Additional Information is designed
solely to inform Customer of certain market conditions and procedures and is
not
intended as a recommendation to invest or not invest in particular markets;
and
(ii) Bank has gathered the information from sources it considers reliable,
but
does not assume responsibility for inaccuracies or incomplete information
attributable to actions or omissions of third parties. (For this
purpose, “third parties” shall not include any of the Subcustodians listed on
Schedule A, except to the extent that, in a given case, a Subcustodian
accurately transmitted information it had itself received from a third party
(such as from a regulator or securities depository) rather than information
it
had generated itself.)
(e) Customer
and Bank hereby acknowledge and agree that the decision to place Customer's
Foreign Assets with an Eligible Securities Depository shall be made by
Customer's investment adviser (subject to the Board's oversight) or the
Customer, after consideration of the information provided by Bank and other
information Customer deems relevant, and based on standards of care that are
generally applicable to investment advisers and the Board. Further,
the parties understand that the decision to place Customer’s Foreign Assets with
an Eligible Securities Depository does not have to be made separately, but
may
be made in the overall context of the decision to invest in a particular
country.
|
7.
|
Use
of Subcustodians and Securities
Depositories.
|
(a) Bank
shall identify the Assets on its books as belonging to Customer and identify
the
Portfolio to which such Assets belong.
(b) A
Subcustodian shall hold such Assets together with assets belonging to other
customers of Bank in accounts identified on such Subcustodian's books as custody
accounts for the exclusive benefit of customers of Bank, such that it is readily
apparent that the Assets do not belong to Bank or the Subcustodian.
(c) Any
Financial Assets in the Accounts held by a Subcustodian shall be subject only
to
the instructions of Bank or its agent. Any Financial Assets held in a
securities depository for the account of a Subcustodian shall be subject only
to
the instructions of such Subcustodian or its agent.
(d) Where
Securities are deposited by a Subcustodian with a securities depository, Bank
shall cause the Subcustodian to identify on its books as belonging to Bank,
as
agent, the Securities shown on the Subcustodian’s account on the books of such
securities depository, such that it is readily apparent that the Securities
do
not belong to Bank or the Subcustodian.
(e) Bank
shall supply periodically, as mutually agreed upon, a statement in respect
of
any Securities and cash, including identification of the foreign entities having
custody of the Securities and cash and descriptions thereof.
8. Deposit
Account Transactions.
(a) Bank
(or the applicable Subcustodian) shall make payments from the Deposit Account
upon receipt of Instructions which include all information reasonably required
by Bank.
(b) In
the event that any payment to be made under this Section 8 exceeds the funds
available in the Deposit Account, Bank, in its discretion, may advance Customer
such excess amount which shall be deemed a loan payable on demand, bearing
interest at the rate customarily charged by Bank on similar loans.
(c) Bank
shall, or shall cause the applicable Subcustodian to: (i) subject to
the last sentence hereof, collect all amounts due and payable to Customer with
respect to Financial Assets and other assets held in the Accounts; (ii) promptly
notify Customer of the collection of income or other payments in a currency
other than US dollars that relate to Financial Assets or other Assets held
by
Bank (or the applicable Subcustodian’s receipt) in a manner mutually agreeable
to Bank and Customer; (iii) promptly credit to the account of Customer all
income and other payments relating to Financial Assets or other Assets held
by
Bank hereunder upon Bank’s receipt (or the applicable Subcustodian’s receipt) of
such income or payments or as otherwise agreed in writing by Customer and Bank;
and (iv) promptly endorse and deliver instruments required to effect such
collections. If Bank credits the Deposit Account on a payable date,
or at any time prior to actual collection and reconciliation to the Deposit
Account, with interest, dividends, redemptions or any other amount due, Customer
shall promptly return any such amount upon oral or written notification: (i)
that such amount has not been received in the ordinary course of business or
(ii) that such amount was incorrectly credited. If Customer does not
promptly return any amount upon such notification, Bank shall be entitled,
upon
oral or written notification to Customer, to reverse such credit by debiting
the
Deposit Account for the amount previously credited. Bank shall
furnish regular overdue income reports to Customer in writing (or by any means
by which Instructions may be transmitted hereunder, other than by telephone)
of
any amounts payable with respect to Financial Assets or other Assets of Customer
if such amounts are not received by Bank (or the applicable Subcustodian) when
due (or otherwise in accordance with Local Practice). Bank or its
Subcustodian shall have no duty or obligation to institute legal proceedings,
file a claim or a proof of claim in any insolvency proceeding or take any other
action with respect to the collection of such amount, but will reasonably notify
Customer of any such proceedings known to Bank and may act for Customer upon
Instructions after consultation with Customer.
9. Custody
Account Transactions.
(a) Financial
Assets shall be transferred, exchanged or delivered by Bank or its Subcustodian
upon receipt by Bank of Instructions which include all information reasonably
required by Bank. Settlement and payment for Financial Assets
received for, and delivery of Financial Assets out of, the Custody Account
shall
be made in accordance with Local Practice. In connection with the
foregoing, where Bank believes in good faith that use of a reasonably available
alternative practice to Local Practice would be more protective of Financial
Assets than Local Practice, Bank shall advise Customer of such practice and
Customer may authorize its use solely in such instance or consent that such
practice shall thereafter be deemed to be Local Practice.
