CUSTODY AGREEMENT
AGREEMENT made as of the 6th day of March 1997, by and between Third Avenue
Trust (the "Trust"), on behalf of the Third Avenue Value Fund series of the
Trust (hereinafter called the "Fund") and NORTH AMERICAN TRUST COMPANY, a state
chartered trust company existing under the laws of California (hereinafter
called the "Custodian").
WITNESSETH
WHEREAS, the Fund desires that its securities and funds shall be hereafter
held and administered by the Custodian pursuant to the terms of this agreement:
WHEREAS, pursuant to a separate agreement, FPS Services Inc.("FPS"), a
FinDaTex, Inc. company, will perform the duties of Transfer-Agent, Accounting
Services Agent, and Dividend Disbursing Agent.
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Fund and the Custodian agree as follows:
SECTION 1. Definitions
Securities: The word securities as used herein includes units of limited
partnership interest, stocks, shares, bonds, debentures, bills, notes,
mortgages, certificates of deposit, bank time deposits, bankers' acceptances,
commercial paper, scrip, warrants, participation certificates, choses in action,
evidences of indebtedness or other obligations and any certificates, receipts,
warrants or other instruments representing rights to receive, purchase, or
subscribe for the same, or evidencing or representing any other rights or
interests therein, or any other property or assets of any kind.
Oral Instructions: The term Oral Instructions shall mean an authorization,
instruction, approval, item or set of data, or information of any kind
transmitted to the Custodian in person or by telephone, telegram, telecopy or
other mechanical or documentary means lacking original signature, by an officer
or employee of the Fund or an employee of FPS in its capacity as Transfer Agent,
Accounting Services Agent, and Dividend Disbursing Agent, authorized by a
resolution of the Board of Trustees of the Fund to give Oral Instructions on
behalf of the Fund.
Written Instructions: The term Written Instructions shall mean an
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to the Custodian containing original signatures or a copy of
such document transmitted by telecopy including transmission of such signature,
reasonably believed by the Custodian to be the signature of officers or employee
of the Fund or an employee of FPS in its capacity as Transfer Agent, Accounting
Services Agent, and Dividend Disbursing Agent, authorized by a resolution of the
Board of Trustees of the Fund to give written instructions on behalf of the
Fund.
Securities Depository: The term Securities Depository shall mean a system
for the central handling of securities where all securities of any particular
class or series of any issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry without physical
delivery of securities.
Book-Entry Securities: The term Book-Entry Securities shall mean securities
issued by the Treasury of the United States of America and federal agencies of
the United States of America which are maintained in the book-entry system as
provided in Subpart O of Treasury Circular Xx. 000, 00 XXX 000, Xxxxxxx X of 31
CFR Part 350, and the book-entry regulations of federal agencies substantially
in the form of Subpart O and the term Book-Entry Account shall mean an account
maintained by a Federal Reserve Bank in accordance with the aforesaid Circular
and regulations.
SECTION 2.
The Fund shall from time to time file with the Custodian a certified copy
of each resolution of its Board of Trustees authorizing execution of Written
Instructions and the number of signatories required, together with certified
signatures of the officers and other signatories authorized to sign, which shall
constitute conclusive evidence of the authority of the officers and other
signatories designated therein to act, and shall be considered in full force and
effect with the Custodian fully protected in acting in reliance thereon until it
receives a new certified copy of a resolution adding or deleting a person or
persons with authority to give Written Instructions. If the certifying officer
is authorized to sign Written Instructions, the certification shall also be
signed by a second officer of the Fund. The Fund also agrees that Custodian may
rely on Written Instructions received from FPS as Agent for the Fund acting in
its capacity as Transfer Agent, Accounting Service Agent or Dividend Disbursing
Agent, if those Written Instructions are given by persons having such authority
pursuant to resolutions of the Boards of Trustees of the Fund.
