EXHIBIT 23(G)
MUTUAL FUND CUSTODY AGREEMENT
AMERITOR SECURITY TRUST
FIRST UNION NATIONAL BANK
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MUTUAL FUND CUSTODY AGREEMENT
AMERITOR SECURITY TRUST
FIRST UNION NATIONAL BANK
Table of Contents
1. DEFINITIONS ............................................................. 4
2. APPOINTMENT ............................................................. 5
3. DELIVERY OF DOCUMENTS ................................................... 5
4. DELIVERY AND REGISTRATION OF THE PROPERTY ............................... 6
5. VOTING RIGHTS ........................................................... 6
6. RECEIPT AND DISBURSEMENT OF MONEY ....................................... 7
7. RECEIPT AND DELIVERY OF SECURITIES ...................................... 8
8. PLEDGE OR ENCUMBRANCE OF SECURITIES OR CASH ............................. 9
9. PRICING SERVICES ........................................................ 9
10. SEGREGATED ACCOUNT ..................................................... 9
11. NON-CUSTODY SECURITIES ................................................. 10
12. LENDING OF SECURITIES .................................................. 10
13. OVERDRAFTS OR INDEBTEDNESS ............................................. 11
14. USE OF DEPOSITORY OR THE BOOK-ENTRY SYSTEM ............................. 11
15. INSTRUCTIONS CONSISTENT WITH THE ARTICLES, ETC ......................... 13
16. TRANSACTIONS NOT REQUIRING INSTRUCTIONS ................................ 14
17. TRANSACTIONS REQUIRING INSTRUCTIONS .................................... 16
18. PURCHASE AND SALE OF SECURITIES ........................................ 18
19. RECORDS ................................................................ 20
20. COOPERATION WITH ACCOUNTANTS ........................................... 20
21. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS ...................... 20
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22. CONFIDENTIALITY ........................................................ 20
23. EQUIPMENT .............................................................. 21
24. RIGHT TO RECEIVE ADVICE ................................................ 21
25. COMPENSATION ........................................................... 22
26. INDEMNIFICATION ........................................................ 22
27. PERFORMANCE OF DUTIES AND STANDARD OF CARE ............................. 23
28. EFFECTIVE PERIOD; TERMINATION AND AMENDMENT ............................ 24
29. SUCCESSOR CUSTODIAN .................................................... 25
30. NOTICES ................................................................ 25
31. FURTHER ACTIONS ........................................................ 26
32. ADDITIONAL PORTFOLIOS .................................................. 26
33. MISCELLANEOUS .......................................................... 26
ATTACHMENT A Fees
ATTACHMENT B Authorized Persons
ATTACHMENT C Portfolios of the Fund
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MUTUAL FUND CUSTODY AGREEMENT
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THIS AGREEMENT is made as of August 23, 2000, by and between AMERITOR
SECURITY TRUST, and FIRST UNION NATIONAL BANK, a National Bank ("First Union").
1. DEFINITIONS
A. AUTHORIZED PERSON means the Fund's President, Vice-President, Treasurer and
any other person, whether or not that person is an officer or employee of
the Fund, duly authorized by the Directors or Trustees of the Fund to give
Proper Instructions on behalf of the Fund and listed on Attachment B
hereto, which may be amended from time to time in writing.
B. BOOK-ENTRY SYSTEM shall mean the Federal Reserve/Treasury book-entry system
for United States and federal agency securities, its successor or
successors and its nominee or nominees.
C. BUSINESS DAY shall mean any day on which First Union, the Book-Entry
System, and relevant Depositories are open for business.
D. DEPOSITORY shall include the Book-Entry System, the Depository Trust
Company, and any other domestic securities depository, book-entry system or
clearing agency registered with the Securities and Exchange Commission (the
"SEC") or its successor or successors and its nominee or nominees, and
shall also mean any other registered clearing agency, its successor or
successors, specially identified in a certified copy of a resolution of the
Fund's Directors or Trustees approving deposits by First Union therein.
First Union shall hold Securities through a Depository only if (a) the
Depository and any of its creditors may not assert any right, charge,
security interest, lien, encumbrance or other claim of any kind to
Securities except a claim of payment for their safe custody or
administration, and (b) beneficial ownership of Securities may be freely
transferred without the payment of money or value other than for safe
custody or administration.
E. FIRST UNION shall include any office, branch or subsidiary of First Union
National Bank.
F. PROPER INSTRUCTIONS shall mean any notices, instructions or other
instruments in writing First Union receives from an Authorized Person or
from a person First Union reasonably believes to be an Authorized Person by
letter, telex, facsimile transmission, First Union's on-line communication
system, or any other method whereby First Union is able to verify with a
reasonable degree of certainty the identity of the sender of the
communications or the sender is required to provide a password or other
identification code. Oral instructions will be considered Proper
Instructions if First Union reasonably believes that an Authorized Person
has given the oral instructions. The Fund shall cause all oral instructions
to be confirmed in writing. Proper Instructions that conflict with earlier
Proper Instructions will supersede earlier Instructions unless First Union
has already acted in reliance on the earlier Instructions.
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G. PROPERTY shall mean any and all Securities, cash, and other property of the
Fund which the Fund may from time to time deposit, or cause to be
deposited, with First Union or which First Union may from time to time hold
for the Fund; all income of any Securities or other property; all proceeds
of the sales of any Securities or other property; and all proceeds of the
sale of securities issued by the Fund, which First Union receives from time
to time from or on behalf of the Fund.
H. SECURITIES shall include, without limitation, any common stock and other
equity securities; bonds, debentures and other debt securities; forwards,
swaps, futures, derivatives, mortgages or other obligations; and any
instruments representing rights to receive, purchase, or subscribe for the
same, or representing any other rights or interests therein (whether
represented by a certificate or held in a Depository or a subcustodian).
2. APPOINTMENT
The Fund is registered as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "l 940 Act"), and the
Fund desires to retain First Union to serve as the Fund's custodian and
First Union is willing to furnish these services. The Fund hereby appoints
First Union to act as custodian of its Securities, cash and other Property
on the terms set forth in this Agreement. First Union accepts this
appointment and agrees to furnish the services set forth below for the
compensation as provided in Paragraph 25 of this Agreement.
3. DELIVERY OF DOCUMENTS
The Fund will promptly furnish to First Union copies, properly certified or
authenticated, of contracts, documents and other related information that
First Union may request or requires to properly discharge its duties. These
documents may include but are not limited to the following:
a. Resolutions of the Fund's Directors or Trustees authorizing the
appointment of First Union as custodian of the Property of the Fund
and approving this Agreement;
b. Incumbency and signature certificates identifying and containing the
signatures of the Fund's Authorized Persons;
c. The Fund's Articles of Incorporation or Declaration of Trust filed
with the State of Delaware and all amendments thereto (the "Articles"
or "Declaration");
d. The Fund's By-Laws and all amendments thereto (the "By-Laws");
e. Resolutions of the Fund's Directors or Trustees approving the
investment advisory agreement between the Fund and the Fund's
investment adviser (the "Advisory Agreement");
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f. The Advisory Agreement; and the Fund's current Registration Statement
on Form N-1A under the 1940 Act and the Securities Act of 1933, as
amended ("▇▇▇ ▇▇▇▇ ▇▇▇") as filed with the SEC; and
g. The Fund's most recent prospectus including all amendments and
supplements thereto (the "Prospectus").
