CUSTODY AGREEMENT
-----------------
This AGREEMENT, dated as of December 15, 2000, by and between THE SHEPHERD
STREET FUNDS, INC. (the "Company"), a corporation organized under the laws of
the State of Maryland, acting with respect to the Shepherd Street Equity Fund
(the "Fund"), a series of the Company operated and administered by the Company,
SALEM INVESTMENT COUNSELORS, INC. ("Salem"), a corporation organized under the
laws of the State of North Carolina, and FIRSTAR BANK, N.A., a national banking
association (the "Custodian").
W I T N E S S E T H:
--------------------
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, Salem is an investment advisory firm registered as such with the
Securities and Exchange Commission; and
WHEREAS, the Company and Salem previously have entered into an "Operating
Services Agreement" dated as of September 30, 1998, authorizing and directing
Salem to provide certain operational and administrative services to the Company
and which further authorizes Salem to enter into this Custody Agreement on
behalf of the Company; and
WHEREAS, the Company and Salem desire that the Fund's Securities and cash
be held and administered by the Custodian pursuant to this Agreement; and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Company, Salem and the Custodian hereby agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
- 1 -
<PAGE>
1.1 "AUTHORIZED PERSON" means any Officer or other person duly authorized
by resolution of the Board of Directors to give Oral Instructions and Written
Instructions on behalf of the Company and named in Exhibit A hereto or in such
resolutions of the Board of Directors, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "BOARD OF DIRECTORS" shall mean the Directors from time to time serving
under the Company's Articles of Incorporation and Bylaws, as from time to time
amended.
1.3 "BOOK-ENTRY SYSTEM" shall mean a federal book-entry system as provided
in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFR
Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "BUSINESS DAY" shall mean any day recognized as a settlement day by The
New York Stock Exchange, Inc. and any other day for which the Company computes
the net asset value of Shares of the Fund.
1.5 "FUND CUSTODY ACCOUNT" shall mean any of the accounts in the name of
the Fund, which is provided for in Section 3.2 below.
1.6 "NASD" shall mean The National Association of Securities Dealers, Inc.
1.7 "OFFICER" shall mean the Chairman, President, any Vice President, any
Assistant Vice President, the Secretary, any Assistant Secretary, the Treasurer,
or any Assistant Treasurer of the Company.
1.8 "ORAL INSTRUCTIONS" shall mean instructions orally transmitted to and
accepted by the Custodian because such instructions are: (i) reasonably believed
by the Custodian to have been given by an Authorized Person, (ii) recorded and
kept among the records of the Custodian made in the ordinary course of business
and (iii) orally confirmed by the Custodian. The Company shall cause all Oral
Instructions to be confirmed by Written Instructions prior to the end of the
next Business Day. If such Written Instructions confirming Oral Instructions are
not received by the Custodian prior to a transaction, it shall in no way affect
the validity of the transaction or the authorization thereof by the Company. If
Oral Instructions vary from the Written Instructions which purport to confirm
them, the Custodian shall notify the Company of such variance but such Oral
Instructions will govern unless the Custodian has not yet acted.
1.9 "PROPER INSTRUCTIONS" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by the parties.
- 2 -
<PAGE>
1.10 "Securities Depository" shall mean The Depository Trust Company and
(provided that Custodian shall have received a copy of a resolution of the Board
of Directors, certified by an Officer, specifically approving the use of such
clearing agency as a depository for the Fund) any other clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities and Exchange Act of 1934 as amended (the "1934 Act"), which acts as a
system for the central handling of Securities where all Securities of any
particular class or series of an issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of the Securities.
1.11 "SECURITIES" shall include, without limitation, common and preferred
stocks, bonds, call options, put options, futures contracts, debentures, notes,
bank certificates of deposit, bankers' acceptances, mortgage-backed securities
or other obligations, and any certificates, receipts, warrants or other
instruments or documents representing rights to receive, purchase or subscribe
for the same, or evidencing or representing any other rights or interests
therein, or any similar property or assets that the Custodian has the facilities
to clear and to service.
1.12 "SHARES" shall mean the shares of common stock issued by the Company
on account of the Fund.
1.13 "WRITTEN INSTRUCTIONS" shall mean (i) written communications actually
received by the Custodian and signed by an Authorized Person, or (ii)
communications by telex or any other such system from one or more persons
reasonably believed by the Custodian to be Authorized Persons, or (iii)
communications between electro-mechanical or electronic devices provided that
the use of such devices and the procedures for the use thereof shall have been
approved by resolutions of the Board of Directors, a copy of which, certified by
an Officer, shall have been delivered to the Custodian.
ARTICLE II
----------
APPOINTMENT OF CUSTODIAN
------------------------
2.1 APPOINTMENT. The Company and Salem hereby constitute and appoint the
Custodian as custodian of all Securities and cash owned by or in the possession
of the Fund at any time during the period of this Agreement.
2.2 ACCEPTANCE. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
- 3 -
<PAGE>
2.3 DOCUMENTS TO BE FURNISHED. The following documents, including any
amendments thereto, will be provided contemporaneously with the execution of the
Agreement to the Custodian by the Company:
a. A copy of the Articles of Incorporation of the Company certified
by the Secretary;
b. A copy of the Bylaws of the company certified by the Secretary;
c. A copy of the resolution of the Board of Directors of the Company
appointing the Custodian, certified by the Secretary;
d. A copy of the then current Prospectus of the Fund; and
e. A certification of the President and Secretary of the Company
setting forth the names and signatures of the current Officers of
the Company and other Authorized Persons.
