EXHIBIT (g)
Amendment to Custodian Agreement
SECOND AMENDMENT
TO
CUSTODY AGREEMENT
This instrument dated July 1, 2001 is a Second Amendment to that
certain Custody Agreement between Sit Mutual Funds, Inc., a corporation
organized under the laws of the State of Minnesota (the "Fund") and The Northern
Trust Company (the "Custodian") dated as of July 1, 1999 and amended on July 1,
1999 (the "Custody Agreement").
WHEREAS, the parties desire to amend the Custody Agreement to take into
account Rule 17f-7 under the Investment Company Act of 1940.
NOW THEREFORE, the parties agree that the Agreement shall be amended as
follows:
1. The following definition shall be added to Section 1 of the Custody
Agreement:
"(n) 'Rule 17f-7' shall mean Rule 17f-7 under the 1940 Act."
2. The following shall replace the definition of "Sub-Custodian" under
Section 1(l) of the Custody Agreement:
"'Sub-Custodian' shall mean and include (i) any branch of the
Custodian, and (ii) any 'eligible foreign custodian,' as that term is
defined in Rule 17f-5 under the 1940 Act, approved by the Fund or a
Delegate of the Fund in the manner required by Rule 17f-5. For the
avoidance of doubt, the term 'Sub-Custodian' shall not include any
central securities depository or clearing agency."
3. The following shall replace Sections 3, 3A and 4 of the Custody
Agreement:
"3. Appointment and Removal of Sub-Custodians.
(a) The Custodian may appoint one or more Sub-Custodians to act as
sub-custodian or sub-custodians of Securities and moneys at any time
held in any Portfolio, upon the terms and conditions specified in this
Agreement. The Custodian shall oversee the maintenance by any
Sub-Custodian of any Securities or moneys of any Portfolio.
(b) The Agreement between the Custodian and each Sub-Custodian
described in clause (ii) of Section 1(l) and acting hereunder shall
contain any provisions necessary to comply with Rule 17f-5 under the
1940 Act.
(c) Prior to the Custodian's use of any Sub-Custodian described in
clause (ii) of Paragraph 1(l), the Fund or a Delegate of the Fund must
approve such Sub-Custodian in the manner required by Rule 17f-5 and
provide the Custodian with satisfactory evidence of such approval.
(d) The Custodian shall promptly take such steps as may be required to
remove any Sub-Custodian that has ceased to be an "eligible foreign
custodian" or has otherwise ceased to meet the requirements under Rule
17f-5. If the Custodian intends to remove any Sub-Custodian previously
approved by the
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Fund or a Delegate of the Fund pursuant to paragraph 3(c), and the
Custodian proposes to replace such Sub-Custodian with a Sub-Custodian
that has not yet been approved by the Fund or a Delegate of the Fund,
it will so notify the Fund or a Delegate of the Fund and provide it
with information reasonably necessary to determine such proposed
Sub-Custodian's eligibility under Rule 17f-5, including a copy of the
proposed agreement with such Sub-Custodian. The Fund shall at the
meeting of the Board of Directors next following receipt of such notice
and information, or a Delegate of the Fund shall promptly after receipt
of such notice and information, determine whether to approve the
proposed Sub-Custodian and will promptly thereafter give written notice
of the approval or disapproval of the proposed action.
(e) The Custodian hereby represents to the Fund that in its opinion,
after due inquiry, the established procedures to be followed by each
Sub-Custodian in connection with the safekeeping of property of a
Portfolio pursuant to this Agreement afford reasonable care for the
safekeeping of such property based on the standards applicable in the
relevant market.
3A. Delegation of Foreign Custody Management.
(a) The Fund hereby delegates to Custodian the role and
responsibilities of foreign custody manager set forth in subparagraph (b) below
of this Section 3A, in accordance with Rule 17f-5 with respect to foreign
custody arrangements for the Fund's existing and future investment portfolios,
except that the Custodian shall not have such responsibility with respect to
central depositories and clearing agencies or with respect to custody
arrangements in the countries listed on Schedule I, attached hereto, as that
Schedule may be amended from time to time by notice to the Fund.
(b) With respect to each arrangement with any Sub-custodian
regarding the assets of any investment portfolio of the Fund for which Custodian
has responsibility under this Section 3A (an "Eligible Foreign Custodian"),
Custodian shall:
(i) determine that the Fund's assets will be subject to
reasonable care, based on the standards applicable to
custodians in the relevant market, if maintained with the
Eligible Foreign Custodian, after considering all factors
relevant to the safekeeping of such assets including without
limitation the factors set forth in Rule 17f-5(c);
(ii) determine that the written contract with such Eligible
Foreign Custodian governing the foreign custody arrangements
complies with the requirements of Rule 17f-5 and will provide
reasonable care for the Fund's assets;
(iii) establish a system to monitor the appropriateness of
maintaining the Fund's assets with such Eligible Foreign
Custodian and the contract governing the Fund's foreign
custody arrangements;
(iv) provide to the Fund's Board of Directors, at least
annually, written reports notifying the Board of the placement
of the Fund's assets with a particular Eligible Foreign
Custodian and periodic reports of any material changes to the
Fund's foreign custodian arrangements; and
(v) withdraw the Fund's assets from any Eligible Foreign
Custodian as soon as reasonably practicable, if the foreign
custody arrangement no longer meets the requirement of Rule
17f-5.
