March 30, 2000
Bankers Trust Company
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
XXX
RE: Securities Lending Agreement
Ladies and Gentlemen:
This letter will confirm our agreement, as set forth below, pursuant to
which Bankers Trust Company ("BTC") will be authorized by each investment
company on whose behalf this Agreement is executed, including any series
thereof, (each, a "Company"), each Company being an investment company
registered under the Investment Company Act of 1940, as amended ("1940 Act"), to
lend on behalf of each Company set forth on Schedule 1 attached hereto, certain
securities held by BTC as custodian:
1. Appointment of Agent
--------------------
(a) (i) Until this Agreement is terminated pursuant to Section 11, BTC
is authorized as our agent to lend on a disclosed basis our securities held in
custody by BTC to such borrowers as appear on BTC's approved list of borrowers,
a copy of which may be obtained at any time upon request, at the time of any
loan and on such terms as BTC shall in its sole discretion decide. Such
borrowers may include certain United Kingdom entities, if we provide BTC with
our authorization in the form attached hereto as Exhibit A. BTC shall further be
authorized as our agent to sign agreements with borrowers, ownership or other
certificates as may be required by the Internal Revenue Service or any other tax
authorities, and to take any other actions necessary to effect such loans.
(ii) No securities loans shall be made on behalf of a Company if,
as a result, the aggregate value of all securities loans of such Company will
exceed the percentage set forth on Schedule 1 attached hereto (or such other
level as may be communicated to BTC by the Company) of the value of such
Company's total assets, including the value of collateral received in respect of
securities loans.
(b) We acknowledge that BTC acts as agent for other securities lending
clients who may hold some of the same securities as we may hold and,
accordingly, that any given loan to a borrower may be allocated among several of
BTC's clients. We agree that BTC shall have full discretion to allocate such
loans among BTC's clients as it deems appropriate and shall have no obligation
to include us in any such allocation.
(c) We represent, warrant and agree that: (i) each Company is a
corporation established pursuant to the laws of the State of Maryland and is
registered under the 1940 Act; (ii) we have and will have the right to lend the
securities subject to loans hereunder; (iii) a majority of the Board of
Directors of the Company (including a majority of the directors who are not
"interested persons," within the meaning of the 1940 Act, of the Company), will
initially and at least annually thereafter determine that the investment of
securities lending cash collateral in shares of the BT Institutional Funds -
Institutional Daily Assets Fund ("DAF") is in the best interest of the
shareholders of each Company; (iv) investment in shares of the DAF by a
particular Company will be consistent with such Company's investment objectives
and policies; (v) investment in shares of DAF by a particular Company will be in
accordance with guidelines regarding the investment of cash collateral specified
by the Company and DAF has been approved for investment by each Company or DAF
invests in the types of instruments that such Company has authorized for the
investment of its cash collateral; (vi) the securities lending program or each
Company will comply with all present and future applicable positions of the
Securities and Exchange Commission and its staff regarding such arrangements;
(vii) the execution, delivery and performance of this Agreement are within our
powers, have been and remain duly authorized by all necessary action and will
not violate or constitute a default under any applicable law or regulation or of
any decree, order, judgment, agreement or instrument binding on us; (viii) no
consent (including, but not limited to, exchange control consents) of any
applicable governmental authority or body is necessary, except for such consents
as have been obtained and are in full force and effect, and all conditions of
which have been duly complied with; and (ix) this Agreement constitutes a legal,
valid and binding obligation enforceable against us in accordance with its
terms.
(d) When used herein, "we", "us" and "our" shall include the Company
and/or each respective Company, as the context shall require.
2. Remuneration
------------
Unless otherwise agreed, BTC shall pay us a fee for each loan equal to
an agreed upon percentage of (a) in the case of loans not collateralized by
cash, the fee paid by the borrower to BTC with respect to each loan, and (b) in
the case of loans collateralized by cash, the difference between (i) the net
realized income derived from approved investments of the cash collateral, minus
(ii) the borrower's rebate. BTC shall receive any fee paid by the borrower and,
provided that BTC shall have actually received payment of such fees from the
borrower, credit our portion of such fees to our account monthly.
