SENIOR DEBT PORTFOLIO
January 1, 1998
Senior Debt Portfolio hereby adopts and agrees to become a party to the attached
Custodian Agreement, as amended October 23, 1995, between the Xxxxx Xxxxx Hub
Portfolios and Investors Bank & Trust Company.
SENIOR DEBT PORTFOLIO
By: /s/ Xxxxx X. Xxxxxx
--------------------------
Xxxxx X. Xxxxxx, President
Accepted and agreed to:
Investors Bank & Trust Company
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Title: Director, Client Management
MASTER CUSTODIAN AGREEMENT
between
XXXXX XXXXX HUB PORTFOLIOS
and
INVESTORS BANK & TRUST COMPANY
TABLE OF CONTENTS
1. Definitions............................................................................................1-3
2. Employment of Custodian and Property to be Held by It..................................................3-4
3. Duties of the Custodian with Respect to
Property of the Trust....................................................................................4
A. Safekeeping and Holding of Property................................................................4-5
B. Delivery of Securities.............................................................................5-8
C. Registration of Securities.........................................................................8-9
D. Bank Accounts........................................................................................9
E. Payments for Interests, or Increases in Interests,
in the Trust...................................................................................9-10
F. Investment and Availability of Federal Funds........................................................10
G. Collections......................................................................................10-11
H. Payment of Trust Monies..........................................................................11-13
I. Liability for Payment in Advance of
Receipt of Securities Purchased..................................................................13-14
J. Payments for Repurchases or Redemptions
of Interests of the Trust...........................................................................14
K. Appointment of Agents by the Custodian..............................................................14
L. Deposit of Trust Portfolio Securities in Securities
Systems ......................................................................................14-17
M. Deposit of Trust Commercial Paper in an Approved
Book-Entry System for Commercial Paper........................................................17-20
N. Segregated Account...............................................................................20-21
O. Ownership Certificates for Tax Purposes.............................................................21
P. Proxies.............................................................................................21
Q. Communications Relating to Trust Portfolio ......................................................21-22
Securities
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R. Exercise of Rights; Tender Offers................................................................22-23
S. Depository Receipts.................................................................................23
T. Interest Bearing Call or Time Deposits...........................................................23-24
U. Options, Futures Contracts and Foreign
Currency Transactions.........................................................................24-26
V. Actions Permitted Without Express Authority.........................................................26
4. Duties of Bank with Respect to Books of Account and
Calculations of Net Asset Value......................................................................26-27
5. Records and Miscellaneous Duties.....................................................................27-28
6. Opinion of Trust's Independent Public Accountants.......................................................28
7. Compensation and Expenses of Bank....................................................................28-29
8. Responsibility of Bank...............................................................................29-30
9. Persons Having Access to Assets of the Trust............................................................30
10. Effective Period, Termination and Amendment;
Successor Custodian..................................................................................30-32
11. Interpretive and Additional Provisions..................................................................32
12. Notices.................................................................................................32
13. Massachusetts Law to Apply...........................................................................32-33
14. Adoption of the Agreement by the Trust..................................................................33
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MASTER CUSTODIAN AGREEMENT
This Agreement is made between each investment company advised by
Boston Management and Research which has adopted this Agreement in the manner
provided herein and Investors Bank & Trust Company (hereinafter called "Bank",
"Custodian" and "Agent"), a trust company established under the laws of
Massachusetts with a principal place of business in Boston, Massachusetts.
Whereas, each such investment company is registered under the
Investment Company Act of 1940 and has appointed the Bank to act as Custodian of
its property and to perform certain duties as its Agent, as more fully
hereinafter set forth; and
Whereas, the Bank is willing and able to act as each such investment
company's Custodian and Agent, subject to and in accordance with the provisions
hereof;
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements herein contained, each such investment company and the
Bank agree as follows:
1. DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Trust" shall mean the investment company which has adopted this
Agreement.
(b) "Board" shall mean the board of trustees of the Trust.
(c) "The Depository Trust Company", a clearing agency registered with
the Securities and Exchange Commission under Section 17A of the Securities
Exchange Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Trust by the Board.
(d) "Participants Trust Company", a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities Exchange
Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Trust by the Board.
(e) "Approved Clearing Agency" shall mean any other domestic clearing
agency registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934 which acts as a securities depository BUT
ONLY if the Custodian has received a certified copy of a resolution of the Board
approving such clearing agency as a securities depository for the Trust.
