EXHIBIT (G)(2)
_________________, 2003
RE: FOREIGN CUSTODY MANAGER
Ladies and Gentlemen:
In connection with the safekeeping of securities and cash and various
other custody activities provided by Xxxxx Fargo Bank Minnesota, N.A. (the
"Custodian") to RBC Funds, Inc. (the "Fund") under the Custody Agreement dated
as of ______________, 2003 (the "Agreement" and attached hereto as Exhibit A),
the Fund desires to delegate to the Custodian certain additional duties as a
"Foreign Custody Manager" as permitted by Rules 17f-5 and 17f-7 of the
Investment Company Act of 1940, ("Rule 17f-5" and "Rule 17f-7"). Such
additional duties shall be performed on the terms and conditions set forth
herein.
Capitalized terms not otherwise defined herein shall have the meaning
attributed to them in the attached Exhibit A or Rules 17f-5 and 17f-7, as the
case may be.
The Fund hereby delegates to the Custodian, with respect to Fund
assets located in each Specified Country, the duties of a "Foreign Custody
Manager" as defined in Rule 17f-5 and as specified below. The Custodian accepts
the Board's delegation of Responsibilities with respect to each Specified
Country and agrees in performing the Responsibilities as a Foreign Custody
Manager to exercise reasonable care, prudence and diligence such as a person
having responsibility for the safekeeping of the Fund's assets would exercise.
SECTION I. REPORTS.
The Custodian shall provide to the Board at such times as the Board
deems reasonable and appropriate based on the circumstances of the Fund's
foreign custody arrangements, written reports notifying the Board of the
placement of assets of the Fund with a particular Eligible Foreign Custodian
within a Specified Country and of any material change in the arrangements
(including, in the case of Qualified Foreign Banks, any material change in any
contract governing such arrangements and in the case of Securities
Depositories, any material change in the established practices or procedures of
such Securities Depositories) with respect to assets of the Fund with any such
Eligible Foreign Custodian.
SECTION II. DUTIES OF THE CUSTODIAN.
1. Eligible Foreign Custodians.
Subject to the provisions of this Agreement, the Custodian shall
select an Eligible Foreign Custodian with respect to each Specified Country. In
connection therewith, the Custodian shall:
(a) determine that assets of the Fund held by such Eligible Foreign
Custodian will be subject to reasonable care, based on the standards applicable
to custodians in the relevant market in which such Eligible Foreign Custodian
operates, after considering all factors relevant to the safekeeping of such
assets, including, without limitation, those contained in paragraph (c)(1) of
Rule 17f-5;
(b) determine that the Fund's foreign custody arrangements with each
Qualified Foreign Bank are governed by a written contract with the Custodian
(or, in the case of a Securities Depository, by such a contract, by the rules
or established practices or procedures of the Securities Depository, or by any
combination of the foregoing) which will provide reasonable care for the Fund's
assets based on the standards specified in paragraph (c)(1) of Rule 17f-5;
(c) determine that each contract with a Qualified Foreign Bank shall
include the provisions specified in paragraph (c)(2)(i)(A) through (F) of Rule
17f-5 or, alternatively, in lieu of any or all of such (c)(2)(i)(A) through (F)
provisions, such other provisions as the Custodian determines will provide, in
their entirety, the same or a greater level of care and protection for the
assets of the Fund as such specified provisions;
(d) monitor pursuant to the Monitoring System the appropriateness of
maintaining the assets of the Fund with a particular Eligible Foreign Custodian
pursuant to paragraph (c)(1) of Rule 17f-5 and in the case of a Qualified
Foreign Bank, any material change in the contract governing such arrangement
and in the case of a Securities Depository, any material change in the
established practices or procedures of such Securities Depository; and
(e) advise the Fund whenever an arrangement (including, in the case of
a Qualified Foreign Bank, any material change in the contract governing such
arrangement and in the case of a Securities Depository, any material change in
the established practices or procedures of such Securities Depository)
described in preceding clause (d) no longer meets the requirements of Rule
17f-5.
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2. Eligible Securities Depositories.
(a) With respect to each Eligible Securities Depository (as defined in
Rule 17f-7) identified by the Custodian to the Board from time to time,
Custodian shall exercise reasonable care, prudence, and diligence such as a
person having responsibilities for the safekeeping of the Fund's assets would
exercise (i) to provide the Fund or its investment adviser with an analysis of
the custody risks associated with maintaining assets with that Eligible
Securities Depository, and (ii) to monitor such custody risks on a continuing
basis and promptly notify the Fund of any material change in such risks.