The Fund shall from time to time file with the Custodian a certified copy
of each resolution of its Board of Trustees authorizing the transmittal of Oral
Instructions and specifying the person or persons authorized to give Oral
Instructions in accordance with this Agreement. The Fund agrees that Custodian
may rely on Oral Instructions received from FPS as Agent for the Fund acting in
its capacity as Transfer Agent, Accounting Service Agent or Dividend Disbursing
Agent, if those instructions are given by persons having such authority pursuant
to resolutions adopted by the Boards of Trustees of the Fund. Any resolution so
filed with the Custodian shall be considered in full force and effect and the
Custodian shall be fully protected in acting in reliance thereon until it
actually receives a new certified copy of a resolution adding or deleting a
person or persons with authority to give Oral Instructions. If the certifying
officer is authorized to give Oral Instructions, the certification shall also be
signed by a second officer of the Fund.
SECTION 3. Receipt and Disbursement of Funds
A. The Custodian shall open and maintain a separate account or accounts in
the name of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement. The Custodian shall hold in such
account or accounts, subject to the provisions hereof, all funds received by it
from or for the account of the Fund. The Fund will deliver or cause to be
delivered to the Custodian all funds owned by the Fund, including cash received
for the issuance of its shares during the period of this Agreement. The
Custodian shall make payments of funds to, or for the account of, the Fund from
such funds only: (a) for the purchase of securities for the portfolio of the
Fund (i) upon the delivery of such securities to the Custodian (or to any bank,
banking firm or trust company doing business in the United States and designated
by the Custodian as its sub-custodian or agent for this purpose), registered (if
registerable) in the name of Fund or of the nominee of the Custodian referred to
in Section 8 or in proper form for transfer, or (ii) in the case of repurchase
agreements entered into between the Fund and a bank, upon delivery of the
receipt evidencing purchase by the Fund of securities owned by the bank along
with written evidence of the Agreement by the bank to repurchase such securities
from the Fund; (b) for the repurchase or redemption of shares of the Fund upon
written advice thereof to the Custodian from the Fund's Transfer Agent, in the
amount specified in such advice; (c) for the payment of interest, dividends,
taxes, management or supervisory fees, or operating expenses (including, without
limitation thereto, trustees' fees and expenses, and fees for legal, accounting
and auditing services); (d) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by the Fund held by
or to be delivered to
the Custodian; (e) for the payment to any bank of interest on or any portion of
the Fund of any loan made by such bank to the Fund; (f) for the payment to any
person, firm or corporation who has borrowed the Fund's portfolio securities the
amount deposited with the Custodian as collateral for such borrowing upon the
delivery of such securities to the Custodian, registered (if registerable) in
the name of the Fund or of the nominee of the Custodian referred to in Section 8
or in proper form for transfer or (g) for other proper purposes of the Fund.
Before making any such payment the Custodian shall receive (and may rely upon)
Oral Instructions or Written Instructions directing such payment and stating
that it is for a purpose permitted under the terms of items (a), (b), (c), (d),
(e) or (f) of this subsection A. In respect of item (g), the Custodian will take
such action only upon receipt of instructions and a certified copy of a
resolution of the Board of Trustees of the Fund, and certified by the Secretary
or an Assistant Secretary, specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such purpose to be a
proper purpose of the Fund, and naming the person or persons to whom such
payment is to be made. In respect of item (f), the Custodian shall make payment
to the borrower of securities loaned by the Fund of part of the collateral
deposited with the Custodian upon receipt of instructions stating that the
market value of the securities loaned has declined and specifying the amount to
be paid by the Custodian without receipt or return of any of the securities
loaned by the Fund. In respect of item (a), in the case of repurchase agreements
entered into with a bank which is a member of the Federal Reserve System, the
Custodian may transfer funds to the account of such bank prior to receipt of the
safekeeping receipt and repurchase agreement, provided that such documents are
received prior to the close of business on the same day.
B. Notwithstanding anything herein to the contrary, the Custodian may at
any time or times, appoint (and may at any time remove) any other bank or trust
company as its sub-custodian or agent to carry out such of the provisions of
Subsection A of this Section 3 as instructions from Custodian may from time to
time request; provided, however, that the appointment of such sub-custodian or
agent shall not relieve the Custodian of any of its responsibilities hereunder;
and provided, further, that the instructions will not request the appointment of
any bank or trust company as sub-custodian unless it meets the requirements of
Section 26 of the Investment Company Act of 1940 as amended (the "Investment
Company Act".)
