CUSTODIAN AGREEMENT
AGREEMENT made as of this 1st day of October, 1999, between LSA VARIABLE
SERIES TRUST, a business trust organized under the laws of the state of Delaware
(the "Trust"), and INVESTORS BANK & TRUST COMPANY, a Massachusetts trust company
(the "Bank").
The Trust, an open-end management investment company, on behalf of the
funds listed on APPENDIX A hereto (as such APPENDIX A may be amended from time
to time) (each a "Fund" and collectively, the "Funds"), desires to place and
maintain all of its Fund securities and cash in the custody of the Bank. The
Bank has at least the minimum qualifications required by Section 17(f)(1) of the
Investment Company Act of 1940 (the "1940 Act") to act as custodian of the Fund
securities and cash of the Trust, and has indicated its willingness to so act,
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. BANK APPOINTED CUSTODIAN. The Trust hereby appoints the Bank as
custodian of its Fund securities and cash delivered to the Bank as hereinafter
described and the Bank agrees to act as such upon the terms and conditions
hereinafter set forth. For the services rendered pursuant to this Agreement the
Trust agrees to pay to the Bank the fees set forth on APPENDIX B hereto.
2. DEFINITIONS. Whenever used herein, the terms listed below will have the
following meaning:
2.1 AUTHORIZED PERSON. Authorized Person will mean any of the persons
duly authorized to give Proper Instructions or otherwise act on behalf of the
Trust by appropriate resolution of its Board, and set forth in a certificate as
required by Section 4 hereof.
2.2 BOARD. Board will mean the Board of Trustees of the Trust.
2.3 SECURITY. The term security as used herein will have the same
meaning assigned to such term in the Securities Act of 1933, as amended,
including, without limitation, any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any profit
sharing agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign currency, or, in general, any interest or instrument commonly known as
a "security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.4 FUND SECURITY. Fund Security will mean any security owned by the
Trust.
2.5 OFFICERS' CERTIFICATE. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Trust.
2.6 BOOK-ENTRY SYSTEM. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.7 DEPOSITORY. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 ("Exchange
Act"), its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor or successors and its nominee
or nominees, specifically identified in a certified copy of a resolution of the
Board.
2.8 PROPER INSTRUCTIONS. Proper Instructions shall mean (i) instructions
regarding the purchase or sale of Fund Securities, and payments and deliveries
in connection therewith, given by an Authorized Person, such instructions to be
given in such form and manner as the Bank and the Trust shall agree upon from
time to time, and (ii) instructions (which may be continuing instructions)
regarding other matters signed or initialed by an Authorized Person. Oral
instructions will be considered Proper Instructions if the Bank reasonably
believes them to have been given by an Authorized Person. The Trust shall cause
all oral instructions to be promptly confirmed in writing. The Bank shall act
upon and comply with any subsequent Proper Instruction which modifies a prior
instruction and the sole obligation of the Bank with respect to any follow-up or
confirmatory instruction shall be to make reasonable efforts to detect any
discrepancy between the original instruction and such confirmation and to report
such discrepancy to the Trust. The Trust shall be responsible, at the Trust's
expense, for taking any action, including any reprocessing, necessary to correct
any such discrepancy or error, and to the extent such action requires the Bank
to act, the Trust shall give the Bank specific Proper Instructions as to the
action required. Upon receipt by the Bank of an Officers' Certificate as to the
authorization by the Board accompanied by a detailed description of procedures
approved by the Trust, Proper Instructions may include communication effected
directly between electro-mechanical or electronic devices provided that the
Board and the Bank agree in writing that such procedures afford adequate
safeguards for the Trust's assets.
3. SEPARATE ACCOUNTS. If the Trust has more than one series or Fund, the
Bank will segregate the assets of each series or Fund to which this Agreement
relates into a separate account for each such series or Fund containing the
assets of such series or Fund (and all investment earnings thereon). Unless the
context otherwise requires, any reference in this Agreement to any actions to be
taken by the Trust shall be deemed to refer to the Trust acting on behalf of one
or more of its series, any reference in this Agreement to any assets of the
Trust, including, without limitation, any Fund securities and cash and earnings
thereon, shall be deemed to refer only to assets of the applicable series, any
duty or obligation of the Bank hereunder to the Trust shall be deemed to refer
to duties and obligations with respect to such individual series and any
obligation or liability of the Trust hereunder shall be binding only with
respect to such individual series, and shall be discharged only out of the
assets of such series.
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4. CERTIFICATION AS TO AUTHORIZED PERSONS. The Secretary or Assistant
Secretary of the Trust will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
members of the Board, it being understood that upon the occurrence of any change
in the information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or Assistant
Secretary of the Trust will sign a new 6r amended certification setting forth
the change and the new, additional or omitted names or signatures. The Bank will
be entitled to rely and act upon any Officers' Certificate given to it by the
Trust which has been signed by Authorized Persons named in the most recent
certification received by the Bank.
5. CUSTODY OF CASH. As custodian for the Trust, the Bank will open and
maintain a separate account or accounts in the name of the Trust or in the name
of the Bank, as custodian of the Trust, and will deposit to the account of the
Trust all of the cash of the Trust, except for cash held by a subcustodian
appointed pursuant to Sections 14.2 or 14.3 hereof, including borrowed Trusts,
delivered to the Bank, subject only to draft or order by the Bank acting
pursuant to the terms of this Agreement. Pursuant to the Bank's internal
policies regarding the management of cash accounts, the Bank may segregate
certain portions of the cash of the Trust into a separate savings deposit
account upon which the Bank reserves the right to require seven (7) days notice
prior to withdrawal of cash from such an account. Upon receipt by the Bank of
Proper Instructions (which may be continuing instructions) or in the case of
payments for redemptions and repurchases of outstanding shares of common stock
of the Trust, notification from the Trust's transfer agent as provided in
Section 7, requesting such payment, designating the payee or the account or
accounts to which the Bank will release funds for deposit, and stating that it
is for a purpose permitted under the terms of this Section 5, specifying the
applicable subsection, the Bank will make payments of cash held for the accounts
of the Trust, insofar as funds are available for that purpose, only as permitted
in subsections 5.1-5.9 below.
5.1 PURCHASE OF SECURITIES. Upon the purchase of securities for the
Trust, against contemporaneous receipt of such securities by the Bank or against
delivery of such securities to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs registered in the name of the Trust or in the name of, or
properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of Book Entry Paper (as
that term is defined in Section 6.6 here6f)) of purchase of the securities
received by the Bank before such payment is made, as confirmed in the Proper
Instructions received by the Bank before such payment is made.
5.2 REDEMPTIONS. In such amount as may be necessary for the repurchase
or redemption of common shares of the Trust offered for repurchase or redemption
in accordance with Section 7 of this Agreement.
5.3 DISTRIBUTIONS AND EXPENSES OF TRUST. For the payment on the account
of the Trust of dividends or other distributions to shareholders as may from
time to time be declared by the Board, interest, taxes, management or
supervisory fees, distribution fees, fees of the Bank for its services hereunder
and reimbursement of the expenses and liabilities of the Bank as provided
hereunder, fees of any transfer agent, fees for legal, accounting, and auditing
services, or other operating expenses of the Trust.
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5.4 PAYMENT IN RESPECT OF SECURITIES. For payments in connection with
the conversion, exchange or surrender of Fund Securities or securities
subscribed to by the Trust held by or to be delivered to the Bank.
5.5 REPAYMENT OF LOANS. To repay loans of money made to the Trust, but,
in the case of final payment, only upon redelivery to the Bank of any Fund
Securities pledged or hypothecated therefor and upon surrender of documents
evidencing the loan.
