SPECIAL CUSTODY ACCOUNT AGREEMENT
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(Short Sales)
AGREEMENT, dated as of January 13, 1998, by and among State Street Bank
and Trust Company, in its capacity as custodian hereunder (the "Bank"), INVESCO
Global Health Sciences Fund (the "Customer") and Bear, Xxxxxx Securities Corp.
(the "Broker").
WHEREAS, Broker is a securities broker-dealer and is a member of several
national securities exchanges;
WHEREAS, Customer is a Registered Investment Company pursuant to the
Investment Company Act of 1940 and Rules promulgated thereunder;
WHEREAS, Customer desires from time to time to sell securities "short"
through Broker, such short sales being permitted by Customer's investment
policies, and for that purpose has executed Broker's Professional Account
Agreement (the "Customer Agreement"), which provides for margin transactions;
WHEREAS, to facilitate Customer's transactions in short sales of
securities, Customer and Broker desire to establish procedures for the
compliance by Broker with the provisions of Regulation T of the Board of
Governors of the Federal Reserve System and other applicable requirements
(the "Margin Rules"); and
WHEREAS, to assist Broker and Customer in complying with the Margin Rules,
Bank is prepared to act as custodian to hold Collateral as defined below.
NOW, THEREFORE, be it agreed as follows:
1 . DEFINITIONS
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As used herein, the following terms have the following meanings:
(a) "Adequate Margin" in respect of short sales means such Collateral as
is adequate in Broker's reasonable judgment under the Margin Rules
and the internal policies of Broker.
(b) "Advice from Broker" or "Advice" means a written notice sent to
Customer and Bank or transmitted by a facsimile sending device,
except that the Advice for initial or additional Collateral or with
respect to Broker's ability to effect a short sale for Customer may
be given orally. With respect to any short sale or Closing
Transaction, the Advice from Broker shall mean a standard
confirmation in use by Broker and sent or transmitted to Customer
and Bank. With respect to substitutions or releases of Collateral,
Advice from Broker means a written notice signed by Broker and sent
or transmitted to Customer and Bank. An authorized agent of Broker
will certify to Customer and Bank the names and signatures of those
employees who are authorized to sign Advices from Broker, which
certification may be amended from time to time. When used herein,
the term "Advice" means the act of sending an Advice from Broker.
(c) "Closing Transaction" means a transaction in which Customer
purchases securities which have been sold short.
(d) "Collateral" means cash or U.S. Government securities or other U.S.
securities acceptable to Broker.
(e) "Custody Agreement" means the agreement for general custodial
services between Bank and Customer.
(f) "Insolvency" means that (A) an order, judgment or decree has been
entered under the bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law (herein called the "Bankruptcy Law") of
any competent jurisdiction adjudicating the Customer Insolvent; (B)
the Customer has petitioned or applied to any tribunal for, or
consented to the appointment of, or taking possession by, a trustee,
receiver, liquidator or similar official, of the Customer,
commenced a voluntary case under the Bankruptcy Law of the United
States or any proceedings relating to the customer under the
Bankruptcy Law of any other competent jurisdiction, whether now or
hereinafter in affect; or (C) any such petition or application has
been filed, or any such proceedings commenced, against the Customer
and the Customer by any act has indicated its approval thereof,
consent thereto or acquiescence therein, or an order for relief has
been entered in an involuntary case under the Bankruptcy Law of the
United States, as now or hereinafter constituted, or any order,
judgment or decree has been entered appointing any such trust,
receiver, liquidator or similar official, or approving the petition
in any such proceedings, and such order, judgment or decree remains
unseated and in effect for more than 60 days.
(g) "Instructions from Customer" or "Instructions" means a request,
direction or certification in writing signed by Customer and
delivered to Bank and Broker or transmitted by a facsimile sending
device. An officer of Customer will certify to Bank and Broker the
names and signatures of those persons authorized to sign the
instructions, which certification may be amended from time to time.
When used herein, the term "Instruct" shall mean the act of sending
an Instruction from Customer.
(h) "Receipt of Payment" means receipt by Bank of (1) a certified or
official bank check or wire transfer to Bank; (2) a written or
telegraphic advice from a registered clearing agency that funds have
been or will be credited to the account of Bank, or (3) a transfer
of funds from any of Broker's accounts maintained at Bank.
