CUSTODIAN AGREEMENT
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This Agreement is made as of December 30, 2004 by and between XXXXXX
BROTHERS INSTITUTIONAL LIQUIDITY SERIES, a business trust organized and existing
under the laws of Delaware (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
("SHARES"), 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 each its
series set forth on Appendix A hereto (such series together with all other
series subsequently established by the Fund and made subject to this Agreement
in accordance with Section 18.5, shall be 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
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The Fund hereby employs the Custodian as a custodian of assets of the
Portfolios, including securities which 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 Custodian shall not be responsible for any property
of a Portfolio which is not received by it or which is delivered out in
accordance with Proper Instructions (as such term is defined in Section 7
hereof) including, without limitation, Portfolio property (i) held by brokers,
private bankers or other entities on behalf of the Portfolio (each a "LOCAL
AGENT"), (ii) held by Special Sub-Custodians (as such term is defined in Section
5 hereof), (iii) held by entities which have advanced monies to or on behalf of
the Portfolio and which have received Portfolio property as security for such
advance(s) (each a "PLEDGEE"), or (iv) delivered or otherwise removed from the
custody of the Custodian pursuant to Special Instructions (as such term is
defined in Section 7 hereof). With respect to uncertificated shares (the
"UNDERLYING SHARES") of registered "investment companies" (as defined in Section
3(a)(1) of the Investment Company Act of 1940, as amended from time to time (the
"1940 ACT")), whether in the same "group of investment companies" (as defined in
Section 12(d)(1)(G)(ii) of the 0000 Xxx) or otherwise, including pursuant to
Section 12(d)(1)(F) of the 1940 Act (hereinafter sometimes referred to as the
"UNDERLYING PORTFOLIOS") the holding of confirmation statements that identify
the shares as being recorded in the Custodian's name on behalf of the Portfolios
will be deemed custody for purposes hereof.
Upon receipt of Proper Instructions, 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), and provided that 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. The Custodian may place and maintain each Fund's foreign securities
with foreign banking institution sub-custodians employed by the Custodian and/or
foreign securities depositories, all as designated in Schedules A and B hereto,
but only in accordance with the applicable provisions of Sections 3 and 4
hereof.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE
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PORTFOLIOS TO BE HELD IN THE UNITED STATES
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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 (a) 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") and (b) Underlying Shares owned by the Fund which are
maintained pursuant to Section 2.10 hereof in an account with State Street Bank
and Trust Company or such other entity which may from time to time act as a
transfer agent for the Underlying Portfolios and with respect to which the
Custodian is provided with Proper Instructions (the "UNDERLYING TRANSFER
AGENT").
SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by the Custodian, in a
U.S. Securities System account of the Custodian or in an account at the
Underlying Transfer Agent, 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
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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 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 (a) against receipt of collateral as agreed from time to
time by the Fund on behalf of the Portfolio, except that in
connection with any loans for which collateral is to be credited to
the Custodian's account in the book-entry system authorized by the
U.S. Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned by the
Portfolio prior to the receipt of such collateral or (b) to the
lending agent, or the lending agent's custodian, in accordance with
written Proper Instructions (which may not provide for the receipt
by the Custodian of collateral therefor) agreed upon from time to
time by the Custodian and the Fund;
11) For delivery as security in connection with any borrowing by the
Fund on behalf of a Portfolio requiring a pledge of assets by the
Fund on behalf of such Portfolio;
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. (the "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
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organizations, regarding escrow or other arrangements in connection
with transactions by the Fund on behalf of a Portfolio;
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 (the "CFTC") and/or any contract market, or any
similar organization or organizations, regarding account deposits in
connection with transactions by the Fund on behalf of a Portfolio;
14) Upon the sale or other delivery of such investments (including,
without limitation, to one or more (a) Special Sub-Custodians or (b)
additional custodians appointed by the Fund, and communicated to the
Custodian from time to time via a writing duly executed by an
authorized officer of the Fund, for the purpose of engaging in
repurchase agreement transactions(s), each a "REPO CUSTODIAN"), and
prior to receipt of payment therefor, as set forth in written Proper
Instructions (such delivery in advance of payment, along with
payment in advance of delivery made in accordance with Section
2.6(7), as applicable, shall each be referred to herein as a "FREE
TRADE"), provided that such Proper Instructions shall set forth (a)
the securities of the Portfolio to be delivered and (b) the
person(s) to whom delivery of such securities shall be made;
15) Upon receipt of instructions from the Fund's transfer agent (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;
16) In the case of a sale processed through the Underlying Transfer
Agent of Underlying Shares, in accordance with Section 2.10 hereof;
and
17) For any other purpose, but only upon receipt of Proper Instructions
from the Fund on behalf of the applicable Portfolio specifying (a)
the securities of the Portfolio to be delivered and (b) the person
or persons to whom delivery of such securities shall be made.