C. The Custodian is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received by the Custodian for
the account of the Fund.
SECTION 4. Receipt of Securities
A. The Custodian shall hold in a separate account, and physically
segregated at all times from those of any other persons, firms, corporations or
trusts, pursuant to the provisions hereof, all securities received by it from or
for the account of the Fund, and the Fund will deliver or cause to be delivered
to the Custodian all securities owned by the Fund. All such securities are to be
held or disposed of by the Custodian for, and subject at all times to the
instructions pursuant to the terms of this Agreement. The Custodian shall have
no power or authority to assign, hypothecate, pledge or otherwise dispose of any
such securities and investments, except pursuant to instructions and only for
the account of the Fund as set forth in Section 5 of this Agreement.
B. Notwithstanding anything herein to the contrary, the Custodian may at
any time or times, appoint (and may at any time remove) any other bank or trust
company as its sub-custodian or agent to carry out such of the provisions of
Subsection A of this Section 4 and of Section 5 of this Agreement, as
instructions may from time to time request from the Custodian; provided;
however, that the appointment of such sub-custodian or
agent shall not relieve the Custodian of any of its responsibilities hereunder,
and provided, further, that instructions will not request the appointment of any
bank or trust company as sub-custodian unless it meets the requirements of
Section 26 of the Investment Company Act.
SECTION 5. Transfer, Exchange, Redelivery, etc. of Securities
The Custodian shall have sole power to release or deliver any securities of
the Fund held by it pursuant to this Agreement. The Custodian agrees to
transfer, exchange or deliver securities held by it hereunder only: (a) for
sales of such securities for the account of the Fund upon receipt by the
Custodian of payment therefor, (b) when such securities mature or are called,
redeemed or retired or otherwise become payable, (c) for examination by any
broker selling any such securities in accordance with "street delivery" custom,
(d) in exchange for or upon conversion into other securities alone or other
securities and cash whether pursuant to any plan of merger, consolidation,
reorganization, recapitalization or readjustment, or otherwise, (e) upon
conversion of such securities pursuant to their terms into other securities, (f)
upon exercise of subscription, purchase or other similar rights represented by
such securities, (g) for the purpose of exchanging interim receipts for
temporary securities for definitive securities, (h) for the purpose of effecting
a loan of the Fund's portfolio securities to any person, firm, corporation or
trust upon the receipt by the Custodian of cash or cash equivalent collateral at
least equal to the market value of the securities loaned, (i) to any bank for
the purpose of collateralizing the obligation of the Fund to repay any monies
borrowed by the Fund from such bank; provided, however, that the Custodian may
at the option of such lending bank keep such collateral in its possession,
subject to the rights of such bank given to it by virtue of any promissory note
or agreement executed and delivered by the Fund to such bank, or (j) for other
proper purposes of the Fund. As to any deliveries made by the Custodian pursuant
to items (a), (b), (c), (d), (e), (f), (g) and (h), securities or funds
receivable in exchange therefor shall be deliverable to the Custodian. Before
making any such transfer, exchange or delivery, the Custodian shall receive (and
may rely upon) instructions requesting such transfer, exchange, or delivery and
stating that it is for a purpose permitted under the terms of items (a), (b),
(c), (d), (e), (f), (g), (h) or (i) of this Section 5, and, in respect of item
(j), upon receipt of instructions of person or persons authorized by the Board
of Trustees of the Fund, specifying the securities to be delivered, setting
forth the purpose for which such delivery is to be made, declaring such purpose
to be a proper purpose of the Fund, and naming the person or persons to whom
delivery of such securities shall be made. In respect of item (h), the
instructions shall state the market value of the securities to be loaned and the
corresponding amount of collateral to be deposited with the Custodian;
thereafter, upon receipt of instructions stating that the market value of the
securities loaned has increased and specifying the amount of increase, the
Custodian shall collect from the borrower additional cash collateral in such
amount.
