EXHIBIT (g)(1)
CUSTODIAN AGREEMENT
AGREEMENT made as of this 1st day of April, 2002, between ▇▇▇▇▇▇
ASSOCIATES INVESTMENT TRUST, a business trust organized under the laws of the
Commonwealth of Massachusetts (the "Fund"), and INVESTORS BANK & TRUST COMPANY,
a Massachusetts trust company (the "Bank").
The Fund, an open-end management investment company on behalf of the
portfolios/series listed on APPENDIX A hereto (as such APPENDIX A may be amended
from time to time) (each a "Portfolio" and collectively, the "Portfolios"),
desires to place and maintain all of its portfolio securities and cash in the
custody of the Bank. The Bank has at least the minimum qualifications required
by Section 17(f)(1) of the Investment Company Act of 1940 (the "1940 Act") to
act as custodian of the portfolio securities and cash of the Fund, and has
indicated its willingness to so act, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. BANK APPOINTED CUSTODIAN. The Fund hereby appoints the Bank as
custodian of its Portfolio Securities (as defined below) and cash delivered to
the Bank as hereinafter described and the Bank hereby accepts appointment as
such custodian and agrees to act as such upon the terms and conditions
hereinafter set forth. For the services rendered pursuant to this Agreement the
Fund agrees to pay to the Bank fees as may be agreed to from time to time in
writing between the parties.
2. DEFINITIONS. Whenever used herein, the terms listed below will have
the following meaning:
2.1 AUTHORIZED PERSON. Authorized Person will mean any of the persons
duly authorized to give Proper Instructions or otherwise act on behalf of the
Fund by appropriate resolution of its Board, and set forth in a certificate as
required by Section 4 hereof.
2.2 BOARD. Board will mean the Board of Directors or the Board of
Trustees of the Fund, as the case may be.
2.3 SECURITY. The term security as used herein will have the same
meaning assigned to such term in the Securities Act of 1933, as amended,
including, without limitation, any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any profit
sharing agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign currency, or, in general, any interest or instrument commonly known as
a "security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.4 PORTFOLIO SECURITY. Portfolio Security will mean any security owned
by a Portfolio.
2.5 OFFICERS' CERTIFICATE. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund.
2.6 BOOK-ENTRY SYSTEM. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.7 DEPOSITORY. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 ("Exchange
Act"), its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor or successors and its nominee
or nominees, specifically identified in a certified copy of a resolution of the
Board.
2.8 PROPER INSTRUCTIONS. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized Person,
such instructions to be given in such form and manner as the Bank and the Fund
shall agree upon from time to time, and (ii) instructions (which may be
continuing instructions) regarding other matters signed or initialed by an
Authorized Person. Oral instructions will be considered Proper Instructions if
the Bank reasonably believes them to have been given by an Authorized Person.
The Fund shall cause all oral instructions to be promptly confirmed in writing.
If such subsequent written confirmation of an oral instruction is not received
by the Bank prior to a transaction, it shall in no way affect the validity of a
transaction or the authorization thereof by the Fund. The Bank shall act upon
and comply with any subsequent Proper Instruction which modifies a prior
instruction and the sole obligation of the Bank with respect to any follow-up or
confirming instruction shall be to make reasonable efforts to detect any
discrepancy between the original instruction and such confirmation and to report
such discrepancy to the Fund. The Fund shall be responsible, at the Fund's
expense, for taking any action, including any reprocessing, necessary to correct
any such discrepancy or error, and to the extent such action requires the Bank
to act, the Fund shall give the Bank specific Proper Instructions as to the
action required. Upon receipt by the Bank of an Officers' Certificate as to the
authorization by the Board accompanied by a detailed description of procedures
approved by the Fund, Proper Instructions may include communication effected
directly between electro-mechanical or electronic devices provided that the
Board and the Bank agree in writing that such procedures afford adequate
safeguards for the Fund's assets.
3. SEPARATE ACCOUNTS. If the Fund has more than one series or
portfolio, the Bank will segregate the assets of each series or portfolio to
which this Agreement relates into a separate account for each such series or
portfolio containing the assets of such series or portfolio (and all investment
earnings thereon). Unless the context otherwise requires, any reference in this
Agreement to any actions to be taken by the Fund shall be deemed to refer to the
Fund acting on behalf of one or more of its series, any reference in this
Agreement to any assets of the Fund, including, without limitation, any
portfolio securities and cash and earnings thereon, shall be deemed to refer
only to assets of the applicable series, any duty or obligation of the Bank
hereunder to the Fund shall be deemed to refer to duties and obligations with
respect to such individual series and any obligation or liability of the Fund
hereunder shall be binding only with respect to such individual series, and
shall be discharged only out of the assets of such series.
4. CERTIFICATION AS TO AUTHORIZED PERSONS. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
members of the Board, it being understood that as soon as is reasonably
practicable after the occurrence of any change in the information set forth in
the most recent certification on file (including without limitation any person
named in the most recent certification who is no longer an Authorized Person as
designated therein), the Secretary or Assistant Secretary of the Fund will sign
a new or amended certification setting forth the change and the new, additional
or omitted names or signatures. The Bank will be entitled to rely and act upon
any Officers' Certificate given to it by the Fund which has been signed by
Authorized Persons named in the most recent certification received by the Bank.
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5. CUSTODY OF CASH. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund, on behalf of
each of its Portfolios, or in the name of the Bank, as Custodian of the Fund, on
behalf of each of its Portfolios, and will deposit to the account of the Fund
all of the cash of the Fund, except for cash held by a subcustodian appointed
pursuant to Sections 14.2 or 14.3 hereof, including borrowed funds, delivered to
the Bank, subject only to draft or order by the Bank acting pursuant to the
terms of this Agreement. Upon receipt by the Bank of Proper Instructions (which
may be continuing instructions) or in the case of payments for redemptions and
repurchases of outstanding shares of beneficial interest of the Fund,
notification from the Fund's transfer agent as provided in Section 7, requesting
such payment, designating the payee or the account or accounts to which the Bank
will release funds for deposit, and stating that it is for a purpose permitted
under the terms of this Section 5, specifying the applicable subsection, the
Bank will make payments of cash held for the accounts of the Fund, insofar as
funds are available for that purpose, only as permitted in subsections 5.1-5.9
below.
5.1 PURCHASE OF SECURITIES. Upon the purchase of securities for the
Fund, against contemporaneous receipt of such securities by the Bank or against
delivery of such securities to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs registered in the name of the Fund or in the name of, or
properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of Book Entry Paper (as
that term is defined in Section 6.6 hereof)) of purchase of the securities
received by the Bank before such payment is made, as confirmed in the Proper
Instructions received by the Bank before such payment is made.
5.2 REDEMPTIONS. In such amount as may be necessary for the repurchase
or redemption of shares of beneficial interest of the Fund offered for
repurchase or redemption in accordance with Section 7 of this Agreement.
5.3 DISTRIBUTIONS AND EXPENSES OF FUND. For the payment on the account
of the Fund of dividends or other distributions to shareholders as may from time
to time be declared by the Board, interest, taxes, management or supervisory
fees, distribution fees, fees of the Bank for its services hereunder and
reimbursement of the expenses and liabilities of the Bank as provided herein,
fees of any transfer agent or trustee of the Fund, fees for legal, accounting,
and auditing services, or other operating expenses of the Fund.
5.4 PAYMENT IN RESPECT OF SECURITIES. For payments in connection with
the conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Fund held by or to be delivered to the Bank.
5.5 REPAYMENT OF LOANS. To repay loans of money made to the Fund, but,
in the case of final payment, only upon redelivery to the Bank of any Portfolio
Securities pledged or hypothecated therefor and upon surrender of documents
evidencing the loan;
5.6 REPAYMENT OF CASH. To repay the cash delivered to the Fund for the
purpose of collateralizing the obligation to return to the Fund certificates
borrowed from the Fund representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.
5.7 FOREIGN EXCHANGE TRANSACTIONS.
(a) For payments in connection with foreign exchange
contracts or options to purchase and sell foreign currencies for spot and future
delivery (collectively, "Foreign Exchange Agreements") which may be entered into
by the Bank on behalf of the Fund upon the receipt of Proper Instructions, such
Proper Instructions to specify the currency broker or banking institution (which
may be the Bank, or any other subcustodian or agent hereunder, acting as
principal) with which the contract or option is made, and the Bank
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shall have no duty with respect to the selection of such currency brokers or
banking institutions with which the Fund deals or for their failure to comply
with the terms of any contract or option.