The Fund will furnish First Union from time to time with copies of all
amendments of or supplements to the foregoing, if any. The Fund also
will furnish First Union with a copy of the opinion of counsel for the
Fund on the validity of the shares of common stock or units of
beneficial interest (the "Shares") of the Fund and the status of the
Shares under the 1933 Act as registered with the SEC, and under any
other applicable federal law or regulation.
4. DELIVERY AND REGISTRATION OF THE PROPERTY
The Fund will deliver or cause to be delivered to First Union all Property
it owns, including cash received for the issuance of its Shares, at any
time during the period of this Agreement, except for Securities and monies
to be delivered to any subcustodian appointed pursuant to Paragraph 7.
First Union will not be responsible for Securities and monies until First
Union or any subcustodian actually receives them. All Securities delivered
to First Union or to any subcustodian (other than in bearer form) shall be
registered in the name of the Fund or in the name of a nominee of the Fund,
in the name of First Union or any nominee of First Union (with or without
indication of fiduciary status), in the name of any subcustodian or any
nominee of a subcustodian appointed pursuant to Paragraph 7, or shall be
properly endorsed and in form for transfer satisfactory to First Union.
5. VOTING RIGHTS
a. The Fund shall exercise voting and other rights and powers for all
Securities, however registered. First Union's only duty shall be to
mail for delivery on the next Business Day to the Fund any documents
received, including proxy statements and offering circulars, with any
proxies for Securities registered in a nominee name executed by the
nominee. First Union shall vote or cause proxies to be voted only as
expressly directed in writing pursuant to Proper Instructions of the
Fund's Authorized Person. In the absence of Proper Instructions,
neither First Union nor any subcustodian shall vote or cause proxies
to be voted, and they shall expire without liability to First Union.
First Union will not advise the Fund or act for the Fund in any legal
proceedings, including bankruptcies, involving Securities the Fund
holds or previously held or the issuers of these Securities, except as
the Fund and First Union expressly agree upon in writing.
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b. First Union shall transmit promptly to the Fund all written
information (including, without limitation, pendency of calls and
maturities of Securities and expirations of rights in connection
therewith and notices of exercise of call and put options the Fund
writes and the maturity of futures contracts the Fund purchases or
sells) First Union receives from issuers of the Securities the Fund
holds. For tender or exchange offers, First Union shall transmit
promptly by facsimile to the Fund all written information First Union
receives from issuers of the Securities whose tender or exchange is
sought and from the party (or his agents) making the tender or
exchange offer. If the Fund desires to take action on any tender
offer, exchange offer or any other similar transaction, the Fund shall
notify First Union at least three business days before the date on
which First Union is to take action or upon the date the Fund first
receives the notification, if later. Absent First Union's timely
receipt of Proper Instructions, First Union shall not be liable for
failure to take any action relating to or to exercise any rights the
Securities confer.
c. First Union shall notify the Fund of any rights or discretionary
actions or of the date or dates by when the rights must be exercised
or action must be taken provided that First Union has received, from
the issuer or otherwise, timely notice of rights, discretionary
corporate action, or dates. Absent actual receipt of this notice,
First Union shall have no liability for failing to so notify the Fund.
6. RECEIPT AND DISBURSEMENT OF MONEY
a. First Union shall open and maintain a custody account for the Fund
(the "Account") subject only to draft or order by First Union acting
pursuant to the terms of this Agreement, and shall hold in the
Account, subject to the provisions in this Paragraph 6, all cash it
receives by or for the Fund, other than cash the Fund maintains in a
bank account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940, as amended. First Union shall make
payments of cash to, or for the account of, the Fund from cash only
(i) for the purchase of Securities; (ii) in the case of a purchase of
Securities effected through a Book-Entry System or Securities
Depository, in accordance with the conditions set forth in Paragraph
14; (iii) in the case of repurchase agreements entered into between
the Fund and First Union, or another bank, or a broker-dealer which is
a member of The National Association of Securities Dealers, Inc.
("NASD"), either (a) against delivery of the Securities either in
certificate form or through an entry crediting First Union's account
at the Federal Reserve Bank with the Securities or (b) against
delivery of the receipt evidencing the Fund's purchase of Securities
First Union owns along with written evidence of First Union's
agreement to repurchase the Securities from the Fund; (iv) for
transfer to a time deposit account of the Fund in any bank, whether
domestic or foreign; the transfer may be effected before receipt of a
confirmation from a broker and/or the applicable bank pursuant to
Proper Instructions from the Fund; (v) for the payment of dividends or
other distributions on shares declared pursuant to the governing
documents of the Fund, or for the payment of interest, taxes,
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administration, distribution or advisory fees or expenses which the
Fund is to bear under the terms of this Agreement, any Advisory
Agreement, or any administration agreement; (vi) for payments in
connection with the conversion, exchange or surrender of Securities
the Fund owns or subscribes to and First Union holds or is to deliver
; (vii) to a subcustodian pursuant to Paragraph 7; (viii) for common
expenses the Fund incurs in the ordinary course of its business,
including but not limited to printing and mailing expenses, legal
fees, accountants' fees, exchange fees; or (ix) for any other proper
purpose, but only upon receipt of, in addition to Proper Instructions,
a certified copy of a resolution of the Board of Directors or Trustees
or of the Executive Committee of the Fund signed by an officer of the
Fund and certified by its Secretary or an Assistant Secretary,
specifying the amount of the payment, setting forth the purpose for
which the payment is to be made, declaring the purpose to be a proper
purpose, and naming the person or persons to whom the payment is to be
made.
b. First Union is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received as custodian
for the Fund.
7. RECEIPT AND DELIVERY OF SECURITIES
a. Except as provided in this Paragraph 7, First Union shall hold and
physically segregate all Securities and non-cash Property it receives
for the Fund. First Union will hold or dispose of all Securities and
non-cash Property for the Fund pursuant to the terms of this
Agreement. In the absence of Proper Instructions accompanied by a
certified resolution of the Fund's Board authorizing the specific
transaction, First Union shall have no power or authority to withdraw,
deliver, assign, hypothecate, pledge or otherwise dispose of any
Securities and other Property, except in accordance with this
Agreement. In no case may any director, trustee, officer, employee or
agent of the Fund withdraw any Securities. First Union may, at its own
expense, enter into subcustodian agreements with other banks or trust
companies for the receipt of certain Securities and cash First Union
is to hold for the account of the Fund pursuant to this Agreement;
provided that each bank or trust company has an aggregate capital,
surplus and undivided profits, as shown by its last published report,
of not less than twenty million dollars ($20,000,000) and that such
bank or trust company agrees with First Union to comply with all
relevant provisions of the 1940 Act and applicable rules and
regulations thereunder. First Union will be liable for acts or
omissions of any subcustodian. First Union shall employ subcustodians
upon receipt of Proper Instructions, but only in accordance with an
applicable vote of the Board of Directors or Trustees of the Fund.
b. Promptly after the close of business on each day First Union shall
furnish the Fund with confirmations and a summary of all transfers to
or from the account of the Fund during said day. Where Securities are
transferred to the account of the Fund established at a Securities
Depository or Book-Entry System pursuant to this Paragraph 7, First
Union shall also by book-entry or otherwise identify as belonging
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to the Fund the quantity of Securities in a fungible bulk of
Securities registered in the name of First Union (or its nominee) or
shown in First Union's account on the books of a Securities Depository
or Book-Entry System. At least monthly and from time to time, First
Union shall furnish the Fund with a detailed statement of the Property
held for the Fund under this Agreement.