SECTION 6. Federal Reserve Book-Entry System
Notwithstanding any other provision of this Agreement, it is expressly
understood and agreed that the Custodian is authorized in the performance of its
duties hereunder to deposit in the book-entry deposit system operated by the
Federal Reserve Bank (the "System"), United States government, instrumentality
and agency securities and any other securities deposited in the System
("Securities") and to use the facilities of the System, as permitted by Rule
17f-4 under the Investment Company Act of 1940, in accordance with the following
terms and provisions:
(a) The Custodian may keep securities of the Fund in the System provided
that such Securities are represented in an account ("Account") of
the Custodian's in the System which shall not include any assets of the
Custodian other than assets held in a fiduciary or custodian capacity.
(b) The records of the Custodian with respect to the Fund's participation
in the System through the Custodian shall identify by book entry securities
belonging to the Fund which are included with other securities deposited in the
Account 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 Securities and Exchange
Commission.
(c) The Custodian shall pay for securities purchased for the account of the
Fund upon: (i) receipt of advice from the System that such securities have been
transferred to the 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 Fund. The
Custodian shall transfer securities sold for the account of the Fund upon: (i)
receipt of advice from the System that payment for such securities has been
transferred to the 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 Fund. The
Custodian shall send the Fund a confirmation of any transfers to or from the
account of the Fund.
(d) The Custodian will provide the Fund with any report obtained by the
Custodian on the System's account system, internal accounting control and
procedures for safeguarding securities deposited in the System. The Custodian
will provide the Fund, 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 including
securities deposited in the System relating to the services provided by the
Custodian under this Agreement; such reports shall detail material inadequacies
disclosed by such examination, and, if there are no such inadequacies, shall so
state, and shall be of such scope and in such detail as the Fund may reasonably
require and shall be of sufficient scope to provide reasonable assurance that
any material inadequacies would be disclosed.
SECTION 6A. Use of Clearing Facilities
Notwithstanding any other provisions of the Agreement, the Custodian may,
in connection with transactions in portfolio securities by the Fund, use the
facilities of the Depository Trust Company ("DTC"), and the Participants Trust
Company ("PTC"), as permitted by Rule 17f-4 under the Investment Company Act, in
accordance with the following terms and provisions:
(a) DTC and PTC may be used to receive and hold eligible securities owned
by the Fund; (b) payment for securities purchased may be made through the
clearing medium employed by DTC and PTC for transactions of participants' action
through them; (c) securities of the Fund deposited in DTC and PTC will at all
times be segregated from any assets and cash controlled by the Custodian in
other than a fiduciary or custodian capacity but may be commingled with other
assets held in such capacities. Subject to the provisions of the Agreement with
regard to "Officers' Certificates," the Custodian will pay out money only upon
receipt of securities or notification thereof and will deliver securities only
upon the receipt of money or notification thereof; (d) all books and records
maintained by the Custodian which relate to the Fund's participation in DTC and
PTC shall identify by book entry securities belonging to the Fund which are
deposited in DTC and PTC and shall at all times during the Custodian's regular
business hours be open to inspection by the Fund's duly authorized officers,
employees, agents and auditors, and the Fund will be furnished with all the
information in respect of the services rendered to it as it may require; (e) the
Custodian will make available to the Fund copies of any internal control reports
concerning DTC and PTC to it by either
internal or external auditors within ten days after receipt of such a report by
the Custodian; and (f) confirmations of transactions using the facilities of DTC
and PTC shall be provided as set forth in Rule 17f-4.
SECTION 7. Custodian's Acts Without Instructions
Unless and until the Custodian receives Oral or Written Instructions to the
contrary, the Custodian shall:
(a) Present for payment all coupons and other income items held by it for
the account of the Fund which call for payment upon presentation and hold the
funds received by it upon such payment for the account of the Fund; (b) collect
interest and cash dividends received, with notice to the Fund, for the account
of the Fund; (c) hold for the account of the Fund hereunder all stock dividends,
rights and similar securities issued with respect to any securities held by it
hereunder; (d) execute as agent on behalf of the Fund all necessary ownership
certificates required by the Internal Revenue Code or the Income Tax Regulations
of the United States Treasury Department or under the laws of any state now or
hereafter in effect, inserting the Fund's name on such certificates as the owner
of the securities covered thereby, to the extent it may lawfully do so; (e)
transmit promptly to the Fund all reports, notices and other written information
received by the Custodian from or concerning issuers of the Fund's portfolio
securities; and (f) collect from the borrower the securities loaned and
delivered by the Custodian pursuant to item (h) of Section 5 hereof, any
interest or cash dividends paid on such securities, and all stock dividends,
rights and similar securities issued with respect to any such loaned securities.
