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Exhibit (g)(21)
GLOBAL SUB-CUSTODIAN AGREEMENT
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AGREEMENT dated as of November 27, 2000, among Bankers Trust Company
(the "Bank"), Firstar Funds, Inc. (the "Fund") and Firstar Bank, N.A. (the
"Custodian").
WITNESSETH:
WHEREAS, the Fund is registered as an open-end diversified, management
investment company under the Investment Company Act of 1940, as amended ("1940
Act");
WHEREAS, the Fund may, from time to time organize one or more series
of shares, in addition to the series set forth in Exhibit A attached hereto,
each of which shall represent an interest in a separate portfolio of Securities
and Cash (each as hereinafter defined) (all such existing and additional series
now or hereafter listed on Exhibit A being hereafter referred to individually as
a "Portfolio" and collectively, as the ("Portfolios");
WHEREAS, the Custodian has entered into a Custodian Agreement with the
Fund to provide certain custody services to the Portfolios; and
WHEREAS, the Custodian and the Fund wish to retain the Bank to provide
certain global subcustodian services to the Custodian and the Fund, for the
benefit of the Portfolios, and the Bank is willing to provide such services;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed among the parties hereto as follows:
1. Employment of Bank. The Custodian and the Fund, on behalf of each
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Portfolio, hereby employ the Bank as global subcustodian of all assets of each
Portfolio that are delivered to and accepted by the Bank or any of its
Subcustodians (as that term is defined in Section 5) anywhere in the world (the
"Property") pursuant to the terms and conditions set forth herein. For purposes
of this Agreement, "delivery" of Property shall include the acquisition of a
security entitlement (as that term is defined in the New York Uniform Commercial
Code ("UCC")) with respect thereto. Without limitation, such Property shall
include stocks and other equity interests of every type, evidences of
indebtedness, other instruments representing same or rights or obligations to
receive, purchase, deliver or sell same and other non-cash investment property
of a Portfolio ("Securities") and cash from whatever source and in whatever
currency ("Cash"). The Bank shall not be responsible for any property of a
Portfolio held or received by the Fund or others and not delivered to the Bank
or any of its Subcustodians.
2. Custody Account. The Bank agrees to establish and maintain one or
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more separate custody accounts each in the name of the Custodian, on behalf of
the Fund for each Portfolio (individually, an "Account" and collectively, the
"Accounts") for any and all Property from time to time delivered to and accepted
by the Bank or any of its Subcustodians for the account of such Portfolio. Upon
delivery by the Fund or the Custodian to the Bank of any
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Property belonging to a Portfolio, the Fund or the Custodian, as the case may
be, shall specifically indicate which Portfolio such Property belongs or if such
Property belongs to more than one Portfolio shall allocate such Property to the
appropriate Portfolio(s) all in accordance with Instructions (as defined in
Section 13). The Custodian and the Fund, on behalf of the Portfolios, each
acknowledge its responsibility as a principal for all of its obligations to the
Bank arising under or in connection with this Agreement, notwithstanding in the
case of the Custodian, that it may be acting on behalf of other persons and
warrants its authority to deposit in the Accounts any Property delivered
therefor to the Bank or its Subcustodian and to give, and authorize others to
give, instructions relative thereto. The Bank may deliver securities of the same
class in place of those deposited in or credited to the Account. The Fund, on
behalf of the Portfolios, and the Custodian agree that the Bank shall not be
subject to, nor shall its rights and obligations under this Agreement or with
respect to the Accounts be affected by, any agreement between the Fund or the
Custodian and any other person, except as otherwise provided herein.
The Bank shall hold, keep safe and protect as global subcustodian for each
Account, on behalf of the Fund, all Property in such Account and, to the extent
such Property constitutes financial assets for purposes of the New York UCC,
shall maintain those financial assets in such Account as security entitlements
in favor of the Portfolio in whose name the Account is maintained. All
transactions, including, but not limited to, foreign exchange transactions,
involving the Property shall be executed or settled solely in accordance with
Instructions (as defined in Section 13), except that until the Bank, or its
Subcustodian, receives Instructions to the contrary, the Bank will directly or
through a Subcustodian:
(a) collect all interest and dividends and all other income and
payments, whether paid in cash or in kind, on the Property, as
the same become payable and credit the same to the appropriate
Account;
(b) present for payment all Securities credited to the Account which
are called, redeemed or retired or otherwise become payable and
all coupons and other income items which call for payment upon
presentation to the extent that the Bank or its Subcustodian is
actually aware of such opportunities and credit the cash received
to such Account pursuant to this Agreement;
(c) exchange Securities where the exchange is purely ministerial
(including, without limitation, the exchange of temporary
securities for those in definitive form and the exchange of
warrants, or other documents of entitlement to securities, for
the Securities themselves);
(d) whenever notification of a rights entitlement or a fractional
interest resulting from a rights issue, stock dividend or stock
split is received for the Account and such rights entitlement or
fractional interest bears an expiration date, endeavor to receive
Instructions, provided that if such Instructions are not received
in time for the Bank to take timely action, sell in the
discretion of the Bank, or its Subcustodian (which sale the Fund,
on behalf of the Portfolios, and the Custodian hereby authorize
the Bank to
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make), such rights entitlement or fractional interest and credit
the Account with the net proceeds of such sale;
(e) execute in the Custodian's or Fund's name for an Account,
whenever the Bank, or its Subcustodian, deems it appropriate,
such ownership and other certificates as may be required to
obtain the payment of income from Property;
(f) pay for each Account, any and all taxes and levies in the nature
of taxes imposed on income on the Property by any governmental
authority. In the event there is insufficient Cash available in
such Account to pay such taxes and levies, the Bank, or its
Subcustodian, shall notify the Custodian of the amount of the
shortfall and the Custodian may, or may cause the Fund to, at its
option, deposit additional Cash in such Account or take steps to
have sufficient Cash available. The Custodian and the Fund, on
behalf of the Portfolios agree, when and if requested by the Bank
and required in connection with the payment of any such taxes to
cooperate with the Bank, or its Subcustodian, in furnishing
information, executing documents or otherwise; and
(g) appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank
or any Subcustodian.
3. Records, Ownership of Property, Statements and Electronic Access.
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(a) The ownership of the Property whether Securities, Cash and/or
other property, and whether maintained directly by the Bank or indirectly
through a Subcustodian or a Securities System as authorized herein, shall be
clearly recorded on the Bank's books as belonging to the Custodian, on behalf of
the appropriate Portfolio and not for the Custodian's or the Bank's own
interest. The Bank shall keep accurate and detailed accounts of all
investments, receipts, disbursements and other transactions for each Account.
All accounts, books and records of the Bank relating thereto shall be open to
inspection and audit at all reasonable times during normal business hours by any
person designated by the Bank. The Bank will supply to the Fund and the
Custodian from time to time, as mutually agreed upon, a statement in respect to
any Property in the Accounts held by the Bank or by a Subcustodian. In the
absence of the filing in writing with the Bank by the Fund or the Custodian of
exceptions or objections to any such statement within sixty (60) days of the
mailing thereof, the Fund shall be deemed to have approved such statement; and
in such case or upon written approval of the Fund or the Custodian of any such
statement, such statement shall be presumed to be correct with respect to all
information set forth therein absent manifest error or omissions.
