CUSTODIAN AGREEMENT
between
ASIAN SMALL COMPANIES PORTFOLIO et al
and
INVESTORS BANK & TRUST COMPANY
TABLE OF CONTENTS
1. Definitions..............................................................1-3
2. Employment of Custodian and Property to be Held by it......................3
3. Duties of the Custodian with Respect to Property of the Trust..............4
A. Safekeeping and Holding of Property....................................4
B. Delivery of Securities...............................................4-7
C. Registration of Securities.............................................7
D. Bank Accounts........................................................7-8
E. Payments for Interests, or Increases in Interests, in the Trust........8
F. Investment and Availability of Federal Funds...........................8
G. Collections..........................................................8-9
H. Payment of Trust Monies.............................................9-11
I. Liability for Payment in Advance of Receipt of Securities Purchased...11
J. Payments for Repurchases or Redemptions of Interests of the Trust.....11
K. Appointment of Agents by the Custodian.............................11-12
L. Deposit of Trust Portfolio Securities in Securities Systems........12-14
M. Deposit of Trust Commercial Paper in an Approved Book-Entry System
for Commercial Paper.............................................14-16
N. Segregated Account.................................................16-17
O. Ownership Certificates for Tax Purposes...............................17
P. Proxies...............................................................17
Q. Communications Relating to Trust Portfolio Securities.................17
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R. Exercise of Rights; Tender Offers.................................17-18
S. Depository Receipts...................................................18
T. Interest Bearing Call or Time Deposits.............................18-19
U. Options, Futures Contracts and Foreign Currency Transactions.......19-21
V. Actions Permitted Without Express Authority...........................21
4. Duties of Bank with Respect to Books of Account and Calculations of
Net Asset Value........................................................21-22
5. Records and Miscellaneous Duties.......................................22-23
6. Opinion of Trust's Independent Public Accountants.........................23
7. Compensation and Expenses of Bank.........................................23
8. Responsibility of Bank.................................................23-24
9. Persons Having Access to Assets of the Trust..............................24
10. Effective Period, Termination and Amendment; Successor Custodian.......24-25
11. Interpretive and Additional Provisions.................................25-26
12. Notices...................................................................26
13. Massachusetts Law to Apply................................................26
14. Adoption of the Agreement by the Trust....................................26
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CUSTODIAN AGREEMENT
This Agreement is made between Asian Small Companies Portfolio and each of
the investment companies listed on Schedule A attached hereto, each of which has
adopted this Agreement in the manner provided herein and Investors Bank & Trust
Company (hereinafter called "Bank", "Custodian" and "Agent"), a trust company
established under the laws of Massachusetts with a principal place of business
in Boston, Massachusetts.
Whereas, each such investment company is registered under the Investment
Company Act of 1940 and has appointed the Bank to act as Custodian of its
property and to perform certain duties as its Agent, as more fully hereinafter
set forth; and
Whereas, the Bank is willing and able to act as each such investment
company's Custodian and Agent, subject to and in accordance with the provisions
hereof;
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements herein contained, each such investment company and the
Bank agree as follows:
1. DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
(a) "Trust" shall mean the investment company which has adopted this
Agreement.
(b) "Board" shall mean the board of trustees of the Trust.
(c) "The Depository Trust Company", a clearing agency registered with
the Securities and Exchange Commission under Section 17A of the Securities
Exchange Act of 1934 which acts as a securities depository and which has
been specifically approved as a securities depository for the Trust by the
Board.
(d) "Participants Trust Company", a clearing agency registered with
the Securities and Exchange Commission under Section 17A of the Securities
Exchange Act of 1934 which acts as a securities depository and which has
been specifically approved as a securities depository for the Trust by the
Board.
(e) "Approved Clearing Agency" shall mean any other domestic clearing
agency registered with the Securities and Exchange Commission under Section
17A of the Securities Exchange Act of 1934 which acts as a securities
depository BUT ONLY if the Custodian has received a certified copy of a
resolution of the Board approving such clearing agency as a securities
depository for the Trust.
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(f) "Federal Book-Entry System" shall mean the book-entry system
referred to in Rule 17f-4(b) under the Investment Company Act of 1940 for
United States and federal agency securities (i.e., as provided in Subpart O
of Treasury Circular 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).
(g) "Approved Foreign Securities Depository" shall mean a foreign
securities depository or clearing agency referred to in Rule 17f-4 under
the Investment Company Act of 1940 for foreign securities BUT ONLY if the
Custodian has received a certified copy of a resolution of the Board
approving such depository or clearing agency as a foreign securities
depository for the Trust.