(b) All such analysis and monitoring by the Custodian shall be made on
the basis of, and limited by, information gathered from Subcustodians, from
trade associations of which Custodian is a member from time to time, or through
publicly available information otherwise obtained by Custodian, and shall not
include any evaluation of Country Risks. Information supplied by Custodian with
respect to the status of an institution as a Eligible Securities Depository or
utilized by Custodian to conclude that an institution is a Eligible Securities
Depository shall be limited to information supplied by such institution without
any independent verification.
(c) Custodian will endeavor to include in its analysis and monitoring,
where appropriate, an Eligible Securities Depository's expertise and market
reputation, the quality of its services, its financial strength, any insurance
or indemnification arrangements, the extent and quality of regulation and
independent examination of the depository, its standing in published ratings,
its internal controls and other procedures for safeguarding investments, and
any related legal protections.
(d) In the event that the Fund reasonably believes that there is a
discrepancy between Custodian's performance of its obligations in (a) above and
the requirements of paragraphs (a)(1)(i)(A) or (B) of Rule 17f-7, respectively,
and provides a detailed notification to Custodian, Custodian shall reasonably
cooperate with the Fund and endeavor to resolve any such discrepancy.
(e) As used herein, the term "Country Risks" shall mean with respect
to any Eligible Securities Depository: (i) the financial infrastructure of the
country in which it is organized, but not of any Eligible Securities Depository
to the extent covered by an analysis described in clause (a) of this Section,
(ii) such country's prevailing custody and settlement practices, (iii)
nationalization, expropriation or other governmental actions, (iv) such
country's regulation of the banking or securities industry, (v) currency
controls, restrictions, devaluations or fluctuations, and (vi) market
conditions which affect the orderly execution of securities transactions or
affect the value of securities.
SECTION III LIMITATIONS ON CUSTODIAN'S DUTY.
(1) For purposes of Section II above with respect to both Eligible
Foreign Custodians and Eligible Securities Depositories, it is understood that
such determination shall be made on the basis of, and limited by, information
gathered through the
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Custodian's subcustodian network through the Bank of New York, or through
publicly available information otherwise obtained with respect to each such
Securities Depository.
(2) For purposes of clause (d) of subsection 1 of Section II above,
the Custodian's determination of appropriateness shall not include, nor be
deemed to include, any evaluation of Country Risks associated with investment
in a particular country. For purposes hereof, "Country Risks" shall mean
systemic risks of holding assets in a particular country including, but not
limited to, (a) the use of Compulsory Depositories, (b) such country's
financial infrastructure, (c) such country's prevailing custody and settlement
practices, (d) nationalization, expropriation or other governmental actions,
(e) regulation of the banking or securities industry, (f) currency controls,
restrictions, devaluations or fluctuations, and (g) market conditions which
affect the orderly execution of securities transactions or affect the value of
securities.
SECTION IV. REPRESENTATIONS.
1. The Fund hereby represents that: (a) this Foreign Custody
Manager Agreement has been duly authorized, executed and delivered by the Fund,
constitutes a valid and legally binding obligation of the Fund enforceable in
accordance with its terms, and no statute, regulation, rule, order, judgment or
contract binding on the Fund prohibits the Fund's execution or performance of
this Agreement; (b) this Foreign Custody Manager Agreement has been approved
and ratified by the Board at a meeting duly called and at which a quorum was at
all times present; and (c) the Board or its investment advisor has considered
the Country Risks associated with investment in each Specified Country and will
have considered such risks prior to any settlement instructions being given to
the Custodian with respect to any other Specified Country.
2. The Custodian hereby represents that: (a) the Custodian is
duly organized and existing as a national banking association, with full power
to carry on its businesses as now conducted, and to enter into this Foreign
Custody Manager Agreement and to perform its obligations hereunder; (b) this
Foreign Custody Manager Agreement has been duly authorized, executed and
delivered by the Custodian, constitutes a valid and legally binding obligation
of the Custodian enforceable in accordance with its terms, and no statute,
regulation, rule, order, judgment or contract binding on the Custodian
prohibits the Custodian's execution or performance of this Foreign Custody
Manager Agreement; and (c) the Custodian has established the Monitoring System.
SECTION V. LIABILITY OF THE CUSTODIAN.
1. The Custodian shall not be liable for any costs, expenses,
damages, liabilities or claims, including attorneys' and accountants' fees,
sustained or incurred by, or asserted against, the Fund except to the extent
the same arises out of the failure of the Custodian to exercise the care,
prudence and diligence required of the Custodian under this Foreign Custody
Manager Agreement. In no event shall the Custodian be liable to the Fund, the
Board, or any third party for special, indirect or consequential damages, or
for lost profits or loss of business, arising in connection with this Foreign
Custody Manager Agreement.
