CUSTODIAN AGREEMENT
This Agreement, dated as of June 1, 2007, is by and between FIFTH THIRD
FUNDS, a Massachusetts business trust (the "FUND"), and STATE STREET BANK and
TRUST COMPANY, a Massachusetts trust company (the "CUSTODIAN").
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends that this Agreement be applicable to the
portfolios listed on Exhibit A hereto (such series, together with all other
series subsequently established by the Fund and made subject to this Agreement
in accordance with Section 18, are referred to herein as the "PORTFOLIO(S)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolios of the Fund, including securities that the Fund, on behalf of the
applicable Portfolio, desires to be held in places within the United States
("DOMESTIC SECURITIES") and securities it desires to be held outside the United
States ("FOREIGN securities"). The Fund, on behalf of the Portfolio(s), agrees
to deliver to the Custodian all securities and cash of the Portfolios, and all
payments of income, payments of principal or capital distributions received by
it with respect to all securities owned by the Portfolio(s) from time to time,
and the cash consideration received by it for such new or treasury shares of
beneficial interest of the Fund representing interests in the Portfolios
("SHARES") as may be issued or sold from time to time. The Custodian shall not
be responsible for any property of a Portfolio held or received by the Portfolio
and not delivered to the Custodian.
Upon receipt of "PROPER INSTRUCTIONS" (as such term is defined in Section 6
hereof), the Custodian shall on behalf of the applicable Portfolio(s) from time
to time employ one or more sub-custodians located in the United States, but only
in accordance with an applicable vote by the Board of Trustees of the Fund (the
"BOARD") on behalf of the applicable Portfolio(s). The Custodian may employ as
sub-custodian for the Fund's foreign securities on behalf of the applicable
Portfolio(s) the foreign banking institutions and foreign securities
depositories designated in Schedules A and B hereto, but only in accordance with
the applicable provisions of Sections 3 and 4. The Custodian shall have no more
or less responsibility or liability to the Fund on account of any actions or
omissions of any sub-custodian so employed than any such sub-custodian has to
the Custodian.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY
THE CUSTODIAN IN THE UNITED STATES
1
SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash property, to be held by
it in the United States, including all domestic securities owned by such
Portfolio other than securities which are maintained pursuant to Section 2.8 in
a clearing agency which acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the Treasury (each, a "U.S.
SECURITIES SYSTEM").
SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian only upon receipt of Proper
Instructions on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, and only in the following
cases:
1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a U.S. Securities
System, in accordance with the provisions of Section 2.8
hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.7 or into the name
or nominee name of any sub-custodian appointed pursuant to
Section 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate
face amount or number of units; provided that, in any such
case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall
have no responsibility or liability for any loss arising from
the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of
2
such securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Portfolio, but only against receipt of such collateral
as the Fund shall have specified to the Custodian in Proper
Instructions;
11) For delivery as security in connection with any borrowing by
the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "EXCHANGE ACT") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a futures commission merchant registered under
the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission ("CFTC")
and/or any contract market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent for the
Fund (the "TRANSFER AGENT") for delivery to such Transfer
Agent or to the holders of Shares in connection with
distributions in kind, as may be described from time to time
in the currently effective prospectus and statement of
additional information of the Fund related to the Portfolio
(the "PROSPECTUS"), in satisfaction of requests by holders of
Shares for repurchase or redemption;
15) For delivery as initial or variation margin in connection with
futures or options on futures contracts entered into by the
Fund on behalf of the Portfolio; and
16) For any other purpose, but only upon receipt of Proper
Instructions from the Fund on behalf of the applicable
Portfolio specifying the securities of the Portfolio to be
delivered and naming the person or persons to whom delivery of
such securities shall be made.
3
SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio
or of any nominee of the Custodian which nominee shall be assigned exclusively
to the Portfolio, unless the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered investment companies having
the same investment advisor as the Portfolio, or in the name or nominee name of
any agent appointed pursuant to Section 2.7 or in the name or nominee name of
any sub-custodian appointed pursuant to Section 1. All securities accepted by
the Custodian on behalf of the Portfolio under the terms of this Agreement shall
be in "street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls, maturities,
tender or exchange offers.
SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a
separate bank account or accounts in the United States in the name of each
Portfolio of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940, as amended (the "1940 ACT"). Funds held by the
Custodian for a Portfolio may be deposited in the banking department of the
Custodian or in such other banks or trust companies as it may in its discretion
deem necessary or desirable; provided, however, that every such bank or trust
company shall be qualified to act as a custodian under the 1940 Act and that
each such bank or trust company and the funds to be deposited with each such
bank or trust company shall on behalf of each applicable Portfolio be approved
by vote of a majority of the Board, and provided further, that the appointment
of such banks or trust companies and maintenance of any cash of the Fund shall
be at the Custodian's expense and shall not relieve the Custodian of any of its
obligations under this Agreement. Such funds shall be deposited by the Custodian
in its capacity as Custodian and shall be withdrawable by the Custodian only in
that capacity.
SECTION 2.5 COLLECTION OF INCOME. Subject to the provisions of Section
2.3, the Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer domestic securities if, on the date of payment
by the issuer, such securities are held by the Custodian or its agent. Without
limiting the generality of the foregoing, the Custodian shall detach and present
for payment all coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on securities held
hereunder. The Custodian shall credit income to the Fund as such income is
received or in accordance with Custodian's then current payable date income
schedule. Any credit to the Fund in advance of receipt may be reversed when the
Custodian determines that payment will not occur in due course and the Fund may
be charged at the Custodian's applicable rate for time credited. Income due each
Portfolio on securities loaned pursuant to the provisions of Section 2.2 (10)
shall be the responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund with such
information or
4
data as may be necessary to assist the Fund in arranging for the timely delivery
to the Custodian of the income to which the Portfolio is properly entitled.
