CUSTODIAN AGREEMENT
This Agreement between WASATCH FUNDS, INC. a corporation organized and
existing under the laws of Minnesota (the "FUND"), and STATE STREET BANK and
TRUST COMPANY, a Massachusetts trust company (the "CUSTODIAN"),
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends that this Agreement be applicable to
its series in existence as of the date of this Agreement (such series together
with all other series subsequently established by the Fund and made subject to
this Agreement in accordance with Section 18, 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
The Fund hereby employs the Custodian as the custodian of the assets
of the Portfolios of the Fund, 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 Fund, on behalf of the Portfolio(s),
agrees to deliver to the Custodian all securities and cash of the Portfolios,
and all payments of income, payments of principal or capital distributions
received by it with respect to all securities owned by the Portfolio(s) from
time to time, and the cash consideration received by it for such new or treasury
shares of beneficial interest of the Fund representing interests in the
Portfolios ("SHARES") as may be issued or sold from time to time. The Custodian
shall not be responsible for any property of a Portfolio held or received by the
Portfolio and not delivered to the Custodian.
Upon receipt of "PROPER INSTRUCTIONS" (as such term is defined in Section 6
hereof), the Custodian shall on behalf of the applicable Portfolio(s) from time
to time employ one or more sub-custodians located in the United States, but only
in accordance with an applicable vote by the Board of Directors of the Fund (the
"BOARD") on behalf of the applicable Portfolio(s). The Custodian may employ as
sub-custodian for the Fund's foreign securities on behalf of the applicable
Portfolio(s) the foreign banking institutions and foreign securities
depositories designated in Schedules A and B hereto, but only in accordance with
the applicable provisions of Sections 3 and 4. The Custodian shall have no more
or less responsibility or liability to the Fund on account of any actions or
omissions of any sub-custodian so employed than any such sub-custodian has to
the Custodian.
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SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD
BY THE CUSTODIAN IN THE UNITED STATES
SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash property, to be held by
it in the United States, including all domestic securities owned by such
Portfolio other than securities which are maintained pursuant to Section 2.8 in
a clearing agency which acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the Treasury (each, a "U.S.
SECURITIES SYSTEM").
SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian only upon receipt of Proper
Instructions on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, and only in the following
cases:
1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a U.S. Securities
System, in accordance with the provisions of Section 2.8
hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodia n 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;
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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, but only against receipt of adequate
collateral as agreed upon from time to time by the Custodian
and the Fund on behalf of the Portfolio, which may be in the
form of cash or obligations issued by the United States
government, its agencies or instrumentalities, 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;
11) For delivery as security in connection with any borrowing by
the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio,
the Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "EXCHANGE ACT") and a
member of The National Association of Securities Dealers, Inc.
("NASD"), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission
("CFTC") and/or any contract market, or any similar
organization or organizations, regarding account deposits
in connection with transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent for the
Fund (the "TRANSFER AGENT") for delivery to such Transfer
Agent or to the holders of Shares in connection with
distributions in kind, as may be described from time to time
in the currently effective prospectus and statement of
additional information of the Fund related to the
Portfolio (the "PROSPECTUS"), in satisfaction of requests
by holders of Shares for repurchase or redemption; and
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15) For any other purpose, but only upon receipt of Proper
Instructions from the Fund on behalf of the applicable
Portfolio specifying the securities of the Portfolio to be
delivered and naming the person or persons to whom delivery of
such securities shall be made.
SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by
the Custodian (other than bearer securities) shall be registered in the name of
the Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be assigned
exclusively to the Portfolio, unless the Fund has authorized in writing the
appointment of a nominee to be used in common with other registered investment
companies having the same investment advisor as the Portfolio, or in the name or
nominee name of any agent appointed pursuant to Section 2.7 or in the name or
nominee name of any sub-custodian appointed pursuant to Section 1. All
securities accepted by the Custodian on behalf of the Portfolio under the terms
of this Agreement shall be in "street name" or other good delivery form. If,
however, the Fund directs the Custodian to maintain securities in "street name",
the Custodian shall utilize its best efforts only to timely collect income due
the Fund on such securities and to notify the Fund on a best efforts basis only
of relevant corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a
separate bank account or accounts in the United States in the name of each
Portfolio of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940, as amended (the "1940 ACT"). Funds held by the
Custodian for a Portfolio may be deposited 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. 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 each Portfolio on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be the responsibility of
the Fund. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or 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.
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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:
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 repurchase agreements entered into between the
Fund on behalf of the Portfolio and the Custodian, or another
bank, or a broker-dealer which is a member of NASD, (i)
against delivery of the securities either in certificate form
or through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Portfolio
of securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase such
securities from the Portfolio; or (d) for transfer to a time
deposit account of the Fund in any bank, whether domestic or
foreign; such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank pursuant
to Proper Instructions from the Fund as defined herein;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued as set
forth in Section 5 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 governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short; and
7) For any other purpose, but only upon receipt of Proper
Instructions from the Fund on behalf of the Portfolio
specifying the amount of such payment and naming the person or
persons to whom such payment is to be made.
SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or
times in its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the 1940 Act to act as a
custodian, as its agent to carry out such of the provisions of this Section 2 as
the Custodian may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The
Custodian may deposit and/or maintain securities owned by a Portfolio in a U.S.
Securities System subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are
represented in an account of the Custodian in the U.S.
Securities System (the "U.S. SECURITIES SYSTEM ACCOUNT")
which account shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise
for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging
to the Portfolio;
3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from the
U.S. Securities System that such securities have been
transferred to the U.S. Securities System Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the
Portfolio. The Custodian shall transfer securities sold for
the account of the Portfolio upon (i) receipt of advice from
the U.S. Securities System that payment for such
securities has been transferred to the U.S. Securities
System Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer
and payment for the account of the Portfolio. Copies of all
advices from the U.S. Securities System of transfers of
securities for the account of the Portfolio shall identify
the Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund on behalf of
the Portfolio confirmation of each transfer to or from the
account of the Portfolio in the form of a written advice
or notice and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each
day's transactions in the U.S. Securities System for the
account of the Portfolio;
4) The Custodian shall provide the Fund with any report obtained
by the Custodian on the U.S. Securities System's accounting
system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities
System;
5) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Fund for the benefit
of the Portfolio for any loss or damage to the Portfolio
resulting from use of the U.S. Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or
any of its agents or of
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any of its or their employees or from failure of the Custodian
or any such agent to enforce effectively such rights as it may
have against the U.S. Securities System; at the election of
the Fund, it shall be entitled to be subrogated to the rights
of the Custodian with respect to any claim against the U.S.
Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the
extent that the Portfolio has not been made whole for any such
loss or damage.
SECTION 2.9 SEGREGATED ACCOUNT. The Custodian shall upon receipt of
Proper Instructions on behalf of each applicable Portfolio establish and
maintain a segregated account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by the Custodian
pursuant to Section 2.8 hereof, (i) in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the CFTC or any registered
contract market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the Portfolio,
(ii) for purposes of segregating cash or government securities in connection
with options purchased, sold or written by the Portfolio or commodity futures
contracts or options thereon purchased or sold by the Portfolio, (iii) for the
purposes of compliance by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release of the U.S.
Securities and Exchange Commission (the "SEC"), or interpretative opinion of the
staff of the SEC, relating to the maintenance of segregated accounts by
registered investment companies, and (iv) for any other purpose upon receipt of
Proper Instructions from the Fund on behalf of the applicable Portfolio.
SECTION 2.10 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian
shall execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other payments
with respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
SECTION 2.11 PROXIES. The Custodian shall, 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 Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
SECTION 2.12 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject
to the provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without limitation,
pendency of calls and maturities of domestic securities and expirations of
rights in connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian from
issuers of the securities being held for the Portfolio. With respect to tender
or exchange offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or its agents) making the
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tender or exchange offer. If the Portfolio desires to take action with respect
to any tender offer, exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
SECTION 3. PROVISIONS RELATING TO RULES 17F-5 AND 17F-7
SECTION 3.1. DEFINITIONS. As used throughout this Agreement, the
capitalized terms set forth below shall have the indicated meanings:
"Country Risk" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment, economic and financial infrastructure
(including any Eligible Securities Depository operating in the country),
prevailing or developing custody and settlement practices, and laws and
regulations applicable to the safekeeping and recovery of Foreign Assets held in
custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the SEC, or a foreign branch of a Bank (as defined in Section 2(a)(5)
of the 0000 Xxx) meeting the requirements of a custodian under Section 17(f) of
the 1940 Act; the term does not include any Eligible Securities Depository.
"Eligible Securities Depository" has the meaning set forth in section (b)(1) of
Rule 17f-7.
"Foreign Assets" means any of the Portfolios' investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Portfolios'
transactions in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(3) of Rule
17f-5.
"Rule 17f-5" means Rule 17f-5 promulgated under the 1940 Act.
"Rule 17f-7" means Rule 17f-7 promulgated under the 1940 Act.
SECTION 3.2. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
3.2.1 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Fund, by resolution adopted by its Board, hereby delegates to the Custodian,
subject 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 Contract, 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,
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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 Portfolios, of the
applicable account opening requirements for such country, the Foreign Custody
Manager shall be deemed to ha ve been delegated by the Board on behalf of the
Portfolios responsibility as Foreign Custody Manager with respect to that
country and to have accepted such delegation. Execution of this Agreement by the
Fund shall be deemed to be a Proper Instruction to open an account, or to place
or maintain Foreign Assets, in each country listed on Schedule A in which the
Custodian has previously placed or currently maintains Foreign Assets pursuant
to the terms of the Contract. Following the receipt of Proper Instructions
directing the Foreign Custody Manager to close the account of a Portfolio with
the Eligible Foreign Custodian selected by the Foreign Custody Manager in a
designated country, the delegation by the Board on behalf of the Portfolios to
the Custodian as Foreign Custody Manager for that country shall be deemed to
have been withdrawn and the Custodian shall immediately cease to be the Foreign
Custody Manager of the Portfolios with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer period to which the parties agree in writing)
after receipt of any such notice by the Fund, the Custodian shall have no
further responsibility in its capacity as Foreign Custody Manager to the Fund
with respect to the country as to which the Custodian's acceptance of delegation
is withdrawn.
