EXHIBIT (G)(1)
CUSTODIAN AGREEMENT
AGREEMENT made this 1st day of August, 1991 by and among GMO TRUST, a
business trust established under the laws of the Commonwealth of Massachusetts
(THE "TRUST") on behalf of the GMO Core Fund, GMO SAF Core Fund, GMO Value
Allocation Fund, GMO Growth Fund, GMO Short-Term Income Fund and any other
series of the Trust, currently existing or hereafter created, as shall be
mutually agreed to by the parties hereto to be subject to this Agreement (each
such series referred to herein as the "Fund" and collectively as the "Funds),
GRANTHAM, MAYO, VAN OTTERLOO & CO., a Massachusetts general partnership, (THE
"MANAGER") and INVESTORS BANK & TRUST COMPANY, a Massachusetts trust company
(THE "BANK").
The Trust, an open-end management investment company, desires to place and
maintain all of its portfolio securities and cash in the custody of the Bank.
The Bank has at least the minimum qualifications required by Section 17(f)(1) of
the Investment Company Act of 1940 to act as custodian of the portfolio
securities and cash of the Trust, and has indicated its willingness to so act,
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual agreements
contained herein, the parties hereto agree as follows:
1. BANK APPOINTED CUSTODIAN. The Trust hereby appoints the Bank as
custodian; of its portfolio securities and cash delivered to the Bank as
hereinafter described and to perform such duties and provide such services as
are set forth on any schedule hereto, and the Bank agrees to act as such upon
the terms and conditions hereinafter set forth.
2. DEFINITIONS. Whenever used herein, the terms listed below will have the
following meaning:
2.1 AUTHORIZED PERSON. Authorized Person will mean any of the persons
duly authorized to give Proper Instructions or otherwise act on behalf of
the Trust by appropriate resolution of the Trustees of the Trust.
2.2 SECURITY. The term security as used herein will have the same
meaning as when such term is used in the Securities Act of 1933 as amended,
including, without limitation, any note, stock, treasury stock, bond,
debenture, evidence of indebtedness, certificate of interest or
participation in any profit sharing agreement, collateral-trust
certificate, preorganization certificate or subscription, transferable
share, investment contract, voting-trust certificate, certificate of
deposit for a security, fractional undivided interest in oil, gas, or other
mineral rights, any put, call, straddle, option, or privilege on any
security, certificate of deposit, or group or index of securities
(including any interest therein or based on the value thereof), or any put,
call, straddle, option, or privilege entered into on a national securities
exchange relating to a foreign currency, or, in general, any interest or
instrument commonly known as a "security", or any certificate of interest
or participation in, temporary or interim certificate for, receipt for,
guarantee of, or warrant or right to subscribe to, or option contract to
purchase or sell any of the foregoing and futures, forward contracts and
options thereon.
2.3 PORTFOLIO SECURITY. Portfolio security will mean any security
owned by the Trust
2.4 OFFICERS' CERTIFICATE. Officers' Certificate will mean unless
otherwise indicated, any request, direction, instruction, or certification
in writing signed by any two Authorized Persons of the Trust
2.5 BOOK-ENTRY SYSTEM. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank,
its successor or successors and its nominee or nominees.
2.6 DEPOSITORY. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934, its
successor or successors and its nominee or nominees. The term "Depository"
shall further mean and include any other person authorized to act as a
depository under the Investment Company Act of 1940, its successor or
successors and its nominee or nominees, specifically identified in a
certified copy of a resolution of the Trustees of the Trust
3. PROPER INSTRUCTIONS. Proper Instructions shall mean (i) instructions
regarding the purchase or sale of securities for the portfolio of the Trust, and
payments and deliveries in connection therewith, given by an Authorized Person
as shall have been designated in an Officers' Certificate, such instructions to
be given in such form and manner as the Bank and the Trust shall agree upon from
time to time, and (ii) instructions (which may be continuing instructions)
regarding other matters signed or initialed by such one or more persons from
time to time designated in an Officers' Certificate as having been authorized by
the Trustees of the Trust Oral instructions will be considered Proper
Instructions if the Bank 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 promptly confirmed in writing.