(b) Bank
shall effect book entries on a contractual settlement date accounting
basis with respect to the settlement of trades in those markets where Bank
generally offers contractual settlement day accounting and shall notify Customer
of these markets from time to time. On the contractual settlement
date for a sale, Bank shall credit the Cash Account with the sales proceeds
of
the sale and transfer the relevant Financial Assets to an account pending
settlement of the trade if not already delivered. On the contractual
settlement date for the purchase (or earlier if market practice requires
delivery of the purchase price before the contractual settlement date), Bank
shall debit the Cash Account with the settlement monies and credit a separate
account. Bank then shall post the Securities Account as awaiting
receipt of the expected Financial Assets. Customer shall not be
entitled to the delivery of Financial Assets that are awaiting receipt until
Bank or a Subcustodian actually receives them. Bank reserves the
right to restrict in good faith the availability of contractual date settlement
accounting for credit reasons. Bank, whenever reasonably possible,
will notify Customer prior to imposing such restrictions.
(i) Bank
may reverse credits or debits made to the Accounts in its discretion if the
related transaction fails to settle within a reasonable period, determined
by
Bank in its discretion, after the contractual settlement date for the related
transaction; provided however that prior to taking action, Bank will use every
reasonable effort to give Customer written notice of any such reversal which
may
include back valuation.
(ii) If
any Financial Assets delivered pursuant to this Section 9 are returned by the
recipient thereof, Bank may reverse the credits and debits of the particular
transaction at any time.
10. Actions
of Bank.
Bank
shall follow Instructions received
regarding Assets held in the Accounts. However, until it receives
Instructions to the contrary, Bank shall:
(a) Present
for payment any Financial Assets which are called, redeemed or retired or
otherwise become payable and all coupons and other income items which call
for payment upon presentation, to the extent that Bank or Subcustodian is
actually aware of such opportunities.
(b) Execute
in the name of Customer such ownership and other certificates as may be required
to obtain payments in respect of Financial Assets.
(c) Exchange
interim receipts or temporary Financial Assets for definitive Financial
Assets.
(d) Appoint
brokers and agents for any transaction involving the Financial Assets,
including, without limitation, Affiliates of Bank or any
Subcustodian.
(e) Issue
statements to Customer, at times and in a form mutually agreed upon, identifying
the Assets in the Accounts.
Bank
shall promptly send Customer an
advice or notification of any transfers of Assets to or from the
Accounts. Such statements, advices or notifications shall indicate
the identity of the entity having custody of the Assets.
All
collections of funds or other
property paid or distributed in respect of Financial Assets in the Custody
Account shall be made at the risk of Customer until such funds or other property
have been received by Bank (or the applicable Subcustodian). Bank
shall have no liability for any loss occasioned by delay (other than its own)
in
the actual receipt of notice by Bank or by its Subcustodians of any payment,
redemption or other transaction regarding Financial Assets in the Custody
Account in respect of which Bank has agreed to take any action
hereunder.
11. Corporate
Actions; Proxies; Taxes; Class Actions.
(a) Corporate
Actions. Bank shall transmit promptly to Customer on behalf of each
Portfolio summary notification of corporate action information received on
a
timely basis by Bank (including, without limitation, pendency of calls and
maturities of Financial Assets and expirations of rights in connection therewith
and notices of exercise of call and put options written by Customer on behalf
of
a Portfolio and the maturity of futures contracts (and options thereon)
purchased or sold by Customer on behalf of a Portfolio) from issuers of the
Financial Assets being held for a Portfolio. Bank shall transmit
promptly to Customer on behalf of each Portfolio notice of the filing of any
registration statement with respect to Financial Assets held for a Portfolio
if
such information is received by Bank or Bank’s central corporate actions
department has actual knowledge of the filing. With respect to tender
or exchange offers, Bank shall transmit promptly to Customer on behalf of each
Portfolio notice of corporate action information received on a timely basis
by
Bank from issuers of the Financial Assets whose tender or exchange is sought
and
from the party (or its agents) making the tender or exchange
offer. If Customer desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, Customer shall notify
Bank within such period as will give Bank (including any Subcustodian)
reasonably sufficient time to take such action. Bank shall inform
Customer of pertinent deadlines in each case.
When
a rights entitlement or a
fractional interest resulting from a rights issue, stock dividend, stock split
or similar corporate action is received which bears an expiration date, Bank
shall use reasonable efforts to obtain Instructions from Customer or its
Authorized Person, even if its own deadlines for receiving instructions have
passed; however, if Instructions are not received in time for Bank to take
timely action, or actual notice of such corporate action was received too late
to seek Instructions, Bank will notify Customer of the corporate action but
shall not be required to take further action.
(b) Proxy
Voting.
(i) Bank
shall, with respect to Financial Assets that are not Foreign Assets, cause
to be
promptly executed by the registered holder of such Financial Assets, if the
Financial Assets are registered otherwise than in the name of Customer on behalf
of a Portfolio or a nominee thereof, all proxies, without indication of the
manner in which such proxies are to be voted, and shall promptly deliver to
Customer such proxies, all proxy soliciting materials and all notices relating
to such Financial Assets.