(b) The Fund and the Custodian or any agent of the Fund or the
Custodian authorized in accordance with the terms hereof may elect to
communicate with the Bank through an electronic or other similar communications
system for any purpose, including, without limitation, the furnishing of
Instructions. Such system may provide the Fund, the Custodian or such agent,
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on a daily basis, with the ability to view on-line or to print on hard copy
various reports of Account activity and of Securities and/or Cash being held in
or credited to any Account. To the extent that such reports shall include market
values of Securities in an Account, the Fund and the Custodian hereby
acknowledge that the Bank now obtains and may in the future obtain information
on such values from outside sources that the Bank considers to be reliable and
the Fund and the Custodian agree that the Bank (i) does not verify nor represent
or warrant either the reliability of such service nor the accuracy or
completeness of any such information furnished or obtained by or through such
service and (ii) shall be without liability in selecting and utilizing such
service or furnishing any information derived therefrom.
4. Maintenance of Property at Bank and Subcustodian Locations. Pursuant
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to Instructions, the Fund, on behalf of the Portfolios, shall, or shall cause
the Custodian to, direct the Bank to (a) settle Securities transactions in the
country or other jurisdiction in which the principal trading market for such
Securities is located, where such Securities are to be presented for payment or
where such Securities are acquired and (b) maintain Cash and cash equivalents in
such countries where Cash may be legally deposited, where it is the legal
currency for payment of public or private debts, and in amounts reasonably
necessary to effect the Portfolios' transactions in such Securities.
Instructions to settle Securities transactions in any country shall be deemed to
authorize the holding of such Securities and Cash in that country.
5. Subcustodians and Securities Systems. The Fund and the Custodian
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authorize and instruct the Bank to maintain the Property in the Account(s) in
custody accounts which have been established by the Bank directly in one of its
U.S. branches or indirectly through custody accounts which have been established
by the Bank with the following other securities intermediaries (which may or may
not be an affiliate of the Bank): (a) another U.S. bank or trust company or
branch thereof located in the U.S. which is itself qualified under the 1940 Act
to act as custodian (individually, a "U.S. Subcustodian"), or a U.S. securities
depository or clearing agency in which the Bank or a U.S. Subcustodian
participates (individually, a "U.S. Securities System") or (b) one of its non-
U.S. branches or subsidiaries, a non-U.S. branch or majority-owned subsidiary of
a U.S. bank or a non-U.S. bank or trust company, acting as custodian
(individually, a "non-U.S. Subcustodian"; U.S. Subcustodians and non-U.S.
Subcustodians, collectively, "Subcustodians"), or a non-U.S. depository or
clearing system in which the Bank or any Subcustodian participates
(individually, a "non-U.S. Securities System"; U.S. and non-U.S. Securities
Systems, collectively, Securities Systems"), provided that in each case in which
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a U.S. Subcustodian or U.S. Securities System is employed, such Subcustodian or
Securities System shall have been approved by Instructions; provided further
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that in each case in which a non-U.S. Subcustodian or non-U.S. Securities System
is employed,
(a) such Subcustodian or Securities System either is (1) a
qualified U.S. bank as defined by Rule 17f-5 under the 1940
Act ("Rule 17f-5") or (2) an "eligible foreign custodian"
within the meaning of Rule 17f-5 or such Subcustodian or
Securities System is the subject of an order granted by the
U.S. Securities and Exchange Commission ("SEC") exempting
such agent or the subcustody arrangements thereto from all
or part of the provisions of Rule 17f-5,
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(b) the agreement between the Bank and such non-U.S.
Subcustodian has been approved by Instructions; it being
understood that the Bank shall have no liability or
responsibility for determining whether the approval of any
Subcustodian or Securities System has been proper under the
1940 Act or any rule or regulation thereunder, and
(c) the Bank shall promptly notify the Fund and the Custodian
if, in the normal course of its custodial activities, the
Bank has reason to believe that any non-U.S. Subcustodian or
non-U.S. Securities System has ceased to comply with the
requirements of subparagraph (a) of this further proviso.
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Upon receipt of Instructions, the Bank agrees, as soon as reasonably
possible, to cease the employment of any Subcustodian or Securities System with
respect to the applicable Account, and if desirable and practicable, appoint a
replacement subcustodian securities system in accordance with the provisions of
this Section 5. In addition, the Bank may, at any time in its discretion, upon
written notification to the Custodian or the Fund, terminate the employment of
any Subcustodian or Securities System.
Upon request of the custodian, the Bank shall deliver to the Custodian
no less frequently than annually a certificate stating: (i) the identity of each
non-U.S. Subcustodian and non-U.S. Securities System then acting on behalf of
the Bank and the name and address of the governmental agency or other regulatory
authority that supervises or regulates such non-U.S. Subcustodian and Securities
System; (ii) the countries in which each non-U.S. Subcustodian or non-U.S.
Securities System is located; and (iii) so long as Rule 17f-5 requires the
Fund's Board of Directors to directly approve its foreign custody arrangements,
such other information relating to such non-U.S. Subcustodians and non-U.S.
Securities Systems as may reasonably be requested by the Custodian to ensure
compliance with Rule 17f-5. So long as Rule 17f-5 requires the Fund's Board of
Directors to directly approve its foreign custody arrangements, the Bank also
shall furnish no less frequently than annually to the Custodian information
concerning such non-U.S. Subcustodians and non-U.S. Securities Systems similar
in kind and scope as that furnished to the Custodian in connection with the
initial approval of this Agreement.
6. Use of Subcustodian. With respect to Property in the Account
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maintained by the Bank in the custody of a Subcustodian employed pursuant to
Section 5:
(a) The Bank will identify on its books as belonging to the Fund, on
behalf of a Portfolio, any Property maintained through such
Subcustodian.
(b) Any Property in the Account(s) held by or credited to a
Subcustodian will be subject only to the instructions of the Bank
or its agents.
(c) Property deposited with or credited to a Subcustodian will be
maintained in an account holding only assets for customers of the
Bank.
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(d) Any agreement the Bank shall enter into with a non-U.S.
Subcustodian with respect to the holding of Property shall
require that (i) the Property will be adequately indemnified or
its losses adequately insured;. (ii) the Securities are not
subject to any right, charge, security interest, lien, or claim
of any kind in favor of such Subcustodian or its creditors except
for a claim of payment in accordance with such agreement for
their safe custody or administration and expenses related
thereto, or in the case of cash deposits, liens or rights in
favor of creditors of the custodian arising under bankruptcy,
insolvency or similar laws; (iii) beneficial ownership of such
Securities be freely transferable without the payment of money or
value other than for safe custody or administration and expenses
related thereto; (iv) adequate records will be maintained
identifying the Property held pursuant to such Agreement as
belonging to the Bank, on behalf of its customers, (v) to the
extent permitted by applicable law, officers of or auditors
employed by, or other representatives of or designated by, the
Bank, including the independent public accountants of or
designated by, the Custodian or the Fund be given access to the
books and records of such Subcustodian relating to its actions
under its agreement pertaining to any Property held by it
thereunder or confirmation of or pertinent information contained
in such books and records be furnished to such persons designated
by the Bank, and (vi) the Fund will receive periodic reports with
respect to the safekeeping of the Property, including, but not
limited to, notification of any transfer to or from the Fund's
account or a third party account containing Property held for the
benefit of the Fund. Such agreement may contain, in lieu of any
or all of the provisions specified in this Section 6(d), such
other provisions that the Foreign Custody Manager determines will
provide, in their entirety, the same or a greater level of care
and protection for Fund assets as the specified provisions, in
their entirety.