4. Use of Sub-Custodians and Securities Depositories.
With respect to property of a Portfolio which is maintained by the
Custodian in the custody of a Sub-Custodian pursuant to Section 3:
(a) The Custodian will identify on its books as belonging to the
particular Portfolio any property held by such Sub-Custodian.
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(b) In the event that a Sub-Custodian permits any of the Securities
placed in its care to be held in an Eligible Securities Depository,
such Sub-Custodian will be required by its agreement with the Custodian
to identify on its books such Securities as being held for the account
of the Custodian as a custodian for its customers.
(c) Any Securities held by a Sub-Custodian will be subject only to the
instructions of the Custodian or its agents; and any Securities held in
an Eligible Securities Depository for the account of a Sub-Custodian
will be subject only to the instructions of such Sub-Custodian.
(d) The Custodian will only deposit property of a Portfolio in an
account with a Sub-Custodian which includes exclusively the assets held
by the Custodian for its customers, and will cause such account to be
designated by such Sub-Custodian as a special custody account for the
exclusive benefit of customers of the Custodian.
(e) Before any Securities are placed in an Eligible Securities
Depository, the Custodian shall provide the Fund's Board of Directors
with an analysis of the custody risks associated with maintaining
assets with the Eligible Securities Depository.
(f) The Custodian or its agent shall continue to monitor the custody
risks associated with maintaining the Securities with an Eligible
Securities Depository and shall promptly notify the Fund's Board of
Directors of any material changes in said risks."
5. The following shall replace Sections 16(b)(1) and 16(b)(2) of the
Custody Agreement:
"1. The Custodian will use reasonable care, prudence and
diligence with respect to its obligations under this Agreement
and the safekeeping of property of the Portfolios. The
Custodian shall be liable to, and shall indemnify and hold
harmless the Fund from and against any loss which shall occur
as the result of the failure of the Custodian or a
Sub-Custodian to exercise reasonable care, prudence and
diligence with respect to their respective obligations under
this Agreement and the safekeeping of such property. The
determination of whether the Custodian or Sub-Custodian has
exercised reasonable care, prudence and diligence in
connection with their obligations under this Agreement shall
be made in light of prevailing standards applicable to
professional custodians in the jurisdiction in which such
custodial services are performed. In the event of any loss to
the Fund by reason of the failure of the Custodian or a
Sub-Custodian to exercise reasonable care, prudence and
diligence, the Custodian shall be liable to the Fund only to
the extent of the Fund's direct damages and expenses, which
damages, for purposes of property only, shall be determined
based on the market value of the property which is the subject
of the loss at the date of discovery of such loss and without
reference to any special condition or circumstances.
2. The Custodian will not be responsible for any act,
omission, or default of, or for the solvency of, any central
securities depository or clearing agency."
6. The following shall replace Section 16(h):
"(h) Indemnification. The Fund agrees to indemnify and hold
the Custodian harmless from all loss, cost, taxes, charges,
assessments, claims, and liabilities (including, without limitation,
liabilities arising under the Securities Act of 1933, the Securities
Exchange Act of 1934 and the 1940 Act and state or foreign securities
laws) and expenses (including reasonable attorneys fees and
disbursements) arising directly or indirectly from any action taken or
omitted by the Custodian (i) at the request or on the direction of or
in reliance on the advice of the Fund or in reasonable reliance upon
the Prospectus or (ii) upon an Instruction; provided, that the
foregoing indemnity shall not apply to any loss, cost, tax, charge,
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assessment, claim, liability or expense to the extent the same is
attributable to the Custodian's or any Sub-Custodian's negligence,
willful misconduct, bad faith or reckless disregard of duties and
obligations under this Agreement or any other agreement relating to the
custody of Fund property."
In all other respects the Custody Agreement shall remain in full force and
effect as originally written.
IN WITNESS WHEREOF, the parties have executed this First Amendment,
intending it to be effective as of the date written above.
SIT MUTUAL FUNDS, INC.
By: /s/ Xxxx X. Xxxxxxxxx
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Name: Xxxx X. Xxxxxxxxx
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Title: Vice President
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THE NORTHERN TRUST COMPANY
By: /s/ Xxxxxxx X. Lies
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Name: Xxxxxxx X. Lies
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Title: Vice President
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