5.6 REPAYMENT OF CASH. To repay the cash delivered to the Trust for the
purpose of collateralizing the obligation to return to the Trust certificates
borrowed from the Trust representing Fund Securities, but only upon redelivery
to the Bank of such borrowed certificates.
5.7 FOREIGN EXCHANGE TRANSACTIONS.
(a) For payments in connection with foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future delivery
(collectively, "Foreign Exchange Agreements") which may be entered into by the
Bank on behalf of the Trust upon the receipt of Proper Instructions. If such
Proper Instructions specify the currency broker or banking institution (which
may be the Bank, or any other subcustodian or agent hereunder, acting as
principal) with which the contract or option is made, and the Bank did not have
discretion in choosing such currency broker or banking institutions, the Bank,
in its capacity as custodian for the Trust, shall have no duty with respect to
the selection of such currency brokers or banking institutions with which the
Trust deals or for their failure to comply with the terms of any contract or
option.
(b) In order to secure any payments in connection with Foreign
Exchange Agreements which may be entered into by the Bank pursuant to Proper
Instructions, the Fund agrees that the Bank, in its capacity as a lending
institution in advancing such payments on behalf of the Fund, shall have a
continuing lien and security interest, to the extent of any payment due under
any Foreign Exchange Agreement, in and to any property at any time held by the
Bank for the Fund's benefit or in which the Fund has an interest and which is
then in the Bank's possession or control (or in the possession or control of any
third party acting on the Bank's behalf). The Fund authorizes the Bank, in the
Bank's sole discretion, at any time to charge any such payment due under any
Foreign Exchange Agreement against any balance of account standing to the credit
of the Fund on the Bank's books.
5.8 OTHER AUTHORIZED PAYMENTS. For other authorized transactions of the
Trust, or other obligations of the Trust incurred for proper Trust purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Trust, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper corporate purpose.
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5.9 TERMINATION. Upon the termination of this Agreement as hereinafter
set forth pursuant to Section 8 and Section 16 of this Agreement.
6. SECURITIES.
6.1 SEGREGATION AND REGISTRATION. Except as otherwise provided herein,
and except for securities to be delivered to any subcustodian appointed pursuant
to Sections 14.2 or 14.3 hereof, the Bank as custodian will receive and hold
pursuant to the provisions hereof; in a separate account or accounts and
physically segregated at all times from those of other persons, any and all Fund
Securities which may now or hereafter be delivered to it by or for the account
of the Trust. All such Fund Securities will be held or disposed of by the Bank
for, and subject at all times to, the instructions of the Trust pursuant to the
terms of this Agreement. Subject to the specific provisions herein relating to
Fund Securities that are not physically held by the Bank, the Bank will register
all Fund Securities (unless otherwise directed by Proper Instructions or an
Officers' Certificate), in the name of a registered nominee of the Bank as
defined in the Internal Revenue Code and any Regulations of the Treasury
Department issued thereunder, and will execute and deliver all such certificates
in connection therewith as may be required by such laws or regulations or under
the laws of any state.
The Trust will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any Fund Securities which may
from time to time be registered in the name of the Trust.
6.2 VOTING AND PROXIES. Neither the Bank nor any nominee of the Bank
will vote any of the Fund Securities held hereunder, except in accordance with
Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Trust all notices,
proxies and proxy soliciting materials delivered to the Bank with respect to
such Securities, such proxies to be executed by the registered holder of such
Securities (if registered otherwise than in the name of the Trust), but without
indicating the manner in which such proxies are to be voted.
6.3 CORPORATE ACTION. If at any time the Bank is notified that an issuer
of any Fund Security has taken or intends to take a corporate action (a
"Corporate Action") that affects the rights, privileges, powers, preferences,
qualifications or ownership of a Fund Security, including without limitation,
liquidation, consolidation, merger, recapitalization, reorganization,
reclassification, subdivision, combination, stock split or stock dividend, which
Corporate Action requires an affirmative response or action on the part of the
holder of such Fund Security (a "Response"), the Bank shall notify the Trust
promptly of the Corporate Action, the Response required in connection with the
Corporate Action and the Bank's deadline for receipt from the Trust of Proper
Instructions regarding the Response (the "Response Deadline"). The Bank shall
forward to the Trust via telecopier and/or overnight courier all notices,
information statements or other materials relating to the Corporate Action
promptly after receipt of such materials by the Bank.
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(a) The Bank shall act upon a required Response only after receipt
by the Bank of Proper Instructions from the Trust no later than 5:00 p.m. on the
date specified as the Response Deadline and only if the Bank (or its agent or
subcustodian hereunder) has actual possession of all necessary Securities,
consents and other materials no later than 5:00 p.m. on the date specified as
the Response Deadline.
(b) The Bank shall have no duty to act upon a required Response if
Proper Instructions relating to such Response and all necessary Securities,
consents and other materials are not received by and in the possession of the
Bank no later than 5:00 p.m. on the date specified as the Response Deadline.
Notwithstanding, the Bank may, in its sole discretion, use its best efforts to
act upon a Response for which Proper Instructions and/or necessary Securities,
consents or other materials are received by the Bank after 5:00 p.m. on the date
specified as the Response Deadline, it being acknowledged and agreed by the
parties that any undertaking by the Bank to use its best efforts in such
circumstances shall in no way create any duty upon the Bank to complete such
Response prior to its expiration.
(c) In the event that the Trust notifies the Bank of a Corporate
Action requiring a Response and the Bank has received no other notice of such
Corporate Action, the Response Deadline shall be 48 hours prior to the Response
expiration time set by the depository processing such Corporate Action.
(d) Section 14.3(e) of this Agreement shall govern any Corporate
Action involving Foreign Fund Securities held by a Selected Foreign
Sub-Custodian.
6.4 BOOK-ENTRY SYSTEM. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits of Trust
assets in the Book-Entry System, and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may keep Fund Securities in the Book-Entry System
provided that such Fund Securities are represented in an account ("Account") of
the Bank (or its agent) in such System which shall not include any assets of the
Bank (or such agent) other than assets held as a fiduciary, custodian, or
otherwise for customers;
(b) The records of the Bank (and any such agent) with respect to the
Trust's participation in the Book-Entry System through the Bank (or any such
agent) will identify by book entry the Fund Securities which are included with
other securities deposited in the Account and shall at all times during the
regular business hours of the Bank (or such agent) be open for inspection by
duly authorized officers, employees or agents of the Trust. Where securities are
transferred to the Trust's account, the Bank shall also, by book entry or
otherwise, identify as belonging to the Trust a quantity of securities in a
fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities purchased for
the account of the Trust or shall pay cash collateral against the return of Fund
Securities loaned by the Trust upon (i) receipt of advice from the Book-Entry
System that such Securities have been transferred to the Account, and (ii) the
making of an entry on the records of the Bank (or its agent) to reflect such
payment and transfer for the account of the Trust. The Bank (or its agent) shall
transfer securities sold or loaned for the account of the Trust upon:
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(i) receipt of advice from the Book-Entry System that payment for
securities sold or payment of the initial cash collateral against the delivery
of securities loaned by the Trust has been transferred to the Account; and
(ii) the making of an entry on the records of the Bank (or its
agent) to reflect such transfer and payment for the account of the Trust. Copies
of all advices from the Book-Entry System of transfers of securities for the
account of the Trust shall identify the Trust, be maintained for the Trust by
the Bank and shall be provided to the Trust at its request. The Bank shall send
the Trust a confirmation, as defined by Rule 17f4 of the 1940 Act, of any
transfers to or from the account of the Trust; and
(d) The Bank will promptly provide the Trust with any report
obtained by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Book-Entry System.
