Exhibit 1
CUSTODIAN AGREEMENT
THIS AGREEMENT, dated as of June 29, 2001, between GMO Trust, a
Massachusetts business trust (the TRUST) on behalf of each series of the Trust
set forth on Schedule I hereto and any additional series of the Trust currently
existing or hereafter created as shall be mutually agreed to in writing by the
parties hereto (each, a FUND), an open-end management series investment company
registered with the Commission under the 1940 Act, and XXXXX BROTHERS XXXXXXXX &
CO., a limited partnership formed under the laws of the State of New York
(BBH&CO. or the CUSTODIAN),
W I T N E S S E T H:
WHEREAS, the Trust wishes to employ BBH&Co. to act as custodian for
each of the Funds and to provide related services, all as provided herein, and
BBH&Co. is willing to accept such employment, subject to the terms and
conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Trust and BBH&Co. hereby agree, as follows:
1. APPOINTMENT OF CUSTODIAN. The Trust hereby appoints BBH&Co. as each
Fund's custodian, and BBH&Co. hereby accepts such appointment. All Investments
of a Fund delivered to the Custodian or its agents or Subcustodians shall be
dealt with as provided in this Agreement. The duties of the Custodian with
respect to a Fund's Investments shall be only as set forth expressly in this
Agreement which duties are generally comprised of safekeeping and various
administrative duties that will be performed in accordance with Instructions and
as reasonably required to effect Instructions.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE TRUST. The Trust
hereby represents, warrants
1
and covenants each of the following:
2.1 This Agreement has been, and at the time of delivery of
each Instruction such Instruction will have been, duly authorized,
executed and delivered by the Trust. This Agreement does not violate
any Applicable Law or conflict with or constitute a default under the
Trust's prospectus or other organic document, agreement, judgment,
order or decree to which the Trust is a party or by which it or its
Investments is bound.
2.2 By providing an Instruction with respect to the first
acquisition of an Investment in a jurisdiction other than the United
States of America, the Fund shall be deemed to have confirmed to the
Custodian that the Trust has (a) assessed and accepted all material
Country or Sovereign Risks and accepted responsibility for their
occurrence, (b) made all determinations required to be made by the
Trust under the 1940 Act, and (iii) appropriately and adequately
disclosed to its shareholders, other investors and all persons who have
rights in or to such Investments, all material investment risks,
including those relating to the custody and settlement infrastructure
or the servicing of securities in such jurisdiction.
2.3 The Trust shall safeguard and shall solely be responsible
for the safekeeping of any testkeys, identification codes, passwords,
other security devices or statements of account with which the
Custodian provides it. In furtherance and not limitation of the
foregoing, in the event the Trust utilizes any on-line service offered
by the Custodian, the Trust and the Custodian shall be fully
responsible for the security of each party's connecting terminal,
access thereto and the proper and authorized use thereof and the
initiation and application of continuing effective safeguards in
respect thereof. Additionally, if the Trust uses any on-line or similar
communications service made available by the Custodian, the Trust shall
be solely responsible for ensuring the security of its access to the
service and for the use of the service, and shall only attempt to
access the service and the Custodian's computer systems as directed by
the Custodian. If the Custodian provides any computer software to the
Trust relating to the services described in this Agreement, the Trust
will only use the software for the purposes for which the Custodian
provided the software to the Trust, and will abide by the license
agreement accompanying the software and any other security policies
which the Custodian provides to the Trust.
3. REPRESENTATION AND WARRANTY OF BBH&CO. BBH&Co. hereby represents
and warrants that this Agreement has been duly authorized, executed and
delivered by BBH&Co., does not and will not violate any Applicable Law or
conflict with or constitute a default under BBH&Co.'s limited partnership
agreement or any agreement, instrument, judgment, order or decree to which
BBH&Co. is a party or by which it is bound and that BBH&Co. is eligible to serve
as a custodian for a management investment company registered with the
Commission under the 1940 Act.
4. INSTRUCTIONS. Unless otherwise explicitly indicated herein, the
Custodian shall perform its duties
2
pursuant to Instructions. As used herein, the term INSTRUCTION shall mean a
directive initiated by the Trust, acting directly or through its board of
trustees, officers or other Authorized Persons, which directive shall conform to
the requirements of this Section 4.
4.1 AUTHORIZED PERSONS. For purposes hereof, an AUTHORIZED PERSON shall
be a person or entity authorized to give Instructions for or on behalf of the
Trust by written notices to the Custodian or otherwise in accordance with
procedures delivered to and acknowledged by the Custodian, including without
limitation the Trust's Investment Advisor. The Custodian may treat any
Authorized Person as having full authority of a Fund to issue Instructions
hereunder unless the notice of authorization contains explicit limitations as to
said authority. The Custodian shall be entitled to rely upon the authority of
Authorized Persons until it receives appropriate written notice from the Trust
to the contrary.
4.2 FORM OF INSTRUCTION. Each Instruction shall be transmitted in
accordance with Subsections 4.2.1 through 4.2.3 of this Section or by such other
secured or authenticated electro-mechanical means as the Custodian may make
available to the Trust from time to time.
4.2.1 TRUST DESIGNATED SECURED-TRANSMISSION METHOD.
Instructions may be transmitted through a secured or tested
electro-mechanical means identified by the Trust or by an Authorized
Person entitled to give Instruction and acknowledged and accepted by
the Custodian; it being understood that such acknowledgment shall
authorize the Custodian to receive and process such means of delivery
but shall not represent a judgment by the Custodian as to the
reasonableness or security of the method determined by the Authorized
Person.
4.2.2 WRITTEN INSTRUCTIONS. Instructions may be transmitted in
a writing that bears the manual signature of Authorized Persons.
4.2.3 OTHER FORMS OF INSTRUCTION. Instructions may also be
transmitted by another means determined by the Trust or Authorized
Persons and acknowledged and accepted by the Custodian (subject to the
same limits as to acknowledgements as is contained in Subsection 4.2.1,
above) including Instructions given orally or by SWIFT, telex or
telefax (whether tested or untested).
When an Instruction is given by means established under Subsections 4.2.1
through 4.2.3, it shall be the
3
responsibility of the Custodian to use reasonable care to adhere to any security
or other procedures established in writing between the Custodian and the
Authorized Person with respect to such means of Instruction, but such Authorized
Person shall be solely responsible for determining that the particular means
chosen is reasonable under the circumstances. Oral Instructions will not be
accepted by the Custodian. With respect to telefax instructions, the parties
agree and acknowledge that the Custodian cannot verify that authorized
signatures on telefax instructions are original or properly affixed, and that
the Custodian shall not be liable for losses or expenses incurred through
actions taken in reliance on inaccurately stated telefax instructions, or
telefax instructions on which authorized signatures are illegible, not original
or not properly affixed. In no event will the Custodian act upon the receipt of
illegible telefax instructions. The provisions of Section 4A of the Uniform
Commercial Code shall apply to Funds Transfers performed in accordance with
Instructions. The Funds Transfer Services Schedule to this Agreement as such
schedule may be executed at such time hereafter as may be agreed by the parties
hereto, shall comprise a designation of form of a means of delivering
Instructions for purposes of funds transfer only.