SECTION 2.6A PAYMENT OF FUND MONIES. The Custodian shall pay out monies
of a Portfolio as provided in Section 5 and otherwise upon receipt of Proper
Instructions on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, in the following cases
only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Portfolio but only (a) in accordance with customary or
established market practices and procedures, including,
without limitation, delivering money to the seller thereof or
to a dealer therefor (or an agent for such seller or dealer)
against expectation of receiving later delivery of such
securities or evidence of title to such futures contracts or
options on futures contracts to the Custodian (or any bank,
banking firm or trust company doing business in the United
States or abroad which is qualified under the 1940 Act to act
as a custodian and has been designated by the Custodian as its
agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer or in the case of options on securities against
delivery to the Custodian (or any institution) of such
receipts as are required by the customs prevailing among
dealers in such options; (b) in the case of a purchase
effected through a U.S. Securities System, in accordance with
the conditions set forth in Section 2.8 hereof; (c) in the
case of repurchase agreements entered into between the Fund on
behalf of the Portfolio and the Custodian, or another bank, or
a broker-dealer which is a member of NASD, (i) against
delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Portfolio
of securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase such
securities from the Portfolio; or (d) for transfer to a time
deposit account of the Fund in any bank, whether domestic or
foreign; such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank pursuant
to Proper Instructions from the Fund as defined herein;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued as set forth
in Section 2.6B hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5
5) For the payment of any dividends or capital gain distributions
on Shares declared pursuant to the governing documents of the
Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For delivery as initial or variation margin in connection with
futures or options on futures contracts entered into by the
Fund on behalf of the Portfolio; and
8) For any other purpose, but only upon receipt of Proper
Instructions from the Fund on behalf of the Portfolio
specifying the amount of such payment and naming the person or
persons to whom such payment is to be made.
SECTION 2.6B PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF
SHARES. The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent and deposit into the account of the appropriate Portfolio
such payments as are received for Shares thereof issued or sold from time to
time by the Fund. The Custodian will provide timely notification to the Fund on
behalf of each such Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
From such funds as may be available for the purpose, the Custodian
shall, upon receipt of instructions from the Transfer Agent, make funds
available for payment to holders of Shares who have delivered to the Transfer
Agent a request for redemption or repurchase of their Shares. In connection with
the redemption or repurchase of Shares, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian
by a holder of Shares, which checks have been furnished by the Fund to the
holder of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time between
the Fund and the Custodian.
SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or
times in its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the 1940 Act to act as a
custodian, as its agent to carry out such of the provisions of this Section 2 as
the Custodian may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The
Custodian may deposit and/or maintain securities owned by a Portfolio in a U.S.
Securities System in compliance with the conditions of Rule 17f-4 of the 1940
Act, as amended from time to time.
SECTION 2.9 SEGREGATED ACCOUNT. The Custodian shall upon receipt of
Proper Instructions on behalf of each applicable Portfolio establish and
maintain a segregated account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by the Custodian
pursuant to Section 2.8 hereof, (i) in accordance with the provisions of any
agreement among the
6
Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and of any registered
national securities exchange (or the CFTC or any registered contract market), or
of any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio, (ii) for purposes
of segregating cash or government securities in connection with options
purchased, sold or written by the Portfolio or commodity futures contracts or
options thereon purchased or sold by the Portfolio, (iii) for the purposes of
compliance by the Portfolio with the procedures required by Investment Company
Act Release No. 10666, or any subsequent release of the U.S. Securities and
Exchange Commission (the "SEC"), or interpretative opinion of the staff of the
SEC, relating to the maintenance of segregated accounts by registered investment
companies, and (iv) for any other purpose upon receipt of Proper Instructions
from the Fund on behalf of the applicable Portfolio.
SECTION 2.10 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian
shall execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other payments
with respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
SECTION 2.11 PROXIES. The Custodian shall deliver promptly to the Fund
or its designated agent all proxies and all proxy solicitation materials
registered in the name of the Portfolio. The Custodian shall, with respect to
the domestic securities held hereunder, cause to be promptly executed by the
registered holder of such securities, if the securities are registered otherwise
than in the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be voted .
SECTION 2.12 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject
to the provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without limitation,
pendency of calls and maturities of domestic securities and expirations of
rights in connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian from
issuers of the securities being held for the Portfolio. With respect to tender
or exchange offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or its agents) making the
tender or exchange offer. The Custodian shall not be liable for any untimely
exercise of any tender, exchange or other right or power in connection with
domestic securities or other property of the Portfolios at any time held by it
unless (i) the Custodian is in actual possession of such domestic securities or
property and (ii) the Custodian receives Proper Instructions with regard to the
exercise of any such right or power, and both (i) and (ii) occur at least three
business days prior to the date on which the Custodian is to take action to
exercise such right or power. The Custodian shall also transmit promptly to the
Fund for each applicable Portfolio all written information received by the
Custodian regarding any class action or other litigation in connection with
Portfolio securities or other assets issued in the United States and then held,
or previously held, during the term of this Agreement by the Custodian for the
account of the Fund for such Portfolio, including, but not limited to, opt-out
notices and proof-of-claim forms. For avoidance of doubt, upon and after the
effective date of any termination of this Agreement, with respect to a
7
Fund or its Portfolio(s), as may be applicable, the Custodian shall have no
responsibility to so transmit any information under this Section 2.12.
SECTION 3. PROVISIONS RELATING TO RULES 17F-5 AND 17F-7
SECTION 3.1. DEFINITIONS. As used throughout this Agreement, the
capitalized terms set forth below shall have the indicated meanings:
"Country Risk" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment, economic and financial infrastructure
(including any Eligible Securities Depository operating in the country),
prevailing or developing custody and settlement practices, and laws and
regulations applicable to the safekeeping and recovery of Foreign Assets held in
custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the SEC), or a foreign branch of a Bank (as defined in Section 2(a)(5)
of the 0000 Xxx) meeting the requirements of a custodian under Section 17(f) of
the 1940 Act; the term does not include any Eligible Securities Depository.
"Eligible Securities Depository" has the meaning set forth in section (b)(1) of
Rule 17f-7.
"Foreign Assets" means any of the Portfolios' investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Portfolios'
transactions in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(3) of Rule
17f-5.
"Rule 17f-5" means Rule 17f-5 promulgated under the 1940 Act.
"Rule 17f-7" means Rule 17f-7 promulgated under the 1940 Act.
SECTION 3.2. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
3.2.1 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Fund, by resolution adopted by its Board, hereby delegates to the Custodian,
subject and pursuant to Section (b) of Rule 17f-5, the responsibilities set
forth in this Section 3.2 with respect to Foreign Assets of the Portfolios held
outside the United States, and the Custodian hereby accepts such delegation as
Foreign Custody Manager with respect to the Portfolios.
3.2.2 COUNTRIES COVERED. The Foreign Custody Manager shall be
responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A to this Agreement, which list of countries may be amended
from time to time by the Fund with the agreement of the Foreign Custody Manager.