6.5 USE OF A DEPOSITORY. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits in DTC or
other such Depository and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Fund Securities including stock
dividends, rights and other items of like nature, and to receive and remit to
the Bank on behalf of the Trust all income and other payments thereon and to
take all steps necessary and proper in connection with the collection thereof;
(b) Registration of Fund Securities may be made in the name of any
nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made through
the clearing medium employed by such Depository for transactions of participants
acting through it. Upon any purchase of Fund Securities, payment will be made
only upon delivery of the securities to or for the account of the Trust and the
Trust shall pay cash collateral against the return of Fund Securities loaned by
the Trust only upon delivery of the Securities to or for the account of the
Trust; and upon any sale of Fund Securities, delivery of the Securities will be
made only against payment therefor or, in the event Fund Securities are loaned,
delivery of Securities will be made only against receipt of the initial cash
collateral to or for the account of the Trust; and
(d) The Bank shall use its best efforts to provide that:
(i) The Depository obtains replacement of any certificated Fund
Security deposited with it in the event such Security is lost, destroyed,
wrongfully taken or otherwise not available to be returned to the Bank upon its
request;
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(ii) Proxy materials received by a Depository with respect to
Fund Securities deposited with such Depository are forwarded immediately to the
Bank for prompt transmittal to the Trust;
(iii) Such Depository promptly forwards to the Bank confirmation
of any purchase or sale of Fund Securities and of the appropriate book entry
made by such Depository to the Trust's account;
(iv) Such Depository prepares and delivers to the Bank such
records with respect to the performance of the Bank's obligations and duties
hereunder as may be necessary for the Trust to comply with the recordkeeping
requirements of Section 31(a) of the 1940 Act and Rule 31(a) thereunder; and
(v) Such Depository delivers to the Bank all internal accounting
control reports, whether or not audited by an independent public accountant, as
well as such other reports as the Trust may reasonably request in order to
verify the Fund Securities held by such Depository.
6.6 USE OF BOOK-ENTRY SYSTEM FOR COMMERCIAL PAPER. Provided (i) the Bank
has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Trust has purchased such Issuer's Book-Entry
Paper, the Bank shall issue and hold in book-entry form, on behalf of the Trust,
commercial paper issued by issuers with whom the Bank has entered into a
book-entry agreement (the "Issuers"). In maintaining procedures for Book-Entry
Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by the Trust in
an account of the Bank that includes only assets held by it for customers;
(b) The records of the Bank with respect to the Trust's purchase of
Book-Entry Paper through the Bank will identify, by book-entry, commercial paper
belonging to the Trust which is included in the Book-Entry System and shall at
all times during the regular business hours of the Bank be open for inspection
by duly authorized officers, employees or agents of the Trust;
(c) The Bank shall pay for Book-Entry Paper purchased for the
account of the Trust upon contemporaneous (i) receipt of advice from the Issuer
that such sale of Book-Entry Paper has been effected, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for the
account of the Trust;
(d) The Bank shall cancel such Book-Entry Paper obligation upon the
maturity thereof upon contemporaneous (i) receipt of advice that payment for
such Book-Entry Paper has been transferred to the Trust, and (ii) the making of
an entry on the records of the Bank to reflect such payment for the account of
the Trust; and
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(e) The Bank will send to the Trust such reports on its system of
internal accounting control with respect to the Book-Entry Paper as the Trust
may reasonably request from time to time.
6.7 [RESERVED]
6.8 EURODOLLAR CDS. Any Fund Securities which are Eurodollar CDs may be
physically held by the European branch of the U.S. banking institution that is
the issuer of such Eurodollar CD (a "European Branch"), provided that such Fund
Securities are identified on the books of the Bank as belonging to the Trust and
that the books of the Bank identify the European Branch holding such Fund
Securities. Notwithstanding any other provision of this Agreement to the
contrary, except as stated in the first sentence of this subsection 6.8, the
Bank shall be under no other duty with respect to such Eurodollar CDs belonging
to the Trust.
6.9 OPTIONS AND FUTURES TRANSACTIONS.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
(i) The Bank shall take action as to put options ("puts") and
call options ("calls") purchased or sold (written) by the Trust regarding escrow
or other arrangements (i) in accordance with the provisions of any agreement
entered into upon receipt of Proper Instructions among the Bank, any
broker-dealer registered with the National Association of Securities Dealers,
Inc. (the "NASD"), and, if necessary, the Trust, relating to the compliance with
the rules of the Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or organizations.
(ii) Unless another agreement requires it to do so, the Bank
shall be under no duty or obligation to see that the Trust has deposited or is
maintaining adequate margin, if required, with any broker in connection with any
option, nor shall the Bank be under duty or obligation to present such option to
the broker for exercise unless it receives Proper Instructions from the Trust.
The Bank shall have no responsibility for the legality of any put or call
purchased or sold on behalf of the Trust, the propriety of any such purchase or
sale, or the adequacy of any collateral delivered to a broker in connection with
an option or deposited to or withdrawn from a Segregated Account (as defined in
subsection 6.10 below). The Bank specifically, but not by way of limitation,
shall not be under any duty or obligation to: (i) periodically check or notify
the Trust that the amount of such collateral held by a broker or held in a
Segregated Account is sufficient to protect such broker or the Trust against any
loss; (ii) effect the return of any collateral delivered to a broker; or (iii)
advise the Trust that any option it holds, has or is about to expire. Such
duties or obligations shall be the sole responsibility of the Trust.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Trust in accordance with the
provisions of any agreement entered into upon the receipt of Proper Instructions
among the Trust, the Bank and a Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in connection with
transactions by the Trust.
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(ii) The responsibilities of the Bank as to futures, puts and
calls traded on commodities exchanges, any Futures Commission Merchant account
and the Segregated Account shall be limited as set forth in subparagraph (a)(ii)
of this Section 6.9 as if such subparagraph referred to Futures Commission
Merchants rather than brokers, and Futures and puts and calls thereon instead of
options.
6.10 SEGREGATED ACCOUNT. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Trust.
(a) Cash and/or Fund Securities may be transferred into a Segregated
Account upon receipt of Proper Instructions in the following circumstances:
(i) in accordance with the provisions of any agreement among the
Trust, the Bank and a broker-dealer registered under the Exchange Act and a
member of the NASD or any Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Options
Clearing Corporation and of any registered national securities exchange or the
Commodity Futures Trading Commission or any registered Contract Market, or of
any similar organizations regarding escrow or other arrangements in connection
with transactions by the Trust;
(ii) for the purpose of segregating cash or securities in
connection with options purchased or written by the Trust or commodity futures
purchased or written by the Trust;
(iii) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Trust's then
outstanding forward commitment or "when-issued" agreements relating to the
purchase of Fund Securities and all the Trust's then outstanding commitments
under reverse repurchase agreements entered into with broker-dealer firms;
(iv) for the purposes of compliance by the Trust with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies; or
(v) for other proper corporate purposes, but only, in the case of
this clause (v), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board signed by an officer of the Trust
and certified by the Secretary or an Assistant Secretary, setting for the
purpose or purposes of such Segregated Account and declaring such purposes to be
proper corporate purposes.
(b) Cash and/or Fund Securities may be withdrawn from a Segregated
Account pursuant to Proper Instructions in the following circumstances:
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(i) with respect to assets deposited in accordance with the
provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (a)(iii) or
(a)(iv) above, for sale or delivery to meet the Trust's obligations under
outstanding forward commitment or when-issued agreements for the purchase of
Fund Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or greater
value deposited in the Segregated Account;
(iv) to the extent that the Trust's outstanding forward
commitment or when-issued agreements for the purchase of Fund Securities or
reverse repurchase agreements are sold to other parties or the Trust's
obligations thereunder are met from assets of the Trust other than those in the
Segregated Account;
(v) for delivery upon settlement of a forward commitment or
when-issued agreement for the sale of Fund Securities; or
(vi) with respect to assets deposited pursuant to (a)(v) above,
in accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 INTEREST BEARING CALL OR TIME DEPOSITS. The Bank shall, upon
receipt of Proper Instructions relating to the purchase by the Trust of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated in
such Proper Instructions. The Bank shall include in its records with respect to
the assets of the Trust appropriate notation as to the amount of each such
deposit, the banking institution with which such deposit is made (the "Deposit
Bank"), and shall retain such forms of advice or receipt evidencing the deposit,
if any, as may be forwarded to the Bank by the Deposit Bank. Such deposits shall
be deemed Fund Securities of the Trust and the responsibility of the Bank
therefore shall be the same as and no greater than the Bank's responsibility in
respect of other Fund Securities of the Trust.