3.2.3 SCOPE OF DELEGATED RESPONSIBILITIES:
(a) SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the
provisions of this Section 3.2, the Foreign Custody Manager may place and
maintain the Foreign Assets in the care of the Eligible Foreign Custodian
selected by the Foreign Custody Manager in each country listed on Schedule A, as
amended from time to time. In performing its delegated responsibilities as
Foreign Custody Manager to place or maintain Foreign Assets with an Eligible
Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign
Assets will be subject to reasonable care, based on the standards applicable to
custodians in the country in which the Foreign Assets will be held by that
Eligible Foreign Custodian, after considering all factors relevant to the
safekeeping of such assets, including, without limitation the factors specified
in Rule 17f-5(c)(1).
(b) CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign
Custody Manager shall determine that the contract governing the foreign custody
arrangements with each Eligible Foreign Custodian selected by the Foreign
Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
(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
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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.
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 Contract 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 advisor) with
an analysis of the custody risks associated with maintaining assets with the
Eligible Securities Depositories set forth on Schedule B hereto in accordance
with section (a)(1)(i)(A) of Rule 17f-7, and (b) monitor such risks on a
continuing basis, and promptly notify the Fund (or its duly-authorized
investment
10
manager or investment advisor) of any material change in such risks, in
accordance with section (a)(1)(i)(B) of Rule 17f-7.
3.3.2 STANDARD OF CARE. The Custodian agrees to exercise
reasonable care, prudence and diligence in performing the duties set forth in
Section 3.3.1.
SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE
PORTFOLIOS HELD OUTSIDE THE UNITED STATES
SECTION 4.1 DEFINITIONS. As used throughout this Agreement, the
capitalized terms set forth below shall have the indicated meanings:
"Foreign Securities System" means an Eligible Securities Depository listed on
Schedule B hereto.
"Foreign Sub-Custodian" means a foreign banking institution serving as an
Eligible Foreign Custodian.
SECTION 4.2. HOLDING SECURITIES. The Custodian shall identify on its
books as belonging to the Portfolios the foreign securities held by each Foreign
Sub-Custodian or Foreign Securities System. The Custodian may hold foreign
securities for all of its customers, including the Portfolios, with any Foreign
Sub-Custodian in an account that is identified as belonging to the Custodian for
the benefit of its customers, provided however, that (i) the records of the
Custodian with respect to foreign securities of the Portfolios which are
maintained in such account shall identify those securities as belonging to the
Portfolios and (ii), to the extent permitted and customary in the market in
which the account is maintained, the Custodian shall require that securities so
held by the Foreign Sub-Custodian be held separately from any assets of such
Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
SECTION 4.3. FOREIGN SECURITIES SYSTEMS. Foreign securities shall be
maintained in a Foreign Securities System in a designated country through
arrangements implemented by the Custodian or a Foreign Sub-Custodian, as
applicable, in such country.
SECTION 4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. DELIVERY OF FOREIGN ASSETS. The Custodian or a Foreign
Sub-Custodian shall release and deliver foreign securities of the Portfolios
held by the Custodian or such Foreign Sub-Custodian, or in a Foreign Securities
System account, only upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, and only in the
following cases:
(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;
11
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other
similar offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign
securities are called, redeemed, retired or otherwise become
payable;
(v) to the issuer thereof, or its agent, for transfer into the
name of the Custodian (or the name of the respective Foreign
Sub-Custodian or of any nominee of the Custodian or such
Foreign Sub-Custodian) or for exchange for a different
number of bonds, certificates or other evidence representing
the same aggregate face amount or number of units;
(vi) to brokers, clearing banks or other clearing agents for
examination or trade execution in accordance with market
custom; provided that in any such case the Foreign Sub-
Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise
from the Foreign Sub-Custodian's own negligence or willful
misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities,
the surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts or
temporary securities for definitive securities;
(ix) for delivery as security in connection with any borrowing by
the Portfolios requiring a pledge of assets by the Portfolios;
(x) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other purpose, but only upon receipt of Proper
Instructions specifying the foreign securities to be delivered
and naming the person or persons to whom delivery of such
securities shall be made.