4.3 COMPLETENESS AND CONTENTS OF INSTRUCTIONS. The Authorized Person
shall be responsible for assuring the adequacy and accuracy of Instructions.
Particularly, upon any acquisition or disposition or other dealing in a Fund's
Investments and upon any delivery and transfer of any Investment or moneys, the
person initiating such Instruction shall give the Custodian an Instruction with
appropriate detail, including, without limitation:
4.3.1 The transaction date and the date and location of settlement;
4.3.2 The specification of the type of transaction;
4.3.3 A description of the Investments or moneys in question,
including, as appropriate, quantity, price per unit, amount of money to
be received or delivered and currency information. Where an Instruction
is communicated by electronic means, or otherwise where an Instruction
4
contains an identifying number such as a CUSIP, SEDOL or ISIN number,
the Custodian shall be entitled to rely on such number as controlling
notwithstanding any inconsistency contained in such Instruction,
particularly with respect to Investment description; and
4.3.4 The name of the broker or similar entity concerned with
execution of the transaction.
If the Custodian shall determine that an Instruction is either unclear or
incomplete, the Custodian shall give prompt notice of such determination to the
Trust, and the Trust shall thereupon amend or otherwise reform such Instruction.
In such event, the Custodian shall have no obligation to take any action in
response to the Instruction initially delivered until the redelivery of an
amended or reformed Instruction.
4.4 TIMELINESS OF INSTRUCTIONS. When the Custodian has established
specific timing requirements or deadlines with respect to particular classes of
Instruction (and notified the Trust of such requirements or deadlines), or when
an Instruction is received by the Custodian at such a time that it could not
reasonably be expected to have acted on such instruction due to time zone
differences or other factors beyond its reasonable control, the execution of any
Instruction received by the Custodian after such deadline or at such time
(including any modification or revocation of a previous Instruction) shall be at
the risk of the Trust.
5. SAFEKEEPING OF FUND ASSETS. The Custodian shall hold Investments
delivered to it or Subcustodians for a Fund in accordance with the provisions of
this Section. The Custodian shall not be responsible for (a) the safekeeping of
Investments not delivered or that are not caused to be issued to it or its
Subcustodians; or, (b) pre-existing faults or defects in Investments that are
delivered to the Custodian, or its Subcustodians. The Custodian is hereby
authorized to hold with itself or a Subcustodian, and to record in one or more
accounts, all Investments delivered to and accepted by the Custodian, any
Subcustodian or
5
their respective agents pursuant to an Instruction or in consequence of any
corporate action. The Custodian shall hold Investments for the account of each
Fund and shall segregate Investments from assets belonging to the Custodian and
shall cause its Subcustodians to segregate Investments from assets belonging to
the Subcustodian in an account held for each Fund or in an account maintained by
the Subcustodian generally for non-proprietary assets of the Custodian.
5.1 USE OF SECURITIES DEPOSITORIES. Investments held in a Securities
Depository shall be held (a) subject to the agreement, rules, statement of terms
and conditions or other document or conditions effective between the Securities
Depository and the Custodian or the Subcustodian, as the case may be, and (b) in
an account for each Fund or in bulk segregation in an account maintained for the
non-proprietary assets of the entity holding such Investments in the Depository.
If market practice or the rules and regulations of the Securities Depository
prevent the Custodian, the Subcustodian or (any agent of either) from holding
its client assets in such a separate account, the Custodian, the Subcustodian or
other agent shall as appropriate segregate such Investments for benefit of each
Fund or for benefit of clients of the Custodian generally on its own books.
5.2 CERTIFICATED ASSETS. Investments which are certificated may be held
in registered or bearer form: (a) in the Custodian's vault; (b) in the vault of
a Subcustodian or agent of the Custodian or a Subcustodian; or (c) in an account
maintained by the Custodian, Subcustodian or agent at a Securities Depository;
all in accordance with customary market practice in the jurisdiction in which
any Investments are held.
5.3 REGISTERED ASSETS. Investments which are registered may be
registered in the name of the Custodian, a Subcustodian, or in the name of a
Fund or a nominee for any of the foregoing, and may be
6
held in any manner set forth in paragraph 5.2 above with or without any
identification of fiduciary capacity in such registration.
5.4 BOOK ENTRY ASSETS. Investments which are represented by book-entry
may be so held in an account maintained by the Book-entry Agent on behalf of the
Custodian, a Subcustodian or another agent of the Custodian, or a Securities
Depository.
5.5 REPLACEMENT OF LOST INVESTMENTS. In the event of a loss of
Investments for which the Custodian is responsible under the terms of this
Agreement, the Custodian shall replace such Investment, or in the event that
such replacement cannot be effected, the Custodian shall pay to the Fund the
fair market value of such Investment based on the last available price as of the
close of business in the relevant market on the date that a claim was first made
to the Custodian with respect to such loss, or such other amount as shall be
agreed by the parties as the date for settlement.
6. ADMINISTRATIVE DUTIES OF THE CUSTODIAN. The Custodian shall perform the
following administrative duties with respect to Investments of a Fund.
6.1 PURCHASE OF INVESTMENTS. Pursuant to Instruction, Investments
purchased for the account of a Fund shall be paid for (a) against delivery
thereof to the Custodian or a Subcustodian, as the case may be, either directly
or through a Clearing Corporation or a Securities Depository (in accordance with
the rules of such Securities Depository or such Clearing Corporation), or (b)
otherwise in accordance with an Instruction, Applicable Law, generally accepted
trade practices, or the terms of the instrument representing such Investment.
6.2 SALE OF INVESTMENTS. Pursuant to Instruction, Investments sold for
the account of the Fund shall be delivered (a) against payment therefor in
cash, by check or by bank wire transfer, (b) by credit to the account of the
Custodian or the applicable Subcustodian, as the case may be, with a Clearing
7
Corporation or a Securities Depository (in accordance with the rules of such
Securities Depository or such Clearing Corporation), or (c) otherwise in
accordance with an Instruction, Applicable Law, generally accepted trade
practices, or the terms of the instrument representing such Investment.
6.3 DELIVERY IN CONNECTION WITH BORROWINGS OF A FUND OR OTHER
COLLATERAL AND MARGIN REQUIREMENTS. Pursuant to Instruction, the Custodian may
deliver Investments or cash of a Fund in connection with borrowings and other
collateral and margin requirements.
6.4 FUTURES AND OPTIONS. If, pursuant to an Instruction, the Custodian
shall become a party to an agreement with a Fund and a futures commission
merchant regarding margin (TRI-PARTY AGREEMENT), the Custodian shall (a) receive
and retain, to the extent the same are provided to the Custodian, confirmations
or other documents evidencing the purchase or sale by the Fund of
exchange-traded futures contracts and commodity options, (b) when required by
such Tri-Party Agreement, deposit and maintain in an account opened pursuant to
such Agreement (MARGIN ACCOUNT), segregated either physically or by book-entry
in a Securities Depository for the benefit of any futures commission merchant,
such Investments as the Fund shall have designated as initial, maintenance or
variation "margin" deposits or other collateral intended to secure the Fund's
performance of its obligations under the terms of any exchange-traded futures
contracts and commodity options; and (c) thereafter pay, release or transfer
Investments into or out of the margin account in accordance with the provisions
of such Agreement. Alternatively, the Custodian may, in accordance with an
Instruction, deliver Investments to a futures commission merchant for purposes
of margin requirements in accordance with Rule 17f-6. The Custodian shall in no
event be responsible for the acts and omissions of any futures commission
merchant to whom Investments are delivered pursuant to this Section; for the
sufficiency of Investments held in any Margin Account; or, for the performance
of any terms of any exchange-traded futures contracts and commodity options.