(ii) Bank
shall, with respect to Financial Assets that are Foreign Assets, use
commercially reasonable efforts (including the use of third party
representatives) to facilitate the exercise of voting and other shareholder
proxy rights; it being understood and agreed that (A) proxy voting may not
be
available in all markets (it being understood that Bank shall make proxy voting
services available to Customer in a given market where Bank offers such services
to any other custody client), and (B) apart from voting, Bank will, upon request
and in its discretion, assist customer in exercising other shareholder rights
such as attending shareholder meetings, nominating directors and proposing
agenda items. In particular, and without limiting the generality of
the foregoing, Bank may provide written summaries of proxy materials in lieu
of
providing original materials (or copies thereof) and while Bank shall attempt
to
provide accurate summaries, whether or not translated, Bank shall not be liable
for any losses or other consequences that may result from reliance by Customer
upon the same where Bank prepared the same in good faith and with reasonable
efforts. Bank shall use reasonable efforts to notify Customer in
cases where, due to various circumstances beyond control of Bank, voting cannot
be exercised. Customer acknowledges that local conditions, including
lack of regulation, onerous procedural obligations, lack of notice, practical
constraints and other facts, may have the effect of severely limiting the
ability of Customer to exercise shareholder rights. In addition,
Customer acknowledges that: (A) in certain countries Bank may be unable to
vote
individual proxies but shall only be able to vote proxies on a net basis
(e.g., a net yes or no vote given the voting instructions received from
all customers); and (B) proxy voting may be precluded or restricted in a variety
of circumstances, including, without limitation, where the relevant Financial
Assets are: (1) on loan; (2) at registrar for registration or reregistration;
(3) the subject of a conversion or other corporate action; (4) not held in
a
name subject to the control of Bank or its Subcustodian or are otherwise held
in
a manner which precludes voting; (5) held in a margin or collateral account;
and
(6) American Depository Receipts.
(iii)
Customer and each Authorized
Person shall respect the proprietary nature of information developed exclusively
through the efforts of Bank (or Subcustodians or other parties acting under
Bank’s direction) in relation to proxy voting services.
(c) Taxes.
(i) Customer
confirms that Bank is authorized to deduct from any cash received or credited
to
the Deposit Account any taxes or levies required to be deducted by any revenue
or other governmental authority for whatever reason in respect of the
Custody Account.
(ii) Customer
shall provide Bank with all required tax-related documentation and other
information relating to Assets held hereunder (“Tax
Information”). Tax Information shall include, but shall not be
limited to, information necessary for submission to revenue or other
governmental authorities to establish taxable amounts or reduce tax burdens
that
would otherwise be borne by a Portfolio. Upon receipt of Instructions
and all required Tax Information from Customer, Bank shall (A) execute ownership
and other certificates and affidavits for all tax purposes (within and outside
of the United States) in connection with receipt of income and other payments
with respect to Assets held hereunder, or in connection with the purchase,
sale
or transfer of such Assets, and (B) where appropriate, file any certificates
or
other affidavits for the refund or reclaim of non-U.S. taxes paid with respect
to such Assets. Customer warrants that, when given, Tax Information
shall be true and correct in all material respects. Customer shall
notify Bank promptly if any Tax Information requires updating or amendment
to correct misleading information.
(iii) Bank
shall have no responsibility or liability for any tax obligations (including
both taxes and any and all penalties, interest or additions to tax) now or
hereafter imposed on Customer, its Portfolio, or Bank as Customer’s custodian,
by any revenue or governmental authority, or penalties or other costs or
expenses arising out of the delivery of, or failure to deliver, Tax Information
by Customer
(iv) Bank
shall perform tax reclaim services only with respect to taxation levied by
the
revenue authorities of the countries notified to Customer from time to time
and
Bank may, by notification in writing, in Bank’s absolute discretion, supplement
or amend the markets in which tax reclaim services are offered; provided that,
Bank shall make tax reclaim services available to Customer in a given country
where Bank offers such services to any other custody client having the same
tax
status. Other than as expressly provided in this sub-clause, Bank
shall have no responsibility with regard to Customer’s tax position or status in
any jurisdiction.
(v) Tax
reclaim services may be provided by Bank or, in whole or in part, by one or
more
third parties appointed by Bank (which may be Bank’s affiliates); provided that
Bank shall be liable for the performance of any such third party to the same
extent as Bank would have been if Bank had performed such services.
(vi) If
Bank does not receive appropriate declarations, documentation and
information then any applicable United States withholding tax shall be
deducted from income received from Financial Assets.
(d) Class
Actions.
(i) Upon
receipt of a settled securities class action notification by its corporate
actions department, Bank shall research its records for each Custody Account
to
endeavour to identify Customer’s interest, if any, with respect to any such
class action notification. Customer acknowledges that identifying its interest
may involve manually researching historic records and that Bank does not warrant
that the review will be error free.
(ii) Bank
will provide Customer with a summary of each class action notification that
it
has identified as being pertinent to Customer (together with the information
discovered with regard to the applicable securities holding of Customer) and
the
cut-off time by which Customer is required to inform Bank if it disagrees
with Bank’s record of such securities holdings and/or securities
transactions or wishes to instruct Bank not to file a claim on Customer’s
behalf.
(iii) Unless
Customer instructs Bank not to do so by the applicable cut-off time, Bank shall
complete and file the required claim forms for the particular class action
insofar as they relate to transactions or holdings for which Bank acted as
custodian. Bank shall present with the claim any supporting information that
it
has in its possession and that is required as part of the filing as set out
in
the class action notification. Bank shall be authorized to disclose such
information as may be reasonably required to complete and file such
claims. Customer acknowledges that Bank is acting in a clerical
capacity in completing and filing such claim forms and that Bank will not be
using legal expertise in providing this service.