4.4.2. PAYMENT OF PORTFOLIO MONIES. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out, or direct the respective Foreign Sub-
Custodian or the respective Foreign Securities System to pay out, monies of a
Portfolio in the following cases only:
12
(i) upon the purchase of foreign securities for the Portfolio,
unless otherwise directed by Proper Instructions, by (A)
delivering money to the seller thereof or to a dealer
therefor (or an agent for such seller or dealer) against
expectation of receiving later delivery of such foreign
securities; or (B) in the case of a purchase effected through
a Foreign Securities System, in accordance with the rules
governing the operation of such Foreign Securities
System;
(ii) in connection with the conversion, exchange or surrender of
foreign securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio,
including but not limited to the following payments: interest,
taxes, investment advisory fees, transfer agency fees, fees
under this Contract, 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) for payment of part or all of the dividends received in
respect of securities sold short;
(vii) in connection with the borrowing or lending of foreign
securities; and
(viii) for any other purpose, but only upon receipt of Proper
Instructions specifying the amount of such payment and
naming the person or persons to whom such payment
is to be made.
4.4.3. MARKET CONDITIONS. Notwithstanding any provision of
this Contract 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.
The Custodian shall provide to the Board the informa tion 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
13
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 Contract 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 will use reasonable commercial
efforts to facilitate the exercise of voting and other shareholder rights,
subject always to the laws, regulations and practical constraints that may exist
in the country where such securities are issued. The Fund acknowledges that
local conditions, including lack of regulation, onerous procedural obligations,
lack of notice and other factors may have the effect of severely limiting the
ability of the Fund to exercise shareholder rights.
SECTION 4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The
Custodian shall transmit promptly to the Fund written information with respect
to materials received by the Custodian via the Foreign Sub-Custodians from
issuers of the foreign securities being held for the account of the Portfolios
(including, without limitation, pendency of calls and maturities of foreign
securities and expirations of rights in connection therewith). With respect to
tender or exchange offers, the Custodian shall transmit promptly to the Fund
written information with respect to materials so received by the Custodian from
issuers of the foreign securities whose tender or exchange is sought or from the
party (or its agents) making the tender or exchange offer. The Custodian shall
not be liable for any untimely exercise of any tender, exchange or other right
or power in connection with foreign securities or other property of the
Portfolios at any time held by it unless (i) the Custodian or the respective
Foreign Sub-Custodian is in actual possession of such foreign securities or
property and (ii) the Custodian receives Proper Instructions with regard to the
exercise of any such right or power, and both (i) and (ii) occur at
14
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 the Contract and, regardless
of whether assets are maintained in the custody of a Foreign Sub-Custodian or a
Foreign Securities System, the Custodian shall not be liable for any loss,
damage, cost, expense, liability or claim resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism, or any other
loss where the Sub-Custodian has otherwise acted with reasonable care.
SECTION 5. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent and deposit into the account of the appropriate Portfolio such
payments as are received for Shares thereof issued or sold from time to time by
the Fund. The Custodian will provide timely notification to the Fund on behalf
of each such Portfolio and the Transfer Agent of any receipt by it of payments
for Shares of such Portfolio.
From such funds as may be available for the purpose, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian
by a holder of Shares, which
16
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 6. PROPER INSTRUCTIONS
Proper Instructions, which may also be standing instructions, as used throughout
this Agreement, shall mean instructions received by the Custodian from the Fund,
the Fund's investment manager or sub-adviser, as duly authorized by Fund. Such
instructions may be in writing signed by the authorized person(s) or may be in a
tested communication or in a communication utilizing access codes effected
between electro-mechanical or electronic devices or may be by such other means
and utilizing such intermediary systems and utilities as may be agreed to from
time to time by the Custodian and the person or entity giving such instructions,
provided that the Fund has followed any security procedures agreed to from time
to time by the Fund and the Custodian, including, but not limited to, the
security procedures selected by the Fund in the Funds Transfer Addendum to this
Agreement. Oral instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person authorized to
give such instructions with respect to the transaction involved. The Fund shall
cause all oral instructions to be confirmed in writing. For purposes of this
Section, Proper Instructions shall include instructions received by the
Custodian pursuant to any multi-party agreement which requires a segregated
asset account in accordance with Section 2.10 of this Agreement. The Fund or the
Fund's investment manager shall cause its duly authorized officer to certify to
the Custodian in writing the names and specimen signatures of persons authorized
to give Proper Instructions. The Custodian shall be entitled to rely upon the
identity and authority of such persons until it receives notice from the Fund to
the contrary.
SECTION 7. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the Fund on
behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Agreement, provided that all such payments
shall be accounted for to the Fund on behalf of the
Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and
property of the Portfolio except as otherwise directed by
the Board.
SECTION 8. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a copy of a
16
resolution certified by the Secretary or an Assistant Secretary of the Fund
("CERTIFIED RESOLUTION") as conclusive evidence (a) of the authority of any
person to act in accordance with such resolution or (b) of any determination or
of any action by the Board as described in such resolution, and such resolution
may be considered as in full force and effect until receipt by the Custodian of
written notice to the contrary.