2.4 NOTICE OF APPOINTMENT OF DIVIDEND AND TRANSFER AGENT. The Company
agrees to notify the Custodian in writing of the appointment, termination or
change in appointment of any Dividend and Transfer Agent of the Fund.
ARTICLE III
-----------
CUSTODY OF CASH AND SECURITIES
------------------------------
3.1 SEGREGATION. All Securities and non-cash property held by the Custodian
for the account of the Fund (other than Securities maintained in a Securities
Depository or Book-Entry System) shall be physically segregated from other
Securities and non-cash property in the possession of the Custodian (including
the Securities and non-cash property of the other funds) and shall be identified
as subject to this Agreement.
3.2 FUND CUSTODY ACCOUNTS. The Custodian shall open and maintain in its
trust department a custody account in the name of the Company coupled with the
name of the Fund, subject only to draft or order of the Custodian, in which the
Custodian shall enter and carry all Securities, cash and other assets of the
Fund which are delivered to it.
3.3 APPOINTMENT OF AGENTS. In its discretion, the Custodian may appoint one
or more Sub-Custodians to act as Securities Depositories or as sub-custodians to
hold Securities and cash of the Fund and to carry out such other provisions of
this Agreement as it may determine,
- 4 -
<PAGE>
provided, however, that the appointment of any such agents and maintenance of
any Securities and cash of the Fund shall be at the Custodian's expense and
shall not relieve the Custodian of any of its obligations or liabilities under
this Agreement.
3.4 DELIVERY OF ASSETS TO CUSTODIAN. The Company shall deliver, or cause to
be delivered, to the Custodian all of the Fund's Securities, cash and other
similar assets, including (a) all payments of income, payments of principal and
capital distributions received by the Fund with respect to such Securities, cash
or other assets owned by the Fund at any time during the period of this
Agreement, and (b) all cash received by the Fund for the issuance, at any time
during such period, of Shares. The Custodian shall not be responsible for such
Securities, cash or other assets until actually received by it.
3.5 SECURITIES DEPOSITORIES AND BOOK-ENTRY SYSTEMS. The Custodian may
deposit and/or maintain Securities of the Fund in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Fund in any Securities
Depository or Book-Entry System, the Company shall deliver to the
Custodian a resolution of the Board of Directors, certified by an
Officer, authorizing and instructing the Custodian on an on-going
basis to deposit in such Securities Depository or Book-Entry System
all Securities eligible for deposit therein and to make use of such
Securities Depository or Book-Entry System to the extent possible and
practical in connection with its performance hereunder, including,
without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns
of collateral consisting of Securities.
(b) Securities of the Fund kept in a Book-Entry System or Securities
Depository shall be kept in an account of the Custodian in such
Book-Entry System or Securities Depository which includes only assets
held by the Custodian as a fiduciary, custodian or otherwise for
customers ("Depository Account").
(c) The records of the Custodian with respect to Securities of the
Fund maintained in a Book-Entry System or Securities Depository shall,
by book-entry, identify such Securities as belonging to the Fund.
(d) If Securities purchased by the Fund are to be held in a
Book-Entry System or Securities Depository, the Custodian shall pay
for such Securities upon (i)
- 5 -
<PAGE>
receipt of advice from the Book-Entry System or Securities Depository
that such Securities have been transferred to the Depository Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund. If
Securities sold by the Fund are held in a Book-Entry System or
Securities Depository, the Custodian shall transfer such Securities
upon (i) receipt of advice from the Book-Entry System or Securities
Depository that payment for such Securities has been transferred to
the Depository Account, and (ii) the making of an entry on the records
of the Custodian to reflect such transfer and payment for the account
of the Fund.
(e) The Custodian shall provide the Company with copies of any report
(obtained by the Custodian from a Book-Entry System or Securities
Depository in which Securities of the Fund are kept) on the internal
accounting controls and procedures for safeguarding Securities
deposited in such Book-Entry System or Securities Depository.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Company for any loss or damage to the
Fund resulting (i) from the use of a Book-Entry System or Securities
Depository by reason of any negligence or willful misconduct on the
part of Custodian or any Sub-Custodian appointed pursuant to Section
3.3 above or any of its or their employees, or (ii) from failure of
Custodian or any such Sub-Custodian to enforce effectively such rights
as it may have against a Book-Entry System or Securities Depository.
At its election, the Company shall be subrogated to the rights of the
Custodian with respect to any claim against a Book-Entry System or
Securities Depository or any other person from any loss or damage to
the Fund arising from the use of such Book-Entry System or Securities
Depository, if and to the extent that the Fund has not been made whole
for any such loss or damage.