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 management investment
companies having the same investment adviser as the Portfolio, or in the name or
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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 1940
Act. Funds held by the Custodian for a Portfolio may be deposited by it to its
credit as Custodian 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. 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. Except with respect to Portfolio
property released and delivered pursuant to Section 2.2(14) or purchased
pursuant to Section 2.6(7), and 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 thereof and shall credit
such income, as collected, to such Portfolio's custodian account. 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. Income due the Fund on securities loaned pursuant to the provisions
of Section 2.2 (10) shall be the responsibility of the Custodian so long as the
securities are registered and remain in the name of the Fund, the Custodian, or
its nominee, or in the Depository Trust Company account of the Custodian, but
shall otherwise 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 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 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions on
behalf of the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out monies of a
Portfolio in the following cases only:
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1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of
title to such options, 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; (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 a purchase of Underlying
Shares, in accordance with the conditions set forth in Section 2.10
hereof; (d) 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 (e)
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 6 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) For the payment of any dividends on Shares declared pursuant to the
Fund's Certificate of Statutory Trust, Declaration of Trust and
Prospectus, each as my be amended from time to time (collectively,
the "GOVERNING DOCUMENTS");
6) For payment of the amount of dividends received in respect of
securities sold short;
7) Upon the purchase of domestic investments including, without
limitation, repurchase agreement transactions involving delivery of
Portfolio monies to Repo Custodian(s), and prior to receipt of such
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investments, as set forth in written Proper Instructions (such
payment in advance of delivery, along with delivery in advance of
payment made in accordance with Section 2.2(14), as applicable,
shall each be referred to herein as a "FREE TRADE"), provided that
such Proper Instructions shall also set forth (a) the amount of such
payment and (b) the person(s) to whom such payment is made; and
8) For any other purpose, but only upon receipt of Proper Instructions
from the Fund on behalf of the Portfolio specifying (a) the amount
of such payment and (b) the person or persons to whom such payment
is to be made.
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. The Underlying Transfer Agent shall not be deemed an agent or
sub-custodian of the Custodian for purposes of this Section 2.7 or any other
provision of this Agreement.
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 under 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, (a) 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
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, (b) 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, (c) 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 management investment
companies, and (d) for any other purpose in accordance with Proper Instructions.
SECTION 2.10 DEPOSIT OF FUND ASSETS WITH THE UNDERLYING TRANSFER AGENT.
Underlying Shares beneficially owned by the Fund, on behalf of a Portfolio,
shall be deposited and/or maintained in an account or accounts maintained with
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an Underlying Transfer Agent and the Custodian's only responsibilities with
respect thereto shall be limited to the following:
1) Upon receipt of a confirmation or statement from an Underlying
Transfer Agent that such Underlying Transfer Agent is holding or
maintaining Underlying Shares in the name of the Custodian (or a
nominee of the Custodian) for the benefit of a Portfolio, the
Custodian shall identify by book-entry that such Underlying Shares
are being held by it as custodian for the benefit of such Portfolio.
2) In respect of the purchase of Underlying Shares for the account of a
Portfolio, upon receipt of Proper Instructions, the Custodian shall
pay out monies of such Portfolio as so directed, and record such
payment from the account of such Portfolio on the Custodian's books
and records.
3) In respect of the sale or redemption of Underlying Shares for the
account of a Portfolio, upon receipt of Proper Instructions, the
Custodian shall transfer such Underlying Shares as so directed,
record such transfer from the account of such Portfolio on the
Custodian's books and records and, upon the Custodian's receipt of
the proceeds therefor, record such payment for the account of such
Portfolio on the Custodian's books and records.
The Custodian shall not be liable to the Fund for any loss or damage to
the Fund or any Portfolio resulting from the maintenance of Underlying
Shares with an Underlying Transfer Agent except for losses resulting
directly from the fraud, negligence or willful misconduct of the Custodian
or any of its agents or of any of its or their employees.
SECTION 2.11 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 2.12 PROXIES. Except with respect to Portfolio property released
and delivered pursuant to Section 2.2(14), or purchased pursuant to Section
2.6(7), 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, and shall promptly deliver to the
Fund such proxies, all proxy soliciting materials and all notices relating to
such securities.