6.12 TRANSFER OF SECURITIES. The Bank will transfer, exchange, deliver
or release Fund Securities held by it hereunder, insofar as such Securities are
available for such purpose, provided that before making any transfer, exchange,
delivery or release under this Section only upon receipt of Proper Instructions.
The Proper Instructions shall state that such transfer, exchange or delivery is
for a purpose permitted under the terms of this Section 6.12, and shall specify
the applicable subsection, or describe the purpose of the transaction with
sufficient particularity to permit the Bank to ascertain the applicable
subsection. After receipt of such Proper Instructions, the Bank will transfer,
exchange, deliver or release Fund Securities only in the following
circumstances:
(a) Upon sales of Fund Securities for the account of the Trust,
against contemporaneous receipt by the Bank of payment therefor in full, or
against payment to the Bank in accordance with generally accepted settlement
practices and customs in the jurisdiction or market in which the transaction
occurs, each such payment to be in the amount of the sale price shown in a
broker's confirmation of sale received by the Bank before such payment is made,
as confirmed in the Proper Instructions received by the Bank before such payment
is made;
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(b) In exchange for or upon conversion into other securities alone
or other securities and cash pursuant to any plan of merger, consolidation,
reorganization, share split-up, change in par value, recapitalization or
readjustment or otherwise, upon exercise of subscription, purchase or sale or
other similar rights represented by such Fund Securities, or for the purpose of
tendering shares in the event of a tender offer therefor, provided, however,
that in the event of an offer of exchange, tender offer, or other exercise of
rights requiring the physical tender or delivery of Fund Securities, the Bank
shall have no liability for failure to so tender in a timely manner unless such
Proper Instructions are received by the Bank at least two business days prior to
the date required for tender, and unless the Bank (or its agent or subcustodian
hereunder) has actual possession of such Security at least two business days
prior to the date of tender;
(c) Upon conversion of Fund Securities pursuant to their terms into
other securities;
(d) For the purpose of redeeming in-kind shares of the Trust upon
authorization from the Trust;
(e) In the case of option contracts owned by the Trust, for
presentation to the endorsing broker;
(f) When such Fund Securities are called, redeemed or retired or
otherwise become payable;
(g) For the purpose of effectuating the pledge of Fund Securities
held by the Bank in order to collateralize loans made to the Trust by any bank,
including the Bank; provided, however, that such Fund Securities will be
released only upon payment to the Bank for the account of the Trust of the
moneys borrowed, provided further, however, that in cases where additional
collateral is required to secure a borrowing already made, and such fact is made
to appear in the Proper Instructions, Fund Securities may be released for that
purpose without any such payment. In the event that any pledged Fund Securities
are held by the Bank, they will be so held for the account of the lender, and
after notice to the Trust from the lender in accordance with the normal
procedures of the lender and any loan agreement between the Trust and the lender
that an event of deficiency or default on the loan has occurred, the Bank may
deliver such pledged Fund Securities to or for the account of the lender;
(h) for the purpose of releasing certificates representing Fund
Securities, against contemporaneous receipt by the Bank of the fair market value
of such security, as set forth in the Proper Instructions received by the Bank
before such payment is made;
(i) for the purpose of delivering securities lent by the Trust to a
bank or broker dealer, but only against receipt in accordance with street
delivery custom except as otherwise provided herein, of adequate collateral as
agreed upon from time to time by the Trust and the Bank, and upon receipt of
payment in connection with any repurchase agreement relating to such securities
entered into by the Trust;
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(j) for other authorized transactions of the Trust or for other
proper corporate purposes; provided that before making such transfer, the Bank
will also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Trust (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Fund Securities to be delivered, setting forth the transaction in or purpose
for which such delivery is to be made, declaring such transaction to be an
authorized transaction of the Trust or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 16 of this Agreement.
With the exception of subsection 6.12(k), as to any deliveries made by the
Bank pursuant to this Section 6.12, securities or cash receivable in exchange
therefor shall be delivered to the Bank.
7. REDEMPTIONS. In the case of payment of assets of the Trust held by the
Bank in connection with redemptions and repurchases by the Trust of outstanding
common shares, the Bank will rely on notification by the Trust's transfer agent
of receipt of a request for redemption and certificates, if issued, in proper
form for redemption before such payment is made. Payment shall be made in
accordance with the Declaration of Trust (the "Declaration") and By-laws of the
Trust (the "By-laws"), from assets available for said purpose.
8. MERGER. DISSOLUTION. ETC. OF TRUST. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Trust into or the consolidation of the Trust with another investment company,
the sale by the Trust of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Trust and
distribution of its assets, the Bank will deliver the Fund Securities held by it
under this Agreement and disburse cash only upon the order of the Trust set
forth in an Officers' Certificate, accompanied by a certified copy of a
resolution of the Board authorizing any of the foregoing transactions. Upon
completion of such delivery and disbursement and the payment of the fees,
disbursements and expenses of the Bank, this Agreement will terminate and the
Bank shall be released from any and all obligations hereunder.
9. ACTIONS OF BANK WITHOUT PRIOR AUTHORIZATION. Notwithstanding anything
herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, the Bank will take the following actions without
prior authorization or instruction of the Trust or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name of
the Trust all checks, drafts, or other negotiable or transferable instruments or
other orders for the payment of money received by it for the account of the
Trust and hold for the account of the Trust all income, dividends, interest and
other payments or distributions of cash with respect to the Fund Securities held
thereunder;
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9.2 Present for payment all coupons and other income items held by it
for the account of the Trust which call for payment upon presentation and hold
the cash received by it upon such payment for the account of the Trust;
9.3 Receive and hold for the account of the Trust all securities
received as a distribution on Fund Securities as a result of a stock dividend,
share split-up, reorganization, recapitalization, merger, consolidation,
readjustment, distribution of rights and similar securities issued with respect
to any Fund Securities held by it hereunder;
9.4 Execute as agent on behalf of the Trust all necessary ownership and
other certificates and affidavits required by the Internal Revenue Code or the
regulations of the Treasury Department issued thereunder, or by the laws of any
state, now or hereafter in effect, inserting the Trust's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof.
The Bank will execute and deliver such certificates in connection with Fund
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any State;
9.5 Present for payment all Fund Securities which are called, redeemed,
retired or otherwise become payable, and hold cash received by it upon payment
for the account of the Trust; and
9.6 Exchange interim receipts or temporary securities for definitive
securities.
10. COLLECTIONS AND DEFAULTS. The Bank will use reasonable efforts to
collect any funds which may to its knowledge become collectible arising from
Fund Securities, including dividends, interest and other income, and to transmit
to the Trust notice actually received by it of any call for redemption, offer of
exchange, right of subscription, reorganization or other proceedings affecting
such Securities. If Fund Securities upon which such income is payable are in
default or payment is refused after due demand or presentation, the Bank will
notify the Trust in writing of any default or refusal to pay within two business
days from the day on which it receives knowledge of such default or refusal.