6.5 CONTRACTUAL OBLIGATIONS AND SIMILAR INVESTMENTS. From time to time,
a Fund's Investments may include Investments that are not ownership interests as
may be represented by certificate (whether registered or bearer), by entry in a
Securities Depository or by book entry agent, registrar or similar agent for
recording ownership interests in the relevant Investment. If a Fund shall at any
time acquire such Investments, including without limitation deposit obligations,
loan participations, repurchase agreements and derivative arrangements, the
Custodian shall (a) receive and retain, to the extent the same are provided
8
to the Custodian, confirmations or other documents evidencing the arrangement;
and (b) perform on the Fund's account in accordance with the terms of the
applicable arrangement, but only to the extent directed to do so by Instruction.
The Custodian shall have no responsibility for agreements running to a Fund as
to which it is not a party other than to retain, to the extent the same are
provided to the Custodian, documents or copies of documents evidencing the
arrangement and, in accordance with Instruction, to include such arrangements in
reports made to the Fund.
6.6 EXCHANGE OF SECURITIES. Unless otherwise directed by Instruction,
the Custodian shall: (a) exchange securities held for the account of a Fund for
other securities in connection with any reorganization, recapitalization,
conversion, split-up, change of par value of shares or similar event, and (b)
deposit any such securities in accordance with the terms of any reorganization
or protective plan.
6.7 SURRENDER OF SECURITIES. Unless otherwise directed by Instruction,
the Custodian may surrender securities: (a) in temporary form for definitive
securities; (b) for transfer into the name of an entity allowable under Section
5.3; and (c) for a different number of certificates or instruments representing
the same number of shares or the same principal amount of indebtedness, provided
the securities to be issued are to be delivered to the Custodian.
6.8 RIGHTS, WARRANTS, ETC. Pursuant to Instruction, the Custodian shall
(a) deliver warrants, puts, calls, rights or similar securities to the issuer or
trustee thereof, or to any agent of such issuer or trustee, for purposes of
exercising such rights or selling such securities, provided that the new
securities and cash, if any, acquired by such action are to be delivered to the
Custodian, and (b) deposit securities in response to any invitation for the
tender thereof, provided that the consideration is to be paid or delivered or
the tendered securities are to be returned to the Custodian.
6.9 MANDATORY CORPORATE ACTIONS. Unless otherwise directed by
Instruction, the Custodian shall: (a) comply with the terms of all mandatory or
compulsory exchanges, calls, tenders, redemptions or similar rights of
securities ownership affecting securities held on a Fund's account and promptly
notify a Fund of such action, and (b) collect all stock dividends, rights and
other items of like nature with respect to such securities.
6.10 INCOME COLLECTION. Unless otherwise directed by Instruction, the
Custodian shall collect any amount due and payable to a Fund with respect to
Investments and promptly credit the amount
9
collected to a Principal or Agency Account; provided, however, that the
Custodian shall not be responsible for: (a) the collection of amounts due and
payable with respect to Investments that are in default, or (b) the collection
of cash or share entitlements with respect to Investments that are not
registered in the name of the Custodian or its Subcustodians. The Custodian is
hereby authorized to endorse and deliver any instrument required to be so
endorsed and delivered to effect collection of any amount due and payable to a
Fund with respect to Investments.
6.11 OWNERSHIP CERTIFICATES AND DISCLOSURE OF A FUND'S INTEREST. The
Custodian is hereby authorized to execute on behalf of a Fund ownership
certificates, affidavits or other disclosure required under Applicable Law or
established market practice in connection with the receipt of income, capital
gains or other payments by a Fund with respect to Investments, or in connection
with the sale, purchase or ownership of Investments.
6.12 PROXY MATERIALS. The Custodian shall deliver promptly, or cause to
be delivered promptly, to a Fund proxy forms, notices of meeting, and any other
notices or announcements materially affecting or relating to Investments
received by the Custodian or any nominee, and upon receipt of proper
Instructions, to execute and deliver or cause its nominee to execute and deliver
such proxies or other authorizations as may be required.
6.13 TAXES. The Custodian shall, where applicable, assist a Fund in the
reclamation of taxes withheld on dividends and interest payments received by a
Fund. In the performance of its duties with respect to tax withholding and
reclamation, the Custodian shall be entitled to rely on the advice of counsel
and upon information and advice regarding a Fund's tax status that is received
from or on behalf of the Fund without duty of separate inquiry.
6.14 OTHER DEALINGS. The Custodian shall otherwise act as directed by
Instruction, including without limitation effecting the free payments of moneys
or the free delivery of securities, provided that such Instruction shall
indicate the purpose of such payment or delivery and that the Custodian shall
record the party to whom such payment or delivery is made.
The Custodian shall attend to all nondiscretionary details in
connection with the sale or purchase or other administration of Investments,
except as otherwise directed by an Instruction, and may make
10
payments to itself or others for minor expenses of administering Investments
under this Agreement, provided that all such payments shall be accounted for to
the Fund.
In fulfilling the duties set forth in Sections 6.6 through 6.10 above,
the Custodian shall provide promptly to a Fund all material information
pertaining to a corporate action which the Custodian actually receives; provided
that the Custodian shall not be responsible for the completeness or accuracy of
such information. Any advance credit of cash or shares expected to be received
as a result of any corporate action shall be subject to actual collection and
may, when the Custodian deems collection unlikely and with notice to the Fund,
be reversed by the Custodian.
The Custodian may at any time or times in its discretion appoint (and
may at any time remove) agents (other than Subcustodians) to carry out some or
all of the administrative provisions of this Agreement (AGENTS), provided,
however, that the appointment of such Agent shall not relieve the Custodian of
its obligations under this Agreement, and provided, further, that the Custodian
shall be liable for any direct damage incurred by the Fund as a result of such
Agent's negligence, bad faith, misfeasance or willful misconduct.
7. CASH ACCOUNTS, DEPOSITS AND MONEY MOVEMENTS. Subject to the terms and
conditions set forth in this Section 7, the Trust on behalf of each Fund hereby
authorizes the Custodian to open and maintain, with itself or with
Subcustodians, cash accounts in United States Dollars, in such other currencies
as are the currencies of the countries in which a Fund maintains Investments or
in such other currencies as a Fund shall from time to time request by
Instruction, subject only to draft or order by the Custodian.