8. PLEDGE OR ENCUMBRANCE OF SECURITIES OR CASH
Except as provided in this Agreement, First Union may not pledge, assign,
hypothecate or otherwise encumber Securities or cash in any Account without
the Fund's prior written consent.
9. PRICING SERVICES
First Union is authorized to use any vendor (including brokers and dealers
of Securities) First Union reasonably believes to be reliable to provide
pricing and other information regarding Securities in the Account, subject
to adjustment by an Authorized Person of the Fund pursuant to the pricing
procedures approved by the Fund's board of Trustees . The Fund understands
that certain pricing information for complex financial instruments (e.g.,
derivatives) or thinly-traded Securities may be based on calculated amounts
rather than actual market transactions and may not reflect actual market
values, and that the variance between the calculated amounts and actual
market values may be material. Where vendors do not provide information for
particular Securities, an Authorized Person may advise First Union
regarding the fair market value of, or provide other information about, the
Securities as the Authorized Person determines in good faith. First Union
shall not be liable for any loss, damage or expense incurred as a result of
errors or omissions for any pricing or other information First Union uses
under this Agreement.
10. SEGREGATED ACCOUNT.
First Union shall upon receipt of Proper Instructions establish and
maintain a segregated account or accounts for and on behalf of the Fund,
into which account or accounts may be transferred cash and/or Securities,
including Securities First Union maintains in an account pursuant to
Paragraph 7, (i) in accordance with the provisions of any agreement among
the Fund, First Union and a broker-dealer registered under the Securities
Exchange Act of 1934 (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 Clearing Corporation
and of any registered national securities exchange (or the Commodity
Futures Trading Commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with Fund transactions, (ii) for purposes of
segregating cash or government securities in connection with options the
Fund purchases, sells or writes or commodity futures contracts or
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options thereon the Fund purchases or sells, (iii) for the purposes of the
Fund's compliance with the procedures set out in Investment Company Act
Release No. 10666, or any subsequent release or releases of the SEC
relating to registered investment companies" maintenance of segregated
accounts and (iv) for other proper corporate purposes, but only, in the
case of clause (iv), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board of Directors or Trustees or of
the Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose or
purposes of the segregated account and declaring the purposes to be proper
corporate purposes.
11. NON-CUSTODY SECURITIES.
As an accommodation to the Fund, First Union may provide consolidated
recordkeeping services pursuant to which First Union reflects on account
statements Securities positions for which First Union has no safekeeping or
other responsibility under this Agreement ("Non-Custody Securities").
Non-Custody Securities shall be designated on First Union's books as
"shares not held" or by other similar characterization. The Fund
acknowledges and agrees that First Union shall rely, without independent
verification, on information the Fund provides regarding Non-Custody
Securities (including but not limited to Account positions and market
valuations) and shall have no responsibility whatsoever with respect to
Non-Custody Securities or the accuracy of any information maintained on
First Union's books or set forth on account statements concerning
Non-Custody Securities.
12. LENDING OF SECURITIES.
a. Promptly after the Fund or its agent lends Securities in the Fund's
account, the Fund shall deliver or cause to be delivered to First
Union a certificate specifying (a) the name of the issuer and the
title of the Securities; (b) the number of shares or principal amount
loaned; (c) the date of the loan and delivery; (d) the total amount to
be delivered to First Union against the loan of the Securities,
including the amount of the cash collateral and the premium, if any,
separately identified; and (e) the name of the broker-dealer or
financial institution to which the loan was made. First Union shall
not lend Securities except as the Fund or its agent instructs. First
Union shall deliver Securities so designated to the broker-dealer or
financial institution to which the loan was made upon the receipt of
the total amount designated as to be delivered against the loan of
Securities. First Union may accept payment in connection with a
delivery otherwise than through the Book-Entry System or a Depository
only in the form of a certified or bank cashier's check payable to the
order of the Fund or First Union drawn on New York Clearing House
funds and may deliver Securities in accordance with the customs
prevailing among dealers in Securities.
b. Promptly after each termination of a loan of Securities, the Fund
shall deliver to First Union a certificate specifying (a) the name of
the issuer and the title of the Securities
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to be returned; (b) the number of shares or principal amount to be
returned; (c) the date of termination; (d) the total amount First
Union is to deliver, including the amount of the cash collateral less
any offsetting credits as described in the certificate; (e) the name
of the broker-dealer or financial institution from which the
Securities will be returned; and (f) whether the return is to be
effected through the Book-Entry System or a Depository. First Union
shall receive all Securities returned from a broker-dealer or other
financial institution to which the Securities were loaned, and upon
receipt thereof shall pay the total amount payable upon the return of
the Securities as set forth in the certificate. Securities returned to
First Union shall be held as they were before the loan.
c. The terms of this Paragraph 12 are subject to a separate written
agreement between the parties entered into for the specific purpose of
setting forth the terms of an arrangement by which First Union or its
agent may lend Securities of the Fund.
13. OVERDRAFTS OR INDEBTEDNESS
First Union may from time to time agree to advance cash to the Fund,
without interest, for the fund's other proper corporate purposes. If First
Union advances cash for any purpose, or if an overdraft in the Fund's
Account shall arise for any reason (including, without limitation,
overdrafts incurred in connection with the settlement of Securities
transactions, funds transfers, or foreign exchange transactions) the Fund
shall and hereby does grant to First Union a security interest in
Securities the Fund holds equal in value to the amount of the cash advance
but in no event shall the value of Securities the Fund holds in which a
security interest has been granted exceed 20% of the value of the Fund's
total assets at the time of the pledge. Should the Fund fail to repay First
Union promptly, First Union shall be entitled to use available cash and to
reasonably dispose of any Securities in which it has a security interest to
the extent necessary to obtain reimbursement.