3.6 DISBURSEMENT OF MONEYS FROM FUND CUSTODY ACCOUNT. Upon receipt of
Proper Instructions, the Custodian shall disburse moneys from the Fund Custody
Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only in
accordance with Section 4.1 of this Agreement and only (i) in the case
of Securities (other than
- 6 -
<PAGE>
options on Securities sold over-the-counter, futures contracts and
options on futures contracts), against the delivery to the Custodian
(or any Sub-Custodian appointed pursuant to Section 3.3 above) of such
Securities registered as provided in Section 3.9 below or in proper
form for transfer, or if the purchase of such Securities is effected
through a Book-Entry System or Securities Depository, in accordance
with the conditions set forth in Section 3.5 above; (ii) in the case
of options on Securities sold over-the-counter, against delivery to
the Custodian (or such Sub-Custodian) of such receipts as are required
by the customs prevailing among dealers in such options; (iii) in the
case of futures contracts and options on futures contracts, against
delivery to the Custodian (or such Sub-Custodian) of evidence of title
thereto in favor of the Fund or any nominee referred to in Section 3.9
below; and (iv) in the case of repurchase or reverse repurchase
agreements entered into between the Company and a bank which is a
member of the Federal Reserve System or between the Company and a
primary dealer in U.S. Government securities, against delivery of the
purchased Securities either in certificate form or through an entry
crediting the Custodian's account at a Book-Entry System or Securities
Depository with such Securities;
(b) In connection with the conversion, exchange or surrender, as set
forth in Section 3.7(f) below, of Securities owned by the Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in
Section 5.1 below;
(e) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account of
the Fund: interest; taxes; administration and investment advisory
fees; distribution fees; and other operating expenses of the Fund; in
all cases, whether or not such expenses are to be in whole or in part
capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any agreement
among the Company, the Custodian and a broker-dealer registered under
the 1934 Act and a member of the NASD, relating to compliance with
rules of The Options
- 7 -
<PAGE>
Clearing Corporation and of any registered national securities
exchange (or of any similar organization or organizations) regarding
escrow or other arrangements in connection with transactions by the
Fund;
(g) For transfer in accordance with the provision of any agreement
among the Company, the Custodian, 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;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including the
Custodian), which deposit or account has a term of one year or less;
and
(i) For any other proper purpose, but only upon receipt, in addition
to Proper Instructions, of a copy of a resolution of the Board of
Directors, certified by an Officer, specifying the amount and purpose
of such payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is to
be made.
3.7 DELIVERY OF SECURITIES FROM FUND CUSTODY ACCOUNT. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from the
Fund Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of the Fund but only
against receipt of payment therefor in cash, by certified or cashiers
check or bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of Section
3.5 above;
(c) To an offeror's depository agent in connection with tender or
other similar offers for Securities of the Fund; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the name
of the Fund, the Custodian or any Sub-Custodian appointed pursuant to
Section 3.3 above, or of any nominee or nominees of any of the
foregoing, or (ii) for exchange for a different number of certificates
or other evidence representing the same aggregate
- 8 -
<PAGE>
face amount or number of units; provided that, in any such case, the
new Securities are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in accordance
with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan or merger,
consolidation, recapitalization, reorganization or readjustment of the
issuer of such Securities, or pursuant to provisions for conversion
contained in such Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities in connection
with the issuance or cancellation of depository receipts; provided
that, in any such case, the new Securities and cash, if any, are to be
delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or
reverse repurchase agreement entered into by the Fund;
(h) In the case of warrants, rights or similar Securities, upon the
exercise thereof, provided that, in any such case, the new Securities
and cash, if any, are to be delivered to the Custodian;
(i) For delivery in connection with any loans of Securities of the
Fund, but only against receipt of such collateral as the Company shall
have specified to the Custodian in Proper Instructions;
(j) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Company;
(k) For delivery in accordance with the provisions of any agreement
among the Company, the Custodian and a broker-dealer registered under
the 1934 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 transactions by the Fund;
(l) For delivery in accordance with the provisions of any agreement
among the Company, the Custodian, 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; or
- 9 -
<PAGE>
(m) For any other proper corporate purpose, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Board of Directors, certified by an Officer, specifying the Securities
to be delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such Securities
shall be made.
3.8 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. Unless otherwise instructed
by the Company, the Custodian shall with respect to all Securities held for the
Fund:
(a) Subject to Section 7.4 below, collect on a timely basis all
income and other payments to which the Fund is entitled either by law
or pursuant to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect on
a timely basis the amount payable upon all Securities which may mature
or be called, redeemed, or retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates
of ownership under the federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter in effect,
and prepare and submit reports to the Internal Revenue Service ("IRS")
and to the Company at such time, in such manner and containing such
information as is prescribed by the IRS;
(f) Hold for the Fund, either directly or, with respect to Securities
held therein, through a Book-Entry System or Securities Depository,
all rights and similar securities issued with respect to Securities of
the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with Securities and assets of the Fund.
- 10 -
<PAGE>
3.9 REGISTRATION AND TRANSFER OF SECURITIES. All Securities held for the
Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Securities Depository or Book-Entry System if eligible therefor. All other
Securities held for the Fund may be registered in the name of the Fund, the
Custodian, or any Sub-Custodian appointed pursuant to Section 3.3 above, or in
the name of any nominee of any of them. The Company shall furnish to the
Custodian appropriate instruments to enable the Custodian to hold or deliver in
proper form for transfer, or to register in the name of any of the nominees
hereinabove referred to or in the name of a Book-Entry System or Securities
Depository, any Securities registered in the name of the Fund.
