FORM OF
ASIAN SMALL COMPANIES PORTFOLIO
April , 1996
Asian Small Companies Portfolio hereby adopts and agrees to become a party
to the attached Custodian Agreement with Investors Bank & Trust Company.
ASIAN SMALL COMPANIES PORTFOLIO
BY: ______________________________
Accepted and agreed to:
INVESTORS BANK & TRUST COMPANY
BY:_____________________________
Title
CUSTODIAN AGREEMENT
between
ASIAN SMALL COMPANIES PORTFOLIO et al
and
INVESTORS BANK & TRUST COMPANY
TABLE OF CONTENTS
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1-3
2. Employment of Custodian and Property to be Held by it . . . . 3
3. Duties of the Custodian with Respect to Property of the Trust 4
A. Safekeeping and Holding of Property . . . . . . . . . . . 4
B. Delivery of Securities . . . . . . . . . . . . . . . . . 4-7
C. Registration of Securities . . . . . . . . . . . . . . . . 7
D. Bank Accounts . . . . . . . . . . . . . . . . . . . . . 7-8
E. Payments for Interests, or Increases in Interests, in
the Trust . . . . . . . . . . . . . . . . . . . . . . . 8
F. Investment and Availability of Federal Funds . . . . . . . 8
G. Collections . . . . . . . . . . . . . . . . . . . . . . 8-9
H. Payment of Trust Monies . . . . . . . . . . . . . . . . 9-11
I. Liability for Payment in Advance of Receipt of Securities
Purchased . . . . . . . . . . . . . . . . . . . . . . . 11
J. Payments for Repurchases or Redemptions of Interests of
the Trust . . . . . . . . . . . . . . . . . . . . . . . 11
K. Appointment of Agents by the Custodian . . . . . . . . 11-12
L. Deposit of Trust Portfolio Securities in Securities
Systems . . . . . . . . . . . . . . . . . . . . . . 12-14
M. Deposit of Trust Commercial Paper in an Approved
Book-Entry System for Commercial Paper . . . . . . 14-16
X. Xxxxxxxxxx Account . . . . . . . . . . . . . . . . . . 16-17
O. Ownership Certificates for Tax Purposes . . . . . . . . . 17
P. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . 17
Q. Communications Relating to Trust Portfolio Securities . . 17
R. Exercise of Rights; Tender Offers . . . . . . . . . . 17-18
S. Depository Receipts . . . . . . . . . . . . . . . . . . . 18
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T. Interest Bearing Call or Time Deposits . . . . . . . . 18-19
U. Options, Futures Contracts and Foreign Currency
Transactions . . . . . . . . . . . . . . . . . . . 19-21
V. Actions Permitted Without Express Authority . . . . . . . 21
4. Duties of Bank with Respect to Books of Account and
Calculations of Net Asset Value . . . . . . . . . . . . . 21-22
5. Records and Miscellaneous Duties . . . . . . . . . . . . . 22-23
6. Opinion of Trust's Independent Public Accountants . . . . . . 23
7. Compensation and Expenses of Bank . . . . . . . . . . . . . . 23
8. Responsibility of Bank . . . . . . . . . . . . . . . . . . 23-24
9. Persons Having Access to Assets of the Trust . . . . . . . . . 24
10. Effective Period, Termination and Amendment; Successor
Custodian . . . . . . . . . . . . . . . . . . . . . . . . 24-25
11. Interpretive and Additional Provisions . . . . . . . . . . 25-26
12. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
13. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . 26
14. Adoption of the Agreement by the Trust . . . . . . . . . . . . 26
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CUSTODIAN AGREEMENT
This Agreement is made between Asian Small Companies Portfolio
and each of the investment companies listed on Schedule A attached hereto,
each of which has adopted this Agreement in the manner provided herein and
Investors Bank & Trust Company (hereinafter called "Bank", "Custodian" and
"Agent"), a trust company established under the laws of Massachusetts with
a principal place of business in Boston, Massachusetts.
Whereas, each such investment company is registered under the
Investment Company Act of 1940 and has appointed the Bank to act as
Custodian of its property and to perform certain duties as its Agent, as
more fully hereinafter set forth; and
Whereas, the Bank is willing and able to act as each such
investment company's Custodian and Agent, subject to and in accordance
with the provisions hereof;
Now, therefore, in consideration of the premises and of the
mutual covenants and agreements herein contained, each such investment
company and the Bank agree as follows:
1. Definitions
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Trust" shall mean the investment company which has adopted
this Agreement.
(b) "Board" shall mean the board of trustees of the Trust.
(c) "The Depository Trust Company", a clearing agency registered
with the Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934 which acts as a securities depository and
which has been specifically approved as a securities depository for the
Trust by the Board.
(d) "Participants Trust Company", a clearing agency registered
with the Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934 which acts as a securities depository and
which has been specifically approved as a securities depository for the
Trust by the Board.
(e) "Approved Clearing Agency" shall mean any other domestic
clearing agency registered with the Securities and Exchange Commission
under Section 17A of the Securities Exchange Act of 1934 which acts as a
securities depository but only if the Custodian has received a certified
copy of a resolution of the Board approving such clearing agency as a
securities depository for the Trust.
(f) "Federal Book-Entry System" shall mean the book-entry
system referred to in Rule 17f-4(b) under the Investment Company Act of
1940 for United States and federal agency securities (i.e., as provided in
Subpart O of Treasury Circular No. 300, 31 CFR 306, Subpart B of 31 CFR
Part 350, and the book-entry regulations of federal agencies substantially
in the form of Subpart O).
(g) "Approved Foreign Securities Depository" shall mean a
foreign securities depository or clearing agency referred to in Rule 17f-4
under the Investment Company Act of 1940 for foreign securities but only
if the Custodian has received a certified copy of a resolution of the
Board approving such depository or clearing agency as a foreign securities
depository for the Trust.
(h) "Approved Book-Entry System for Commercial Paper" shall mean
a system maintained by the Custodian or by a subcustodian employed
pursuant to Section 2 hereof for the holding of commercial paper in
book-entry form but only if the Custodian has received a certified copy of
a resolution of the Board approving the participation by the Trust in such
system.
(i) The Custodian shall be deemed to have received "proper
instructions" in respect of any of the matters referred to in this
Agreement upon receipt of written or facsimile instructions signed by such
one or more person or persons as the Board shall have from time to time
authorized to give the particular class of instructions in question.
Different persons may be authorized to give instructions for different
purposes. A certified copy of a resolution of the Board may be received
and accepted by the Custodian as conclusive evidence of the authority of
any such person to act and may be considered as in full force and effect
until receipt of written notice to the contrary. Such instructions may be
general or specific in terms and, where appropriate, may be standing
instructions. Unless the resolution delegating authority to any person or
persons to give a particular class of instructions specifically requires
that the approval of any person, persons or committee shall first have
been obtained before the Custodian may act on instructions of that class,
the Custodian shall be under no obligation to question the right of the
person or persons giving such instructions in so doing. Oral instructions
will be considered proper instructions if the Custodian reasonably
believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Trust shall
cause all oral instructions to be confirmed in writing. The Trust
authorizes the Custodian to tape record any and all telephonic or other
oral instructions given to the Custodian. Upon receipt of a certificate
signed by two officers of the Trust as to the authorization by the
President and the Treasurer of the Trust accompanied by a detailed
description of the communication procedures approved by the President and
the Treasurer of the Trust, "proper instructions" may also include
communications effected directly between electromechanical or electronic
devices provided that the President and Treasurer of the Trust and the
Custodian are satisfied that such procedures afford adequate safeguards
for the Trust's assets. In performing its duties generally, and more
particularly in connection with the purchase, sale and exchange of
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securities made by or for the Trust, the Custodian may take cognizance of
the provisions of the governing documents and registration statement of
the Trust as the same may from time to time be in effect (and resolutions
or proceedings of the holders of interests in the Trust or the Board),
but, nevertheless, except as otherwise expressly provided herein, the
Custodian may assume unless and until notified in writing to the contrary
that so-called proper instructions received by it are not in conflict with
or in any way contrary to any provisions of such governing documents and
registration statement, or resolutions or proceedings of the holders of
interests in the Trust or the Board.
(j) The term "Vote" when used with respect to the Board or the
Holders of Interests in the Trust shall include a vote, resolution,
consent, proceeding and other action taken by the Board or Holders in
accordance with the Declaration of Trust or By-Laws of the Trust.
2. Employment of Custodian and Property to be Held by It
The Trust hereby appoints and employs the Bank as its Custodian
and Agent in accordance with and subject to the provisions hereof, and the
Bank hereby accepts such appointment and employment. The Trust agrees to
deliver to the Custodian all securities, participation interests, cash and
other assets owned by it, and all payments of income, payments of
principal and capital distributions and adjustments received by it with
respect to all securities and participation interests owned by the Trust
from time to time, and the cash consideration received by it from time to
time in exchange for an interest in the Trust or for an increase in such
an interest. The Custodian shall not be responsible for any property of
the Trust held by the Trust and not delivered by the Trust to the
Custodian. The Trust will also deliver to the Bank from time to time
copies of its currently effective declaration of trust, by-laws,
registration statement and placement agent agreement with its placement
agent, together with such resolutions, and other proceedings of the Trust
as may be necessary for or convenient to the Bank in the performance of
its duties hereunder.
The Custodian may from time to time employ one or more
subcustodians to perform such acts and services upon such terms and
conditions as shall be approved from time to time by the Board. Any such
subcustodian so employed by the Custodian shall be deemed to be the agent
of the Custodian, and the Custodian shall remain primarily responsible for
the securities, participation interests, moneys and other property of the
Trust held by such subcustodian. Any foreign subcustodian shall be a bank
or trust company which is an eligible foreign custodian within the meaning
of Rule 17f-5 under the Investment Company Act of 1940, and the foreign
custody arrangements shall be approved by the Board and shall be in
accordance with and subject to the provisions of said Rule. For the
purposes of this Agreement, any property of the Trust held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the
Custodian under the terms of this Agreement.