(h) "Approved Book-Entry System for Commercial Paper" shall mean a
system maintained by the Custodian or by a subcustodian employed pursuant
to Section 2 hereof for the holding of commercial paper in book-entry form
BUT ONLY if the Custodian has received a certified copy of a resolution of
the Board approving the participation by the Trust in such system.
(i) The Custodian shall be deemed to have received "proper
instructions" in respect of any of the matters referred to in this
Agreement upon receipt of written or facsimile instructions signed by such
one or more person or persons as the Board shall have from time to time
authorized to give the particular class of instructions in question.
Different persons may be authorized to give instructions for different
purposes. A certified copy of a resolution of the Board may be received and
accepted by the Custodian as conclusive evidence of the authority of any
such person to act and may be considered as in full force and effect until
receipt of written notice to the contrary. Such instructions may be general
or specific in terms and, where appropriate, may be standing instructions.
Unless the resolution delegating authority to any person or persons to give
a particular class of instructions specifically requires that the approval
of any person, persons or committee shall first have been obtained before
the Custodian may act on instructions of that class, the Custodian shall be
under no obligation to question the right of the person or persons giving
such instructions in so doing. Oral instructions will be considered proper
instructions if the Custodian reasonably believes them to have been given
by a person authorized to give such instructions with respect to the
transaction involved. The Trust shall cause all oral instructions to be
confirmed in writing. The Trust authorizes the Custodian to tape record any
and all telephonic or other oral instructions given to the Custodian. Upon
receipt of a certificate signed by two officers of the Trust as to the
authorization by the President and the Treasurer of the Trust accompanied
by a detailed description of the communication procedures approved by the
President and the Treasurer of the Trust, "proper instructions" may also
include communications effected directly between electromechanical or
electronic devices provided that the President and Treasurer of the Trust
and the Custodian are satisfied that such procedures afford adequate
safeguards for the Trust's assets. In performing its duties generally, and
more particularly in connection with the purchase, sale and exchange of
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securities made by or for the Trust, the Custodian may take cognizance
of the provisions of the governing documents and registration statement of
the Trust as the same may from time to time be in effect (and resolutions
or proceedings of the holders of interests in the Trust or the Board), but,
nevertheless, except as otherwise expressly provided herein, the Custodian
may assume unless and until notified in writing to the contrary that
so-called proper instructions received by it are not in conflict with or in
any way contrary to any provisions of such governing documents and
registration statement, or resolutions or proceedings of the holders of
interests in the Trust or the Board.
(j) The term "Vote" when used with respect to the Board or the Holders
of Interests in the Trust shall include a vote, resolution, consent,
proceeding and other action taken by the Board or Holders in accordance
with the Declaration of Trust or By-Laws of the Trust.
2. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Trust hereby appoints and employs the Bank as its Custodian and Agent
in accordance with and subject to the provisions hereof, and the Bank hereby
accepts such appointment and employment. The Trust agrees to deliver to the
Custodian all securities, participation interests, cash and other assets owned
by it, and all payments of income, payments of principal and capital
distributions and adjustments received by it with respect to all securities and
participation interests owned by the Trust from time to time, and the cash
consideration received by it from time to time in exchange for an interest in
the Trust or for an increase in such an interest. The Custodian shall not be
responsible for any property of the Trust held by the Trust and not delivered by
the Trust to the Custodian. The Trust will also deliver to the Bank from time to
time copies of its currently effective declaration of trust, by-laws,
registration statement and placement agent agreement with its placement agent,
together with such resolutions, and other proceedings of the Trust as may be
necessary for or convenient to the Bank in the performance of its duties
hereunder.
The Custodian may from time to time employ one or more subcustodians to
perform such acts and services upon such terms and conditions as shall be
approved from time to time by the Board. Any such subcustodian so employed by
the Custodian shall be deemed to be the agent of the Custodian, and the
Custodian shall remain primarily responsible for the securities, participation
interests, moneys and other property of the Trust held by such subcustodian. Any
foreign subcustodian shall be a bank or trust company which is an eligible
foreign custodian within the meaning of Rule 17f-5 under the Investment Company
Act of 1940, and the foreign custody arrangements shall be approved by the Board
and shall be in accordance with and subject to the provisions of said Rule. For
the purposes of this Agreement, any property of the Trust held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the Custodian
under the terms of this Agreement.
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3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE TRUST
A. SAFEKEEPING AND HOLDING OF PROPERTY The Custodian shall keep safely
all property of the Trust and on behalf of the Trust shall from time to
time receive delivery of Trust property for safekeeping. The Custodian
shall hold, earmark and segregate on its books and records for the account
of the Trust all property of the Trust, including all securities,
participation interests and other assets of the Trust (1) physically held
by the Custodian, (2) held by any subcustodian referred to in Section 2
hereof or by any agent referred to in Paragraph K hereof, (3) held by or
maintained in The Depository Trust Company or in Participants Trust Company
or in an Approved Clearing Agency or in the Federal Book-Entry System or in
an Approved Foreign Securities Depository, each of which from time to time
is referred to herein as a "Securities System", and (4) held by the
Custodian or by any subcustodian referred to in Section 2 hereof and
maintained in any Approved Book-Entry System for Commercial Paper.