(f) "Federal Book-Entry System" shall mean the book-entry system
referred to in Rule 17f-4(b) under the Investment Company Act of 1940 for United
States and federal agency securities (i.e., as provided in Subpart O of Treasury
Circular 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
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that class, the Custodian shall be under no obligation to question the right of
the person or persons giving such instructions in so doing. Oral instructions
will be considered proper instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Trust shall cause all oral instructions to be
confirmed in writing. The Trust authorizes the Custodian to tape record any and
all telephonic or other oral instructions given to the Custodian. Upon receipt
of a certificate signed by two officers of the Trust as to the authorization by
the President and the Treasurer of the Trust accompanied by a detailed
description of the communication procedures approved by the President and the
Treasurer of the Trust, "proper instructions" may also include communications
effected directly between electromechanical or electronic devices provided that
the President and Treasurer of the Trust and the Custodian are satisfied that
such procedures afford adequate safeguards for the Trust's assets. In performing
its duties generally, and more particularly in connection with the purchase,
sale and exchange of securities made by or for the Trust, the Custodian may take
cognizance of the provisions of the governing documents and registration
statement of the Trust as the same may from time to time be in effect (and
resolutions 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
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distributions and adjustments received by it with respect to all securities and
participation interests owned by the Trust from time to time, and the cash
consideration received by it from time to time in exchange for an interest in
the Trust or for an increase in such an interest. The Custodian shall not be
responsible for any property of the Trust held by the Trust and not delivered by
the Trust to the Custodian. The Trust will also deliver to the Bank from time to
time copies of its currently effective declaration of trust, by-laws,
registration statement and placement agent agreement with its placement agent,
together with such resolutions, and other proceedings of the Trust as may be
necessary for or convenient to the Bank in the performance of its duties
hereunder.
The Custodian may from time to time employ one or more subcustodians to
perform such acts and services upon such terms and conditions as shall be
approved from time to time by the Board. Any such subcustodian so employed by
the Custodian shall be deemed to be the agent of the Custodian, and the
Custodian shall remain primarily responsible for the securities, participation
interests, moneys and other property of the Trust held by such subcustodian. Any
foreign subcustodian shall be a bank or trust company which is an eligible
foreign custodian within the meaning of Rule 17f-5 under the Investment Company
Act of 1940, and the foreign custody arrangements shall be approved by the Board
and shall be in accordance with and subject to the provisions of said Rule. For
the purposes of this Agreement, any property of the Trust held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the Custodian
under the terms of this Agreement.
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE TRUST
A. SAFEKEEPING AND HOLDING OF PROPERTY The Custodian shall keep
safely all property of the Trust and on behalf of the Trust 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
4
Securities Depository, each of which from time to time is
referred to herein as a "Securities System", and (4) held by the
Custodian or by any subcustodian referred to in Section 2 hereof
and maintained in any Approved Book-Entry System for Commercial
Paper.
B. DELIVERY OF SECURITIES The Custodian shall release and deliver
securities or participation interests owned by the Trust held (or
deemed to be held) by the Custodian or maintained in a Securities
System account or in an Approved Book-Entry System for Commercial
Paper account only upon receipt of proper instructions, which may
be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities or participation
interests for the account of the Trust, BUT ONLY
against receipt of payment therefor; if delivery is
made in Boston or New York City, payment therefor
shall be made in accordance with generally accepted
clearing house procedures or by use of Federal
Reserve Wire System procedures; if delivery is made
elsewhere payment therefor shall be in accordance
with the then current "street delivery" custom or in
accordance with such procedures agreed to in writing
from time to time by the parties hereto; if the sale
is effected through a Securities System, delivery and
payment therefor shall be made in accordance with the
provisions of Paragraph L hereof; if the sale of
commercial paper is to be effected through an
Approved Book-Entry System for Commercial Paper,
delivery and payment therefor shall be made in
accordance with the provisions of Paragraph M hereof;
if the securities are to be sold outside the United
States, delivery may be made in accordance with
procedures agreed to in writing from time to time by
the parties hereto; for the purposes of this
subparagraph, the term "sale" shall include the
disposition of a portfolio security (i) upon the
exercise of an option written by the Trust and (ii)
upon the failure by the Trust to make a successful
bid with respect to a portfolio security, the
continued holding of which is contingent upon the
making of such a bid;
5
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,
6
in any such case, the new securities and cash, if
any, are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof;
8) In the case of warrants, rights or similar
securities, the surrender thereof in connection with
the exercise of such warrants, rights or similar
securities, or the surrender of interim receipts or
temporary securities for definitive securities;