The Foreign Custody Manager shall list on Schedule A the Eligible Foreign
Custodians selected by the Foreign Custody Manager to maintain the assets of the
Portfolios, which list of Eligible Foreign
8
Custodians may be amended from time to time in the sole discretion of the
Foreign Custody Manager. The Foreign Custody Manager will provide amended
versions of Schedule A in accordance with Section 3.2.5 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open
an account or to place or maintain Foreign Assets in a country listed on
Schedule A, and the fulfillment by the Fund, on behalf of the Portfolios, of the
applicable account opening requirements for such country, the Foreign Custody
Manager shall be deemed to have been delegated by the Board on behalf of the
Portfolios responsibility as Foreign Custody Manager with respect to that
country and to have accepted such delegation. Execution of this Agreement by the
Fund shall be deemed to be a Proper Instruction to open an account, or to place
or maintain Foreign Assets, in each country listed on Schedule A in which the
Custodian has previously placed or currently maintains Foreign Assets pursuant
to the terms of the Agreement. Following the receipt of Proper Instructions
directing the Foreign Custody Manager to close the account of a Portfolio with
the Eligible Foreign Custodian selected by the Foreign Custody Manager in a
designated country, the delegation by the Board on behalf of the Portfolios to
the Custodian as Foreign Custody Manager for that country shall be deemed to
have been withdrawn and the Custodian shall immediately cease to be the Foreign
Custody Manager of the Portfolios with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer period to which the parties agree in writing)
after receipt of any such notice by the Fund, the Custodian shall have no
further responsibility in its capacity as Foreign Custody Manager to the Fund
with respect to the country as to which the Custodian's acceptance of delegation
is withdrawn.
3.2.3 SCOPE OF DELEGATED RESPONSIBILITIES:
(a) SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the provisions
of this Section 3.2, the Foreign Custody Manager may place and maintain the
Foreign Assets in the care of the Eligible Foreign Custodian selected by the
Foreign Custody Manager in each country listed on Schedule A, as amended from
time to time. In performing its delegated responsibilities as Foreign Custody
Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian,
the Foreign Custody Manager shall determine that the Foreign Assets will be
subject to reasonable care, based on the standards applicable to custodians in
the country in which the Foreign Assets will be held by that Eligible Foreign
Custodian, after considering all factors relevant to the safekeeping of such
assets, including, without limitation the factors specified in Rule 17f-5(c)(1).
(b) CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign Custody
Manager shall determine that the contract governing the foreign custody
arrangements with each Eligible Foreign Custodian selected by the Foreign
Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
9
(c) MONITORING. In each case in which the Foreign Custody Manager
maintains Foreign Assets with an Eligible Foreign Custodian selected by the
Foreign Custody Manager, the Foreign Custody Manager shall establish a system to
monitor (i) the appropriateness of maintaining the Foreign Assets with such
Eligible Foreign Custodian and (ii) the contract governing the custody
arrangements established by the Foreign Custody Manager with the Eligible
Foreign Custodian. In the event the Foreign Custody Manager determines that the
custody arrangements with an Eligible Foreign Custodian it has selected are no
longer appropriate, the Foreign Custody Manager shall notify the Board in
accordance with Section 3.2.5 hereunder.
3.2.4 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For
purposes of this Section 3.2, the Fund's Adviser shall be deemed to have
considered and determined to accept such Country Risk as is incurred by placing
and maintaining the Foreign Assets in each country for which the Custodian is
serving as Foreign Custody Manager of the Portfolios.
3.2.5 REPORTING REQUIREMENTS. The Foreign Custody Manager
shall report the withdrawal of the Foreign Assets from an Eligible Foreign
Custodian and the placement of such Foreign Assets with another Eligible Foreign
Custodian by providing to the Board an amended Schedule A at the end of the
calendar quarter in which an amendment to such Schedule has occurred. The
Foreign Custody Manager shall make written reports notifying the Board of any
other material change in the foreign custody arrangements of the Portfolios
described in this Section 3.2 after the occurrence of the material change.
3.2.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF A
PORTFOLIO. In performing the responsibilities delegated to it, the Foreign
Custody Manager agrees to exercise reasonable care, prudence and diligence such
as a person having responsibility for the safekeeping of assets of management
investment companies registered under the 1940 Act would exercise.
3.2.7 REPRESENTATIONS WITH RESPECT TO RULE 17F-5. The Foreign
Custody Manager represents to the Fund that it is a U.S. Bank as defined in
section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the
Board has determined that it is reasonable for the Board to rely on the
Custodian to perform the responsibilities delegated pursuant to this Agreement
to the Custodian as the Foreign Custody Manager of the Portfolios.
3.2.8 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS
FOREIGN CUSTODY MANAGER. The Board's delegation to the Custodian as Foreign
Custody Manager of the Portfolios shall be effective as of the date hereof and
shall remain in effect until terminated at any time, without penalty, by written
notice from the terminating party to the non-terminating party. Termination will
become effective thirty (30) days after receipt by the non-terminating party of
such notice. The provisions of Section 3.2.2 hereof shall govern the delegation
to and termination of the Custodian as Foreign Custody Manager of the Portfolios
with respect to designated countries.
SECTION 3.3 ELIGIBLE SECURITIES DEPOSITORIES.
10
3.3.1 ANALYSIS AND MONITORING. The Custodian shall (a) provide
the Fund (or its duly-authorized investment manager or investment advisor) with
an analysis of the custody risks associated with maintaining assets with the
Eligible Securities Depositories set forth on Schedule B hereto in accordance
with section (a)(1)(i)(A) of Rule 17f-7, and (b) monitor such risks on a
continuing basis, and promptly notify the Fund (or its duly-authorized
investment manager or investment advisor) of any material change in such risks,
in accordance with section (a)(1)(i)(B) of Rule 17f-7.
3.3.2 STANDARD OF CARE. The Custodian agrees to exercise
reasonable care, prudence and diligence in performing the duties set forth in
Section 3.3.1.
SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS
HELD OUTSIDE THE UNITED STATES
SECTION 4.1 DEFINITIONS. As used throughout this Agreement, the
capitalized terms set forth below shall have the indicated meanings:
"Foreign Securities System" means an Eligible Securities Depository listed on
Schedule B hereto.
"Foreign Sub-Custodian" means a foreign banking institution serving as an
Eligible Foreign Custodian.
SECTION 4.2. HOLDING SECURITIES. The Custodian shall identify on its
books as belonging to the Portfolios the foreign securities held by each Foreign
Sub-Custodian or Foreign Securities System. The Custodian may hold foreign
securities for all of its customers, including the Portfolios, with any Foreign
Sub-Custodian in an account that is identified as belonging to the Custodian for
the benefit of its customers, provided however, that (i) the records of the
Custodian with respect to foreign securities of the Portfolios which are
maintained in such account shall identify those securities as belonging to the
Portfolios and (ii), to the extent permitted and customary in the market in
which the account is maintained, the Custodian shall require that securities so
held by the Foreign Sub-Custodian be held separately from any assets of such
Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
SECTION 4.3. FOREIGN SECURITIES SYSTEMS. Foreign securities shall be
maintained in a Foreign Securities System in a designated country through
arrangements implemented by the Custodian or a Foreign Sub-Custodian, as
applicable, in such country.