7. Use of Securities System. With respect to Property in the Account
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which is maintained by the Bank or any Subcustodian through a Securities System
employed pursuant to Section 5:
(a) The Bank will, and the Subcustodian will be required by its
agreement with the Bank to, identify on its books such Property
as being maintained for the account of the Bank or by the
Subcustodian for the account of customers of the Bank or a
Subcustoodian.
(b) Any Property maintained through a Securities System for the
account of the Bank or a Subcustodian will be subject only to the
instructions of the Bank or such Subcustodian, as the case may
be.
(c) Property deposited with a Securities System will be maintained in
an account holding only assets for customers of the Bank or
Subcustodian, as
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the case may be unless precluded by applicable law, rule or
regulation or unless local market practice provides otherwise.
(d) The Bank will provide the Custodian with any report obtained by
the Bank on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities
deposited in the Securities System.
(e) Beginning July 2, 2001, the effective date for compliance with
Rule 17f-7 of the 1940 Act, the Bank will monitor the custody
risks associated with maintaining assets with the Securities
System on a continuing basis, and promptly notify the Fund or its
investment advisor of any material change in these risks.
8. Agents. The Bank may at any time or times in its sole discretion
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appoint (or remove) any other U.S. bank or trust company which is itself
qualified under the 1940 Act to act as custodian, as its agent to carry out such
of the provisions of this Agreement as the Bank may from time to time direct;
provided, however, that the appointment of any agent shall not relieve the Bank
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of its responsibilities or liabilities hereunder.
9. Holding of Securities, Nominees, etc. Securities in an Account that
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are maintained by the Bank or any Subcustodian may be held directly by such
entity in the name of the Fund, on behalf of a Portfolio, in its own name, in
the name of its nominee or in bearer form. Securities that are maintained
through a Subcustodian or are eligible for deposit in a securities system as
provided above may be maintained with the Subcustodian or securities system, as
the case may be, in an account for the Bank's or Subcustodian's customers. The
Bank or Subcustodian, as the case may be, may combine certificates representing
Securities held in an Account with certificates of the same issue held by it as
fiduciary or as a custodian. In the event that any Securities in the name of
the Bank or its nominee or held by one of its Subcustodians and registered in
the name of such Subcustodian or its nominee are called for partial redemption
by the issuer of such Security, the Bank may, subject to the rules or
regulations pertaining to allocation of any securities depository in which such
Securities been deposited, allot, or cause to be allotted, the called portion of
the respective beneficial holders of such class of security in any manner the
Bank deems to be fair and equitable.
10. Proxies, Notices and Reports. With respect to any proxies, notices,
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reports or other communications relative to any of the Securities in the
Account(s), the Bank shall perform such services and only such services relative
thereto as are (i) set forth in Section 2 of this Agreement, (ii) described in
Exhibit B attached hereto (as such service therein described may be in effect
from time to time) (the "Proxy Service") and (iii) as otherwise agreed upon
between the Bank, the Custodian and the Fund. The liability and responsibility
of the Bank in connection with the Proxy Service referred to in (ii) of the
immediately preceding sentence and in connection with any additional services
that the Bank, the Custodian and the Fund may agree upon as provided in (iii) of
the immediately preceding sentence shall be as set forth in the description of
the Proxy Service and as may be agreed upon by the Bank, the Custodian and the
Fund in connection with the furnishing of any such additional service and shall
not be affected by
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any other term of this Agreement. Neither the Bank nor its nominees or agents
shall vote upon or in respect of any of the Securities in the Accounts, execute
any form of proxy to vote thereon, or give any consent or take any action
(except as provided in Section 2) with respect thereto except upon the receipt
of Instructions relative thereto.
11. Settlement Procedures. Settlement and payment for Securities received
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for an Account and delivery of Securities maintained for an Account may be
effected in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivering
Securities to the purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the expectation of receiving
later payment for such Securities from such purchaser or dealer, as such
practices and procedures may be modified or supplemented in accordance with the
standard operating procedures of the Bank in effect from time to time for that
jurisdiction or market.
Notwithstanding that the Bank may settle purchases and sales against,
or credit income to, an Account, on a contractual basis, the Bank may, at its
sole option, reverse such credits or debits to the appropriate Account in the
event that the transaction does not settle, or the income is not received in a
timely manner, and the Fund and the Custodian agree to hold the Custodian
harmless from any losses which may result therefrom.
12. Conditional Credits.
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(a) Notwithstanding any other provision of this Agreement, the Bank shall
not be required to comply with any Instructions to settle the purchase of any
securities for the Account, unless there are sufficient immediately available
funds in the relevant currency credited to the Account, provided that, if, after
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all expenses, debits and withdrawals of Cash in the relevant currency ("Debits,"
which term includes all advances made by the Subcustodian in respect of the
Account) applicable to the Account have been made and if after all Conditional
Credits, as defined below, applicable to the Account have been made final
entries as set forth in (c) below, the amount of immediately available funds of
the relevant currency in such Account is at least equal to the aggregate
purchase price of all securities for which the Bank has received Instructions to
settle on that date ("Settlement Date"), the Bank, upon settlement, shall credit
the Securities to the Account by making a final entry on its books and records.
(b) Notwithstanding the foregoing, if after all Debits applicable to the
Account have been made, there remains outstanding any Conditional Credit (as
defined below) applicable to the Account or the amount of immediately available
funds in a given currency in such Account are less than the aggregate purchase
price in such currency of all securities for which the Bank has received
Instructions to settle on the Settlement Date, the Bank, upon settlement, may
credit the securities to the Account by making a conditional entry on its books
and records ("Conditional Credit"), pending receipt of sufficient immediately
available funds in the relevant currency in the Account.
(c) If, within a reasonable time from the posting of a Conditional Credit
and after all Debits applicable to the Account have been made, immediately
available funds in the relevant currency at
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least equal to the aggregate purchase price in such currency of all securities
subject to a Conditional Credit on a Settlement Date are credited to or
deposited into the Account, the Bank shall make the Conditional Credit a final
entry on its books and records. In such case, the Fund and the Custodian shall
be liable to the Bank only for late charges at a rate which the Bank customarily
charges for similar extensions of credit.
(d) If (i) within a reasonable time from the posting of a Conditional
Credit, immediately available funds at least equal to the resultant Debit on a
Settlement Date are not credited to or on deposit in the Account, or (ii) any
Proceeding shall occur, the Bank may sell such of the Securities subject to the
Conditional Credit as it selects in its sole discretion and shall apply the net
proceeds of such sale to cover such Debit, including related late charges, and
any remaining proceeds shall be credited to the Account. If such proceeds are
insufficient to satisfy such debt in full, the Fund and the Custodian shall
continue to be liable to the Bank for any shortfall. The Bank shall make the
Conditional Credit a final entry on its books as to the Securities not required
to be sold to satisfy such Debit. Pending payment in full by the Fund and the
Custodian of the purchase price for Securities subject to a Conditional Credit,
and the Bank's making a Conditional Credit a final entry on its books and unless
consented to by the Bank, neither the Fund nor the Custodian shall have any
right to give further Instructions in respect of Securities subject to a
Conditional Credit. The Bank shall have the sole discretion to determine which
Securities shall be deemed to have been paid for by the Fund and the Custodian
out of funds available in the Account. Any such Conditional Credit may be
reversed (and any corresponding Debit shall be canceled) by the Bank unless and
until the Bank makes a final entry on its books crediting such Securities to the
Account. The term "Proceeding" shall mean any insolvency, bankruptcy,
receivership, reorganization or similar proceeding relating to the Fund and the
Custodian, whether voluntary or involuntary.