The Bank shall act upon and comply with any subsequent Proper Instruction which
modifies a prior instruction and the sole obligation of the Bank with respect to
any follow-up or confrmatory instruction shall be to make reasonable efforts to
detect any discrepancy between the original instruction and such confirmation
and to report such discrepancy to the Trust. The Trust shall be responsible, at
the Trust's expense, for taking any action, including any reprocessing,
necessary to correct any such discrepancy or error, and to the extent such
action requires the Bank to act the Trust shall give the Bank specific Proper
Instructions as to the action required. Upon receipt of an Officers' Certificate
as to the authorization by the Trustees of the Trust accompanied by a detailed
description of procedures approved by the Trust, Proper Instructions may include
communication effected directly between electro-mechanical or electronic devices
provided that the Trustees and the Bank are satisfied that such procedures
afford adequate safeguards for the Trust's assets.
4. SEPARATE ACCOUNTS. The Bank will establish a Separate Account for each
Fund of the Trust, and deposit and maintain therein the assets of such Fund (and
all investment earnings thereon). -Any references in this Agreement to the Trust
shall be deemed to be references to the separate Funds as appropriate.
5. CERTIFICATION AS TO AUTHORIZED PERSONS. The Secretary or Assistant
Secretary of the Trust will at all times maintain on file with the Bank his
certification to the Bank, in such form as may be acceptable to the Bank, of (i)
the names and signatures of the Authorized Persons and (ii) the names of the
members of the Trustees of the Trust, it being understood that upon the
occurrence of any change in the information set forth in the most recent
certification on file (including without limitation any person named in the most
recent certification who is no longer an Authorized Person as designated
therein), the Secretary or Assistant Secretary of the Trust will sign a new or
amended certification setting forth the change and the new, additional or
omitted names or signatures. The Bank will be entitled to rely and act upon any
Officers' Certificate given to it by the Trust which has been signed by officers
named in the most recent certification.
6. CUSTODY OF CASH AND SECURITIES. Except as set forth on Schedule A hereto
with respect to assets of the Trust held outside of the U.S., as custodian for
the Trust, the Bank will keep safely all of the portfolio securities delivered
to the Bank, and will deposit to the account of he Trust all of the cash of the
Trust delivered to the Bank, as set forth below.
6.1 CASH. The Bank will open and maintain a separate account or
accounts in the name of the Trust or in the name of the Bank, as custodian
of the Trust, subject only to draft or order by the Bank acting pursuant to
the terns of this Agreement. The Bank will hold in such account or accounts
as custodian, subject to the provisions hereof, all cash received by it,
including borrowed funds, for the account of the Trust. Upon receipt by the
Bank of Proper Instructions (which may be continuing instructions) or in
the case of payments for redemptions and repurchases of outstanding shares
of common stock of the Trust, notification from the Trust's transfer agent
as provided in Section 8, requesting such payment, designating the payee or
the account or accounts to which the Bank will release funds for deposit,
and stating that it is for a purpose permitted under the terms of this
Section 6.1, specifying the applicable subsection, or describing such
purpose with sufficient particularity to permit the Bank to ascertain the
applicable subsection, the Bank will make payments of cash held for the
accounts of the Trust, insofar as funds are available for that purpose,
only as permitted in (a)-(i) below.