12. Nominees.
Financial
Assets which are ordinarily
held in registered form may be registered in a nominee name of Bank,
Subcustodian or Eligible Securities Depository, as the case may
be. Bank may without notice to Customer cause any such Financial
Assets to cease to be registered in the name of any such nominee and to be
registered in the name of Customer. Bank shall, or shall cause the
applicable Subcustodian or Eligible Securities Depository to use commercially
reasonable efforts to promptly register such Financial Assets that are or may
be
subject to ownership limitations. In the event that any Financial
Assets registered in a nominee name are called for partial redemption by the
issuer, Bank may allot the called portion to the respective beneficial holders
of such class of security in any manner Bank deems to be fair and
equitable. Customer shall hold Bank, Subcustodians, and their
respective nominees harmless from any liability arising directly or indirectly
from their status as a mere record holder of Financial Assets in the Custody
Account. Financial Assets accepted by Custodian on behalf of a
Portfolio under this Agreement shall be in a form and delivered in a manner
consistent with Local Practice.
13. Instructions.
Unless
otherwise expressly provided,
all Instructions shall continue in full force and effect until canceled or
superseded. Any Instructions delivered to Bank by telephone shall
promptly thereafter be confirmed in writing by an Authorized Person (which
confirmation may bear the facsimile signature of such Person), but Customer
shall hold Bank harmless for the failure of an Authorized Person to send such
confirmation in writing, the failure of such confirmation to conform to the
telephone instructions received or Bank's failure to produce such confirmation
at any subsequent time. Bank shall notify Customer as soon as
reasonably practicable if Bank does not receive written confirmation or if
such
written confirmation fails to conform to the telephone Instructions
received. Either party may electronically record any Instructions
given by telephone, and any other telephone discussions with respect to the
Custody Account. Customer shall be responsible for safeguarding any
testkeys, identification codes or other security devices which Bank shall make
available to Customer or its Authorized Persons.
14. Standard
of Care; Liabilities.
(a) Bank
shall exercise reasonable care and diligence in carrying out all of its duties
and obligations under this Agreement, and shall be liable to Customer for any
and all claims, liabilities, losses, damages, fines, penalties, and expenses,
including out-of-pocket and incidental expenses and reasonable attorneys’ fees
(“Losses”) suffered or incurred by Customer resulting from failure of Bank
(including any branch thereof, regardless of location) to exercise such
reasonable care and diligence. Bank shall be liable to Customer in
respect of such Losses to the same extent that Bank would be liable to Customer
if Bank were holding the affected Assets in New York City, but only to the
extent of Customer’s direct damages, to be determined based on the market value
of the property which is the subject of the Loss at the date of discovery of
such Loss by Customer and without reference to any special conditions or
circumstances. Nevertheless, under no circumstances will Bank be
liable for any indirect, incidental, consequential, or special damages
(including, without limitation, lost profits) of any form incurred by any person
or entity, whether or not foreseeable and regardless of the type of action
in
which such a claim may be brought, with respect to the Accounts, Bank’s
performance hereunder, or Bank’s role as custodian.
(b) Bank
shall be liable to Customer for all Losses resulting from the failure of any
Subcustodian to use reasonable care in the provisions of custodial services
in
accordance with the standards prevailing in the relevant market or from the
fraud or willful misconduct of such Subcustodian in the provisions of custodial
services.
(c) As
long as and to the extent that it has exercised reasonable care and acted in
good faith, Bank shall not be responsible for:
(i) the
title, validity or genuineness of any property or evidence of title thereto
received by it or delivered by it pursuant to this Agreement; it being
understood that Bank shall be deemed to have exercised reasonable care in
respect of this subparagraph (i) if Financial Assets are received by Bank in
accordance with Local Practice for the particular Financial Asset in
question;
(ii) any
act, omission, default or for the solvency of any broker or agent which it
or a
Subcustodian appoints and which is not a branch or Affiliate of the Bank; it
being understood that Bank or a Subcustodian shall be deemed to have exercised
reasonable care in respect of this subparagraph (ii) if it exercised reasonable
care in the selection and continued retention of any such broker or agent;
or
(iii) the
insolvency of any Subcustodian which is not a branch or Affiliate of Bank;
it
being understood that Bank shall be deemed to have exercised reasonable care
in
respect of this subparagraph (iii) where Bank used reasonable care in the
monitoring of a Subcustodian’s financial condition as reflected in its most
recently published financial statements and other publicly available financial
information.
(d)
Neither Bank nor any Subcustodian
shall be liable for the acts or omissions of any Eligible Securities Depository
(or, for purposes of clarity, any domestic securities depository). In
the event Customer incurs a loss due to the negligence, bad faith, willful
misconduct or insolvency of an Eligible Securities Depository, Bank shall make
reasonable endeavors to seek recovery from the Eligible Securities
Depository.