3. Statements of Loan Activity and Fees
------------------------------------
BTC shall promptly advise us by written or electronic means of any loan
entered into by BTC on our behalf. In addition, BTC shall send us a monthly
statement summarizing securities lending activity (including revenues therefrom)
for the previous month effected by BTC on our behalf.
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4. Distributions on Loaned Securities and Collateral
-------------------------------------------------
All borrowers shall be required to pay or otherwise deliver to BTC all
substitute payments in respect of interest payments, dividends, or other
distributions made on the loaned securities. Such payments shall be credited by
BTC to our account upon receipt by BTC of such payments from the borrower,
unless otherwise agreed upon by the parties. We authorize BTC to pay, provided
that the borrower is not in default under its agreement with BTC, to the
borrower all interest payments received by BTC on Government Securities (as
defined in Section 6(a)) held by BTC as collateral for our loans.
5. Recalls of Securities
---------------------
(a) Unless otherwise agreed by us, we may instruct BTC to terminate any
loan in whole or in part by giving BTC written notice thereof (a "Recall
Notice"). BTC shall thereupon promptly recall the securities from the borrower,
within the recall period specified by BTC's agreement with the borrower, which
shall not be later than the fifth business day (but, in the case of U.S. equity
securities, the third business day, and, in the case of Government Securities,
the first business day) following the business day on which BTC gives a notice
recalling the securities to the borrower (the "Recall Period"). If, on the day
BTC receives the Recall Notice, (i) the borrower is closed for business or (ii)
the principal market for the loaned securities is closed for trading, the Recall
Period will commence on the next business day on which both the borrower and the
principal trading market are open.
(b) If any loaned security is not returned by a borrower by the
expiration of the applicable Recall Period, BTC shall notify us of such fact.
BTC shall take all steps which BTC deems appropriate to secure the prompt return
of the securities pursuant to BTC's agreement with the borrower (which may
include the liquidation of collateral and the purchase of replacement
securities).
6. Collateral
----------
(a) Unless otherwise indicated to us by BTC, prior to or simultaneously
with the delivery of our securities to a borrower, BTC shall obtain and hold on
our behalf collateral having a value not less than the value (the "Margin
Requirement") specified in Exhibit B hereto. The collateral shall consist of (i)
cash, (ii) securities issued or guaranteed by the United States Government or
its agencies or instrumentalities ("Government Securities"), or (iii) letters of
credit issued by banks as may be acceptable to BTC.
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(b) BTC will xxxx to market loaned securities and collateral (if the
collateral is represented by Government Securities) on a daily basis, and if on
any day, the aggregate market value of the collateral held by BTC for loans made
to any one borrower is less than the Margin Requirement, BTC shall obtain from
such borrower pursuant to BTC's agreement with the borrower such additional
collateral so that the aggregate market value of the collateral is not less than
the Margin Requirement. We understand that BTC may be obligated to release
collateral in excess of the Margin Requirement to the borrower when so required
by BTC's agreement with the borrower.
(c) We authorize BTC to invest, on our behalf and for our account, any
cash collateral received from a borrower in any of the instruments described in
Exhibit B hereto, including any such instrument purchased through or entered
into with BTC or its affiliates. We acknowledge that such cash collateral is
invested at our risk, and if, upon termination of any loan, the cash collateral
held by BTC for our account is less than the amount required to be returned to
the borrower under BTC's agreement with the borrower, we will provide BTC with
cash in the amount of any such deficiency.