14. USE OF DEPOSITORY OR THE BOOK-ENTRY SYSTEM
a. The Fund shall deliver to First Union a certified resolution of the
Directors or Trustees of the Fund approving, authorizing and
instructing First Union on a continuous and ongoing basis, until First
Union actually receives Proper Instructions to the contrary, (i) to
deposit in a Depository or the Book-Entry System all Securities of the
Fund eligible for deposit therein and (ii) to use a Depository or the
Book-Entry System to the extent possible in connection with the
performance of its duties hereunder, including without limitation,
settlements of the Fund's purchases and sales of Securities, and
deliveries and returns of securities collateral in connection with
borrowings. Without limiting the generality of this use, it is agreed
that the following provisions shall apply thereto:
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b. Securities and any cash of the Fund deposited in a Securities
Depository or Book-Entry System or subcustodian will at all times (1)
be represented in an account of First Union in the Securities
Depository or Book-Entry System (the "Account") and (2) be segregated
from any assets and cash First Union controls in other than a
fiduciary or custodian capacity but may be commingled with other
assets held in these capacities. Securities and cash First Union
deposits in a Depository or Book-Entry System will be held subject to
the rules, terms and conditions of the Depository or Book-Entry
System. Securities and cash held through subcustodians shall be held
subject to the terms and conditions of First Union's agreements with
the subcustodians. First Union shall identify on its books and records
the Securities and cash belonging to the Fund, whether held directly
or indirectly through Depositories, the Book-Entry System, or
subcustodians. First Union shall not be responsible for Securities or
cash until actually received. First Union will effect payment for
Securities and receive and deliver Securities in accordance with
accepted industry practices as set forth in (b) below, unless the Fund
has given First Union Proper Instructions to the contrary.
c. First Union shall pay for Securities purchased for the account of the
Fund upon (i) receipt of advice from the Securities Depository or
Book-Entry System that the Securities have been transferred to the
Fund, and (ii) the making of an entry on the records of First Union to
reflect the payment and transfer for the account of the Fund. Upon
receipt of Proper Instructions, First Union shall transfer Securities
sold for the account of the Fund upon (i) receipt of advice from the
Securities Depository or Book-Entry System that payment for the
Securities has been transferred to the Account, and (ii) the making of
an entry on the records of First Union to reflect the transfer and
payment for the account of the Fund. Copies of all advices from the
Securities Depository or Book-Entry System of transfers of Securities
for the account of the Fund shall identify the Fund, and First Union
shall maintain these copies for the Fund and provide them to the Fund
at its request. Upon request, First Union shall furnish the Fund
confirmation of each transfer to or from the account of the Fund in
the form of a written advice or notice and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's transactions
in a Securities Depository or Book-Entry System for the account of the
Fund.
d. First Union shall provide the Fund with any report First Union obtains
on the Securities Depository or Book-Entry System's accounting system,
internal accounting controls and procedures for safeguarding
Securities deposited in the Securities Depository or Book-Entry
System.
e. All books and records First Union maintains that relate to the Fund's
participation in a Securities Depository or Book-Entry System will at
all times during First Union's regular business hours be open to the
inspection of the Fund's duly authorized employees or agents, and the
Fund will be furnished with all information in respect of the services
rendered to it as it may require.
f. Anything to the contrary in this Agreement notwithstanding, First
Union shall be liable to the Fund for any loss or damage to the Fund
resulting from any negligence,
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misfeasance or misconduct of First Union or any of its agents or of
any of its or their employees in connection with its or their use of
the Securities Depository or Book-Entry Systems or from failure of
First Union or any agent to enforce effectively the rights it may have
against the Securities Depository or Book-Entry System; at the
election of the Fund, it shall be entitled to be subrogated to the
rights of First Union for any claim against the Securities Depository
or Book-Entry System or any other person which First Union may have as
a consequence of any loss or damage if and to the extent that the Fund
has not been made whole for any loss or damage.
15. INSTRUCTIONS CONSISTENT WITH THE ARTICLES, ETC
a. Unless otherwise provided in this Agreement, First Union shall act
only upon Proper Instructions. First Union may assume that any Proper
Instructions received hereunder are not in any way inconsistent with
any provision of the Articles or Declaration or By-Laws of the Fund or
any vote or resolution of the Fund's Directors or Trustees, or any
committee thereof. First Union shall be entitled to rely upon any
Proper Instructions it actually receives pursuant to this Agreement
and which it reasonably believes an Authorized Person has given. The
Fund agrees that First Union shall incur no liability in acting in
good faith upon Proper Instructions that First Union reasonably
believes an Authorized Person has given to First Union. The Fund
agrees to forward to First Union Proper Instructions confirming oral
instructions by the close of business of the same day that the oral
instructions are given to First Union. However, the Fund agrees that
where First Union does not receive confirming Proper Instructions or
receives contrary Proper Instructions, the validity or enforceability
of transactions the oral instructions authorize and which First Union
carries out shall not be affected.
b. In accordance with instructions from the Fund, as accepted industry
practice requires or as First Union may elect in effecting Proper
Instructions, First Union shall be deemed to make a loan to the Fund,
payable on demand, bearing interest at a rate it customarily charges
for similar loans, when First Union advances cash or other Property,
arising from the purchase, sale, redemption, transfer or other
disposition of Property of the Fund, or in connection with the
disbursement of funds to any party, or in payment of fees, expenses,
claims or liabilities the Fund owes to First Union, or to any other
party that has secured judgment in a court of law against the Fund
which creates an overdraft in the accounts or over-delivery of
Property.
c. The Fund agrees that test arrangements, authentication methods or
other security devices to be used for Proper Instructions which the
Fund may give by telephone, telex, TWX, facsimile transmission, bank
wire or through an electronic instruction system, shall be processed
in accordance with terms and conditions for the use of the
arrangements, methods or devices as First Union may put into effect
and modify from time to time. The Fund shall safeguard any test keys,
identification codes or other security devices which First Union makes
available to the Fund and agrees that the Fund shall be responsible
for any loss, liability or damage First Union or the Fund incurs as a
result of First Union's acting in accordance with instructions from
any
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unauthorized person using the proper security device unless the loss,
liability or damage was incurred as a result of First Union's
negligence or willful misconduct. First Union may, but is not
obligated to, electronically record any instructions given by
telephone and any other telephone discussions about the Account. [IF
FIRST UNION HAS A COMPUTER NETWORK TO WHICH THE FUND HAS ACCESS: In
the event that the Fund uses First Union's [name of system or
network], the Fund agrees that First Union is not responsible for the
consequences of the failure of the [system or network] to perform for
any reason, beyond the reasonable control of First Union, or the
failure of any communications carrier, utility, or communications
network. In the event the [system or network] is inoperable, the Fund
agrees that it will accept the communication of transaction
instructions by telephone, facsimile transmission on equipment
compatible to First Union's facsimile receiving equipment or by
letter, at no less or additional charge to the Fund.]