3.10 RECORDS. (a) The Custodian shall maintain complete and accurate
records with respect to Securities, cash or other property held for the Fund,
including (i) journals or other records of original entry containing an itemized
daily record in detail of all receipts and deliveries of Securities and all
receipts and disbursements of cash; (ii) ledgers (or other records) reflecting
(A) Securities in transfer, (B) Securities in physical possession, (C) monies
and Securities borrowed and monies and Securities loaned (together with a record
of the collateral therefor and substitutions of such collateral), (D) dividends
and interest received, and (E) dividends receivable and interest receivable; and
(iii) canceled checks and bank records related thereto. The Custodian shall keep
such other books and records of the Fund as the Company shall reasonably
request, or as may be required by the 1940 Act, including, but not limited to,
Section 31 of the 1940 Act and Rule 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Company and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Company and at all times during the regular business hours of the Custodian
be made available upon request for inspection by duly authorized officers,
employees or agents of the Company and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
3.11 FUND REPORTS BY CUSTODIAN. The Custodian shall furnish the Company
with a daily activity statement and a summary of all transfers to or from each
Fund Custody Account on the day following such transfers. At least monthly and
from time to time, the Custodian shall furnish the Company with a detailed
statement of the Securities and moneys held by the Custodian and the
- 11 -
<PAGE>
Sub-Custodians for the Fund under this Agreement.
3.12 OTHER REPORTS BY CUSTODIAN. The Custodian shall provide the Company
with such reports, as the Company may reasonably request from time to time, on
the internal accounting controls and procedures for safeguarding Securities,
which are employed by the Custodian or any Sub-Custodian appointed pursuant to
Section 3.3 above.
3.13 PROXIES AND OTHER MATERIALS. The Custodian shall cause all proxies
relating to Securities which are not registered in the name of the Fund, to be
promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Company such proxies, all proxy soliciting materials and
all notices relating to such Securities.
3.14 INFORMATION ON CORPORATE ACTIONS. The Custodian shall use reasonable
efforts to monitor and promptly deliver to the Company all information obtained
or received by the Custodian and pertaining to Securities being held by the Fund
with respect to optional tender or exchange offers, calls for redemption or
purchase, expiration of rights and other corporate actions as described in the
Standards of Service Guide attached as Exhibit B. If the Company desires to take
action with respect to any tender offer, exchange offer or other similar
transaction, the Company shall notify the Custodian at least five Business Days
prior to the date on which the Custodian is to take such action. The Company
will provide or cause to be provided to the Custodian all relevant information
for any Security which has unique put/option provisions at least five Business
Days prior to the beginning date of the tender period.
ARTICLE IV
----------
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
--------------------------------------------
4.1 PURCHASE OF SECURITIES. Promptly upon each purchase of Securities for
the Fund, Written Instructions shall be delivered to the Custodian, specifying
(a) the name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any) or other units purchased, (c) the date of purchase and
settlement, (d) the purchase price per unit, (e) the total amount payable upon
such purchase, and (f) the name of the person to whom such amount is payable.
The Custodian shall upon receipt of such Securities purchased by the Fund pay
out of the moneys held for the account of the Fund the total amount specified in
such Written Instructions to the person named therein.
- 12 -
<PAGE>
The Custodian shall not be under any obligation to pay out moneys to cover the
cost of a purchase of Securities for the Fund, if in the Fund Custody Account
there is insufficient cash available to the Fund for which such purchase was
made.
4.2 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. In
any and every case where payment for the purchase of Securities for the Fund is
made by the Custodian in advance of receipt of the Securities purchased but in
the absence of specified Written Instructions to so pay in advance, the
Custodian shall be liable to the Fund for such Securities to the same extent as
if the Securities had been received by the Custodian.
4.3 SALE OF SECURITIES. Promptly upon each sale of Securities by the Fund,
Written Instructions shall be delivered to the Custodian, specifying (a) the
name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and settlement, (d)
the sale price per unit, (e) the total amount payable upon such sale, and (f)
the person to whom such Securities are to be delivered. Upon receipt of the
total amount payable to the Fund as specified in such Written Instructions, the
Custodian shall deliver such Securities to the person specified in such Written
Instructions. Subject to the foregoing, the Custodian may accept payment in such
form as shall be satisfactory to it and consistent with prevailing industry
practices, and may deliver Securities and arrange for payment in accordance with
the customs prevailing among dealers in Securities.
4.4 DELIVERY OF SECURITIES SOLD. Notwithstanding Section 4.3 above or any
other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Fund shall bear the risk that
final payment for such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person to whom they
were delivered, and the Custodian shall have no liability for any of the
foregoing.
4.5 PAYMENT FOR SECURITIES SOLD, ETC. In its sole discretion and from time
to time, the Custodian may credit the Fund Custody Account, prior to actual
receipt of final payment thereof, with (i) proceeds from the sale of Securities
which it has been instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Fund, and (iii) income from
cash, Securities or other assets of the Fund. Any such credit shall be
conditional
- 13 -
<PAGE>
upon actual receipt by Custodian of final payment and may be reversed if final
payment is not actually received in full. The Custodian may, in its sole
discretion and from time to time, permit the Fund to use funds so credited to
the Fund Custody Account in anticipation of actual receipt of final payment. Any
such funds shall be repayable immediately upon demand made by the Custodian at
any time prior to the actual receipt of all final payments in anticipation of
which funds were credited to the Fund Custody Account.
4.6 ADVANCES BY CUSTODIAN FOR SETTLEMENT. The Custodian may, in its sole
discretion and from time to time, advance funds to the Company to facilitate the
settlement of the Fund's transactions in the Fund Custody Account. Any such
advance shall be repayable immediately upon demand made by Custodian.