SECTION 2.13 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Except with
respect to Portfolio property released and delivered pursuant to Section
2.2(14), or purchased pursuant to Section 2.6(7), and 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
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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 Fund on behalf of 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 Fund 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. If the Fund desires to take action with
respect to any tender offer, exchange offer or any other similar transaction,
the Fund shall notify the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
SECTION 2.14 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES
PURCHASED. Except as specifically stated otherwise in this Agreement, in any and
every case where payment for purchase of domestic securities is made by the
Custodian in advance of receipt of the securities purchased in the absence of
specific instructions from the Fund to so pay in advance, the Custodian shall be
absolutely liable to the Fund for such securities to the same extent as if the
securities had been received by the Custodian.
SECTION 3. PROVISIONS RELATING TO RULES 17F-5 AND 17F-7
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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.
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"RULE 17F-7" means Rule 17f-7 promulgated under the 1940 Act.
SECTION 3.2. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
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3.2.1 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The
Fund, by resolution adopted by the Board, hereby delegates to the Custodian,
subject 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 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 applicable
Portfolio(s), 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 such Portfolio(s) 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. 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 such Portfolio 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 with respect
to such Portfolio 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:
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(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).
(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 Board 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.
11
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.
--------------------------------
3.3.1 ANALYSIS AND MONITORING. The Custodian shall (a) provide the
Fund (or its duly-authorized investment manager or investment adviser) 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 adviser) 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 TO BE 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.
12
"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:
(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
13
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 foreign securities prior to receiving payment for such
foreign 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
Fund on behalf of a Portfolio requiring a pledge of assets by the
Fund on behalf of such Portfolio;
(x) In connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(xi) Upon the sale or other delivery of such foreign securities
(including, without limitation, to one or more Special
Sub-Custodians or Repo Custodians) as a Free Trade, provided that
applicable Proper Instructions shall set forth (A) the foreign
securities to be delivered and (B) the person or persons to whom
delivery shall be made;
(xii) In connection with the lending of foreign securities; and
(xiii) For any other purpose, but only upon receipt of Proper Instructions
specifying (A) the foreign securities to be delivered and (B) 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
14
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) In connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(vi) Upon the purchase of foreign investments including, without
limitation, repurchase agreement transactions involving delivery of
Portfolio monies to Repo Custodian(s), as a Free Trade, provided
that applicable Proper Instructions shall set forth (A) the amount
of such payment and (B) the person or persons to whom payment shall
be made;
(vii) For payment of part or all of the dividends received in respect of
securities sold short;
(viii) In connection with the borrowing or lending of foreign securities;
and
(ix) For any other purpose, but only upon receipt of Proper Instructions
specifying (A) the amount of such payment and (B) 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 for such purchaser or dealer) with the expectation of
receiving later payment for such Foreign Assets from such purchaser or dealer.
15
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 and
shall credit such income, as collected, to the applicable Portfolio. 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.
SECTION 4.8 SHAREHOLDER RIGHTS. With respect to the foreign securities
held pursuant to this Section 4, the Custodian shall 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 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.
16
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.
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 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 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 this 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,
17
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. SPECIAL SUB-CUSTODIANS
----------------------
Upon receipt of Special Instructions (as such term is defined in Section 7
hereof), the Custodian shall, on behalf of one or more Portfolios, appoint one
or more banks, trust companies or other entities designated in such Special
Instructions to act as a sub-custodian for the purposes of effecting such
transaction(s) as may be designated by the Fund in Special Instructions. Each
such designated sub-custodian is referred to herein as a "SPECIAL
SUB-CUSTODIAN." Each such duly appointed Special Sub-Custodian shall be listed
on Schedule D hereto, as it may be amended from time to time by the Fund, with
the acknowledgment of the Custodian. In connection with the appointment of any
Special Sub-Custodian, and in accordance with Special Instructions, the
Custodian shall enter into a sub-custodian agreement with the Fund and the
Special Sub-Custodian in form and substance approved by the Fund, provided that
such agreement shall in all events comply with the provisions of the 1940 Act
and the rules and regulations thereunder and the terms and provisions of this
Agreement.
SECTION 6. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES
----------------------------------------------------------
The Custodian shall receive from the distributor of 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 7. PROPER INSTRUCTIONS AND SPECIAL INSTRUCTIONS
--------------------------------------------
"PROPER INSTRUCTIONS," which may also be standing instructions, as such term is
used throughout this Agreement shall mean instructions received by the Custodian
from the Fund, the Fund's duly authorized investment manager or investment
adviser, 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
18
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 from time to time by the Custodian and the person(s) or entity giving
such instruction, 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 via the form of Funds
Transfer Addendum hereto. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to provide 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 which requires a
segregated asset account in accordance with Section 2.9 hereof.