PROVIDED that, in any such case, the new securities
and cash, if any, are to be delivered to the
Custodian or any subcustodian employed pursuant to
Section 2 hereof;
9) For delivery in connection with any loans of
securities made by the Trust (such loans to be made
pursuant to the terms of the Trust's current
registration statement), BUT ONLY against receipt of
adequate collateral as agreed upon from time to time
by the Custodian and the Trust, which may be in the
form of cash or obligations issued by the United
States government, its agencies or instrumentalities;
except that in connection with any securities loans
for which collateral is to be credited to the
Custodian's account in the book-entry system
authorized by the U.S. Department of Treasury, the
Custodian will not be held liable or responsible for
the delivery of securities loaned by the Trust prior
to the receipt of such collateral;
10) For delivery as security in connection with any
borrowings by the Trust requiring a pledge or
hypothecation of assets by the Trust (if then
permitted under circumstances described in the
current registration statement of the Trust),
provided, that the securities shall be released only
upon payment to the Custodian of the monies 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;
7
11) When required for delivery in connection with any
redemption or repurchase of an interest in the Trust
in accordance with the provisions of Paragraph J
hereof;
12) For delivery in accordance with the provisions of
any agreement between the Custodian (or a
subcustodian employed pursuant to Section 2 hereof)
and a broker-dealer registered under the Securities
Exchange Act of 1934 and, if necessary, the Trust,
relating to compliance with the rules of The Options
Clearing Corporation or of any registered national
securities exchange, or of any similar organization
or organizations, regarding deposit or escrow or
other arrangements in connection with options
transactions by the Trust;
13) For delivery in accordance with the provisions of
any agreement among the Trust, the Custodian (or a
subcustodian employed pursuant to Section 2 hereof),
and a futures commissions merchant, relating to
compliance with the rules of the Commodity Futures
Trading Commission and/or of any contract market or
commodities exchange or similar organization,
regarding futures margin account deposits or payments
in connection with futures transactions by the Trust;
14) For any other proper corporate purpose, BUT ONLY
upon receipt of, in addition to proper instructions,
a certified copy of a resolution of the Board
specifying the securities to be delivered, setting
forth the purpose for which such delivery is to be
made, declaring such purpose to be proper corporate
purpose, and naming the person or persons to whom
delivery of such securities shall be made.
C. REGISTRATION OF SECURITIES Securities held by the Custodian
(other than bearer securities) for the account of the Trust
shall be registered in the name of the Trust 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
8
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 in
pursuant to the terms of this Agreement, and shall hold in
such account or accounts, subject to the provisions hereof,
all cash received by it from or for the account of the Trust
other than cash maintained by the Trust in a bank account
established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian
for the Trust may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in
such other banks or trust companies as the Custodian may in
its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the
funds to be deposited with each such bank or trust company
shall be approved in writing by two officers of the Trust.
Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be subject to withdrawal
only by the Custodian in that capacity.
E. PAYMENTS 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
9
the Trust, or increases in such interests, in accordance
with the governing documents and registration statement of
the Trust. The Custodian will provide prompt notification to
the Trust of any receipt by it of such payments.
F. INVESTMENT AND AVAILABILITY OF FEDERAL FUNDS Upon agreement
between the Trust and the Custodian, the Custodian shall,
upon the receipt of proper instructions, which may be
continuing instructions when deemed appropriate by the
parties, invest in such securities and instruments as may be
set forth in such instructions on the same day as received
all federal funds received after a time agreed upon between
the Custodian and the Trust.
G. COLLECTIONS The Custodian shall promptly collect all income
and other payments with respect to registered securities
held hereunder to which the Trust shall be entitled either
by law or pursuant to custom in the securities business, and
shall promptly collect all income and other payments with
respect to bearer securities if, on the date of payment by
the issuer, such securities are held by the Custodian or
agent thereof and shall credit such income, as collected, to
the Trust's custodian account. The Custodian shall do all
things necessary and proper in connection with such prompt
collections and, without limiting the generality of the
foregoing, the Custodian shall
1) Present for payment all coupons and other income
items requiring presentations;
2) Present for payment all securities which may mature
or be called, redeemed, retired or otherwise become payable;
3) Endorse and deposit for collection, in the name of
the Trust, checks, drafts or other negotiable instruments;
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
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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
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(iii)written confirmation of the purchase by the Trust
of the options, futures contracts, forward contracts or
options on futures contracts by the Custodian (or by a
subcustodian employed pursuant to Section 2 hereof or by a
clearing corporation of a national securities exchange of
which the Custodian is a member or by any bank, banking
institution or trust company doing business in the United
States or abroad which is qualified under the Investment
Company Act of 1940 to act as a custodian and which has been
designated by the Custodian as its agent for this purpose or
by the agent specifically designated in such instructions as
representing the purchasers of a new issue of privately
placed securities); (b) in the case of a purchase effected
through a Securities System, upon receipt of the securities
by the Securities System in accordance with the conditions
set forth in Paragraph L hereof; (c) in the case of a
purchase of commercial paper effected through an Approved
Book-Entry System for Commercial Paper, upon receipt of the
paper by the Custodian or subcustodian in accordance with
the conditions set forth in Paragraph M hereof; (d) in the
case of repurchase agreements entered into between the Trust
and another bank or a broker-dealer, against receipt by the
Custodian of the securities underlying the repurchase
agreement either in certificate form or through an entry
crediting the Custodian's segregated, non-proprietary
account at the Federal Reserve Bank of Boston with such
securities along with written evidence of the agreement by
the bank or broker-dealer to repurchase such securities from
the Trust; or (e) with respect to securities purchased
outside of the United States, in accordance with written
procedures agreed to from time to time in writing by the
parties hereto;
2) When required in connection with the conversion, exchange or
surrender of securities owned by the Trust as set forth in Paragraph B
hereof;
3) When required for the reduction or redemption of an interest
in the Trust in accordance with the provisions of Paragraph J hereof;
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4) For the payment of any expense or liability incurred by the
Trust, including but not limited to the following payments for the
account of the Trust: advisory fees, interest, taxes, management
compensation and expenses, accounting, transfer agent and legal fees,
and other operating expenses of the Trust whether or not such expenses
are to be in whole or part capitalized or treated as deferred
expenses;
5) For distributions or payment to Holders of Interest in 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 trusts 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
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agreement is received by the Custodian in due course; AND EXCEPT that
if the securities are to be purchased outside the United States,
payment may be made in accordance with procedures agreed to in writing
from time to time by the parties hereto.
J. PAYMENTS FOR 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 who have caused the amount of their interests to be reduced,
or for their interest to be redeemed.
K. APPOINTMENT OF AGENTS BY THE CUSTODIAN The Custodian may at any time
or times in its discretion appoint (and may at any time remove) any
other bank or trust company (PROVIDED such bank or trust company is
itself qualified under the Investment Company Act of 1940 to act as a
custodian or is itself an eligible foreign custodian within the
meaning of Rule 17f-5 under said Act) as the agent of the Custodian to
carry out such of the duties and functions of the Custodian described
in this Section 3 as the Custodian may from time to time direct;
PROVIDED, however, that the appointment of any such agent shall not
relieve the Custodian of any of its responsibilities or liabilities
hereunder, and as between the Trust and the Custodian the Custodian
shall be fully responsible for the acts and omissions of any such
agent. For the purposes of this Agreement, any property of the Trust
held by any such agent shall be deemed to be held by the Custodian
hereunder.
L. DEPOSIT OF TRUST PORTFOLIO SECURITIES IN SECURITIES SYSTEMS The
Custodian may deposit and/or maintain securities owned by the Trust
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
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(5) in an Approved Foreign Securities Depository in each
case only in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and
regulations, and at all times subject to the following
provisions:
(a) The Custodian may (either directly or through one or more
subcustodians employed pursuant to Section 2 keep securities of the
Trust in a Securities System provided that such securities are
maintained in a non-proprietary account ("Account") of the Custodian
or such subcustodian in the Securities System which shall not include
any assets of the Custodian or such subcustodian or any other person
other than assets held by the Custodian or such subcustodian as a
fiduciary, custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to securities of
the Trust which are maintained in a Securities System shall identify
by book-entry those securities belonging to the Trust, and the
Custodian shall be fully and completely responsible for maintaining a
recordkeeping system capable of accurately and currently stating the
Trust's holdings maintained in each such Securities System.
(c) The Custodian shall pay for securities purchased in
book-entry form for the account of the Trust only upon (i) receipt of
notice or advice from the Securities System that such securities have
been transferred to the Account, and (ii) the making of any entry on
the records of the Custodian to reflect such payment and transfer for
the account of the Trust. The Custodian shall transfer securities sold
for the account of the Trust only upon (i) receipt of notice or advice
from the Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and payment for the
account of the Trust. Copies of all notices or advices from the
15
Securities System of transfers of securities for the account of the
Trust shall identify the Trust, be maintained for the Trust by the
Custodian and be promptly provided to the Trust at its request. The
Custodian shall promptly send to the Trust confirmation of each
transfer to or from the account of the Trust in the form of a written
advice or notice of each such transaction, and shall furnish to the
Trust copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the Trust on
the next business day.
(d) The Custodian shall promptly send to the Trust any report or
other communication received or obtained by the Custodian relating to
the Securities System's accounting system, system of internal
accounting controls or procedures for safeguarding securities
deposited in the Securities System; the Custodian shall promptly send
to the Trust any report or other communication relating to the
Custodian's internal accounting controls and procedures for
safeguarding securities deposited in any Securities System; and the
Custodian shall ensure that any agent appointed pursuant to Paragraph
K hereof or any subcustodian employed pursuant to Section 2 hereof
shall promptly send to the Trust and to the Custodian any report or
other communication relating to such agent's or subcustodian's
internal accounting controls and procedures for safeguarding
securities deposited in any Securities System. The Custodian's books
and records relating to the Trust's participation in each Securities
System will at all times during regular business hours be open to the
inspection of the Trust's authorized officers, employees or agents.
(e) The Custodian shall not act under this Paragraph L in the
absence of receipt of a certificate of an officer of the Trust that
the Board has approved the use of a particular Securities System; the
Custodian shall also obtain appropriate assurance from the officers of
the Trust that the Board has annually reviewed the continued use by
16
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
further that such paper is maintained in a non-proprietary account
17
("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
Securities 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
18
the form of a written advice or notice of each such transaction, and
shall furnish to the Trust copies of daily transaction sheets
reflecting each day's transactions in the System for the account of
the Trust on the next business day.
(d) The Custodian shall promptly send to the Trust any report or
other communication received or obtained by the Custodian relating to
each System's accounting system, system of internal accounting
controls or procedures for safeguarding commercial paper deposited in
the System; the Custodian shall promptly send to the Trust any report
or other communication relating to the Custodian's internal accounting
controls and procedures for safeguarding commercial paper deposited in
any Approved Book-Entry System for Commercial Paper; and the Custodian
shall ensure that any agent appointed pursuant to Paragraph K hereof
or any subcustodian employed pursuant to Section 2 hereof shall
promptly send to the Trust and to the Custodian any report or other
communication relating to such agent's or subcustodian's internal
accounting controls and procedures for safeguarding securities
deposited in any Approved Book-Entry System for Commercial Paper.
(e) The Custodian shall not act under this Paragraph M in the
absence of receipt of a certificate of an officer of the Trust that
the Board has approved the use of a particular Approved Book-Entry
System for Commercial Paper; the Custodian shall also obtain
appropriate assurance from the officers of the Trust that the Board
has annually reviewed the continued use by the Trust of each Approved
Book-Entry System for Commercial Paper, and the Trust shall promptly
notify the Custodian if the use of an Approved Book-Entry System for
Commercial Paper is to be discontinued; at the request of the Trust,
the Custodian will terminate the use of any such System as promptly as
practicable.
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(f) The Custodian (or subcustodian, if the Approved Book-Entry
System for Commercial Paper is maintained by the subcustodian) shall
issue physical commercial paper or promissory notes whenever requested
to do so by the Trust or in the event of an electronic system failure
which impedes issuance, transfer or custody of direct issue commercial
paper by book-entry.
(g) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Trust for any loss or damage to
the Trust resulting from use of any Approved Book-Entry System for
Commercial Paper by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or subcustodians or
of any of its or their employees or from any failure of the Custodian
or any such agent or subcustodian to enforce effectively such rights
as it may have against the System, the issuer of the commercial paper
or any other person; at the election of the Trust, it shall be
entitled to be subrogated to the rights of the Custodian with respect
to any claim against the System, the issuer of the commercial paper or
any other person which the Custodian may have as a consequence of any
such loss or damage if and to the extent that the Trust has not been
made whole for any such loss or damage.
N. SEGREGATED ACCOUNT The Custodian shall upon receipt of proper
instructions establish and maintain a segregated account or accounts
for and on behalf of the Trust, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Paragraph L hereof, (i) in
accordance with the provisions of any agreement among the Trust, the
Custodian and any registered broker-dealer (or any futures commission
merchant), relating to compliance with the rules of the Options
Clearing Corporation and of any registered national securities
exchange (or of the Commodity Futures Trading Commission or of any
contract market or commodities exchange), or of any similar
organization or organizations, regarding escrow or deposit or other
arrangements in connection with transactions by the Trust, (ii) for
purposes of segregating cash or U.S.
20
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
21
persons relating to the securities and participation interests being
held for the Trust. With respect to tender or exchange offers, the
Custodian shall deliver promptly to the Trust all written information
received by the Custodian from issuers and other persons relating to
the securities and participation interests whose tender or exchange is
sought and from the party (or his agents) making the tender or
exchange offer.