(i) "Receipt of Securities" means receipt by Bank, of (1) securities in
proper form for transfer or (2) a written or telegraphic advice from
a registered clearing agency that securities have been credited to
the account of Bank of the Special Custody Account.
(j) "Special Custody Account" shall have the meaning assigned to that
term in Section 2 hereof.
2. SPECIAL CUSTODY ACCOUNT
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(a) OPENING CUSTODY ACCOUNT. Bank shall open an account on its books
entitled "Special Custody Account for Bear, Steams Securities Corp.
as Pledgee of INVESCO Global Health Sciences Fund" (the "Special
Custody Account"), which shall be a sub-account of Customer's
custody account with Bank, and shall hold therein all securities and
similar property as shall be received and accepted by it therein
pursuant to this Agreement. Customer agrees to instruct Bank in
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Instructions from Customer as to cash and specific securities which
Bank is to identify on its books and records as pledged to Broker as
Collateral in the Special Custody Account. Customer agrees that the
value of such cash and securities shall be at least equal in value
to what Broker shall initially and from time to time advise Customer
in an Advice from Broker is necessary to constitute Adequate Margin.
Such collateral (i) will be held by Bank for Broker as agent of
Broker, (ii) may be released only in accordance with the terms of
this Agreement and (iii) except as required to be released hereunder
to Broker, shall not be made available to Broker or to any other
person claiming through Broker, including the creditors of the
Broker. In the event Customer wishes to open another Special Custody
Account for another series of the Fund pursuant to this Agreement,
the title of said account shall be appended hereto as a schedule to
this Agreement.
(b) SECURITY INTEREST. Customer hereby grants a continuing security
interest to Broker in the Collateral in the Special Custody Account.
To perfect Broker's security Interest, Bank will hold the Collateral
in the Special Custody Account, subject to the interest therein of
Broker as the pledgee and secured party thereof in accordance with
the terms of this Agreement. Such security interest will terminate
at such time as Collateral is released as provided herein. Bank
shall have no responsibility for the validity or enforceability of
such security interest.
(c) CONFIRMATION. Bank will confirm in writing to Broker and Customer
all pledges, releases or substitutions of Collateral and will supply
Broker and Customer with a monthly statement of Collateral and
transaction in the Special Custody Account for such month. Bank will
also advise Broker upon request of the kind and amount of Collateral
pledged to Broker.
(d) EXCESS COLLATERAL. Upon the request of Customer, Broker shall advise
Bank and customer of any excess of Collateral in the Special Custody
Account. Such excess shall at Customer's request be transferred
therefrom upon Advice from Broker.
(e) ACCOUNTS AND RECORDS. Bank will maintain accounts and records for
the Collateral in the Special Custody Account as more fully
described in subparagraph 5(a) below. The Collateral shall at all
times remain the property of the Customer subject only to the extent
of the interest and rights therein of Broker as the pledgee thereof.
3. ORIGINAL AND VARIATION MARGIN ON SHORT SALES
--------------------------------------------
(a) SHORT SALES. From time to time, Customer may place order with Broker
for the short sale of securities. Prior to the acceptance of such
orders, Broker will advise Customer of Broker's ability to borrow
such securities or other properties and acceptance of short sale
orders will be contingent upon same.
(b) OPEN SHORT SALES BALANCE. Broker shall, based on the closing market
price on each business day, compute the aggregate net credit or
debit balance on Customer's open short sales and advise Customer
and/or Customer's designated agent by 11:00 A.M. New York time on
the next business day (each a "Determination Day"), of the amount of
the net debit or credit, as the case may be. If a net debit balance
exists on a Determination Day, Customer will cause an amount equal
to such net debit balance to be paid to Broker by the close of
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business on such Determination Day. If a net credit balance exists
on a Determination Day, Broker will pay such credit balance to
Customer by the close of business on such Determination Day. As
Customer's open short positions are marked-to-market each business
day, payments will be made by or to Customer to reflect changes (if
any) in the credit or debit balances. Broker will charge interest on
any debit balances, and Broker will pay interest on any credit
balances. Balances will be appropriately adjusted when short sales
are closed out.