SECTION 9. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board to keep the books of account of each
Portfolio and/or compute the net asset value per Share of the outstanding Shares
or, if directed in writing to do so by the Fund on behalf of the Portfolio,
shall itself keep such books of account and/or compute such net asset value per
Share. If so directed, the Custodian shall also calculate daily the net income
of the Portfolio as described in the Prospectus and shall advise the Fund and
the Transfer Agent daily of the total amounts of such net income and, if
instructed in writing by an officer of the Fund to do so, shall advise the
Transfer Agent periodically of the division of such net income among its various
components. The calculations of the net asset value per Share and the daily
income of each Portfolio shall be made at the time or times described from time
to time in the Prospectus.
SECTION 10. RECORDS
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Agreement in such
manner as will meet the obligations of the Fund under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the SEC. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
SECTION 11. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf of each
applicable Portfolio may from time to time request, to obtain from year to year
favorable opinions from the Fund's independent accountants with respect to its
activities hereunder in connection with the preparation of the Fund's Form N-1A,
Form N-SAR and Form N-CSR or other annual reports to the SEC and with respect to
any other requirements thereof.
SECTION 12. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the Portfolios at
such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a U.S. Securities
System or a Foreign Securities System, relating to the services provided by the
17
Custodian under this Agreement; such reports, shall be of sufficient scope and
in sufficient detail, as may reasonably be required by the Fund to provide
reasonable assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the reports shall so state.
SECTION 13. COMPENSATION OF CUSTODIAN
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 14. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable care, the
Custodian shall not be responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or delivered by it pursuant
to this Agreement and shall be held harmless in acting upon any notice, request,
consent, certificate or other instrument reasonably believed by it to be genuine
and to be signed by the proper party or parties, including any futures
commission merchant acting pursuant to the terms of a three-party futures or
options agreement. The 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 witho ut 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 advisor in
their instructions to the Custodian provided such instructions have been in
accordance with this Agreement; (iii) the insolvency of or acts or omissions by
a Securities System; (iv) any delay or failure of any broker, agent or
intermediary, central bank or other commercially prevalent payment or clearing
system to deliver to the Custodian's sub-custodian or agent securities purchased
or in the remittance or payment made in connection with securities sold; (v) any
delay or failure of any company, corporation, or other body in charge of
registering or transferring securities in the name of the Custodian, the Fund,
the Custodian's sub-custodians, nominees or agents or any consequential losses
arising out of such delay or failure to transfer such securities including
non-receipt of bonus, dividends and rights and other accretions or benefits;
(vi) delays
18
or inability to perform its duties due to any disorder in market infrastructure
with respect to any particular security or Securities System; and (vii) any
provision of any present or future law or regulation or order of the United
States of America, or any state thereof, or any other country, or political
subdivision thereof or of any court of competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a Foreign Sub-
Custodian (as defined in Section 4 hereof) to the same extent as set forth with
respect to sub-custodians generally in this Agreement.
If the Fund on behalf of a Portfolio requires the Custodian to take any action
with respect to securities, which action involves the payment of money or which
action may, in the opinion of the Custodian, result in the Custodian or its
nominee assigned to the Fund or the Portfolio being liable for the payment of
money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
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 15. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Agreement shall become effective as of the date last written below, 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 sixty (60) 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 Articles of Incorporation, 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.
19
SECTION 16. SUCCESSOR CUSTODIAN
If a successor custodian for one or more Portfolios shall be appointed by the
Board, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities of each applicable Portfolio then held by it hereunder
and shall transfer to an account of the successor custodian all of the
securities of each such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in like
manner, upon receipt of a Certified Resolution, deliver at the office of the
Custodian and transfer such securities, funds and other properties in accordance
with such resolution.
In the event that no written order designating a successor custodian
or Certified Resolution shall have been delivered to the Custodian on or before
the date when such termination shall become effective, then the Custodian shall
have the right to deliver to a bank or trust company, which is a "bank" as
defined in the 1940 Act, doing business in Boston, Massachusetts, or New York,
New York, of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by the Custodian on
behalf of each applicable Portfolio and all instruments held by the Custodian
relative thereto and all other property held by it under this Agreement on
behalf of each applicable Portfolio, and to transfer to an account of such
successor custodian all of the securities of each such Portfolio held in any
Securities System. Thereafter, such bank or trust company shall be the successor
of the Custodian under this Agreement.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the Certified Resolution to appoint a successor
custodian, the Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such securities, funds
and other properties and the provisions of this Agreement relating to the duties
and obligations of the Custodian shall remain in full force and effect.
SECTION 17. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Agreement, the Custodian and the Fund
on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Agreement as
may in their joint opinion be consistent with the general tenor of this Agreeme
nt. 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 Articles of Incorporation. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Agreement.
SECTION 18. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in addition
to those in existence as of the date of this Agreement 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,
20
and if the Custodian agrees in writing to provide such services, such series of
Shares shall become a Portfolio hereunder.
SECTION 19. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted under
and in accordance with laws of The Commonwealth of Massachusetts.