With respect to securities of foreign issue, it is expected that the
Custodian will use its best efforts to effect collection of dividends, interest
and other income, and to notify the Fund of any call for redemption, offer of
exchange, right of subscription, reorganization, or other proceedings affecting
such securities, or any default in payments due thereon. It is understood,
however, that the Custodian shall be under no responsibility for any failure or
delay in effecting such collections or giving such notice with respect to
securities of foreign issue, regardless of whether or not the relevant
information is published in any financial service available to it unless such
failure or delay is due to its negligence; however, this sentence shall not be
construed as creating any such responsibility with respect to securities of
non-foreign issue, other than such responsibility as may be part of the general
responsibility of the Custodian as stated in this Section 7. Collections of
income in foreign currency are, to the extent possible, to be converted into
United States dollars unless otherwise instructed in writing, and in effecting
such conversion the Custodian may use such methods or agencies as it may see
fit, including the facilities of its own foreign division at customary rates.
All risk and expenses incident to such collection and conversion is for the
account of the Fund and the Custodian shall have no responsibility for
fluctuations in exchange rates affecting any such conversion.
SECTION 8. Registration of Securities
Except as otherwise directed by instructions, the Custodian shall register
all securities, except such as are in bearer form, in the name of a registered
nominee of the Custodian as defined in the Internal Revenue Code and any
Regulation of the Treasury Department issued thereunder or in any provision of
any subsequent Federal tax law exempting such transaction from liability for
stock transfer taxes, and shall execute and deliver all such certificates in
connection therewith as may be required by such laws or Regulations or under the
laws of any State. The Custodian shall use its best efforts to the end that the
specific securities held by it hereunder shall be at all times identifiable in
its records.
The Fund shall from time to time furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee, any securities
which it may hold for the account of the Fund and which may from time to time be
registered in the name of the Fund.
SECTION 9. Voting and Other Actions
Neither the Custodian nor any nominee of the Custodian shall vote any of
the securities held hereunder by or for the account of the Fund, except in
accordance with instructions. The Custodian shall execute and deliver, or cause
to be executed and delivered, to the Fund all notices, proxies and proxy
soliciting materials with relation to such securities (excluding any securities
loaned and delivered by the Custodian pursuant to item (h) of Section 5 hereof),
such proxies to be executed by the registered holder of such securities (if
registered otherwise than in the name of the Fund), but without indicating the
manner in which such proxies are to be voted.
SECTION 10. Transfer Tax and Other Disbursements
The Fund shall pay or reimburse the Custodian from time to time for any
transfer taxes payable upon transfers of securities made hereunder and for all
other necessary and proper disbursements and expenses made or incurred by the
Custodian in the performance of this Agreement.
The Custodian shall execute and deliver such certificates in connection
with securities delivered to it or by it under this Agreement as may be required
under the provision of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any State, to exempt
from taxation any exemptible transfers and/or deliveries of any such securities.
SECTION 11. Concerning the Custodian
A. The Custodian's compensation shall be set forth pursuant to an agreement
between the Fund and the Custodian, exhibit A, as may be amended.
B. The Custodian shall not be liable for any action taken in good faith
upon instructions as herein defined from a person authorized by resolution of
the Board of Trustees of the Fund, and may rely on the genuineness of any such
document which it may in good faith believe to have been validly executed.