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2. The Fund shall indemnify the Custodian and hold it harmless
from and against any and all costs, expenses, damages, liabilities or claims,
including attorneys' and accountants' fees, sustained or incurred by, or
asserted against, the Custodian by reason or as a result of any action or
inaction, or arising out of the Custodian's performance hereunder, provided
that the Fund shall not indemnify the Custodian to the extent any such costs,
expenses, damages, liabilities or claims arises out of the Custodian's failure
to exercise the reasonable care, prudence and diligence required of it under
this Foreign Custody Manager Agreement.
3. The Custodian shall have only such duties as are expressly
set forth herein. In no event shall the Custodian be liable for any Country
Risks associated with investments in a particular country.
SECTION VI. MISCELLANEOUS.
1. For its services hereunder, the Fund agrees to pay to the
Custodian such compensation and out-of-pocket expenses as shall be mutually
agreed.
2. This Foreign Custody Manager Agreement constitutes the entire
agreement between the Fund and the Custodian, and no provision in the Custody
Agreement between the Fund and the Custodian shall affect the duties and
obligations of the Custodian as a Foreign Custody Manager hereunder, nor shall
any provision in this Foreign Custody Manager Agreement affect the duties or
obligations of the Custodian under the Custody Agreement.
3. Any notice or other instrument in writing, authorized or
required by this Foreign Custody Manager Agreement to be given to the
Custodian, shall be sufficiently given if received by it at its offices at:
Xxxxx Fargo Bank Minnesota, N.A.
Attn: Xxxxxxxxx Xxxxxxxxx, AVP
Global Custody - N9306-05C
000 Xxxxxxxxx Xxx X
Xxxxxxxxxxx, XX 00000
4. Any notice or other instrument in writing, authorized or
required by this Foreign Custody Manager Agreement to be given to the Fund
shall be sufficiently given if received by it at its offices at:
_________
_________________
_________________
_________
5. This Foreign Custody Manager Agreement shall be construed in
accordance with the substantive laws of the State of Minnesota, without regard
to
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conflicts of laws principles thereof. The Fund and the Custodian each hereby
irrevocably waives any and all rights to trial by jury in any legal proceeding
arising out of or relating to this Foreign Custody Manager Agreement.
6. This Foreign Custody Manager Agreement shall terminate
simultaneously with the termination of the Custody Agreement between the Fund
and the Custodian, and may otherwise be terminated by either party giving to
the other party a notice in writing specifying the date of such termination,
which shall be not less than thirty (30) days after the date of such notice.
If the foregoing corresponds to your understanding of our agreement,
please indicate your acceptance by the signature of your authorized
representative below.
Yours truly,
Xxxxx Fargo Bank Minnesota, National Association
By
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Name:
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Title:
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Agreed and Accepted:
By RBC Funds, Inc.
Name:
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Title:
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Date:
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EXHIBIT A
Whenever used in the Foreign Custody Manager Agreement (the
"Agreement"), the following words and phrases, unless the context otherwise
requires, shall have the following meanings:
1. "BOARD" shall mean the board of directors or board of
trustees, as the case may be, of the Fund.
2. "ELIGIBLE FOREIGN CUSTODIAN" shall have the meaning provided
in the Rule.
3. "ELIGIBLE SECURITIES DEPOSITORY" shall mean a system for the
central handling of securities as defined in Rule 17f-4 under the Investment
Company Act of 1940 ("the Act").
4. "MONITORING SYSTEM" shall mean a system established by the
Custodian to fulfill the Responsibilities specified in clauses 1(d) and 1(e) of
Article III of the Agreement.
5. "QUALIFIED FOREIGN BANK" shall have the meaning provided in
the Rule.
6. "RESPONSIBILITIES" shall mean the responsibilities delegated
to the Custodian as a Foreign Custody Manager with respect to each Specified
Country and each Eligible Foreign Custodian, as such responsibilities are more
fully described in Sections II and III of the Agreement.
7. "RULE" shall mean Rule 17f-5 under the Act, as amended.
8. "SPECIFIED COUNTRY" shall mean each country identified on a
list maintained from time to time by mutual agreement of the Fund and the
Custodian and each country, other than the United States, constituting the
primary market for a security with respect to which the Fund has given
settlement instructions to the Custodian as custodian (the "Custodian") under
its Custody Agreement with the Fund.