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3. Duties of the Custodian with Respect to Property of the Trust
A. Safekeeping and Holding of Property The Custodian shall
keep safely all property of the Trust and on behalf of
the Trust shall from time to time receive delivery of
Trust property for safekeeping. The Custodian shall
hold, earmark and segregate on its books and records for
the account of the Trust all property of the Trust,
including all securities, participation interests and
other assets of the Trust (1) physically held by the
Custodian, (2) held by any subcustodian referred to in
Section 2 hereof or by any agent referred to in Paragraph
K hereof, (3) held by or maintained in The Depository
Trust Company or in Participants Trust Company or in an
Approved Clearing Agency or in the Federal Book-Entry
System or in an Approved Foreign Securities Depository,
each of which from time to time is referred to herein as
a "Securities System", and (4) held by the Custodian or
by any subcustodian referred to in Section 2 hereof and
maintained in any Approved Book-Entry System for
Commercial Paper.
B. Delivery of Securities The Custodian shall release and
deliver securities or participation interests owned by
the Trust held (or deemed to be held) by the Custodian or
maintained in a Securities System account or in an
Approved Book-Entry System for Commercial Paper account
only upon receipt of proper instructions, which may be
continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities or participation
interests for the account of the Trust, but only
against receipt of payment therefor; if delivery
is made in Boston or New York City, payment
therefor shall be made in accordance with
generally accepted clearing house procedures or
by use of Federal Reserve Wire System
procedures; if delivery is made elsewhere
payment therefor shall be in accordance with the
then current "street delivery" custom or in
accordance with such procedures agreed to in
writing from time to time by the parties hereto;
if the sale is effected through a Securities
System, delivery and payment therefor shall be
made in accordance with the provisions of
Paragraph L hereof; if the sale of commercial
paper is to be effected through an Approved
Book-Entry System for Commercial Paper, delivery
and payment therefor shall be made in accordance
with the provisions of Paragraph M hereof; if
the securities are to be sold outside the United
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States, delivery of the securities for the
account of the Trust may be made either (a) in
advance of receipt of payment therefor in the
absence of specific instructions to do so
provided such actions are consistent with local
settlement practices and customs, subject to the
Custodian's standard of care, or (b) in
accordance with procedures agreed to in writing
from time to time by the parties hereto; for the
purposes of this subparagraph, the term "sale"
shall include the disposition of a portfolio
security (i) upon the exercise of an option
written by the Trust and (ii) upon the failure
by the Trust to make a successful bid with
respect to a portfolio security, the continued
holding of which is contingent upon the making
of such a bid;
2) Upon the receipt of payment in connection with
any repurchase agreement or reverse repurchase
agreement relating to such securities and
entered into by the Trust;
3) To the depository agent in connection with
tender or other similar offers for portfolio
securities of the Trust;
4) To the issuer thereof or its agent when such
securities or participation interests are
called, redeemed, retired or otherwise become
payable; provided that, in any such case, the
cash or other consideration is to be delivered
to the Custodian or any subcustodian employed
pursuant to Section 2 hereof;
5) To the issuer thereof, or its agent, for
transfer into the name of the Trust or into the
name of any nominee of the Custodian or into the
name or nominee name of any agent appointed
pursuant to Paragraph K hereof or into the name
or nominee name of any subcustodian employed
pursuant to Section 2 hereof; or for exchange
for a different number of bonds, certificates or
other evidence representing the same aggregate
face amount or number of units; provided that,
in any such case, the new securities or
participation interests are to be delivered to
the Custodian or any subcustodian employed
pursuant to Section 2 hereof;
6) To the broker selling the same for examination
in accordance with the "street delivery" custom;
5
provided that the Custodian shall adopt such
procedures as the Trust from time to time shall
approve to ensure their prompt return to the
Custodian by the broker in the event the broker
elects not to accept them;
7) For exchange or conversion pursuant to any plan
of merger, consolidation, recapitalization,
reorganization or readjustment of the securities
of the issuer of such securities, or pursuant to
provisions for conversion of such securities, or
pursuant to any deposit agreement; provided
that, in any such case, the new securities and
cash, if any, are to be delivered to the
Custodian or any subcustodian employed pursuant
to Section 2 hereof;
8) In the case of warrants, rights or similar
securities, the surrender thereof in connection
with the exercise of such warrants, rights or
similar securities, or the surrender of interim
receipts or temporary securities for definitive
securities; provided that, in any such case, the
new securities and cash, if any, are to be
delivered to the Custodian or any subcustodian
employed pursuant to Section 2 hereof;
9) For delivery in connection with any loans of
securities made by the Trust (such loans to be
made pursuant to the terms of the Trust's
current registration statement), but only
against receipt of adequate collateral as agreed
upon from time to time by the Custodian and the
Trust, which may be in the form of cash or
obligations issued by the United States
government, its agencies or instrumentalities;
except that in connection with any securities
loans for which collateral is to be credited to
the Custodian's account in the book-entry system
authorized by the U.S. Department of Treasury,
the Custodian will not be held liable or
responsible for the delivery of securities
loaned by the Trust prior to the receipt of such
collateral;
10) For delivery as security in connection with any
borrowings by the Trust requiring a pledge or
hypothecation of assets by the Trust (if then
permitted under circumstances described in the
current registration statement of the Trust),
provided, that the securities shall be released
only upon payment to the Custodian of the monies
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borrowed, except that in cases where additional
collateral is required to secure a borrowing
already made, further securities may be released
for that purpose; upon receipt of proper
instructions, the Custodian may pay any such
loan upon redelivery to it of the securities
pledged or hypothecated therefor and upon
surrender of the note or notes evidencing the
loan;
11) When required for delivery in connection with
any reduction of or redemption of an interest in
the Trust in accordance with the provisions of
Paragraph J hereof;
12) For delivery in accordance with the provisions
of any agreement between the Custodian (or a
subcustodian employed pursuant to Section 2
hereof) and a broker-dealer registered under the
Securities Exchange Act of 1934 and, if
necessary, the Trust, relating to compliance
with the rules of The Options Clearing
Corporation or of any registered national
securities exchange, or of any similar
organization or organizations, regarding deposit
or escrow or other arrangements in connection
with options transactions by the Trust;
13) For delivery in accordance with the provisions
of any agreement among the Trust, the Custodian
(or a subcustodian employed pursuant to Section
2 hereof), and a futures commissions merchant,
relating to compliance with the rules of the
Commodity Futures Trading Commission and/or of
any contract market or commodities exchange or
similar organization, regarding futures margin
account deposits or payments in connection with
futures transactions by the Trust;
14) For any other proper corporate purpose, but only
upon receipt of, in addition to proper
instructions, a certified copy of a resolution
of the Board specifying the securities to be
delivered, setting forth the purpose for which
such delivery is to be made, declaring such
purpose to be proper corporate purpose, and
naming the person or persons to whom delivery of
such securities shall be made.
C. Registration of Securities Securities held by the
Custodian (other than bearer securities) for the account
of the Trust shall be registered in the name of the Trust
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or in the name of any nominee of the Trust or of any
nominee of the Custodian, or in the name or nominee name
of any agent appointed pursuant to Paragraph K hereof, or
in the name or nominee name of any subcustodian employed
pursuant to Section 2 hereof, or in the name or nominee
name of The Depository Trust Company or Participants
Trust Company or Approved Clearing Agency or Federal
Book-Entry System or Approved Book-Entry System for
Commercial Paper; provided, that securities are held in
an account of the Custodian or of such agent or of such
subcustodian containing only assets of the Trust or only
assets held by the Custodian or such agent or such
subcustodian as a custodian or subcustodian or in a
fiduciary capacity for customers. All certificates for
securities accepted by the Custodian or any such agent or
subcustodian on behalf of the Trust shall be in "street"
or other good delivery form or shall be returned to the
selling broker or dealer who shall be advised of the
reason thereof.
D. Bank Accounts The Custodian shall open and maintain a
separate bank account or accounts in the name of the
Trust, subject only to draft or order by the Custodian
acting pursuant to the terms of this Agreement, and shall
hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for
the account of the Trust other than cash maintained by
the Trust in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company
Act of 1940. Funds held by the Custodian for the Trust
may be deposited by it to its credit as Custodian in the
Banking Department of the Custodian or in such other
banks or trust companies as the Custodian may in its
discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment
Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank
or trust company shall be approved in writing by two
officers of the Trust. Such funds shall be deposited by
the Custodian in its capacity as Custodian and shall be
subject to withdrawal only by the Custodian in that
capacity.
E. Payment for Interests, or Increases in Interests, in the
Trust The Custodian shall make appropriate arrangements
with the Transfer Agent of the Trust to enable the
Custodian to make certain it promptly receives the cash
or other consideration due to the Trust for payment of
interests in the Trust, or increases in such interests,
in accordance with the governing documents and
registration statement of the Trust. The Custodian will
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provide prompt notification to the Trust of any receipt
by it of such payments.
F. Investment and Availability of Federal Funds Upon
agreement between the Trust and the Custodian, the
Custodian shall, upon the receipt of proper instructions,
which may be continuing instructions when deemed
appropriate by the parties, invest in such securities and
instruments as may be set forth in such instructions on
the same day as received all federal funds received after
a time agreed upon between the Custodian and the Trust.
G. Collections The Custodian shall promptly collect all
income and other payments with respect to registered
securities held hereunder to which the Trust shall be
entitled either by law or pursuant to custom in the
securities business, and shall promptly collect all
income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such
securities are held by the Custodian or agent thereof and
shall credit such income, as collected, to the Trust's
custodian account. The Custodian shall do all things
necessary and proper in connection with such prompt
collections and, without limiting the generality of the
foregoing, the Custodian shall
1) Present for payment all coupons and other income
items requiring presentations;
2) Present for payment all securities which may
mature or be called, redeemed, retired or
otherwise become payable;
3) Endorse and deposit for collection, in the name
of the Trust, checks, drafts or other negotiable
instruments;
4) Credit income from securities maintained in a
Securities System or in an Approved Book-Entry
System for Commercial Paper at the time funds
become available to the Custodian; in the case
of securities maintained in The Depository Trust
Company funds shall be deemed available to the
Trust not later than the opening of business on
the first business day after receipt of such
funds by the Custodian. The Custodian shall
notify the Trust as soon as reasonably
practicable whenever income due on any security
is not promptly collected. In any case in which
the Custodian does not receive any due and
unpaid income after it has made demand for the
same, it shall immediately so notify the Trust
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in writing, enclosing copies of any demand
letter, any written response thereto, and
memoranda of all oral responses thereto and to
telephonic demands, and await instructions from
the Trust; the Custodian shall in no case have
any liability for any nonpayment of such income
provided the Custodian meets the standard of
care set forth in Section 8 hereof. The
Custodian shall not be obligated to take legal
action for collection unless and until
reasonably indemnified to its satisfaction.