11. MAINTENANCE OF RECORDS AND ACCOUNTING SERVICES. The Bank will maintain
records with respect to transactions for which the Bank is responsible pursuant
to the terms and conditions of this Agreement, and in compliance with the
applicable rules and regulations of the 1940 Act. The books and records of the
Bank pertaining to its actions under this Agreement and reports by the Bank or
its independent accountants concerning its accounting system, procedures for
safeguarding securities and internal accounting controls will be open to
inspection and audit at reasonable times by officers of or auditors employed by
the Trust and will be preserved by the Bank in the manner and in accordance with
the applicable rules and regulations under the 1940 Act. In the event of the
termination of this Agreement, it is the obligation of the Bank to promptly
deliver to the Trust the books and records with respect to transactions for
which the Bank is responsible pursuant to the terms and conditions of this
Agreement.
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The Bank shall perform fund accounting and shall keep the books of account
and render statements or copies from time to time as reasonably requested by the
Treasurer or any executive officer of the Trust.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the 1940 Act and the Rules thereunder, the Bank agrees
that all such records prepared or maintained by the Bank relating to the
services to be performed by the Bank hereunder are the confidential property of
the Trust and will be preserved, maintained and made available in accordance
with such Section and Rules, and will be surrendered to the Trust on and in
accordance with its request.
12. TRUST EVALUATION AND YIELD CALCULATION
12.1 TRUST EVALUATION. The Bank shall compute and, unless otherwise
directed by the Board, determine as of the close of regular trading on the New
York Stock Exchange on each day on which said Exchange is open for unrestricted
trading and as of such other days, or hours, if any, as may be authorized by the
Board, the net asset value and the public offering price of a share of capital
stock of the Trust, such determination to be made in accordance with the
provisions of the Declaration and By-laws and the Prospectus and Statement of
Additional Information relating to the Trust, as they may from time to time be
amended, and any applicable resolutions of the Board at the time in force and
applicable; and promptly to notify the Trust, the proper exchange and the NASD
or such other persons as the Trust may request of the results of such
computation and determination. In computing the net asset value hereunder, the
Bank may rely in good faith upon information furnished to it by any Authorized
Person in respect of (i) the manner of accrual of the liabilities of the Trust
and in respect of liabilities of the Trust not appearing on its books of account
kept by the Bank, (ii) reserves, if any, authorized by the Board or that no such
reserves have been authorized, (iii) the source of the quotations to be used in
computing the net asset value, (iv) the value to be assigned to any security for
which no price quotations are available, and (v) the method of computation of
the public offering price on the basis of the net asset value of the shares, and
the Bank shall not be responsible for any loss occasioned by such reliance or
for any good faith reliance on any quotations received from a source pursuant to
(iii) above.
12.2. YIELD CALCULATION. The Bank will compute the performance results
of the Trust (the "Yield Calculation") in accordance with the provisions of
Release No. 33-6753 and Release No. IC-16245 (February 2, 1988) (the "Releases")
promulgated by the Securities and Exchange Commission, and any subsequent
amendments to, published interpretations of or general conventions accepted by
the staff of the Securities and Exchange Commission with respect to such
releases or the subject matter thereof ("Subsequent Staff Positions"), subject
to the terms set forth below:
(a) The Bank shall compute the Yield Calculation for the Trust for
the stated periods of time as shall be mutually agreed upon, and communicate in
a timely manner the result of such computation to the Trust.
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(b) In performing the Yield Calculation, the Bank will derive the
items of data necessary for the computation from the records it generates and
maintains for the Trust pursuant Section 11 hereof. The Bank shall have no
responsibility to review, confirm, or otherwise assume any duty or liability
with respect to the accuracy or correctness of any such data supplied to it by
the Trust, any of the Trust's designated agents or any of the Trust's designated
third party providers.
(c) At the request of the Bank, the Trust shall provide, and the
Bank shall be entitled to rely on, written standards and guidelines to be
followed by the Bank in interpreting and applying the computation methods set
forth in the Releases or any Subsequent Staff Positions as they specifically
apply to the Trust. In the event that the computation methods in the Releases or
the Subsequent Staff Positions or the application to the Trust of a standard or
guideline is not free from doubt or in the event there is any question of
interpretation as to the characterization of a particular security or any aspect
of a security or a payment with respect thereto (e.g., original issue discount,
participating debt security, income or return of capital, etc.) or otherwise or
as to any other element of the computation which is pertinent to the Trust, the
Trust or its designated agent shall have the full responsibility for making the
determination of how the security or payment is to be treated for purposes of
the computation and how the computation is to be made and shall inform the Bank
thereof on a timely basis. The Bank shall have no responsibility to make
independent determinations with respect to any item which is covered by this
Section, and shall not be responsible for its computations made in accordance
with such determinations so long as such computations are mathematically
correct.
(d) The Trust shall keep the Bank informed of all publicly available
information and of any non-public advice, or information obtained by the Trust
from its independent auditors or by its personnel or the personnel of its
investment adviser, or Subsequent Staff Positions related to the computations to
be undertaken by the Bank pursuant to this Agreement and the Bank shall not be
deemed have knowledge of such information (except as contained in the Releases)
unless it has been furnished to the Bank in writing.
13. ADDITIONAL SERVICES. The Bank shall perform the additional services for
the Trust as are set forth on APPENDIX C hereto. APPENDIX C may be amended from
time to time upon agreement of the parties to include further additional
services to be provided by the Bank to the Trust, at which time the fees set
forth in APPENDIX B may be appropriately increased.
14. DUTIES OF THE BANK.
14.1 PERFORMANCE OF DUTIES AND STANDARD OF CARE. In performing its
duties hereunder and any other duties listed on any Schedule hereto, if any, the
Bank will be entitled to receive and act upon the advice of independent counsel
of its own selection, which may be counsel for the Trust, and will be without
liability for any action taken or thing done or omitted to be done in accordance
with this Agreement in good faith in conformity with such advice.
The Bank will be under no duty or obligation to inquire into and will
not be liable for:
(a) the validity of the issue of any Fund Securities purchased by or
for the Trust, the legality of the purchases thereof or the propriety of the
price incurred therefor;
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(b) the legality of any sale of any Fund Securities by or for the
Trust or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of the
Trust or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of the Trust
or the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by a Fund or the
legality of the distribution of any Fund Securities as payment in kind of such
dividend; and
(f) any property or moneys of the Trust unless and until received by
it, and any such property or moneys delivered or paid by it pursuant to the
terms hereof.
Moreover, the Bank will not be under any duty or obligation to ascertain
whether any Fund Securities at any time delivered to or held by it for the
account of the Trust are such as may properly be held by the Trust under the
provisions of its Declaration, By-laws, any federal or state statutes or any
rule or regulation of any governmental agency.
14.2 AGENTS AND SUBCUSTODIANS WITH RESPECT TO PROPERTY OF THE TRUST HELD
IN THE UNITED STATES.
The Bank may employ agents of its own selection in the performance of
its duties hereunder and shall be responsible for the acts and omissions of such
agents as if performed by the Bank hereunder. Without limiting the foregoing,
certain duties of the Bank hereunder may be performed by one or more affiliates
of the Bank.
Upon receipt of Proper Instructions, the Bank may employ subcustodians
selected by or at the direction of the Trust, provided that any such
subcustodian meets at least the minimum qualifications required by Section
17(f)(1) of the 1940 Act to act as a custodian of the Trust's assets with
respect to property of the Trust held in the United States. The Bank shall have
no liability to the Fund or any other person by reason of any act or omission of
any such subcustodian and the Fund shall indemnify the Bank and hold it harmless
from and against any and all actions, suits and claims, arising directly or
indirectly out of the performance of any such subcustodian. Upon request of the
Bank, the Trust shall assume the entire defense of any action, suit, or claim
subject to the foregoing indemnity. The Trust shall pay all fees and expenses of
any such subcustodian.