(e) In
no event shall Bank incur liability hereunder if Bank or any Subcustodian,
or
any nominee of Bank or any Subcustodian (each a “Person”), is prevented,
forbidden or delayed from performing, or omits to perform, any act or thing
which this Agreement provides shall be performed or omitted to be performed,
by
reason of:
(i)
any provision of any present or
future law or regulation or order of the United States of America, or any state
thereof, or any other country, or political subdivision thereof or of any court
of competent jurisdiction; or
(ii)
events or circumstances beyond the
reasonable control of the applicable Person, including, without limitation,
the
interruption, suspension or restriction of trading on or the closure of any
securities market, power or other mechanical or technological failures or
interruptions, computer viruses or communications disruptions, work stoppages,
natural disasters, or other similar events or acts, unless, in each case, such
delay or nonperformance is caused by (A) the negligence, misfeasance or
misconduct of the applicable Person, or (B) a malfunction or failure of
equipment operated or utilized by the applicable Person other than a malfunction
or failure beyond such Person’s control and which could not be reasonably
anticipated or prevented by such Person (each such provision, event or
circumstance being a “Force Majeure Event”).
Bank
shall notify Customer as soon as reasonably practicable of any material
performance delay or non-performance in accordance with this clause
(e).
(f) In
no event shall Customer incur liability to Bank if it is prevented, forbidden
or
delayed from performing, or omits to perform, any act or thing which this
Agreement provides shall be performed or omitted to be performed, by reason
of a
Force Majeure Event.
(g) Customer
shall indemnify and hold Bank and its directors, officers, agents and employees
(collectively the “Indemnitees”) harmless from and against any and all Losses
that may be imposed on, incurred by, or asserted against, the Indemnitees or
any
of them for following any Instructions or other directions upon which Bank
is
authorized to rely pursuant to the terms of this Agreement, or for any
action taken or omitted by it in good faith, provided that such action or
omission is consistent with the standard of care applicable to Bank under this
Agreement and the Indemnitees have not acted with negligence or bad faith or
engaged in fraud or willful misconduct in connection with the Losses in
question.
(h) In
performing its obligations hereunder, Bank may rely on the genuineness of any
document which it believes in good faith to have been validly executed, and,
subject to the following sentence, shall be entitled to rely on and may act
upon
advice of counsel (which may be counsel for Customer) on all matters, and shall
be without liability for action reasonably taken or omitted pursuant to such
advice. If Customer disputes an action or omission by Bank within 45
days of when Customer became aware or reasonably should have become aware of
such action or omission, Bank shall be entitled to rely on and may act upon
advice of “independent legal counsel” (as defined by rule 0-1(6) of the
Investment Company Act of 1940) to Customer or such other counsel that is
mutually acceptable to Customer and Bank and shall be without liability for
action reasonably taken or omitted pursuant to such advice.
(i) Customer
shall pay for and hold Bank harmless from any liability or loss resulting from
the imposition or assessment of any taxes or other governmental charges, and
any
related expenses (including, without limitation, penalties, interest or
additions to tax due), with respect to income from or Assets in the Accounts,
provided that Bank has complied with the standard of care set forth in Section
14(a) of this Agreement (it being understood that while Bank’s failure to comply
with such standard of care shall constitute a breach of this Agreement, Bank
shall have no liability for taxes or governmental charges and related expenses
imposed or assessed with respect to such Assets prior to such breach or that
would have been imposed or assessed even absent such breach).
(j) Bank
need not maintain any insurance for the benefit of Customer.
(k) Without
limiting the foregoing, Bank shall not be liable for any Loss which results
from
(i) the general risk of investing, or (ii) investing or holding Assets in a
particular country including, but not limited to, losses resulting from
nationalization, expropriation or other governmental actions; regulation of
the
banking or securities industry; currency restrictions, devaluations or
fluctuations; and market conditions which prevent the orderly execution of
securities transactions or affect the value of Assets.
(l) Consistent
with and without limiting the application of the foregoing paragraphs of this
Section 14, it is specifically acknowledged that Bank shall have no duty or
responsibility to:
(i) question
Instructions or make any suggestions to Customer or an Authorized Person
regarding such Instructions that Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions the Bank may
specify;
(ii) supervise
or make recommendations with respect to investments or the retention of
Financial Assets;
(iii) advise
Customer or an Authorized Person regarding any default in the payment of
principal or income of any security other than as provided in Section 8(c)
hereof;
(iv) evaluate
or report to Customer or an Authorized Person regarding the financial condition
of any broker, agent or other party to which Bank receives an Instruction to
deliver Financial Assets;
(v) except
for trades settled at DTC where the broker provides DTC trade confirmation
and
Customer provides for Bank to receive the trade instruction, review or reconcile
trade confirmations received from brokers. Customer or its Authorized
Persons issuing Instructions shall bear any responsibility to review such
confirmations against Instructions issued to and statements issued by
Bank;
(vi) advise
Customer or an Authorized Person regarding information (i) held on a
confidential basis by an officer, director or employee of Bank (or any Affiliate
of Bank) and (ii) obtained by such person in connection with the provision
of
services or other activities unrelated to global custody; and
(vii) advise
Customer or an Authorized Person promptly regarding corporate action information
obtained by an officer, director or employee of Bank (or any Affiliate of Bank)
who is not engaged directly in the provision of global custody
services.
(m) Customer
authorizes Bank to act hereunder notwithstanding that Bank or any of its
divisions or Affiliates may have a material interest in a transaction, or
circumstances are such that Bank may have a potential conflict of duty or
interest including the fact that Bank or any of its Affiliates may provide
brokerage services to other customers, act as financial advisor to the
issuer of Financial Assets, act as a lender to the issuer of Financial Assets,
act in the same transaction as agent for more than one customer, have a material
interest in the issue of Financial Assets, or earn profits from any of the
activities listed herein; provided that none of such services or actions would
violate applicable laws or regulations.