SECTION 4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. DELIVERY OF FOREIGN ASSETS. The Custodian or a Foreign
Sub-Custodian shall release and deliver foreign securities of the Portfolios
held by the Custodian or such Foreign Sub-Custodian, or in a Foreign Securities
System account, only upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, and only in the
following cases:
11
(i) upon the sale of such foreign securities for the Portfolio in
accordance with commercially reasonable market practice in the
country where such foreign securities are held or traded,
including, without limitation: (A) delivery against
expectation of receiving later payment; or (B) in the case of
a sale effected through a Foreign Securities System, in
accordance with the rules governing the operation of the
Foreign Securities System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other
similar offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign
securities are called, redeemed, retired or otherwise become
payable;
(v) to the issuer thereof, or its agent, for transfer into the
name of the Custodian (or the name of the respective Foreign
Sub-Custodian or of any nominee of the Custodian or such
Foreign Sub-Custodian) or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units;
(vi) to brokers, clearing banks or other clearing agents for
examination or trade execution in accordance with market
custom; provided that in any such case the Foreign
Sub-Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise from
the Foreign Sub-Custodian's own negligence or willful
misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities,
the surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts or
temporary securities for definitive securities;
(ix) for delivery as security in connection with any borrowing by
the Portfolios requiring a pledge of assets by the Portfolios;
(x) for delivery as initial or variation margin in connection with
futures or options on futures contracts entered into by the
Fund on behalf of the Portfolio;
(xi) in connection with the lending of foreign securities; and
12
(xii) for any other purpose, but only upon receipt of Proper
Instructions specifying the foreign securities to be delivered
and naming the person or persons to whom delivery of such
securities shall be made.
4.4.2. PAYMENT OF PORTFOLIO MONIES. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out, or direct the respective Foreign
Sub-Custodian or the respective Foreign Securities System to pay out, monies of
a Portfolio in the following cases only:
(i) upon the purchase of foreign securities for the Portfolio,
unless otherwise directed by Proper Instructions, by (A)
delivering money to the seller thereof or to a dealer therefor
(or an agent for such seller or dealer) against expectation of
receiving later delivery of such foreign securities; or (B) in
the case of a purchase effected through a Foreign Securities
System, in accordance with the rules governing the operation
of such Foreign Securities System;
(ii) in connection with the conversion, exchange or surrender of
foreign securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio,
including but not limited to the following payments: interest,
taxes, investment advisory fees, transfer agency fees, fees
under this Agreement, legal fees, accounting fees, and other
operating expenses;
(iv) for the purchase or sale of foreign exchange or foreign
exchange contracts for the Portfolio, including transactions
executed with or through the Custodian or its Foreign
Sub-Custodians;
(v) for delivery as initial or variation margin in connection with
futures or options on futures contracts entered into by the
Fund on behalf of the Portfolio;
(vi) for payment of part or all of the dividends received in
respect of securities sold short;
(vii) in connection with the borrowing or lending of foreign
securities; and
(viii) for any other purpose, but only upon receipt of Proper
Instructions specifying the amount of such payment and naming
the person or persons to whom such payment is to be made.
4.4.3. MARKET CONDITIONS. Notwithstanding any provision of
this Agreement to the contrary, settlement and payment for Foreign Assets
received for the account of the Portfolios and delivery of Foreign Assets
maintained for the account of the Portfolios may be effected in accordance with
the customary established securities trading or processing practices and
procedures in the country or market in which the transaction occurs, including,
without limitation, delivering Foreign Assets to the purchaser thereof or to a
dealer therefor (or an agent
13
for such purchaser or dealer) with the expectation of receiving later payment
for such Foreign Assets from such purchaser or dealer.
The Custodian shall provide to the Board the information with respect to custody
and settlement practices in countries in which the Custodian employs a Foreign
Sub-Custodian described on Schedule C hereto at the time or times set forth on
such Schedule. The Custodian may revise Schedule C from time to time, provided
that no such revision shall result in the Board being provided with
substantively less information than had been previously provided hereunder.
SECTION 4.5. REGISTRATION OF FOREIGN SECURITIES. The foreign securities
maintained in the custody of a Foreign Sub-Custodian (other than bearer
securities) shall be registered in the name of the applicable Portfolio or in
the name of the Custodian or in the name of any Foreign Sub-Custodian or in the
name of any nominee of the foregoing, and the Fund on behalf of such Portfolio
agrees to hold any such nominee harmless from any liability as a holder of
record of such foreign securities. The Custodian or a Foreign Sub-Custodian
shall not be obligated to accept securities on behalf of a Portfolio under the
terms of this Agreement unless the form of such securities and the manner in
which they are delivered are in accordance with reasonable market practice.
SECTION 4.6 BANK ACCOUNTS. The Custodian shall identify on its books as
belonging to the Fund cash (including cash denominated in foreign currencies)
deposited with the Custodian. Where the Custodian is unable to maintain, or
market practice does not facilitate the maintenance of, cash on the books of the
Custodian, a bank account or bank accounts shall be opened and maintained
outside the United States on behalf of a Portfolio with a Foreign Sub-Custodian.
All accounts referred to in this Section shall be subject only to draft or order
by the Custodian (or, if applicable, such Foreign Sub-Custodian) acting pursuant
to the terms of this Agreement to hold cash received by or from or for the
account of the Portfolio. Cash maintained on the books of the Custodian
(including its branches, subsidiaries and affiliates), regardless of currency
denomination, is maintained in bank accounts established under, and subject to
the laws of, The Commonwealth of Massachusetts.
SECTION 4.7. COLLECTION OF INCOME. The Custodian shall use reasonable
commercial efforts to collect all income and other payments with respect to the
Foreign Assets held hereunder to which the Portfolios shall be entitled. In the
event that extraordinary measures are required to collect such income, the Fund
and the Custodian shall consult as to such measures and as to the compensation
and expenses of the Custodian relating to such measures. The Custodian shall
credit income to the applicable Portfolio as such income is received or in
accordance with Custodian's then current payable date income schedule. Any
credit to the Portfolio in advance of receipt may be reversed when the Custodian
determines that payment will not occur in due course and the Portfolio may be
charged at the Custodian's applicable rate for time credited. Income on
securities loaned other than from the Custodian's securities lending program
shall be credited as received
SECTION 4.8 SHAREHOLDER RIGHTS. With respect to the foreign securities
held pursuant to this Section 4, the Custodian will use reasonable commercial
efforts to facilitate the exercise of voting and other shareholder rights,
subject always to the laws, regulations and practical constraints that may exist
in the country where such securities are issued. The Fund
14
acknowledges that local conditions, including lack of regulation, onerous
procedural obligations, lack of notice and other factors may have the effect of
severely limiting the ability of the Fund to exercise shareholder rights.