"SPECIAL INSTRUCTIONS," as such term is used throughout this Agreement, means
Proper Instructions countersigned or confirmed in writing by the Treasurer or
any Assistant Treasurer of the Fund or any other person designated in writing by
the Treasurer of the Fund, which countersignature or confirmation shall be (a)
included on the same instrument containing the Proper Instructions or on a
separate instrument clearly relating thereto and (b) delivered by hand, by
facsimile transmission, or in such other manner as the Fund and the Custodian
agree in writing.
Concurrently with the execution of this Agreement, and from time to time
thereafter, as appropriate, the Fund shall deliver to the Custodian, duly
certified by the Fund's Treasurer or Assistant Treasurer, a certificate setting
forth: (i) the names, titles, signatures and scope of authority of all persons
authorized to give Proper Instructions or any other notice, request, direction,
instruction, certificate or instrument on behalf of the Fund and (ii) the names,
titles and signatures of those persons authorized to give Special Instructions.
Such certificate may be accepted and relied upon by the Custodian as conclusive
evidence of the facts set forth therein and shall be considered to be in full
force and effect until receipt by the Custodian of a similar certificate to the
contrary.
SECTION 8. EVIDENCE OF AUTHORITY
---------------------
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper reasonably 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 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. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
-------------------------------------------
19
The Custodian may in its discretion, without express authority from the Fund on
behalf of each applicable Portfolio:
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 10. 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 a 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 Fund acknowledges and agrees that, with respect to investments maintained
with the Underlying Transfer Agent, the Underlying Transfer Agent is the sole
source of information on the number of shares of a fund held by it on behalf of
a Portfolio and that the Custodian has the right to rely on holdings information
furnished by the Underlying Transfer Agent to the Custodian in performing its
duties under this Agreement, including without limitation, the duties set forth
in this Section 10 and in Section 11 hereof; provided, however, that the
Custodian shall be obligated to reconcile information as to purchases and sales
of Underlying Shares contained in trade instructions and confirmations received
by the Custodian and to report promptly any discrepancies to the Underlying
Transfer Agent. 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. The Fund acknowledges that, in keeping the books of
account of the Portfolio and/or making the calculations described herein with
respect to Portfolio property released and delivered pursuant to Section
2.2(14), or purchased pursuant to Section 2.6(7) hereof, the Custodian is
authorized and instructed to rely upon information provided to it by the Fund,
the Fund's counterparty(ies), or the agents of either of them.
20
SECTION 11. 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
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. The Fund acknowledges that, in creating and maintaining the
records as set forth herein with respect to Portfolio property released and
delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7)
hereof, the Custodian is authorized and instructed to rely upon information
provided to it by the Fund, the Fund's counterparty(ies), or the agents of
either of them.
SECTION 12. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
----------------------------------------
The Custodian shall take all reasonable action, as the Fund with respect to a
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 or Form
N-2, as applicable, and Form N-SAR or other annual reports to the SEC and with
respect to any other requirements thereof.
SECTION 13. 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 14. COMPENSATION OF CUSTODIAN
-------------------------
The Custodian shall be entitled to reasonable compensation for its services and
expenses as Custodian, as agreed upon from time to time between the Fund on
behalf of each applicable Portfolio and the Custodian.
SECTION 15. RESPONSIBILITY OF CUSTODIAN
---------------------------
21
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 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, including, without
limitation, acting in accordance with any Proper Instruction. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, 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 adviser 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 act or omission of a Special Sub-Custodian
including, without limitation, reliance on reports prepared by a Special
Sub-Custodian; (v) 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; (vi) 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; (vii) delays or
inability to perform its duties due to any disorder in market infrastructure
with respect to any particular security or Securities System; and (viii) 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.
22
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian (as such term is 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.
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.
In no event shall the Custodian be liable for indirect, special or consequential
damages.
SECTION 16. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
-------------------------------------------
This Agreement shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and 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 thirty (30)
days after the date of such delivery or mailing; provided, however, that 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
Governing Documents, and further provided, that the Fund on behalf of one or
more of the Portfolios may at any time by action of its Board (i) substitute
another bank or trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
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
costs, expenses and disbursements.
SECTION 17. SUCCESSOR CUSTODIAN
-------------------
23
If a successor custodian for one or more Portfolios shall be appointed by the
Board, the Custodian shall, upon termination and receipt of Proper Instructions,
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 or at the Underlying Transfer Agent.