(b) In order to secure any payments in connection with
Foreign Exchange Agreements which may be entered into by the Bank pursuant to
Proper Instructions, the Fund agrees that the Bank shall have a continuing lien
and security interest, to the extent of any payment due under any Foreign
Exchange Agreement, in and to any property at any time held by the Bank for the
Fund's benefit or in which the Fund has an interest and which is then in the
Bank's possession or control (or in the possession or control of any third party
acting on the Bank's behalf). The Fund authorizes the Bank, in the Bank's sole
discretion, at any time to charge any such payment due under any Foreign
Exchange Agreement against any balance of account standing to the credit of the
Fund on the Bank's books.
5.8 OTHER AUTHORIZED PAYMENTS. For other authorized transactions of the
Fund, or other obligations of the Fund incurred for proper Fund purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Fund, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper corporate purpose.
5.9 TERMINATION: Upon the termination of this Agreement as hereinafter
set forth pursuant to Section 8 and Section 16 of this Agreement.
6. SECURITIES.
6.1 SEGREGATION AND REGISTRATION. Except as otherwise provided herein,
and except for securities to be delivered to any subcustodian appointed pursuant
to Sections 14.2 or 14.3 hereof, the Bank as custodian will receive and hold
pursuant to the provisions hereof, in a separate account or accounts and
physically segregated at all times from those of other persons, any and all
Portfolio Securities which may now or hereafter be delivered to it by or for the
account of the Fund, on behalf of each of its Portfolios. All such Portfolio
Securities will be held or disposed of by the Bank for, and subject at all times
to, the instructions of the Fund pursuant to the terms of this Agreement.
Subject to the specific provisions herein relating to Portfolio Securities that
are not physically held by the Bank, the Bank will register all Portfolio
Securities (unless otherwise directed by Proper Instructions or an Officers'
Certificate), in the name of a registered nominee of the Bank as defined in the
Internal Revenue Code and any Regulations of the Treasury Department issued
thereunder, and will 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 Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any Portfolio Securities which
may from time to time be registered in the name of the Fund.
6.2 VOTING AND PROXIES. Neither the Bank nor any nominee of the Bank
will vote any of the Portfolio Securities held hereunder, except in accordance
with Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Fund all notices, proxies
and proxy soliciting materials delivered to the Bank with respect to such
Securities, 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.
6.3 CORPORATE ACTION. If at any time the Bank is notified that an
issuer of any Portfolio Security has taken or intends to take a corporate action
(a "Corporate Action") that affects the rights, privileges, powers,
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preferences, qualifications or ownership of a Portfolio Security, including
without limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or stock
dividend, which Corporate Action requires an affirmative response or action on
the part of the holder of such Portfolio Security (a "Response"), the Bank shall
notify the Fund promptly of the Corporate Action, the Response required in
connection with the Corporate Action and the Bank's deadline for receipt from
the Fund of Proper Instructions regarding the Response (the "Response
Deadline"). The Bank shall forward to the Fund via telecopier and/or overnight
courier all notices, information statements or other materials relating to the
Corporate Action promptly after receipt of such materials by the Bank.
(a) The Bank shall act upon a required Response only after
receipt by the Bank of Proper Instructions from the Fund no later than 5:00 p.m.
on the date specified as the Response Deadline and only if the Bank (or its
agent or subcustodian hereunder) has actual possession of all necessary
Securities, consents and other materials no later than 5:00 p.m. on the date
specified as the Response Deadline.
(b) The Bank shall have no duty to act upon a required
Response if Proper Instructions relating to such Response and all necessary
Securities, consents and other materials are not received by and in the
possession of the Bank no later than 5:00 p.m. on the date specified as the
Response Deadline. Notwithstanding, the Bank may, in its sole discretion, use
its best efforts to act upon a Response for which Proper Instructions and/or
necessary Securities, consents or other materials are received by the Bank after
5:00 p.m. on the date specified as the Response Deadline, it being acknowledged
and agreed by the parties that any undertaking by the Bank to use its best
efforts in such circumstances shall in no way create any duty upon the Bank to
complete such Response prior to its expiration, unless the Fund was unable to
provide such Proper Instructions and/or necessary securities, consents or other
materials due to the Bank's negligent actions or omissions, in which case the
Bank shall use its best efforts to complete such Response prior to its
expiration.
(c) In the event that the Fund notifies the Bank of a
Corporate Action requiring a Response and the Bank has received no other notice
of such Corporate Action, the Response Deadline shall be 48 hours prior to the
Response expiration time set by the depository processing such Corporate Action.
(d) Section 14.3(e) of this Agreement shall govern any
Corporate Action involving Foreign Portfolio Securities held by a Selected
Foreign Sub-Custodian.
6.4 BOOK-ENTRY SYSTEM. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits of Fund assets
in the Book-Entry System, and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry
System provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with
respect to the Fund's participation in the Book-Entry System through the Bank
(or any such agent) will identify by book entry the Portfolio Securities which
are included with other securities deposited in the Account and shall at all
times during the regular business hours of the Bank (or such agent) be open for
inspection by duly authorized officers, employees or agents of the Fund. Where
securities are transferred to the Fund's account, the Bank shall also, by book
entry or otherwise, identify as belonging to the Fund a quantity of securities
in a fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
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(c) The Bank (or its agent) shall pay for securities
purchased for the account of the Fund or shall pay cash collateral against the
return of Portfolio Securities loaned by the Fund upon (i) receipt of advice
from the Book-Entry System that such Securities have been transferred to the
Account, and (ii) the making of an entry on the records of the Bank (or its
agent) to reflect such payment and transfer for the account of the Fund. The
Bank (or its agent) shall transfer securities sold or loaned for the account of
the Fund upon
(i) receipt of advice from the Book-Entry System that
payment for securities sold or payment of the initial cash collateral against
the delivery of securities loaned by the Fund has been transferred to the
Account; and
(ii) the making of an entry on the records of the Bank
(or its agent) to reflect such transfer and payment for the account of the Fund.
Copies of all advices from the Book-Entry System of transfers of securities for
the account of the Fund shall identify the Fund, be maintained for the Fund by
the Bank and shall be provided to the Fund at its request. The Bank shall send
the Fund a confirmation, as defined by Rule 17f-4 of the 1940 Act, of any
transfers to or from the account of the Fund;
(d) The Bank will promptly provide the Fund with any report
obtained by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Book-Entry System;
6.5 USE OF A DEPOSITORY. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits in DTC or
other such Depository and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive,
exchange, release, lend, deliver and otherwise deal with Portfolio Securities
including stock dividends, rights and other items of like nature, and to receive
and remit to the Bank on behalf of the Fund all income and other payments
thereon and to take all steps necessary and proper in connection with the
collection thereof;
(b) Registration of Portfolio Securities may be made in the
name of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made
through the clearing medium employed by such Depository for transactions of
participants acting through it. Upon any purchase of Portfolio Securities,
payment will be made only upon delivery of the securities to or for the account
of the Fund and the Fund shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund only upon delivery of the Securities to
or for the account of the Fund; and upon any sale of Portfolio Securities,
delivery of the Securities will be made only against payment therefor or, in the
event Portfolio Securities are loaned, delivery of Securities will be made only
against receipt of the initial cash collateral to or for the account of the
Fund; and
(d) The Bank shall use its best efforts to provide that:
(i) The Depository obtains replacement of any
certificated Portfolio Security deposited with it in the event such Security is
lost, destroyed, wrongfully taken or otherwise not available to be returned to
the Bank upon its request;
(ii) Proxy materials received by a Depository with
respect to Portfolio Securities deposited with such Depository are forwarded
immediately to the Bank for prompt transmittal to the Fund;
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(iii) Such Depository promptly forwards to the Bank
confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the Bank
such records with respect to the performance of the Bank's obligations and
duties hereunder as may be necessary for the Fund to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act and Rule 31(a)
thereunder; and
(v) Such Depository delivers to the Bank all internal
accounting control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Fund may reasonably request in
order to verify the Portfolio Securities held by such Depository.