(a) PURCHASE of Securities: upon the purchase of securities for
the Trust, against contemporaneous receipt of such securities or, where
appropriate, satisfactory evidence of title thereto by the Bank registered
in the name of the Trust or in the name of, or properly endorsed and in
form for transfer to, the Bank, or a nominee of the Bank, or receipt for
the account of the Bank through use of (1) the Book-Entry System pursuant
to Section 6.2(a)(3) below, (2) Depository pursuant to 6.2(b) below, or (3)
Book Entry Paper pursuant to Section 6.2(c) below, each such payment to be
made at the purchase price shown in the Proper Instructions received by the
Bank before such payment is made;
(b) REDEMPTIONS: in such amount as may be necessary for the
repurchase or redemption of shares of beneficial interest of the Trust
offered for repurchase or redemption in accordance with Section 8 of this
Agreement;
(c) DISTRIBUTIONS and Expenses of Fund: for the payment on the
account of the-Trust of dividends or other distributions to shareholders as
may from time to time be declared by the Trustees of the Trust, interest,
taxes, management or supervisory fees, distribution fees, fees of the Bank
for its services hereunder and reimbursement of the expenses and
liabilities of the Bank as provided hereunder, fees of any transfer agent,
fees for legal, accounting, and auditing services, or other operating
expenses of the Trust;
(d) PAYMENT IN RESPECT OF SECURITIES: for payments in connection
with the conversion, exchange or surrender of portfolio securities or
securities subscribed to by the Trust held by or to be delivered to the
Bank;
(e) REPAYMENT OF LOANS: to repay loans of money made to the
Trust, but, in the case of final payment, only upon redelivery to the Bank
of any portfolio securities pledged or hypothecated therefor and upon
surrender of documents evidencing the loan;
(f) REPAYMENT OF CASH: to repay the cash delivered to the Trust
for the purpose of collateralizing the obligation to return to the Trust
certificates borrowed from the Trust representing portfolio securities, but
only upon redelivery to the Bank of such borrowed certificates;
(g) FOREIGN EXCHANGE TRANSACTIONS: for payments in connection
with foreign exchange contracts or options to purchase and sell foreign
currencies for spot and future delivery which may be entered into by the
Bank on behalf of the Trust upon the receipt of Proper Instructions, such
Proper Instructions to specify the currency broker or banking institution
(which may be the Bank, or any other subcustodian or agent hereunder,
acting as principal) with which the contract or option is made, and the
Bank shall have no duty with respect to the selection of such currency
brokers or banking institutions with which the Trust deals or for their
failure to comply with the terms of any contract or option;
(h) OTHER AUTHORIZED PAYMENTS: for other authorized transactions
of the. Trust, or other obligations of the Trust incurred for proper Trust
purposes; provided that before making any such payment the Bank will also
receive a certified copy of a resolution of the Trustees signed by an
Authorized Person of the Trust (other than the Person certifying such
resolution) and certified by its Secretary or Assistant Secretary, naming
the person or persons to whom such payment is to be made, and either
describing the transaction for which payment is to be made and declaring it
to be an authorized transaction of the Trust, or specifying the amount of
the obligation for which payment is to be made, setting forth the purpose
for which such obligation was incurred and declaring such purpose to be a
proper corporate purpose; and
(i) TERMINATION: upon the termination of this Agreement as
hereinafter set forth pursuant to.Section 9 and Section 13 of this
Agreement.
The Bank is hereby authorized to endorse for collection and collect on
behalf of and in the name of the Trust all checks, drafts, or other
negotiable or transferable instruments or other orders for the payment of
money received by it for the account of the Trust.
6.2 Securities. Except as otherwise provided herein, the Bank as
custodian, will receive and hold pursuant to the provisions hereof, in a
separate account or accounts and physically segregated at all times from
those of other persons, any and all portfolio securities which may now or
hereafter be delivered to it by or for the account of the Trust. All such
portfolio securities will be held or disposed of by the Bank for, and
subject at all tunes to, the instructions of the Trust pursuant to the
terms of this Agreement. Subject to the specific provisions herein relating
to securities that are not physically held by the Bank, the Bank will
register all portfolio securities (unless otherwise directed by Proper
Instructions or an Officers' Certificate), in the name of a registered
nominee of the Bank as defined in the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, and will execute
and deliver all such certificates in connection therewith as may be
required by such laws or regulations or under the laws of any State. The
Bank will use its best efforts to the end that the specific securities held
by it hereunder will be at all times identifiable.
The Bank will use the same care with respect to the safekeeping of
portfolio securities and cash of the Trust held by it as it uses in respect
of its own similar property but it need not maintain any special insurance
for the benefit of the Trust.
The Trust will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or
to register in the name of its registered nominee, any securities which it
may hold for the account of the Trust and which may from time to time be
registered in the name of the Trust.
Neither the Bank nor any nominee of the Bank will vote any of the
portfolio securities held hereunder by or for the account of the Trust,
except in accordance with Proper Instructions or an Officers' Certificate.
The Bank will execute and deliver, or cause to be executed and
delivered, to the Trust all notices, proxies and proxy soliciting materials
with respect to such securities, such proxies to be executed by the
registered holder of such securities (if registered otherwise than in the
name of the Trust), but without indicating the manner in which such proxies
are to be voted.