7. Indemnification
---------------
(a) In the event that any loan is terminated and the loaned securities
or any portion thereof shall not have been returned to BTC by or on behalf of
the borrower within the time specified by BTC's agreement with the borrower, BTC
shall at its expense (i) within one (1) business day after the expiration of the
Recall Period, replace the loaned securities (or any portion thereof not so
returned) with a like amount of the loaned securities of the same issuer, class
and denomination, and hold us harmless from any brokerage commission, fees, and
New York State or City transfer taxes incurred by BTC in the purchase of such
replacement securities or (ii) if BTC is unable to purchase such securities on
the open market, credit our account with an amount of cash in U.S. dollars equal
to the Market Value (as defined below) of such unreturned loaned securities
determined at the close of business as of the date on which the loaned
securities should have been returned plus, until such time as the events in (i)
or (ii) are consummated, all financial benefits derived from the beneficial
ownership of the loaned securities which have accrued on the loaned securities
whether or not received from the borrower. The Market Value of any securities
listed on a national securities exchange will be the last sales price on the
principal exchange on which trading occurred on the date the Market Value is
determined or, if there was no sale on any such exchange on such date, the last
bid price quoted. The Market Value of securities traded in the over-the-counter
market will be the last quoted bid price in the over-the-counter market as
reported by the National Quotation Bureau Incorporated or any successor
organization. The Market Value of Government Securities shall be the price as
quoted by a generally recognized pricing service for the business day preceding
the date of determination (or, if not so quoted on such day, the next preceding
day on which they were so quoted). The Market Value of securities the principal
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trading market for which is outside the United States will be the last sale
price on the principal exchange on which they are traded, or if there was no
sale on that date, the last sale price on the next preceding day on which there
was such a sale on such exchange, all as quoted in the DataSheet Service of the
Interactive Data Corporation, or, if not therein quoted, then as quoted by any
such exchange; the foreign exchange rate used to calculate the Market Value of
foreign securities not denominated in U.S. dollars shall be the foreign exchange
rate quoted by BTC at the close of business in New York on the preceding day.
The Market Value of securities for which market quotations are not readily
available over a reasonable period of time, will be the average of values quoted
by three major investment banking firms which are mutually agreeable to BTC and
us.
(b) In the event that BTC shall be required to make any payment to us
or shall incur any loss or expense pursuant to (a) above, it shall, to the
extent of such payment or loss or expense, be subrogated to, and succeed to, all
of our rights against the borrower and to the collateral involved; to the extent
the collateral consists of cash or Government Securities, we shall
contemporaneously with any such payment to us by BTC surrender same to BTC for
its sole disposition.
(c) Except as provided in this Section 7, BTC shall have no liability
to us for any failure of a borrower to return loaned securities.
8. BTC's Relationship with a Borrower.
-----------------------------------
We acknowledge that BTC and/or its affiliates may be a creditor of, for
its own account or in a fiduciary capacity, or generally engage in any kind of
commercial or investment banking business with, a borrower to whom BTC has lent
our securities. Without limiting the generality of the foregoing, BTC shall not
be required to disclose to us any financial information about a borrower
obtained in the course of its relationship with such borrower.
9. Notices
-------
a) All notices under this Agreement, except with respect to Recall
Notices which shall be sent in accordance with section 9(b) herein below, shall
be in writing and sent by mail or facsimile, addressed as follows:
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If to BTC:
Bankers Trust Company
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
U.S.A.
Attention: Securities Lending Documentation Unit
Facsimile No.: (000) 000-0000
If to us, one copy to each:
Flag Investors Funds Flag Investors Funds
Mutual Fund Services Administration Mutual Fund Services Xxxxx Xxxx.
Xxx Xxxxx Xxxxxx, 00xx Xxxxx Xxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000 Xxxxxxxxx, Xxxxxxxx 00000
Attention: Mr. Xxxxxxx Xxxx Attention: Xx. Xxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000 Facsimile No.: (000) 000-0000
Phone No.: (000) 000-0000 Phone No.: (000) 000-0000
b) All Recall Notices under this Agreement shall be in writing and sent
by mail or facsimile, addressed as follows:
Recall Notices for US Securities:
Bankers Trust Company
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
U.S.A
Attention: Securities Lending Operations Support
Facsimile No.: (000) 000-0000
Recall Notices for Non-US Securities:
Bankers Trust Company
Winchester House
1 Great Xxxxxxxxxx Xxxxxx
Xxxxxx, XX0X 0XX
Xxxxxxx
Attention: Securities Lending Manager
Facsimile No.: (171) 545-2905
All notices delivered in accordance with this Agreement shall be
effective upon receipt. The address indicated above for either party may be
changed by prior written notice to the other party.
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10. Indemnification and Reimbursement of Agent, etc.