SECTION 4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The
Custodian shall transmit promptly to the Fund written information with respect
to materials received by the Custodian via the Foreign Sub-Custodians from
issuers of the foreign securities being held for the account of the Portfolios
(including, without limitation, pendency of calls and maturities of foreign
securities and expirations of rights in connection therewith). With respect to
tender or exchange offers, the Custodian shall transmit promptly to the Fund
written information with respect to materials so received by the Custodian from
issuers of the foreign securities whose tender or exchange is sought or from the
party (or its agents) making the tender or exchange offer. The Custodian shall
not be liable for any untimely exercise of any tender, exchange or other right
or power in connection with foreign securities or other property of the
Portfolios at any time held by it unless (i) the Custodian or the respective
Foreign Sub-Custodian is in actual possession of such foreign securities or
property and (ii) the Custodian receives Proper Instructions with regard to the
exercise of any such right or power, and both (i) and (ii) occur at least three
business days prior to the date on which the Custodian is to take action to
exercise such right or power. The Custodian shall also transmit promptly to the
Fund all written information received by the Custodian via the Foreign
Sub-Custodians from issuers of the foreign securities being held for the account
of the Portfolios regarding any class action or other litigation in connection
with Portfolio foreign securities or other assets issued outside the United
States and then held, or previously held, during the term of this Agreement by
the Custodian via a Foreign Sub-Custodian for the account of the Fund for such
Portfolio, including, but not limited to, opt-out notices and proof-of-claim
forms. For avoidance of doubt, upon and after the effective date of any
termination of this Agreement, with respect to a Fund or its Portfolio(s), as
may be applicable, the Custodian shall have no responsibility to so transmit any
information under this Section 4.9.
SECTION 4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement
pursuant to which the Custodian employs a Foreign Sub-Custodian shall, to the
extent possible, require the Foreign Sub-Custodian to exercise reasonable care
in the performance of its duties, and will comply with the provisions of Section
(c)(2) of Rule 17f-5 under the 1940 Act, including a provision to indemnify, and
hold harmless, the Custodian from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the Foreign
Sub-Custodian's performance of such obligations. At the Fund's election, the
Portfolios shall be entitled to be subrogated to the rights of the Custodian
with respect to any claims against a Foreign Sub-Custodian as a consequence of
any such loss, damage, cost, expense, liability or claim if and to the extent
that the Portfolios have not been made whole for any such loss, damage, cost,
expense, liability or claim.
SECTION 4.11 TAX LAW. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund, the
Portfolios or the Custodian as custodian of the Portfolios by the tax law of the
United States or of any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations imposed on
the Fund with respect to the Portfolios or the Custodian as custodian of the
Portfolios by the tax law of countries other than those mentioned in the above
sentence, including responsibility for
15
withholding and other taxes, assessments or other governmental charges,
certifications and governmental reporting. The sole responsibility of the
Custodian with regard to such tax law shall be to use reasonable efforts to
assist the Fund with respect to any claim for exemption or refund under the tax
law of countries for which the Fund has provided such information.
SECTION 4.12. LIABILITY OF CUSTODIAN. The Custodian shall be liable for
the acts or omissions of a Foreign Sub-Custodian to the same extent as set forth
with respect to sub-custodians generally in the Agreement and, regardless of
whether assets are maintained in the custody of a Foreign Sub-Custodian or a
Foreign Securities System, the Custodian shall not be liable for any loss,
damage, cost, expense, liability or claim resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism, or any other
loss where the Sub-Custodian has otherwise acted with reasonable care.
SECTION 5. CONTRACTUAL SETTLEMENT SERVICES.
The Custodian shall, in accordance with the terms set out in
this Section 5, debit or credit the appropriate cash account in connection with
the purchase of securities and proceeds of the sale of securities on a
contractual settlement basis (the "Contractual Settlement Services").The
Contractual Settlement Services shall be provided for such instruments and in
such markets as the Custodian may advise from time to time. The Custodian may
terminate or suspend any part of the provision of the Contractual Settlement
Services under this Agreement at its sole discretion immediately upon notice to
the Fund (in writing, including without limitation e-mail, if circumstances
permit) in the event of force majeure events affecting settlement, which may
include a disorder in markets, or other changed external business circumstance
affecting the markets or the Fund's assets that is beyond the Custodian's
reasonable control.
The consideration payable in connection with a purchase transaction shall be
debited from the appropriate cash account as of the time and date that monies
would ordinarily be required to settle such transaction in the applicable
market. The Custodian shall promptly recredit such amount at the time that an
authorized person notifies the Custodian by Proper Instruction that such
transaction has been cancelled.
With respect to the settlement of a sale of securities, a provisional credit of
an amount equal to the net sale price for the transaction (the "Settlement
Amount") shall be made to the appropriate cash account as if the Settlement
Amount had been received as of the close of business on the date that monies
would ordinarily be available in good funds in the applicable market. Such
provisional credit will be made conditional upon the Custodian having received
Proper Instructions with respect to, or reasonable notice of, the transaction,
as applicable; and the Custodian or its agents having possession of the asset or
assets associated with the transaction in good deliverable form and not being
aware of any facts which would lead any of them to believe that the transaction
will not settle in the time period ordinarily applicable to such transactions in
the applicable market.
The Custodian shall have the right to reverse any provisional credit or debit
given in connection with the Contractual Settlement Services at any time when
the Custodian believes, in its
16
reasonable judgment, that such transaction will not settle in accordance with
its terms or amounts due pursuant thereto will not be collectable or where the
Custodian has not been provided Proper Instructions with respect thereto, as
applicable, and the Fund shall be responsible for any costs or liabilities
resulting from such reversal. In the case of a provisional credit, upon reversal
a sum equal to the amount credited to the Fund shall become immediately due and
payable to the Custodian.