(a) BOOK-ENTRY SYSTEM. Provided (i) the Bank has received a
certified copy of a resolution of the Trustees of the Trust specifically
approving deposits of Trust assets in the Book-Entry System, and (ii) for
each year following such approval, the Trustees of the Trust have reviewed
and approved the arrangement and have not delivered an Officers Certificate
to the Bank indicating that the Trustees have withdrawn their approval:
1. The Bank may keep Securities of the Trust in the Book-Entry System
provided that such securities are represented in an account ("Account") of
the Bank (or its
agent) in such System which shall not include any assets of the Bank (or
such agent) other than assets held as a fiduciary, custodian, or otherwise
for customers.
2. The records of the Bank (and any such agent) with respect to the
Trust's participation in the Book-Entry System through the Bank (or any
such agent) will identify by book entry securities belonging to the Trust
which are included with other securities deposited in the Account and shall
at all times during the regular business hours of the Bank (or such agent)
be open for inspection by duly authorized officers, employees or agents of
the Trust. Where securities are transferred to the Trust's account, the
Bank shall also, by book entry or otherwise, identify as belonging to the
Trust a quantity of securities in fusible bulk of securities (i) registered
in the name of the Bank or its nominee, or (ii) shown on the Bank's account
on the books of the Federal Reserve Bank.
3. The Bank (or its agent) shall pay for securities purchased for the
account of the Trust or shall pay cash collateral against the return of
securities loaned by the Trust upon (i) receipt of advice from the
Book-Entry System that such Securities have been transferred to the
Account, and (ii) the making of an entry on the records of the Bank (or its
agent) to reflect such payment and transfer for the account of the Trust.
The Bank (or its agent) shall transfer securities sold or loaned for the
account of the Trust upon
(i) receipt of advice from the Book-Entry System that payment for
Securities sold or payment of the initial cash collateral against the
delivery of securities loaned by the Trust has been transferred to the
Account, and
(ii) the making of an entry on the records of the Bank (or its
agent) to reflect such transfer and payment for the account of the
Trust. Copies of all advices from the Book-Entry System of transfers
of Securities for the account of the Trust shall identify the Trust,
be maintained for the Trust by the Bank and shall be provided to the
Trust at its request. The Bank shall send the Trust a confirmation, as
defined by Rule 17f-4 under the Investment Company Act of 1940, of any
transfers to or from the account of the Trust.
4. The Bank will promptly provide the Trust with any report obtained
by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities
deposited in the Book-Entry System- The Bank will provide the Trust and
cause any such agent to provide, at such times as the Trust may reasonably
require, with reports by independent public accountants on the accounting
system, internal accounting control and procedures for safeguarding
securities, including Securities deposited in the Book-Entry System,
relating to the services provided by the Bank or such agent under the
Agreement.
5. Anything to the contrary in the Agreement notwithstanding, the Bank
shall be liable to the Trust for any loss or damage to the Trust resulting
from use of the Book-Entry System by reason of any negligence, willful
misfeasance or bad faith of the Bank or any of its agents or of any of its
or their employees or
from any reckless disregard by the Bank or any such agent of its duty to
enforce effectively such rights as it may have against the Book-Entry
System; at the election of the Trust, it shall be entitled to be subrogated
for the Bank in any claim against the Book-Entry System or any other person
which the Bank or its agent 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
loss or damage.
(b) USE OF A DEPOSITORY. Provided (i) the Bank has received a
certified copy of a resolution of the Trustees of the Trust specifically
approving deposits in DTC or other such Depository and (ii) for each year
following such approval, the Trustees of the Trust have reviewed and
approved the arrangement and have not delivered an Officer's Certificate to
the Bank indicating that the Trustees have withdrawn their approval:
1. The Bank may use a Depository to hold, receive, exchange, release,
lend, deliver and otherwise deal with the securities owned by the Trust,
including stock dividends, rights and other items of like nature, and to
receive and remit to the Bank on behalf of the Trust all income and other
payments thereon and to take all steps necessary and proper in connection
with the collection thereof.
2. Registration of the Trust's securities may be made in the name of
any nominee or nominees used by such Depository.
3. Payment for securities purchased and sold may be made through the
clearing medium employed by such Depository for transactions of
participants acting through it. Upon any purchase of securities for the
account of the Trust, payment will be made only upon delivery of the
securities to or for the account of the Trust and the Trust shall pay cash
collateral against the return of securities loaned by the Trust only upon
delivery of the securities to or for the account of the Trust; and upon any
sale of securities for the account of the Trust, delivery of the securities
will be made only against payment thereof or, in the event securities are
loaned, delivery of securities will be made only against receipt of the
initial cash collateral to or for the account of the Trust.