SECTION 20. PRIOR AGREEMENTS
This Agreement supersedes and terminates, as of the date hereof, all prior
Agreements between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
SECTION 21. NOTICES
Any Proper Instruction, notice, communication or other instrument required to be
given hereunder may be (a) delivered in person to the offices of the parties as
set forth herein during normal business hours; or (b) effected directly between
electro- mechanical or electronic devises as provided in Section 4 hereof; or
(c) delivered prepaid registered mail (in which case it shall be deemed to have
been served at the expiration of five business days after posting); or (d)
delivered by telecopy (in which case it shall be deemed to have been served on
the business day after the receipt thereof). Each party hereto shall designate
from time to time the person(s) and address(es) for Proper Instructions and
other communications related to the daily operations. Proper Instructions and
other communications related to this Agreement (including, but not limited to
termination, breach, or default) shall be delivered at the following addresses
or such other addresses as may be notified by any party from time to time.
To the Fund: WASATCH FUNDS, INC.
000 Xxxxxx Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxx
Telephone: 000-000-0000, ext. 4169
Telecopy: 000-000-0000
To the Custodian: STATE STREET BANK AND TRUST COMPANY
000 Xxxxxxxxxxxx
Xxxxxx Xxxx, Xx 00000
Attention: Vice President, Mutual Funds
Telephone: 000-000-0000
Telecopy: 000-000-0000
SECTION 22. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, addenda, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm, micro-
card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be
21
admissible in evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not such
reproduction was made by a party in the regular course of business, and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
SECTION 23. REMOTE ACCESS SERVICES ADDENDUM
The Custodian and the Fund agree to be bound by the terms of the Remote Access
Services Addendum.
SECTION 24. 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.
22
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 to be effective as of June 1, 2003.
WASATCH FUNDS, INC. FUND SIGNATURE ATTESTED TO BY:
By: By:
--------------------------- --------------------------
Name: Name:
--------------------------- --------------------------
Title: Title:
--------------------------- --------------------------
STATE STREET BANK AND TRUST COMPANY SIGNATURE ATTESTED TO BY:
By: By:
--------------------------- --------------------------
Name: Name:
--------------------------- --------------------------
Title: Title:
--------------------------- --------------------------
EXHIBIT A
FUNDS TRANSFER OPERATING GUIDELINES
1. OBLIGATION OF THE SENDER: State Street Bank and Trust Company ("State
Street") is authorized to promptly debit Client's (as named below) account(s)
upon the receipt of a payment order in compliance with any of the Security
Procedures chosen by the Client, from those offered on the attached selection
form (and any updated selection forms hereafter executed by the Client), for
funds transfers and in the amount of money that State Street has been instructed
to transfer. State Street shall execute payment orders in compliance with the
delivery methods and Security Procedures indicated on the attached selection
form (and any updated selection forms hereafter executed by the Client) and with
the Client's (or its Investment Manager's) instructions on the execution date
provided that such payment order is received by the customary deadline for
processing such a request, unless the payment order specifies a later time.
State Street will use reasonable efforts to execute on the execution date
payment orders received after the customary deadline, but if it is unable to
execute any such payment order on the execution date, such payment order will
be deemed to have been received on the next business day.
2. SECURITY PROCEDURES: The Client acknowledges that the selected Security
Procedures were selected by the Client from Security Procedures offered by State
Street. The Client agrees that the Security Procedures are reasonable and
adequate for its wire transfer transactions and agrees to be bound by any
payment orders, amendments and cancellations, whether or not authorized, issued
in its name and accepted by State Street after being confirmed by any of the
selected Security Procedures. The Client also agrees to be bound by any other
valid and authorized payment order accepted by State Street. The Client shall
restrict access to confidential information relating to the Security Procedures
to authorized persons as communicated in writing to State Street. The Client
must notify State Street immediately if it has reason to believe unauthorized
persons may have obtained access to such information or of any change in the
Client's authorized personnel. State Street shall verify the authenticity of all
instructions according to the selected Security Procedures.
3. ACCOUNT NUMBERS: State Street shall process all payment orders on the basis
of the account number contained in the payment order. In the event of a
discrepancy between any name indicated on the payment order and the account
number, the account number shall take precedence and govern. Financial
institutions that receive payment orders initiated by State Street at the
instruction of the Client may also process payment orders on the basis of
account numbers, regardless of any name included in the payment order. State
Street will also rely on any financial institution identification numbers
included in any payment order, regardless of any financial institution name
included in the payment order.
4. REJECTION: State Street reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the collected balance in
the account to be charged at the time of State Street's receipt of such payment
order; (b) if initiating such payment order would cause State Street, in State
Street's sole judgment, to exceed any applicable volume, aggregate dollar,
network, time, credit or similar limits upon wire transfers; or (c) if State
Street, in good faith, is unable to satisfy itself that the transaction has been
properly authorized.