(n) Upon
the occurrence of any event which causes or may cause any Loss to the other
party, each of Customer and Bank shall (and Bank shall cause each applicable
Subcustodian to) use all commercially reasonable efforts and take all reasonable
steps under the circumstances to mitigate the effects of such event and to
avoid
continuing harm to the other party. For this purpose, the obligations
of Customer and Bank to mitigate Losses (or potential Losses) hereunder shall
include (but shall not be limited to) the periodic review and reconciliation
by
Bank and Customer (or Authorized Persons) of statements provided to Customer
under Section 10 of this Agreement; provided, however, that Bank's obligations
to Customer with respect to any transaction covered by a given statement shall
be reduced to the extent that Bank's ability to mitigate damages related to
such
transaction has been compromised by Customer’s failure to object to such
statement within 180 days of Customer’s receipt thereof.
15. Bank
Fees and Expenses.
Customer
agrees to pay Bank for its
services under this Agreement such amount as may be mutually agreed upon in
writing. Customer agrees to reimburse Bank for its reasonable
out-of-pocket or incidental expenses (including, without limitation, legal
fees)
incurred on behalf of Customer, provided that, in respect of such expenses,
Bank
has acted in conformity with the standard of care set forth in Section 14
hereof. Bank shall obtain Customer’s prior approval, which approval
shall not be unreasonably withheld, of out-of-pocket or incidental expenses
that
Bank reasonably expects to exceed $10,000 or that approaches $10,000 during
the
process of incurring such expenses. In the latter case, Customer
shall not withhold its approval on the ground that Bank had not obtained
Customer’s approval prior to beginning to incur such expenses if Bank believed
in good faith that the subject expenses would not exceed
$10,000. Subject to the foregoing, Bank shall have a lien on and is
authorized to charge or otherwise enforce its rights as lienholder against
Assets in any Accounts of the Customer for any amount owing in respect of such
Account by the Customer to the Bank under any provision of this
Agreement.
16. Miscellaneous.
(a) Foreign
Exchange Transactions Other Than as Principal. Upon receipt of
Instructions, Bank shall settle foreign exchange contracts or options to
purchase and sell foreign currencies for spot and future delivery on behalf
of
and for the account of a Portfolio with such currency brokers or banking
institutions as Customer may determine and direct pursuant to
Instructions. Bank shall be responsible for the transmission of cash
and instructions to and from the currency broker or banking institution with
which the contract or option is made, the safekeeping of all certificates and
other documents and agreements evidencing or relating to such foreign exchange
transactions and the maintenance of proper records in accordance with this
Agreement. Bank shall have no duty with respect to the selection of
currency brokers or banking institutions with which Customer deals on behalf
of
its Portfolio or, as long as Bank acts in accordance with Instructions, for
the
failure of such brokers or banking institutions to comply with the terms of
any
contract or option.
(b) Foreign
Exchange Transactions as Principal. Bank shall not be obligated
to enter into foreign exchange transactions as principal. However, if
and to the extent that Bank makes available to Customer its services as
principal in foreign exchange transactions, upon receipt of Instructions, Bank
shall enter into foreign exchange contracts or options to purchase and sell
foreign currencies for spot and future delivery on behalf of and for the account
of Customer on behalf of its Portfolio with Bank as
principal. Instructions may be issued with respect to such contracts
but Bank may establish rules or limitations concerning any foreign exchange
facility made available. Bank shall be responsible for the selection
of currency brokers or banking institutions (which may include Affiliates of
Bank and Subcustodians) and the failure of such currency brokers or banking
institutions to comply with the terms of any contract or option.
(c) Certification
of Residency, etc. Customer certifies that it is a resident of
the United States and shall notify Bank of any changes in
residency. Bank may rely upon this certification or the certification
of such other facts as may be required to administer Bank's obligations
hereunder. Customer shall indemnify Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.
(d) Custodian’s
Records; Access to Records. Bank shall provide any assistance
reasonably requested by Customer in the preparation of reports to Customer’s
shareholders and others, audits of accounts, and other ministerial matters
of
like nature. Bank shall maintain complete and accurate records with
respect to Financial Assets and other Assets held for the account of Customer
as
required by the rules and regulations of the U.S. Securities and Exchange
Commission applicable to investment companies registered under the 0000
Xxx. All such books and records maintained by Bank shall be made
available to Customer upon request and shall, where required to be maintained
by
Rule 31a-1 under the 1940 Act, be preserved for the periods prescribed in Rule
31a-2 under the 1940 Act. Bank shall allow Customer's independent
public accountant reasonable access to the records of Bank relating to Financial
Assets as is required in connection with their examination of books and records
pertaining to Customer's affairs. Subject to restrictions under
applicable law, Bank shall also obtain an undertaking to permit Customer's
independent public accountants reasonable access to the records of any
Subcustodian which has physical possession of any Financial Assets as may be
required in connection with the examination of Customer's books and
records. Upon reasonable request of Customer, Bank shall provide
Customer with a copy of Bank’s reports prepared in compliance with the
requirements of Statement of Auditing Standards No. 70 issued by the American
Institute of Certified Public Accountants, as it may be amended from time to
time (commonly referred to as a “SAS 70 report”). Bank shall use
commercially reasonable efforts to obtain and furnish Customer with such similar
reports as Customer may reasonably request with respect to each Subcustodian
holding Assets of Customer. Except as respects Bank’s SAS 70 Report,
as to which there shall be no charge, the Customer shall pay reasonable expenses
of the Bank and any Subcustodians under this provision. Bank shall
use commercially reasonable efforts to provide Customer and agents with such
reports as the Customer may reasonably request or otherwise reasonably require
to fulfill its duties under rule 38a-1 of the 1940 Act, and, in any case,
provide Customer with at least the same level of such reporting as Bank
furnishes to its other mutual fund clients.