ARTICLE V
---------
REDEMPTION OF FUND SHARES
-------------------------
5.1 TRANSFER OF FUNDS. From such funds as may be available for the purpose
in the Fund Custody Account, and upon receipt of Proper Instructions specifying
that the funds are required to redeem Shares of the Fund, the Custodian shall
wire each amount specified in such Proper Instructions to or through such bank
as the Company may designate with respect to such amount in such Proper
Instructions.
5.2 NO DUTY REGARDING PAYING BANKS. The Custodian shall not be under any
obligation to effect payment or distribution by any bank designated in Proper
Instructions given pursuant to Section 5.1 above of any amount paid by the
Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
----------
SEGREGATED ACCOUNTS
-------------------
Upon receipt of Proper Instructions, the Custodian shall 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 maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the
Company, the Custodian and a broker-dealer registered under the 1934
- 14 -
<PAGE>
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 Trust 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 transactions by the Fund,
(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by the Fund or in connection
with financial futures contracts (or options thereon) purchased or
sold by the Fund,
(c) which constitute collateral for loans of Securities made by the
Fund or collateral to secure borrowings by the Fund,
(d) for purposes of compliance by the Fund with requirements under
the 1940 Act for the maintenance of segregated accounts by registered
investment companies in connection with reverse repurchase agreements
and when-issued, delayed delivery and firm commitment transactions,
and
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Trustees, certified by an Officer, setting forth the
purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
Each segregated account established under this Article VI shall be
established and maintained for the Fund only.
ARTICLE VII
-----------
CONCERNING THE CUSTODIAN
------------------------
7.1 STANDARD OF CARE. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Company or the Fund for any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim unless
such loss, damage, cost, expense, liability or claim arises from negligence, bad
faith or willful misconduct on the Custodian's part or on the part of any
Sub-Custodian appointed pursuant to Section 3.3 above. The Custodian shall be
entitled to rely
- 15 -
<PAGE>
on and may act upon advice of counsel on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian shall promptly notify the Company of any action taken or omitted
by the Custodian pursuant to advice of counsel. The Custodian shall not be under
any obligation at any time to ascertain whether the Company or the Fund is in
compliance with the 1940 Act, the regulations thereunder, the provisions of the
Company's Articles of Incorporation or Bylaws, or its investment objectives and
policies as then in effect.
7.2 ACTUAL COLLECTION REQUIRED. The Custodian shall not be liable for, or
considered to be the custodian of, any cash belonging to the Fund or any money
represented by a check, draft or other instrument for the payment of money,
until the Custodian or its agents actually receive such cash or collect on such
instrument.
7.3 NO RESPONSIBILITY FOR TITLE, ETC. So long as and to the extent that it
is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4 LIMITATION ON DUTY TO COLLECT. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Fund if such Securities are
in default or payment is not made after due demand or presentation.
7.5 RELIANCE UPON DOCUMENTS AND INSTRUCTIONS. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and any Written Instructions
actually received by it pursuant to this Agreement.
7.6 EXPRESS DUTIES ONLY. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
7.7 CO-OPERATION. The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Company or Salem to keep
the books of account of the Fund and/or compute the value of the assets of the
Fund. The Custodian shall take all such reasonable actions as the Company may
from time to time request to enable the
- 16 -
<PAGE>
Trust to obtain, from year to year, favorable opinions from the Company's
independent accountants with respect to the Custodian's activities hereunder in
connection with (a) the preparation of the Company's reports on Form N-1A and
Form N-SAR and any other reports required by the Securities and Exchange
Commission, and (b) the fulfillment by the Company of any other requirements of
the Securities and Exchange Commission.
ARTICLE VIII
------------
INDEMNIFICATION
---------------
8.1 INDEMNIFICATION BY THE COMPANY. The Company shall indemnify and hold
harmless the Custodian and any Sub-Custodian appointed pursuant to Section 3.3
above, and any nominee of the Custodian or of such Sub-Custodian, from and
against any loss, damage, cost, expense (including attorneys' fees and
disbursements), liability (including, without limitation, liability arising
under the Securities Act of 1933, the 1934 Act, the 1940 Act, and any state or
foreign securities and/or banking laws) or claim arising directly or indirectly
(a) from the fact that Securities are registered in the name of any such
nominee, or (b) from any action or inaction by the Custodian or such
Sub-Custodian (i) at the request or direction of or in reliance on the advice of
the Company, or (ii) upon Proper Instructions, or (c) generally, from the
performance of its obligations under this Agreement or any sub-custody agreement
with a Sub-Custodian appointed pursuant to Section 3.3 above, provided that
neither the Custodian nor any such Sub-Custodian shall be indemnified and held
harmless from and against any such loss, damage, cost, expense, liability or
claim arising from the Custodian's or such Sub-Custodian's negligence, bad faith
or willful misconduct.
8.2 INDEMNIFICATION BY CUSTODIAN. The Custodian shall indemnify and hold
harmless the Company and Salem from and against any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability (including without
limitation, liability arising under the Securities Act of 1933, the 1934 Act,
the 1940 Act, and any state or foreign securities and/or banking laws) or claim
arising from the negligence, bad faith or willful misconduct of the Custodian or
any Sub-Custodian appointed pursuant to Section 3.3 above, or any nominee of the
Custodian or of such Sub-Custodian.