C. The Custodian shall not be liable for any loss or damage, resulting from
its action or omission to act or otherwise, except for any such loss or damage
arising out of its own negligence or willful misconduct and except that the
Custodian shall be responsible for the acts of any sub-custodian or agent
appointed hereunder and approved by the Board of Trustees of the Fund. At any
time, the Custodian may seek advice from legal counsel for the Fund or its own
counsel with respect to any matter arising in connection with this Agreement,
and it shall not be liable for any action taken or not taken or suffered by it
in good faith in accordance with the opinion of counsel for the Fund, or its own
legal counsel; provided, however, that the Custodian may not rely upon legal
counsel other than the Fund's legal counsel for any question of law which could
reasonably be expected to expose the Fund to a possible loss of $20,000 or more.
D. Without limiting the generality of the foregoing, the Custodian shall be
under no duty or obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any securities purchased by or for the
Fund, the legality of the purchase thereof, or the propriety of the amount paid
therefor;
(b) The legality of the issue or sale of any securities by or for the Fund,
or the propriety of the amount for which the same are sold;
(c) The legality of the issue or sale of any shares of the Fund, or the
sufficiency of the amount to be received therefor;
(d) The legality of the redemption of any shares of the Fund, or the
propriety of the amount to be paid therefore;
(e) The legality of the declaration of any dividend or distribution by the
Fund, or the legality of the issue of any shares of the Fund in payment of any
dividend or distribution in shares;
(f) The legality of the delivery of any securities held for the Fund for
the purpose of collateralizing the obligation of the Fund to repay any monies
borrowed by the Fund; or
(g) The legality of the delivery of any securities held for the Fund for
the purpose of lending said securities to any person, firm or corporation.
E. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount, if the securities upon which such amount is
payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by
written instructions signed in the name of the Fund by one of its executive
officers, and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
F. The Custodian shall not be under any duty or obligation to ascertain
whether any securities at any time delivered to or held by it for the account of
the Fund, are such as may properly be held by the Fund under the provisions of
the Trust Instrument of the Trust as amended from time to time.
G. The Fund agrees to indemnify and hold harmless the Custodian and its
nominee from all taxes, charges, expenses, assessments, claims, liabilities, and
losses (including reasonable counsel fees) incurred or assessed against it or
its nominee 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. The Custodian is authorized to charge any account of
the Fund for such items. In the event of any advance of funds for any purpose
made by the Custodian resulting from orders or instructions, 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 Fund shall be security therefor.
H. In the event that, pursuant to this Agreement, instructions direct the
Custodian to pay for securities on behalf of the Fund, the Fund hereby grants to
the Custodian a security interest in such securities, until the Custodian has
been reimbursed by the Fund in immediately available funds. The instructions
designating the securities to be paid for shall be considered the requisite
description and designation of the securities pledged to the Custodian for
purposes of the requirements of the Uniform Commercial Code.
SECTION 12.
The Fund shall from time to time engage in the purchase and sale of put and
call options subject to the following provisions:
a. Put and call option contracts which are purchased or sold by the Fund
shall be treated as any other security owned by the Fund except as expressly set
forth in this paragraph a. Written or oral instructions with respect to such
purchase or sale contracts shall, insofar as applicable, also state: (a) the
price at which the underlying security may be bought or sold, (b) the issuer,
the title and number of the shares or Fund amounts of
such security, (c) the premium to be paid, (d) the expiration date, and whether
or not the transaction, if a sale, is a Closing Sale Transaction requiring
delivery to the broker through whom it is made of a certificate of ownership.
Written or Oral Instructions with respect to the purchase of an option contract
shall also provide receipt of the certificate of ownership executed by the
broker through whom the purchase was made.
b. The Fund shall deliver Written or Oral Instructions to the Custodian
promptly after the Fund sells a put or call option contract stating: (a) the
name of the issuer and title and number of shares or the Fund amount of the
security subject to the option, (b) the exercise price, (c) the expiration date,
(d) the premium to be received by the Fund, (e) the name of the person or broker
from whom the premium is to be received, and (f) whether or not such option, if
a call, is covered.