B. DELIVERY OF SECURITIES The Custodian shall release and deliver
securities or participation interests owned by the Trust held (or deemed to
be held) by the Custodian or maintained in a Securities System account or
in an Approved Book-Entry System for Commercial Paper account only upon
receipt of proper instructions, which may be continuing instructions when
deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities or participation interests for
the account of the Trust, BUT ONLY against receipt of payment
therefor; if delivery is made in Boston or New York City, payment
therefor shall be made in accordance with generally accepted clearing
house procedures or by use of Federal Reserve Wire System procedures;
if delivery is made elsewhere payment therefor shall be in accordance
with the then current "street delivery" custom or in accordance with
such procedures agreed to in writing from time to time by the parties
hereto; if the sale is effected through a Securities System, delivery
and payment therefor shall be made in accordance with the provisions
of Paragraph L hereof; if the sale of commercial paper is to be
effected through an Approved Book-Entry System for Commercial Paper,
delivery and payment therefor shall be made in accordance with the
provisions of Paragraph M hereof; if the securities are to be sold
outside the United States, delivery of the securities for the account
of the Trust may be made either (a) in advance of receipt of payment
therefor in the absence of specific instructions to do so provided
such actions are consistent with local settlement practices and
customs, subject to the Custodian's standard of care, or (b) in
accordance with procedures agreed to in writing from time to
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time by the parties hereto; for the purposes of this
subparagraph, the term "sale" shall include the disposition of a
portfolio security (i) upon the exercise of an option written by the
Trust and (ii) upon the failure by the Trust to make a successful bid
with respect to a portfolio security, the continued holding of which
is contingent upon the making of such a bid;
2) Upon the receipt of payment in connection with any repurchase
agreement or reverse repurchase agreement relating to such securities
and entered into by the Trust;
3) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Trust;
4) To the issuer thereof or its agent when such securities or
participation interests are called, redeemed, retired or otherwise
become payable; PROVIDED that, in any such case, the cash or other
consideration is to be delivered to the Custodian or any subcustodian
employed pursuant to Section 2 hereof;
5) To the issuer thereof, or its agent, for transfer into the
name of the Trust or into the name of any nominee of the Custodian or
into the name or nominee name of any agent appointed pursuant to
Paragraph K hereof or into the name or nominee name of any
subcustodian employed pursuant to Section 2 hereof; or for exchange
for a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
PROVIDED that, in any such case, the new securities or participation
interests are to be delivered to the Custodian or any subcustodian
employed pursuant to Section 2 hereof;
6) To the broker selling the same for examination in accordance
with the "street delivery" custom; 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;
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8) In the case of warrants, rights or similar securities, the
surrender thereof in connection with the exercise of such warrants,
rights or similar securities, or the surrender of interim receipts or
temporary securities for definitive securities; PROVIDED that, in any
such case, the new securities and cash, if any, are to be delivered to
the Custodian or any subcustodian employed pursuant to Section 2
hereof;
9) For delivery in connection with any loans of securities made
by the Trust (such loans to be made pursuant to the terms of the
Trust's current registration statement), BUT ONLY against receipt of
adequate collateral as agreed upon from time to time by the Custodian
and the Trust, which may be in the form of cash or obligations issued
by the United States government, its agencies or instrumentalities;
except that in connection with any securities loans for which
collateral is to be credited to the Custodian's account in the
book-entry system authorized by the U.S. Department of Treasury, the
Custodian will not be held liable or responsible for the delivery of
securities loaned by the Trust prior to the receipt of such
collateral;
10) For delivery as security in connection with any borrowings by
the Trust requiring a pledge or hypothecation of assets by the Trust
(if then permitted under circumstances described in the current
registration statement of the Trust), provided, that the securities
shall be released only upon payment to the Custodian of the monies
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;
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13) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian (or a subcustodian employed
pursuant to Section 2 hereof), and a futures commissions merchant,
relating to compliance with the rules of the Commodity Futures Trading
Commission and/or of any contract market or commodities exchange or
similar organization, regarding futures margin account deposits or
payments in connection with futures transactions by the Trust;
14) For any other proper corporate purpose, BUT ONLY upon receipt
of, in addition to proper instructions, a certified copy of a
resolution of the Board specifying the securities to be delivered,
setting forth the purpose for which such delivery is to be made,
declaring such purpose to be proper corporate purpose, and naming the
person or persons to whom delivery of such securities shall be made.