16. TRANSACTIONS NOT REQUIRING INSTRUCTIONS
First Union is authorized to take the following action without
Instructions:
a. COLLECTION OF INCOME AND OTHER PAYMENTS. First Union shall:
i. collect and receive on a timely basis for the account of the
Fund, all income and other payments and distributions, including
(without limitation) stock dividends, rights, warrants and
similar items, included or to be included in the Property of the
Fund, and promptly advise the Fund of the receipt and shall
credit the income, as collected, to the Fund. Without limiting
the generality of the foregoing, First Union shall detach and
present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect
interest when due on Securities held hereunder. Income due the
Fund on Securities loaned pursuant to the provisions of
Paragraph 12 shall be the responsibility of the Fund. First
Union will have no duty or responsibility in connection
therewith, other than to provide the Fund with information or
data as may be necessary to assist the Fund in arranging for the
timely delivery to First Union of the income to which the Fund
is properly entitled. From time to time, First Union may elect,
but shall not be so obligated, to credit the Account with
interest, dividends or principal payments on payable or
contractual settlement date, in anticipation of receiving the
same from a payor, central depository, broker or other agent the
Fund or First Union employs. Any such crediting and posting
shall be at the Fund's sole risk, and First Union shall be
authorized to reverse any advance posting in the event First
Union does not receive good funds from any payor, central
depository, broker or agent of the Fund;
ii. endorse and deposit for collection in the name of the Fund,
checks, drafts, or other orders for the payment of money on the
same day as received;
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iii. receive and hold for the account of the Fund all Securities the
Fund receives as a result of a stock dividend, share split-up or
reorganization, recapitalization, readjustment or other
rearrangement or distribution of rights or similar securities
issued with respect to any Securities of the Fund First Union
holds hereunder;
iv. present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed or retired,
or otherwise become payable on the date the Securities become
payable;
v. take any action which may be necessary and proper in connection
with the collection and receipt of the income and other payments
and the endorsement for collection of checks, drafts and other
negotiable instruments;
vi. effect an exchange of the shares where the par value of stock is
changed, and to surrender Securities at maturity or when advised
of an earlier call for redemption or when Securities otherwise
become available, against payment therefore in accordance with
accepted industry practice. The Fund understands that First
Union subscribes to one or more nationally recognized services
that provide information on calls for redemption of bonds or
other corporate actions. First Union shall not be liable for
failure to redeem any called bond or to take other action if any
service to which it subscribes did not provide notice of the
call or action, provided that First Union shall have acted in
good faith without negligence and in accordance with "Street
Practice" (as is customary in industry). First Union shall have
no duty to notify the Fund of any rights, duties, limitations,
conditions or other information set forth in any Security
(including mandatory or optional put, call and similar
provisions), but First Union shall forward to the Fund any
notices or other documents subsequently received in regard to
any security. When fractional shares of stock of a declaring
corporation are received as a stock distribution, unless
specifically instructed to the contrary in writing, First Union
is authorized to sell the fraction received and credit the
Fund's account. Unless specifically instructed to the contrary
in writing, First Union is authorized to exchange Securities in
bearer form for Securities in registered form. If the issuer of
any Property registered in the name of a nominee of First Union
calls the Property for partial redemption, First Union is
authorized to allot the called portion to the beneficial holders
of the Property in a manner it deems fair and equitable in its
sole discretion;
vii. forward to the Fund copies of all information or documents that
it may receive from an issuer of Securities which, in the
opinion of First Union, are intended for the Fund as the
beneficial owner of Securities; and
viii. execute, as First Union, any certificates of ownership,
affidavits, declarations or other certificates for all federal
and state tax purposes in connection with the collection or
receipt of income, bond and note coupons, or other payments from
Securities or in connection with transfers of Securities.
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b. MISCELLANEOUS TRANSACTIONS. First Union is authorized to deliver or
cause to be delivered Property against payment or other consideration
or written receipt therefore in the following cases:
i. for examination by a broker selling for the Account of the Fund
in accordance with street delivery custom;
ii. for the exchange of interim receipts or temporary Securities for
definitive securities; and
iii. for transfer of Securities into the name of the Fund or First
Union or a nominee of either, or for exchange of Securities for
a different number of bonds, certificates, or other evidence,
representing the same aggregate face amount or number of units
bearing the same interest rate, maturity date and call
provisions, if any; provided that, in any case, the new
Securities are to be delivered to First Union.
17. TRANSACTIONS REQUIRING INSTRUCTIONS
In addition to the actions requiring Proper Instructions set forth in this
Agreement, upon receipt of Proper Instructions and not otherwise, First
Union, directly or through the use of a Depository or the Book-Entry
System, shall:
a. Execute and deliver to the persons as may be designated in Proper
Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any
Securities may be exercised;
b. Deliver any Securities held for the Fund against receipt of other
Securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization
of any corporation, or the exercise of any conversion privilege;
c. Deliver any Securities held for the Fund to any protective committee,
reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization
or sale of assets of any corporation, against receipt of certificates
of deposit, interim receipts or other instruments or documents as may
be issued to it to evidence delivery;
d. Make transfers or exchanges of the assets of the Fund and take such
other steps as shall be stated in the instructions to effectuate any
duly authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund;
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16
e. Release Securities belonging to the Fund to any bank or trust company
for the purpose of pledge or hypothecation to secure any loan the Fund
incurs; provided, however, that securities shall be released only upon
payment to First Union of the monies borrowed or upon receipt of
adequate collateral as the Fund and First Union agree, which may be in
cash or obligations issued by the U.S. government, its agencies, or
instrumentalities, except that in cases where additional collateral is
required to secure a borrowing already made, subject to proper prior
authorization, further securities may be released for that purpose;
and pay the loan upon redelivery to it of the securities pledged or
hypothecated therefore and upon surrender of the note or notes
evidencing the loan;
f. Deliver Securities in accordance with the provisions of any agreement
among the Fund, First Union and a broker-dealer registered under the
Exchange Act and a member of the NASD relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with Fund transactions;
g. Deliver Securities in accordance with the provisions of any agreement
among the Fund, First Union 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 Fund transactions;
h. Deliver Securities against payment or other consideration or written
receipt therefore for transfer of Securities into the name of the Fund
or First Union or a nominee of either, or for exchange of Securities
for a different number of bonds, certificates, or other evidence,
representing the same aggregate face amount or number of units bearing
the same interest rate, maturity date and call provisions, if any;
provided that, in any case, the new Securities are to be delivered to
First Union;
i. Exchange Securities in temporary form for Securities in definitive
form;
j. Surrender, in connection with their exercise, warrants, rights or
similar Securities, provided that in each case, the new Securities and
cash, if any, are to be delivered to First Union;
k. Deliver Securities upon receipt of payment for any repurchase
agreement the Fund enters into;
l. Deliver Securities pursuant to any other proper corporate purpose, but
only upon receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board of Trustees or of the Executive
Committee signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, specifying the Securities to be
delivered, setting forth the purpose for which the delivery is to be
made, declaring the purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of the Securities shall
be made; and
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17
m. Deliver Securities held for the Fund pursuant to separate security
lending agreements concerning the lending of the Fund's Securities
into which the Fund may enter, from time to time.