14.3 DUTIES OF THE BANK WITH RESPECT TO PROPERTY OF THE TRUST HELD
OUTSIDE OF THE UNITED STATES.
(a) APPOINTMENT OF FOREIGN CUSTODY MANAGER
(i) If the Trust has appointed the Bank Foreign Custody Manager
(as that term is defined in Rule 17f-5 under the 1940 Act), the Bank's duties
and obligations with respect to the Trust's Fund Securities and other assets
maintained outside the United States shall be, to the extent not set forth
herein, as set forth in the Delegation Agreement between the Trust and the Bank
(the "Delegation Agreement").
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(ii) If the Trust has appointed any other person or entity
Foreign Custody Manager, the Bank shall act only upon Proper Instructions from
the Trust with regard to any of the Trust's Fund Securities or other assets held
or to be held outside of the United States, and the Bank shall be without
liability for any Claim (as that term is defined in Section 15 hereof) arising
out of maintenance of the Trust's Fund Securities or other assets outside of the
United States. The Trust also agrees that it shall enter into a written
agreement with such Foreign Custody Manager that shall obligate such Foreign
Custody Manager to provide to the Bank in a timely manner all information
required by the Bank in order to complete its obligations hereunder. The Bank
shall not be liable for any Claim arising out of the failure of such Foreign
Custody Manager to provide such information to the Bank.
(b) SEGREGATION OF SECURITIES. The Bank shall identify on its books
as belonging to the Trust the Foreign Fund Securities held by each foreign
sub-custodian (each an "Eligible Foreign Custodian") selected by the Foreign
Custody Manager, subject to receipt by the Bank of the necessary information
from such Eligible Foreign Custodian if the Foreign Custody Manager is not the
Bank.
(c) ACCESS OF INDEPENDENT ACCOUNTANTS OF THE TRUST. If the Bank is
the Trust's Foreign Custody Manager, upon request of the Trust, the Bank will
use its best efforts to arrange for the independent accountants of the Trust to
be afforded access to the books and records of any foreign banking institution
employed as an Eligible Foreign Custodian insofar as such books and records
relate to the performance of such foreign banking institution with regard to the
Trust's Fund Securities and other assets.
(d) REPORTS BY BANK. If the Bank is the Trust's Foreign Custody
Manager, the Bank will supply to the Trust the reports required under the
Delegation Agreement.
(e) TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. Transactions with
respect to the assets of the Trust held by an Eligible Foreign Custodian shall
be effected pursuant to Proper Instructions from the Trust to the Bank and shall
be effected in accordance with the applicable agreement between the Foreign
Custody Manager and such Eligible Foreign Custodian. If at any time any Foreign
Fund Securities shall be registered in the name of the nominee of the Eligible
Foreign Custodian, the Trust agrees to hold any such nominee harmless from any
liability by reason of the registration of such securities in the name of such
nominee.
Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for Foreign Fund Securities received for the account of
the Trust and delivery of Foreign Fund Securities maintained for the account of
the Trust may be effected in accordance with the customary established
securities trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivering securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such purchaser
or dealer.
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In connection with any action to be taken with respect to the
Foreign Fund Securities held hereunder, including, without limitation, the
exercise of any voting rights, subscription rights, redemption rights, exchange
rights, conversion rights or tender rights, or any other action in connection
with any other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Trust such
information in connection therewith as is made available to the Bank by the
Eligible Foreign Custodian, and shall promptly forward to the applicable
Eligible Foreign Custodian any instructions, forms or certifications with
respect to such Rights, and any instructions relating to the actions to be taken
in connection therewith, as the Bank shall receive from the Trust pursuant to
Proper Instructions. Notwithstanding the foregoing, the Bank shall have no
further duty or obligation with respect to such Rights, including, without
limitation, the determination of whether the Trust is entitled to participate in
such Rights under applicable U.S. and foreign laws, or the determination of
whether any action proposed to be taken with respect to such Rights by the Trust
or by the applicable Eligible Foreign Custodian will comply with all applicable
terms and conditions of any such Rights or any applicable laws or regulations,
or market practices within the market in which such action is to be taken or
omitted.
(f) TAX LAW. The Bank shall have no responsibility or liability for
any obligations now or hereafter imposed on the Trust or the Bank as custodian
of the Trust by the tax laws of any jurisdiction, and it shall be the
responsibility of the Trust to notify the Bank of the obligations imposed on the
Trust or the Bank as the custodian of the Trust by the tax law of any non-U.S.
jurisdiction, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The sole responsibility of the Eligible Foreign Custodian with regard
to such tax law shall be to use reasonable efforts to assist the Trust with
respect to any claim for exemption or refund under the tax law of jurisdictions
for which the Trust has provided such information.
14.4 INSURANCE. The Bank shall use the same care with respect to the
safekeeping of Fund Securities and cash of the Trust held by it as it uses in
respect of its own similar property but it need not maintain any special
insurance for the benefit of the Trust.
14.5. FEES AND EXPENSES OF THE BANK. The Trust will pay or reimburse the
Bank from time to time for any transfer taxes payable upon transfer of Fund
Securities made hereunder, and for all necessary proper disbursements, expenses
and charges made or incurred by the Bank in the performance of this Agreement
(including any duties listed on any Schedule hereto, if any) including any
indemnities for any loss, liabilities or expense to the Bank as provided above.
For the services rendered by the Bank hereunder, the Trust will pay to the Bank
such compensation or fees at such rate and at such times as shall be agreed upon
in writing by the parties from time to time. The Bank will also be entitled to
reimbursement by the Trust for all reasonable expenses incurred in conjunction
with termination of this Agreement.
14.6 ADVANCES BY THE BANK. The Bank may, in its sole discretion, advance
funds on behalf of the Trust to make any payment permitted by this Agreement
upon receipt of any proper authorization required by this Agreement for such
payments by the Trust. Should such a payment or payments, with advanced funds,
result in an overdraft (due to insufficiencies of the Trust's account with the
Bank, or for any other reason) this Agreement deems any such overdraft or
related indebtedness a loan made by the Bank, in its capacity as a lending
institution, to the Trust payable on demand. Such overdraft shall bear interest
at the current rate charged by the Bank for such loans unless the Trust shall
provide the Bank with agreed upon compensating balances. The Fund agrees that
the Bank, in its capacity as a lending institution, shall have a continuing lien
and security interest to the extent of any overdraft or indebtedness and to the
extent required by law, in and to any property at any time held by it for the
Fund's benefit or in which the Fund has an interest and which is then in the
Bank's possession or control (or in the possession or control of any third party
acting on the Bank's behalf). The Trust authorizes the Bank, in the Bank's sole
discretion, at any time to charge any overdraft or indebtedness, together with
interest due thereon, against any balance of account standing to the credit of
the Trust on the Bank's books.
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15. LIMITATION OF LIABILITY.