C. REGISTRATION OF SECURITIES Securities held by the Custodian (other
than bearer securities) for the account of the Trust shall be registered in
the name of the Trust 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
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held by the Custodian for the Trust may be deposited by it to its
credit as Custodian in the Banking Department of the Custodian or in such
other banks or trust companies as the Custodian may in its discretion deem
necessary or desirable; PROVIDED, however, that every such bank or trust
company shall be qualified to act as a custodian under the Investment
Company Act of 1940 and that each such bank or trust company and the funds
to be deposited with each such bank or trust company shall be approved in
writing by two officers of the Trust. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be subject to withdrawal
only by the Custodian in that capacity.
E. PAYMENT FOR INTERESTS, OR INCREASES IN INTERESTS, IN THE TRUST The
Custodian shall make appropriate arrangements with the Transfer Agent of
the Trust to enable the Custodian to make certain it promptly receives the
cash or other consideration due to the Trust for payment of interests in
the Trust, or increases in such interests, in accordance with the governing
documents and registration statement of the Trust. The Custodian will
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;
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3) Endorse and deposit for collection, in the name of the Trust,
checks, drafts or other negotiable instruments;
4) Credit income from securities maintained in a Securities
System or in an Approved Book-Entry System for Commercial Paper at the
time funds become available to the Custodian; in the case of
securities maintained in The Depository Trust Company funds shall be
deemed available to the Trust not later than the opening of business
on the first business day after receipt of such funds by the
Custodian. The Custodian shall notify the Trust as soon as reasonably
practicable whenever income due on any security is not promptly
collected. In any case in which the Custodian does not receive any due
and unpaid income after it has made demand for the same, it shall
immediately so notify the Trust 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
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pursuant to Section 2 hereof or by a clearing corporation of
a national securities exchange of which the Custodian is a member
or by any bank, banking institution or trust company doing
business in the United States or abroad which is qualified under
the Investment Company Act of 1940 to act as a custodian and
which has been designated by the Custodian as its agent for this
purpose or by the agent specifically designated in such
instructions as representing the purchasers of a new issue of
privately placed securities); (b) in the case of a purchase
effected through a Securities System, upon receipt of the
securities by the Securities System in accordance with the
conditions set forth in Paragraph L hereof; (c) in the case of a
purchase of commercial paper effected through an Approved
Book-Entry System for Commercial Paper, upon receipt of the paper
by the Custodian or subcustodian in accordance with the
conditions set forth in Paragraph M hereof; (d) in the case of
repurchase agreements entered into between the Trust and another
bank or a broker-dealer, against receipt by the Custodian of the
securities underlying the repurchase agreement either in
certificate form or through an entry crediting the Custodian's
segregated, non-proprietary account at the Federal Reserve Bank
of Boston with such securities along with written evidence of the
agreement by the bank or broker-dealer to repurchase such
securities from the Trust; or (e) in the case of securities
purchased outside the United States, the Custodian may make
payment therefor either (i) in advance of receipt of such
securities in the absence of specific instructions to do so
provided such actions are consistent with local settlement
practices and customs, subject to the Custodian's standard of
care, or (ii) in accordance with procedures agreed to in writing
from time to time by the parties hereto;
2) When required in connection with the conversion, exchange or
surrender of securities owned by the Trust as set forth in Paragraph B
hereof;
3) When required for the reduction or redemption of an interest
in the Trust in accordance with the provisions of Paragraph J hereof;
4) For the payment of any expense or liability incurred by the
Trust, including but not limited to the following payments for the
account of the Trust: advisory fees, interest, taxes, management
compensation and expenses, accounting, transfer agent and legal fees,
and other operating expenses of the Trust whether or not such expenses
are to be in whole or part capitalized or treated as deferred
expenses;
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5) For distributions or payments to Holders of Interest of the
Trust; and
6) 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 amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper corporate purpose, and naming
the person or persons to whom such payment is to be made.
I. LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED
In any and every case where payment for purchase of securities for the
account of the Trust is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions signed
by two officers of the Trust to so pay in advance, the Custodian shall be
absolutely liable to the Trust for such securities to the same extent as if
the securities had been received by the Custodian; EXCEPT that in the case
of a repurchase agreement entered into by the Trust with a bank which is a
member of the Federal Reserve System, the Custodian may transfer funds to
the account of such bank prior to the receipt of (i) the securities in
certificate form subject to such repurchase agreement or (ii) written
evidence that the securities subject to such repurchase agreement have been
transferred by book-entry into a segregated non-proprietary account of the
Custodian maintained with the Federal Reserve Bank of Boston or (iii) the
safekeeping receipt, PROVIDED that such securities have in fact been so
TRANSFERRED by book-entry and the written repurchase agreement is received
by the Custodian in due course; AND EXCEPT that if the securities are to be
purchased outside the United States, payment may be made in accordance with
procedures agreed to in writing from time to time by the parties hereto.