If the option sold is a put or uncovered call, the Written or Oral
Instructions shall also state either (a) the amount and kind of assets of the
Fund, if any, which shall be segregated from the general assets of the Fund and
shall be held by the Custodian in a segregated option account (the "Option
Account"). The Custodian shall set up and maintain the Option Account as it
shall be directed by Written or Oral Instructions and shall increase or decrease
the assets in such Option Account only as it shall be so directed by subsequent
Written or Oral Instructions.
c. If the Custodian either (a) acts as escrow agent with respect to a
covered call, or securities underlying such covered call are maintained by the
Custodian with a securities depository, or (b) holds assets in the Option
Account in connection with a put or uncovered call, the Custodian shall deliver
or cause to be delivered such receipts as are required in accordance with the
customs prevailing among dealers in such securities.
d. If an option contract purchased or sold by the Fund expires, the Fund
will deliver to the Custodian Written or Oral Instructions containing the
information specified in paragraph b. above and instruct the Custodian to (a)
delete such option contract from the list of holdings that the Custodian
maintains for the Fund and (b) to either remove from the Option Account the
assets held herein with respect to such option (which assets shall be specified
in such Written or Oral Instructions), or to remove the restriction on any
securities underlying a covered call, as the case may be. Upon the return and/or
cancellation or expiration of any receipts issued pursuant to paragraph c.
above, the Custodian shall remove such restrictions, delete the option from the
list of holdings maintained by the Custodian, and transfer such assets to the
general account maintained by the Custodian for the benefit of the Fund.
Collateral delivered by the broker with whom it was previously deposited
pursuant to paragraph b. above shall, if identical to the collateral specified
in the receipt previously issued by such broker be accepted by the Custodian and
held in the general account maintained by the Custodian for the benefit of the
Fund. The Custodian shall accept delivery of collateral not specified in such a
receipt only upon receipt of Written or Oral Instructions.
e. If a call option written by the Fund is exercised, the Fund shall
promptly furnish the Custodian with Written or Oral Instructions stating: (a)
that the Custodian shall deliver the underlying securities, (b) the name of the
issuer and title and number of shares or the Fund amount of the security subject
to the option, (c) the person to whom the underlying securities are to be
delivered, (d) the amount to be received by the Custodian to hold for the Fund
upon such delivery, and (e) the assets, if any, to be removed from the Option
Account. If a put option sold by the Fund is exercised, the Fund shall promptly
furnish the Custodian with Written or Oral Instructions stating: (a) that the
Custodian shall make payment for the securities subject to the put, (b) the name
of the issuer and title and number of shares or the principal amount of the
security subject to the option, (c) the name of the person to whom payment will
be made against receipt of such security, (d) the amount of such payment, and
(e) the assets, if any, to be removed from the Option Account. Assets of the
Fund freed of restrictions imposed by reason of an option shall be held by the
Custodian in accordance with this Agreement.
f. In the event the Fund purchases an option identical to previously
written by the Fund in a "Closing Purchase Transaction" in order to liquidate
its position as a seller of a call option, the Fund will deliver to the
Custodian Written or Oral Instructions stating: (a) the name of the issuer and
title and number of shares or the Fund amount of the security subject to the
option, (b) the exercise price, (c) the premium to be paid by the Fund, (d) the
expiration date, and (e) the name of the person to whom the premium is to be
paid. Upon the Custodian's payment of the premium and the return and/or
cancellation of any receipts issued pursuant to paragraph c. above, the
Custodian shall (1) either remove from the Option Account the assets held
therein or remove the previously imposed restrictions on the securities
underlying the option that is liquidated by reason of the Closing Purchase
Transaction, (2) delete such option from the list of holding maintained by the
Fund, and (3) transfer such securities or assets to the general account
maintained by the Custodian for the benefit of the Fund.
g. If the Fund exercises an option contract held by the Custodian, the Fund
shall deliver to the Custodian at least 24 hours before the last day on which
such option contract may be exercised Written or Oral Instructions which contain
the information required under paragraph a. above and which instruct the
Custodian (i) in the case of a put, to deliver the securities subject to the put
to the broker specified in the Written or Oral Instructions against receipt of
the exercise price, and (ii) in the case of a call, to make payment of the
exercise price to the broker specified in the Written or Oral Instructions
against receipt of the securities subject to the call.
h. The Custodian shall have no responsibility for the legality of any put
or call option contract written by the Fund, the propriety of any such purchase
or sale, and the adequacy of any collateral delivered to a broker in connection
with an option or held in the Option Account. The Custodian specifically, but
not by way of limitation, shall not be under any duty or obligation (i) to
periodically check or notify the Fund that the amount of assets held in the
Option Account is sufficient to protect such broker or the Fund against any
loss, or (ii) to advise the Fund that any option it holds is about to expire.