In the event that the Custodian is unable to debit an account
held hereunder, and the Fund fails to pay any amount due to the Custodian at the
time such amount becomes payable in accordance with this Agreement, (i) the
Custodian may charge the Fund for reasonable costs and expenses associated with
providing the provisional credit, including without limitation the reasonable
cost of funds associated therewith, (ii) the amount of any accrued dividends,
interest and other distributions with respect to assets associated with such
transaction may be set off against the credited amount, (iii) the provisional
credit and any such reasonable costs and expenses shall be considered an advance
of cash for purposes of this Agreement and (iv) the Custodian shall have the
right to reasonably setoff against any property and the discretion to reasonably
sell, exchange, convey, transfer or otherwise dispose of any property at any
time held hereunder to the full extent necessary for the Custodian to make
itself whole.
SECTION 6. PROPER INSTRUCTIONS
Proper Instructions, which may also be standing instructions, as used throughout
this Agreement, shall mean instructions received by the Custodian from the Fund,
the Fund's investment manager, or a person or entity duly authorized by either
of them. Such instructions may be in writing signed by the authorized person or
persons or may be in a tested communication or in a communication utilizing
access codes effected between electro-mechanical or electronic devices or may be
by such other means and utilizing such intermediary systems and utilities as may
be agreed to from time to time by the Custodian and the person or entity giving
such instructions, provided that the Fund has followed any security procedures
agreed to from time to time by the Fund and the Custodian, including, but not
limited to, the security procedures selected by the Fund in the Funds Transfer
Addendum to this Agreement. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in writing.
For purposes of this Section, Proper Instructions shall include instructions
received by the Custodian pursuant to any multi-party agreement that requires a
segregated asset account in accordance with Section 2.10 of this Agreement. The
Fund or the Fund's investment manager shall cause its duly authorized officer to
certify to the Custodian in writing the names and specimen signatures of persons
authorized to give Proper Instructions. The Custodian shall be entitled to rely
upon the identity and authority of such persons until it receives notice from
the Fund to the contrary.
SECTION 7. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the Fund on
behalf of each applicable Portfolio:
17
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Agreement, provided that all such payments
shall be accounted for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Portfolio except as otherwise directed by the Board.
SECTION 8. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Fund ("CERTIFIED RESOLUTION") as
conclusive evidence (a) of the authority of any person to act in accordance with
such resolution or (b) of any determination or of any action by the Board as
described in such resolution, and such resolution may be considered as in full
force and effect until receipt by the Custodian of written notice to the
contrary.
SECTION 9. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board to keep the books of account of each
Portfolio and/or compute the net asset value per Share of the outstanding Shares
or, if directed in writing to do so by the Fund on behalf of the Portfolio,
shall itself keep such books of account and/or compute such net asset value per
Share. If so directed, the Custodian shall also calculate daily the net income
of the Portfolio as described in the Prospectus and shall advise the Fund and
the Transfer Agent daily of the total amounts of such net income and, if
instructed in writing by an officer of the Fund to do so, shall advise the
Transfer Agent periodically of the division of such net income among its various
components. The calculations of the net asset value per Share and the daily
income of each Portfolio shall be made at the time or times described from time
to time in the Prospectus.
SECTION 10. RECORDS
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Agreement in such
manner as will meet the obligations of the Fund under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
18
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the SEC. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
SECTION 11. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf of each
applicable Portfolio may from time to time request, to obtain from year to year
favorable opinions from the Fund's independent accountants with respect to its
activities hereunder in connection with the preparation of the Fund's Form N-1A,
and Form N-SAR or other annual reports to the SEC and with respect to any other
requirements thereof.
SECTION 12. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the Portfolios at
such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a U.S. Securities
System or a Foreign Securities System (either, a "SECURITIES SYSTEM"), relating
to the services provided by the Custodian under this Agreement; such reports,
shall be of sufficient scope and in sufficient detail, as may reasonably be
required by the Fund to provide reasonable assurance that any material
inadequacies would be disclosed by such examination, and, if there are no such
inadequacies, the reports shall so state.
SECTION 13. COMPENSATION OF CUSTODIAN
In consideration for its services hereunder, the Fund will pay to Custodian the
compensation set forth in a separate fee schedule, incorporated herein by
reference, to be agreed to in writing by the Fund and Custodian from time to
time, and, upon demand, reimbursement for reasonable out-of-pocket costs and
expenses incurred by Custodian in connection with the performance of services
hereunder, such reimbursements to be made thirty (30) days from receipt of
Custodian's statements by the Fund. Custodian agrees that all reimbursable
travel expenses will be subject to a corporate travel policy designed to manage
such expenses at a commercially reasonable level.
SECTION 14. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable care, the
Custodian shall not be responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or delivered by it pursuant
to this Agreement and shall be held harmless in acting upon any notice, request,
consent, certificate or other instrument reasonably believed by it to be genuine
and to be signed by the proper party or parties, including any futures
commission merchant acting pursuant to the terms of a three-party futures or
options agreement. The
19
Custodian shall be held to the exercise of reasonable care in carrying out the
provisions of this Agreement, but shall be kept indemnified by and shall be
without liability to the Fund for any action taken or omitted by it in good
faith without negligence, bad faith or willful misconduct, including, without
limitation, acting in accordance with any Proper Instruction. It shall be
entitled to rely on and may act upon advice of counsel that is reasonably
competent in such matters (who may be counsel for the Fund) and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian shall be without liability to the Fund and the Portfolios for any
loss, liability, claim or expense resulting from or caused by anything which is
part of Country Risk (as defined in Section 3 hereof), including without
limitation nationalization, expropriation, currency restrictions, or acts of
war, revolution, riots or terrorism.
Except as may arise from the Custodian's own negligence or willful misconduct or
the negligence or willful misconduct of a sub-custodian or agent, the Custodian
shall be without liability to the Fund for any loss, liability, claim or expense
resulting from or caused by; (i) events or circumstances beyond the reasonable
control of the Custodian or any sub-custodian or Securities System or any agent
or nominee of any of the foregoing, including, without limitation, the
interruption, suspension or restriction of trading on or the closure of any
securities market, power or other mechanical or technological failures or
interruptions, computer viruses or communications disruptions, work stoppages,
natural disasters, or other similar events or acts; (ii) errors by the Fund or
its duly-authorized investment manager or investment advisor in their
instructions to the Custodian provided such instructions have been in accordance
with this Agreement; (iii) the insolvency of or acts or omissions by a
Securities System; (iv) any delay or failure of any broker, agent or
intermediary, central bank or other commercially prevalent payment or clearing
system to deliver to the Custodian's sub-custodian or agent securities purchased
or in the remittance or payment made in connection with securities sold; (v) any
delay or failure of any company, corporation, or other body in charge of
registering or transferring securities in the name of the Custodian, the Fund,
the Custodian's sub-custodians, nominees or agents or any consequential losses
arising out of such delay or failure to transfer such securities including
non-receipt of bonus, dividends and rights and other accretions or benefits;
(vi) delays or inability to perform its duties due to any disorder in market
infrastructure with respect to any particular security or Securities System; and
(vii) 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.