------------------------------------------------
(a) We agree to indemnify BTC and to hold BTC harmless from any
liabilities, losses, costs or expenses (including reasonable attorneys' fees)
which BTC may incur in connection with this Agreement or the transactions
contemplated hereby; provided that such indemnification shall not extend to
liabilities, losses, costs or expenses to the extent that such liabilities,
losses, costs or expenses (i) are found by a final judgment of a court of
competent jurisdiction to have resulted from BTC's own willful misconduct or
gross negligence or (ii) result from BTC's indemnity provided in Section 7.
(b) We agree that BTC's duties and responsibilities shall only be those
expressly set forth herein and that BTC may consult with counsel and be fully
protected with respect to any action taken or omitted to be taken in good faith
upon advice of such counsel.
(c) We agree that BTC may rely on any certificate, statement, request,
consent, agreement or other instrument which it believes to be genuine and to
have been signed or presented by a proper person or persons.
11. Termination
-----------
Either party may terminate this Agreement by giving not less than five
business days written notice to the other party. Such termination shall be
effective on the date specified therein, provided that such termination notice
shall not constitute a notice pursuant to Section 5 unless so specified by us,
and further provided that this Agreement shall continue to govern all
outstanding loans until the termination thereof.
12. Governing Law and Legal Proceedings
-----------------------------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York (without giving effect to conflicts of
laws principles thereof).
(b) We hereby agree that any legal action or proceeding arising out of
or relating to this Agreement may be brought in the courts of the State of New
York, the courts of the United States of America located in the City of New York
or in any other court having jurisdiction with respect thereto. We hereby waive,
in relation to any such action or proceeding, any defense to any action or
proceeding based on venue or that the action has been brought in an inconvenient
forum.
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13. Force Majeure
-------------
Notwithstanding any other provision contained herein, BTC shall not be
liable for any action taken, or any failure to take any action required to be
taken hereunder or otherwise to fulfill BTC's obligations hereunder in the event
and to the extent that the taking of such action or such failure arises out of
or is caused by acts of governmental authorities (whether de jure or de facto),
including nationalization, expropriation, the imposition of currency
restrictions, war, insurrection, riot, revolution, terrorism or civil commotion;
acts of God, accident, fire, water damage, explosion, hurricane, cyclone,
earthquake, volcanic eruption, nuclear fusion, fission, or radioactivity;
mechanical breakdown, computer or system failure or computer virus, failure or
malfunctioning of any communications media for whatever reason; interruption
(whether partial or total) of power supplies or other utility or service; strike
or other stoppage (whether partial or total) of labor; any law, decree,
regulation or order of any government or governmental body (including any court
or tribunal); or any other cause (whether similar or dissimilar to any of the
foregoing) whatsoever beyond BTC's control.
14. Miscellaneous
-------------
This Agreement constitutes the entire agreement of the parties with
respect to BTC's acting as our agent in connection with the loan of our
securities which we have placed in custody with BTC, and supersedes all prior
understandings, written or oral, or any previous agreement with respect thereto.
Neither party shall be bound by any modifications of this Agreement unless it
has so agreed in writing.
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If the terms hereof accurately reflect our agreement, please so
indicate by signing below.
FLAG INVESTORS COMMUNICATIONS
FUND, INC. AND FLAG INVESTORS
EQUITY PARTNERS FUND, INC.
By: ________________________
Xxxxxx X. Xxxxxx
Assistant Secretary
Agreed to and Accepted by
As of the Date Hereof:
BANKERS TRUST COMPANY
By: _______________________
Name:
Title:
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Exhibit A
LOANS TO UK COUNTERPARTIES
Certain of the borrowers to which Bankers Trust Company ("BTC") may
loan our securities held in trust and/or custody are entities which are
organized and existing under the laws of the United Kingdom ("UK
Counterparties"). Loans to UK Counterparties will be made by BTC as our agent
pursuant to a form of securities lending agreement governed by the laws of the
United Kingdom (the "UK Agreement") which is available to us upon request.
By signing this authorization, we grant our consent to BTC making, on
our behalf, the following representations and warranties to such UK
Counterparties:
(1) We are duly authorized and empowered to perform our respective
duties and obligations under the UK Agreement;
(2) We are not restricted under the terms of our constitution or
in any other manner from lending securities in accordance with
the UK Agreement or from otherwise performing our obligations
thereunder; and
(3) We are absolutely entitled to pass full beneficial ownership
of all securities loaned under the UK Agreement to the
applicable UK Counterparty free from all liens, charges and
encumbrances.