The Custodian shall also receive and collect all
stock dividends, rights and other items of like
nature, and deal with the same pursuant to
proper instructions relative thereto.
H. Payment of Trust Monies Upon receipt of proper
instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall
pay out monies of the Trust in the following cases only:
1) Upon the purchase of securities, participation
interests, options, futures contracts, forward
contracts and options on futures contracts
purchased for the account of the Trust but only
(a) against the receipt of
(i) such securities registered as provided in
Paragraph C hereof or in proper form for
transfer or
(ii) detailed instructions signed by an officer
of the Trust regarding the participation
interests to be purchased or
(iii) written confirmation of the purchase by
the Trust of the options, futures contracts,
forward contracts or options on futures
contracts by the Custodian (or by a subcustodian
employed pursuant to Section 2 hereof or by a
clearing corporation of a national securities
exchange of which the Custodian is a member or
by any bank, banking institution or trust
company doing business in the United States or
abroad which is qualified under the Investment
Company Act of 1940 to act as a custodian and
which has been designated by the Custodian as
its agent for this purpose or by the agent
specifically designated in such instructions as
representing the purchasers of a new issue of
privately placed securities); (b) in the case of
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a purchase effected through a Securities System,
upon receipt of the securities by the Securities
System in accordance with the conditions set
forth in Paragraph L hereof; (c) in the case of
a purchase of commercial paper effected through
an Approved Book-Entry System for Commercial
Paper, upon receipt of the paper by the
Custodian or subcustodian in accordance with the
conditions set forth in Paragraph M hereof; (d)
in the case of repurchase agreements entered
into between the Trust and another bank or a
broker-dealer, against receipt by the Custodian
of the securities underlying the repurchase
agreement either in certificate form or through
an entry crediting the Custodian's segregated,
non-proprietary account at the Federal Reserve
Bank of Boston with such securities along with
written evidence of the agreement by the bank or
broker-dealer to repurchase such securities from
the Trust; or (e) in the case of securities
purchased outside the United States, the
Custodian may make payment therefor either (i)
in advance of receipt of such securities in the
absence of specific instructions to do so
provided such actions are consistent with local
settlement practices and customs, subject to the
Custodian's standard of care, or (ii) in
accordance with procedures agreed to in writing
from time to time by the parties hereto;
2) When required in connection with the conversion,
exchange or surrender of securities owned by the
Trust as set forth in Paragraph B hereof;
3) When required for the reduction or redemption of
an interest in the Trust in accordance with the
provisions of Paragraph J hereof;
4) For the payment of any expense or liability
incurred by the Trust, including but not limited
to the following payments for the account of the
Trust: advisory fees, interest, taxes,
management compensation and expenses,
accounting, transfer agent and legal fees, and
other operating expenses of the Trust whether or
not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For distributions or payments to Holders of
Interest of the Trust; and
6) For any other proper corporate purpose, but only
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upon receipt of, in addition to proper
instructions, a certified copy of a resolution
of the Board, specifying the amount of such
payment, setting forth the purpose for which
such payment is to be made, declaring such
purpose to be a proper corporate purpose, and
naming the person or persons to whom such
payment is to be made.
I. Liability for Payment in Advance of Receipt of Securities
Purchased In any and every case where payment for
purchase of securities for the account of the Trust is
made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written
instructions signed by two officers of the Trust to so
pay in advance, the Custodian shall be absolutely liable
to the Trust for such securities to the same extent as if
the securities had been received by the Custodian; except
that in the case of a repurchase agreement entered into
by the Trust with a bank which is a member of the Federal
Reserve System, the Custodian may transfer funds to the
account of such bank prior to the receipt of (i) the
securities in certificate form subject to such repurchase
agreement or (ii) written evidence that the securities
subject to such repurchase agreement have been
transferred by book-entry into a segregated
non-proprietary account of the Custodian maintained with
the Federal Reserve Bank of Boston or (iii) the
safekeeping receipt, provided that such securities have
in fact been so transferred by book-entry and the written
repurchase agreement is received by the Custodian in due
course; and except that if the securities are to be
purchased outside the United States, payment may be made
in accordance with procedures agreed to in writing from
time to time by the parties hereto. Notwithstanding any
other provision in this Agreement to the contrary, where
securities are purchased or sold outside the United
States, delivery of securities for the account of the
Trust may be made by the Custodian in advance of receipt
of payment for the securities sold, and the Custodian may
pay for securities in advance of receipt of the
securities purchased for the account of the Trust, in the
absence of specific instructions to do so provided such
actions are consistent with local settlement practices
and customs, subject to the Custodian's standard of care.
J. Payments for Repurchases or Redemptions of Interests in
the Trust From such funds as may be available for the
purpose, but subject to any applicable resolutions of the
Board and the current procedures of the Trust, the
Custodian shall, upon receipt of written instructions
from the Trust or from the Trust's transfer agent make
12
funds and/or portfolio securities available for payment
to holders of interest in the Trust which have caused the
amount of their interests to be reduced, or for their
interest to be redeemed.
K. Appointment of Agents by the Custodian The Custodian may
at any time or times in its discretion appoint (and may
at any time remove) any other bank or trust company
(provided such bank or trust company is itself qualified
under the Investment Company Act of 1940 to act as a
custodian or is itself an eligible foreign custodian
within the meaning of Rule 17f-5 under said Act) as the
agent of the Custodian to carry out such of the duties
and functions of the Custodian described in this Section
3 as the Custodian may from time to time direct;
provided, however, that the appointment of any such agent
shall not relieve the Custodian of any of its
responsibilities or liabilities hereunder, and as between
the Trust and the Custodian the Custodian shall be fully
responsible for the acts and omissions of any such agent.
For the purposes of this Agreement, any property of the
Trust held by any such agent shall be deemed to be held
by the Custodian hereunder.
L. Deposit of Trust Portfolio Securities in Securities
Systems The Custodian may deposit and/or maintain
securities owned by the Trust
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities
Depository
in each case only in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission
rules and regulations, and at all times subject to the
following provisions:
(a) The Custodian may (either directly or
through one or more subcustodians employed pursuant to
Section 2 keep securities of the Trust in a Securities
System provided that such securities are maintained in a
non-proprietary account ("Account") of the Custodian or
such subcustodian in the Securities System which shall
not include any assets of the Custodian or such
subcustodian or any other person other than assets held
13
by the Custodian or such subcustodian as a fiduciary,
custodian, or otherwise for its customers.
(b) The records of the Custodian with respect
to securities of the Trust which are maintained in a
Securities System shall identify by book-entry those
securities belonging to the Trust, and the Custodian
shall be fully and completely responsible for maintaining
a recordkeeping system capable of accurately and
currently stating the Trust's holdings maintained in each
such Securities System.
(c) The Custodian shall pay for securities
purchased in book-entry form for the account of the Trust
only upon (i) receipt of notice or advice from the
Securities System that such securities have been
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
payment and transfer for the account of the Trust; except
that when such securities are purchased outside the
United States, payment therefor may be made by the
Custodian in advance of receipt of such notice or advice
and the making of such entry in the absence of specific
instructions to do so provided such actions are
consistent with local settlement practices and customs,
subject to the Custodian's standard of care. The
Custodian shall transfer securities sold for the account
of the Trust only upon (i) receipt of notice or advice
from the Securities System that payment for such
securities has been transferred to the Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the
Trust; except that when such securities are sold outside
the United States, transfer thereof may be made by the
Custodian in advance of receipt of such notice or advice
and the making of such entry in the absence of specific
instructions to do so provided such actions are
consistent with local settlement practices and customs,
subject to the Custodian's standard of care. Copies of
all notices or advices from the Securities System of
transfers of securities for the account of the Trust
shall identify the Trust, be maintained for the Trust by
the Custodian and be promptly provided to the Trust at
its request. The Custodian shall promptly send to the
Trust confirmation of each transfer to or from the
account of the Trust in the form of a written advice or
notice of each such transaction, and shall furnish to the
Trust copies of daily transaction sheets reflecting each
day's transactions in the Securities System for the
account of the Trust on the next business day.
(d) The Custodian shall promptly send to the
14
Trust any report or other communication received or
obtained by the Custodian relating to the Securities
System's accounting system, system of internal accounting
controls or procedures for safeguarding securities
deposited in the Securities System; the Custodian shall
promptly send to the Trust any report or other
communication relating to the Custodian's internal
accounting controls and procedures for safeguarding
securities deposited in any Securities System; and the
Custodian shall ensure that any agent appointed pursuant
to Paragraph K hereof or any subcustodian employed
pursuant to Section 2 hereof shall promptly send to the
Trust and to the Custodian any report or other
communication relating to such agent's or subcustodian's
internal accounting controls and procedures for
safeguarding securities deposited in any Securities
System. The Custodian's books and records relating to
the Trust's participation in each Securities System will
at all times during regular business hours be open to the
inspection of the Trust's authorized officers, employees
or agents.
(e) The Custodian shall not act under this
Paragraph L in the absence of receipt of a certificate of
an officer of the Trust that the Board has approved the
use of a particular Securities System; the Custodian
shall also obtain appropriate assurance from the officers
of the Trust that the Board has annually reviewed the
continued use by the Trust of each Securities System, and
the Trust shall promptly notify the Custodian if the use
of a Securities System is to be discontinued; at the
request of the Trust, the Custodian will terminate the
use of any such Securities System as promptly as
practicable.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to the Trust resulting from
use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its
agents or subcustodians or of any of its or their
employees or from any failure of the Custodian or any
such agent or subcustodian to enforce effectively such
rights as it may have against the Securities System or
any other person; at the election of the Trust, it shall
be entitled to be subrogated to the rights of the
Custodian with respect to any claim against the
Securities System or any other person which the Custodian
may have as a consequence of any such loss or damage if
and to the extent that the Trust has not been made whole
for any such loss or damage.