7.1 TYPES OF CASH ACCOUNTS. Cash accounts opened on the books of the
Custodian (PRINCIPAL ACCOUNTS) shall be opened in the name of a Fund. Such
accounts collectively shall be a deposit obligation
11
of the Custodian and shall be subject to the terms of this Section 7 and the
general liability provisions contained in Section 9. Cash accounts opened on the
books of a Subcustodian may be opened in the name of a Fund or in the name of
the Custodian for its customers generally (AGENCY ACCOUNTS). Such deposits shall
be obligations of the Subcustodian and shall be treated as an Investment of a
Fund. Accordingly, the responsibility of the Custodian therefore shall be the
same as and no greater than the Custodian's responsibility in respect of other
Investments of the Fund. Notwithstanding the foregoing sentence, the Custodian
shall not be liable for the repayment of such accounts in the event such
Subcustodian, by reason of its bankruptcy, insolvency or otherwise, fails to
make repayment to the Fund.
7.2 PAYMENTS AND CREDITS WITH RESPECT TO THE CASH ACCOUNTS. The
Custodian shall make payments from or deposits to any of said accounts in the
course of carrying out its administrative duties, including but not limited to
income collection with respect to a Fund's Investments, and otherwise in
accordance with Instructions. The Custodian and its Subcustodians shall be
required to credit amounts to the cash accounts only when moneys are actually
received in cleared funds in accordance with banking practice in the country and
currency of deposit. Any credit made to any Principal or Agency Account before
actual receipt of cleared funds shall be provisional and may be reversed by the
Custodian in the event such payment is not actually collected. Unless otherwise
specifically agreed in writing by the Custodian or any Subcustodian, all
deposits shall be payable only at the branch of the Custodian or Subcustodian
where the deposit is made or carried.
7.3 CURRENCY AND RELATED RISKS. A Fund bears risks of holding or
transacting in any currency. The Custodian shall not be liable for any loss or
damage arising from the applicability of any law or regulation now or hereafter
in effect, or from the occurrence of any event, which may delay or affect the
12
transferability, convertibility or availability of any currency in the country
(a) in which such Principal or Agency Accounts are maintained or (b) in which
such currency is issued, and in no event shall the Custodian be obligated to
make payment of a deposit denominated in a currency during the period during
which its transferability, convertibility or availability has been affected by
any such law, regulation or event. Without limiting the generality of the
foregoing, neither the Custodian nor any Subcustodian shall be required to repay
any deposit made at a foreign branch of either the Custodian or Subcustodian if
such branch cannot repay the deposit due to a cause for which the Custodian
would not be responsible in accordance with the terms of Section 9.1 of this
Agreement unless the Custodian or such Subcustodian expressly agrees in writing
to repay the deposit under such circumstances. All currency transactions in any
account opened pursuant to this Agreement are subject to exchange control
regulations of the United States and of the country where such currency is the
lawful currency or where the account is maintained. Any taxes, costs, charges or
fees imposed on the convertibility of a currency held by a Fund shall be for the
account of such Fund.
7.4 FOREIGN EXCHANGE TRANSACTIONS. The Custodian shall, subject to the
terms of this Section, settle foreign exchange transactions (including
contracts, futures, options and options on futures) on behalf and for the
account of a Fund with such currency brokers or banking institutions, including
Subcustodians, as a Fund may direct pursuant to Instructions. The Custodian may
act as principal in any foreign exchange transaction with a Fund in accordance
with Section 7.4.2 of this Agreement. The obligations of the Custodian in
respect of all foreign exchange transactions (whether or not the Custodian shall
act as principal in such transaction) shall be contingent on the free,
unencumbered transferability of the currency transacted on the actual settlement
date of the transaction.
13
7.4.1 THIRD PARTY FOREIGN EXCHANGE TRANSACTIONS. The
Custodian shall process foreign exchange transactions
(including without limitation contracts, futures, options, and
options on futures), where any third party acts as principal
counterparty to a Fund on the same basis it performs duties as
agent for the Fund with respect to any other of such Fund's
Investments. Accordingly the Custodian shall only be
responsible for delivering or receiving currency on behalf of
a Fund in respect of such contracts pursuant to Instructions.
The Custodian shall not be responsible for the failure of any
counterparty (including any Subcustodian) in such agency
transaction to perform its obligations thereunder. The
Custodian, pursuant to Instructions, (a) shall transmit cash
and Instructions to and from the currency broker or banking
institution with which a foreign exchange contract or option
has been executed pursuant hereto, (b) may make free outgoing
payments of cash in the form of Dollars or foreign currency
without receiving confirmation of a foreign exchange contract
or option or confirmation that the countervalue currency
completing the foreign exchange contract has been delivered or
received or that the option has been delivered or received,
and (c) shall hold all confirmations, certificates and other
documents and agreements received by the Custodian and
evidencing or relating to such foreign exchange transactions
in safekeeping. Each Fund accepts full responsibility for its
use of third-party foreign exchange dealers and for execution
of said foreign exchange contracts and options and understands
that such Fund shall be responsible for any and all costs and
interest charges which may be incurred by the Fund or the
Custodian as a result of the failure or delay of third parties
to deliver foreign exchange.
7.4.2 FOREIGN EXCHANGE WITH THE CUSTODIAN AS
PRINCIPAL. The Custodian may undertake foreign exchange
transactions with a Fund as principal, as the Custodian and
such Fund may agree from time to time. In such event, the
foreign exchange transaction will be performed in accordance
with the particular agreement of the parties, or in the event
a principal foreign exchange transaction is initiated by
Instruction in the absence of specific agreement, such
transaction will be performed in accordance with the usual
commercial terms of the Custodian.
7.5 DELAYS. If no event of Force Majeure shall have occurred and be
continuing and in the event that a delay shall have been caused by the
negligence or misconduct of the Custodian in carrying out an Instruction to
credit or transfer cash, the Custodian shall be liable to a Fund: (a) with
respect to Principal Accounts, for interest to be calculated at the rate
customarily paid on such deposit and currency by the Custodian on overnight
deposits at the time the delay occurs for the period from the day when the
transfer should have been effected until the day it is in fact effected; and,
(b) with respect to Agency Accounts, for interest to be calculated at the rate
customarily paid on such deposit and currency by the Subcustodian on overnight
deposits at the time the delay occurs for the period from the day when the
transfer should have been effected until the day it is in fact effected. The
Custodian shall not be liable for delays in carrying out such Instructions to
transfer cash which are not due to the Custodian's own negligence or misconduct.
7.6 ADVANCES. If, for any reason in the conduct of its safekeeping
duties pursuant to Section 5
14
hereof or its administration of a Fund's assets pursuant to Section 6 hereof,
the Custodian or any Subcustodian, at the request of a Fund, advances monies to
facilitate settlement or otherwise for benefit of such Fund (whether or not any
Principal or Agency Account shall be overdrawn either during, or at the end of,
any Business Day), the Fund hereby does grant to the Custodian a security
interest in and pledges to the Custodian the Investments held by the Custodian
or on its behalf in an amount not to exceed the lesser of the dollar amount of
the Advance or ten percent of such Fund's total assets (taken at cost), the
specific Investments to be designated in writing from time to time by the Trust,
provided that (A) if from time to time the Trust has not designated in writing
specific Investments in an amount at least equal to the lesser of the value of
the Advance or ten percent of the Fund's total assets, taken at cost, or (B) if
as a result of the delivery by the Custodian out of its custody, pursuant to
proper Instructions, of any Investments previously so designated, the remaining
amount of Investments so designated shall be less than the lesser of the value
of the Advance or ten percent of the Fund's total assets, taken at cost, then
the Custodian shall have a security interest in Investments of such Fund
designated by the Custodian, in an amount that, taken together with amounts of
Investments from time to time designated in writing by the Trust that have not
been delivered out of the custody of the Custodian pursuant to proper
Instructions, does not exceed the lesser of the value of the Advance or ten
percent of the Fund's total assets, taken at cost.