If no such successor custodian shall be appointed, the Custodian shall, in like
manner, upon receipt of Proper Instructions, 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 Proper Instructions designating a successor custodian or
alternative arrangements 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 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 or at the Underlying Transfer Agent. 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 provide Proper Instructions as aforesaid, 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 18. GENERAL
-------
SECTION 18.1 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 18.2 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.
SECTION 18.3 ASSIGNMENT. This Agreement may not be assigned by either
party without the written consent of the other.
24
SECTION 18.4 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 Governing Documents. No interpretive or additional provisions made as
provided in the preceding sentence shall be deemed to be an amendment of this
Agreement.
SECTION 18.5 ADDITIONAL FUNDS. In the event that the Fund establishes one
or more series of Shares in addition to those listed on Appendix A hereto 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 18.6 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: XXXXXX BROTHERS INSTITUTIONAL LIQUIDITY SERIES
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: _________________________
Telephone: (212) __________
Facsimile: (212) __________
To the Custodian: STATE STREET BANK AND TRUST COMPANY
Lafayette Corporate Center, LCC/3N
0 Xxxxxx xx Xxxxxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Vice President
Telephone: 000-000-0000
Facsimile: 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.
25
SECTION 18.7 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all such
counterparts taken together shall constitute one and the same Agreement.
SECTION 18.8 SEVERABILITY. If any provision or provisions of this
Agreement shall be held to be invalid, unlawful or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired.
SECTION 18.9 REPRODUCTION OF DOCUMENTS. This Agreement and all schedules,
addenda, exhibits, appendices, 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 18.10 REMOTE ACCESS SERVICES ADDENDUM. The Custodian and the Fund
agree to be bound by the terms of the Remote Access Services Addendum hereto.
SECTION 18.11 SHAREHOLDER COMMUNICATIONS ELECTION. SEC Rule 14b-2 requires
banks which 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 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 19. LIMITATION OF TRUSTEE, OFFICER AND SHAREHOLDER LIABILITY
--------------------------------------------------------
It is expressly agreed that the obligations of the Fund and each Portfolio
26
hereunder shall not be binding upon any of the Board members, officers, agents
or employees of the Fund or upon the shareholders of any Portfolio personally,
but shall only bind the assets and property of the Fund. The execution and
delivery of this Agreement have been authorized by the Board, and this Agreement
has been executed and delivered by an authorized officer of the Fund acting as
such; neither such authorization by such Board nor such execution and delivery
by such officer shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the
assets and property of the Fund.
SECTION 20. NO LIABILITY OF OTHER PORTFOLIOS
--------------------------------
Notwithstanding any other provision of this Agreement, the parties agree
that the assets and liabilities of each Portfolio are separate and distinct from
the assets and liabilities of each other Portfolio and that no Portfolio shall
be liable or shall be charged for any debt, obligation or liability of any other
Portfolio, whether arising under this Agreement or otherwise.
SECTION 21. CONFIDENTIALITY.
---------------
The Custodian agrees that all non-public books, records, information and
data pertaining to the business of the Fund which are exchanged or received
pursuant to the negotiation or carrying out of this Agreement shall remain
confidential, shall not be disclosed to any other person, except as may be
required by law, regulation or order by a court of competent jurisdiction, and
shall not be used by the Custodian for any purpose not directly related to the
business of the Fund, except with the Fund's written consent. Notwithstanding
the foregoing, the Custodian may aggregate Fund data with similar data of other
customers of the Custodian ("Aggregated Data") and may use Aggregated Data for
purposes of constructing statistical models so long as such Aggregated Data
represents such a sufficiently large sample that no Fund data can be identified
either directly or by inference or implication.
27
SIGNATURE PAGE
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the date first above-written.
Attest: XXXXXX BROTHERS INSTITUTIONAL LIQUIDITY
SERIES
_______________________ By:____________________________
Name: Name:
Title: Title: , Duly Authorized
Attest: STATE STREET BANK AND TRUST COMPANY
____________________ By:________________________________
Xxxxxxxx Xxxxxxxxx Xxxxxx X. Xxxxxx
Vice President and Counsel Executive Vice President
28
APPENDIX A
TO
CUSTODIAN AGREEMENT
Xxxxxx Brothers Institutional Liquidity Fund
Xxxxxx Brothers Prime Money Fund
Xxxxxx Brothers U.S. Treasury Fund
29
SCHEDULE D
TO
CUSTODIAN AGREEMENT
-------------------
SPECIAL SUB-CUSTODIANS
----------------------
None
30