6.6 USE OF BOOK-ENTRY SYSTEM FOR COMMERCIAL PAPER. Provided (i) the
Bank has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Fund has purchased such Issuer's Book-Entry
Paper, the Bank shall issue and hold in book-entry form, on behalf of the Fund,
commercial paper issued by issuers with whom the Bank has entered into a
book-entry agreement (the "Issuers"). In maintaining procedures for Book-Entry
Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by the
Fund in an account of the Bank that includes only assets held by it for
customers;
(b) The records of the Bank with respect to the Fund's
purchase of Book-Entry Paper through the Bank will identify, by book-entry,
commercial paper belonging to the Fund which is included in the Book-Entry
System and shall at all times during the regular business hours of the Bank be
open for inspection by duly authorized officers, employees or agents of the
Fund;
(c) The Bank shall pay for Book-Entry Paper purchased for
the account of the Fund upon contemporaneous (i) receipt of advice from the
Issuer that such sale of Book-Entry Paper has been effected, and (ii) the making
of an entry on the records of the Bank to reflect such payment and transfer for
the account of the Fund;
(d) The Bank shall cancel such Book-Entry Paper obligation
upon the maturity thereof upon contemporaneous (i) receipt of advice that
payment for such Book-Entry Paper has been transferred to the Fund, and (ii) the
making of an entry on the records of the Bank to reflect such payment for the
account of the Fund; and
(e) The Bank will send to the Fund such reports on its
system of internal accounting control with respect to the Book-Entry Paper as
the Fund may reasonably request from time to time.
6.7 USE OF IMMOBILIZATION PROGRAMS. Provided (i) the Bank has received
a certified copy of a resolution of the Board specifically approving the
maintenance of Portfolio Securities in an immobilization program operated by a
bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and (ii)
for each year following such approval the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a subcustodian hereunder.
6.8 EURODOLLAR CDS. Any Portfolio Securities which are Eurodollar CDs
may be physically held by the European branch of the U.S. banking institution
that is the issuer of such Eurodollar CD (a "European Branch"), provided that
such Portfolio Securities are identified on the books of the Bank as belonging
to the
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Fund and that the books of the Bank identify the European Branch holding
such Portfolio Securities. Notwithstanding any other provision of this Agreement
to the contrary, except as stated in the first sentence of this subsection 6.8,
the Bank shall be under no other duty with respect to such Eurodollar CDs
belonging to the Fund.
6.9 OPTIONS AND FUTURES TRANSACTIONS.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
(i) The Bank shall take action as to put options
("puts") and call options ("calls") purchased or sold (written) by the Fund
regarding escrow or other arrangements (i) in accordance with the provisions of
any agreement entered into upon receipt of Proper Instructions among the Bank,
any broker-dealer registered with the National Association of Securities
Dealers, Inc. (the "NASD"), and, if necessary, the Fund, relating to the
compliance with the rules of the Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations.
(ii) Unless another agreement requires it to do so, the
Bank shall be under no duty or obligation to see that the Fund has deposited or
is maintaining adequate margin, if required, with any broker in connection with
any option, nor shall the Bank be under duty or obligation to present such
option to the broker for exercise unless it receives Proper Instructions from
the Fund. The Bank shall have no responsibility for the legality of any put or
call purchased or sold on behalf of the Fund, the propriety of any such purchase
or sale, or the adequacy of any collateral delivered to a broker in connection
with an option or deposited to or withdrawn from a Segregated Account (as
defined in subsection 6.10 below). The Bank specifically, but not by way of
limitation, shall not be under any duty or obligation to: (i) periodically check
or notify the Fund that the amount of such collateral held by a broker or held
in a Segregated Account is sufficient to protect such broker or the Fund against
any loss; (ii) effect the return of any collateral delivered to a broker; or
(iii) advise the Fund that any option it holds, has or is about to expire. Such
duties or obligations shall be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action as to puts, calls and
futures contracts ("Futures") purchased or sold by the Fund in accordance with
the provisions of any agreement entered into upon the receipt of Proper
Instructions among the Fund, the Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract Market, or
any similar organization or organizations, regarding account deposits in
connection with transactions by the Fund.
(ii) The responsibilities of the Bank as to Futures,
puts and calls traded on commodities exchanges, any Futures Commission Merchant
account and the Segregated Account shall be limited as set forth in subparagraph
(a)(ii) of this Section 6.9 as if such subparagraph referred to Futures
Commission Merchants rather than brokers, and Futures and puts and calls thereon
instead of options.
6.10 SEGREGATED ACCOUNT. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Fund.
(a) Cash and/or Portfolio Securities may be transferred into
a Segregated Account upon receipt of Proper Instructions in the following
circumstances:
(i) in accordance with the provisions of any agreement
among the Fund, the Bank and a broker-dealer registered under the Exchange Act
and a member of the NASD or any Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Options
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Clearing Corporation and of any registered national securities exchange or the
Commodity Futures Trading Commission or any registered Contract Market, or of
any similar organizations regarding escrow or other arrangements in connection
with transactions by the Fund;
(ii) for the purpose of segregating cash or securities
in connection with options purchased or written by the Fund or commodity Futures
purchased or written by the Fund;
(iii) for the deposit of liquid assets, such as cash,
U.S. Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Fund's then
outstanding forward commitment or "when-issued" agreements relating to the
purchase of Portfolio Securities and all the Fund's then outstanding commitments
under reverse repurchase agreements entered into with broker-dealer firms;
(iv) for the purposes of compliance by the Fund with
the procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies;
(v) for other proper corporate purposes, but only, in
the case of this clause (v), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board, or of the executive
committee of the Board signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, setting forth the purpose or purposes of
such Segregated Account and declaring such purposes to be proper corporate
purposes.
(b) Cash and/or Portfolio Securities may be withdrawn from a
Segregated Account pursuant to Proper Instructions in the following
circumstances:
(i) with respect to assets deposited in accordance
with the provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to
(a)(iii) or (a)(iv) above, for sale or delivery to meet the Fund's obligations
under outstanding forward commitment or when-issued agreements for the purchase
of Portfolio Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or
greater value deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding forward
commitment or when-issued agreements for the purchase of portfolio securities or
reverse repurchase agreements are sold to other parties or the Fund's
obligations thereunder are met from assets of the Fund other than those in the
Segregated Account;
(v) for delivery upon settlement of a forward
commitment or when-issued agreement for the sale of Portfolio Securities; or
(vi) with respect to assets deposited pursuant to
(a)(v) above, in accordance with the purposes of such account as set forth in
Proper Instructions.
6.11 INTEREST BEARING CALL OR TIME DEPOSITS. The Bank shall, upon
receipt of Proper Instructions relating to the purchase by the Fund of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated in
such Proper Instructions. The Bank shall include in its records with respect to
the assets of the Fund appropriate notation as to the amount of
9
each such deposit, the banking institution with which such deposit is made (the
"Deposit Bank"), and shall retain such forms of advice or receipt evidencing the
deposit, if any, as may be forwarded to the Bank by the Deposit Bank. Such
deposits shall be deemed Portfolio Securities of the Fund and the responsibility
of the Bank therefore shall be the same as and no greater than the Bank's
responsibility in respect of other Portfolio Securities of the Fund.