5. CANCELLATION OR AMENDMENT: State Street shall use reasonable efforts to act
on all authorized requests to cancel or amend payment orders received in
compliance with the selected Security Procedures provided that such requests are
received in a timely manner affording State Street a reasonable opportunity to
act. However, State Street assumes no liability if the request for amendment or
cancellation cannot be satisfied.
6. ERRORS: State Street shall assume no responsibility for failure to detect any
erroneous payment order provided that State Street complies with the payment
order instructions as received and State Street complies with the selected
Security Procedures. The Security Procedures are established for the purpose of
authenticating payment orders only and not for the detection of errors in
payment orders.
7. INTEREST AND LIABILITY LIMITS: State Street shall assume no responsibility
for lost
24
interest with respect to the refundable amount of any unauthorized payment
order, unless State Street is notified of the unauthorized payment order within
thirty (30) days of notification by State Street of the acceptance of such
payment order. In no event shall State Street be liable for special, indirect or
consequential damages, even if advised of the possibility of such damages and
even for failure to execute a payment order.
8. AUTOMATED CLEARING HOUSE ("ACH") CREDIT ENTRIES/PROVISIONAL PAYMENTS: When
the Client initiates or receives ACH credit and debit entries pursuant to
these Guidelines and the rules of the National Automated Clearing House
Association, the New England Clearing House Association and the Mid-America
Payment Exchange or other similar body, State Street or its agent will act as
an Originating Depository Financial Institution and/or Receiving Depository
Financial Institution, as the case may be, with respect to such entries.
Credits given by State Street or its agent with respect to an ACH credit entry
are provisional until final settlement for such entry is received from the
Federal Reserve Bank. If such final settlement is not received, the Client
agrees to promptly refund the amount credited to the Client in connection with
such entry, and the party making payment to the Client via such entry shall not
be deemed to have paid the amount of the entry.
9. CONFIRMATIONS: Confirmation of State Street's execution of payment orders
shall ordinarily be provided within 24 hours. Notice may be delivered through
State Street's information systems, account statements, advices, or by facsimile
or callback. The Client must report any objections to the execution of a payment
order within 30 days.
10. MISCELLANEOUS: State Street and the Client agree to cooperate to attempt to
recover any funds erroneously paid to wrong parties, regardless of any fault of
State Street or the Client, but the party responsible for the erroneous payment
shall bear all costs and expenses incurred in trying to effect such recovery.
These Guidelines may not be amended except by a written agreement signed by the
parties.
11. LIABILITY ON FOREIGN ACCOUNTS: State Street shall not be required to repay
any deposit made at a non-U.S. branch of State Street, or any deposit made with
State Street and denominated in a non-U.S. dollar currency, if repayment of such
deposit or the use of assets denominated in the non-U.S. dollar currency is
prevented, prohibited or otherwise blocked due to: (a) an act of war,
insurrection or civil strife; (b) any action by a non-U.S. government or
instrumentality or authority asserting governmental, military or police power of
any kind, whether such authority be recognized as a defacto or a dejure
government, or by any entity, political or revolutionary movement or otherwise
that usurps, supervenes or otherwise materially impairs the normal operation of
civil authority; or (c) the closure of a non-U.S. branch of State Street in
order to prevent, in the reasonable judgment of State Street, harm to the
employees or property of State Street. The obligation to repay any such deposit
shall not be transferred to and may not be enforced against any other branch of
State Street.
The foregoing provisions constitute the disclosure required by Massachusetts
General Laws, Chapter 167D, Section 36.
While State Street is not obligated to repay any deposit made at a non-U.S.
branch or any deposit denominated in a non-U.S. currency during the period in
which its repayment has been prevented, prohibited or otherw ise blocked, State
Street will repay such deposit when and if all circumstances preventing,
prohibiting or otherwise blocking repayment cease to exist.
25
SECURITY PROCEDURES SELECTION FORM
Please select at least two of the funds transfer security procedures indicated
below.
[] SWIFT
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a
cooperative society owned and operated by member financial institutions that
provides telecommunication services for its membership. Participation is limited
to securities brokers and dealers, clearing and depository institutions,
recognized exchanges for securities, and investment management institutions.
SWIFT provides a number of security features through encryption and
authentication to protect against unauthorized access, loss or wrong delivery of
messages, transmission errors, loss of confidentiality and fraudulent changes to
messages.
Selection of this security procedure would be most appropriate for existing
SWIFT members.
[] REMOTE BATCH TRANSMISSION
Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU) data
communications between the Client and/or its agent and State Street and/or its
agent. Security procedures include encryption and/or the use of a test key by
those individuals authorized as Automated Batch Verifiers or a callback
procedure to those individuals.
Clients selecting this option should have an existing facility for completing
CPU-CPU transmissions. This delivery mechanism is typically used for high-volume
business such as shareholder redemptions and dividend payments.
[] AUTOMATED CLEARING HOUSE (ACH)
State Street or its agent receives an automated transmission from a Client for
the initiation of payment (credit) or collection (debit) transactions through
the ACH network. The transactions contained on each transmission or tape must be
authenticated by the Client. The transmission is sent from the Client's or its
agent's system to State Street's or its agent's system with encryption.