Such duties or obligations shall be the sole responsibility of the Fund.
SECTION 13. Reports by the Custodian
A. The Custodian shall furnish the Fund daily with a statement summarizing
all transactions and entries for the account of the Fund. The Custodian shall
furnish the Fund at the end of every month with a list of the portfolio
securities held by it as Custodian for the Fund, adjusted for all commitments
confirmed by instructions as of such time. The books and records of the
Custodian pertaining to its actions under this Agreement shall be open to
inspection and audit at reasonable times by officers of the Fund, its
independent accountants and officers of its investment advisors.
B. The Custodian will maintain such books and records relating to
transactions effected by it as are required by the Investment Company Act, and
any rule or regulation thereunder; or by any other applicable provision of the
law to be maintained by the Fund or its Custodian, with respect to such
transactions, and preserving or causing to be preserved, any such books and
records for such periods as may be required by any such rule or regulation.
SECTION 14. Termination or Assignment
This agreement may be terminated by the Fund, or by the Custodian, on sixty
(60) days' notice, given in writing and sent by registered mail to the
Custodian, or to the Fund, as the case may be, at the address hereinafter set
forth. Upon any termination of this Agreement, pending appointment of a
successor to the Custodian or a vote of the shareholders of the Fund to dissolve
or to function without a Custodian of its funds, securities and other property,
the Custodian shall not deliver funds, securities or other property of the Fund
to the Fund, but may deliver them to a bank or trust company of its own
selection having an aggregate capital, surplus and undivided profits, as shown
by its last published report of not less than ten million dollars ($10,000,000)
as a Custodian for the Fund to be held under terms similar to those of this
Agreement; provided, however, that the Custodian shall not be required to make
any such delivery or payment until full payment shall have been made by the Fund
of all liabilities constituting a charge against the Custodian, and until full
payment shall have been made to the Custodian of all its fees, compensations,
costs and expenses, subject to the provisions of Section II of this Agreement.
SECTION 15. Miscellaneous
A. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its office at 000 X
Xxxxxx, 00xx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, or at such other place as the
Custodian may from time to time designate in writing.
B. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund, shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at the office of FPS in its capacity
as the Fund's Transfer Agent, Accounting Services Agent, and Dividend Disbursing
Agent at 3200 Horizon Dr. X.X. Xxx 00000, Xxxx xx Xxxxxxx, Xxxxxxxxxxxx
00000-0000, with a copy thereof mailed or delivered to the President of the Fund
at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as the
Fund may from time to time designate in writing.
C. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement, and authorized or approved by a resolution of the Board of Trustees
of the Fund.
D. This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the written consent of the
Custodian or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of its Board of Trustees.
E. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute but one instrument.
F. This Agreement and the rights and obligations of the Fund and the
Custodian hereunder shall be construed and interpreted in accordance with the
laws of the State of California.
G. The Custodian agrees that the Fund's obligations hereunder shall be
limited to the Fund, and that the Custodian shall not seek satisfaction of any
such obligation from the Trust or any other series of the Trust, the
shareholders of the Fund nor from any director, officer, employee, or agent of
the Trust or the Fund.
IN WITNESS WHEREOF, the Fund and the Custodian have caused this Agreement
to be signed and witnessed by duly authorized persons as of the date first
written above.
Executed in several counterparts, each of which is an original
NORTH AMERICAN TRUST COMPANY
Attest: --------------------- By---------------------------
Title------------------------
By---------------------------
Title------------------------
THIRD AVENUE TRUST ON BEHALF OF THE THIRD AVENUE VALUE FUND SERIES
Attest:--------------------- By---------------------------
Title------------------------
By---------------------------
Title------------------------