R. EXERCISE OF RIGHTS; TENDER OFFERS In the case of tender offers,
similar offers to purchase or exercise rights (including, without
limitation, pendency of calls and maturities of securities and
participation interests and expirations of rights in connection
therewith and notices of exercise of call and put options and the
maturity of futures contracts) affecting or relating to securities and
participation interests held by the Custodian under this Agreement,
the Custodian shall have responsibility for promptly notifying the
Trust of all such offers in accordance with the standard of reasonable
care set forth in Section 8 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
22
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 in
the name of a nominee of the Custodian or in the name or nominee name
of any subcustodian employed pursuant to Section 2 hereof, for
delivery to the Custodian or such subcustodian at such place as the
Custodian or such subcustodian may from time to time designate. The
Custodian shall, upon receipt of proper instructions, surrender ADRs
to the issuer thereof against a written receipt therefor adequately
describing the ADRs surrendered and written evidence satisfactory to
the Custodian that the issuer of the ADRs has acknowledged receipt of
instructions to cause its depository to deliver the securities
underlying such ADRs to the Custodian or to a subcustodian employed
pursuant to Section 2 hereof.
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
23
deemed portfolio securities of the Trust for the purposes of this
Agreement, and the Custodian shall be responsible for the collection
of income from such accounts and the transmission of cash to and from
such accounts.
U. OPTIONS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS
1. OPTIONS. The Custodian shall, upon receipt of proper instructions
and in accordance with the provisions of any agreement between the
Custodian, any registered broker-dealer and, if necessary, the Trust,
relating to compliance with the rules of the Options Clearing
Corporation or of any registered national securities exchange or
similar organization or organizations, receive and retain
confirmations or other documents, if any, evidencing the purchase or
writing of an option on a security or securities index or other
financial instrument or index by the Trust; deposit and maintain in a
segregated account for the Trust, either physically or by book-entry
in a Securities System, securities subject to a covered call option
written by the Trust; and release and/or transfer such securities or
other assets only in accordance with a notice or other communication
evidencing the expiration, termination or exercise of such covered
option furnished by the Options Clearing Corporation, the securities
or options exchange on which such covered option is traded or such
other organization as may be responsible for handling such options
transactions. The Custodian and the broker-dealer shall be responsible
for the sufficiency of assets held in the Trust's segregated account
in compliance with applicable margin maintenance requirements.
2. FUTURES CONTRACTS The Custodian shall, upon receipt of proper
instructions, receive and retain confirmations and other documents, if
any, evidencing the purchase or sale of a futures contract or an
option on a futures contract by the Trust; deposit and maintain in a
segregated account, for the benefit of any futures commission
merchant, assets designated by the Trust as initial, maintenance or
variation "margin" deposits (including xxxx-to-market payments)
24
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 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
25
transaction on behalf and for the account of the Trust) make free
outgoing payments of cash in the form of U.S. dollars or foreign
currency before receiving confirmation of a foreign exchange contract
or confirmation that the countervalue currency completing the foreign
exchange contract has been delivered or received. The Custodian shall
not be responsible for any costs and interest charges which may be
incurred by the Trust or the Custodian as a result of the failure or
delay of third parties to deliver foreign exchange; provided that the
Custodian shall nevertheless be held to the standard of care set forth
in, and shall be liable to the Trust in accordance with, the
provisions of Section 8.
V. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY The Custodian may in its
discretion, without express authority from the Trust:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its duties
under this Agreement, PROVIDED, that all such payments shall be
accounted for by the Custodian to the Treasurer of the Trust;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of 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
The Bank shall as Agent (or as Custodian, as the case may be) keep such
books of account (including records showing the adjusted tax costs of the
Trust's portfolio securities) and render as at the close of business on each day
a detailed statement of the amounts received or paid out and of securities
received or delivered for the account of the Trust during said day and such
26
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
27
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 holder of interest in the
Trust, to the Securities and Exchange Commission, including Form N-SAR, and to
others, audits of accounts, and other ministerial matters of like nature; and,
upon request, shall furnish the Trust's auditors with an attested inventory of
securities held with appropriate information as to securities in transit or in
the process of purchase or sale and with such other information as said auditors
may from time to time request. The Custodian shall also maintain records of all
receipts, deliveries and locations of such securities, together with a current
inventory thereof, and shall conduct periodic verifications (including sampling
counts at the Custodian) of certificates representing bonds and other securities
for which it is responsible under this Agreement in such manner as the Custodian
shall determine from time to time to be advisable in order to verify the
accuracy of such inventory. The Bank shall not disclose or use any books or
records it has prepared or maintained by reason of this Agreement in any manner
except as expressly authorized herein or directed by the Trust, and the Bank
shall keep confidential any information obtained by reason of this Agreement.
6. OPINION OF TRUST'S INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall take all reasonable action, as the Trust may from
time to time request, to enable the Trust to obtain from year to year favorable
opinions from the Trust's independent public accountants with respect to its
activities hereunder in connection with the preparation of the Trust's
registration statement and Form N-SAR or other periodic reports to the
Securities and Exchange Commission and with respect to any other requirements of
such Commission.