(e) The Fund and the Custodian agree that they will not use the Account to
facilitate the purchase of securities without sufficient funds in the Account
(which funds shall not include the expected proceeds of the sale of the
purchased securities).
13. Instructions. The term "Instructions" means instructions from the
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Custodian or the Fund in respect of any of the Bank's duties hereunder which
have been received by the Bank at its address set forth in Section 20 below in
writing ,by tested telex or SWIFT/ISITC signed or given by such one or more
person or persons as the Custodian or the Fund shall have from time to time
authorized to give the particular class of Instructions in question and whose
name and (if applicable) signature and office address have been filed with the
Bank, or which have been transmitted electronically through an electronic on-
line service or other similar communications system acceptable to the Bank,, or
upon receipt of such other form of instructions as the Fund or the Custodian may
from time to time authorize in writing and which the Bank agrees to accept. A
list of those persons initially authorized to act on behalf of the Custodian and
the Fund is set forth in Exhibit C hereto. The Bank shall have the right to
assume in the absence of notice to the contrary from the Fund or the Custodian
that any person whose name is set forth in Exhibit C hereto or subsequently
placed on file with the Bank pursuant to this Section has been authorized by the
Fund or the Custodian to give the Instructions in question and that such
authorization has not been revoked. The Bank may act upon and conclusively rely
on, without any liability to the Fund, the Custodian or any other person or
entity for any losses resulting therefrom, any
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instructions reasonably believed by it to be furnished by the proper person or
persons as provided above.
14. Standard of Care. The Bank shall be responsible for the performance
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of only such duties as are set forth herein or contained in Instructions given
to the Bank that are not contrary to the provisions of this Agreement. The Bank
will use reasonable care with respect to the safekeeping of Securities in each
Account and, except as otherwise expressly provided herein, in carrying out its
obligations under this Agreement. So long as and to the extent that it has
exercised reasonable care, the Bank shall not be responsible for the title,
validity or genuineness of any Property or other property or evidence of title
thereto received by it or delivered by it pursuant to this Agreement and shall
be held harmless in acting upon, and may conclusively rely on, without liability
for any loss resulting therefrom, any notice, request, consent, certificate or
other instrument reasonably believed by it to be genuine and to be signed or
furnished by the proper party or parties, including, without limitation,
Instructions, and shall be indemnified by the Fund and the Custodian for any
losses, damages, costs and expenses (including the fees and expenses of counsel)
incurred by the Bank and arising out of action taken or omitted with reasonable
care by the Bank hereunder or under any Instructions. The Bank shall be liable
to the Fund or the Custodian for any act or omission to act of any Subcustodian
to the same extent as if it committed such act itself. With respect to a
Securities System, the Bank shall only be responsible or liable for losses
arising from the employment of such Securities System caused by the Bank's own
failure to exercise reasonable care, prudence and diligence in performing the
requirements of Sections 5 and 7 hereto. In the event of any loss to the Fund
or the Custodian by reason of the failure of the Bank or its Subcustodian to
utilize reasonable care, the Bank shall be liable to the Fund or the Custodian
to the extent of the Fund's or Custodian's actual damages at the time such loss
was discovered without reference to any special conditions or circumstances. In
no event shall the Bank be liable for any consequential or special damages. The
Bank shall be entitled to solely, and may act, on advice of counsel (who may be
counsel for Fund or the Custodian) on all matters and shall be without liability
for any action reasonably taken or omitted pursuant to such advice.
In the event the Fund or the Custodian utilizes an electronic or other
similar system to communicate with the Bank for any purpose, including, without
limitation, the furnishing of Instructions, the Fund or the Custodian shall be
fully responsible for the security of the connecting terminal utilized by them,
access thereto and the proper and authorized use thereof and the initiation and
application of continuing effective safeguards with respect thereto and agrees
to defend and indemnify the Bank and hold the Bank harmless from and against any
and all losses, damages, costs and expenses (including the fees and expenses of
counsel) incurred by the Bank as a result of any improper or unauthorized use of
such terminal. Should the Fund or the Custodian authorize, in accordance with
the terms hereof, any agent to communicate with the Bank and such agent utilizes
any such system to so communicate, the Fund or the Custodian shall be
responsible for the use of such system and shall defend, indemnify and hold
harmless the Bank for such use to the same extent as if such system were being
used by the Fund or the Custodian to communicate with the Bank.
All collections of funds or other property paid or distributed in
respect of Securities in an Account, including funds involved in third-party
foreign exchange transactions,
-10-
<PAGE>
shall be made at the risk of the Fund. Subject to the exercise of reasonable
care, the Bank shall have no liability for any loss occasioned by delay in the
actual receipt of notice by the Bank or by its Subcustodian of any payment,
redemption or other transaction regarding Securities in an Account in respect of
which the Bank has agreed to take action as provided in Section 2 thereof. The
Bank shall not be liable for any loss resulting from, or caused by, or resulting
from acts of governmental authorities (whether de jure or de facto), including,
-- ---- -- -----
without limitation, nationalization, expropriation, and the imposition of
currency restrictions; devaluations of or fluctuations in the value of
currencies; changes in laws and regulations applicable to the banking or
securities industry; market conditions that prevent the orderly execution of
securities transactions or affect the value of Property; acts of war, terrorism,
insurrection or revolution; strikes or work stoppages; the inability of a local
clearing and settlement system to settle transactions for reasons beyond the
control of the Bank; hurricane, cyclone, earthquake, volcanic eruption, nuclear
fusion, fission, radioactivity or other acts of God.
The provisions of this Section shall survive termination of this
Agreement.
15 Liability for past Records. The Bank shall have no liability in
--------------------------
respect of any loss, damage or expense suffered by the Fund or the Custodian,
insofar as such loss, damage or expense arises from the performance of the
Bank's duties hereunder by reason of the Bank's reliance upon records that were
maintained for the Fund by entities other than the Bank prior to the Bank's
employment hereunder.
16. Investment Limitations and Legal or Contractual Restrictions or
---------------------------------------------------------------
Regulations. Provided that the Bank exercises reasonable care to comply with
-----------
Instructions, particularly in connection with the purchase, sale or exchange of
Securities made by or for a Portfolio in any country, the Bank shall not be
liable to the Custodian or the Fund or a Portfolio and the Custodian and the
Fund, on behalf of the applicable Portfolio. The Custodian and the Fund each
agree to indemnify the Bank and its nominees, for any loss, damage or expense
suffered or incurred by the Bank or its nominees arising out of any violation of
any investment restriction or other restriction or limitation applicable to the
Fund or any Portfolio pursuant to any contract or any law or regulation. The
provisions of this Section shall survive termination of this Agreement.
17. Fees and Expenses. The Custodian agrees to pay to the Bank such
-----------------
compensation for its services pursuant to this Agreement, including if elected
by the Custodian or the Fund fees for an electronic on-line service and
communications system offered by the Bank, as may be mutually agreed upon in
writing from time to time and the Bank's reasonable out-of-pocket or incidental
expenses in connection with the performance of this, Agreement, including but
without limitation, reasonable legal fees. The initial fee schedule is set
forth in Exhibit D attached hereto. The Custodian and the Fund hereby agree to
hold the Bank harmless from any liability or loss resulting from any taxes or
other governmental charges, and any expense related thereto, that may be
imposed, or assessed with respect to any Property in the Account(s) and also
agree to hold the Bank, its Subcustodians, and their respective nominees
harmless from any liability as a record holder of Property in the Account. The
Bank is authorized to charge the applicable Account for such items and the Bank
shall have a lien on the Property in the applicable Account for any amount
payable to the Bank under this Agreement, including but not limited to amounts
payable pursuant to the last paragraph of Section 2 and pursuant to
-11-
<PAGE>
indemnities granted by the Fund under this Agreement. Indemnities provided in
this Agreement for Bank's costs and expenses shall include the fees and expenses
of counsel to enforce the provisions of this Agreement. The provisions of this
Section shall survive the termination of this Agreement.
18. Amendment, Modifications, Etc. No provisions of this Agreement may be
-----------------------------
amended, modified or waived except in a writing signed by the parties hereto.
19. Tax Reclaims. With respect to withholding taxes deducted and which
------------
may be deducted from any income received from any Property in an Account, the
Custodian shall perform such services with respect thereto as are described in
Exhibit E attached hereto and shall in connection therewith be subject to he
standard of care set forth in such Exhibit E. Such standard of care shall not
be affected by any other term of this Agreement.
20. Termination. This Agreement may be terminated (in its entirety or
-----------
with respect to one or more but less than all portfolios) by the Fund, the
Custodian or the Bank by sixty (60) days' written notice to the others; provided
that notice of termination by the Fund or the Custodian shall be authorized by a
resolution of the Board of Directors of the Fund, a certified copy of which
shall accompany such notice of termination, and provided further, that such
resolution shall specify the names of the persons to whom the Bank has been
authorized by the Fund to deliver the Securities in each applicable Account and
to whom the Cash in such Account shall be paid. Termination as to one or more
Portfolios shall be effected by delivery by the Fund, of an amended Exhibit A
deleting such Portfolios, to the Custodian and the Bank. If notice of
termination is given by the Bank, the Fund shall, within sixty (60) days
following the giving of such notice, deliver to the Bank a certified copy of a
resolution of the Board of Directors of the Fund specifying the names of the
persons to whom the Bank shall deliver the Securities in each applicable Account
and to whom the Cash in the Account shall be paid. In either case, the Bank
will deliver such Securities and Cash to the persons so specified, after
deducting therefrom any amounts which the Bank determines to be owed to it under
Section 17 herein. In addition, the Bank may in its discretion withhold from
such delivery such Cash and Securities as may be necessary to settle
transactions pending at the time of such delivery. If within sixty (60) days
following the giving of a notice of termination by the Bank, the Bank does not
receive from the Fund or the Custodian a certified resolution specifying the
names of the persons to whom the Bank has been authorized by the Fund to deliver
the Securities in the applicable Accounts and to whom the Cash in such Accounts
shall be paid, the Bank, at its election, may deliver such Securities and pay
such Cash to a bank or trust company doing business in the State of New York and
meeting the requirements of Section 17(f) of the 1940 Act to be held and
disposed of pursuant to the provisions of this Agreement, or may continue to
hold such Securities and Cash until a certified resolution as aforesaid is
delivered to the Bank, in which case the Bank shall be entitled to reasonable
compensation in connection with its continuing obligations under this Agreement.
This Agreement shall terminate automatically upon the termination
of the custody agreement between the Custodian and the Fund. The Custodian or
the Fund shall notify the Bank of the termination of the custody agreement
between the Custodian and the Fund simultaneously with the Custodian's or Fund's
notice of termination provided to each other pursuant to the custody agreement.
21. Notices. Except as otherwise provided in this
-------
-12-
<PAGE>
Agreement, all requests, demand or other communications between the parties or
notices in connection herewith (a) shall be in the writing, hand delivered or
sent by telex, telegram, facsimile, cable or other means of electronic
communication agreed upon by the parties hereto, addressed to such party at its
address set forth on the signature page hereof or to such other address as shall
have been furnished to the receiving party pursuant to the provisions hereof and
(b) shall be deemed effective when received.
22. Governing Law and Successors and Assigns. This Agreement shall be
----------------------------------------
governed by the law of the State of New York and shall not be assignable by any
party, but shall bind the successors in interest of the Fund, the Custodian and
the Bank.
23. Publicity. The Fund and the Custodian shall furnish to the Bank at
---------
its office referred to in Section 21above, prior to any distribution thereof,
copies of any material prepared for distribution to any persons who are not
parties hereto that refer in any way to the Bank. Neither the Fund nor the
Custodian shall distribute or permit the distribution of such materials if the
Bank reasonably objects in writing within ten (10) business days (or such other
time as may be mutually agreed) after receipt thereof. The provisions of this
Section shall survive the termination of this Agreement.
24. Submission to Jurisdiction. To the extent, if any, to which the
--------------------------
Custodian, the Fund or any of each such party's respective properties may be
deemed to have or hereafter to acquire immunity, on the ground of sovereignty or
otherwise, from any judicial process or proceeding to enforce this Agreement or
to collect amounts due hereunder (including, without limitation, attachment
proceedings prior to judgment or in aid of execution) in any jurisdiction, the
Custodian and the Fund hereby waive such immunity and agree not to claim the
same. Any suit, action or proceeding arising out of this Agreement may be
instituted in any State or Federal court sitting in the City of New York, State
of New York, United States of America, and the Custodian and the Fund
irrevocably submit to the non-exclusive jurisdiction of any such court in any
such suit, action or proceeding and waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of venue of
any such suit, action or proceeding brought in such a court and any claim that
such suit, action or proceeding was brought in an inconvenient forum. The
Custodian and the Fund each hereby irrevocably designates, appoints and empowers
CT Corporation System, 111 8/th/ Avenue, New York, New York 10011 as its
authorized agent to receive, for and on its own behalf and its property service
of process in the State of New York when and as such legal actions or
proceedings may be brought in any of the aforementioned courts, and such service
of process shall be deemed complete upon the date of delivery thereof to such
agent whether or not such agent gives notice thereof to the Custodian or the
Fund, as the case may be, or upon the earliest of any other date permitted by
applicable law. The Custodian and the Fund each further irrevocably consent to
the service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by certified air mail,
postage prepaid, to it at its address set forth below or in any other manner
permitted by law, such service to become effective upon the earlier of (i) the
date fifteen (15) days after such mailing or (ii) any earlier date permitted by
applicable law. Each of the custodian and the Fund agrees that it will at all
times continuously maintain an agent to receive service of process in City and
State of New York on behalf of itself and its properties with respect to this
Agreement and in the event that, for any reason, the agent named
-13-
<PAGE>
above or its successor shall no longer serve as agent of the Custodian or the
Fund, as the case may be, to receive service of process in the City and State of
New York on its behalf, the Custodian or the Fund, as the case may be, shall
promptly appoint a successor to so serve and shall advise the Bank thereof.
25. Counterparts. This Agreement may be executed in any number of
--- ------------
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts, have been signed and delivered
by each of the parties hereto.
26. Headings. The headings of the paragraphs hereof are included for
--------
convenience of reference only and do not form a part of this Agreement.
27. Confidentiality. The parties hereto agree that each shall treat
---------------
confidentially the terms and conditions of this Agreement and all information
provided by each party to the other regarding its business and operations. All
confidential information provided by a party hereto shall be used by any other
party hereto solely for the purpose of rendering services pursuant to this
Agreement and, except as may be required in carrying out this Agreement, shall
not be disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is
publicly available when provided or thereafter becomes publicly available other
than through a breach of this Agreement, or that is required to be disclosed by
any bank examiner of the Bank, Custodian or any Subcustodian, any auditor of the
parties hereto, by judicial or administrative process or otherwise by applicable
law or regulation.
[This space intentionally left blank.)
-14-
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed in its name and behalf of the day and year first above written.
FIRSTAR BANK, N.A.
By:_________________________________
Name:
Title:
Address for record:
615 E. Michigan Street
3/rd/ Floor
Milwaukee, WI 53202
Attn:
BANKERS TRUST COMPANY
By:_________________________________
Name:
Title:
Address for record:
Bankers Trust Company
130 Liberty Street, 20/th/ Floor
New York, New York 10006
Attn: Lynne Jimenez
FIRSTAR FUNDS, INC.
By:_________________________________
Name: Laura Rauman
Title: Vice President
Address for Record:
Firstar Investment Research
& Management Company, LLC
777 E. Wisconsin Avenue
Suite 800
Milwaukee, WI 53202
Attn: Laura Rauman
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<PAGE>
EXHIBIT A
To Global Sub-Custodian Agreement dated as of November 27, 2000 among
Bankers Trust Company, Firstar Funds, Inc. and Firstar Bank, N.A.
LIST OF PORTFOLIOS
The following is a list of Portfolios referred to in the second
WHEREAS clause of the above-referred to Global Sub-Custodian Agreement. Terms
used herein as defined terms unless otherwise defined shall have the meanings
ascribed to them in the above-referred to Global Sub-Custodian Agreement. The
Fund may add or delete Portfolios upon delivery of an amended Exhibit A to the
Bank and the Custodian. Upon delivery of such amended Exhibit A and, if such
amended Exhibit A adds Portfolios, the acceptance thereof by the Bank and the
Custodian, this Exhibit A shall be deemed to be amended in accordance therewith
as of the date of such delivery or delivery and acceptance by the Bank and the
Custodian, as the case may be.
Firstar International Growth Fund
Dated as of
______ ______ ____________
Bank Fund Custodian
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<PAGE>
EXHIBIT B
To Global Sub-Custodian Agreement dated as of November 27, 2000 among
Bankers Trust Company, Firstar Funds, Inc. and Firstar Bank, N.A.
PROXY SERVICE
-------------
The following is a description of the Proxy Service referred to in Section
10 of the above referred to Global Sub-Custodian Agreement. Terms used herein as
defined terms shall have the meanings ascribed to them therein unless otherwise
defined below.
The Bank provides a service, described below, for the transmission of
corporate communications in connection with shareholder meetings relating to
Securities held in Australia, Canada, Denmark, Finland, France, Germany, Hong
Kong, Indonesia, Ireland, Japan, Malaysia, Mexico, New Zealand, Singapore,
Spain, Sweden, United Kingdom, United States and Venezuela. For the United
States and Canada, the term "corporate communications" means the proxy
statements or meeting agenda, proxy cards, annual reports and any other meeting
materials received by the Bank. For countries other than the United States and
Canada, the term "corporate communications" means the meeting agenda only and
does not include any meeting circulars, proxy statements or any other corporate
communications furnished by the issuer in connection with such meeting. Non-
meeting related corporate communications are not included in the transmission
service to be provided by the Bank except upon request as provided below.
The Bank's process for transmitting and translating meeting agendas will be
as follows:
1) If the meeting agenda is not provided by the issuer in the English
language, and if the language of such agenda is in the official
language of the country in which the related security is held, the
Bank will as soon as practicable after receipt of the original meeting
agenda by the Bank's Subcustodian provide to the Custodian an English
translation prepared by our Subcustodian.
2) If an English translation of the meeting agenda is furnished, the
local language agenda will not be furnished unless requested.
Translations will be free translations and neither the Bank nor any of its
Subcustodians will be liable or held responsible for the accuracy thereof or any
direct or indirect consequences arising therefrom, including without limitation,
arising out of any action taken or omitted to be taken based thereon.
If requested, the Bank will, on a best efforts basis, endeavor to obtain
any additional corporate communication such as annual or interim reports, proxy
statements, meeting circulars, or local language agendas, and provide them to
the Custodian in the form obtained.
Timing in the voting process is important and, in that regard, upon receipt
by the Bank of notice from its Subcustodian, the Bank will provide a notice to
the Custodian indicating the deadline for receipt of its instructions to enable
the voting process to take place effectively and
-17-
<PAGE>
efficiently. As voting procedures will vary from market to market, attention to
any required procedures will be very important. Upon timely receipt of voting
instructions, the Bank will promptly forward such instructions to the applicable
Subcustodian. If voting instructions are not timely received, the Bank shall
have no liability or obligation to take any action.
For Securities held in other markets, the Bank will not furnish the
material described above or seek voting instructions. However, if requested to
exercise voting rights at a specific meeting, the Bank will endeavor to do so on
a best efforts basis without any assurance that such rights will be so exercised
at such meeting.
If the Bank or any Subcustodian incurs extraordinary expenses in exercising
voting rights related to any Securities pursuant to appropriate instructions or
direction (e.g., by way of illustration only and not by way of limitation,
----
physical presence is required at a meeting and/or travel expenses are incurred),
such expenses will be reimbursed out of the applicable Accounts containing such
Securities unless other arrangements have been made for such reimbursement.
It is the intent of the Bank to expand the Proxy Service to include
jurisdictions which are not currently included as set forth in the second
paragraph hereof. The Bank will notify the Custodian as to the inclusion of
additional countries or deletion of existing countries after their inclusion or
deletion and this Exhibit B will be deemed to be automatically amended to
include or delete such countries as the case may be.
Dated as of
______ ______ ___________
Bank Fund Custodian
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<PAGE>
EXHIBIT C
To Global Sub-Custodian Agreement dated as of November 27, 2000 among
Bankers Trust Company, Firstar Funds, Inc. and Firstar Bank, N.A.
AUTHORIZED PERSONS
------------------
Pursuant to Section 13 of the above referred to Global Sub-Custodian
Agreement, the following persons of Firstar Mutual Fund Services, LLC are
authorized to act on behalf of Fund:
<TABLE>
<CAPTION>
------------------------------------------------------------
Name Specimen Signature
---- ------------------
------------------------------------------------------------
<S> <C>
Doug Hess
------------------------------------------------------------
Katherine Harwood
------------------------------------------------------------
Cheryl King
------------------------------------------------------------
Pam Coleman
------------------------------------------------------------
Kevin Hayden
------------------------------------------------------------
Andrew Frailing
------------------------------------------------------------
</TABLE>
Pursuant to Section 13 of the above referred to Global Sub-Custodian
Agreement, Firstar Bank, N.A. ("Custodian") names the following persons who are
authorized to act on the Custodian's behalf:
<TABLE>
<CAPTION>
------------------------------------------------------------
Name Specimen Signature
---- ------------------
------------------------------------------------------------
<S> <C>
Faye Guenther
------------------------------------------------------------
Steve Kass
------------------------------------------------------------
Jill Gilmore
------------------------------------------------------------
Scott Joers
------------------------------------------------------------
Marsha Crockdon
------------------------------------------------------------
Dennis Roebel
------------------------------------------------------------
Dale Smith
------------------------------------------------------------
</TABLE>
Dated as of
______ ______ ___________
Bank Fund Custodian
-19-
<PAGE>
EXHIBIT D
To Global Sub-Custodian Agreement dated as of November 27, 2000 among
Bankers Trust Company, Firstar Funds, Inc. and Firstar Bank, N.A.
CUSTODY FEE SCHEDULE
--------------------
Pursuant to Section 17 of the above referred to Global Sub-Custodian
Agreement, the Custodian shall pay the following fees and expenses:
<TABLE>
<CAPTION>
Annual Charge of Assets
-----------------------
<S> <C>
First $50 million 14 Basis Points
Next $50 million 12.5 Basis Points
Next $150 million 10 Basis Points
Excess over $250 million 7.5 Basis Points
</TABLE>
Dated as of
______ ______ ___________
Bank Fund Custodian
This Exhibit D shall be amended upon delivery by the Bank of a new Exhibit D to
the Custodian and acceptance thereof by the Custodian and shall be effective as
of the date of acceptance by the Custodian or a date agreed upon between the
Bank and the Custodian.
-20-
<PAGE>
EXHIBIT E
To Global Sub-Custodian Agreement dated as of November 27, 2000 among
Bankers Trust Company, Firstar Funds, Inc. and Firstar Bank, N.A.
TAX RECLAIMS
------------
Pursuant to Section 19 of the above referred to Global Sub-Custodian
Agreement, the Bank shall perform the following services with respect to
withholding taxes imposed or which may be imposed on income from Property
credited to the Account in certain countries. Terms used herein as defined terms
shall unless otherwise defined have the meanings ascribed to them in the above
referred to Global Sub-Custodian Agreement.
When withholding tax has been deducted with respect to income from any
Property in an Account, the Bank will actively pursue on a reasonable efforts
basis the reclaim process, provided that the Bank shall not be required to
-------------
institute any legal or administrative proceeding against any Subcustodian or
other person. The Bank will provide fully detailed advices/vouchers to support
reclaims submitted to the local authorities by the Bank or its designee. In all
cases of withholding, the Bank will provide full details to the Fund or the
Custodian. When the Bank becomes aware of an opportunity to obtain exemption,
the Bank will notify and advise the Fund or the Custodian of the required
documentation, if any, to obtain such exemption. Provided that the Bank can
-------- ----
file the exemption on behalf of the Fund or the Custodian, the Bank will do so
upon receipt of the completed appropriate documentation. The Bank will notify
the Fund or the Custodian when such exemption has been obtained.
In connection with providing the foregoing services, the Bank shall be
entitled to apply categorical treatment of the Fund or the Custodian according
to the Fund or the Custodian's nationality, the particulars of its organization
and other relevant details that shall be supplied by the Fund or the Custodian.
It shall be the duty of the Fund or the Custodian to inform the Bank of any
change in the organization, domicile or other relevant fact concerning tax
treatment of the Fund or the Custodian and further to inform the Bank if the
Fund or the Custodian is or becomes the beneficiary of any special ruling or
treatment not applicable to the general nationality and category or entity of
which the Fund or the Custodian is a party under general laws and treaty
provisions. The Bank may rely on any such information provided by the Fund or
the Custodian.
In connection with providing the foregoing services, the Bank may also rely
on professional tax services published by a major international accounting firm
and/or advice received from a Subcustodian in the jurisdictions in question. In
addition, the Bank may seek the advice of counsel or other professional tax
advisers in such jurisdictions. The Bank is entitled to rely, and may act, on
information set forth in such services and on advice received from a
Subcustodian, counsel or other professional tax advisers and shall be without
liability to the Fund or the Custodian for any action reasonably taken or
omitted pursuant to information contained in such services or such advice.
Dated as of
______ ______ ___________
Bank Fund Custodian
-21-
<PAGE>
EXHIBIT F
CASH MANAGEMENT ADDENDUM (this "Addendum") to the CUSTODIAN AGREEMENT
--------
(the "Agreement") among BANKERS TRUST COMPANY (the "Custodian"), Firstar Funds,
--------- ---------
Inc. (the "Fund") and Firstar Bank, N.A. (the "Custodian").
----
WHEREAS, the Custodian will provide cash management services to the
Fund and the Custodian, and the Bank, the Fund and the Custodian desire to
confirm their understanding with respect to such services;
NOW, THEREFORE, the Bank, the Fund and the Custodian agree as follows:
1. Until the Bank receives Instructions to the contrary, the Bank
will (a) hold with Subcustodians, in deposit accounts maintained for the benefit
of the Bank's clients, all Cash received for the Account, (b) credit such
interest, if any, on Cash in the Account as the Bank shall from time to time
determine and (c) receive compensation out of any amounts paid by Subcustodians
in respect of Cash in the Account.
2. The Bank may (on an overnight or other short-term basis) move
certain, or all, currencies of Cash in the Account from any Subcustodian and
place it, as deposits or otherwise, with one or more other Subcustodians
(including branches and affiliates of the Custodian). The Bank will notify the
Fund or the Custodian of any placement procedures it implements and will move
Cash in accordance with such procedures until it notifies the Fund or the
Custodian otherwise or receives Instructions to the contrary. The Bank may
credit interest and receive compensation as described in 1 above with respect to
any Cash moved.
3. The Fund and the Custodian acknowledge that they has received and
reviewed the current policies of the Bank regarding cash management services,
which are attached to this Addendum.
4. Capitalized terms used but not defined in this Addendum are used
with the respective meanings assigned to them in the Agreement.
IN WITNESS WHEREOF, this Addendum has been executed as of the date of
the Agreement.
BANKERS TRUST COMPANY
By:________________________________
FIRSTAR FUNDS, INC.
By:________________________________
FIRSTAR BANK, N.A.
By:________________________________
-22-
<PAGE>
Global Custody Cash Management Program
In the Global Custody cash management program, currencies on which
Bankers Trust pays interest are divided into two categories: (1) currencies on
which we pay interest based on a market benchmark rate for overnight deposits,
and (2) currencies on which we pay interest based on a rate paid by the London
branch of Deutsche Bank AG or the local subcustodian.
Currencies on which we pay interest based on a market benchmark rate
for overnight deposits (which we call "Benchmark Rate Currencies"):
. For each of these currencies, the interest rate we pay is based on a
specific market benchmark (such as Effective Fed Funds) and is
calculated by taking an average of the benchmark rate and subtracting
a spread. (See Schedule A)
. Currently, the only Benchmark Rate Currency is the U.S. Dollar. Over
time we will be considering additional currencies to include in this
category.
. Operationally, most balances in U.S. Dollars are swept overnight into
deposits at the Nassau branch of Bankers Trust Company. Where you have
selected a short-term investment fund, your U.S. Dollar balances in
the U.S. will be swept overnight in accordance with your instructions.
Currencies on which we pay interest based on a rate paid by the London
branch of Deutsche Bank AG or the local subcustodian (which we call "Base Rate
Currencies"):
. For each of these currencies, the interest rate we pay is based on the
rate paid by the London branch of Deutsche Bank AG or the local
subcustodian on overnight deposits in the currency. In either case,
interest is calculated by using the overnight rate (which will be the
actual overnight, a weekly average, monthly average rate, depending on
the month and currency) and subtracting a spread. (See Schedule A)
. Currencies that are part of the sweep program will earn interest based
on the base rate, which will be the higher of the rate offered by the
London branch of Deutsche Bank AG or the local subcustodian.
. Currencies that are not part of the sweep program will generally earn
interest based on the rate paid by the local subcustodian. We may at
times be able to sweep certain currency balances into deposits of
Deutsche Bank AG's London branch in order to be able to earn a higher
rate for you. On those days, any such currency will be treated as part
of the sweep program, and you will earn interest on all of your
balances in that currency at the higher rate for that day.
. Currently, there are 30 Base Rate Currencies, 10 of which are included
in our sweep program to the London branch of Deutsche Bank AG.
. Operationally, most balances in Base Rate Currencies that are part of
our sweep program are swept overnight into deposits at the London
branch of Deutsche Bank AG,
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<PAGE>
while balances in Base Rate Currencies that are not part of our sweep
program remain with the local subcustodian.
For each currency on which we pay interest:
. We will notify you periodically in writing of changes in spreads and
updates to the cash management program. These program updates also
will be available through Global Custody Flash Notices.
. For markets where we maintain one or more omnibus cash accounts, you
earn interest at the calculated rate on your entire contractual
balance without any action on your part and without any minimum
balance requirements. This is the case regardless of whether we are
able to invest your balances at or near the applicable benchmark or
base rate and regardless of whether your contractual balance may
exceed your actual balance.
. For markets where we maintain one or more omnibus cash accounts, the
minimum rate paid is 0.50%, except for the Japanese Yen (for which the
minimum rate of 0.05% has been suspended for the time being due to
market conditions) and the Singapore Dollar (for which the minimum
rate is 0.25%). Please note that this is also subject to change as
appropriate for any currency. Notwithstanding the foregoing, in no
event will interest be negative.
. For the currencies of "client specific markets," those markets where
for regulatory or other reasons we do not maintain omnibus accounts
for client cash, on which we pay credit interest (which at this time
are the Hungarian Forint, Israeli Shekel, Polish Zloty, Korean Won and
Taiwanese Dollar), we will no longer be taking a spread for providing
interest on cash balances. The credit interest you earn on overnight
balances will be based on actual balances, as opposed to contractual
balances, and the minimum credit interest rate will no longer be
applied.
. You will have continuous access through Globe*View, BTWorld, or
Globe*Link or other agreed electronic on-line system to the interest
rate earned during the previous "rate averaging period". Because we
may use weekly or monthly average rates to calculate the interest you
earn, we do not know the actual interest rate until the weekly or
monthly period is completed.
-24-
<PAGE>
. Our program generally requires that overnight balances in each
currency remain with (or are swept to) a subcustodian we designate for
that currency. Nevertheless, we pay our stated rate of interest on any
balances that, because of transactions in your account, are held
overnight with an alternate subcustodian if we receive interest on
that currency from that subcustodian. If the alternate subcustodian
does not pay interest, however, these balances are excluded from our
program.
. For swept currencies, from time to time we may not be able to sweep
the full amount of your balances to the London branch of Deutsche Bank
AG because of operational constraints or because your balance on a
contractual basis temporarily exceeds your actual balance. You will,
however, always receive credit for interest based on your entire
contractual balance. To the extent you would have earned a lower rate
on balances not swept, we will make up the difference. To the extent
that actual balances are higher than contractually posted balances due
to purchase fails or otherwise, we will retain the interest earned as
compensation.
. The effective rate we pay on overnight balances will generally differ
from the effective rate we receive (whether from the London branch of
Deutsche Bank AG or the local subcustodian). Any difference between
the effective rate we receive and the effective rate we pay (which may
be positive or negative, but is generally positive) is kept by us and
covers our fee for running the cash management program and the related
costs we absorb.
Obviously, there will be currencies on which we will not pay interest
because of local regulations, insufficient scale, or other reasons. However, we
hope to identify additional currencies where we can begin paying interest and we
will announce those to you as soon as practical.
Currently most cash balances in our overnight sweep program are swept
into deposits at the London branch of Deutsche Bank AG. We reserve the right to
utilize other branches or affiliates for the overnight sweep program. In the
event of such change, we will notify you in writing, which may be through Global
Custody Flash Notice.
As you know, overdrafts are not permitted in the normal course of
business in any currency. Should they occur in any currency, your account will
be charged a fee to settle transactions in advance of receipt of funds. If the
overdraft is not promptly cured (and in any event upon the expiration of 30
days) after the investment manager has been notified of the outstanding
overdraft, the account's home currency will be used to cure the overdraft and
the associated foreign exchange will be done by Bankers Trust at market rates.
(Other currencies may be utilized to the extent the home currency is
insufficient.) Investment managers that have not cured overdrafts within such
period will be deemed to have directed such foreign exchange transaction.
Accounts subject to ERISA will be deemed to have engaged in the transaction
under the authority of the class exemptions available to qualified professional
asset managers and in-house investment managers. To the extent that the
overdraft is less than the U.S. dollar equivalent of $50,000, Bankers Trust's
foreign exchange desk will bundle the transaction with other small amounts for
other clients.
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<PAGE>
Schedule A
Cash Management Program - Global Custody
Overnight Uninvested Cash Balances
(* - Denotes currencies in sweep program)
Currencies Rates
---------- -----
Argentine Peso Base Rate less 150
Australian Dollar* Base Rate less 130
British Pound Sterling* Base Rate less 215
Canadian Dollar* Base Rate less 175
Czech Koruna Base Rate less 75
Danish Krone* Base Rate less 250
EMU Euro* Base Rate less 175
Greek Drachma Base Rate less 150
Hong Kong Dollar* Base Rate less 250
Hungarian Forint Base Rate less 0
Indonesian Rupiah Base Rate less 200
Israeli Shekel Base Rate less 0
Japanese Yen Base Rate less 75
Jordanian Dinar Base Rate less 200
Korean Won Base Rate less 0
Malaysian Ringgit/1/ Base Rate less 200
Mexican Peso Base Rate less 200
Moroccan Dirham Base Rate Less 150
New Taiwan Dollar Base Rate less 0
New Zealand Dollar Base Rate less 100
Norwegian Krone* Base Rate less 175
Philippine Peso Base Rate less 150
Polish Zloty Base Rate less 0
Singapore Dollar Base Rate less 200
Slovak Koruna Base Rate less 150
South African Rand* Base Rate less 250
Swedish Krona* Base Rate less 250
Swiss Franc* Base Rate less 100
Thai Baht Base Rate less 200
Turkish Lira Base Rate less 200
U.S. Dollar* Effective Fed Funds less 100 /2/
We reserve the right, in our sole discretion, to adjust the base rates and
benchmark rates used and the spreads charged at any time and for any reason. We
will notify you periodically in writing of changes in spreads and updates to the
cash management program. These program updates also will be available through
Global Custody Flash Notices.
/1/ As a result of the rules introduced by local Malaysia regulators, we have
suspended paying interest on Ringgit balances. Should the situation change, we
will notify you via Flash Notice.
/2/ Not applicable if U.S. Dollars are swept to a short-term investment fund.
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