18. PURCHASE AND SALE OF SECURITIES
a. Promptly after the investment adviser (or any sub-adviser) purchases
Securities, the Fund shall deliver to First Union (as custodian)
Proper Instructions specifying for each purchase: (a) the name of the
issuer and the title of the Securities, (b) the number of shares or
the principal amount purchased and accrued interest, if any, (c) the
dates of purchase and settlement, (d) the purchase price per unit, (e)
the total amount payable upon the purchase, (f) the name of the person
from whom or the broker through whom the purchase was made and (g) the
Portfolio of the Fund for which the purchase was made. First Union
shall upon receipt of Securities purchased by or for the Fund pay out
of the monies held for the account of the Fund the total amount
payable to the person from whom or the broker through whom the
purchase was made, provided that the same conforms to the total amount
payable as set forth in Proper Instructions.
b. Promptly after the investment adviser (or any sub-adviser) sells
Securities, the Fund shall deliver to First Union (as First Union)
Proper Instructions, specifying for each sale: (a) the name of the
issuer and the title of the security, (b) the number of shares or
principal amount sold, and accrued interest, if any, (c) the dates of
sale and settlement, (d) the sale price per unit, (e) the total amount
payable to the Fund upon sale, (f) the name of the broker through whom
or the person to whom the sale was made and (g) the Portfolio of the
Fund for which the sale was made. First Union shall deliver the
Securities upon receipt of the total amount payable to the Fund upon
sale, provided that the same conforms to the total amount payable as
set forth in Proper Instructions. Subject to the foregoing, First
Union may accept payment in any form as shall be satisfactory to it,
and may deliver Securities and arrange for payment in accordance with
the customs prevailing among dealers in Securities.
c. The Fund understands that when First Union is instructed to deliver
Securities against payment, delivery of the Securities and receipt of
payment therefore may not be completed simultaneously. The Fund
assumes full responsibility for all credit risks involved in
connection with First Union's delivery of Securities pursuant to
instructions of the Fund.
d. Upon the Fund's Proper Instructions, First Union shall purchase or
sell Securities and is authorized to use any broker or agent in
connection with these transactions, but shall use affiliates of First
Union only as the Fund directs. First Union shall not be liable for
the acts or omissions of any broker or agent (except an affiliate of
First
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18
Union). Upon the Fund's Proper Instructions (which may include
standing instructions), First Union shall also invest cash balances in
certificates of deposit, savings accounts or other similar instruments
First Union issues or in money market or other mutual funds for which
First Union or an affiliate may serve as investment adviser,
administrator, custodian, shareholder servicing agent, or other
capacity notwithstanding that First Union or its affiliate collects
fees from these mutual funds for providing the services.
e. Except as otherwise provided by law, a cash account (including
subdivisions of accounts maintained in different currencies) shall
constitute one single and indivisible Account. Consequently, First
Union has the right, among others, to transfer the balance of any
subaccount of a cash account to any other subaccount at any time and
without prior notice.
f. (i) For puts and calls traded on securities exchanges, NASDAQ, or
over-the-counter, First Union shall take action as to put
options and call options the Fund purchases or sells (writes)
regarding escrow or other arrangements in accordance with the
provisions of any agreement entered into upon receipt of Proper
Instructions among First Union, any broker-dealer that is a
member of the NASD, and, if necessary, the Fund, relating to
compliance with 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, First Union shall
be under no obligation or duty to see that the Fund has
deposited or is maintaining adequate margin, if required, with
any broker in connection with any option, nor shall First Union
be under any obligation or duty to present the option to the
broker for exercise unless it receives Proper Instructions from
the Fund. First Union shall have no responsibility for the
legality of any put or call option sold on the Fund's behalf,
the propriety of any purchase or sale, or the adequacy of any
collateral delivered to a broker in connection with an option or
deposited to or withdrawn from any account. First Union
specifically, but not by way of limitation, shall not be under
any obligation or duty to: (x) periodically check with or notify
the Fund that the amount of collateral a broker holds is
sufficient to protect the broker or the Fund against any loss;
(y) effect the return of any collateral delivered to a broker;
or (z) advise the Fund that any option it holds has expired or
is about to expire. These obligations and duties shall be the
Fund's sole responsibility.
(iii) For puts, calls, and futures traded on commodities exchanges,
First Union shall take action as to put options and call options
the Fund purchases or sells (writes) regarding escrow or other
arrangements in accordance with the provisions of any agreement
entered into upon receipt of Proper Instructions among First
Union, any futures commission merchant registered under the
Commodity Exchange Act, and the Fund, relating to compliance
with rules of the Commodity Futures Trading Commission and/or
any Contract Market, or of any similar organization or
organizations, regarding account deposits for the Fund's
transactions.
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(iv) First Union's responsibility as to futures, puts, and calls
traded on commodities exchanges, any futures commission merchant
account, and any account of the Fund shall be limited as set
forth in subparagraph (f)(ii) of this Paragraph 18 as if the
subparagraph referred to futures commission merchants rather
than brokers, and futures and puts and calls thereon instead of
options.
19. RECORDS
The books and records pertaining to the Fund which are in the possession of
First Union shall be the property of the Fund. First Union shall prepare
and maintain these books and records as the 1940 Act and other applicable
federal securities laws and rules and regulations require. The Fund or the
Fund's authorized representatives shall have access to First Union's books
and records pertaining to the Fund at all times during First Union's normal
business hours, and First Union shall surrender these books and records to
the Fund promptly upon request. Upon reasonable request of the Fund, First
Union shall provide copies of any books and records to the Fund or the
Fund's authorized representative at the Fund's expense.
20. COOPERATION WITH ACCOUNTANTS.
First Union shall cooperate with the Fund's independent public accountants
and shall take all reasonable action in the performance of its obligations
under this Agreement to assure that the necessary information is made
available to the accountants for the expression of their unqualified
opinion, including but not limited to the opinion included in the Fund's
Form N-1A, Form N-SAR, and other reports to the SEC and for any other
requirement of the SEC.
21. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS.
First Union shall provide the Fund, at times as the Fund may reasonably
require, with reports from First Union's independent public accountants on
the accounting system, internal accounting controls and procedures for
safeguarding Securities, futures contracts and options on futures
contracts, including Securities deposited and/or maintained in a Securities
Depository or Book-Entry System, relating to the services First Union
provides under this Agreement. These reports shall be of sufficient scope
and in sufficient detail as the Fund may reasonably require to provide
reasonable assurance that the examination would disclose any material
inadequacies and, if there are no material inadequacies, the reports shall
so state.
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20
22. CONFIDENTIALITY.
First Union agrees on behalf of itself and its employees to treat
confidentially and as the proprietary information of the Fund all records
and other information related to the Fund and its prior, present or
potential Shareholders, and to the investment adviser and its prior,
present or potential customers, and not to use these records and
information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to the Fund and the
Fund's written approval. The Fund shall not unreasonably withhold this
approval, and may not withhold its approval where First Union may be
exposed to civil or criminal contempt proceedings for failure to comply,
when duly constituted authorities request First Union to divulge this
information, or when the Fund so requests. Nothing contained herein,
however, shall prohibit First Union from advertising or soliciting the
public generally for other products or services, regardless of whether the
advertisement or solicitation may include prior, present or potential
shareholders of the Fund.
23. EQUIPMENT
a. First Union represents and warrants that each and every commercial and
noncommercial hardware, software, and firmware used with any services
provided under this Agreement shall, at no additional costs to the
Fund, be able to store and process accurately any and all date and
date-related data (including, but not limited to, calculating,
comparing, storing, processing, recording, valuing, recognizing,
validating, presenting, and sequencing) without error or malfunction
before, during, and after the twentieth ("20th") and twenty-first
("21st") centuries, including but not limited to, changing accurately
the calendar year to the year 2000, processing leap year calculations,
and processing any other dates with unique digit arrangements such as,
by way of example, 9/9/99. These representations and warranties shall
be in effect so long as First Union provides the services under this
Agreement for the Fund's benefit.
b. First Union shall notify the Fund of any errors, omissions or
interruptions in, or delay or unavailability of First Union's ability
to safeguard and hold Securities and cash in accordance with this
Agreement as promptly as practicable, and proceed to correct the same
as soon as is reasonably possible at no less or additional expense to
the Fund.
c. In the event of equipment failures beyond First Union's control, First
Union shall, at no additional expense to the Fund, take reasonable
steps to minimize service interruptions but shall not have liability
with respect thereto. First Union shall enter into and shall maintain
in effect with appropriate parties one or more agreements making
reasonable provision for back up emergency use of electronic data
processing equipment to the extent appropriate equipment is available.