15.1 LIMITATION OF BANK LIABILITY. Notwithstanding anything in this
Agreement to the contrary, in no event shall the Bank or any of its officers,
directors, employees or agents (collectively, the "Indemnified Parties") be
liable to the Trust or any third party, and the Trust shall indemnify and hold
the Bank and the Indemnified Parties harmless from and against any and all loss,
damage, liability, actions, suits, claims, costs and expenses, including legal
fees, (a "Claim") arising as a result of any act or omission of the Bank or any
Indemnified Party under this Agreement, except for any Claim resulting solely
from the negligence, willful misfeasance or bad faith of the Bank or any
Indemnified Party. Without limiting the foregoing, neither the Bank nor the
Indemnified Parties shall be liable for, and the Bank and the Indemnified
Parties shall be indemnified against, any Claim arising as a result of:
(a) Any act or omission by the Bank or any Indemnified Party in good
faith reliance upon the terms of this Agreement, any Officer's Certificate,
Proper Instructions, resolution of the Board, telegram, telecopier, notice,
request, certificate or other instrument reasonably believed by the Bank to
genuine;
(b) Any act or omission of any subcustodian selected by or at the
direction of the Trust;
(c) Any act or omission of any Foreign Custody Manager other than
the Bank or any act or omission of any Eligible Foreign Custodian if the Bank is
not the Foreign Custody Manager;
(d) Any Corporate Action, distribution or other event related to
Fund Securities which, at the direction of the Trust, have not been registered
in the name of the Bank or its nominee;
(e) Any Corporate Action requiring a Response for which the Bank has
not received Proper Instructions or obtained actual possession of all necessary
Securities, consents or other materials by 5:00 p.m. on the date specified as
the Response Deadline;
(f) Any act or omission of any European Branch of a U.S. banking
institution that is the issuer of Eurodollar CDs in connection with any
Eurodollar CDs held by such European Branch; or
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(g) Information relied on in good faith by the Bank and supplied by
any Authorized Person in connection with the calculation of (i) the net asset
value and public offering price of the shares of capital stock of the Trust or
(ii) the Yield Calculation.
15.2 LIMITATION OF TRUST LIABILITY. The Bank shall indemnify and hold
the Trust harmless from and against any and all losses, damages, costs, charges,
legal fees, payments, expenses and liability arising out of or attributed to any
action or failure or omission to act by the Bank as a result of the negligence,
willful misfeasance or bad faith of the Bank or any Indemnified Party.
15.3 CONSEQUENTIAL DAMAGES.
(a) Notwithstanding anything to the contrary in this Agreement, in
no event shall the Bank or the Indemnified Parties be liable to the Trust or any
third party for lost profits or lost revenues or any special, consequential,
punitive or incidental damages of any kind whatsoever in connection with this
Agreement or any activities hereunder.
(b) Notwithstanding anything to the contrary in this Agreement, in
no event shall the Trust or the Trust Indemnified Parties be liable to the Bank
or any third party for lost profits or lost revenues or any special,
consequential, punitive or incidental damages of any kind whatsoever in
connection with this Agreement or any activities hereunder.
15.4 FORCE MAJEURE. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
earthquakes, fires, floods, storms or other disturbances of nature, epidemics,
strikes, riots, nationalization, expropriation, currency restrictions, acts of
war, civil war or terrorism, insurrection, nuclear fusion, fission or radiation,
the interruption, loss or malfunction of utilities, transportation or computers
(hardware or software) and computer facilities, the unavailability of energy
sources and other similar happenings or events, such party shall not be liable
to the other for compensation nor for any damages resulting from such failure to
perform or otherwise from such causes.
16. TERMINATION.
16.1 The term of this Agreement shall be three years commencing upon the
date hereof (the "Initial Term"), unless earlier terminated as provided herein.
After the expiration of the Initial Term, the term of this Agreement shall
automatically renew for successive one-year terms (each a "Renewal Term") unless
notice of non-renewal is delivered by the non-renewing party to the other party
no later than ninety days prior to the expiration of the Initial Term or any
Renewal Term, as the case may be.
(a) Either party hereto may terminate this Agreement prior to the
expiration of the Initial Term in the event the other party violates any
material provision of this Agreement, provided that the non-violating party
gives written notice of such violation to the violating party and the violating
party does not cure such violation within forty-five (45) days of receipt of
such notice.
21
(b) If, during the Initial Term of this Agreement, a state or
Federal statutory or regulatory change shall occur such that the sale of
variable products by insurance companies generally is no longer feasible (and
such change is evidenced by changes in the sales practices for variable products
across the insurance industry) and as a result, the Board of Trustees of the
Fund votes to liquidate the Fund and terminate its registration with the
Securities and Exchange Commission, written notice (the "Liquidation Notice") of
such determination setting forth the reasons for such determination shall be
provided to the Bank. In order to be effective, any Liquidation Notice must be
executed by two officers of the Fund. The Bank shall, within seven days of
receipt of such a Liquidation Notice, reply to the Fund as to whether it agrees
that the terms of the Liquidation Notice meet the requirements of this
paragraph, which agreement shall not be unreasonably withheld. Upon such
agreement, the Fund may terminate this Agreement without additional action by
the Fund's Board upon an additional sixty (60) days written notice.
Should this Agreement be terminated in accordance with the terms of
this paragraph, the Fund shall pay to the Bank, in lieu of the fees for which
the Fund would otherwise be liable to the Bank hereunder through the end of the
Initial Term, the following amounts:
i. If during the first year of the Initial Term the Fund shall pay to the
Bank an amount equal to the fees that would otherwise be due under
this Agreement through the last day of the eighteenth month of the
Initial Term, WITHOUT giving effect to the discount provided on the
first years' fees set forth in Appendix B;
ii. If during the second year of the Initial Term the Fund shall pay to
the Bank an amount equal to the fees that would otherwise be due under
this Agreement through the last day of the second year of the Initial
Term;
iii. If during the third year of the Initial Term the Fund shall pay to the
Bank an amount equal to the fees that would otherwise be due under
this Agreement through the end of the Initial Term.
(c) Either party may terminate this Agreement during any Renewal
Term upon ninety days written notice to the other party. Any termination
pursuant to this paragraph 16.1(b) shall be effective upon expiration of such
ninety days, provided, however, that the effective date of such termination may
be postponed to a date not more than one hundred twenty days after delivery of
the written notice: (i) at the request of the Bank, in order to prepare for the
transfer by the Bank of all of the assets of the Trust held hereunder; or (ii)
at the request of the Trust, in order to give the Trust an opportunity to make
suitable arrangements for a successor custodian.
16.2 In the event of the termination of this Agreement, the Bank will
immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Fund Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Trust. The obligation of the Bank to deliver and transfer over the assets of the
Trust held by it directly to such successor custodian will commence as soon as
such successor is appointed and will continue until completed as aforesaid. If
the Trust does not select a successor custodian within ninety (90) days from the
date of delivery of notice of termination the Bank may, subject to the
provisions of subsection 16.3, deliver the Fund Securities and cash of the Trust
held by the Bank to a bank or trust company of the Bank's own selection which
meets the requirements of Section 17(f)(1) of the 1940 Act and has a reported
capital, surplus and undivided profits aggregating not less than $2,000,000, to
be held as the property of the Trust under terms similar to those on which they
were held by the Bank, whereupon such bank or trust company so selected by the
Bank will become the successor custodian of such assets of the Trust with the
same effect as though selected by the Board. Thereafter, the Bank shall be
released from any and all obligations under this Agreement.
22
16.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Trust may furnish the Bank with an order of the
Trust advising that a successor custodian cannot be found willing and able to
act upon reasonable and customary terms and that there has been submitted to the
shareholders of the Trust the question of whether the Trust will be liquidated
or will function without a custodian for the assets of the Trust held by the
Bank. In that event the Bank will deliver the Fund Securities and cash of the
Trust held by it, subject as aforesaid, in accordance with one of such
alternatives which may be approved by the requisite vote of shareholders, upon
receipt by the Bank of a copy of the minutes of the meeting of shareholders at
which action was taken, certified by the Trust's Secretary and an opinion of
counsel to the Trust in form and content satisfactory to the Bank. Thereafter,
the Bank shall be released from any and all obligations under this Agreement.
16.4 The Trust shall reimburse the Bank for any reasonable expenses
incurred by the Bank in connection with the termination of this Agreement and/or
the liquidation or deliverance of the Fund Securities and cash of the Trust to
the successor custodian or other shareholder approved alternative, whatever the
case may be.