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian (as defined in Section 4 hereof) to the same extent as set forth
with respect to sub-custodians generally in this Agreement.
If the Fund on behalf of a Portfolio requires the Custodian to take any action
with respect to securities, which action involves the payment of money or which
action may, in the opinion of the Custodian, result in the Custodian or its
nominee assigned to the Fund or the Portfolio being liable for the payment of
money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
20
If the Fund requires the Custodian, its affiliates, subsidiaries or agents, to
advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) or in
the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable Portfolio shall
be security therefor and should the Fund fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain reimbursement.
The Custodian shall timely deliver such management reports as the parties
mutually agree upon. In no event shall either party be liable for indirect,
special or consequential damages.
SECTION 15. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Agreement shall become effective as of its execution and shall continue in
full force and effect for a period of three (3 ) years from that date (the
"Initial Term"). Following the Initial Term, this Agreement may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than sixty (60) days
after the date of such delivery or mailing. In addition, either party may
terminate this Agreement with immediate effect at any time upon written notice
if:
1) The other party shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against such
party seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee, or other similar official for it or for any
substantial part of its property; or such party shall take any
corporate action to authorize any of the preceding actions;
2) The other party shall commit any material breach hereunder, which
breach, although capable of remedy within sixty (60) days, has not been
remedied by such party within sixty (60) days after receipt of written
notice specifying the nature of the breach, provided that the parties
shall have completed the escalation procedure described in Section 29
below;
3) The other party shall commit any material breach hereunder, which
breach cannot be remedied with reasonable efforts within sixty (60)
days after receipt of written notice specifying the nature of the
breach; provided, that if within such sixty (60) day period the other
party has commenced and is diligently pursuing efforts to remedy such
breach, such party shall have a reasonable period of time in which to
effect a remedy; provided further,
21
that the parties shall have completed the escalation procedure
described in Section 29 below; or
4) The other party shall commit any act of fraud or willful or
intentional misconduct in the performance of its obligations hereunder.
Upon termination of the Agreement, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as
may be due as of the date of such termination and shall likewise
reimburse the Custodian for its reasonable costs, expenses and
disbursements.
Upon the termination of this Agreement for any reason, and provided that
Custodian and the Fund agree in writing upon the compensation to be paid by the
Fund, for a period of up to six (6) months Custodian will perform such services
as the parties in good faith agree in writing are reasonably necessary to
facilitate the orderly transfer of the Fund's assets and the functions,
responsibilities, tasks and operations comprising the services provided by
Custodian hereunder to the successor custodian ("Services Transfer Assistance").
Notwithstanding the foregoing, Custodian shall not be required to disclose any
proprietary or confidential material to any successor custodian or other third
party, nor shall it be required to obtain or develop any data not produced as
part of the services hereunder. Services Transfer Assistance shall be in
addition to the continued provision by Custodian of the services hereunder.
Notwithstanding anything contained in this Agreement to the contrary, the term
of this Agreement and the fee schedule shall continue in full force and effect
so long as Custodian provides the Services Transfer Assistance. In the event of
a termination by Custodian due to the Fund's material breach of this Agreement,
all compensation and reimbursable expenses of Custodian shall be payable by the
Fund in advance.
This Agreement may be amended at any time by mutual agreement of the parties
hereto. The Fund shall not amend or terminate this Agreement in contravention of
any applicable federal or state regulations, or any provision of the Fund's
Declaration of Trust.
SECTION 16. SUCCESSOR CUSTODIAN
If a successor custodian for one or more Portfolios shall be appointed by the
Board, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities of each applicable Portfolio then held by it hereunder
and shall transfer to an account of the successor custodian all of the
securities of each such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in like
manner, upon receipt of a Certified Resolution, deliver at the office of the
Custodian and transfer such securities, funds and other properties in accordance
with such resolution.
In the event that no written order designating a successor custodian or
Certified Resolution shall have been delivered to the Custodian on or before the
date when such termination shall become effective, then the Custodian shall have
the right to deliver to a bank or trust company, which is a "bank" as defined in
the 1940 Act, doing business in Boston, Massachusetts, or New York, New York, of
its own selection, having an aggregate capital, surplus, and undivided profits,
as shown
22
by its last published report, of not less than $25,000,000, all securities,
funds and other properties held by the Custodian on behalf of each applicable
Portfolio and all instruments held by the Custodian relative thereto and all
other property held by it under this Agreement on behalf of each applicable
Portfolio, and to transfer to an account of such successor custodian all of the
securities of each such Portfolio held in any Securities System. Thereafter,
such bank or trust company shall be the successor of the Custodian under this
Agreement.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the Certified Resolution to appoint a successor
custodian, the Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such securities, funds
and other properties and the provisions of this Agreement relating to the duties
and obligations of the Custodian shall remain in full force and effect.
SECTION 17. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Agreement, the Custodian and the Fund
on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Agreement as
may in their joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Fund's Declaration of Trust. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Agreement.
SECTION 18. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in addition
to the portfolios listed on Exhibit A with respect to which it desires to have
the Custodian render services as custodian under the terms hereof, it shall so
notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Portfolio hereunder.
SECTION 19. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted under
and in accordance with laws of The Commonwealth of Massachusetts.
SECTION 20. PRIOR AGREEMENTS
This Agreement supersedes and terminates, as of the date hereof, all prior
Agreements between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
23
SECTION 21. NOTICES.
Any notice, instruction or other instrument required to be given hereunder may
be delivered in person to the offices of the parties as set forth herein during
normal business hours or delivered prepaid registered mail or by telex, cable or
telecopy to the parties at the following addresses or such other addresses as
may be notified by any party from time to time.
To the Fund: FIFTH THIRD FUNDS
00 Xxxxxxxx Xxxxxx Xxxxx
XX 0000X0
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
Telephone: 000.000.0000
Telecopy: 513.534.4312
To the Custodian: STATE STREET BANK AND TRUST COMPANY
000 Xxxxxxxxxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
Attention: Vice President, Fifth Third Funds Services
Telephone: 000-000-0000
Telecopy: 000-000-0000
Such notice, instruction or other instrument shall be deemed to have been served
in the case of a registered letter at the expiration of five business days after
posting, in the case of cable twenty-four hours after dispatch and, in the case
of telex, immediately on dispatch and if delivered outside normal business hours
it shall be deemed to have been received at the next time after delivery when
normal business hours commence and in the case of cable, telex or telecopy on
the business day after the receipt thereof. Evidence that the notice was
properly addressed, stamped and put into the post shall be conclusive evidence
of posting.