4. The Bank shall be subject to the same liability and duty to the
Trust and its shareholders with respect to all securities of the Trust, and
all cash, stock dividends, rights and items of like nature to which the
Trust is entitled, held or received by a central securities system as agent
for the Bank, pursuant to the foregoing authorization, as if the same were
held or received by the Bank at its own offices. In this connection, with
respect to the use of the Depository by the Bank but without limiting the
foregoing duty or liability, the Bank, without cost to the Trust, shall
ensure that:
(i) The Depository obtains replacement of any certificated
security deposited with it in the event such security is lost,
destroyed, wrongfully taken or otherwise not available to be returned
to the Bank upon its request;
(ii) Any proxy materials received by Depository with respect to
securities of the Trust deposited with such Depository are forwarded
immediately to the Bank for prompt transmittal to the Trust;
(iii) Such Depository immediately forwards to the Bank
confirmation of any purchase or sale of securities for the account of
the Trust and of the appropriate book entry made by such Depository to
the Trust's account;
(iv) Such Depository prepares and delivers to the Bank such
records with respect to the performance of the Bank's obligations and
duties hereunder as may be necessary for the Trust to comply with the
recordkeeping requirements of Section 31(a) of the Investment Company
Act of 1940 and Rules 3la-1 and 31a-2 thereunder, and
(v) Such Depository delivers to the Bank and the Trust all
internal accounting control reports, whether or not audited by an
independent public accountant, as well as such other reports as the
Trust may reasonably request in order to verify the Trust's securities
held by such Depository.
(c) USE OF BOOK-ENTRY SYSTEM FOR COMMERCIAL PAPER. Provided (i)
the Bank has received a certified copy of a resolution of the Trustees of
the Trust specifically approving participation in a system maintained by
the Bank for the holding of commercial paper in book-entry form ("Book
Entry Paper") and (ii) for each year following such approval the Trustees
of the Trust have received and approved the arrangements, upon receipt of
Proper Instructions and upon receipt of confirmation from an Issuer (as
defined below) that the Trust has purchased such Issuer's Book Entry Paper,
the Bank shall issue and hold in book-entry form, on behalf of the Trust,
commercial paper issued by issuers with whom the Bank has entered into a
book-entry agreement (the "Issuers"). In maintaining its Book Entry Paper
System, the Bank agrees that:
1. the Bank will maintain all Book Entry Paper held by the Trust in an
account of the Bank that includes only assets held by it for customers;
2. the records of the Bank with respect to the Trust's purchase of
Book Entry Paper through the Bank will identify, by book entry, Commercial
Paper belonging to the Trust which is included in the Book Entry Paper
System and shall at all times during the regular business hours of the Bank
be open for inspection by duly authorized officers, employees or agents of
the Trust.
3. (a) The Bank shall pay for Book Entry Paper purchased for the
account of the Trust upon contemporaneous (i) receipt of advice from the
Issuer that such sale of Book Entry Paper has been effected, and (ii) the
making of an entry on the records of the Bank to reflect such payment and
transfer for the account of the Trust
(b) The Bank shall cancel such Book Entry Paper obligation upon
the maturity thereof upon contemporaneous (i) receipt of advice that
payment for such Book Entry Paper has been transferred to the Trust, and
(ii) the making of an entry on the records of the Bank to reflect such
payment for the account of the Trust
4. the Bank shall transmit to the Trust a transaction journal
confirming each transaction in Book Entry Paper for the account of the
Trust on the next business day following the transactions and
5. the Bank will send to the Trust such reports on its system of
internal accounting control as the Trust may reasonably request from time
to time
(d) USE OF IMMOBILIZATION PROGRAMS. Provided (i) the Bank has
received a certified copy of a resolution of the Trustees of the Trust
specifically approving the maintenance of portfolio securities in an
immobilization program operated by a bank which meets the requirements of
Section 26(x)(1) of the Investment Company Act of 1940, and (ii) for each
year following such approval the Trustees of the Trust have reviewed and
approved the arrangement and have not delivered an Officer's Certificate to
the Bank indicating that the Trustees have withdrawn-their approval, the
Bank shall enter into such immobilization program with such bank acting as
a subcustodian hereunder.