16.5 After termination of this Agreement, it is the obligation of the
Bank to promptly deliver to the Trust the records of the Bank relating to its
performance of its duties as custodian.
17. CONFIDENTIALITY. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed without the consent of the other party, except as may be
required by applicable law or at the request of a governmental agency. The
parties further agree that a breach of this provision would irreparably damage
the other party and accordingly agree that each of them is entitled, in addition
to all other remedies at law or in equity to an injunction or injunctions
without bond or other security to prevent breaches of this provision.
18. NOTICES. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered via (I) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, (iii) hand delivery with signature to such party at its office at
the address set forth below, namely:
(a) In the case of notices sent to the Trust to:
23
LSA Variable Series Trust
Allstate Life Insurance Company
0000 Xxxxxxx Xxxx, Xxxxx X0X
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxx Xxxxxxx, Vice President, Chief Operations
Officer
With a copy to: Xxxxxxx X. Xxxxxxx, Secretary, Chief Compliance
Officer
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
000 Xxxxxxxxx Xxxxxx, X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx, Director - Client Management
With a copy to: Xxxx X. Xxxxx, General Counsel
or at such other place as such party may from time to time designate
in writing.
19. AMENDMENTS. This Agreement, its Appendices and Schedules, may not be
altered or amended, except by an instrument in writing, executed by both
parties.
20. PARTIES. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Trust
without the written consent of the Bank or by the Bank without the written
consent of the Trust, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 16 hereof will not be deemed to
be an assignment within the meaning of this provision.
21. GOVERNING LAW. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.
22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
23. ENTIRE AGREEMENT. This Agreement, together with its Appendices,
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any conflicting
terms or provisions of any other instrument and terminates and supersedes any
and all prior agreements and undertakings between the parties relating to the
subject matter herein.
24. LIMITATION OF LIABILITY. The Bank agrees that the obligations assumed
by the Trust hereunder shall be limited in all cases to the assets of the Trust
and that the Bank shall not seek satisfaction of any such obligation from the
officers, agents, employees, trustees, or shareholders of the Trust.
24
25. SEVERAL OBLIGATIONS OF THE FUNDS. This Agreement is an agreement
entered into between the Bank and the Trust with respect to each Fund. With
respect to any obligation of the Trust on behalf of any Fund arising out of this
Agreement, the Bank shall look for payment or satisfaction of such obligation
solely to the assets of the Fund to which such obligation relates as though the
Bank had separately contracted with the Trust by separate written instrument
with respect to each Fund.
26. SEVERABILITY. If any provision of this Agreement is held to be
unenforceable or invalid, that provision shall be severed from this Agreement
and the remainder of this Agreement shall remain in full force and effect.
[Remainder of Page Intentionally Left Blank]
25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
LSA VARIABLE SERIES TRUST
By: /s/ Xxxx X. Xxxxxx
------------------
Name: Xxxx X. Xxxxxx
Title: President
INVESTORS BANK & TRUST COMPANY
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
26
Appendix A
LSA Variable Series Trust
Fund List
IBT
Account Fund Adviser
------ ---- -------
255 Focused Equity Xxxxxx Xxxxxxx Asset Management
260 Growth Equity Xxxxxxx Sachs Asset Management
265 Disciplined Equity XX Xxxxxx Investment Management Inc.
270 Value Equity Salomon Brothees Asset Management Inc.
275 Balanced OpCap Advisors
280 Emerging Growth
Domestic Equity RS Investment Management, L.P.
1
Appendix B
LSA Variable Series Trust
Proposed Fee Schedule*
For 6 Mutual Funds
DOMESTIC CUSTODY, FUND ACCOUNTING,
CALCULATION OF N.A.V.,
ADMINISTRATION AND TRANSFER AGENCY
A. DOMESTIC CUSTODY, FUND ACCOUNTING, CALCULATION OF N.A.V., ADMINISTRATION AND
TRANSFER AGENCY
The following fees will apply to all assets for which Investors Bank
provides Custody, Fund Accounting, calculation of N.A.V., Administration and
Transfer Agency services.
Annual Fee
----------
FIRST $500 MILLION OF NET ASSETS 11.0 Basis Points
NEXT $500 MILLION OF NET ASSETS 9.0 Basis Points
NEXT $500 MILLION OF NET ASSETS 6.0 Basis Points
Assets in excess of $1.5 Billion 4.0 Basis Points
There will be an annual minimum fee of $140,000 per fund. However, to
accommodate the start-up period, first year minimums will be as follows: 1st
Quarter 50%, 2nd Quarter 75%, 3rd Quarter 85%, 4th Quarter and beyond 100%.
B. DOMESTIC TRANSACTIONS
o DTC/Fed Book Entry $10**
o Physical Securities 35
o Options and Futures 18
o GNMA Securities 30
o Principal Paydown 5
o Foreign Currency 18***
o Outgoing Wires 7
o Incoming Wires 5
1
**This assumes that the trade information will be sent to Investors Bank in the
ISITC/SWIFT format. Manual trades will be billed at $12.00 per trade. There are
no transaction charges for use of the Investors Bank Repo.
***There are no transaction charges for F/X contracts executed by Investors
Bank.
C. FOREIGN SUBCUSTODIAN FEES
o Incremental basis point and transaction fees will be charged for
all foreign assets for which we are custodian. The asset based
fees and transaction fees vary by country, based upon the
attached global custody fee schedule. Local duties, script fees,
registration, reclaims, exchange fees, and other market charges
are additional out-of-pocket fees.
o Investors Bank will require the fund to hold all international
assets at the subcustodian of our choice.
MISCELLANEOUS
A. OUT-OF-POCKET
o These charges consist of:
-Legal Expenses -InvestView
-Printing, Delivery & Postage -Forms and Supplies
-Third Party Review -Micro Rental
-Extraordinary Travel Expenses
-Customized Systems Development/Reporting
-International Verification Services($3/security/month)
-Pricing and Verification Services
-Telecommunications
-Support Equipment Rental
-Data Transmissions
-Non Standard Extract
B. DOMESTIC BALANCE CREDIT
o We allow use of balance credit against fees (excluding
out-of-pocket charges) for fund balances arising out of the
custody relationship. The credit is based on collected balances
reduced by balances required to support the activity charges of
the accounts. The monthly earnings allowance is equal to 75% of
the 90-day T-xxxx rate.
2
C. SECURITIES LENDING, FOREIGN EXCHANGE & CASH MANAGEMENT
o The assumption was made that Investors Bank would perform
securities lending, if applicable, foreign exchange and cash
management for the portfolios. Securities Lending revenue is
split with the funds and Investors Bank on a 60/40% basis: 60%
going to the funds.
D. PAYMENT
o The above fees will be charged against the fund's custodian
checking account five business days after the invoice is mailed.
E. SYSTEMS
o The details of any systems work will be determined after a
thorough business analysis. System's work will be billed on a
time and material basis. Investors Bank provides an allowance of
10 system hours for data extract set up and reporting extract set
up. Additional systems hours will be billed on a time and
material basis.
* A LETTER OF INTENT ACCOMPANIED BY A $25,000 DEPOSIT TO BE CREDITED AGAINST
FUTURE FEES IS REQUIRED TO BEGIN THIS IMPLEMENTATION. THIS FEE SCHEDULE IS VALID
FOR 60 DAYS FROM DATE OF ISSUE AND ASSUMES THE EXECUTION OF OUR STANDARD
CONTRACTUAL AGREEMENTS FOR A MINIMUM OF THREE YEARS.
* THIS FEE SCHEDULE IS CONFIDENTIAL INFORMATION OF THE PARTIES AND SHALL NOT BE
DISCLOSED TO ANY THIRD PARTY WITHOUT PRIOR WRITTEN CONSENT OF BOTH PARTIES.
3