- 17 -
<PAGE>
8.3 INDEMNITY TO BE PROVIDED. If the Company requests the Custodian to take
any action with respect to Securities, which may, in the opinion of the
Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Company shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
8.4 SECURITY. If the Custodian advances cash or Securities to the Fund for
any purpose, either at the Company's request or as otherwise contemplated in
this Agreement, or in the event that the Custodian or its nominee incurs, in
connection with its performance under this Agreement, any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim
(except such as may arise from its or its nominee's negligence, bad faith or
willful misconduct), then, in any such event, any property at any time held for
the account of the Fund shall be security therefor, and should the Fund fail
promptly to repay or indemnify the Custodian, the Custodian shall be entitled to
utilize available cash of the Fund and to dispose of other assets of the Fund to
the extent necessary to obtain reimbursement or indemnification.
ARTICLE IX
----------
FORCE MAJEURE
-------------
Neither the Custodian nor the Company nor Salem shall be liable for any
failure or delay in performance of its obligations under this Agreement arising
out of or caused, directly or indirectly, by circumstances beyond its reasonable
control, including, without limitation, acts of God; earthquakes; fires; floods;
wars; civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes; acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay (i) shall not discriminate against the Fund in favor of any other
customer of the Custodian in making computer time and personnel available to
input or process the transactions contemplated by this Agreement and (ii) shall
use its best efforts to ameliorate the effects of any such failure or delay.
- 18 -
<PAGE>
ARTICLE X
---------
EFFECTIVE PERIOD; TERMINATION
-----------------------------
10.1 EFFECTIVE PERIOD. This Agreement shall become effective as of its
execution and shall continue in full force and effect until terminated as
hereinafter provided.
10.2 TERMINATION. Any party hereto may terminate this Agreement by giving
to the other parties a notice in writing specifying the date of such
termination, which shall be not less than sixty (60) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board of Directors, the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on such specified date of termination (a) deliver
directly to the successor custodian all Securities (other than Securities held
in a Book-Entry System or Securities Depository) and cash then owned by the Fund
and held by the Custodian as custodian, and (b) transfer any Securities held in
a Book-Entry System or Securities Depository to an account of or for the benefit
of the Fund at the successor custodian, provided that Salem shall have paid to
the Custodian all fees, expenses and other amounts to the payment or
reimbursement of which it shall then be entitled. Upon such delivery and
transfer, the Custodian shall be relieved of all obligations under this
Agreement. The Company may at any time immediately terminate this Agreement in
the event of the appointment of a conservator or receiver for the Custodian by
regulatory authorities or upon the happening of a like event at the direction of
an appropriate regulatory agency or court of competent jurisdiction.
10.3 FAILURE TO APPOINT SUCCESSOR CUSTODIAN. If a successor custodian is
not designated by the Company on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or corporation company of its own selection, which (a) is a
"bank" as defined in the 1940 Act and (b) has aggregate capital, surplus and
undivided profits as shown on its then most recent published report of not less
than $25 million, all Securities, cash and other property held by Custodian
under this Agreement and to transfer to an account of or for the Fund at such
bank or trust company all Securities of the Fund held in a Book-Entry System or
Securities Depository. Upon such delivery and transfer, such bank or trust
company shall be the successor custodian under this Agreement and the Custodian
shall be relieved of all obligations under this Agreement.
- 19 -
<PAGE>
ARTICLE XI
----------
COMPENSATION OF CUSTODIAN
-------------------------
The Custodian shall be entitled to compensation from Salem as agreed upon
from time to time by Salem and the Custodian. The fees and other charges in
effect on the date hereof and applicable to the Fund are set forth in Exhibit C
attached hereto.
ARTICLE XII
-----------
NOTICES
-------
Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be in writing and shall be sent
or delivered to the recipient at the address set forth after its name
hereinbelow:
To the Company or Salem:
------------------------
The Shepherd Street Funds, Inc.
480 Shepherd Street
Winston-Salem, North Carolina 27103
Telephone: (336) 768-7230
Facsimile: (336) 760-2512
To Custodian:
-------------
Firstar Bank, N.A.
425 Walnut Street, M.L. CN-WN-06TC
Cincinnati, Ohio 45202
Attention: Mutual Fund Custody Services
Telephone: (513) 632_____
Facsimile: (513) 632-3299
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XII. Writing shall include
transmissions by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
- 20 -
<PAGE>
ARTICLE XIII
------------
MISCELLANEOUS
-------------
13.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
13.2 REFERENCES TO CUSTODIAN. The Company shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information for the Fund and such other printed matter
as merely identifies Custodian as custodian for the Fund. The Company shall
submit printed matter requiring approval to Custodian in draft form, allowing
sufficient time for review by Custodian and its counsel prior to any deadline
for printing.
13.3 NO WAIVER. No failure by either party hereto to exercise, and no delay
by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
13.4 AMENDMENTS. This Agreement cannot be changed orally and no amendment
to this Agreement shall be effective unless evidenced by an instrument in
writing executed by the parties hereto.
13.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
13.6 SEVERABILITY. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
13.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
- 21 -
<PAGE>
13.8 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the day and year first above written.
ATTEST: THE SHEPHERD STREET FUNDS, INC.
/s/ Jeffrey C. Howard By: /s/ David B. Rea
---------------------- ----------------------
Secretary Its: President
ATTEST: SALEM INVESTMENT COUNSELORS, INC.
/s/ William R. Watson By: /s/ David B. Rea
---------------------- ----------------------
Secretary Its: President
ATTEST: FIRSTAR BANK, N.A.