15
M. Deposit of Trust Commercial Paper in an Approved
Book-Entry System for Commercial Paper Upon receipt of
proper instructions with respect to each issue of direct
issue commercial paper purchased by the Trust, the
Custodian may deposit and/or maintain direct issue
commercial paper owned by the Trust in any Approved
Book-Entry System for Commercial Paper, in each case only
in accordance with applicable Securities and Exchange
Commission rules, regulations, and no-action
correspondence, and at all times subject to the following
provisions:
(a) The Custodian may (either directly or
through one or more subcustodians employed pursuant to
Section 2) keep commercial paper of the Trust in an
Approved Book-Entry System for Commercial Paper, provided
that such paper is issued in book entry form by the
Custodian or subcustodian on behalf of an issuer with
which the Custodian or subcustodian has entered into a
book-entry agreement and provided further that such paper
is maintained in a non-proprietary account ("Account") of
the Custodian or such subcustodian in an Approved
Book-Entry System for Commercial Paper which shall not
include any assets of the Custodian or such subcustodian
or any other person other than assets held by the
Custodian or such subcustodian as a fiduciary, custodian,
or otherwise for its customers.
(b) The records of the Custodian with respect
to commercial paper of the Trust which is maintained in
an Approved Book-Entry System for Commercial Paper shall
identify by book-entry each specific issue of commercial
paper purchased by the Trust which is included in the
System and shall at all times during regular business
hours be open for inspection by authorized officers,
employees or agents of the Trust. The Custodian shall be
fully and completely responsible for maintaining a
recordkeeping system capable of accurately and currently
stating the Trust's holdings of commercial paper
maintained in each such System.
(c) The Custodian shall pay for commercial
paper purchased in book-entry form for the account of the
Trust only upon contemporaneous (i) receipt of notice or
advice from the issuer that such paper has been issued,
sold and transferred to the Account, and (ii) the making
of an entry on the records of the Custodian to reflect
such purchase, payment and transfer for the account of
the Trust. The Custodian shall transfer such commercial
paper which is sold or cancel such commercial paper which
is redeemed for the account of the Trust only upon
contemporaneous (i) receipt of notice or advice that
16
payment for such paper has been transferred to the
Account, and (ii) the making of an entry on the records
of the Custodian to reflect such transfer or redemption
and payment for the account of the Trust. Copies of all
notices, advices and confirmations of transfers of
commercial paper for the account of the Trust shall
identify the Trust, be maintained for the Trust by the
Custodian and be promptly provided to the Trust at its
request. The Custodian shall promptly send to the Trust
confirmation of each transfer to or from the account of
the Trust in the form of a written advice or notice of
each such transaction, and shall furnish to the Trust
copies of daily transaction sheets reflecting each day's
transactions in the System for the account of the Trust
on the next business day.
(d) The Custodian shall promptly send to the
Trust any report or other communication received or
obtained by the Custodian relating to each System's
accounting system, system of internal accounting controls
or procedures for safeguarding commercial paper deposited
in the System; the Custodian shall promptly send to the
Trust any report or other communication relating to the
Custodian's internal accounting controls and procedures
for safeguarding commercial paper deposited in any
Approved Book-Entry System for Commercial Paper; and the
Custodian shall ensure that any agent appointed pursuant
to Paragraph K hereof or any subcustodian employed
pursuant to Section 2 hereof shall promptly send to the
Trust and to the Custodian any report or other
communication relating to such agent's or subcustodian's
internal accounting controls and procedures for
safeguarding securities deposited in any Approved
Book-Entry System for Commercial Paper.
(e) The Custodian shall not act under this
Paragraph M in the absence of receipt of a certificate of
an officer of the Trust that the Board has approved the
use of a particular Approved Book-Entry System for
Commercial Paper; the Custodian shall also obtain
appropriate assurance from the officers of the Trust that
the Board has annually reviewed the continued use by the
Trust of each Approved Book-Entry System for Commercial
Paper, and the Trust shall promptly notify the Custodian
if the use of an Approved Book-Entry System for
Commercial Paper is to be discontinued; at the request of
the Trust, the Custodian will terminate the use of any
such System as promptly as practicable.
(f) The Custodian (or subcustodian, if the
Approved Book-Entry System for Commercial Paper is
maintained by the subcustodian) shall issue physical
17
commercial paper or promissory notes whenever requested
to do so by the Trust or in the event of an electronic
system failure which impedes issuance, transfer or
custody of direct issue commercial paper by book-entry.
(g) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to the Trust resulting from
use of any Approved Book-Entry System for Commercial
Paper by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or
subcustodians or of any of its or their employees or from
any failure of the Custodian or any such agent or
subcustodian to enforce effectively such rights as it may
have against the System, the issuer of the commercial
paper or any other person; at the election of the Trust,
it shall be entitled to be subrogated to the rights of
the Custodian with respect to any claim against the
System, the issuer of the commercial paper or any other
person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the
Trust has not been made whole for any such loss or
damage.
N. Segregated Account The Custodian shall upon receipt of
proper instructions establish and maintain a segregated
account or accounts for and on behalf of the Trust, into
which account or accounts may be transferred cash and/or
securities, including securities maintained in an account
by the Custodian pursuant to Paragraph L hereof, (i) in
accordance with the provisions of any agreement among the
Trust, the Custodian and any registered broker-dealer (or
any futures commission merchant), relating to compliance
with the rules of the Options Clearing Corporation and of
any registered national securities exchange (or of the
Commodity Futures Trading Commission or of any contract
market or commodities exchange), or of any similar
organization or organizations, regarding escrow or
deposit or other arrangements in connection with
transactions by the Trust, (ii) for purposes of
segregating cash or U.S. Government securities in
connection with options purchased, sold or written by
the Trust or futures contracts or options thereon
purchased or sold by the Trust, (iii) for the purposes of
compliance by the Trust with the procedures required by
Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies
and (iv) for other proper purposes, but only, in the case
of clause (iv), upon receipt of, in addition to proper
instructions, a certificate signed by two officers of the
18
Trust, setting forth the purpose such segregated account
and declaring such purpose to be a proper purpose.
O. Ownership Certificates for Tax Purposes The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to securities of the Trust held by it and in
connection with transfers of securities.
P. Proxies The Custodian shall, with respect to the
securities held by it hereunder, cause to be promptly
delivered to the Trust all forms of proxies and all
notices of meetings and any other notices or
announcements or other written information affecting or
relating to the securities, and upon receipt of proper
instructions shall execute and deliver or cause its
nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian
nor its nominee shall vote upon any of the securities or
execute any proxy to vote thereon or give any consent or
take any other action with respect thereto (except as
otherwise herein provided) unless ordered to do so by
proper instructions.
Q. Communications Relating to Trust Portfolio Securities
The Custodian shall deliver promptly to the Trust all
written information (including, without limitation,
pendency of call and maturities of securities and
participation interests and expirations of rights in
connection therewith and notices of exercise of call and
put options written by the Trust and the maturity of
futures contracts purchased or sold by the Trust)
received by the Custodian from issuers and other persons
relating to the securities and participation interests
being held for the Trust. With respect to tender or
exchange offers, the Custodian shall deliver promptly to
the Trust all written information received by the
Custodian from issuers and other persons relating to the
securities and participation interests whose tender or
exchange is sought and from the party (or his agents)
making the tender or exchange offer.
R. Exercise of Rights; Tender Offers In the case of tender
offers, similar offers to purchase or exercise rights
(including, without limitation, pendency of calls and
maturities of securities and participation interests and
expirations of rights in connection therewith and notices
of exercise of call and put options and the maturity of
futures contracts) affecting or relating to securities
and participation interests held by the Custodian under
this Agreement, the Custodian shall have responsibility
19
for promptly notifying the Trust of all such offers in
accordance with the standard of reasonable care set forth
in Section 8 hereof. For all such offers for which the
Custodian is responsible as provided in this Paragraph R,
the Trust shall have responsibility for providing the
Custodian with all necessary instructions in timely
fashion. Upon receipt of proper instructions, the
Custodian shall timely deliver to the issuer or trustee
thereof, or to the agent of either, warrants, puts,
calls, rights or similar securities for the purpose of
being exercised or sold upon proper receipt therefor and
upon receipt of assurances satisfactory to the Custodian
that the new securities and cash, if any, acquired by
such action are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof. Upon
receipt of proper instructions, the Custodian shall
timely deposit securities upon invitations for tenders of
securities upon proper receipt therefor and upon receipt
of assurances satisfactory to the Custodian that the
consideration to be paid or delivered or the tendered
securities are to be returned to the Custodian or
subcustodian employed pursuant to Section 2 hereof.
Notwithstanding any provision of this Agreement to the
contrary, the Custodian shall take all necessary action,
unless otherwise directed to the contrary by proper
instructions, to comply with the terms of all mandatory
or compulsory exchanges, calls, tenders, redemptions, or
similar rights of security ownership, and shall
thereafter promptly notify the Trust in writing of such
action.
S. Depository Receipts The Custodian shall, upon receipt of
proper instructions, surrender or cause to be surrendered
foreign securities to the depository used by an issuer of
American Depository Receipts or International Depository
Receipts (hereinafter collectively referred to as "ADRs")
for such securities, against a written receipt therefor
adequately describing such securities and written
evidence satisfactory to the Custodian that the
depository has acknowledged receipt of instructions to
issue with respect to such securities ADRs in the name of
a nominee of the Custodian or in the name or nominee name
of any subcustodian employed pursuant to Section 2
hereof, for delivery to the Custodian or such
subcustodian at such place as the Custodian or such
subcustodian may from time to time designate. The
Custodian shall, upon receipt of proper instructions,
surrender ADRs to the issuer thereof against a written
receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the
Custodian that the issuer of the ADRs has acknowledged
receipt of instructions to cause its depository to
20
deliver the securities underlying such ADRs to the
Custodian or to a subcustodian employed pursuant to
Section 2 hereof.