Neither the Custodian nor any Subcustodian shall be obligated to
advance monies to a Fund, and in the event that such Advance occurs, any
transaction giving rise to an Advance shall be for the account and risk of such
Fund and shall not be deemed to be a transaction undertaken by the Custodian for
its own account and risk. If such Advance shall have been made by a Subcustodian
or any other person, the Custodian may assign the security interest and any
other rights granted to the Custodian hereunder to such Subcustodian or other
person. If a Fund shall fail to repay when due the principal balance of an
Advance and accrued and unpaid interest thereon, the Custodian or its assignee,
as the case may be, shall be entitled to utilize the available cash balance in
any Agency or Principal Account and to dispose of Investments
15
designated pursuant to this Section 7.6. to the extent necessary to recover
payment of all principal of, and interest on, such Advance in full. The
Custodian may assign any rights it has hereunder to a Subcustodian or third
party. Any security interest in Investments taken hereunder shall be treated as
financial assets credited to securities accounts under Articles 8 and 9 of the
Uniform Commercial Code (1997). Accordingly, the Custodian shall have the rights
and benefits of a secured creditor that is a securities intermediary under such
Articles 8 and 9.
7.7 INTEGRATED ACCOUNT. In the event a Fund fails to promptly repay any
Advances made pursuant to Section 7.6, deposits maintained in all Principal
Accounts for the account of such Fund (whether or not denominated in Dollars)
shall collectively constitute a single and indivisible current account with
respect to such Fund's obligations to the Custodian, or its assignee, and
balances in such Principal Accounts shall be available for satisfaction of such
Fund's obligations under this Section 7. The Custodian shall further have a
right of offset against the balances in any Agency Account maintained hereunder
to the extent that the aggregate of all Principal Accounts is overdrawn.
8. SUBCUSTODIANS AND SECURITIES DEPOSITORIES. Subject to the provisions
hereinafter set forth in this Section 8, the Trust hereby authorizes the
Custodian to utilize Securities Depositories to act on behalf of a Fund and to
appoint from time to time and to utilize Subcustodians. With respect to
securities and funds held by a Subcustodian, either directly or indirectly
(including by a Securities Depository or Clearing Corporation), notwithstanding
any provisions of this Agreement to the contrary, payment for securities
purchased and delivery of securities sold may be made prior to receipt of
securities or payment, respectively, and securities or payment may be received
in a form, in accordance with (a) governmental
16
regulations, (b) rules of Securities Depositories and clearing agencies, (c)
generally accepted trade practice in the applicable local market, (d) the terms
and characteristics of the particular Investment, or (e) the terms of
Instructions.
8.1 DOMESTIC SUBCUSTODIANS AND SECURITIES DEPOSITORIES. The Custodian
may deposit and/or maintain, either directly or through one or more agents
appointed by the Custodian, Investments of a Fund in (i) The Depository Trust
Company, (ii) any book-entry system as provided in Subpart O of Treasury
Circular Xx. 000, 00 XXX 000, Xxxxxxx X of 31 CFR Part 350, or the book-entry
regulations of federal agencies substantially in the form of Subpart O, or (iii)
any other domestic clearing agency registered with the Commission under Section
17A of the Securities Exchange Act of 1934 which acts as a securities depository
and whose use the Trust has previously approved in writing, provided that such
use shall be in accordance with applicable Federal Reserve Board and Commission
rules and regulations, if any. The Custodian may, at any time and from time to
time, appoint any bank as defined in Section 2(a)(5) of the 1940 Act meeting the
requirements of a custodian under Section 17(f) of the 1940 Act and the rules
and regulations thereunder, to act on behalf of a Fund as a Subcustodian for
purposes of holding Investments of such Fund in the United States.
8.2 FOREIGN SUBCUSTODIANS AND SECURITIES DEPOSITORIES. Unless
instructed otherwise by the Trust, the Custodian may deposit and/or maintain
non-U.S. Investments of a Fund in any non-U.S. Securities Depository provided
such Securities Depository meets the requirements of an "eligible securities
depository" under Rule 17f-7 promulgated under the 1940 Act, or any successor
rule or regulation ("Rule 17f-7") or which by order of the Commission is
exempted therefrom. Prior to the time that securities are placed with such
depository, but subject to the provisions of Section 8.2.4 below, the Custodian
shall have
17
prepared an analysis of the custody risks associated with maintaining assets
with the Securities Depository and shall have established a system to monitor
such risks on a continuing basis in accordance with subsection 8.2.3 of this
Section. Additionally, the Custodian may, at any time and from time to time,
appoint (a) any bank, trust company or other entity meeting the requirements of
an "eligible foreign custodian" under Rule 17f-5 or which by order of the
Commission is exempted therefrom, or (b) any U.S. Bank as defined in Rule 17f-7,
to act on behalf of a Fund as a Subcustodian for purposes of holding Investments
of such Fund outside the United States. Such appointment of foreign
Subcustodians shall be subject to approval of the Trust in accordance with
Subsections 8.2.1 and 8.2.2 hereof, and use of non-U.S. Securities Depositories
shall be subject to the terms of Subsections 8.2.3 and 8.2.4 hereof. An
Instruction to open an account in a given country shall comprise authorization
of the Custodian to hold assets in such country in accordance with the terms of
this Agreement. The Custodian shall not be required to make independent inquiry
as to the authorization of a Fund to invest in such country.
8.2.1 BOARD APPROVAL OF FOREIGN SUBCUSTODIANS. Unless and
except to the extent that the Board has delegated to and the Custodian
has accepted delegation of review of certain matters concerning the
appointment of Subcustodians pursuant to Subsection 8.2.2, the
Custodian shall, prior to the appointment of any Subcustodian for
purposes of holding Investments of a Fund outside the United States,
obtain written confirmation of the approval of the Board of Trustees of
the Trust with respect to (a) the identity of a Subcustodian, and (b)
the subcustodian agreement which shall govern such appointment, such
approval to be signed by an Authorized Person.
8.2.2 DELEGATION OF BOARD REVIEW OF SUBCUSTODIANS. From time
to time, the Custodian may agree to perform certain reviews of
Subcustodians and of Subcustodian Contracts as delegate of the Trust's
Board. In such event, the Custodian's duties and obligations with
respect to this delegated review will be performed in accordance with
the terms of the attached 17f-5 Delegation Schedule to this Agreement.
8.2.3 MONITORING AND RISK ANALYSIS OF SECURITIES DEPOSITORIES.
Prior to the placement of any assets of a Fund with a non-U.S.