6.3 OPTIONS AND FUTURES TRANSACTIONS.
(a) PUTS AND CALLS TRADED ON SECURITIES EXCHANGES, NASDAQ OR
OVER-THE-COUNTER.
1. The Bank shall take action as to put options ("puts") and call
options ("calls") purchased or sold (written) by the Trust regarding escrow
or other arrangements (i) in accordance with the provisions of any
agreement entered into upon receipt of Proper Instructions between the
Bank, any broker-dealer registered under the Securities Exchange Act of
1934 and a member of the National Association of Securities Dealers, Inc.,
and, if necessary, the Trust relating to the compliance with the rules of
the Options Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations.
2. Unless another agreement requires it to do so, the Bank shall be
under no duty or obligation to see that the Trust has deposited or is
maintaining adequate margin, if required, with any broker in connection
with any option, nor shall the Bank be under duty or obligation to present
such option to the broker for exercise unless it receives Proper
Instructions from the Trust. The Bank shall have no responsibility for the
legality of any put or call purchased or sold on behalf of the Trust, the
propriety of any such purchase or sale, or the adequacy of any collateral
delivered to a broker in connection with an option or deposited to or
withdrawn from a Segregated Account as described in subparagraph c of this
Section 6.3. The Bank specifically, but not by way of limitation, shall not
be under any duty or obligation to: (i) periodically check or notify the
Trust that the amount of such collateral held by a broker or held in a
Segregated Account as described in subparagraph (c) of this Section 6.3 is
sufficient to protect such broker of the Trust against any loss; (ii)
effect the return of any collateral delivered to a broker, or (iii) advise
the Trust that any option it holds, has or is
about to expire. Such duties or obligations shall be the sole
responsibility of the Trust.
(b) PUTS, CALLS AND FUTURES TRADED ON COMMODITIES
1. The Bank shall take action as to puts, calls and futures contracts
("Futures") purchased or sold by the Trust in accordance with the
provisions of any agreement among the Trust, the Bank and a Futures
Commission Merchant registered under the Commodity Exchange Act, relating
to compliance with the rules of the Commodity Futures Trading Commission
and/or any Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by the Trust.
2. The responsibilities and liabilities of the Bank as to Futures,
puts and calls traded on commodities exchanges, any Futures Commission
Merchant account and the Segregated Account shall be limited as set forth
in subparagraph (a)(2) of this Section 6.3 as if such subparagraph referred
to Futures Commission Merchants rather than brokers, and Futures and puts
and calls thereon instead of options.
(c) SEGREGATED ACCOUNT.
The Bank 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 Bank pursuant to
Section 6.2 hereof, (i) in accordance with the provisions of any agreement
among the Trust, the Bank and a broker/dealer registered under the Exchange
Act and a member of the NASD or any Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with the rules of
the Options Clearing Corporation and of any registered national securities
exchange or the Commodity Futures Trading Commission or any registered
Contract Market, or of any similar organization or organizations regarding
escrow or other arrangements in connection with transactions by the Trust,
and (ii) for the purpose of segregating cash or securities in connection
with options purchased, or written by the Trust or commodity futures
purchased or written by the Trust, and (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 corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of the
Trustees of the Trust, or of the Executive Committee signed by an officer
of the Trust and certified by the Secretary or an Assistant Secretary,
setting forth the purpose or purposes of such Segregated Account and
declaring such purposes to be proper corporate purposes.
6.4 SEGREGATED ACCOUNT FOR "WHEN-ISSUED", "FORWARD COMMITMENT" AND
REVERSE REPURCHASE AGREEMENT TRANSACTIONS. Notwithstanding any other
provisions hereof, the Bank will maintain a segregated account (the
"Segregated Account") in the name of the Trust (i) for the deposit of
liquid assets, such as cash, U.S. Government securities or other high grade
debt obligations, having a market value (marked to the market on a daily
basis) at all times equal to not less than the aggregate purchase price due
on the settlement dates of all the Trust's then outstanding forward
commitment or "when-issued" agreements relating to the purchase of
portfolio securities and all the Trust's then outstanding commitments under
reverse repurchase agreements entered into with broker-dealer faros, and
(ii) for the deposit of any portfolio securities which the Trust has agreed
to sell on a forward commitment basis, all in accordance with Investment
Company Act Release No. 10666. No assets shall be deposited in the
Segregated Account except pursuant to Proper Instructions. Assets may be
withdrawn from the Segregated Account pursuant to Proper Instructions only
(a) for sale or delivery to meet the Trust's obligations under outstanding
firm commitment or when-issued agreements for the purchase of portfolio
securities and under reverse repurchase agreements, (b) for exchange for
other liquid assets of equal or greater value deposited in the Segregated
Account, (c) to the extent that the Trust's outstanding forward commitment
or when-issued agreements for the purchase of portfolio securities or
reverse repurchase agreements are sold to other parties or the Trust's
obligations thereunder are met from assets of the Trust other than those in
the Segregated Account, or (d) for delivery upon settlement of a forward
commitment agreement for the sale of portfolio securities.