Notwithstanding any other provision in this Agreement to the contrary,
where securities are purchased or sold outside the United States, delivery
of securities for the account of the Trust may be made by the Custodian in
advance of receipt of payment for the securities sold, and the Custodian
may pay for securities in advance of receipt of the securities purchased
for the account of the Trust, in the absence of specific instructions to do
so provided such actions are consistent with local settlement practices and
customs, subject to the Custodian's standard of care.
J. PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF INTERESTS IN THE TRUST
From such funds as may be available for the purpose, but subject to any
applicable resolutions of the Board and the current procedures of the
Trust, the Custodian shall, upon receipt of written instructions from the
Trust or from the Trust's transfer agent make 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.
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K. APPOINTMENT OF AGENTS BY THE CUSTODIAN The Custodian may at any
time or times in its discretion appoint (and may at any time remove) any
other bank or trust company (PROVIDED such bank or trust company is itself
qualified under the Investment Company Act of 1940 to act as a custodian or
is itself an eligible foreign custodian within the meaning of Rule 17f-5
under said Act) as the agent of the Custodian to carry out such of the
duties and functions of the Custodian described in this Section 3 as the
Custodian may from time to time direct; PROVIDED, however, that the
appointment of any such agent shall not relieve the Custodian of any of its
responsibilities or liabilities hereunder, and as between the Trust and the
Custodian the Custodian shall be fully responsible for the acts and
omissions of any such agent. For the purposes of this Agreement, any
property of the Trust held by any such agent shall be deemed to be held by
the Custodian hereunder.
L. DEPOSIT OF TRUST PORTFOLIO SECURITIES IN SECURITIES SYSTEMS The
Custodian may deposit and/or maintain securities owned by the Trust
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities Depository
in each case only in accordance with applicable Federal Reserve Board
and Securities and Exchange Commission rules and regulations, and at all
times subject to the following provisions:
(a) The Custodian may (either directly or through one or more
subcustodians employed pursuant to Section 2 keep securities of the
Trust in a Securities System provided that such securities are
maintained in a non-proprietary account ("Account") of the Custodian
or such subcustodian in the Securities System which shall not include
any assets of the Custodian or such subcustodian or any other person
other than assets held by the Custodian or such subcustodian as a
fiduciary, custodian, or otherwise for its customers.
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(b) The records of the Custodian with respect to securities of
the Trust which are maintained in a Securities System shall identify
by book-entry those securities belonging to the Trust, and the
Custodian shall be fully and completely responsible for maintaining a
recordkeeping system capable of accurately and currently stating the
Trust's holdings maintained in each such Securities System.
(c) The Custodian shall pay for securities purchased in
book-entry form for the account of the Trust only upon (i) receipt of
notice or advice from the Securities System that such securities have
been transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such payment and transfer for
the account of the Trust; except that when such securities are
purchased outside the United States, payment therefor may be made by
the Custodian in advance of receipt of such notice or advice and the
making of such entry in the absence of specific instructions to do so
provided such actions are consistent with local settlement practices
and customs, subject to the Custodian's standard of care. The
Custodian shall transfer securities sold for the account of the Trust
only upon (i) receipt of notice or advice from the Securities System
that payment for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Trust; except
that when such securities are sold outside the United States, transfer
thereof may be made by the Custodian in advance of receipt of such
notice or advice and the making of such entry in the absence of
specific instructions to do so provided such actions are consistent
with local settlement practices and customs, subject to the
Custodian's standard of care. Copies of all notices or advices from
the Securities System of transfers of securities for the account of
the Trust shall identify the Trust, be maintained for the Trust by the
Custodian and be promptly provided to the Trust at its request. The
Custodian shall promptly send to the Trust confirmation of each
transfer to or from the account of the Trust in the form of a written
advice or notice of each such transaction, and shall furnish to the
Trust copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the Trust on
the next business day.
(d) The Custodian shall promptly send to the 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
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other communication relating to such agent's or subcustodian's
internal accounting controls and procedures for safeguarding
securities deposited in any Securities System. The Custodian's books
and records relating to the Trust's participation in each Securities
System will at all times during regular business hours be open to the
inspection of the Trust's authorized officers, employees or agents.
(e) The Custodian shall not act under this Paragraph L in the
absence of receipt of a certificate of an officer of the Trust that
the Board has approved the use of a particular Securities System; the
Custodian shall also obtain appropriate assurance from the officers of
the Trust that the Board has annually reviewed the continued use by
the Trust of each Securities System, and the Trust shall promptly
notify the Custodian if the use of a Securities System is to be
discontinued; at the request of the Trust, the Custodian will
terminate the use of any such Securities System as promptly as
practicable.