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
28
the Bank. The Bank shall be entitled to receive from the Trust on demand
reimbursement for its cash disbursements, expenses and charges, including
counsel fees, in connection with its duties as Custodian and Agent hereunder,
but excluding salaries and usual overhead expenses.
8. RESPONSIBILITY OF BANK
So long as and to the extent that it is in the exercise of reasonable
care, the Bank as Custodian and Agent shall be held harmless in acting upon any
notice, request, consent, certificate or other instrument reasonably believed by
it to be genuine and to be signed by the proper party or parties.
The Bank as Custodian and Agent shall be entitled to rely on and may
act upon advice of counsel (who may be counsel for the Trust) on all matters,
and shall be without liability for any action reasonably taken or omitted
pursuant to such advice.
The Bank as Custodian and Agent shall be held to the exercise of
reasonable care in carrying out the provisions of this Agreement but shall be
liable only for its own negligent or bad faith acts or failures to act.
Notwithstanding the foregoing, nothing contained in this paragraph is intended
to nor shall it be construed to modify the standards of care and responsibility
set forth in Section 2 hereof with respect to subcustodians and in subparagraph
f of Paragraph L of Section 3 hereof with respect to Securities Systems and in
subparagraph g of Paragraph M of Section 3 hereof with respect to an Approved
Book-Entry System for Commercial Paper.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to
subcustodians generally in Section 2 hereof, provided that, regardless of
whether assets are maintained in the custody of a foreign banking institution, a
foreign securities depository or a branch of a U.S. bank, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim resulting
from, or caused by, the direction of or authorization by the Trust to maintain
custody of any securities or cash of the Trust in a foreign country including,
but not limited to, losses resulting from 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.
29
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.
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
30
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
non-interested 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 such 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
31
required qualifications, all funds, securities and properties of the Trust held
by or deposited with the Bank, and all books of account and records kept by the
Bank pursuant to this Agreement, and all documents held by the Bank relative
thereto. Thereafter such bank or trust company shall be the successor of the
Custodian under this Agreement.
11. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Agreement, the Custodian and
the Trust may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, PROVIDED that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the governing instruments of the Trust. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment of
this Agreement.
12. NOTICES
Notices and other writings delivered or mailed postage prepaid to the
Trust addressed to 00 Xxxxxxx Xxxxxx, Xxxxxx, XX 00000 or to such other address
as the Trust may have designated to the Bank, in writing with a copy to Xxxxx
Xxxxx Management at 00 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, or to
Investors Bank & Trust Company, 00 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000
with a copy to Xxxxx Xxxxx Management at 00 Xxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, shall be deemed to have been properly delivered or given
hereunder to the respective addressees.
13. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
The Custodian expressly acknowledges the provision in the Declaration
of Trust of the Trust (Section 5.2 and 5.6) limiting the personal liability of
the Trustees and officers of the Trust, and the Custodian hereby agrees that it
32
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 the Custodian
shall not seek satisfaction from any Trustee or officer of the Trust.
14. ADOPTION OF THE AGREEMENT BY THE TRUST
The Trust represents that its Board has approved this Agreement and has
duly authorized the Trust to adopt this Agreement, such adoption to be evidenced
by a letter agreement between the Trust and the Bank reflecting such adoption,
which letter agreement shall be dated and signed by a duly authorized officer of
the Trust and duly authorized officer of the Bank. This Agreement shall be
deemed to be duly executed and delivered by each of the parties in its name and
behalf by its duly authorized officer as of the date of such letter agreement,
and this Agreement shall be deemed to supersede and terminate, as of the date of
such letter agreement, all prior agreements between the Trust and the Bank
relating to the custody of the Trust's assets.
* * * * *
SENIOR DEBT PORTFOLIO
AMENDED AND RESTATED
PROCEDURES FOR ALLOCATIONS
AND DISTRIBUTIONS
November 21, 1994
TABLE OF CONTENTS
PAGE
ARTICLE I--INTRODUCTION ..........................................................................................1
ARTICLE II--DEFINITIONS ..........................................................................................1
ARTICLE III--CAPITAL ACCOUNTS
Section 3.1 Capital Accounts of Holders ..................................................3
Section 3.2 Book Capital Accounts ........................................................4
Section 3.3 Tax Capital Accounts .........................................................4
Section 3.4 Compliance with Treasury Regulations .........................................4
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 .................................5
Section 5.2 Allocation of Taxable Income and Tax Loss
to Tax Capital Accounts.....................................................6
Section 5.3 Special Allocations to Book and Tax Capital
Accounts ...................................................................7
Section 5.4 Other Adjustments to Book and Tax Capital
Accounts ...................................................................7
Section 5.5 Timing of Tax Allocations to Book and Tax
Capital Accounts ...........................................................7
Section 5.6 Redemptions During the Fiscal Year ...........................................7
ARTICLE VI--WITHDRAWALS
Section 6.1 Partial Withdrawals ..........................................................7
Section 6.2 Redemptions ..................................................................7
Section 6.3 Distribution in Kind..........................................................8
ARTICLE VII--LIQUIDATION
Section 7.1 Liquidation Procedure ........................................................8
Section 7.2 Alternative Liquidation Procedure ............................................8
Section 7.3 Cash Distributions Upon Liquidation ..........................................8
Section 7.4 Treatment of Negative Book Capital
Account Balance ............................................................8
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AMENDED AND RESTATED
PROCEDURES FOR
ALLOCATIONS AND DISTRIBUTIONS
OF
SENIOR DEBT 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 May 1,
1992, as amended from time to time.