(e) Confidential
Information. The parties hereto agree that each shall treat
confidentially all confidential information provided by each party to the other
regarding its business and operations in accordance with this Agreement and
represent that each has implemented controls that are reasonably designed to
achieve the purposes of this section. All confidential information provided
by a
party hereto shall be used by the other party hereto solely for the purpose
of
rendering services pursuant to this Agreement and, except as may be required
in
carrying out this Agreement, shall not be disclosed to any affiliated division
or entity or third party in any form without the prior written consent of such
providing party. Confidential information for purposes hereof shall
include information traditionally recognized as confidential, such as financial
information, strategies, security practices, portfolio holdings, portfolio
trades, product and business proposals, business plans, and the
like. The foregoing shall not be applicable to any
information that is publicly available when provided or thereafter becomes
publicly available other than through a breach of this Agreement, that is
generally furnished to third parties by the providing party without
confidentiality restriction, or that is required to be disclosed by any bank
examiner of Bank or any Subcustodian, any auditor of the parties hereto, by
judicial or administrative process or otherwise by applicable law or
regulation. For this purpose, Customer and any Authorized Person
shall be permitted to disclose any information provided by Bank hereunder to
the
U.S. Securities and Exchange Commission (or its staff) in connection with any
inspection or examination or other action or proceeding. If a party
becomes aware that it or its agents have breached the confidentiality
obligations under this Section 16(e), it will promptly notify the other party
in
writing of the nature and extent of such breach.
(f) Governing
Law; Successors and Assigns; Immunity; Captions. THIS AGREEMENT
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED IN NEW YORK and shall not be assigned by either party,
but shall bind the successors in interest of Customer and Bank. To
the extent that in any jurisdiction Customer or Bank may now or hereafter be
entitled to claim, for itself or its assets, immunity from suit, execution,
attachment (before or after judgment) or other legal process, Customer or Bank,
as the case may be, irrevocably shall not claim, and it hereby waives, such
immunity. The captions given to the sections and subsections of this
Agreement are for convenience of reference only and are not to be used to
interpret this Agreement.
(g) Entire
Agreement. This Agreement sets out the entire Agreement among the
parties. There are no other provisions hereof and this Agreement
supersedes any other agreements, whether written or oral, between the
parties. Any amendment hereto must be in writing, executed by both
parties.
(h) Severability. In
the event that one or more provisions hereof are held invalid, illegal or
unenforceable in any respect on the basis of any particular circumstances or
in
any jurisdiction, the validity, legality and enforceability of such provision
or
provisions under other circumstances or in other jurisdictions and of the
remaining provisions shall not in any way be affected or impaired.
(i) Waiver. Except
as otherwise provided herein, no failure or delay on the part of either party
in
exercising any power or right hereunder operates as a waiver, nor does any
single or partial exercise of any power or right preclude any other or further
exercise, or the exercise of any other power or right. No waiver by a
party of any provision hereof, or waiver of any breach or default, is effective
unless in writing and signed by the party against whom the waiver is to be
enforced.
(j) Representations
and Warranties.
(i) Customer
hereby represents and warrants to Bank that: (A) it has full power and authority
to deposit and control the Financial Assets and cash deposited in the Accounts;
(B) it has all necessary authority to use Bank as its custodian; (C) this
Agreement constitutes its legal, valid and binding obligation, enforceable
in
accordance with its terms; (D) it has taken all necessary action to authorize
the execution and delivery hereof.
(ii) Bank
hereby represents and warrants to Customer that: (A) it has the full power
and
authority to perform its obligations hereunder, (B) this Agreement constitutes
its legal, valid and binding obligation, enforceable in accordance with its
terms; and (C) that it has taken all necessary action to authorize the execution
and delivery hereof.
(k) Notices. All
notices hereunder shall be effective when actually received. Any
notices or other communications which may be required hereunder are to be sent
to the parties at the following addresses or such other addresses as may
subsequently be given to the other party in writing: (a) Bank: JPMorgan Chase
Bank, N.A., 0 Xxxxx Xxxxxxxxx Xxxxx, Xxx Xxxx, X.X. 00000, Attention:
Xxxxxx Xxxxxxxx, Vice President, Worldwide Securities Services, Global Client
Group; and (b) Customer: The American Funds Tax-Exempt
Series I – The Tax-Exempt Fund of Virginia c/o Washington Management
Corporation, Attention: Xxxxxxx Xxxxxxxx, Senior Vice President, 0000 Xxxxxxx
Xxx., X.X. Xxxxx 000, Xxxxxxxxxx X.X. 00000 with a copy to Xxxxxxx X. Xxxxxx,
President, Washington Management Corporation 0000 Xxxxxxx Xxx., X.X. Xxxxx
000,
Xxxxxxxxxx X.X. 0000.