T. Interest Bearing Call or Time Deposits The Custodian
shall, upon receipt of proper instructions, place
interest bearing fixed term and call deposits with the
banking department of such banking institution (other
than the Custodian) and in such amounts as the Trust may
designate. Deposits may be denominated in U.S. Dollars
or other currencies. The Custodian shall include in its
records with respect to the assets of the Trust
appropriate notation as to the amount and currency of
each such deposit, the accepting banking institution and
other appropriate details and shall retain such forms of
advice or receipt evidencing the deposit, if any, as may
be forwarded to the Custodian by the banking institution.
Such deposits shall be deemed portfolio securities of the
Trust for the purposes of this Agreement, and the
Custodian shall be responsible for the collection of
income from such accounts and the transmission of cash to
and from such accounts.
U. Options, Futures Contracts and Foreign Currency
Transactions
1. Options The Custodian shall, upon receipt
of proper instructions and in accordance with
the provisions of any agreement between the
Custodian, any registered broker-dealer and, if
necessary, the Trust, relating to compliance
with the rules of the Options Clearing
Corporation or of any registered national
securities exchange or similar organization or
organizations, receive and retain confirmations
or other documents, if any, evidencing the
purchase or writing of an option on a security
or securities index or other financial
instrument or index by the Trust; deposit and
maintain in a segregated account for the Trust,
either physically or by book-entry in a
Securities System, securities subject to a
covered call option written by the Trust; and
release and/or transfer such securities or other
assets only in accordance with a notice or other
communication evidencing the expiration,
termination or exercise of such covered option
furnished by the Options Clearing Corporation,
the securities or options exchange on which such
covered option is traded or such other
organization as may be responsible for handling
such options transactions. The Custodian and
21
the broker-dealer shall be responsible for the
sufficiency of assets held in the Trust's
segregated account in compliance with applicable
margin maintenance requirements.
2. Futures Contracts The Custodian shall,
upon receipt of proper instructions, receive and
retain confirmations and other documents, if
any, evidencing the purchase or sale of a
futures contract or an option on a futures
contract by the Trust; deposit and maintain in a
segregated account, for the benefit of any
futures commission merchant, assets designated
by the Trust as initial, maintenance or
variation "margin" deposits (including
mark-to-market payments) intended to secure the
Trust's performance of its obligations under any
futures contracts purchased or sold or any
options on futures contracts written by the
Trust, in accordance with the provisions of any
agreement or agreements among the Trust, the
Custodian and such futures commission merchant,
designed to comply with the rules of the
Commodity Futures Trading Commission and/or of
any contract market or commodities exchange or
similar organization regarding such margin
deposits or payments; and release and/or
transfer assets in such margin accounts only in
accordance with any such agreements or rules.
The Custodian and the futures commission
merchant shall be responsible for the
sufficiency of assets held in the segregated
account in compliance with the applicable margin
maintenance and mark-to-market payment
requirements.
3. Foreign Exchange Transactions The Custodian
shall, pursuant to proper instructions, enter
into or cause a subcustodian to enter into
foreign exchange contracts or options to
purchase and sell foreign currencies for spot
and future delivery on behalf and for the
account of the Trust. Such transactions may be
undertaken by the Custodian or subcustodian with
such banking or financial institutions or other
currency brokers, as set forth in proper
instructions. Foreign exchange contracts and
options shall be deemed to be portfolio
securities of the Trust; and accordingly, the
responsibility of the Custodian therefor shall
be the same as and no greater than the
Custodian's responsibility in respect of other
22
portfolio securities of the Trust. The
Custodian shall be responsible for the
transmittal to and receipt of cash from the
currency broker or banking or financial
institution with which the contract or option is
made, the maintenance of proper records with
respect to the transaction and the maintenance
of any segregated account required in connection
with the transaction. The Custodian shall have
no duty with respect to the selection of the
currency brokers or banking or financial
institutions with which the Trust deals or for
their failure to comply with the terms of any
contract or option. Without limiting the
foregoing, it is agreed that upon receipt of
proper instructions and insofar as funds are
made available to the Custodian for the purpose,
the Custodian may (if determined necessary by
the Custodian to consummate a particular
transaction on behalf and for the account of the
Trust) make free outgoing payments of cash in
the form of U.S. dollars or foreign currency
before receiving confirmation of a foreign
exchange contract or confirmation that the
countervalue currency completing the foreign
exchange contract has been delivered or
received. The Custodian shall not be
responsible for any costs and interest charges
which may be incurred by the Trust or the
Custodian as a result of the failure or delay of
third parties to deliver foreign exchange;
provided that the Custodian shall nevertheless
be held to the standard of care set forth in,
and shall be liable to the Trust in accordance
with, the provisions of Section 8.
V. Actions Permitted Without Express Authority The
Custodian may in its discretion, without express
authority from the Trust:
1) make payments to itself or others for
minor expenses of handling securities or
other similar items relating to its
duties under this Agreement, provided,
that all such payments shall be
accounted for by the Custodian to the
Treasurer of the Trust;
2) surrender securities in temporary form
for securities in definitive form;
3) endorse for collection, in the name of
23
the Trust, checks, drafts and other
negotiable instruments; and
4) in general, attend to all
nondiscretionary details in connection
with the sale, exchange, substitution,
purchase, transfer and other dealings
with the securities and property of the
Trust except as otherwise directed by
the Trust.
4. Duties of Bank with Respect to Books of Account and Calculations
of Net Asset Value
Inasmuch as the Trust is treated as a partnership for federal
income tax purposes, the Bank shall as Agent (or as Custodian, as the case
may be) keep and maintain the books and records of the Trust in accordance
with the Procedures for Allocations and Distributions adopted by the
Trustees of the Trust, as such Procedures may be in effect from time to
time. A copy of the current Procedures is attached to this Agreement, and
the Trust agrees promptly to furnish all revisions to or restatements of
such Procedures to the Bank.
The Bank shall as Agent (or as Custodian, as the case may be)
keep such books of account (including records showing the adjusted tax
costs of the Trust's portfolio securities) and render as at the close of
business on each day a detailed statement of the amounts received or paid
out and of securities received or delivered for the account of the Trust
during said day and such other statements, including a daily trial balance
and inventory of the Trust's portfolio securities; and shall furnish such
other financial information and data as from time to time requested by the
Treasurer or any executive officer of the Trust; and shall compute and
determine, as of the close of business of the New York Stock Exchange, or
at such other time or times as the Board may determine, the net asset
value of the Trust and the net asset value of each interest in the Trust,
such computations and determinations to be made in accordance with the
governing documents of the Trust and the votes and instructions of the
Board and of the investment adviser at the time in force and applicable,
and promptly notify the Trust and its investment adviser and such other
persons as the Trust may request of the result of such computation and
determination. In computing the net asset value the Custodian may rely
upon security quotations received by telephone or otherwise from sources
or pricing services designated by the Trust by proper instructions, and
may further rely upon information furnished to it by any authorized
officer of the Trust relative (a) to liabilities of the Trust not
appearing on its books of account, (b) to the existence, status and proper
treatment of any reserve or reserves, (c) to any procedures or policies
established by the Board regarding the valuation of portfolio securities
or other assets, and (d) to the value to be assigned to any bond, note,
debenture, Treasury bill, repurchase agreement, subscription right,
security, participation interests or other asset or property for which
market quotations are not readily available. The Custodian shall also
24
compute and determine at such time or times as the Trust may designate the
portion of each item which has significance for a holder of an interest in
the Trust in computing and determining its federal income tax liability
including, but not limited to, each item of income, expense and realized
and unrealized gain or loss of the Trust which is attributable for Federal
income tax purposes to each such holder.
5. Records and Miscellaneous Duties
The Bank shall create, maintain and preserve all records relating
to its activities and obligations under this Agreement in such manner as
will meet the obligations of the Trust under the Investment Company Act of
1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder, applicable federal and state tax laws and any other law
or administrative rules or procedures which may be applicable to the
Trust. All books of account and records maintained by the Bank in
connection with the performance of its duties under this Agreement shall
be the property of the Trust, shall at all times during the regular
business hours of the Bank be open for inspection by authorized officers,
employees or agents of the Trust, and in the event of termination of this
Agreement shall be delivered to the Trust or to such other person or
persons as shall be designated by the Trust. Disposition of any account
or record after any required period of preservation shall be only in
accordance with specific instructions received from the Trust. The Bank
shall assist generally in the preparation of reports to holders of
interest in the Trust, to the Securities and Exchange Commission,
including Form N-SAR, and to others, audits of accounts, and other
ministerial matters of like nature; and, upon request, shall furnish the
Trust's auditors with an attested inventory of securities held with
appropriate information as to securities in transit or in the process of
purchase or sale and with such other information as said auditors may from
time to time request. The Custodian shall also maintain records of all
receipts, deliveries and locations of such securities, together with a
current inventory thereof, and shall conduct periodic verifications
(including sampling counts at the Custodian) of certificates representing
bonds and other securities for which it is responsible under this
Agreement in such manner as the Custodian shall determine from time to
time to be advisable in order to verify the accuracy of such inventory.
The Bank shall not disclose or use any books or records it has prepared or
maintained by reason of this Agreement in any manner except as expressly
authorized herein or directed by the Trust, and the Bank shall keep
confidential any information obtained by reason of this Agreement.
6. Opinion of Trust's Independent Public Accountants
The Custodian shall take all reasonable action, as the Trust may
from time to time request, to enable the Trust to obtain from year to
year favorable opinions from the Trust's independent public accountants
with respect to its activities hereunder in connection with the
preparation of the Trust's registration statement and Form N-SAR or other
periodic reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
25
7. Compensation and Expenses of Bank
The Bank shall be entitled to reasonable compensation for its
services as Custodian and Agent, as agreed upon from time to time between
the Trust and the Bank. The Bank shall be entitled to receive from the
Trust on demand reimbursement for its cash disbursements, expenses and
charges, including counsel fees, in connection with its duties as
Custodian and Agent hereunder, but excluding salaries and usual overhead
expenses.