Securities Depository, the Custodian: (a) shall provide to the Trust
or its Investment Advisor an analysis of the custody risks associated
with maintaining assets within such Securities Depository in
accordance with Rule 17f-7(a)(1)(I)(A); and (b) shall have established
a system to monitor the custody risks associated with maintaining
assets with such Securities Depository on a continuing basis and to
promptly notify the Trust or its Investment Advisor of any material
changes in such risk in accordance with Rule 17f-7(a)(1)(I)(B). In
performing its duties under this subsection, the Custodian shall use
reasonable
18
care, prudence and diligence and may rely on such reasonable sources
of information as may be available including but not limited to: (i)
published ratings; (ii) information supplied by a Subcustodian that is
a participant in such Securities Depository; (iii) industry surveys or
publications; (iv) information supplied by the depository itself, by
its auditors (internal or external) or by the relevant Foreign
Financial Regulatory Authority. It is acknowledged that information
procured through some or all of these sources may not be independently
verifiable by the Custodian and that direct access to Securities
Depositories is limited under most circumstances. Accordingly, the
Custodian shall not be responsible for errors or omissions in its
duties hereunder provided that it has performed its monitoring and
analysis duties with reasonable care, prudence and diligence. The risk
analysis shall be provided to the Trust or its Investment Advisor by
such means as the Custodian shall reasonably establish. Advices of
material change in such analysis may be provided by the Custodian in
the manner established as customary between the Trust and the
Custodian for transmission of material market information. If the
Custodian determines that an arrangement with a Securities Depository
no longer meets the requirements of Rule 17f-7(b)(1), the Custodian
shall promptly notify the Trust or its Investment Advisor.
8.2.4 SPECIAL TRANSITIONAL RULE. It is acknowledged that Rule
17f-7 has a mandatory compliance date of July 2, 2001 and that the
Custodian will require a period of time to fully prepare risk analysis
information and to establish a risk monitoring system as provided in
Subsection 8.2.3. Accordingly, until July 1, 2001, the Custodian shall
use reasonable efforts to implement the measures required by
Subsection 8.2.3, and shall in the interim provide to the Trust or its
Investment Advisor the depository information customarily provided and
shall promptly inform the Trust or its Investment Advisor of any
material development affecting the custody risks associated with the
maintenance of assets with a particular Securities Depository of which
it becomes aware in the course of its general duties under this
Agreement or from its duties under Section 8.2.3 as such duties have
been implemented at any given time.
8.3 RESPONSIBILITY FOR SUBCUSTODIANS. With respect to securities and
funds held by a Subcustodian, either directly or indirectly (including by a
Foreign Depository, Securities System or foreign clearing agency), including
demand deposit and interest bearing deposits, currencies or other deposits and
foreign exchange contracts as referred to herein, the Custodian shall be liable
to a Fund if and only to the extent that such Subcustodian is liable to the
Custodian and the Custodian recovers under the applicable subcustodian
agreement, provided that the Custodian shall have complied with its obligations
herein or as set forth in the attached 17f-5 Delegation Schedule to this
Agreement.
8.4 NEW COUNTRIES. A Fund shall be responsible for informing the
Custodian sufficiently in advance of a proposed investment which is to be held
in a country in which no Subcustodian is authorized to act in order that the
Custodian shall, if it deems appropriate to do so, have sufficient time to
establish a
19
subcustodial arrangement in accordance herewith. In the event, however, the
Custodian is unable to establish such arrangements prior to the time such
investment is to be acquired, upon written notice to the Trust, the Custodian is
authorized to designate at its discretion a local safekeeping agent, and the use
of such local safekeeping agent shall be at the sole risk of the Fund, and
accordingly the Custodian shall be responsible to the Fund for the actions of
such agent if and only to the extent the Custodian shall have recovered from
such agent for any damages caused the Fund by such agent. The Custodian agrees
to remove promptly any Investments held on behalf of a Fund by such agent to an
approved Subcustodian.
9. RESPONSIBILITY OF THE CUSTODIAN. In performing its duties and obligations
hereunder, the Custodian shall use reasonable care and diligence under the facts
and circumstances prevailing in the market where performance is effected.
Subject to the specific provisions of this Section, the Custodian shall be
liable for any direct damage incurred by a Fund in consequence of the
Custodian's negligence, bad faith, willful misfeasance or misconduct. In no
event shall the Custodian be liable hereunder for any special, indirect,
punitive or consequential damages arising out of, pursuant to or in connection
with this Agreement even if the Custodian has been advised of the possibility of
such damages. It is agreed that the Custodian shall have no duty to assess the
risks inherent in a Fund's Investments or to provide investment advice with
respect to such Investments and that a Fund as principal shall bear any risks
attendant to particular Investments such as failure of counterparty or issuer.
9.1 LIMITATIONS OF PERFORMANCE. The Custodian shall not be responsible
under this Agreement for any failure to perform its duties, and shall not liable
hereunder for any loss or damage in association with such failure to perform,
for or in consequence of the following causes:
20
9.1.1 FORCE MAJEURE. FORCE MAJEURE shall mean any circumstance
or event which is beyond the control of the Custodian, a Subcustodian
or any agent of the Custodian or a Subcustodian and which adversely
affects the performance by the Custodian of its obligations hereunder,
by the Subcustodian of its obligations under its Subcustody Agreement
or by any other agent of the Custodian or the Subcustodian, including
any event caused by, arising out of or involving (a) an act of God, (b)
accident, fire, water damage or explosion, (c) any computer, system or
other equipment failure or malfunction caused by any computer virus or
the malfunction or failure of any communications medium, (d) any
interruption of the power supply or other utility service, (e) any
strike or other work stoppage, whether partial or total, (f) any delay
or disruption resulting from or reflecting the occurrence of any
Sovereign Risk, (g) any disruption of, or suspension of trading in, the
securities, commodities or foreign exchange markets, whether or not
resulting from or reflecting the occurrence of any Sovereign Risk, (h)
any encumbrance on the transferability of a currency or a currency
position on the actual settlement date of a foreign exchange
transaction, whether or not resulting from or reflecting the occurrence
of any Sovereign Risk, or (i) any other cause similarly beyond the
control of the Custodian.
9.1.2 COUNTRY RISK. COUNTRY RISK shall mean, with respect to
the acquisition, ownership, settlement or custody of Investments in a
jurisdiction, all risks relating to, or arising in consequence of,
systemic and markets factors affecting the acquisition, payment for or
ownership of Investments including (a) the prevalence of crime and
corruption, (b) the inaccuracy or unreliability of business and
financial information, (c) the instability or volatility of banking and
financial systems, or the absence or inadequacy of an infrastructure to
support such systems, (d) custody and settlement infrastructure of the
market in which such Investments are transacted and held, (e) the acts,
omissions and operation of any Securities Depository, (f) the risk of
the bankruptcy or insolvency of banking agents, counterparties to cash
and securities transactions, registrars or transfer agents, and (g) the
existence of market conditions which prevent the orderly execution or
settlement of transactions or which affect the value of assets.
