Common use of Option Contracts Clause in Contracts

Option Contracts. The Custodian's responsibilities regarding option contracts will be governed by the following sub-paragraphs: (a) Unless more particularly described below, Written or Oral Instructions regarding option contracts purchased or sold by any Series shall state (i) the price at which the underlying Security may be bought or sold, (ii) the issuer, the title and number of the Interests or principal amount of such Security, (iii) the premium to be paid, (iv) the expiration date of the option contract, (v) if the transaction is a "closing sale transaction," whether the sale requires delivery of a certificate of ownership to the broker through whom the sale is made and (vi) if the transaction is a purchase of an option contract, the requirement that payment of the premium be made only upon receipt of a certificate of ownership executed by the broker through whom the purchase is made. (b) Whenever a Series sells an option contract, Written or Oral Instructions to the Custodian must state (ii) the issuer, the title and number of Interests or principal amount of the Security subject to the option contract, (ii) the exercise price of the option contract, (iii) the expiration date of the option contract, (iv) the premium to be received by the Series, (v) the name of the broker from whom the premium is to be received and (vi) if the option is a call, whether it is covered. If the option contract sold is a put, the Written or Oral Instructions shall also state (i) the amount and kind of collateral required by the broker or (ii) the amount and kind of assets of the Series, if any, that shall be segregated from the general assets of the Series and held by the Custodian in a segregated option account (the "Option Account"). If collateral is required, the Custodian shall deliver the collateral directly to the broker through whom such option was written and receive in return a receipt and a confirmation of the option transaction, in accordance with the customs prevailing among brokers in such securities. If an Option Account is established, the Custodian shall maintain it as specified in Written or Oral Instructions. (c) If the Custodian (i) acts as escrow agent with respect to a covered call option contract, (ii) maintains securities underlying a covered call option contract with a Securities Depository or (iii) holds assets in the Option Account in connection with a put option contract, the Custodian shall deliver, or cause to be delivered, all receipts required by the customs prevailing among dealers in such securities. (d) If an option contract purchased or sold by any Series expires, the Trust will deliver to the Custodian Written or Oral Instructions containing the information specified in paragraph (b) above and instructing the Custodian to (i) delete such option contract from the list of holdings that the Custodian maintains for that Series and (ii) either remove from the Option Account specified assets held with respect to such option or remove the restriction on any securities underlying a covered call option contract, as the case may be. Upon the return and/or cancellation or expiration of any receipts issued pursuant to paragraph (c) above, the Custodian shall remove such restriction, delete the option from the list of holdings maintained by the Custodian and transfer the assets to the general account maintained by the Custodian for the benefit of the Series. Collateral delivered by a broker with whom it was previously deposited pursuant to paragraph (b) above shall, if identical with the collateral specified in the receipt previously issued by such broker, be accepted by the Custodian and held in the general account maintained by the Custodian for the benefit of the Series. The Custodian shall accept delivery of collateral not specified in such a receipt only upon receipt of Written or Oral Instructions. (e) If a covered call option sold by a Series is exercised, the Trust shall promptly furnish the Custodian with Written or Oral Instructions stating (i) the issuer, the title and number of Interests or principal amount of the Security subject to the option contract, (ii) the person to whom the underlying Securities are to be delivered, (iii) the amount to be received and held by the Custodian upon delivery and (iv) the assets, if any, to be removed from the Option Account or the collateral, if any, to be returned by a broker with whom it was deposited under paragraph (b) above. (f) If a put option contract sold by a Series is exercised, the Trust shall promptly furnish the Custodian with Written or Oral Instructions stating (i) the issuer, the title and number of Interests or principal amount of the Security subject to the option contract, (ii) the name of the person whom the Custodian will pay for Securities subject to the put, in return for receipt of such Securities, (iii) the amount of such payment and (iv) the assets, if any, to be removed from the Option Account or the collateral, if any, to be returned by a broker with whom it was deposited under paragraph (b) above. (g) In the event a Series purchases, in a "closing purchase transaction," an option contract identical to a previously sold option contract in order to liquidate its position as a seller of a call option contract, the Trust will deliver to the Custodian Written or Oral Instructions stating (i) the issuer, the title and number of Interests or principal amount of the Security subject to the option contract, (ii) the exercise price of the option contract, (iii) the premium to be paid, (iv) the expiration date of the option contract and (v) the name of the person to whom the premium is to be paid. Upon the Custodian's payment of the premium and the return and/or cancellation of any receipts issued pursuant to paragraph (c) above, the Custodian shall (i) either remove from the Option Account the assets held therein or remove the previously-composed restrictions on the Securities underlying the option that is liquidated by reason of the Closing Purchase Transaction, (ii) delete such option from the list of holdings maintained by that Series and (iii) transfer such Securities or assets to the general account maintained by the Custodian for the benefit of the Series. Collateral delivered by a broker with whom it was previously deposited pursuant to paragraph (b) above shall, if identical with the collateral specified in the receipt previously issued by such broker, be accepted by the Custodian and transferred to the general account maintained by the Custodian for the benefit of the Series. The Custodian shall accept delivery of collateral not specified in such a receipt only upon receipt of Written or Oral Instructions. (h) If a Series exercises an option contract held by the Custodian, the Trust shall deliver to the Custodian, at least 24 hours before the last business day on which such option contract may be exercised, Written or Oral Instructions containing the information required under paragraph (a) above and instructing the Custodian (i) in the case of a put option contract, to deliver the securities subject the put to the broker specified in the Written or Oral Instructions, in return for receipt of the exercise price or (ii) in the case of a covered call option contract, to pay the exercise price of the option contract to the broker specified in the Written or Oral Instructions, in return for receipt of the Securities subject to the call. (i) The Custodian shall have no duty or obligation to see that a Series has deposited or is maintaining adequate margin, if required, with any broker in connection with an option contract. The Custodian shall have no duty or obligation to present such option contract to the broker unless it receives Written or Oral Instructions from the Trust. The Custodian shall have no responsibility for (i) the legality of any option contract purchased or sold on behalf of a Series, (ii) the propriety of any such purchase or sale and (iii) the adequacy of any collateral delivered to a broker in connection with an option or held in the Option Account.