6.12 TRANSFER OF SECURITIES. The Bank will transfer, exchange, deliver
or release Portfolio Securities held by it hereunder, insofar as such Securities
are available for such purpose, provided that the Bank will allow any transfer,
exchange, delivery or release under this Section only upon receipt of Proper
Instructions. The Proper Instructions shall state that such transfer, exchange
or delivery is for a purpose permitted under the terms of this Section 6.12, and
shall specify the applicable subsection, or describe the purpose of the
transaction with sufficient particularity to permit the Bank to ascertain the
applicable subsection. After receipt of such Proper Instructions, the Bank will
transfer, exchange, deliver or release Portfolio Securities only in the
following circumstances:
(a) Upon sales of Portfolio Securities for the account of
the Fund, against contemporaneous receipt by the Bank of payment therefor in
full, or against payment to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs, each such payment to be in the amount of the sale price
shown in a broker's confirmation of sale received by the Bank before such
payment is made, as confirmed in the Proper Instructions received by the Bank
before such payment is made;
(b) In exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan of merger,
consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise, upon exercise of subscription,
purchase or sale or other similar rights represented by such Portfolio
Securities, or for the purpose of tendering shares in the event of a tender
offer therefor, provided, however, that in the event of an offer of exchange,
tender offer, or other exercise of rights requiring the physical tender or
delivery of Portfolio Securities, the Bank shall have no liability for failure
to so tender in a timely manner unless such Proper Instructions are received by
the Bank at least two business days prior to the date required for tender, and
unless the Bank (or its agent or subcustodian hereunder) has actual possession
of such Security at least two business days prior to the date of tender;
(c) Upon conversion of Portfolio Securities pursuant to
their terms into other securities;
(d) For the purpose of redeeming in-kind shares of the Fund
upon authorization from the Fund;
(e) In the case of option contracts owned by the Fund, for
presentation to the endorsing broker;
(f) When such Portfolio Securities are called, redeemed or
retired or otherwise become payable;
(g) For the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Fund by
any bank, including the Bank; provided, however, that such Portfolio Securities
will be released only upon payment to the Bank for the account of the Fund of
the moneys borrowed, provided further, however, that in cases where additional
collateral is required to secure a borrowing already made, and such fact is made
to appear in the Proper Instructions, Portfolio Securities may be released for
that purpose without any such payment. In the event that any pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Fund from the lender in accordance with the
normal procedures of the lender and any loan agreement between the fund and the
lender
10
that an event of deficiency or default on the loan has occurred, the Bank may
deliver such pledged Portfolio Securities to or for the account of the lender;
(h) for the purpose of releasing certificates representing
Portfolio Securities, against contemporaneous receipt by the Bank of the fair
market value of such security, as set forth in the Proper Instructions received
by the Bank before such payment is made;
(i) for the purpose of delivering securities lent by the
Fund to a bank or broker dealer, but only against receipt in accordance with
street delivery custom except as otherwise provided herein, of adequate
collateral as agreed upon from time to time by the Fund and the Bank, and upon
receipt of payment in connection with any repurchase agreement relating to such
securities entered into by the Fund;
(j) for other authorized transactions of the Fund or for
other proper corporate purposes; provided that before making such transfer, the
Bank will also receive a certified copy of resolutions of the Board, signed by
an authorized officer of the Fund (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Fund or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made; and
(k) upon termination of this Agreement as hereinafter set
forth pursuant to Section 8 and Section 16 of this Agreement.
As to any deliveries made by the Bank pursuant to this Section 6.12,
securities or cash receivable in exchange therefor shall be delivered to the
Bank.
7. REDEMPTIONS. In the case of payment of assets of the Fund held by
the Bank in connection with redemptions and repurchases by the Fund of
outstanding shares of beneficial interest, the Bank will rely on notification by
the Fund's transfer agent of receipt of a request for redemption and
certificates, if issued, in proper form for redemption before such payment is
made. Payment shall be made in accordance with the Articles of Incorporation or
Declaration of Trust and By-laws of the Fund (collectively the "Articles"), from
assets available for said purpose.
8. MERGER, DISSOLUTION, etc. OF FUND. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Fund into or the consolidation of the Fund with another investment company, the
sale by the Fund of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Fund and
distribution of its assets, upon the payment of the fees, disbursements and
expenses of the Bank through the end of the then current term of this Agreement,
the Bank will deliver the Portfolio Securities held by it under this Agreement
and disburse cash only upon the order of the Fund set forth in an Officers'
Certificate, accompanied by a certified copy of a resolution of the Board
authorizing any of the foregoing transactions. Upon completion of such delivery
and disbursement and the payment of all such fees, disbursements and expenses of
the Bank, this Agreement will terminate and the Bank shall be released from any
and all obligations hereunder.
9. ACTIONS OF BANK WITHOUT PRIOR AUTHORIZATION. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, the Bank will take the following actions without
prior authorization or instruction of the Fund or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name of
the Fund all checks, drafts, or other negotiable or transferable instruments or
other orders for the payment of money received by it for the account of the Fund
and hold for the account of the Fund all income, dividends, interest and other
payments or distributions of cash with respect to the Portfolio Securities held
thereunder;
11
9.2 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 cash received by it upon such payment for the account of the Fund;
9.3 Receive and hold for the account of the Fund all securities
received as a distribution on Portfolio Securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
9.4 Execute as agent on behalf of the Fund all necessary ownership and
other certificates and affidavits required by the Internal Revenue Code or the
regulations of the Treasury Department issued thereunder, or by 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 and as may be required to obtain payment in respect thereof.
The Bank will execute and deliver such certificates in connection with Portfolio
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any State;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it upon
payment for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for definitive
securities.
10. COLLECTIONS AND DEFAULTS. The Bank will use reasonable efforts to
collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Fund notice actually received by it of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such Securities. If Portfolio Securities upon which such income is
payable are in default or payment is refused after due demand or presentation,
the Bank will notify the Fund in writing of any default or refusal to pay within
two business days from the day on which it receives knowledge of such default or
refusal.
11. MAINTENANCE OF RECORDS AND ACCOUNTING SERVICES. The Bank will
maintain records with respect to transactions for which the Bank is responsible
pursuant to the terms and conditions of this Agreement, and in compliance with
the applicable rules and regulations of the 1940 Act. Such records shall be
considered the property of the Funds. The books and records of the Bank
pertaining to its actions under this Agreement and reports by the Bank or its
independent accountants concerning its accounting system, procedures for
safeguarding duly authorized securities and internal accounting controls will be
open to inspection and audit at reasonable times by officers, employees or
agents of or auditors employed by the Fund and will be maintained and preserved
by the Bank in the manner and in accordance with the applicable rules and
regulations under the 1940 Act.
The Bank shall perform fund accounting and shall keep the books of
account as set forth in this Agreement and render statements or copies of such
records daily or monthly as reasonably requested by the Treasurer or any duly
authorized officer of the Fund.
The Bank shall provide the Funds, at such times as the Funds may
reasonably request, but not less than annually, with reports by independent
public accountants on the accounting system, internal controls and procedures
for safeguarding duly authorized securities; such reports shall be of sufficient
scope and in sufficient detail as may reasonable be required by the Funds to
provide reasonable assurance that any material inadequacies would be disclosed
by such examination, and, if there are no such inadequacies, the reports shall
so state.
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The Bank shall assist generally in the preparation of the Fund's
registration statement on Form N-1A; reports to shareholders, the SEC and
others; audits of accounts, including audits by the independent auditors of the
Funds with respect to the Bank's activities hereunder in connection with the
preparation of the Funds' Form N-1A, Form N-SAR or annual reports; the
fulfillment by a Fund of any other requirements of applicable federal or state
law or regulation, or any regulatory body; and other ministerial matters of like
nature.
12. FUND EVALUATION AND YIELD CALCULATION
12.1 FUND ACCOUNTING. The Bank shall keep the books of account of each
Fund and shall compute and, unless otherwise directed by the Board, determine
the net asset value and the public offering price of a share of beneficial
interest of the Fund, such determination to be made in accordance with the
provisions of the Articles and By-laws of the Fund and the Prospectus and
Statement of Additional Information relating to the Fund, as they may from time
to time be amended, and any applicable resolutions of the Board at the time in
force and applicable; and promptly to notify the Fund, the proper exchange and
the NASD or such other persons as the Fund may request of the results of such
computation and determination. In computing the net asset value hereunder, the
Bank may rely in good faith upon information furnished to it by any Authorized
Person in respect of (i) the manner of accrual of the liabilities of the Fund
and in respect of liabilities of the Fund not appearing on its books of account
kept by the Bank, (ii) reserves, if any, authorized by the Board or that no such
reserves have been authorized, (iii) the source of the quotations to be used in
computing the net asset value, (iv) the value to be assigned to any security for
which no price quotations are available, and (v) the method of computation of
the public offering price on the basis of the net asset value of the shares, and
the Bank shall not be responsible for any loss occasioned by such reliance or
for any good faith reliance on any quotations received from a source pursuant to
(iii) or (iv) above.