8. Responsibility of Bank
So long as and to the extent that it is in the exercise of
reasonable care, the Bank as Custodian and Agent shall be held harmless in
acting upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper
party or parties.
The Bank as Custodian and Agent shall be entitled to rely on and
may act upon advice of counsel (who may be counsel for the Trust) on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
The Bank as Custodian and Agent shall be held to the exercise of
reasonable care in carrying out the provisions of this Agreement but shall
be liable only for its own negligent or bad faith acts or failures to act.
Notwithstanding the foregoing, nothing contained in this paragraph is
intended to nor shall it be construed to modify the standards of care and
responsibility set forth in Section 2 hereof with respect to subcustodians
and in subparagraph f of Paragraph L of Section 3 hereof with respect to
Securities Systems and in subparagraph g of Paragraph M of Section 3
hereof with respect to an Approved Book-Entry System for Commercial Paper.
The Custodian shall be liable for the acts or omissions of a
foreign banking institution to the same extent as set forth with respect
to subcustodians generally in Section 2 hereof, provided that, regardless
of whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank,
the Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from, or caused by, the direction of or
authorization by the Trust to maintain custody of any securities or cash
of the Trust in a foreign country including, but not limited to, losses
resulting from governmental actions and restrictions, nationalization,
expropriation, currency restrictions, acts of war, civil war or terrorism,
insurrection, revolution, military or usurped powers, nuclear fission,
fusion or radiation, earthquake, storm or other disturbance of nature or
acts of God.
If the Trust requires the Bank in any capacity to take any action
with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Bank, result in the Bank or its
nominee assigned to the Trust being liable for the payment of money or
26
incurring liability of some other form, the Trust, as a prerequisite to
requiring the Custodian to take such action, shall provide indemnity to
the Custodian in an amount and form satisfactory to it.
9. Persons Having Access to Assets of the Trust
(i) No trustee, officer, employee or agent of the Trust shall
have physical access to the assets of the Trust held by the Custodian or
be authorized or permitted to withdraw any investments of the Trust, nor
shall the Custodian deliver any assets of the Trust to any such person.
No officer or director, employee or agent of the Custodian who holds any
similar position with the Trust or the investment adviser or the
administrator of the Trust shall have access to the assets of the Trust.
(ii) Access to assets of the Trust held hereunder shall only be
available to duly authorized officers, employees, representatives or
agents of the Custodian or other persons or entities for whose actions the
Custodian shall be responsible to the extent permitted hereunder, or to
the Trust's independent public accountants in connection with their
auditing duties performed on behalf of the Trust.
(iii) Nothing in this Section 9 shall prohibit any officer,
employee or agent of the Trust or of the investment adviser of the Trust
from giving instructions to the Custodian or executing a certificate so
long as it does not result in delivery of or access to assets of the Trust
prohibited by paragraph (i) of this Section 9.
10. Effective Period, Termination and Amendment; Successor Custodian
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated by either party after
August 31, 2000 by an instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided,
that the Trust may at any time by action of its Board, (i) substitute
another bank or trust company for the Custodian by giving notice as
described above to the Custodian in the event the Custodian assigns this
Agreement to another party without consent of the noninterested Trustees
of the Trust, or (ii) immediately terminate this Agreement in the event of
the appointment of a conservator or receiver for the Custodian by the
Federal Deposit Insurance Corporation or by the Banking Commissioner of
The Commonwealth of Massachusetts or upon the happening of a like event at
the direction of an appropriate regulatory agency or court of competent
jurisdiction. Upon termination of the Agreement, the Trust shall pay to
the Custodian such compensation as may be due as of the date of such
termination (and shall likewise reimburse the Custodian for its costs,
expenses and disbursements).
This Agreement may be amended at any time by the written
agreement of the parties hereto. If a majority of the non-interested
trustees of any of the Trusts determines that the performance of the
Custodian has been unsatisfactory or adverse to the interests of Trust
27
holders of any Trust or Trusts or that the terms of the Agreement are no
longer consistent with publicly available industry standards, then the
Trust or Trusts shall give written notice to the Custodian of such
determination and the Custodian shall have 60 days to (1) correct such
performance to the satisfaction of the non-interested trustees or (2)
renegotiate terms which are satisfactory to the non-interested trustees of
the Trusts. If the conditions of the preceding sentence are not met then
the Trust or Trusts may terminate this Agreement on sixty (60) days
written notice.
The Board of the Trust shall, forthwith, upon giving or receiving
notice of termination of this Agreement, appoint as successor custodian, a
bank or trust company having the qualifications required by the Investment
Company Act of 1940 and the Rules thereunder. The Bank, as Custodian,
Agent or otherwise, shall, upon termination of the Agreement, deliver to
such successor custodian, all securities then held hereunder and all funds
or other properties of the Trust deposited with or held by the Bank
hereunder and all books of account and records kept by the Bank pursuant
to this Agreement, and all documents held by the Bank relative thereto.
In the event that no written order designating a successor custodian shall
have been delivered to the Bank on or before the date when such
termination shall become effective, then the Bank shall not deliver the
securities, funds and other properties of the Trust to the Trust but shall
have the right to deliver to a bank or trust company doing business in
Boston, Massachusetts of its own selection meeting the above required
qualifications, all funds, securities and properties of the Trust held by
or deposited with the Bank, and all books of account and records kept by
the Bank pursuant to this Agreement, and all documents held by the Bank
relative thereto. Thereafter such bank or trust company shall be the
successor of the Custodian under this Agreement.
11. Interpretive and Additional Provisions
In connection with the operation of this Agreement, the Custodian
and the Trust may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Agreement as may in their
joint opinion be consistent with the general tenor of this Agreement.
Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that
no such interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the governing
instruments of the Trust. No interpretive or additional provisions made
as provided in the preceding sentence shall be deemed to be an amendment
of this Agreement.
12. Notices
Notices and other writings delivered or mailed postage prepaid to
the Trust addressed to 0000 Xxx Xxxxxxxx Xxxxxx, Xxxxxxx Xxxx Xxxx, or to
such other address as the Trust may have designated to the Bank, in
writing with a copy to Xxxxx Xxxxx Management at 00 Xxxxxxx Xxxxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000, or to Investors Bank & Trust Company, 89
28
South Street, Boston, Massachusetts 02111 with a copy to Xxxxx Xxxxx
Management at 00 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, shall be
deemed to have been properly delivered or given hereunder to the
respective addressees.
13. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
The Custodian expressly acknowledges the provision in the
Declaration of Trust of the Trust (Section 5.2 and 5.6) limiting the
personal liability of the Trustees and officers of the Trust, and the
Custodian hereby agrees that it shall have recourse to the Trust for
payment of claims or obligations as between the Trust and the Custodian
arising out of this Agreement and shall not seek satisfaction from any
Trustee or officer of the Trust.
14. Adoption of the Agreement by the Trust
The Trust represents that its Board has approved this Agreement
and has duly authorized the Trust to adopt this Agreement, such adoption
to be evidenced by a letter agreement between the Trust and the Bank
reflecting such adoption, which letter agreement shall be dated and signed
by a duly authorized officer of the Trust and duly authorized officer of
the Bank. This Agreement shall be deemed to be duly executed and
delivered by each of the parties in its name and behalf by its duly
authorized officer as of the date of such letter agreement, and this
Agreement shall be deemed to supersede and terminate, as of the date of
such letter agreement, all prior agreements between the Trust and the Bank
relating to the custody of the Trust's assets.
* * * * *
SCHEDULE A
TO CUSTODIAN AGREEMENT
BETWEEN
ASIAN SMALL COMPANIES PORTFOLIO
AND
INVESTORS BANK & TRUST COMPANY
Additional Parties to the Agreement Date of Agreement
Emerging Markets Portfolio March 8, 1994
Greater China Growth Portfolio October 27, 1992, as amended
February 7, 1994
South Asia Portfolio March 8, 1994
29
ASIAN SMALL COMPANIES PORTFOLIO
-----------------------
PROCEDURES FOR ALLOCATIONS
AND DISTRIBUTIONS
January 19, 1996
TABLE OF CONTENTS
PAGE
ARTICLE I--Introduction . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II--Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III--Capital Accounts
Section 3.1 Capital Accounts of Holders . . . . 4
Section 3.2 Book Capital Accounts . . . . . . . 4
Section 3.3 Tax Capital Accounts . . . . . . . . 4
Section 3.4 Compliance with Treasury Regulations 5
ARTICLE IV--Distributions of Cash and Assets
Section 4.1 Distributions of Distributable Cash 5
Section 4.2 Division Among Holders . . . . . . . 5
Section 4.3 Distributions Upon Liquidation of a
Holder's Interest in the Trust . . . 5
Section 4.4 Amounts Withheld . . . . . . . . . . 5
ARTICLE V--Allocations
Section 5.1 Allocation of Items to Book Capital
Accounts . . . . . . . . . . . . . . 6
Section 5.2 Allocation of Taxable Income and Tax
Loss to Tax Capital Accounts . . . . 6
Section 5.3 Special Allocations to Book and Tax
Capital Accounts . . . . . . . . . . 7
Section 5.4 Other Adjustments to Book and Tax
Capital Accounts . . . . . . . . . . 7
Section 5.5 Timing of Tax Allocations to Book and
Tax Capital Accounts . . . . . . . . 7
Section 5.6 Redemptions During the Fiscal Year . 8
ARTICLE VI--Withdrawals
Section 6.1 Partial Withdrawals . . . . . . . . 8
Section 6.2 Redemptions . . . . . . . . . . . . 8
Section 6.3 Distribution in Kind . . . . . . . . 8
ARTICLE VII--Liquidation
Section 7.1 Liquidation Procedure . . . . . . . 8
Section 7.2 Alternative Liquidation Procedure . 9
Section 7.3 Cash Distributions Upon Liquidation 9
Section 7.4 Treatment of Negative Book Capital
Account Balance . . . . . . . . . 9
i
PROCEDURES FOR
ALLOCATIONS AND DISTRIBUTIONS
OF
ASIAN SMALL COMPANIES PORTFOLIO
(the "Trust")
ARTICLE I
Introduction
The Trust is treated as a partnership for federal income tax
purposes. These procedures have been adopted by the Trustees of the Trust
and will be furnished to the Trust's accountants for the purpose of
allocating Trust gains, income or loss and distributing Trust assets. The
Trust will maintain its books and records, for both book and tax purposes,
using the accrual method of accounting.