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21
24. RIGHT TO RECEIVE ADVICE
a. If First Union shall be in doubt as to any action it may take or omit
to take, it may request, and shall receive, from the Fund
clarification or advice. If First Union shall be in doubt as to any
question of law involved in any action it may take or omit to take, it
may request advice at its own cost from counsel of its own choosing
(who may be counsel for the Fund or First Union, at the option of
First Union). If First Union receives conflicting advice from the Fund
and from counsel of its choosing, First Union shall be entitled to
rely on and follow the advice of its counsel, and shall be fully
protected for anything it does or omits to do in good faith in
conformity with this advice.
b. First Union shall be protected in any action or inaction which it
takes or omits to take in reliance on any directions or advice
received pursuant to subparagraph (a) of this Paragraph 24 which First
Union, after receipt of any directions or advice, in good faith
believes to be consistent with these directions or advice. However,
nothing in this Paragraph shall be construed as imposing upon First
Union any obligation (i) to seek directions or advice, or (ii) to act
in accordance with directions or advice when received, unless, under
the terms or another provision of this Agreement, the same is a
condition to First Union's properly taking or omitting to take action.
Nothing in this subparagraph shall excuse First Union when an action
or omission on the part of First Union constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard of its
duties under this Agreement.
25. COMPENSATION
a. As compensation for the services described in this Agreement that
First Union shall provide during the term of this Agreement, the Fund
will pay to First Union (a) monthly fees as outlined in Attachment A,
and (b) out-of-pocket expenses, including but not limited to all costs
associated with the conversion of the Fund's Securities hereunder and
the transfer of Securities and records kept in connection with this
Agreement, reimbursement of any taxes or other charges which may be
imposed upon the Fund or its income and fees, or on First Union in
connection with any acquisition, holding, sale, transfer, delivery, or
receipt of Securities or cash under this Custody Agreement (other than
income or other taxes imposed upon First Union in connection with its
provision of the custodial services contemplated hereunder); and
expenses of third parties providing services to the Fund (other than
services of third parties as are already compensated as described in
this Agreement), including the services of legal counsel (other than
as described in Paragraph 24) and independent accountants, appraisers,
and brokers. These fees and charges will be payable quarterly in
arrears.
26. INDEMNIFICATION
The Fund, as sole owner of the Property, agrees to indemnify and hold
harmless First Union and its nominees from all taxes, charges, assessments,
claims, and liabilities (including,
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22
without limitation, liabilities arising under the 1933 Act, the 1934 Act,
the 1940 Act, and any state and foreign securities and blue sky laws, all
as or to be amended from time to time) and expenses, including (without
limitation) attorney's fees and disbursements, arising directly or
indirectly from any action or thing which First Union takes or does or
omits to take or do (i) at the request or on the direction of or in
reliance on the advice of the Fund given in accordance with the terms of
this Agreement, or (ii) upon Proper Instructions; provided, however, that
neither First Union nor any of its nominees or subcustodian shall be
indemnified against any liability to the Fund or to its Shareholders (or
any expenses incident to this liability) arising out of (x) First Union's
or its nominee's or subcustodian's own willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties under this Agreement
or any agreement between First Union and any nominee or subcustodian or (y)
First Union's own negligent failure to perform its duties under this
Agreement. First Union similarly agrees to indemnify and hold harmless the
Fund from all liabilities and expenses arising directly or indirectly from
First Union's or its nominee's or sub-custodian's willful misfeasance, bad
faith, negligence or reckless disregard in performing its duties under this
agreement. If First Union advances any cash for any purpose resulting from
Proper Instructions, or if First Union or its nominee or subcustodian shall
incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Agreement, except as
may arise from its or its nominee's or subcustodian's own negligent action,
negligent failure to act, willful misconduct, or reckless disregard of its
duties under this Agreement or any agreement between First Union and any
nominee or subcustodian, the Fund shall promptly reimburse First Union for
the advance of cash or taxes, charges, expenses, assessments, claims or
liabilities.
27. PERFORMANCE OF DUTIES AND STANDARD OF CARE
a. In the performance of its duties hereunder, First Union shall be
obligated to exercise care and diligence and act in good faith to
ensure the accuracy and completeness of all services performed under
this Agreement.
b. First Union shall be under no duty to take any action on behalf of the
Fund except as specifically set forth herein or as First Union may
specifically agree to in writing.
c. First Union may enter into subcontracts, agreements and understandings
with affiliates, whenever and on any terms and conditions as it deems
necessary or appropriate to perform its services under this Agreement,
consistent with the 1940 Act and other applicable law. No subcontract,
agreement or understanding shall discharge First Union from its
obligations under this Agreement.
d. First Union shall not be obligated to execute any of the Fund's Proper
Instructions if First Union believes that to do so will or may
contravene any law or regulation, any relevant market practice, or
First Union's general practice in performing custody services. The
Fund hereby agrees to hold First Union harmless from loss, claims,
liability or expense asserted against First Union as a result of any
contravention undertaken at the Fund's request.
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23
e. First Union shall be responsible for its own negligent failure or that
of any subcustodian it shall appoint to perform its duties under this
Agreement but to the extent that duties, obligations and
responsibilities are not expressly set forth in this Agreement, First
Union shall not be liable for any act or commission which does not
constitute willful misfeasance, bad faith, or negligence on the part
of First Union or any subcustodian it appoints or reckless disregard
of such duties, obligations and responsibilities. Without limiting the
generality of the foregoing or of any other provision of this
Agreement, First Union in connection with its duties under this
Agreement shall, so long as and to the extent it is in the exercise of
reasonable care, not be under any duty or obligation to inquire into
and shall not be liable for or in respect of (i) the validity or
invalidity or authority or lack thereof of any advice, direction,
notice or other instrument which conforms to the applicable
requirements of this Agreement, if any, and which First Union believes
to be genuine, (ii) the validity of the issue of any Securities the
Fund purchases or sells, the legality of the purchase or sale thereof
or the propriety of the amount paid or received therefore, (iii) the
legality of the issue or sale of any Shares, or the sufficiency of the
amount to be received therefore, (iv) the legality of the redemption
of any Shares, or the propriety of the amount to be paid therefore,
(v) the legality of the declaration or payment of any dividend or
distribution on Shares, or (vi) delays or errors or loss of data
occurring by reason of circumstances beyond First Union's control,
including acts of civil or military authority, national emergencies,
labor difficulties, fire, mechanical breakdown (except as provided in
Paragraph 23), flood or catastrophe, acts of God, insurrection, war,
riots, or failure of the mail, transportation systems, communication
systems or power supply.
f. The Fund assumes full responsibility for insuring that the contents of
each Registration Statement of the Fund complies with all applicable
requirements of the 1933 Act, the 1940 Act, and any laws, rules and
regulations of governmental authorities having jurisdiction.