12.2. YIELD CALCULATION. The Bank will compute the performance results
of the Fund (the "Yield Calculation") in accordance with the provisions of
Release No. 33-6753 and Release No. IC-16245 (February 2, 1988) (the "Releases")
promulgated by the Securities and Exchange Commission, and any subsequent
amendments to, published interpretations of or general conventions accepted by
the staff of the Securities and Exchange Commission with respect to such
releases or the subject matter thereof ("Subsequent Staff Positions"), subject
to the terms set forth below:
(a) The Bank shall compute the Yield Calculation for the
Fund for the stated periods of time as shall be mutually agreed upon, and
communicate in a timely manner the result of such computation to the Fund.
(b) In performing the Yield Calculation, the Bank will
derive the items of data necessary for the computation from the records it
generates and maintains for the Fund pursuant Section 11 hereof. The Bank shall
have no responsibility to review, confirm, or otherwise assume any duty or
liability with respect to the accuracy or correctness of any such data supplied
to it by the Fund, any of the Fund's designated agents or any of the Fund's
designated third party providers.
(c) At the request of the Bank, the Fund shall provide, and
the Bank shall be entitled to rely on, written standards and guidelines to be
followed by the Bank in interpreting and applying the computation methods set
forth in the Releases or any Subsequent Staff Positions as they specifically
apply to the Fund. In the event that the computation methods in the Releases or
the Subsequent Staff Positions or the application to the Fund of a standard or
guideline is not free from doubt or in the event there is any question of
interpretation as to the characterization of a particular security or any aspect
of a security or a payment with respect thereto (e.g., original issue discount,
participating debt security, income or return of capital, etc.) or otherwise or
as to any other element of the computation which is pertinent to the Fund, the
Fund or its designated agent shall have the full responsibility for making the
determination of how the security or payment is to be treated for purposes of
the computation and how the computation is to be made and shall inform the Bank
thereof on a timely basis. The Bank shall have no responsibility to make
independent determinations with
13
respect to any item which is covered by this Section, and shall not be
responsible for its computations made in accordance with such determinations so
long as such computations are mathematically correct.
(d) The Fund shall keep the Bank informed of all publicly
available information and of any non-public advice, or information obtained by
the Fund from its independent auditors or by its personnel or the personnel of
its investment adviser, or Subsequent Staff Positions related to the
computations to be undertaken by the Bank pursuant to this Agreement and the
Bank shall not be deemed to have knowledge of such information (except as
contained in the Releases) unless it has been furnished to the Bank in writing
or the Bank otherwise has actual knowledge of such information.
13. ADDITIONAL SERVICES. The Bank shall perform the additional services
for the Fund as are set forth on APPENDIX B hereto. APPENDIX B may be amended
from time to time upon agreement of the parties to include further additional
services to be provided by the Bank to the Fund.
14. DUTIES OF THE BANK.
14.1 PERFORMANCE OF DUTIES AND STANDARD OF CARE. The Bank shall be held
to the standard of good faith and reasonable care in carrying out its
obligations under this Agreement; however, the Bank will be under no duty or
obligation to inquire into and will not be liable for:
(a) the validity of the issue of any Portfolio Securities
purchased by or for the Fund, the legality of the purchases thereof or the
propriety of the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by
or for the Fund or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any shares of
beneficial interest of the Fund or the sufficiency of the amount to be received
therefor;
(d) the legality of the repurchase of any shares of
beneficial interest of the Fund or the propriety of the amount to be paid
therefor;
(e) the legality of the declaration of any dividend by the
Fund or the legality of the distribution of any Portfolio Securities as payment
in kind of such dividend; and
(f) any property or moneys of the Fund unless and until
received by it, and any such property or moneys delivered or paid by it pursuant
to the terms hereof.
Moreover, the Bank will not be under any duty or obligation to
ascertain whether any Portfolio 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 its Articles, By-laws, any federal or state statutes or
any rule or regulation of any governmental agency.
14.2 AGENTS AND SUBCUSTODIANS WITH RESPECT TO PROPERTY OF THE FUND HELD
IN THE UNITED STATES. The Bank may employ agents of its own selection in the
performance of its duties hereunder and shall be responsible for the acts and
omissions of such agents as if performed by the Bank hereunder. Without limiting
the foregoing, certain duties of the Bank hereunder may be performed by one or
more affiliates of the Bank.
Upon receipt of Proper Instructions, the Bank may employ subcustodians
selected by or at the direction of the Fund, provided that any such subcustodian
meets at least the minimum qualifications required by Section 17(f)(1) of the
1940 Act to act as a custodian of the Fund's assets with respect to property of
the Fund held in the United States. The Bank shall have no liability to the Fund
or any other person by reason of any act or
14
omission of any such subcustodian selected by or at the direction of the Fund
and the Fund shall indemnify the Bank and hold it harmless from and against any
and all actions, suits and claims, arising directly or indirectly out of the
performance of any subcustodian selected by or at the direction of the Fund.
Upon request of the Bank, the Fund shall assume the entire defense of any
action, suit, or claim subject to the foregoing indemnity. The Fund shall pay
all fees and expenses of any subcustodian.
14.3 DUTIES OF THE BANK WITH RESPECT TO PROPERTY OF THE FUND HELD
OUTSIDE OF THE UNITED STATES.
(a) APPOINTMENT OF FOREIGN CUSTODY MANAGER.
(i) If the Fund has appointed the Bank Foreign Custody
Manager (as that term is defined in Rule 17f-5 under the 1940 Act), the Bank's
duties and obligations with respect to the Fund's Portfolio Securities and other
assets maintained outside the United States shall be, to the extent not set
forth herein, as set forth in the Delegation Agreement between the Fund and the
Bank (the "Delegation Agreement").
(ii) If the Fund has appointed any other person or
entity Foreign Custody Manager, the Bank shall act only upon Proper Instructions
from the Fund with regard to any of the Fund's Portfolio Securities or other
assets held or to be held outside of the United States, and the Bank shall be
without liability for any Claim (as that term is defined in Section 15 hereof)
arising out of maintenance of the Fund's Portfolio Securities or other assets
outside of the United States. The Fund also agrees that it shall enter into a
written agreement with such Foreign Custody Manager that shall obligate such
Foreign Custody Manager to provide to the Bank in a timely manner all
information required by the Bank in order to complete its obligations hereunder.
The Bank shall not be liable for any Claim arising out of the failure of such
Foreign Custody Manager to provide such information to the Bank.
(b) SEGREGATION OF SECURITIES. The Bank shall identify on
its books as belonging to the Fund the Foreign Portfolio Securities held by each
foreign sub-custodian (each an "Eligible Foreign Custodian") selected by the
Foreign Custody Manager, subject to receipt by the Bank of the necessary
information from such Eligible Foreign Custodian if the Foreign Custody Manager
is not the Bank.
(c) ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. If the
Bank is the Fund's Foreign Custody Manager, upon request of the Fund, the Bank
will use its best efforts to arrange for the independent accountants of the Fund
to be afforded access to the books and records of any foreign banking
institution employed as an Eligible Foreign Custodian insofar as such books and
records relate to the performance of such foreign banking institution with
regard to the Fund's Portfolio Securities and other assets.
(d) REPORTS BY BANK. If the Bank is the Fund's Foreign
Custody Manager, the Bank will supply to the Fund the reports required under the
Delegation Agreement.
(e) TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. Transactions
with respect to the assets of the Fund held by an Eligible Foreign Custodian
shall be effected pursuant to Proper Instructions from the Fund to the Bank and
shall be effected in accordance with the applicable agreement between the
Foreign Custody Manager and such Eligible Foreign Custodian. If at any time any
Foreign Portfolio Securities shall be registered in the name of the nominee of
the Eligible Foreign Custodian, the Fund agrees to hold any such nominee
harmless from any liability by reason of the registration of such securities in
the name of such nominee.
Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for Foreign Portfolio Securities received for
the account of the Fund and delivery of Foreign Portfolio Securities maintained
for the account of the Fund may be effected in accordance with the customary
established securities trading or securities processing practices and procedures
in the jurisdiction or market in which the transaction occurs, including,
without limitation, delivering securities to the purchaser thereof or to a
dealer therefor (or an
15
agent for such purchaser or dealer) against a receipt with the expectation of
receiving later payment for such securities from such purchaser or dealer.
In connection with any action to be taken with respect to the
Foreign Portfolio Securities held hereunder, including, without limitation, the
exercise of any voting rights, subscription rights, redemption rights, exchange
rights, conversion rights or tender rights, or any other action in connection
with any other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Fund such
information in connection therewith as is made available to the Bank by the
Eligible Foreign Custodian, and shall promptly forward to the applicable
Eligible Foreign Custodian any instructions, forms or certifications with
respect to such Rights, and any instructions relating to the actions to be taken
in connection therewith, as the Bank shall receive from the Fund pursuant to
Proper Instructions. Notwithstanding the foregoing, the Bank shall have no
further duty or obligation with respect to such Rights, including, without
limitation, the determination of whether the Fund is entitled to participate in
such Rights under applicable U.S. and foreign laws, or the determination of
whether any action proposed to be taken with respect to such Rights by the Fund
or by the applicable Eligible Foreign Custodian will comply with all applicable
terms and conditions of any such Rights or any applicable laws or regulations,
or market practices within the market in which such action is to be taken or
omitted.
(f) TAX LAW. The Bank shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund or the Bank
as custodian of the Fund by the tax laws of any jurisdiction, and it shall be
the responsibility of the Fund to notify the Bank of the obligations imposed on
the Fund or the Bank as the custodian of the Fund by the tax law of any non-U.S.
jurisdiction, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The sole responsibility of the Eligible Foreign Custodian with regard
to such tax law shall be to use reasonable efforts to assist the Fund with
respect to any claim for exemption or refund under the tax law of jurisdictions
for which the Fund has provided such information.
14.4 INSURANCE. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Fund held by it as it uses
in respect of its own similar property but it need not maintain any special
insurance for the benefit of the Fund.
14.5 ADVANCES BY THE BANK. The Bank may, in its sole discretion,
advance funds on behalf of the Fund to make any payment permitted by this
Agreement upon receipt of any proper authorization required by this Agreement
for such payments by the Fund. Should such a payment or payments, with advanced
funds, result in an overdraft (due to insufficiencies of the Fund's account with
the Bank, or for any other reason) this Agreement deems any such overdraft or
related indebtedness a loan made by the Bank to the Fund payable on demand. Such
overdraft shall bear interest at the current rate charged by the Bank for such
loans unless the Fund shall provide the Bank with agreed upon compensating
balances. The Fund agrees that the Bank shall have a continuing lien and
security interest to the extent of any overdraft or indebtedness and to the
extent required by law, in and to any property at any time held by it for the
Fund's benefit or in which the Fund has an interest and which is then in the
Bank's possession or control (or in the possession or control of any third party
acting on the Bank's behalf). The Fund authorizes the Bank, in the Bank's sole
discretion, at any time to charge any overdraft or indebtedness, together with
interest due thereon, against any balance of account standing to the credit of
the Fund on the Bank's books.
14.6. FEES AND EXPENSES OF THE BANK. For the services rendered by the
Bank hereunder, the Fund will pay to the Bank such fees at such rate as shall be
agreed upon in writing by the parties from time to time. The Fund will also pay
or reimburse the Bank from time to time for any transfer taxes payable upon any
transfers of Portfolio Securities made hereunder, and for all necessary, proper
and reasonable disbursements, expenses and charges made or incurred by the Bank
in the performance of this Agreement (including any duties listed on any
Schedule hereto, if any) including any indemnities for any loss, liabilities or
expense to the Bank as provided herein. The Bank will also be entitled to
reimbursement by the Fund for all reasonable expenses incurred in
16
conjunction with termination of this Agreement and any conversion or transfer
work done in connection therewith unless the Fund terminates the Agreement
pursuant to its right under Sections 16.1(i) or 16.1(ii), in which case the Bank
shall not be entitled to reimbursement for expenses incurred in conjunction with
termination of this Agreement and any conversion or transfer work done in
connection therewith.
Fees and expenses will be calculated monthly. Fees and expenses owed to
the Bank for any month may be charged against any cash balance held by the Fund
beginning on the first (1st) business day after the end of such month based on
information then available. Fees charged to an account may result in an
overdraft that will be subject to normal interest charges. The Fund will have
thirty (30) days after the receipt of an invoice to dispute any charge that
appears on such invoice. After such thirty (30) day period, the invoice will be
deemed to be complete and accurate and may no longer be disputed.
15. LIMITATION OF LIABILITY.
15.1 Notwithstanding anything in this Agreement to the contrary, in no
event shall the Bank or any of its officers, directors, employees or agents
(each, a "Bank Indemnified Party" and collectively, the "Bank Indemnified
Parties") be liable to the Fund or any third party for, and the Fund shall
indemnify and hold the Bank and the Bank Indemnified Parties harmless from and
against, any and all loss, damage, liability, actions, suits, claims, costs and
expenses, including legal fees, (a "Claim") arising as a result of any act or
omission of the Bank or any Bank Indemnified Party under this Agreement, except
for any Claim resulting from the negligence, willful misfeasance or bad faith of
the Bank or any Bank Indemnified Party. Without limiting the foregoing, neither
the Bank nor any Bank Indemnified Parties shall be liable for, and the Bank and
the Bank Indemnified Parties shall be indemnified against, any Claim (other than
Claims arising from the negligence, willful misfeasance or bad faith of the Bank
or any Bank Indemnified Parties) arising as a result of:
(a) Any act or omission by the Bank or any Indemnified Party
in good faith reliance upon the terms of this Agreement, any Officer's
Certificate, Proper Instructions, resolution of the Board, telegram, telecopier,
notice, request, certificate or other instrument reasonably believed by the Bank
to genuine;
(b) Any act or omission of any subcustodian selected by or
at the direction of the Fund;
(c) Any act or omission of any Foreign Custody Manager other
than the Bank or any act or omission of any Eligible Foreign Custodian if the
Bank is not the Foreign Custody Manager;
(d) Any Corporate Action, distribution or other event
related to Portfolio Securities which, at the direction of the Fund, have not
been registered in the name of the Bank or its nominee;
(e) Any Corporate Action requiring a Response for which the
Bank has not received Proper Instructions or obtained actual possession of all
necessary Securities, consents or other materials by 5:00 p.m. on the date
specified as the Response Deadline, unless the Fund was unable to provide such
Proper Instructions and/or necessary securities, consents or other materials due
to the Bank's negligent actions, or omissions;
(f) Any act or omission of any European Branch of a U.S.
banking institution that is the issuer of Eurodollar CDs in connection with any
Eurodollar CDs held by such European Branch;
(g) Information relied on in good faith by the Bank and
supplied by any Authorized Person in connection with the calculation of (i) the
net asset value and public offering price of the shares of beneficial interest
of the Fund or (ii) the Yield Calculation; or
15.2 Notwithstanding anything in this Agreement to the contrary, in no
event shall the Fund or any of its officers, trustees, employees or agents
(each, a "Fund Indemnified Party" and collectively, the "Fund
17
Indemnified Parties") be liable to the Bank or any third party for, and the Bank
shall indemnify and hold the Fund and the Fund Indemnified Parties harmless from
and against any Claim to the extent arising from the negligence, willful
misfeasance or bad faith of the Bank or any Bank Indemnified Party provided that
the Bank's indemnification obligation with respect to the acts or omissions of
its subcustodians shall not exceed the indemnification provided by the
applicable subcustodian to the Bank. The Bank shall provide the Fund copies of
the applicable subcustody agreements, and any amendments to such agreements,
that will in reasonable detail describe such subcustodians' obligation(s) to
indemnify the Bank, if any.
15.3 Notwithstanding anything to the contrary in this Agreement, in no
event shall the Bank, the Fund, the Fund Indemnified Parties or the Bank
Indemnified Parties be liable to the Fund or the Bank, as the case may be, or
any third party for lost profits or lost revenues or any special, consequential,
punitive or incidental damages of any kind whatsoever in connection with this
Agreement or any activities hereunder.
15.4 Neither the Bank nor the Fund shall be liable for any failure or
delay in the performance of its obligations under this Agreement arising out of
or caused by any acts of God, earthquakes, fires, floods, storms or other
disturbances of nature, epidemics, strikes, riots, nationalization,
expropriation, currency restrictions, acts of war, civil war or terrorism,
insurrection, nuclear fusion, fission or radiation, the interruption, loss or
malfunction of utilities, transportation or computers (hardware or software) and
computer facilities, the unavailability of energy sources and other similar
happenings or events that are beyond such party's reasonable control; provided,
however, that in the event of such failure or delay each party shall use its
best efforts to ameliorate the effects of any such failure or delay and each
shall use its commercially reasonable efforts to not discriminate against the
other in favor of any other customer or client in performing the services
contemplated by this Agreement.
16. TERMINATION.
16.1 The term of this Agreement shall be three years commencing upon
the date hereof (the "Initial Term"), unless earlier terminated as provided
herein. After the expiration of the Initial Term, the term of this Agreement
shall automatically renew for successive one-year terms (each a "Renewal Term")
unless notice of non-renewal is delivered by the non-renewing party to the other
party no later than ninety days prior to the expiration of the Initial Term or
any Renewal Term, as the case may be.
If a majority of the Board of Trustees reasonably determines that the
performance of the Bank under this Agreement or the Delegation Agreement, dated
as of the date hereof, by and between the Bank and the Fund does not meet
industry standards, written notice of such determination setting forth the
reasons for such determination shall be provided to the Bank. In the event the
Bank shall not, within sixty (60) days thereafter, cure identified deficiencies
to the reasonable satisfaction of the Board of Trustees, the Fund, with the
authorization of the Board, may terminate this Agreement.
This Agreement may also be terminated (i) by either party prior to the
expiration of the Initial Term or any Renewal Term in the event the other party
violates any material provision of this Agreement, provided that the
non-violating party gives written notice of such violation to the violating
party and the violating party does not cure such violation within 60 days of
receipt of such notice; or (ii) at any time without notice by the Fund in the
event of an appointment of a conservator or receiver for the Bank by regulatory
authorities or the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
16.2 In the event of the termination of this Agreement, the Bank will
immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Portfolio Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Fund. The obligation of the Bank to deliver and transfer over the assets of the
Fund held by it directly to such successor custodian will commence as soon as
such successor is appointed and will continue until completed as aforesaid. If
the Fund does not select a
18
successor custodian within sixty (60) days from the date of delivery of notice
of termination the Bank may, subject to the provisions of subsection 16.3,
deliver the Portfolio Securities and cash of the Fund held by the Bank to a bank
or trust company of the Bank's own selection which meets the requirements of
Section 17(f)(1) of the 1940 Act and has a reported capital, surplus and
undivided profits aggregating not less than $2,000,000, to be held as the
property of the Fund under terms similar to those on which they were held by the
Bank, whereupon such bank or trust company so selected by the Bank will become
the successor custodian of such assets of the Fund with the same effect as
though selected by the Board. Thereafter, the Bank shall be released from any
and all obligations under this Agreement.
16.3 Prior to the expiration of sixty (60) days after notice of
termination has been given, the Fund may furnish the Bank with an order of the
Fund advising that a successor custodian cannot be found willing and able to act
upon reasonable and customary terms and that there has been submitted to the
shareholders of the Fund the question of whether the Fund will be liquidated or
will function without a custodian for the assets of the Fund held by the Bank.
In that event the Bank will deliver the Portfolio Securities and cash of the
Fund held by it, subject as aforesaid, in accordance with one of such
alternatives which may be approved by the requisite vote of shareholders, upon
receipt by the Bank of a copy of the minutes of the meeting of shareholders at
which action was taken, certified by the Fund's Secretary and an opinion of
counsel to the Fund in form and content satisfactory to the Bank. Thereafter,
the Bank shall be released from any and all obligations under this Agreement.
16.4 The Fund shall reimburse the Bank for any reasonable expenses
incurred by the Bank in connection with the termination of this Agreement,
unless the Fund terminates the Agreement pursuant to Sections 16.1(i) or
16.1(ii).
16.5 At any time after the termination of this Agreement, the Fund may,
upon written request, have reasonable access to the records of the Bank relating
to its performance of its duties as custodian.
17. CONFIDENTIALITY. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed without the consent of the other party, except as may be
required by applicable law or at the request of a governmental agency. The
parties further agree that a breach of this provision would irreparably damage
the other party and accordingly agree that each of them is entitled, in addition
to all other remedies at law or in equity to an injunction or injunctions
without bond or other security to prevent breaches of this provision.
18. NOTICES. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered via (I) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, (iii) hand delivery with signature to such party at its office at
the address set forth below, namely:
(a) In the case of notices sent to the Fund to:
▇▇▇▇▇▇ Associates Investment Trust
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Treasurer
With a copy to:
▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLC
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
19
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇, Senior Director -
Client Management
With a copy to: ▇▇▇▇ ▇. ▇▇▇▇▇, General Counsel
or at such other place as such party may from time to time
designate in writing.
19. AMENDMENTS. This Agreement may not be altered or amended, except by
an instrument in writing, executed by both parties.
20. PARTIES. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written consent of the Bank or by the Bank without the written
consent of the Fund, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 16 hereof will not be deemed to
be an assignment within the meaning of this provision.
21. GOVERNING LAW. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.
22. COUNTERPARTS. 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 only one instrument.
23. ENTIRE AGREEMENT. This Agreement, together with its Appendices,
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any conflicting
terms or provisions of any other instrument and terminates and supersedes any
and all prior agreements and undertakings between the parties relating to the
subject matter herein.
24. LIMITATION OF LIABILITY. The Bank agrees that the obligations
assumed by the Fund hereunder shall be limited in all cases to the assets of the
Fund and that the Bank shall not seek satisfaction of any such obligation from
the officers, agents, employees, trustees, or shareholders of the Fund. A copy
of the Agreement and Declaration of Trust of the Fund is on file with the
Secretary of State of the Commonwealth of Massachusetts. Notice is hereby given
that the execution and delivery of this Agreement have been authorized by the
trustees of the Fund, and this Agreement has been signed and delivered by an
authorized officer of the Fund, acting as such, and neither such authorization
by the trustees nor such execution and delivery by such officer shall be deemed
to have been made by any of them individually or to impose any liability on any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Fund.
25. SEVERAL OBLIGATIONS OF THE PORTFOLIOS. This Agreement is an
agreement entered into between the Bank and the Fund with respect to each
Portfolio. With respect to any obligation of the Fund on behalf of any Portfolio
arising out of this Agreement, the Bank shall look for payment or satisfaction
of such obligation solely to the assets of the Portfolio to which such
obligation relates as though the Bank had separately contracted with the Fund by
separate written instrument with respect to each Portfolio.
20
[Remainder of Page Intentionally Left Blank]
21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
▇▇▇▇▇▇ ASSOCIATES INVESTMENT TRUST
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Treasurer
INVESTORS BANK & TRUST COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
22
APPENDICES
Appendix A Portfolios
Appendix B Additional Services
23
APPENDIX A
THE OAKMARK FAMILY OF FUNDS
The Oakmark Fund
The Oakmark Select Fund
The Oakmark Small Cap Fund
The Oakmark Equity and Income Fund
The Oakmark Global Fund
The Oakmark International Fund
The Oakmark International Small Cap Fund
APPENDIX B
INVESTORS BANK & TRUST
SUMMARY OF ADMINISTRATION FUNCTIONS
OAKMARK FAMILY OF FUNDS
SUGGESTED FUND AUDITOR
FUNCTION INVESTORS BANK & TRUST ▇▇▇▇▇▇ ASSOCIATES AND/OR COUNSEL
------------------------------------- --------------------------------- ----------------------------- -------------------------
MANAGEMENT REPORTING
& TREASURY ADMINISTRATION
-------------------------------------
Monitor portfolio compliance in Perform tests of certain specific Continuously monitor A/C - Provide
accordance with the current portfolio activity designed from portfolio activity and Fund consultation as needed on
Prospectus and SAI. provisions of the Fund's operations in conjunction compliance issues.
Prospectus and SAI. Follow-up on with 1940 Act, Prospectus,
potential violations. SAI and any other
applicable laws and
regulations. Monitor
testing results and approve
resolution of compliance
FREQUENCY: MONTHLY issues.
Provide compliance summary package. Provide a report of compliance Review report. A/C - Provide
testing results. consultation as needed.