ARTICLE II
Definitions
Except as otherwise provided herein, a term referred to herein
shall have the same meaning as that ascribed to it in the Declaration.
References in this document to "hereof", "herein" and "hereunder" shall be
deemed to refer to this document in its entirety rather than the article
or section in which any such word appears.
"Book Capital Account" shall mean, for any Holder at any time in
any Fiscal Year, the Book Capital Account balance of the Holder on the
first day of the Fiscal Year, as adjusted each day pursuant to the
provisions of Section 3.2 hereof.
"Capital Contribution" shall mean, with respect to any Holder,
the amount of money and the Fair Market Value of any assets actually
contributed from time to time to the Trust with respect to the Interest
held by such Holder.
"Code" shall mean the U.S. Internal Revenue Code of 1986, as
amended from time to time, as well as any non-superseded provisions of the
Internal Revenue Code of 1954, as amended (or any corresponding provision
or provisions of succeeding law).
"Declaration" shall mean the Trust's Declaration of Trust, dated
January 19, 1996, as amended from time to time.
"Designated Expenses" shall mean extraordinary Trust expenses
attributable to a particular Holder that are to be borne by such Holder.
"Distributable Cash" for any Fiscal Year shall mean the gross
cash proceeds from Trust activities, less the portion thereof used to pay
or establish Reserves, plus such portion of the Reserves as the Trustees,
in their sole discretion, no longer deem necessary to be held as Reserves.
Distributable Cash shall not be reduced by depreciation, amortization,
cost recovery deductions, or similar allowances.
"Fair Market Value" of a security, instrument or other asset on
any particular day shall mean the fair value thereof as determined in good
faith by or on behalf of the Trustees in the manner set forth in the
Registration Statement.
"Fiscal Year" shall mean an annual period determined by the
Trustees which ends on such day as is permitted by the Code.
"Holders" shall mean as of any particular time all holders of
record of Interests in the Trust.
"Interest(s)" shall mean the interest of a Holder in the Trust,
including all rights, powers and privileges accorded to Holders by the
Declaration, which interest may be expressed as a percentage, determined
by calculating, at such times and on such bases as the Trustees shall from
time to time determine, the ratio of each Holder's Book Capital Account
balance to the total of all Holders' Book Capital Account balances.
"Investments" shall mean all securities, instruments or other
assets of the Trust of any nature whatsoever, including, but not limited
to, all equity and debt securities, futures contracts, and all property of
the Trust obtained by virtue of holding such assets.
"Matched Income or Loss" shall mean Taxable Income, Tax-Exempt
Income or Tax Loss of the Trust comprising interest, original issue
discount and dividends and all other types of income or loss to the extent
the Taxable Income, Tax-Exempt Income, Tax Loss or Loss items not included
in Tax Loss arising from such items are recognized for tax purposes at the
same time that Profit or Loss are accrued for book purposes by the Trust.
"Net Unrealized Gain" shall mean the excess, if any, of the
aggregate Fair Market Value of all Investments over the aggregate adjusted
bases, for federal income tax purposes, of all Investments.
"Net Unrealized Loss" shall mean the excess, if any, of the
aggregate adjusted bases, for federal income tax purposes, of all
Investments over the aggregate Fair Market Value of all Investments.
"Profit" and "Loss" shall mean, for each Fiscal Year or other
period, an amount equal to the Taxable Income or Tax Loss for such Fiscal
Year or period with the following adjustments:
(i) Any Tax-Exempt Income shall be added to
such Taxable Income or subtracted from such Tax Loss; and
(ii) Any expenditures of the Trust for such
year or period described in Section 705(a)(2)(B) of the
Code or treated as expenditures under
Section 705(a)(2)(B) of the Code pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(i), and not
otherwise taken into account in computing Profit or Loss
or specially allocated shall be subtracted from such
3
Taxable Income or added to such Tax Loss.
"Redemption" shall mean the complete withdrawal of an Interest of
a Holder the result of which is to reduce the Book Capital Account balance
of that Holder to zero.
"Registration Statement" shall mean the Registration Statement of
the Trust on Form N-1A as filed with the U.S. Securities and Exchange
Commission under the 1940 Act, as the same may be amended from time to
time.
"Reserves" shall mean, with respect to any Fiscal Year, funds set
aside or amounts allocated during such period to reserves which shall be
maintained in amounts deemed sufficient by the Trustees for working
capital and to pay taxes, insurance, debt service, renewals, or other
costs or expenses, incident to the ownership of the Investments or to its
operations.
"Tax Capital Account" shall mean, for any Holder at any time in
any Fiscal Year, the Tax Capital Account balance of the Holder on the
first day of the Fiscal Year, as adjusted each day pursuant to the
provisions of Section 3.3 hereof.
"Tax-Exempt Income" shall mean income of the Trust for such
Fiscal Year or period that is exempt from federal income tax and not
otherwise taken into account in computing Profit or Loss.
"Tax Lot" shall mean securities or other property which are both
purchased or acquired, and sold or otherwise disposed of, as a unit.
"Taxable Income" or "Tax Loss" shall mean the taxable income or
tax loss of the Trust, determined in accordance with Section 703(a) of the
Code, for each Fiscal Year as determined for federal income tax purposes,
together with each of the Trust's items of income, gain, loss or deduction
which is separately stated or otherwise not included in computing taxable
income and tax loss.
"Treasury Regulations" shall mean the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time
to time (including corresponding provisions of succeeding regulations).
"Trust" shall mean Asian Small Companies Portfolio, a trust fund
formed under the laws of the State of New York by the Declaration.
"Trustees" shall mean each signatory to the Declaration, so long
as such signatory shall continue in office in accordance with the terms
thereof, and all other individuals who at the time in question have been
duly elected or appointed and have qualified as Trustees in accordance
with the provisions thereof and are then in office.
The "1940 Act" shall mean the U.S. Investment Company Act of
1940, as amended from time to time, and the rules and regulations
thereunder.
ARTICLE III
4
Capital Accounts
3.1. Capital Accounts of Holders. A separate Book Capital
Account and a separate Tax Capital Account shall be maintained for each
Holder pursuant to Section 3.2 and Section 3.3. hereof, respectively. In
the event the Trustees shall determine that it is prudent to modify the
manner in which the Book Capital Accounts or Tax Capital Accounts, or any
debits or credits thereto, are computed in order to comply with the
Treasury Regulations, the Trustees may make such modification, provided
that it is not likely to have a material effect on the amounts
distributable to any Holder pursuant to Article VII hereof upon the
dissolution of the Trust.
3.2. Book Capital Accounts. The Book Capital Account balance
of each Holder shall be adjusted each day by the following amounts:
(a) increased by any increase in Net Unrealized Gains or
decrease in Net Unrealized Losses allocated to such Holder pursuant to
Section 5.1(a) hereof;
(b) decreased by any decrease in Net Unrealized Gains or
increase in Net Unrealized Losses allocated to such Holder pursuant to
Section 5.1(b) hereof;
(c) increased or decreased, as the case may be, by the amount
of Profit or Loss, respectively, allocated to such Holder pursuant to
Section 5.1(c) hereof;
(d) increased by any Capital Contribution made by such
Xxxxxx; and,
(e) decreased by any distribution, including any distribution
to effect a withdrawal or Redemption, made to such Holder by the Trust.
Any adjustment pursuant to Section 3.2 (a), (b) or (c) above
shall be prorated for increases in each Holder's Book Capital Account
balance resulting from Capital Contributions, or distributions or
withdrawals from the Trust or Redemptions by the Trust occurring, during
such Fiscal Year as of the day after the Capital Contribution,
distribution, withdrawal or Redemption is accepted, made or effected by
the Trust.
3.3. Tax Capital Accounts. The Tax Capital Account balance of
each Holder shall be adjusted at the following times by the following
amounts:
(a) increased daily by the adjusted tax bases of any Capital
Contribution made by such Holder to the Trust;
(b) increased daily by the amount of Taxable Income and Tax-
Exempt Income allocated to such Holder pursuant to Section 5.2 hereof at
such times as the allocations are made under Section 5.2 hereof;
(c) decreased daily by the amount of cash distributed to the
Holder pursuant to any of these procedures including any distribution made
5
to effect a withdrawal or Redemption; and
(d) decreased by the amount of Tax Loss allocated to such
Holder pursuant to Section 5.2 hereof at such times as the allocations are
made under Section 5.2 hereof.
3.4. Compliance with Treasury Regulations. The foregoing
provisions and other provisions contained herein relating to the
maintenance of Book Capital Accounts and Tax Capital Accounts are intended
to comply with Treasury Regulations Section 1.704-1(b), and shall be
interpreted and applied in a manner consistent with such Treasury
Regulations.
The Trustees shall make any appropriate modifications in the
event unanticipated events might otherwise cause these procedures not to
comply with Treasury Regulations Section 1.704-1(b), including the
requirements described in Treasury Regulations Section 1.704-
1(b)(2)(ii)(b)(1) and Treasury Regulations Section 1.704-1(b)(2)(iv).
Such modifications are hereby incorporated into these procedures by this
reference as though fully set forth herein.
ARTICLE IV
Distributions of Cash and Assets
4.1. Distributions of Distributable Cash. Except as otherwise
provided in Article VII hereof, Distributable Cash for each Fiscal Year
may be distributed to the Holders at such times, if any, and in such
amounts as shall be determined in the sole discretion of the Trustees. In
exercising such discretion, the Trustees shall distribute such
Distributable Cash so that Holders that are regulated investment companies
can comply with the distribution requirements set forth in Code
Section 852 and avoid the excise tax imposed by Code Section 4982.
4.2. Division Among Holders. All distributions to the Holders
with respect to any Fiscal Year pursuant to Section 4.1 hereof shall be
made to the Holders in proportion to the Taxable Income, Tax-Exempt Income
or Tax Loss allocated to the Holders with respect to such Fiscal Year
pursuant to the terms of these procedures.