28. EFFECTIVE PERIOD; TERMINATION AND AMENDMENT
This Agreement shall become effective as of its execution and shall
continue in full force and effect until terminated as hereinafter provided.
The parties may mutually agree to amend this Agreement at any time. Either
party may terminate this Agreement by an instrument in writing delivered or
mailed, postage prepaid to the other party, the termination to take effect
not sooner than thirty (30) days after the date of delivery or mailing;
provided, however, that First Union shall not act under Paragraph 7 in the
absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Directors or Trustees of the Fund has
approved the initial use of a particular Securities Depository or
Book-Entry System and the receipt of an annual certificate of the Secretary
or an Assistant Secretary that the Board of Directors or Trustees has
reviewed the Fund's use of the Securities Depository and/or Book-Entry
System, as Rule 17f-4 under the 1940 Act requires, provided further,
however, that the Fund shall not amend or terminate this Agreement in
contravention of any applicable federal
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24
or state regulations, or any provision of the Articles of Incorporation or
Declaration of Trust, and further provided, that the Fund may at any time
by action of its Board of Directors or Trustees (i) substitute another bank
or trust company for First Union by giving notice as described above to
First Union or (ii) immediately terminate this Agreement in the event the
Comptroller of the Currency appoints a conservator or receiver for First
Union or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction. Upon
termination of the Agreement, the Fund shall pay to First Union all
compensation as may be due as of the date of termination and shall likewise
reimburse First Union for its costs, expenses and disbursements.
29. SUCCESSOR CUSTODIAN
If the Board of Directors or Trustees shall appoint a successor custodian,
First Union shall, upon termination, deliver to the successor custodian at
the office of the custodian, duly endorsed and in the form for transfer,
all Securities it then holds under this Agreement and shall transfer to an
account of the successor custodian all of the Fund's Securities held in a
Securities Depository or Book-Entry System. If the Fund does not deliver to
First Union a written order designating a successor custodian or certified
copy of a vote of the Board of Trustees on or before the date when the
termination shall become effective, then First Union shall have the right
to deliver to a bank or trust company, which is a "bank" as defined in the
1940 Act, doing business in New York, New York, of its own selection,
having an aggregate capital, surplus, and undivided profits, as shown by
its last published report, of not less than $25,000,000, all Securities,
monies, and other Property First Union holds and all instruments First
Union holds relative thereto and all other Property it holds under this
Agreement and to transfer to an account of the successor custodian all of
the Fund's Securities held in any Securities Depository or Book-Entry
System. Thereafter, that bank or trust company shall be the successor of
First Union under this Agreement. If Property of the Fund remains in the
possession of First Union after the date of termination of this Agreement
owing to the Fund's failure to procure the certified copy of the vote
referred to or of the Board of Directors or Trustees to appoint a successor
custodian, First Union shall be entitled to fair compensation for its
services during the period as First Union retains possession of the
Property and the provisions of this Agreement relating to the duties and
obligations of First Union shall remain in full force and effect.
30. NOTICES
All notices and other communications ("Notice" or "Notices" in this
Paragraph) hereunder shall be in writing and shall first be sent by
telegram, cable, telex, or facsimile sending device, and thereafter by
overnight mail for delivery on the next business day. Notices shall be
addressed (a) if to First Union, at First Union's address, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; (b) if to the Fund, at the address of the
Fund; or (c) if to neither of the foregoing, at another address as shall
have been notified to the sender of any such Notice or other communication.
If the location of the sender of a Notice and the address of the addressee
thereof are, at the time of sending, more than 100 miles apart, the Notice
may be sent by first-
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25
class mail, in which case it shall be deemed to have been given three days
after it is sent, or if sent by confirming telegram, cable, telex or
facsimile sending device, it shall be deemed to have been given
immediately, and, if the location of the sender of a Notice and the address
of the addressee thereof are, at the time of sending, not more than 100
miles apart, the Notice may be sent by first-class mail, in which case it
shall be deemed to have been given two days after it is sent, of if sent by
messenger, it shall be deemed to have been given on the day it is
delivered, or if sent by confirming telegram, cable, telex or facsimile
sending device, it shall be deemed to have been given immediately. The
sender shall pay all postage, cable, telegram, telex and facsimile sending
device charges arising from the sending of a Notice.
31. FURTHER ACTIONS
Each party agrees to perform further acts and execute further documents as
are necessary to effectuate the purposes of this Agreement.
32. ADDITIONAL PORTFOLIOS
In the event that the Fund establishes one or more portfolios of a Fund in
addition to the Portfolios listed on Attachment C, for which it desires
First Union to render services as custodian under the terms hereof, it
shall so notify First Union in writing, and if the Custodian agrees in
writing to provide these services, the portfolios shall become a Portfolio
hereunder.
33. MISCELLANEOUS
This Agreement embodies the entire Agreement and understanding between the
parties hereto, and supersedes all prior agreements and understandings
relating to the parties hereto. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or effect.
This Agreement shall be deemed to be a contract made in North Carolina and
governed by North Carolina law. If a court decision, statute, rule or
otherwise holds or invalidates any provision of this Agreement, the
remainder of this Agreement shall not be affected. This Agreement shall be
binding upon and shall inure to the benefit of the parties and their
respective successors. The Fund's Articles of Incorporation or Declaration
of Trust is on file with the Secretary of the State of Delaware. The Fund's
officers have executed this Agreement on behalf of the Fund as officers and
not individually and the obligations this Agreement imposes upon the Fund
are not binding upon any of the Fund's Directors or Trustees, officers or
shareholders individually but are binding only upon the assets and Property
of the Fund.
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26
IN WITNESSES WHEREOF, the parties hereto have caused their officers designated
below to execute this Agreement as of the day and year first above written.
AMERITOR SECURITY TRUST
ATTEST: /s/ BY: /s/
----------------------------- -----------------------------
NAME:
---------------------------
TITLE:
--------------------------
FIRST UNION NATIONAL BANK
ATTEST: /s/ BY: /s/
----------------------------- -----------------------------
NAME:
---------------------------
TITLE:
--------------------------
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ATTACHMENT A
FEES
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For the services described in the Agreement, the Fund shall pay a custody
safekeeping fee and custody transaction fees as follows, monthly in arrears:
BASE FEE
--------
$2,400 per year
ASSET BASED FEE (ANNUAL)
------------------------
$ 0 .................. 0.00200%
$ 500,000,000 .................. 0.00175%
$1,000,000,000 .................. 0.00150%
$9,999,999,999 .................. 0.00100%
TRANSACTION FEE
---------------
o $6 per self-affirmed purchase or sale trade
o $10 per maturity, physical transaction or mortgage backed security paydown
o $7 wire charge
Out of pocket expenses incurred under this Agreement will be billed to the Fund
monthly.
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28
ATTACHMENT B
AUTHORIZED PERSONS
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
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29
ATTACHMENT C
PORTFOLIOS OF THE FUND
--------------------------------------------------------------------------------
AMERITOR SECURITY TRUST
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30