We authorize BTC as our agent to (a) disclose our name to the UK Inland
Revenue for approval of us as an approved lender to a UK Counterparty and (b)
undertake to the Inland Revenue on our behalf to lend securities on certain
specified terms, with which BTC as our agent will comply. We agree to provide
BTC with all documents, certificates or other information necessary to enable
BTC to make the appropriate filings on our behalf with the Inland Revenue to
become an approved lender to UK Counterparties. We understand such approval is
necessary to enable the UK Counterparty to make manufactured payments in respect
of interest, dividends or other distributions on the loaned securities without
deduction of UK withholding tax.
In order to make loans to UK Counterparties, we understand that we will
be required to submit to the non-exclusive jurisdiction of the courts of England
in connection with any disputes which may arise out of or in connection with the
UK Agreement, and waive any objection to proceedings in such courts whether on
the grounds of sovereignty, venue or that the proceedings have been brought in
an inconvenient forum. By signing this authorization, we also consent to BTC's
entering into such agreements on our behalf.
Except as specifically described above, all provisions of the
Securities Lending Agreement between us and BTC shall be applicable to loans to
UK Counterparties.
THE LENDING OF SECURITIES TO UK COUNTERPARTIES IS AUTHORIZED UNDER THE
PROCEDURES DESCRIBED ABOVE SUBJECT TO ANY LIMITATIONS SET FORTH BELOW.
Date: 30th day of March, 2000
FLAG INVESTORS COMMUNICATIONS FUND,
INC. AND FLAG INVESTORS EQUITY
PARTNERS FUND, INC.
By: ________________________
Xxxxxx X. Xxxxxx
Assistant Secretary
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Exhibit B
I. Margin Requirements Referred to in Section 6(a)
-----------------------------------------------
For loans of securities the collateral for which is all denominated in
the same currency as the loaned securities, 102%, and for loans of securities
the collateral for which is not all denominated in the same currency as the
loaned securities, 105%, of the aggregate market value of the loaned securities,
plus any accrued but unpaid distributions thereon.
II. Investment Vehicle Referred to in Section 6 (c)
-----------------------------------------------
Institutional Daily Assets Fund ("IDAF"), an open-end money market
investment company registered under the Investment Company Act of 1940.
Schedule 1
Name of Company Percentage Lending Limit
--------------- ------------------------
Flag Investors Communications Fund, Inc. 33 1/3%
Flag Investors Equity Partners Fund, Inc. 33 1/3%
March 30, 2000
Bankers Trust Company
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000 U.S.A.
Re: Securities Lending Agreement
Ladies and Gentlemen:
In accordance with the Securities Lending Agreement between
you and us dated March 30, 2000 ("Agreement"), we hereby confirm our agreement
that we shall be entitled to 70% ("Our Percentage"), and Bankers Trust Company
("BTC") shall be entitled to a securities lending fee of 30%, of the fee paid by
the borrower to BTC, net of commissions, if any, with respect to each loan which
is not collateralized by cash. In the case of each loan collateralized by cash,
BTC shall receive on our behalf the income derived from approved investments of
the cash collateral ("Income"). From the Income BTC shall pay the borrower's
rebate and commissions, if any, (collectively "Rebate"), shall credit to our
account Our Percentage of the difference between (i) the sum of the Income plus
an amount computed at an annual rate of 0.12% on the cash collateral invested
during the term of such investment and (ii) the Rebate, and shall retain the
remainder of the Income as its securities lending fee. The monthly securities
lending earnings statement you provide to us pursuant to the Agreement will
reflect the computation in clause (i) above.
Very truly yours,
FLAG INVESTORS COMMUNICATIONS FUND, INC. AND
FLAG INVESTORS EQUITY PARTNERS FUND, INC.
By: ________________________
Xxxxxx X. Xxxxxx
Assistant Secretary
Agreed to and Accepted:
BANKERS TRUST COMPANY
By: _______________________
Name:
Title:
