UCITS Application Form Section 5 Custodian Agreement

UCITS Application Form Section 5 Custodian Agreement UCITS 1 October 2010 SECTION 5 – UCITS CUSTODIAN AGREEMENT ApplicantApplicant Central Clause Number Bank 5.1 General 5.1.1 For UCITS seeking authorisation: Provide that the UCITS “is to be” or “will be” authorised or “application for authorisation has been made” 5.1.2 Where a change of Custodian is being effected: Indicate the time and date of such replacement 5.1.3 Provide that the governing law for the agreement is Irish law 5.1.4 If applicable, disclose that the UCITS is „an umbrella scheme with segregated liability between sub-funds? 5.1.5 Disclose the fees of the custodian or provide that they will be “as disclosed in the prospectus” 5.1.6 If provision is made for sub-custody fees and expenses to be recouped from the UCITS, provide that they are at normal commercial rates 5.1.7 Where the agreement (and/or the prospectus) permits the Custodian or its associates to carry out a transaction with the UCITS, disclose UCITS 14 provisions. 5.1.8 Provide that: a) The UCITS hereby appoints the Custodian to be, and the Custodian hereby agrees to act as Custodian of all the securities and all other Assets (including cash) of the UCITS or Where the custodian is a credit institution the following may be provided: „The UCITS hereby appoints the Custodian to be, and the Custodian agrees to act as Custodian of all the securities and all other assets of the UCITS save cash deposited with it as principal which shall constitute a debt due by the Custodian? (i) Confirm that the definition of „Assets? includes all investments, i.e. includes cash and derivatives b) The UCITS hereby undertakes to transfer to the custodian, forthwith on receipt thereof, all sums (if any)* received by it representing subscription application money for shares and cash and all payment of income, principal, UCITS 2 October 2010 or capital distribution received by it in relation to all investments owned by the UCITS from time to time. (*The following wording is acceptable if inserted here “(less any initial charge(s) payable to the investment manager or any other distributor in respect thereof)”) 5.1.9 The following statement is permitted It is hereby agreed and declared that the duties and obligations of the Custodian to hold the Assets shall extend only to sums actually received by it and its sub-custodians. Provide that: 5.1.10 Any amendments to the agreement shall be made in accordance with the requirements of the Central Bank; and 5.1.11 Any assignments will be in accordance with the requirements of the Central Bank 5.2 Duties/Regulatory Obligations 5.2.1 Provide that the custodian will carry out the duties listed in UCITS 4 Or Disclose them as follows: i.e. The Custodian must: 5.2.2 Ensure the sale, issue, repurchase, redemption and cancellation of units effected by or on behalf of the UCITS are carried out in accordance with the Regulations and in accordance with the Memorandum and Articles of Association/Deed of Constitution 5.2.3 Ensure that the value of the units is calculated in accordance with the Regulations and the Memorandum and Articles of Association/Deed of Constitution 5.2.4 Carry out the instructions of the investment company unless they conflict with the Regulations or the Memorandum and Articles of Association. (Carry out the instructions of the management company unless they conflict with the Regulations or Deed of Constitution) 5.2.5 Ensure that in transactions involving the UCITS? assets, any consideration is remitted to it within time limits which are acceptable market practice in the context of a particular transaction 5.2.6 Ensure that the UCITS? income is applied in accordance with the Regulations and the Memorandum and Articles of Association/Deed of Constitution 5.2.7 Enquire into the conduct of the investment company/management company in each accounting period and report thereon to the shareholders. The Custodian?s report shall be delivered to the investment company/management company in good time to enable the investment company/management company to include a copy of the report in its Annual Report. The Custodian?s Report shall state whether in the Custodian?s opinion the UCITS UCITS 3 October 2010 has been managed in that period. (i) in accordance with the limitations imposed on the investment and borrowing powers of the investment company and Custodian by the Memorandum and Articles of Association/Deed of Constitution and the Regulations; and (ii) otherwise in accordance with the provisions of the Memorandum and Articles of Association/Deed of Constitution and the Regulations. 5.2.8 If the investment company/management company does not comply with (i) or (ii) above, the Custodian must state why this is the case and outline the steps which the Custodian has taken to rectify the situation. 5.2.9 Notify the Central Bank promptly of any material breach of the Regulations, conditions imposed by the Central Bank or provisions of the prospectus with regard to a common contractual fund/investment company 5.2.10 Provide that the duties provided for above cannot be delegated. 5.3 Control/Transfer of Assets 5.3.1 List all the circumstances under which cash can be transferred, exchanged, surrendered, delivered etc. 5.3.2 Provide that cash can be transferred “only” in the following circumstances 5.3.3 List all the circumstances under which all other Assets can be transferred, exchanged, surrendered, delivered, etc. 5.3.4 Provide that Assets can be transferred “only” in the following circumstances 5.3.5 If the agreement states that the Custodian shall not be responsible for any Assets which the investment company has instructed the Custodian to deliver to third parties other than the sub-custodian appointed by the Custodian confirm the instructions to transfer are in accordance with the circumstances detailed above 5.3.6 If the agreement provides that: a) Cash and other accounts (e.g. security accounts) can be opened in the name of the UCITS, provide that the such accounts are subject only to drawings, instructions and orders by the Custodian b) Assets may be registered in the UCITS? name, provide that (i) registration in the UCITS? name is standard market practice and (ii) such Assets cannot be assigned, transferred, exchanged, delivered without the prior approval of the Custodian. (iii) Internal to Central Bank Confirm that letter setting out the circumstances that necessitate this type of registration procedure was received and reviewed UCITS 4 October 2010 5.3.7 Provide that the custodian may make or accept payment for, or delivery of assets, in accordance with proper instructions. a) Where settlement in accordance with market practice is provided for, confirm that it is clear in the agreement that this is in accordance with proper instructions. b) Confirm the following is not provided for in relation to payment and delivery – “notwithstanding any instruction by the investment company to deliver assets against payment or to pay for assets against delivery” , i.e. there should be no provision permitting the Custodian to act against proper instructions without reverting to the company/management company 5.3.8 Confirm there is no reference to the delivery of Assets outside of the Custodian?s custody network in order to secure borrowings. 5.3.9 Provide that the Assets of the UCITS shall belong exclusively to the UCITS 5.3.10 Provide that the Assets shall be segregated from the assets of either the Custodian or its agents or both and shall not be used to discharge directly or indirectly liabilities or claims against any other undertaking or entity and shall not be available for any such purpose. 5.4 Delegation 5.4.1 Provide that the Custodian may appoint a sub-custodian or agent to hold the Assets of the UCITS. 5.4.2 Provide that the liability of the Custodian will not be affected by the fact that that it has entrusted to a third party some or all of the Assets in its safe- keeping. 5.4.3 Provide that the parties consider that the Central Bank considers that in order for the Custodian to discharge its responsibility under the Regulations, the Custodian must exercise care and diligence in choosing and appointing a third party as a safe-keeping agent so as to ensure that the third party has and maintains the expertise, competence and standing appropriate to discharge the responsibilities concerned. The Custodian must maintain an appropriate level of supervision over the safekeeping agent and make appropriate inquiries from time to time to confirm that the obligations of the agent continue to be competently discharged. This does not purport to be a legal interpretation of these Regulations and the corresponding provisions of the UCITS Directive. 5.4.4 If the following statement is included, confirm that it: immediately follows 5.4.3 above (which provides for the minimum standard of care for sub-custodians ) and it is disclosed in the prospectus Provide: (i) That the UCITS may invest in markets where custodial and/or settlement systems are not fully developed, the assets of the UCITS which are traded in UCITS 5 October 2010 such markets and which have been entrusted to sub-custodians, in the circumstances where the use of such sub-custodians is necessary, may be exposed to risk in circumstances whereby the Custodian will have no liability. (ii) Details of the potential risks to investors in such markets will be set out in full in the UCITS? prospectus in accordance with the requirements of the Central Bank 5.5 Liability/Indemnity 5.5.1 a) Provide that the Custodian will be liable to the investment company and the shareholders for any loss suffered by them as a result of its unjustifiable failure to perform its obligations or its improper performance of them. b) Confirm that there are no provisions detracting from this minimum standard e.g. words such as “hereunder” or “under this agreement” which could limit liability. 5.5.2 In general the Agreement should not contain any clauses limiting the Custodian’s liability. The following clauses are permitted options provided the exact wording is included: a) Subject and without prejudice to (the general liability clause) the Custodian is not responsible for any loss directly or indirectly caused by the failure of a central depository/securities settlement/clearing system in the performance of it?s obligations. And Confirm that it is clear that the term “central depository/securities settlement/clearing system” in this context does not include the participants in the system. Or Subject to and without prejudice to (the general liability clause) the Custodian is not responsible for any loss directly or indirectly caused by the failure of a securities system/clearing system to effect a settlement. Or Subject and without prejudice to (the general liability clause) the Custodian is not responsible for any loss caused by the actions or inaction of a central securities depository b) If the agreement provides that the Custodian is not liable for uninvested moneys provide the following “provided that it is acting under specific proper instructions regarding where to invest the cash” c) Any clearing broker to which margin monies or margin assets are deposited in respect of futures and options or other hedging contracts shall not be a sub-custodian or agent of the Custodian for such purposes and the Custodian shall not be liable for the acts or omissions or any loss directly or indirectly caused by any such clearing broker. UCITS 6 October 2010 d) Where the Agreement provides that “The investment company/manager shall indemnify and keep indemnified and hold harmless the Custodian (and each of its directors, officers, servants, employees and agents) from and against any and all third party actions, proceedings, claims … etc. insert “other that as a result of its unjustifiable failure to perform its obligations or its improper performance of them” e) Subject and without prejudice to (the general liability clause) the the Custodian shall not be liable to the investment company or the shareholders or any other person for consequential or indirect or special damages or losses arising out of or in connection with the performance or non-performance by the Custodian of its duties and obligations 5.5.3 If other clauses limit custodian?s liability and/or indemnify the custodian insert clause numbers here 5.6 Force Majeure Events 5.6.1 Confirm that „failure of a securities system? is not referred to 5.6.2 Provide that the Custodian will use its reasonable efforts to minimise the effect of any such event. 