CUSTODIAN AGREEMENT
between
GREATER CHINA GROWTH PORTFOLIO
and
INVESTORS BANK & TRUST COMPANY
TABLE OF CONTENTS
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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-4
A. Safekeeping and Holding of Property . . . . . . . . . . 3-4
B. Delivery of Securities . . . . . . . . . . . . . . . . . 4-6
C. Registration of Securities . . . . . . . . . . . . . . . 6-7
D. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . 7
E. Payments for Interests, or Increases in Interests,
in the Trust . . . . . . . . . . . . . . . . . . . . . . . 7
F. Investment and Availability of Federal Funds . . . . . . . 7
G. Collections . . . . . . . . . . . . . . . . . . . . . . 7-8
H. Payment of Trust Monies . . . . . . . . . . . . . . . . 8-10
I. Liability for Payment in Advance of Receipt of
Securities Purchased . . . . . . . . . . . . . . . . . . . 10
J. Payments for Reductions or Redemptions of
Interests of the Trust . . . . . . . . . . . . . . . . . . 10
K. Appointment of Agents by the Custodian . . . . . . . . 10-11
L. Deposit of Trust Portfolio Securities in
Securities Systems . . . . . . . . . . . . . . . . . . 11-13
M. Deposit of Trust Commercial Paper in an Approved
Book-Entry System for Commercial Paper . . . . . . . . 13-15
N. Segregated Account . . . . . . . . . . . . . . . . . . . . 15
O. Ownership Certificates for Tax Purposes . . . . . . . . . 15
P. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . 16
Q. Communications Relating to Trust Portfolio Securities . . 16
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R. Exercise of Rights; Tender Offers . . . . . . . . . . 16-17
S. Depository Receipts . . . . . . . . . . . . . . . . . . . 17
T. Interest Bearing Call or Time Deposits . . . . . . . . . . 17
U. Options, Futures Contracts and Foreign Currency
Transactions . . . . . . . . . . . . . . . . . . . . . 18-19
V. Actions Permitted Without Express Authority . . . . . 19-20
4. Duties of Bank with Respect to Books of Account and
Calculations of Net Asset Value . . . . . . . . . . . . . . . 20
5. Records and Miscellaneous Duties . . . . . . . . . . . . . . . 21
6. Opinion of Trust's Independent Public Accountants . . . . . . 21
7. Compensation and Expenses of Bank . . . . . . . . . . . . . . 21
8. Responsibility of Bank . . . . . . . . . . . . . . . . . . . . 22
9. Persons Having Access to Assets of the Trust 22-23
10. Effective Period, Termination and Amendment; Successor
Custodian . . . . . . . . . . . . . . . . . . . . . . . . 23-24
11. Interpretive and Additional Provisions . . . . . . . . . . . . 24
12. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . 24
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CUSTODIAN AGREEMENT
This Agreement is made between Greater China Growth Portfolio
(hereinafter called "Trust"), a New York trust having its principal place
of business in Hong Kong, 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, the Trust 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 the Trust'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, the Trust 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) "Board" shall mean the board of trustees of the Trust.
(b) "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.
(c) "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.
(d) "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.
(e) "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 Xx. 000, 00 XXX 000, Xxxxxxx X of 31 CFR
Part 350, and the book-entry regulations of federal agencies substantially
in the form of Subpart O).
(f) "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.
(g) "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.
(h) 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
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
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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.
(i) 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
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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.
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
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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 States, delivery may be
made 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;
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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; 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
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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 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
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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 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
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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 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;
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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 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
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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 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) with
respect to securities purchased outside of the United
States, in accordance with written procedures agreed to
from time to time in writing 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; and
5) For distributions or payments to Holders of
Interest of the Trust.
6) For any other proper corporate purpose, BUT ONLY
upon receipt of, in addition to proper
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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 TRANSFERED 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.
J. Payments for Reductions 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 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
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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 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 any entry on the records of the Custodian to
reflect such payment and transfer for the account of the
Trust. The Custodian shall transfer securities sold for the
account of the Trust only upon (i) receipt of notice or advice
- 12 -
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. 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 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
- 13 -
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.
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
- 14 -
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 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.
- 15 -
(f) The Custodian (or subcustodian, if the Approved
Book-Entry System for Commercial Paper is maintained by the
subcustodian) shall issue physical 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 Trust, setting forth the purpose such
- 16 -
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 for
promptly notifying the Trust of all such offers in accordance
with the standard of reasonable care set forth in Section 8
- 17 -
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 deliver the securities underlying such ADRs
to the Custodian or to a subcustodian employed pursuant
to Section 2 hereof.
- 18 -
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 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
- 19 -
commission merchant, assets designated by the Trust as
initial, maintenance or variation "margin" deposits
(including xxxx-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 xxxx-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
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
- 20 -
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 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
- 21 -
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 xxxx, repurchase agreement, subscription right,
security, participation interests or other asset or property for which
market quotations are not readily available. The Custodian shall also
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
- 22 -
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.
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
- 23 -
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
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.
- 24 -
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 as hereinafter
provided, may be amended at any time by mutual agreement of the parties
hereto and may be terminated by either party 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, 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.
Unless the holders of a majority of the outstanding "voting
securities" of the Trust (as defined in the Investment Company Act of
1940) vote to have the securities, funds and other properties held
hereunder delivered and paid over to some other bank or trust company,
specified in the vote, having not less than $2,000,000 of aggregate
capital, surplus and undivided profits, as shown by its last published
report, and meeting such other qualifications for custodians set forth in
the Investment Company Act of 1940, the Board shall, forthwith, upon
giving or receiving notice of termination of this Agreement, appoint as
successor custodian, a bank or trust company having such qualifications.
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 such vote has been adopted by the
shareholders and 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, having an aggregate capital,
surplus and undivided profits, as shown by its last published report, of
not less than $2,000,000, 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.
- 25 -
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 3408 One Exchange Square, Central Hong Kong, 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, 00
Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 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.
- 26 -
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement on October 27, 1992.
GREATER CHINA GROWTH PORTFOLIO
By: /s/Xxxxx X. Xxxxxx
--------------------------
Xxxxx X. Xxxxxx
Vice President
INVESTORS BANK & TRUST COMPANY
By: /s/Xxxxx Xxxxxxx
----------------------------
Xxxxx Xxxxxxx
Xxxxxxxxx
- 00 -
XXXXXXX XXXXX GROWTH PORTFOLIO
--------------------------------
PROCEDURES FOR ALLOCATIONS
AND DISTRIBUTIONS
September 1, 1992
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 . . . . . . . . . . . . 8
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
GREATER CHINA GROWTH 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
September 1, 1992, 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
2
(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
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 Greater China Growth Portfolio, a trust fund
formed under the law of the State of New York by the Declaration.
3
"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
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
Holder; 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,
4
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
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
5
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
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.
6
(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
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
7
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.
(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.
8
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
-----------
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
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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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