9.1.3 SOVEREIGN RISK. SOVEREIGN RISK shall mean, in respect of
any jurisdiction, including the United States of America, where
Investments are acquired or held hereunder or under a subcustodian
agreement, (a) any act of war, terrorism, riot, insurrection or civil
commotion, (b) the imposition of any investment, repatriation or
exchange control restrictions by any Governmental Authority, (c) the
confiscation, expropriation or nationalization of any Investments by
any Governmental Authority, whether de facto or de jure, (iv) any
devaluation or revaluation of the currency, (d) the imposition of
taxes, levies or other charges affecting Investments, (vi) any change
in the Applicable Law, or (e) any other economic or political risk
incurred or experienced.
9.2. LIMITATIONS ON LIABILITY. The Custodian shall not be liable for
any loss, claim, damage or other liability arising from the following causes:
9.2.1 FAILURE OF THIRD PARTIES. The failure of any third party
including: (a) any issuer of Investments or book-entry or other agent
of any issuer; (b) any counterparty with respect to any Investment,
including any issuer of exchange-traded or other futures, option,
derivative or commodities contract; (c) failure of an Investment
Advisor, Foreign Custody Manager or other agent of a Fund; or (d)
failure of other third parties similarly beyond the control or choice
of the Custodian.
9.2.2 INFORMATION SOURCES. The Custodian may rely upon
information received from issuers of Investments or agents of such
issuers, information received from Subcustodians and from other
commercially reasonable sources such as commercial data bases and the
like, but shall
21
not be responsible for specific inaccuracies in such information,
provided that the Custodian has relied upon such information in good
faith, or for the failure of any commercially reasonable information
provider.
9.2.3 RELIANCE ON INSTRUCTION. Action by the Custodian or the
Subcustodian in accordance with an Instruction, even when such action
conflicts with, or is contrary to any provision of, the Trust's
declaration of trust, certificate of incorporation or by-laws,
Applicable Law, or actions by the trustees or shareholders of the
Funds.
9.2.4 RESTRICTED SECURITIES. The limitations inherent in the
rights, transferability or similar investment characteristics of a
given Investment of a Fund.
10. INDEMNIFICATION. Each Fund hereby severally indemnifies the Custodian and
each Subcustodian, and their respective agents, nominees and the partners,
employees, officers and directors, and agrees to hold each of them harmless from
and against all claims and liabilities, including counsel fees and taxes,
incurred or assessed against any of them in connection with the performance of
this Agreement and any Instruction, except such as may arise from their breach
of the relevant standards of conduct set forth herein. If a Subcustodian or any
other person indemnified under the preceding sentence, gives written notice of
claim to the Custodian, the Custodian shall promptly give written notice to the
appropriate Fund.
11. REPORTS AND RECORDS. The Custodian shall:
11.1 create and maintain records relating to the performance
of its obligations under this Agreement and as are required of a
custodian under the Investment Company Act of 1940 and the rules and
regulations thereunder (including Section 31 thereof and Rules 31a-1
and 31a-2 thereunder) and under applicable Federal and State tax laws;
11.2 make available to the Trust, its auditors, agents and
employees, during regular business hours of the Custodian, upon
reasonable request and during normal business hours of the Custodian,
all records maintained by the Custodian pursuant to paragraph (a)
above, subject, however, to all reasonable security requirements of the
Custodian then applicable to the records of its custody customers
generally; and
11.3 make available to the Trust all electronic reports, it
being understood that the Custodian shall not be liable hereunder for
the inaccuracy or incompleteness thereof or for errors in any
information included therein.
22
All such records and reports are the property of the Trust and in the
event of termination of this Agreement shall be delivered promptly to the
successor custodian.
The Fund or its delegate shall examine all records, howsoever produced
or transmitted, promptly upon receipt thereof and notify the Custodian promptly
of any discrepancy or error therein. Unless the Fund delivers written notice of
any such discrepancy or error within six (6) consecutive calendar months after
an audit of such records performed by certified public accountants employed by
the Trust, such records shall be deemed to be true and accurate. It is
understood that the Custodian now obtains and will in the future obtain
information on the value of assets from outside sources which may be utilized in
certain reports made available to the Trust. The Custodian deems such sources to
be reliable but it is acknowledged and agreed that the Custodian does not verify
nor represent nor warrant as to the accuracy or completeness of such information
and accordingly shall be without liability in selecting and using such sources
and furnishing such information, provided that the Custodian has exercised
reasonable care and diligence in selecting such sources and has complied with
its obligations herein or under the Accounting Agency Agreement between the
Custodian and the Trust.
12. MISCELLANEOUS.
12.1 PROXIES, ETC. The Trust will promptly execute and deliver, upon
request, such proxies, powers of attorney or other instruments as may be
reasonable and necessary for the Custodian to provide, or to cause any
Subcustodian to provide, custody services.
12.2 ENTIRE AGREEMENT. Except as specifically provided herein, this
Agreement (together with any schedules or exhibits hereto) constitutes the
entire agreement between the Trust and the Custodian with
23
respect to the subject matter hereof. Accordingly, this Agreement supersedes any
custody agreement or other oral or written agreements heretofore in effect
between the Trust and the Custodian with respect to the custody of the Funds'
Investments.
12.3 WAIVER AND AMENDMENT. No provision of this Agreement may be
waived, amended or modified, and no addendum to this Agreement shall be or
become effective, or be waived, amended or modified, except by an instrument in
writing executed by the party against which enforcement of such waiver,
amendment or modification is sought; provided, however, that an Instruction
shall, whether or not such Instruction shall constitute a waiver, amendment or
modification for purposes hereof, be deemed to have been accepted by the
Custodian when it commences actions pursuant thereto or in accordance therewith.
12.4 GOVERNING LAW AND JURISDICTION. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH, AND BE GOVERNED BY THE LAWS OF, THE STATE OF MASSACHUSETTS,
WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW OF SUCH STATE. THE PARTIES HERETO
IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF MASSACHUSETTS
AND THE FEDERAL COURTS LOCATED IN MASSACHUSETTS.
12.5 NOTICES. Notices and other writings contemplated by this
Agreement, other than Instructions, shall be delivered (a) by hand, (b) by first
class registered or certified mail, postage prepaid, return receipt requested,
(c) by a nationally recognized overnight courier or (d) by facsimile
transmission, provided that any notice or other writing sent by facsimile
transmission shall also be mailed, postage prepaid, to the party to whom such
notice is addressed. All such notices shall be addressed, as follows:
24
If to the Trust:
GMO Trust
00 Xxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Legal Department
Telephone: (000) 000-0000
Facsimile (000) 000-0000
If to the Custodian:
Xxxxx Brothers Xxxxxxxx & Co.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Manager, Securities Department
Telephone: (000) 000-0000
Facsimile: (000) 000-0000,
or such other address as the Trust or the Custodian may have designated
in writing to the other.
12.6 HEADINGS. Paragraph headings included herein are for convenience
of reference only and shall not modify, define, expand or limit any of the terms
or provisions hereof.
12.7 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
the Trust and the Custodian.
12.8 COUNSEL. In fulfilling its duties hereunder, the Custodian shall
be entitled to receive and act upon the advice of (i) counsel regularly retained
by the Custodian in respect of such matters, (ii) counsel for the Trust or (iii)
such counsel as the Trust and the Custodian may agree upon, with respect to all
25
matters, and the Custodian shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
13. DEFINITIONS. The following defined terms will have the respective meanings
set forth below.