"DESIGNATED EXPENSES" shall mean extraordinary Trust expenses
attributable to a particular Holder that are to be borne by such Holder.
"DISTRIBUTABLE CASH" for any Fiscal Year shall mean the gross cash
proceeds from Trust activities, less the portion thereof used to pay or
establish Reserves, plus such portion of the Reserves as the Trustees, in their
sole discretion, no longer deem necessary to be held as Reserves. Distributable
Cash shall not be reduced by depreciation, amortization, cost recovery
deductions, or similar allowances.
"FAIR MARKET VALUE" of a security, instrument or other asset on any
particular day shall mean the fair value thereof as determined in good faith by
or on behalf of the Trustees in the manner set forth in the Registration
Statement.
"FISCAL YEAR" shall mean an annual period determined by the Trustees
which ends on such day as is permitted by the Code.
"HOLDERS" shall mean as of any particular time all holders of record
of Interests in the Trust.
"INTEREST(S)" shall mean the interest of a Holder in the Trust,
including all rights, powers and privileges accorded to Holders by the
Declaration, which interest may be expressed as a percentage, determined by
calculating, at such times and on such bases as the Trustees shall from time to
time determine, the ratio of each Holder's Book Capital Account balance to the
total of all Holders' Book Capital Account balances.
"INVESTMENTS" shall mean all securities, instruments or other assets of
the Trust of any nature whatsoever, including, but not limited to, all equity
and debt securities, futures contracts, and all property of the Trust obtained
by virtue of holding such assets.
"MATCHED INCOME OR LOSS" shall mean Taxable Income, Tax-Exempt Income
or Tax Loss of the Trust comprising interest, original issue discount and
dividends and all other types of income or loss to the extent the Taxable
Income, Tax-Exempt Income, Tax Loss or Loss items not included in Tax Loss
arising from such items are recognized for tax purposes at the same time that
Profit or Loss are accrued for book purposes by the Trust.
"NET UNREALIZED GAIN" shall mean the excess, if any, of the aggregate
Fair Market Value of all Investments over the aggregate adjusted bases, for
federal income tax purposes, of all Investments.
"NET UNREALIZED LOSS" shall mean the excess, if any, of the aggregate
adjusted bases, for federal income tax purposes, of all Investments over the
aggregate Fair Market Value of all Investments.
"PROFIT" AND "LOSS" shall mean, for each Fiscal Year or other period,
an amount equal to the Taxable Income or Tax Loss for such Fiscal Year or period
with the following adjustments:
(i) Any Tax-Exempt Income shall be added to such Taxable
Income or subtracted from such Tax Loss; and
(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.
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"REGISTRATION STATEMENT" shall mean the Registration Statement of the
Trust on Form N-2 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 Senior Debt 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-
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.
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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.
-5-
(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.
-6-
(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. From time to time the Trust may permit any
Holder to withdraw its investment, all upon such terms and conditions as may be
determined by the Trustees and subject to any applicable provisions of the
Investment Company Act of 1940.
6.2. REDEMPTIONS. From time to time the Trust may permit any Holder to
redeem all of its Interest, all upon such terms and conditions as may be
determined by the Trustees and subject to any applicable provisions of the
Investment Company Act of 1940. The Trustees may permit a Holder's Interest to
be redeemed at any time during the Fiscal Year as provided in Section 6.3 hereof
by a cash distribution or, at the option of a Holder, by a distribution of a
proportionate amount except for fractional shares of each Trust asset at the
option of the Trust. However, the Holder may be redeemed by a distribution of a
proportionate amount of the Trust's assets only at the end of a Fiscal Year.
However, if the Holder has contributed any property to the Trust other than
cash, if such property remains in the Trust at the time the Holder requests
withdrawal, then such property will be sold by the Trust prior to the time at
which the Holder withdraws from the Trust.
-7-
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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