4.3. Distributions Upon Liquidation of a Holder's Interest in
the Trust. Upon liquidation of a Holder's interest in the Trust, the
proceeds will be distributed to the Holder as provided in Section 5.6,
Article VI, and Article VII hereof. If such Holder has a negative book
capital account balance, the provisions of Section 7.4 will apply.
4.4. Amounts Withheld. All amounts withheld pursuant to the
Code or any provision of any state or local tax law with respect to any
payment or distribution to the Trust or the Holders shall be treated as
amounts distributed to such Holders pursuant to this Article IV for all
purposes under these procedures. The Trustees may allocate any such
amount among the Holders in any manner that is in accordance with
applicable law.
ARTICLE V
6
Allocations
5.1. Allocation of Items to Book Capital Accounts.
(a) Increase in Net Unrealized Gains or Decrease in Net
Unrealized Losses. Any decrease in Net Unrealized Loss due to realization
of items shall be allocated to the Holder receiving the allocation of
Loss, in the same amount, under Section 5.1(c) hereof. Subject to Section
5.1(d) hereof, any increase in Net Unrealized Gains or decrease in Net
Unrealized Loss on any day during the Fiscal Year shall be allocated to
the Holders' Book Capital Accounts at the end of such day, in proportion
to the Holders' respective Book Capital Account balances at the
commencement of such day.
(b) Decrease in Net Unrealized Gains or Increase in Net
Unrealized Losses. Any decrease in Net Unrealized Gains due to
realization of items shall be allocated to the Holder receiving the
allocation of Profit, in the same amount, under Section 5.1(c) hereof.
Subject to Section 5.1(d) hereof, any decrease in Net Unrealized Gains or
increase in Net Unrealized Loss on any day during the Fiscal Year shall be
allocated to the Holders' Book Capital Accounts at the end of such day, in
proportion to the Holders' respective Book Capital Account balances at the
commencement of such day.
(c) Profit and Loss. Subject to Section 5.1(d) hereof,
Profit and Loss occurring on any day during the Fiscal Year shall be
allocated to the Holders' Book Capital Accounts at the end of such day in
proportion to the Holders' respective Book Capital Account balances at the
commencement of such day.
(d) Other Book Capital Account Adjustments.
(i) Any allocation pursuant to Section 5.1(a),
(b) or (c) above shall be prorated for increases in each
Holder's Book Capital Account resulting from Capital
Contributions, or distributions or withdrawals from the
Trust or Redemptions by the Trust occurring, during such
Fiscal Year as of the day after the Capital Contribution,
distribution, withdrawal or Redemption is accepted, made
or effected by the Trust.
(ii) For purposes of determining the Profit,
Loss, and Net Unrealized Gain or Net Unrealized Loss or
any other item allocable to any Fiscal Year, Profit,
Loss, and Net Unrealized Gain or Net Unrealized Loss and
any such other item shall be determined by or on behalf
of the Trustees using any reasonable method under Code
Section 706 and the Treasury Regulations thereunder.
5.2. Allocation of Taxable Income and Tax Loss to Tax Capital
Accounts.
(a) Taxable Income and Tax Loss. Subject to Section 5.2(b)
and Section 5.3 hereof, which shall take precedence over this Section
5.2(a), Taxable Income or Tax Loss for any Fiscal Year shall be allocated
7
at least annually to the Holders' Tax Capital Accounts as follows:
(i) First, Taxable Income and Tax Loss,
whether constituting ordinary income (or loss) or capital
gain (or loss), derived from the sale or other
disposition of a Tax Lot of securities or other property
shall be allocated as of the date such income, gain or
loss is recognized for federal income tax purposes solely
in proportion to the amount of unrealized appreciation
(in the case of such income or capital gain, but not in
the case of any such loss) or depreciation (in the case
of any such loss, but not in the case of any such income
or capital gain) from that Tax Lot which was allocated to
the Holders' Book Capital Accounts each day that such
securities or other property was held by the Trust
pursuant to Section 5.1(a) and (b) hereof; and
(ii) Second, any remaining amounts at the end
of the Fiscal Year, to the Holders in proportion to their
respective daily average Book Capital Account balances
determined for the Fiscal Year of the allocation.
(b) Matched Income or Loss. Notwithstanding the provisions
of Section 5.2(a) hereof, Taxable Income, Tax-Exempt Income or Tax Loss
accruing on any day during the Fiscal Year constituting Matched Income or
Loss, shall be allocated daily to the Holders' Tax Capital Accounts solely
in proportion to and to the extent of corresponding allocations of Profit
or Loss to the Holders' Book Capital Accounts pursuant to the first
sentence of Section 5.1(c) hereof.
5.3. Special Allocations to Book and Tax Capital Accounts.
(a) The Designated Expenses computed for each Holder shall be
allocated separately (not included in the allocations of Matched Income or
Loss, Loss or Tax Loss) to the Book Capital Account and Tax Capital
Account of each Holder.
(b) If the Trust incurs any nonrecourse indebtedness, then
allocations of items attributable to nonrecourse indebtedness shall be
made to the Tax Capital Account of each Holder in accordance with the
requirements of Treasury Regulations Section 1.704-1(b)(4)(iv)(d).
(c) In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, Taxable Income and Tax Loss with respect to any
property contributed to the capital of the Trust shall be allocated to the
Tax Capital Account of each Holder so as to take into account any
variation between the adjusted tax basis of such property to the Trust for
federal income tax purposes and such property's Fair Market Value at the
time of contribution to the Trust.
5.4. Other Adjustments to Book and Tax Capital Accounts.
(a) Any election or other decision relating to such
allocations shall be made by the Trustees in any manner that reasonably
reflects the purpose and intention of these procedures.
8
(b) Each Holder will report its share of Trust income and
loss for federal income tax purposes in accordance with the allocations
effected pursuant to Section 5.2 hereof.
5.5. Timing of Tax Allocations to Book and Tax Capital
Accounts. Allocation of Taxable Income, Tax-Exempt Income and Tax Loss
pursuant to Section 5.2 hereof for any Fiscal Year, unless specified above
to the contrary, shall be made only after corresponding adjustments have
been made to the Book Capital Accounts of the Holders for the Fiscal Year
as provided pursuant to Section 5.1 hereof.
5.6. Redemptions During the Fiscal Year. If a Redemption
occurs prior to the end of a Fiscal Year, the Trust will treat the Fiscal
Year as ended for the purposes of computing the redeeming Holder's
distributive share of Trust items and allocations of all items to such
Holder will be made as though each Holder were receiving its allocable
share of Trust items at such time. All items so allocated to the
redeeming Holder will be subtracted from the items to be allocated among
the other non-redeeming Holders at the actual end of the Fiscal Year. All
items allocated among the redeeming and non-redeeming Holders will be made
subject to the rules of Code Sections 702, 704, 706 and 708 and the
Treasury Regulations promulgated thereunder.
ARTICLE VI
Withdrawals
6.1. Partial Withdrawals. At any time any Holder shall be
entitled to request a withdrawal of such portion of the Interest held by
such Holder as such Holder shall request.
6.2. Redemptions. At any time a Holder shall be entitled to
request a Redemption of all of its Interest. A Holder's Interest may be
redeemed at any time during the Fiscal Year as provided in Section 6.3
hereof by a cash distribution or, at the option of a Holder, by a
distribution of a proportionate amount except for fractional shares of
each Trust asset at the option of the Trust. However, the Holder may be
redeemed by a distribution of a proportionate amount of the Trust's assets
only at the end of a Fiscal Year. However, if the Holder has contributed
any property to the Trust other than cash, if such property remains in the
Trust at the time the Holder requests withdrawal, then such property will
be sold by the Trust prior to the time at which the Holder withdraws from
the Trust.
6.3. Distribution in Kind. If a withdrawing Holder receives a
distribution in kind of its proportionate part of Trust property, then
unrealized income, gain, loss or deduction attributable to such property
shall be allocated among the Holders as if there had been a disposition of
the property on the date of distribution in compliance with the
requirements of Treasury Regulations Section 1.704-1(b)(2)(iv)(e).
ARTICLE VII
Liquidation
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7.1. Liquidation Procedure. Subject to Section 7.4 hereof,
upon dissolution of the Trust, the Trustees shall liquidate the assets of
the Trust, apply and distribute the proceeds thereof as follows:
(a) first to the payment of all debts and obligations of the
Trust to third parties, including without limitation the retirement of
outstanding debt, including any debt owed to Holders or their affiliates,
and the expenses of liquidation, and to the setting up of any Reserves for
contingencies which may be necessary; and
(b) then in accordance with the Holders' positive Book
Capital Account balances after adjusting Book Capital Accounts for
allocations provided in Article V hereof and in accordance with the
requirements described in Treasury Regulations Section 1.704-1(b)(2)
(ii)(b)(2).
7.2. Alternative Liquidation Procedure. Notwithstanding the
foregoing, if the Trustees shall determine that an immediate sale of part
or all of the Trust assets would cause undue loss to the Holders, the
Trustees, in order to avoid such loss, may, after having given
notification to all the Holders, to the extent not then prohibited by the
law of any jurisdiction in which the Trust is then formed or qualified and
applicable in the circumstances, either defer liquidation of and withhold
from distribution for a reasonable time any assets of the Trust except
those necessary to satisfy the Trust's debts and obligations or distribute
the Trust's assets to the Holders in liquidation.
7.3. Cash Distributions Upon Liquidation. Except as provided
in Section 7.2 hereof, amounts distributed in liquidation of the Trust
shall be paid solely in cash.
7.4. Treatment of Negative Book Capital Account Balance. If a
Holder has a negative balance in its Book Capital Account following the
liquidation of its Interest, as determined after taking into account all
capital account adjustments for the Fiscal Year during which the
liquidation occurs, then such Holder shall restore the amount of such
negative balance to the Trust by the later of the end of the Fiscal Year
or 90 days after the date of such liquidation so as to comply with the
requirements of Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(3).
Such amount shall, upon liquidation, be paid to creditors of the Trust or
distributed to other Holders in accordance with their positive Book
Capital Account balances.
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