/s/ By: /s/ Lynette C. Gibson
---------------------- ----------------------
Senior Trust Officer Its: Vice President
<PAGE>
EXHIBIT A
---------
AUTHORIZED PERSONS
------------------
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to administer the Fund Custody Accounts.
Authorized Persons Specimen Signatures
------------------ -------------------
President: David B. Rea /s/ David B. Rea
------------------------------------
Vice President: Dale M. Brown /s/ Dale M. Brown
------------------------------------
Vice President: Robert T. Beach /s/ Robert T. Beach
------------------------------------
Vice President: William R. Watson /s/ William R. Watson
------------------------------------
Asst. Vice President: Robert G. Dorsey /s/ Robert G. Dorsey
------------------------------------
Secretary/Treasurer: Jeffrey C. Howard /s/ Jeffrey C. Howard
------------------------------------
Assistant Secretary: John F. Splain /s/ John F. Splain
------------------------------------
Assistant Treasurer: Mark J. Seger /s/ Mark J. Seger
------------------------------------
Transfer Agent/Fund Accountant Employees:
Theresa M. Samocki /s/ Theresa M. Samocki
------------------------------------
Brooke S. Steinau /s/ Brooke S. Steinau
------------------------------------
Jennifer L. Brown /s/ Jennifer L. Brown
------------------------------------
------------------------------------
------------------------------------
- 23 -
<PAGE>
EXHIBIT B
---------
FIRSTAR INSTITUTIONAL CUSTODY SERVICES
STANDARDS OF SERVICE GUIDE
JULY, 1999
Firstar Bank, N.A. is committed to providing superior quality service to
all customers and their agents at all times. We have compiled this guide as a
tool for our clients to determine our standards for the processing of security
settlements, payment collection, and capital change transactions. Deadlines
recited in this guide represent the times required for Firstar Bank to guarantee
processing. Failure to meet these deadlines by the customer will result in
settlement at our client's risk. In all cases, Firstar Bank will make every
effort to complete all processing on a timely basis.
Firstar Bank is a direct participant of the Depository Trust Company, a
direct member of the Federal Reserve Bank of Cleveland, and utilizes the Bankers
Trust Company as its agent for ineligible and foreign securities.
For corporate reorganizations, Firstar Bank utilizes SEI's Reorg Source,
Financial Information, Inc., XCITEK, DTC Important Notices, and the WALL STREET
JOURNAL.
For bond calls and mandatory puts, Firstar Bank utilizes SEI's Bond Source,
Kenny Information Systems, Standard & Poor's Corporation, and DTC Important
Notices. Firstar Bank will not notify clients of optional put opportunities.
Any securities delivered free to Firstar Bank or its agents must be
received three (3) business days prior to any payment or settlement in order for
the Firstar Bank standards of service to apply.
Should you have any questions regarding the information contained in this
guide, please feel free to contact your account representative.
THE INFORMATION CONTAINED IN THIS STANDARDS OF SERVICE GUIDE IS
SUBJECT TO CHANGE. SHOULD ANY CHANGES BE MADE FIRSTAR BANK WILL
PROVIDE YOU WITH AN UPDATED COPY OF ITS STANDARDS OF SERVICE GUIDE.
- 24 -
<PAGE>
FIRSTAR BANK SECURITY SETTLEMENT STANDARDS
<TABLE>
<CAPTION>
TRANSACTION TYPE INSTRUCTIONS DEADLINES* DELIVERY INSTRUCTIONS
<S> <C> <C>
DTC 1:30 P.M. on Settlement Date DTC Participant #2803
Agent Bank ID 27895
Institutional #________________
For Account #____________
Federal Reserve Book Entry 12:30 P.M. on Settlement Date Federal Reserve Bank of Cinti/Trust
for Firstar Bank, N.A. ABA# 042000013
For Account #_____________
Fed Wireable FNMA & FHLMC 12:30 P.M. on Settlement Date Bk of NYC/Cust
ABA 021000018
A/C Firstar Bank # 117612
For Account #____________
Federal Reserve Book Entry 1:00 P.M. on Settlement Date Federal Reserve Bank of Cinti/Spec
(Repurchase Agreement Collateral for Firstar Bank, N.A. ABA# 042000013
Only) For Account #_____________
PTC Securities 12:00 P.M. on Settlement Date PTC For Account BYORK
(GNMA Book Entry) Firstar Bank / 117612
Physical Securities 9:30 A.M. EST on Settlement Date Bank of New York
(for Deliveries, by 4:00 P.M. on One Wall Street- 3rd Floor - Window A
Settlement Date minus 1) New York, NY 10286
For account of Firstar Bank / Cust #117612
Attn: Donald Hoover
CEDEL/EURO-CLEAR 11:00 A..M. on Settlement Date Cedel a/c 55021
minus 2 FFC: a/c 387000
Firstar Bank / Global Omnibus
Cash Wire Transfer 3:00 P.M. Firstar Bank,N.A. Cinti/Trust
ABA#
Credit Account #
Further Credit to ___________
Account # _______________
</TABLE>
o All times listed are Eastern Standard Time.