SECTION 22. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, addenda, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
SECTION 23. [INTENTIONALLY OMITTED].
SECTION 24. SHAREHOLDER COMMUNICATIONS ELECTION
SEC Rule 14b-2 requires banks that hold securities for the account of customers
to respond to requests by issuers of securities for the names, addresses and
holdings of beneficial owners of
24
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
accounts established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and address for any purpose
other than corporate communications. Please indicate below whether the Fund
consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name, address, and
share positions.
NO [X] The Custodian is not authorized to release the Fund's name, address,
and share positions.
SECTION 25. MASSACHUSETTS BUSINESS TRUST.
The parties expressly agree that the obligations of the Fund hereunder shall not
be binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Fund personally, but shall bind only the trust property of the
Fund. The execution and delivery of this Agreement have been authorized by the
Trustees, and this Agreement has been signed and delivered by an authorized
officer of the Fund, acting as such, and neither such authorization by the
Trustees nor such execution and deliver by such officer shall be deemed to have
been made by any of them individually or to impose any liability on them
personally, but shall bind only the trust property of the Fund as provided in
the Fund's Declaration of Trust.
SECTION 26. DISASTER RECOVERY
The Custodian shall implement and maintain reasonable disaster recovery and
business continuity procedures that are reasonably designed to recover data
processing systems, data communications facilities, information, data and other
business related functions of the Custodian in a manner and time frame
consistent with legal, regulatory and business requirements applicable to the
Custodian in its provision of services hereunder. In the event of any disaster
which causes a business interruption, the Custodian shall act in good faith and
take reasonable steps to minimize service interruptions.
SECTION 27. XXXXXXXX-XXXXX COMPLIANCE
Upon request of the Fund, the Custodian will provide to the Fund in connection
with any periodic annual or semi-annual shareholder report filed by the Fund or,
in the absence of the filing of such reports, on a quarterly basis, a
sub-certification pursuant to the Xxxxxxxx-Xxxxx Act of 2002 with respect to the
Custodian's performance of the services set forth in this Agreement and its
internal controls related thereto. The Custodian reserves the right to amend and
update its
25
sub-certifications provided hereunder from time to time in order to address
changing regulatory and industry developments.
SECTION 28. ASSIGNMENT
Except as otherwise set forth herein, this Agreement may not be assigned by
either party without the written consent of the other; however, this Agreement
shall be binding on and shall inure to the benefit of State Street and the Fund
and their respective successors and permitted assigns. State Street shall have
the right to delegate and sub-contract for the performance of any or all of its
duties hereunder, provided that State Street shall remain responsible for the
performance of such duties and all the terms and conditions hereof shall
continue to apply as though State Street performed such duties itself.
SECTION 29. ESCALATION PROCEDURE
In the event of a claim by either party alleging that the other party has failed
to fulfill its duties and obligations under this Agreement in a material
respect, or any other material dispute relating to this Agreement, the matter
may be referred by the aggrieved party by written notice to the other party to a
Joint Services Committee ("JSC"), consisting of an equal number of
representatives appointed to represent each party. The purpose of a referral to
the JSC shall be to attempt in good faith to resolve the matter referred to it,
which may include, without limitation:
(a) developing and overseeing the implementation of agreed-upon
operational changes necessary to resolve the matter;
(b) approving and overseeing the implementation of alternative policies
and procedures which meet the parties' respective business
requirements; and/or
(c) otherwise finding a mutually agreed-upon solution.
If the JSC cannot agree in writing within thirty (30) days of its first meeting
on a course of action to resolve the matter, or if despite implementation of the
JSC's recommendations, a party still consistently fails to meet in a material
respect its duties and obligations under this Agreement that were the subject of
the consultation, or fails to meet any revised obligations agreed upon as a
result of the consultation, then the aggrieved party may, by written notice to
the other party, refer the matter for attempted resolution to a group consisting
of the senior business and relationship management officers of each party
("Executive Officers"). The Executive Officers shall meet as promptly as
reasonably possible after the notice is received and shall negotiate in good
faith to attempt to resolve the matter within thirty (30) days of the date of
the referral.
[Rest of Page Intentionally Left Blank]
26
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative.
FIFTH THIRD FUNDS FUND SIGNATURE ATTESTED TO BY:
By: /s/ E. Xxxxx Xxxxx By: /s/ Xxxxxxx Xxxxxxxxx
Name: E. Xxxxx Xxxxx Name: Xxxxxxx Xxxxxxxxx
Title: President Title: Secretary
STATE STREET BANK AND TRUST COMPANY SIGNATURE ATTESTED TO BY:
By: /s/ Xxxx Xxxxxxxxx By: /s/ Xxxxxx Xxx
Name: Xxxx Xxxxxxxxx Name: Xxxxxx Xxx
Title: Vice President Title: Vice President
27
Exhibit A
List of Funds
Fifth Third Small Cap Growth Fund
Fifth Third Mid Cap Growth Fund
Fifth Third Quality Growth Fund
Fifth Third Large Cap Core Fund
Fifth Third Equity Index Fund
Fifth Third Balanced Fund
Fifth Third Micro Cap Value Fund
Fifth Third Small Cap Value Fund
Fifth Third Multi Cap Value Fund
Fifth Third Disciplined Large Cap Value Fund
Fifth Third Strategic Income Fund
Fifth Third Dividend Growth Fund
Fifth Third Technology Fund
Fifth Third International Equity Fund
Fifth Third LifeModel Aggressive FundSM
Fifth Third LifeModel Moderately Aggressive FundSM
Fifth Third LifeModel Moderate FundSM
Fifth Third LifeModel Moderately Conservative FundSM
Fifth Third LifeModel Conservative FundSM
Fifth Third High Yield Bond Fund
Fifth Third Bond Fund
Fifth Third Intermediate Bond Fund
Fifth Third Short Term Bond Fund
Fifth Third U.S. Government Bond Fund
Fifth Third Municipal Bond Fund
Fifth Third Intermediate Municipal Bond Fund
Fifth Third Ohio Municipal Bond Fund
Fifth Third Michigan Municipal Bond Fund
Fifth Third Prime Money Market Fund
Fifth Third Institutional Money Market Fund
Fifth Third Institutional Government Money Market Fund
Fifth Third Government Money Market Fund
Fifth Third U.S. Treasury Money Market Fund
Fifth Third Michigan Municipal Money Market Fund
Fifth Third Municipal Money Market Fund
Fifth Third Ohio Tax Exempt Money Market Fund