4. PLACING ORDERS
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It is understood and agreed that Customer, when placing with Broker any
order to sell short for Customer's account, will designate the order as such and
hereby authorizes Broker to xxxx such order as being "short", and when placing
with Broker any order to sell long for Customer's account, will designate the
order as such and hereby authorizes Broker to xxxx such order as being "long".
Any sell order which Customer shall designate as being for long account as above
provided is for securities then owned by Customer and, if such securities are
not then deliverable by Broker from any account of Customer, the placing of such
order shall constitute a representation by Customer that it is impracticable for
Customer than to deliver such securities to Broker but that Customer shall
deliver them by the settlement date or as soon as possible thereafter.
5. RIGHTS AND DUTIES OF THE BANK
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(a) GENERALLY. The Bank shall receive and hold in the Special Custody
Account, as custodian upon the terms of this Agreement, all
Collateral deposited and maintained pursuant to the terms of this
Agreement and, except as provided in subparagraph 5(b) below, shall
receive and hold all monies and other property paid, distributed or
substituted in respect of such Collateral or realized on the sale or
other disposition of such Collateral; provided, however, that the
Bank shall have no duty to require any money or securities to be
delivered to it or to determine that the amount and form of assets
delivered to it comply with any applicable requirements. Collateral
held in the Special Custody Account shall be released only in
accordance with this Agreement or as required by applicable law. The
Customer warrants its authority to deposit in such accounts any
money securities and other property received by the Bank.
The Bank may hold the securities in the Special Custody
Account in bearer, nominee, book entry, or other form and in
depository or clearing corporation, with or without indicating that
the securities are held hereunder; provided, however, that all
securities held in the Special Custody Account shall be identified
on the Bank's records as subject to this Agreement and shall be in a
form that permits transfer without additional authorization or
consent of the Customer. The Customer and Broker hereby agree to
hold the Bank and its nominees harmless from any liability as holder
of record.
(b) DIVIDENDS AND INTEREST. Any dividends or interest paid with respect
to the Collateral held in the Special Custody Account shall be
retained therein as additional Collateral.
(c) REPORTS. The Bank shall, as promptly as practical, provide Broker
and the Customer and/or Customer's designated agent with written
confirmation of each transfer into and out of the Special Custody
Account. The Bank also shall render to Broker and Customer and/or
Customers designated agent a monthly statement of the Collateral
held in the Special Custody Account. In addition, the Bank will
advise Broker and Customer and/or Customers designated agent upon
request at any time of the type and amount of Collateral held in
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such account; provided, however, that the Bank shall have no
responsibility for making any determination as to the value of such
Collateral.
(d) LIMITATION OF BANK'S LIABILITY. The Bank's duties and
responsibilities are as set forth in this Agreement. The Bank shall
act only upon receipt of Advice from Broker regarding release or
substitution of Collateral. The Bank shall not be liable or
responsible for anything done, or omitted to be done, by it in good
faith and in the absence of negligence and may rely and shall be
protected in acting upon any notice, instruction or other
communication which it reasonably believes to be genuine and
authorized. As between the Bank and Broker, Broker shall indemnify
and hold the Bank harmless with regard to any losses or liabilities
of the Bank (including counsel fees) imposed on or incurred by the
Bank arising out of any action or omission of the Bank in accordance
with any Advice, notice or Instruction of Broker under this
Agreement. In matters concerning or relating to this Agreement, the
Bank shall not be responsible for compliance with any status or
regulation regarding the establishment or maintenance of margin
credit, including but not limited to Regulations T or X of the Board
of Governors of the Federal Reserve System, or with any rules or
regulations of the Office of the Controller of the Currency (or the
Securities and Exchange Commission). The Bank shall not be liable to
any party for any acts or omissions of the other parties to this
Agreement.
(e) Bank shall be paid as compensation for its services pursuant to this
Agreement such compensation as may from time to time be agreed upon
in writing between Customer and Bank.