13.1 ADVANCE(S) shall mean any extension of credit by or through the
Custodian or by or through any Subcustodian and shall include amounts paid to
third parties for account of a Fund or in discharge of any expense, tax or other
item payable by a Fund.
13.2 AGENCY ACCOUNT(S) shall mean any deposit account opened on the
books of a Subcustodian or other banking institution in accordance with Section
7.1.
13.3 AGENT(S) shall have the meaning set forth in the last sentence of
Section 6.
13.4 APPLICABLE LAW shall mean with respect to each jurisdiction, all
(a) laws, statutes, treaties, regulations, guidelines (or their equivalents);
(b) orders, interpretations licenses and permits; and (c) judgments, decrees,
injunctions writs, orders and similar actions by a court of competent
jurisdiction; compliance with which is required or customarily observed in such
jurisdiction.
13.5 AUTHORIZED PERSON(S) shall mean any person or entity authorized to
give Instructions on behalf of a Fund in accordance with Section 4.1.
13.6 BOOK-ENTRY AGENT(S) shall mean an entity acting as agent for the
issuer of Investments for purposes of recording ownership or similar entitlement
to Investments, including without limitation a transfer agent or registrar.
13.7 CALLBACK shall mean a call by the Custodian to the Fund at its
last known telephone number and a request to speak to the Authorized Person for
the purpose of confirming the details and authorization of an oral instruction.
13.8 CLEARING CORPORATION shall mean any entity or system established
for purposes of providing securities settlement and movement and associated
functions for a given market.
13.9 COMMISSION shall mean the Securities and Exchange Commission.
13.10 17f-5 DELEGATION SCHEDULE shall mean any separate agreement
entered into between the Custodian and the Trust or its authorized
representative with respect to certain matters concerning the appointment and
administration of Subcustodians delegated to the Custodian pursuant to Rule
17f-5.
13.11 FOREIGN CUSTODY MANAGER shall mean a Fund's foreign custody
manager appointed pursuant to Rule 17f-5 of the 1940 Act.
13.12 FOREIGN FINANCIAL REGULATORY AUTHORITY shall have the meaning
given by Section 2(a)(50) of the 0000 Xxx.
13.13 INSTRUCTION(S) shall have the meaning assigned in Section 4.
26
13.14 INVESTMENT ADVISOR shall mean any person or entity who is an
Authorized Person to give Instructions with respect to the investment and
reinvestment of a Fund's Investments.
13.15 INVESTMENT(S) shall mean any investment asset of a Fund,
including without limitation securities, bonds, notes, and debentures as well as
receivables, derivatives, contractual rights or entitlements and other
intangible assets.
13.16 MARGIN ACCOUNT shall have the meaning set forth in Section 6.4
hereof.
13.17 PRINCIPAL ACCOUNT(S) shall mean deposit accounts of a Fund
carried on the books of BBH&Co. as principal in accordance with Section 7.
13.18 SAFEKEEPING ACCOUNT shall mean an account established on the
books of the Custodian or any Subcustodian for purposes of segregating the
interests of a Fund (or clients of the Custodian or Subcustodian) from the
assets of the Custodian or any Subcustodian.
13.19 SECURITIES DEPOSITORY(IES) shall mean a central or book entry
system or agency established under Applicable Law for purposes of recording the
ownership and/or entitlement to investment securities for a given market that,
if a foreign Securities Depository, meets the definitional requirements of an
"eligible securities depository" under Rule 17f-7 under the 1940 Act.
13.20 SUBCUSTODIAN(S) shall mean each foreign bank appointed by the
Custodian pursuant to Section 8, but shall not include Securities Depositories.
13.21 TRI-PARTY AGREEMENT shall have the meaning set forth in Section
6.4 hereof.
13.22 1940 ACT shall mean the Investment Company Act of 1940.
14. COMPENSATION. The Trust agrees to pay to the Custodian (a) a fee in an
amount set forth in the fee letter between the Trust and the Custodian in effect
on the date hereof or as amended from time to time, and (b) all out-of-pocket
expenses incurred by the Custodian, including the fees and expenses of all
Subcustodians, and payable from time to time. Amounts payable by the Trust under
and pursuant to this Section 14 shall be payable by wire transfer to the
Custodian at BBH&Co. in New York, New York.
15. TERMINATION. This Agreement may be terminated by either party in accordance
with the provisions of this Section. The provisions of this Agreement and any
other rights or obligations incurred or accrued by any party hereto prior to
termination of this Agreement shall survive any termination of this
27
Agreement.
15.1 NOTICE AND EFFECT. This Agreement may be terminated by
either party by written notice effective no sooner than seventy-five
days following the date that notice to such effect shall be delivered
to other party at its address set forth in paragraph 12.5 hereof.
15.2 SUCCESSOR CUSTODIAN. In the event of the appointment of a
successor custodian, it is agreed that the Investments of a Fund held
by the Custodian or any Subcustodian shall be delivered to the
successor custodian in accordance with reasonable Instructions. The
Custodian agrees to cooperate with the Trust in the execution of
documents and performance of other actions necessary or desirable in
order to facilitate the succession of the new custodian. If no
successor custodian shall be appointed, the Custodian shall in like
manner transfer a Fund's Investments in accordance with Instructions.
15.3 DELAYED SUCCESSION. If no Instruction has been given as
of the effective date of termination, Custodian may at any time on or
after such termination date and upon ten (10) calendar days written
notice to the Trust deliver the Investments of the Funds held hereunder
to the Trust at the address designated for receipt of notices
hereunder. In the event that Investments or moneys of a Fund remain in
the custody of the Custodian or its Subcustodians after the date of
termination owing to the failure of the Trust to issue Instructions
with respect to their disposition or owing to the fact that such
disposition could not be accomplished in accordance with such
Instructions despite diligent efforts of the Custodian, the Custodian
shall be entitled to compensation for its services with respect to such
Investments and moneys during such period as the Custodian or its
Subcustodians retain possession of such items and the provisions of
this Agreement shall remain in full force and effect until disposition
in accordance with this Section is accomplished.
16. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS. A copy of the
Agreement and Declaration of Trust of the Trust is on file with the Secretary of
the Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Trust as Trustees and
not individually and that the obligations of this instrument are not binding
upon any of the Trustees or shareholders individually but are binding only upon
the assets and property of the Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date first above written.
00
XXXXX XXXXXXXX XXXXXXXX & XX. XXX TRUST ON BEHALF OF EACH SERIES
THEREOF SET FORTH ON SCHEDULE I HERETO
By: _________________________ By: ________________________________
Name: Name:
Title: Title:
Date: June 29, 2001 Date: June 29, 2001
29
SCHEDULE I
GMO International Disciplined Equity Fund
GMO International Intrinsic Value Fund
GMO International Growth Fund
GMO Currency Hedged International Equity Fund
GMO Foreign Fund
GMO Foreign Small Companies Fund
GMO International Small Companies Fund
GMO Emerging Markets Fund
GMO Evolving Countries Fund
GMO Asia Fund
GMO Tax-Managed International Equities Fund
GMO Global Hedged Equity Fund
30