(f) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Trust for any loss or damage to
the Trust resulting from use of the Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian or any of its
agents or subcustodians or of any of its or their employees or from
any failure of the Custodian or any such agent or subcustodian to
enforce effectively such rights as it may have against the Securities
System or any other person; at the election of the Trust, it shall be
entitled to be subrogated to the rights of the Custodian with respect
to any claim against the Securities System or any other person which
the Custodian may have as a consequence of any such loss or damage if
and to the extent that the Trust has not been made whole for any such
loss or damage.
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
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further that such paper is maintained in a non-proprietary
account ("Account") of the Custodian or such subcustodian in an
Approved Book-Entry System for Commercial Paper which shall not
include any assets of the Custodian or such subcustodian or any other
person other than assets held by the Custodian or such subcustodian as
a fiduciary, custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to commercial paper
of the Trust which is maintained in an Approved Book-Entry System for
Commercial Paper shall identify by book-entry each specific issue of
commercial paper purchased by the Trust which is included in the
System and shall at all times during regular business hours be open
for inspection by authorized officers, employees or agents of the
Trust. The Custodian shall be fully and completely responsible for
maintaining a recordkeeping system capable of accurately and currently
stating the Trust's holdings of commercial paper maintained in each
such System.
(c) The Custodian shall pay for commercial paper purchased in
book-entry form for the account of the Trust only upon contemporaneous
(i) receipt of notice or advice from the issuer that such paper has
been issued, sold and transferred to the Account, and (ii) the making
of an entry on the records of the Custodian to reflect such purchase,
payment and transfer for the account of the Trust. The Custodian shall
transfer such commercial paper which is sold or cancel such commercial
paper which is redeemed for the account of the Trust only upon
contemporaneous (i) receipt of notice or advice that 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
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in any Approved Book-Entry System for Commercial Paper; and the
Custodian shall ensure that any agent appointed pursuant to Paragraph
K hereof or any subcustodian employed pursuant to Section 2 hereof
shall promptly send to the Trust and to the Custodian any report or
other communication relating to such agent's or subcustodian's
internal accounting controls and procedures for safeguarding
securities deposited in any Approved Book-Entry System for Commercial
Paper.
(e) The Custodian shall not act under this Paragraph M in the
absence of receipt of a certificate of an officer of the Trust that
the Board has approved the use of a particular Approved Book-Entry
System for Commercial Paper; the Custodian shall also obtain
appropriate assurance from the officers of the Trust that the Board
has annually reviewed the continued use by the Trust of each Approved
Book-Entry System for Commercial Paper, and the Trust shall promptly
notify the Custodian if the use of an Approved Book-Entry System for
Commercial Paper is to be discontinued; at the request of the Trust,
the Custodian will terminate the use of any such System as promptly as
practicable.
(f) The Custodian (or subcustodian, if the Approved Book-Entry
System for Commercial Paper is maintained by the subcustodian) shall
issue physical 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
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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 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 written information received by the
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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
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.
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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.
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.
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2. FUTURES CONTRACTS The Custodian shall, upon receipt of proper
instructions, receive and retain confirmations and other documents, if
any, evidencing the purchase or sale of a futures contract or an
option on a futures contract by the Trust; deposit and maintain in a
segregated account, for the benefit of any futures commission
merchant, assets designated by the Trust as initial, maintenance or
variation "margin" deposits (including 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
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outgoing payments of cash in the form of U.S. dollars or foreign
currency before receiving confirmation of a foreign exchange contract
or confirmation that the countervalue currency completing the foreign
exchange contract has been delivered or received. The Custodian shall
not be responsible for any costs and interest charges which may be
incurred by the Trust or the Custodian as a result of the failure or
delay of third parties to deliver foreign exchange; provided that the
Custodian shall nevertheless be held to the standard of care set forth
in, and shall be liable to the Trust in accordance with, the
provisions of Section 8.
V. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY The Custodian may in
its discretion, without express authority from the Trust:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its duties
under this Agreement, PROVIDED, that all such payments shall be
accounted for by the Custodian to the Treasurer of the Trust;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of 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
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received or delivered for the account of the Trust during said day and such
other statements, including a daily trial balance and inventory of the Trust's
portfolio securities; and shall furnish such other financial information and
data as from time to time requested by the Treasurer or any executive officer of
the Trust; and shall compute and determine, as of the close of business of the
New York Stock Exchange, or at such other time or times as the Board may
determine, the net asset value of the Trust and the net asset value of each
interest in the Trust, such computations and determinations to be made in
accordance with the governing documents of the Trust and the votes and
instructions of the Board and of the investment adviser at the time in force and
applicable, and promptly notify the Trust and its investment adviser and such
other persons as the Trust may request of the result of such computation and
determination. In computing the net asset value the Custodian may rely upon
security quotations received by telephone or otherwise from sources or pricing
services designated by the Trust by proper instructions, and may further rely
upon information furnished to it by any authorized officer of the Trust relative
(a) to liabilities of the Trust not appearing on its books of account, (b) to
the existence, status and proper treatment of any reserve or reserves, (c) to
any procedures or policies established by the Board regarding the valuation of
portfolio securities or other assets, and (d) to the value to be assigned to any
bond, note, debenture, Treasury 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 Trust's auditors with an attested inventory of
securities held with appropriate information as to securities in transit or in
- 22 -
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 intended to nor shall it be
- 23 -
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 by either party after August 31, 2000
by an instrument in writing delivered or mailed, postage prepaid to the other
party, such termination to take effect not sooner than sixty (60) days after the
date of such delivery or mailing; PROVIDED, that the Trust may at any time by
action of its Board, (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian in the event the
Custodian assigns this Agreement to another party without consent of the
noninterested Trustees of the Trust, or (ii) immediately terminate this
Agreement in the event of the appointment of a conservator or receiver for the
Custodian by the Federal Deposit Insurance Corporation or by the Banking
Commissioner of The Commonwealth of Massachusetts or upon the happening of a
like event at the direction of an appropriate regulatory agency or court of
competent jurisdiction. Upon termination of the Agreement, the Trust shall pay
to the Custodian such compensation as may be due as of the date of such
termination (and shall likewise reimburse the Custodian for its costs, expenses
and disbursements).
This Agreement may be amended at any time by the written agreement of the
parties hereto. If a majority of the non-interested trustees of any of the
Trusts determines that the performance of the Custodian has been unsatisfactory
or adverse to the interests of Trust holders of any Trust or Trusts or that the
terms of the Agreement are no longer consistent with publicly available industry
standards, then the Trust or Trusts shall give written notice to the Custodian
of such determination and the Custodian shall have 60 days to (1) correct such
performance to the satisfaction of the non-interested trustees or (2)
renegotiate terms which are satisfactory to the non- interested trustees of the
Trusts. If the conditions of the preceding sentence are not met then the Trust
or Trusts may terminate this Agreement on sixty (60) days written notice.
The Board of the Trust shall, forthwith, upon giving or receiving notice of
termination of this Agreement, appoint as successor custodian, a bank or trust
company having the qualifications required by the Investment Company Act of 1940
and the Rules thereunder. The Bank, as Custodian, Agent or otherwise, shall,
upon termination of the Agreement, deliver to such successor custodian, all
securities then held hereunder and all funds or other properties of the Trust
deposited with or held by the Bank hereunder and all books of account and
records kept by the Bank pursuant to this Agreement, and all documents held by
the Bank relative thereto. In the event that no written order designating a
successor custodian shall have been delivered to the Bank on or before the date
when such termination shall become effective, then the Bank shall not deliver
the securities, funds and other properties of the Trust to the Trust but shall
have the right to deliver to a bank or trust company doing business in Boston,
Massachusetts of its own selection meeting the above required qualifications,
all funds, securities and properties of the Trust held by or deposited with the
- 25 -
Bank, and all books of account and records kept by the Bank pursuant to
this Agreement, and all documents held by the Bank relative thereto. Thereafter
such bank or trust company shall be the successor of the Custodian under this
Agreement.
11. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Agreement, the Custodian and the
Trust may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement.
Any such interpretive or additional provisions shall be in a writing signed
by both parties and shall be annexed hereto, PROVIDED that no such interpretive
or additional provisions shall contravene any applicable federal or state
regulations or any provision of the governing instruments of the Trust. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Agreement.
12. NOTICES
Notices and other writings delivered or mailed postage prepaid to the Trust
addressed to 3808 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 Xxxxx 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.
14. ADOPTION OF THE AGREEMENT BY THE TRUST
The Trust represents that its Board has approved this Agreement and has
duly authorized the Trust to adopt this Agreement, such adoption to be evidenced
by a letter agreement between the Trust and the Bank reflecting such adoption,
- 26 -
which letter agreement shall be dated and signed by a duly authorized
officer of the Trust and duly authorized officer of the Bank. This Agreement
shall be deemed to be duly executed and delivered by each of the parties in its
name and behalf by its duly authorized officer as of the date of such letter
agreement, and this Agreement shall be deemed to supersede and terminate, as of
the date of such letter agreement, all prior agreements between the Trust and
the Bank relating to the custody of the Trust's assets.