FREQUENCY: MONTHLY
Perform asset diversification testing Perform asset diversification Continuously monitor A - Provide consultation
to establish qualification as a RIC. tests at each tax quarter end. portfolio activity in as needed in establishing
Follow-up on issues. conjunction with IRS positions to be taken in
requirements. Review test tax treatment of
results and take any particular issues. Review
necessary action. Approve quarter end tests on a
tax positions taken. current basis.
FREQUENCY: QUARTERLY
Perform qualifying income testing to Perform qualifying income testing Continuously monitor A- Consult as needed on
establish qualification as a RIC. (on book basis income, unless portfolio activity in tax accounting positions
material differences are conjunction with IRS to be taken. Review in
anticipated) on quarterly basis requirements. Review test conjunction with year-end
and as may otherwise be results and take any audit.
necessary. Follow-up on necessary action. Approve
FREQUENCY: QUARTERLY issues. tax positions taken.
MANAGEMENT REPORTING
& TREASURY ADMINISTRATION
(CONT.)
-------------------------------------
Prepare the Fund's annual expense Prepare preliminary expense Provide asset level
budget. Establish daily accruals. budget. Notify fund accounting projections. Approve
of new accrual rates. expense budget.
FREQUENCY: ANNUALLY
1
SUGGESTED FUND AUDITOR
FUNCTION INVESTORS BANK & TRUST ▇▇▇▇▇▇ ASSOCIATES AND/OR COUNSEL
------------------------------------- --------------------------------- ----------------------------- -------------------------
Monitor the Fund's expense budget. Monitor actual expenses, updating Provide asset level
Review the Fund's net expense ratios, budgets/ expense accruals. projections. Provide vendor
including multi-class expense Review expense differentials information as necessary.
differentials. among classes. Review expense analysis and
approve budget revisions.
FREQUENCY: MONTHLY
Receive and coordinate payment of Propose allocations of invoices Approve invoices and
fund expenses. among Funds and obtain authorized allocations of payments.
approval to process payment. Send invoices to IBT in a
FREQUENCY: AS OFTEN AS NECESSARY timely manner.
Calculate periodic dividend rates to Calculate amounts available for Review and approve dividend C/A - Review and approve
be declared in accordance with distribution. Calculate rates calculation methodologies dividend calculation
management guidelines. Review the for each class in accordance with for each class. Approve methodology for each
Fund's multi-class dividend approved methodology. Coordinate dividend rate per share and class of shares. Provide
calculation procedures. review by management and aggregate amounts. Obtain consultation as
auditors. Notify custody and Board approval when required. requested.
transfer agent of authorized
dividend rates. Report dividends
to Board as required.
FREQUENCY: ACCORDING TO DIVIDEND
POLICY
MANAGEMENT REPORTING
& TREASURY ADMINISTRATION
(CONT.)
-------------------------------------
Prepare responses to major industry Prepare, coordinate as necessary, Identify the services to
questionnaires. and submit responses to the which the Funds report.
appropriate agency. Provide information as
FREQUENCY: AS OFTEN AS NECESSARY requested.
Prepare disinterested Summarize amounts paid to Provide social security
director/trustee Form 1099-Misc. directors/trustees during the numbers and current mailing
calendar year. Prepare and mail address for trustees.
Form 1099-Misc. Review and approve
FREQUENCY: ANNUALLY information provided for
Form 1099-Misc.
2
SUGGESTED FUND AUDITOR
FUNCTION INVESTORS BANK & TRUST ▇▇▇▇▇▇ ASSOCIATES AND/OR COUNSEL
------------------------------------- --------------------------------- ----------------------------- -------------------------
Preparation and filing of 24f-2 Accumulate capital stock Review and approve filing. C - Approve 24f-2 Notice.
Notice. information and draft Form 24f-2
Notice. File approved Form with
FREQUENCY: ANNUALLY SEC via ▇▇▇▇▇.
-------------------------------------
FINANCIAL REPORTING
-------------------------------------
Prepare financial information for Prepare selected financial Review financial
presentation to Fund Management, information for client internal information.
Board of Directors and shareholders. use, inclusion in board material
and distribution to
shareholders. Financial
information limited to Schedule
of Investments and other related
tables.
FREQUENCY: MONTHLY/QUARTERLY
-------------------------------------
FINANCIAL REPORTING (CONT.)
-------------------------------------
Coordinate the annual audit and Coordinate the creation of Provide past financial A - Perform audit and
semi-annual preparation and printing templates reflecting statements and other issue opinion on annual
of financial statements and notes client-selected standardized information required to financial statements.
with management, fund accounting and appearance and text of financial create templates, including
the fund auditors. statements and footnotes. Draft report style and graphics. A/C - Review reports.
and manage production cycle. Approve format and text as
Coordinate with IBT fund standard. Approve
accounting the electronic production cycle and assist
receipt of portfolio and general in managing to the cycle.
ledgar information. Assist in Coordinate review and
resolution of accounting issues. approval by portfolio
Using templates, draft financial managers of portfolio
statements, coordinate auditor listings to be included in
and management review, and clear financial statements.
comments. Coordinate transmission Prepare appropriate
of draft files to ▇▇▇▇▇▇▇ to management letter and
typeset. Coordinate printing of coordinate production of
reports and ▇▇▇▇▇ conversion with Management Discussion and
outside printer and filing with Analysis. Review and
the SEC via ▇▇▇▇▇. approve entire report. Make
appropriate representations
in conjunction with audit.
FREQUENCY: ANNUALLY/SEMI-ANNUALLY
3
SUGGESTED FUND AUDITOR
FUNCTION INVESTORS BANK & TRUST ▇▇▇▇▇▇ ASSOCIATES AND/OR COUNSEL
------------------------------------- --------------------------------- ----------------------------- -------------------------
Prepare and file Form N-SAR. Prepare form for filing. Obtain Provide appropriate C - Provide consultation
any necessary supporting responses. Review and as needed.
documents. File with SEC via authorize filing. A - Provide annual audit
▇▇▇▇▇. internal control letter
TO BE PERFORMED BY R&C. to accompany the annual
FREQUENCY: SEMI-ANNUALLY filing.
-------------------------------------
TAX
-------------------------------------
Prepare income tax provisions. Calculate investment company Provide transaction A - Provide consultation
taxable income, net tax exempt information as requested. as needed in establishing
interest, net capital gain and Identify Passive Foreign positions to be taken in
spillback dividend requirements. Investment Companies tax treatment of
Identify book-tax accounting (PFICs). Approve tax particular issues.
differences. Track required accounting positions to be Perform review in
information relating to taken. Approve provisions. conjunction with the
FREQUENCY: ANNUALLY accounting differences. year-end audit.
TAX (CONT.)
-------------------------------------
Calculate excise tax distributions Calculate required distributions Provide transaction A - Provide consultation
to avoid imposition of excise tax. information as requested. as needed in establishing
- Calculate capital gain net Identify Passive Foreign positions to be taken in
income and foreign currency Investment Companies tax treatment of
gain/loss through October 31. (PFICs). Approve tax particular issues.
- Calculate ordinary income accounting positions to be Review and concur with
and distributions through a taken. Review and approve proposed distributions
specified cut off date . all income and distribution per share.
- Project ordinary income calculations, including
from cut off date to projected income and
December 31. TO BE PERFORMED dividend shares. Approve
BY R&C. distribution rates per share
- Ascertain dividend shares. and aggregate amounts.
TO BE PERFORMED BY R&C. Obtain Board approval when
Identify book-tax accounting required.
differences. Track required
information relating to
accounting differences.
Coordinate review by management
FREQUENCY: ANNUALLY and fund auditors.
Prepare Form 1099 Obtain yearly distribution Review and approve
information. Calculate 1099 information provided for
reclasses and coordinate with Form 1099.
FREQUENCY: ANNUALLY transfer agent.
4
SUGGESTED FUND AUDITOR
FUNCTION INVESTORS BANK & TRUST ▇▇▇▇▇▇ ASSOCIATES AND/OR COUNSEL
------------------------------------- --------------------------------- ----------------------------- -------------------------
Prepare other year-end tax-related Obtain yearly income Review and approve
disclosures distribution information. information provided.
Calculate disclosures
(i.e., dividend received
deductions, foreign tax credits,
tax-exempt income, income by
jurisdiction) and coordinate
with transfer agent.
FREQUENCY: ANNUALLY
5