[] REPETITIVE WIRES
For situations where funds are transferred periodically from an existing
authorized account to the same payee (destination bank and account number) and
only the date and currency amount are variable, a repetitive wire may be
implemented. Repetitive wires will be subject to a $10 million limit. If the
payment order exceeds the $10 million limit, the instruction will be confirmed
by Telephone Confirmation (Call Back) or Test Key prior to execution. Repetitive
wire instructions must be reconfirmed annually. Clients may establish Repetitive
Wires by following the agreed upon security procedures as described by Telephone
Confirmation (Call Back) or Test Key.
This alternative is recommended whenever funds are frequently transferred
between the same two accounts. IF THIS OPTION IS SELECTED, CHOOSE EITHER
TELEPHONE CONFIRMATION OR TEST KEY TO BE USED AS A SECONDARY PROCEDURE WHEN OVER
$10 MILLION.
[] STANDING INSTRUCTIONS
Funds are transferred by State Street to a counter party on the Client's
established list of authorized counter parties. Only the date and the dollar
amount are variable. Clients may establish Standby Instructions by following the
agreed upon security procedures as described by Telephone Confirmation (Call
Back) or Test Key. Additional paperwork will be required from insurance Clients
using 1031 drawdowns.
This option is used for transactions that include but are not limited to
Foreign Exchange Contracts, Time Deposits and Tri-Party Repurchase Agreements.
IF THIS OPTION IS SELECTED, CHOOSE EITHER TELEPHONE CONFIRMATION OR TEST KEY
TO BE USED AS A SECONDARY PROCEDURE WHEN OVER $10 MILLION.
[] TELEPHONE CONFIRMATION (CALL BACK)
This procedure requires Clients to designate individuals as authorized
initiators and authorized verifiers. State Street will verify that the
instruction contains the signature of an authorized person and prior to
execution of the payment order, will contact someone other than the originator
at the Client's location to authenticate the instruction.
Selection of this alternative is appropriate for Clients who do not have the
capability to use other security procedures. PLEASE COMPLETE THE TELEPHONE
CONFIRMATION INSTRUCTIONS ATTACHED AS A SCHEDULE HERETO.
[] TEST KEY
Test Key confirmation will be used to verify all non-repetitive funds transfer
instructions received via facsimile or phone. State Street will provide test
keys if this option is chosen. State Street will verify that the instruction
contains the signature of an authorized person and prior to execution of the
payment order, will authenticate the test key provided with the corresponding
test key at State Street.
Selection of this alternative is appropriate for Clients who do not have the
capability to use other security procedures.
The individual signing below must be authorized to sign contract on behalf of
the client. The execution of payment orders under the selected Security
Procedures is governed by the Funds Transfer Operating Guidelines, which are
incorporated by reference.
-------------------------------------------------
CLIENT
By:
----------------------------------------------
Authorized Signature
-------------------------------------------------
Type or Print Name
-------------------------------------------------
Title
-------------------------------------------------
Date
26
SCHEDULE TO FUNDS TRANSFER OPERATING GUIDELINES
AND SECURITY PROCEDURES SELECTION FORM
CLIENT:
-------------------------------------------------------------------------
Company Name
ACCOUNT NUMBER(S):
--------------------------------------------------------------
KEY CONTACT INFORMATION
Who shall we contact to implement your selection(s)?
CLIENT OPERATIONS CONTACT ALTERNATE CONTACT
------------------------------- ------------------------------
Name Name
------------------------------- ------------------------------
Address Address
------------------------------- ------------------------------
City/State/Zip Code City/State/Zip Code
------------------------------- ------------------------------
Telephone Number Telephone Number
------------------------------- ------------------------------
Facsimile Number Facsimile Number
-------------------------------
SWIFT Number
TELEPHONE CONFIRMATION INSTRUCTIONS
Authorized Initiators (Please Type or Print) - Please provide a listing of your
staff members who are currently authorized to INITIATE wire transfer
instructions:
NAME TITLE SPECIMEN SIGNATURE
----------------------- ------------------------ -------------------------
----------------------- ------------------------ -------------------------
----------------------- ------------------------ -------------------------
----------------------- ------------------------ -------------------------
----------------------- ------------------------ -------------------------
Authorized Verifiers (Please Type or Print) - Please provide a listing of your
staff members who will be CALLED BACK to verify the initiation of repetitive
wires of $10 million or more and all non-repetitive wire instructions:
NAME CALLBACK PHONE NUMBER DOLLAR LIMITATION (IF ANY)
----------------------- ------------------------ -------------------------
----------------------- ------------------------ -------------------------
----------------------- ------------------------ -------------------------
----------------------- ------------------------ -------------------------
----------------------- ------------------------ -------------------------
----------------------------------------- -------------
APPROVAL (FOR STATE STREET USE ONLY) DATE