5.6.3 If there is a provision that the Custodian?s obligations under this agreement shall be suspended for so long as the Force Majeure Events continues? insert “to the extent that the party is prevented, hindered or delayed by such event” 5.7 Termination of Appointment 5.7.1 Provide that the termination of the appointment of the Custodian is only permissible a) On the appointment of a successor custodian; or b) On the revocation of the authorisation of the UCITS 5.7.2 Confirm provisions on the removal or replacement of the Custodian reflect the equivalent provisions in the Articles 5.7.3 Confirm that there is no provision for the termination of the Custodian?s appointment upon the appointment of a liquidator to the UCITS 5.7.4 Provide that a) the appointment of a replacement custodian must be approved by the Central Bank; and b) The replacement custodian must be approved by the Central Bank 5.7.5 Provide that if no replacement custodian is found a) an extraordinary general meeting will be convened at which an ordinary UCITS 7 October 2010 resolution to wind up the UCITS will be considered so that shares in the UCITS will be repurchased; and b) the Custodian?s appointment will only be terminated on the revocation of the UCITS? authorisation 5.7.6 Confirm that there is no provision for Assets to be passed to the Company or to any other entity (except the successor custodian) on the termination of the custodian?s appointment 5.7.7 Confirm that there is no provision for Assets to be passed to the Company or to any other entity (except the liquidator) on the winding up of the UCITS 5.7.8 Confirm that the Agreement provides that either party may terminate on 30 days, 3 months or 6 months notice to the other party 5.7.9 Confirm the following are not provided for: (i) a notice period in excess of 6 months; (ii) an initial term (without termination on notice) in excess of 3 years; or (iii) successive periods (without termination on notice) in excess of 1 year 5.8 Custody in Russia (if investment therein proposed) 5.8.1 If Custodian has not submitted letter re custody arrangements complying provide that custody arrangements will be effected in accordance with the following standards. (See Appendix 1 and list them in the agreement) 5.8.2 Confirm that there are no provisions conflicting with the requirements of Appendix 1 Internal to the Central Bank 5.8.3 Confirm that Custodian?s letter was received UCITS 8 October 2010 Appendix 1 Minimum Standards with respect to Custody of Equity Securities in Russia A. General 1. Only equities the registrar for which is licensed for that purpose by the Russian regulators and which is independent of the issuer should be purchased. 2. In the case of a purchase of securities, cash should only be exchanged once it is confirmed that re-registration has been made in the name of the custodian. 3. The custodian or the custodian?s agent should obtain a share extract after each transaction and should monitor the share register at regular intervals to satisfy itself that it accurately reflects the UCITS?s holding. 4. The custodian or the custodian?s agent should undertake to inform the UCITS as soon as possible of any material concerns which may arise in relation to the performance by the registrar of its obligations. 5. The UCITS should provide that it will only invest in those equity securities which conform to these requirements and in the event that the custodian informs it of any material concerns with regard to the settlement of such securities, as referred to above, that it will cease to trade such securities until such time that these concerns are adequately addressed. The UCITS must give consideration to the liquidation of positions in such securities taking due account of the interests of shareholders. 6. The prospectus of the UCITS should clearly disclose the potential risks associated with investment in Russian securities and in particular with the share registration system. B. Contract between the Registrar and Custodian or custodian’s agent A contract must exist between the custodian or its agent and the registrar. The contract should to the greatest extent possible cover the following issues: 1. Confirm the registrar?s licensed and independent status. 2. Set out the documentation required to effect settlement. 3. Set out the normal time-scale for settlement of transactions. 4. Set out responsibilities in respect of corporate actions, etc. 5. Set out procedures for compensation claims. 6. Provide for obtaining share extracts and regular inspection of the share register. 7. Provide that all documentation is date and time stamped. 8. Provide for access to the share register for independent auditors. 9. Provide that the only person with the authority to act with respect to assets held directly in the name of the UCITS will be Custodian, the custodian?s agent or its appointed representatives (see the Central Bank?s Memorandum in relation to Trust Deeds/Custodian Agreements, June, 1996). 10.Provide, where 9 above does not apply, that the assets will be held in the name of the Custodian or its agent/nominee. UCITS 9 October 2010 UCITS 10 October 2010