6. DEFAULT
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In the event of any failure by Customer to timely comply with any
obligation on Customer's part to be performed or observed under this Agreement
or the Customer Agreement, including, but not limited to, the obligation to
maintain Adequate Margin, or in the event of Customer's Insolvency, Broker has
the right to give notice (which notice may be by telegraph, facsimile
transmission or hand delivery) to Customer specifying such default and Broker
may, after giving such notice to Customer, effect a Closing Transaction or
buying of any securities of which Customer's account may be short. In the event
of any default as aforesaid, Broker shall also have the right, upon like notice
to Customer, to sell any and all Collateral in the Special Custody Account and
to give Advice to Bank to deliver such Collateral free of payment to Broker,
which Advice shall state that, pursuant to this Agreement, the condition
precedent to Brokers right to receive such Collateral free of payment has
occurred. The Bank will provide immediate telephone notice to Customer of any
receipt by Bank of Advice from Broker to deliver Collateral free of payment, and
shall promptly effect delivery of Collateral to Broker. Such sale or purchase
may be made according to Broker's judgment and at Broker's discretion, on the
principal exchange or other market for such securities, or in the event such
principal market is closed, in a manner commercially reasonable for such
securities.
7. LIMITATION OF BROKER LIABILITY
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Broker shall not be liable for any losses, costs, damages, liabilities or
expenses suffered or incurred by Customer as a result of any transaction
executed hereunder, or any other action taken or not taken by Broker hereunder
for Customer's account at Customer's direction or otherwise, except to the
extent that such loss, cost, damage, liability or expense is the result of
Broker's own recklessness, willful misconduct or bad faith.
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8. CUSTOMER REPRESENTATION
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Customer represents and warrants that the Collateral will not be subject
to any other liens or encumbrances.
9. TERMINATION
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Any of the parties hereto may terminate this Agreement by notice in
writing to the other parties hereto; provided, however, that the status of any
short sales, and of Collateral held at the time of such notice to margin such
short sales shall be not affected by such termination until the release of such
Collateral pursuant to applicable law, regulations or rules of any self
regulatory organization to which Broker is subject. In the event of the release
of Collateral, the Collateral shall be transferred to a proper custody account
of the Customer in the Bank.
10. NOTICE
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Written communications hereunder shall be telegraphed, sent to facsimile
transmission or hand delivered as required herein, when another method of
delivery is not specified, may be mailed first class postage prepaid, except
that written notice of termination shall be sent by certified mail, addressed:
(a) if to Bank, to:
State Street Bank and Trust Company
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxxxx, Xxxxxxxxxxxxx 00000
Attn.: Xxxxxxxxxxx Xxxxxx
Telephone: 000-000-0000
Telecopy: 000-000-0000
(b) if to Customer, to:
INVESCO Funds Group, Inc.
0000 X. Xxxxx Xxx.
Xxxxxx, Xxxxxxxx 00000
Attn.: Xxxxx Xxxx
Telephone: 000-000-0000
Telecopy: 000-000-0000
(c) if to Broker, to:
Bear, Steams Securities Corp.
000 Xxxx Xxx.
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxxxx Xxxxxxx, Treasurer
Telephone: 000-000-0000
Facsimile: 000-000-0000
11. CONTROLLING LAW
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The construction and enforcement of this Agreement shall be subject to and
governed by the laws of the State of New York.
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12. THE AGREEMENT CONTROLS/AMENDMENTS
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Customer and Bank agree that the terms of this Agreement shall supplement
and amend the Custody Agreement dated as of January 16, 1992 between the Bank
and the Customer with respect to the Special Custody Account, and to the extent
inconsistent therewith, the terms of this Agreement shall control. No amendment
of this Agreement shall be effective unless in writing and signed by an
authorized officer of Broker, Customer and Bank.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers as of the day and year first above
written.
STATE STREET BANK AND TRUST COMPANY
By: /S/ Xxxxxxx X. Xxxxxxxxxx Xx.
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Name: Xxxxxxx X. Xxxxxxxxxx Xx.
Title: Vice President
INVESCO GLOBAL HEALTH SCIENCES FUND
By: /S/ Xxx X. Xxxxxx
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Name: Xxx X. Xxxxxx
Title: President
BEAR, XXXXXXX SECURITIES CORP .
By: /S/ Xxxxxxx Xxxxxxx
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Name: Xxxxxxx Xxxxxxx
Title: Treasurer
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