(l) Termination. This
Agreement may be terminated as to one or more Portfolios by Customer or Bank
by
giving sixty (60) days’ written notice to the other, provided that such notice
to Bank shall specify the names of the persons to whom Bank shall deliver the
Assets belonging to the affected Portfolios in the Accounts. If
notice of termination is given by Bank, Customer shall, within sixty (60) days
following receipt of the notice, deliver to Bank Instructions specifying the
names of the persons to whom Bank shall deliver the Assets belonging to the
affected Portfolios. In either case Bank shall deliver the Assets
belonging to the affected Portfolios to the persons so specified, after
deducting any uncontested amounts which Bank determines in good faith to be
owed
to it under Section 15. Customer shall reimburse Bank promptly for
all reasonable out-of-pocket expenses it incurs in delivering Assets upon
termination by Customer. Termination shall not affect any of the
liabilities either party owes to the other arising under this Agreement prior
to
such termination. If within sixty (60) days following receipt of a
notice of termination by Bank, Bank does not receive Instructions from Customer
specifying the names of the persons to whom Bank shall deliver the Assets
belonging to the affected Portfolios, Bank, at its election, may deliver such
Assets to a bank or trust company doing business in the State of New York to
be
held and disposed of pursuant to the provisions hereof, or to Authorized
Persons, or may continue to hold such Assets until Instructions are provided
to
Bank. For avoidance of doubt, each Customer, Portfolio or the Bank
may terminate this Agreement pursuant to its provisions and the Agreement shall
survive such termination in respect of the remaining Customers and Portfolios
that have not so terminated or been terminated.
(m) Representative
Capacity; Non-recourse Obligations. A COPY OF THE DECLARATION OF
TRUST OR OTHER ORGANIZATIONAL DOCUMENT OF CUSTOMER IS ON FILE WITH THE SECRETARY
OF STATE OF THE STATE OF THE CUSTOMER’S FORMATION, AND NOTICE IS HEREBY GIVEN
THAT THIS AGREEMENT IS NOT EXECUTED ON BEHALF OF THE TRUSTEES OF CUSTOMER
INDIVIDUALLY, AND THE OBLIGATIONS OF THIS AGREEMENT ARE NOT BINDING UPON ANY
OF
THE TRUSTEES, OFFICERS, SHAREHOLDERS OR PARTNERS OF CUSTOMER INDIVIDUALLY,
BUT
ARE BINDING ONLY UPON THE ASSETS AND PROPERTY OF CUSTOMER’S
PORTFOLIOS. BANK AGREES THAT NO SHAREHOLDER, TRUSTEE, OFFICER OR
PARTNER OF ANY CUSTOMER MAY BE HELD PERSONALLY LIABLE OR RESPONSIBLE FOR ANY
OBLIGATIONS OF ANY PORTFOLIO ARISING OUT OF THIS AGREEMENT.
(n) Several
Obligations of Portfolios. WITH RESPECT TO ANY OBLIGATIONS OF
CUSTOMER ON BEHALF OF ANY OF ITS PORTFOLIOS ARISING OUT OF THIS AGREEMENT,
BANK
SHALL LOOK FOR PAYMENT OR SATISFACTION OF ANY SUCH OBLIGATION SOLELY TO THE
ASSETS AND PROPERTY OF THE PORTFOLIO TO WHICH SUCH OBLIGATION RELATES AS THOUGH
CUSTOMER HAD SEPARATELY CONTRACTED WITH BANK BY SEPARATE WRITTEN AGREEMENT
WITH
RESPECT TO EACH OF ITS PORTFOLIOS. THE RIGHTS AND BENEFITS TO WHICH A
GIVEN PORTFOLIO IS ENTITLED HEREUNDER SHALL BE SOLELY THOSE OF SUCH PORTFOLIO
AND NO OTHER PORTFOLIO HEREUNDER SHALL RECEIVE SUCH BENEFITS.
(o) Information
Concerning Deposits at Bank. Bank’s London Branch is a member of
the United Kingdom Deposit Protection Scheme (the “Scheme”) established under
Banking Xxx 0000 (as amended). The Scheme provides that in the event
of Bank’s insolvency, payments may be made to certain customers of Bank’s London
Branch. Payments under the Scheme are limited to 90% of a depositor’s
total cash deposits subject to a maximum payment to any one depositor of £18,000
(or euro 20,000 if greater). Most deposits denominated in sterling
and other European Economic Area Currencies and euros made with Bank within
the
United Kingdom are covered. Further details of the Scheme are
available on request. Any cash so deposited with Bank’s London Branch
will be payable exclusively by Bank’s London Branch in the applicable currency,
subject to compliance with applicable law, including, without limitation, any
restrictions on transactions in the applicable currency imposed by the country
of the applicable currency.
- -
|
27 |
IN
WITNESS WHEREOF, Customer and Bank have executed this Agreement as of the date
first-written above.
THE
AMERICAN FUNDS TAX-EXEMPT SERIES I – THE TAX-EXEMPT FUND OF
VIRGINIA.
By:____________________________________
Name:
Title:
JPMORGAN
CHASE BANK, NATIONAL ASSOCIATION
By:________________________________________
Name:
Title:
- -
|
27 |