* * * * *
SCHEDULE A
TO CUSTODIAN AGREEMENT
BETWEEN
ASIAN SMALL COMPANIES PORTFOLIO
AND
INVESTORS BANK & TRUST COMPANY
ADDITIONAL PARTIES TO THE AGREEMENT DATE OF AGREEMENT
Emerging Markets Xxxxxxxxx Xxxxx 0, 0000
Xxxxxxx Xxxxx Growth Portfolio October 27, 1992, as amended
Xxxxxxxx 0, 0000
Xxxxxx and Eastern Europe Portfolio November 17, 1997
South Asia Portfolio Xxxxx 0, 0000
XXXXXX AND EASTERN EUROPE PORTFOLIO
November 17, 1997
Russia and Eastern Europe Portfolio hereby adopts and agrees to become a party
to the attached Agreement with Investors Bank & Trust Company.
RUSSIA AND EASTERN EUROPE PORTFOLIO
By: /s/ Xxxxx X. Xxxxxx
--------------------------------
Xxxxx X. Xxxxxx, Vice President
Accepted and agreed to:
INVESTORS BANK & TRUST COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------
Title:
RUSSIA AND EASTERN EUROPE PORTFOLIO
PROCEDURES FOR ALLOCATIONS
AND DISTRIBUTIONS
October 17, 1997
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
PROCEDURES FOR
ALLOCATIONS AND DISTRIBUTIONS
OF
RUSSIA AND EASTERN EUROPE 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 October
17, 1997, as amended from time to time.
"Designated Expenses" shall mean extraordinary Trust expenses attributable
to a particular Holder that are to be borne by such Holder.
"Distributable Cash" for any Fiscal Year shall mean the gross cash proceeds
from Trust activities, less the portion thereof used to pay or establish
Reserves, plus such portion of the Reserves as the Trustees, in their sole
discretion, no longer deem necessary to be held as Reserves. Distributable Cash
shall not be reduced by depreciation, amortization, cost recovery deductions, or
similar allowances.
"Fair Market Value" of a security, instrument or other asset on any
particular day shall mean the fair value thereof as determined in good faith by
or on behalf of the Trustees in the manner set forth in the Registration
Statement.
"Fiscal Year" shall mean an annual period determined by the Trustees which
ends on such day as is permitted by the Code.
"Holders" shall mean as of any particular time all holders of record of
Interests in the Trust.
"Interest(s)" shall mean the interest of a Holder in the Trust, including
all rights, powers and privileges accorded to Holders by the Declaration, which
interest may be expressed as a percentage, determined by calculating, at such
times and on such bases as the Trustees shall from time to time determine, the
ratio of each Holder's Book Capital Account balance to the total of all Holders'
Book Capital Account balances.
"Investments" shall mean all securities, instruments or other assets of the
Trust of any nature whatsoever, including, but not limited to, all equity and
debt securities, futures contracts, and all property of the Trust obtained by
virtue of holding such assets.
"Matched Income or Loss" shall mean Taxable Income, Tax-Exempt Income or
Tax Loss of the Trust comprising interest, original issue discount and dividends
and all other types of income or loss to the extent the Taxable Income,
Tax-Exempt Income, Tax Loss or Loss items not included in Tax Loss arising from
such items are recognized for tax purposes at the same time that Profit or Loss
are accrued for book purposes by the Trust.
"Net Unrealized Gain" shall mean the excess, if any, of the aggregate Fair
Market Value of all Investments over the aggregate adjusted bases, for federal
income tax purposes, of all Investments.
"Net Unrealized Loss" shall mean the excess, if any, of the aggregate
adjusted bases, for federal income tax purposes, of all Investments over the
aggregate Fair Market Value of all Investments.
"Profit" and "Loss" shall mean, for each Fiscal Year or other period, an
amount equal to the Taxable Income or Tax Loss for such Fiscal Year or period
with the following adjustments:
(i) Any Tax-Exempt Income shall be added to such Taxable Income or
subtracted from such Tax Loss; and
(ii) Any expenditures of the Trust for such year or period described
in Section 705(a)(2)(B) of the Code or treated as expenditures under
Section 705(a)(2)(B) of the Code pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profit or Loss or specially allocated shall be subtracted from such 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 Russia and Eastern Europe Portfolio, a trust fund formed
under the laws of the State of New York by the Declaration.
"Trustees" shall mean each signatory to the Declaration, so long as such
signatory shall continue in office in accordance with the terms thereof, and all
other individuals who at the time in question have been duly elected or
appointed and have qualified as Trustees in accordance with the provisions
thereof and are then in office.
The "1940 Act" shall mean the U.S. Investment Company Act of 1940, as
amended from time to time, and the rules and regulations thereunder.
ARTICLE III
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, 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 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.
(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 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.
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 if the Trust so agrees.
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 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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