- 25 -
<PAGE>
FIRSTAR BANK PAYMENT STANDARDS
SECURITY TYPE INCOME PRINCIPAL
Equities Payable Date
Municipal Bonds* Payable Date Payable Date
Corporate Bonds* Payable Date Payable Date
Federal Reserve Bank Book Entry* Payable Date Payable Date
PTC GNMA's (P&I) Payable Date + 1 Payable Date + 1
CMOs *
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1 Payable Date + 1
SBA Loan Certificates When Received When Received
Unit Investment Trust Certificates* Payable Date Payable Date
Certificates of Deposit* Payable Date + 1 Payable Date + 1
Limited Partnerships When Received When Received
Foreign Securities When Received When Received
*Variable Rate Securities
Federal Reserve Bank Book Entry Payable Date Payable Date
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1 Payable Date + 1
NOTE: If a payable date falls on a weekend or bank holiday, payment
will be made on the immediately following business day.
- 26 -
<PAGE>
FIRSTAR BANK CORPORATE REORGANIZATION STANDARDS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
TYPE OF ACTION NOTIFICATION TO CLIENT DEADLINE FOR CLIENT INSTRUCTIONS TRANSACTION POSTING
TO FIRSTAR BANK
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rights, Warrants, Later of 10 business days prior to expiration 5 business days prior to expiration Upon receipt
and Optional Mergers or receipt of notice
------------------------------------------------------------------------------------------------------------------------------------
Mandatory Puts with Later of 10 business days prior to expiration 5 business days prior to expiration Upon receipt
Option to Retain or receipt of notice
------------------------------------------------------------------------------------------------------------------------------------
Class Actions 10 business days prior to expiration date 5 business days prior to expiration Upon receipt
------------------------------------------------------------------------------------------------------------------------------------
Voluntary Tenders, Later of 10 business days prior to expiration 5 business days prior to expiration Upon receipt
Exchanges, or receipt of notice
and Conversions
------------------------------------------------------------------------------------------------------------------------------------
Mandatory Puts, Defaults, At posting of funds or securities received None Upon receipt
Liquidations, Bankruptcies,
Stock Splits, Mandatory
Exchanges
------------------------------------------------------------------------------------------------------------------------------------
Full and Partial Calls Later of 10 business days prior to expiration None Upon receipt
or receipt of notice
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Fractional shares/par amounts resulting from any of the above
will be sold.
- 27 -
<PAGE>
EXHIBIT C
---------
FIRSTAR BANK, N.A.
DOMESTIC CUSTODY FEE SCHEDULE
Firstar Bank, N.A., as Custodian, will receive monthly compensation for services
according to the terms of the following Schedule:
I. PORTFOLIO TRANSACTION FEES:
---------------------------
(a) For each repurchase agreement transaction $ 7.00
(b) For each portfolio transaction processed through
DTC or Federal Reserve $ 9.00
(c) For each portfolio transaction processed through
our New York custodian $25.00
(d) For each GNMA/Amortized Security Purchase $25.00
(e) For each GNMA Prin/Int Paydown, GNMA Sales $ 8.00
(f) For each covered call option/future contract written,
exercised or expired $10.00
(g) For each Cedel/Euro clear transaction $80.00
(h) For each Disbursement (Fund expenses only) $ 5.00
A transaction is a purchase/sale of a security, free receipt/free delivery
(excludes initial conversion), maturity, tender or exchange:
II. MARKET VALUE FEE
----------------
Based upon an annual rate of: Million
.00024 (2.4 Basis Points) on First $20
.00016 (1.6 Basis Points) on Next $30
.00012 (1.2 Basis Points) on Balance
III. MONTHLY MINIMUM FEE-PER FUND $250.00
----------------------------
IV. OUT-OF-POCKET EXPENSES
----------------------
The only out-of-pocket expenses charged to your account will be shipping
fees or transfer fees.
V. EARNINGS CREDITS
----------------
On a monthly basis any earnings credits generated from uninvested custody
balances will be applied against any cash management service fees
generated.
- 28 -
<PAGE>
FIRSTAR BANK, N.A.
CASH MANAGEMENT FEE SCHEDULE
SERVICES UNIT COST ($) MONTHLY COST ($)
-------- ------------- ----------------
D.D.A. Account Maintenance 15.00
Deposits .42
Deposited Items .109
Checks Paid .159
Balance Reporting - P.C. Access 50.00 1st Acct
35.00 each add'l
ACH Transaction .105
ACH Monthly Maintenance 40.00
ACH Additions, Deletions, Changes 6.00
ACH Stop Payment 5.00
ACH Debits .12
Deposited Items Returned 6.00
International Items Returned 10.00
NSF Returned Checks 25.00
Stop Payments 22.00
Data Transmission per account 115.00
Drafts Cleared .179
Lockbox Maintenance 60.00
Lockbox items Processed .34
Miscellaneous Lockbox items .12
Positive Pay .06
Issued Items .015
Invoicing for Service Charge 15.00
Wires Incoming
Domestic 11.00
International 11.00
Wires Outgoing
Domestic International
Repetitive 14.00 Repetitive 35.00
Non-Repetitive 13.00 Non-Repetitive 40.00
PC - Initiated Wires:
Domestic International
Repetitive 10.00 Repetitive 25.00
Non-Repetitive 11.00 Non-Repetitive 25.00
Customer Initiated 9.00
UNCOLLECTED CHARGE -- FIRSTAR PRIME RATE AS OF FIRST OF MONTH PLUS 4% OTHER
AVAILABLE CASH MANAGEMENT SERVICES ARE PRICED SEPARATELY.
- 29 -