6.5 INTEREST BEARING CALL OR TIME DEPOSITS. The Bank shall, upon
receipt of Proper Instructions relating to the purchase by the Trust of
interest bearing fixed term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated
in such Proper Instructions. The Bank shall include in its records with
respect to the assets of the Trust appropriate notation as to the amount of
each such deposit, the banking institution with which such deposit is made
(the "Deposit Bank"), and shall retain such forms of advice or receipt
evidencing the deposit, if any, as may be forwarded to the Bank by the
Deposit Bank. Such deposits shall be deemed portfolio securities of the
Trust and the responsibility of the Bank therefore shall be the same as and
no greater than the Bank's responsibility in respect of other portfolio
securities of the Trust.
7. TRANSFER OF SECURITIES. The Bank will transfer, exchange, deliver or
release portfolio securities held by it hereunder, insofar as such securities
are available for such purpose, provided that before making any transfer,
exchange, delivery or release under this Section the Bank will receive Proper
Instructions requesting such transfer, exchange or delivery stating that it is
for a purpose permitted under the terms of this Section 7, specifying the
applicable subsection, or describing the purpose of the transaction with
sufficient particularity to permit the Bank to ascertain the applicable
subsection, only
(a) upon sales of portfolio securities for the account of the
Trust, against contemporaneous receipt by the Bank of payment therefor in
full, each such payment to be in the amount of the sale price set forth in
the Proper Instructions received by the Bank before such payment is made;
(b) in exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan of merger,
consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise, upon exercise of
subscription, purchase or sale or other similar rights represented by such
portfolio securities, or for the purpose of tendering shares in the event
of a tender offer therefor, provided however that in the event of an offer
of exchange, tender offer, or other exercise of rights requiring the
physical tender or delivery of portfolio securities, the Bank shall have no
liability for failure to so tender in a timely manner unless such Proper
Instructions are received by the Bank at least two business days prior to
the date required for tender, and unless the Bank (or its agent or
subcustodian hereunder) has actual possession of such security at least two
business days prior to the date of tender,
(c) upon conversion of portfolio securities pursuant to their
terms into other securities;
(d) for the purpose of redeeming in kind shares of thdi Trust
upon authorization from the Trust;
(e) in the case of option contracts owned by the Trust, for
presentation to the endorsing broker;
(f) when such portfolio securities are called, redeemed or
retired or otherwise become payable;
(g) for the purpose of effectuating the pledge of portfolio
securities held by the Bank pursuant to this Agreement in order to
collateralize loans made to the Trust by any bank, including the Bank;
provided, however, that such portfolio securities will be released only
upon payment to the Bank for the account of the Trust of the monies
borrowed, except that in cases where additional collateral is required to
secure a borrowing already made, and such fact is made to appear in the
Proper Instructions, further portfolio securities. may be released for that
purpose without any such payment_ In the event that any such pledged
portfolio securities are held by the Bank, they will be so held for the
account of the lender, and after notice to the Trust from the lender in
accordance with the normal procedures of the lender, that an event of
deficiency or default on the loan has occurred, the Bank may deliver such
pledged portfolio securities to or for the account of the lender;
(h) for the purpose of releasing certificates representing
portfolio securities of the Trust, against contemporaneous receipt by the
Bank of the fair market value of such security, as set forth in Proper
Instructions received by the Bank before such payment is made;
(i) for the purpose of delivering securities lent by the Trust to
a bank or broker dealer, but only against receipt in accordance with street
delivery custom except as otherwise provided in Subsections 6.2(a) and (b)
hereof, of adequate collateral as agreed upon from time to time by the
Trust and the Bank, and upon receipt of
payment in connection with any repurchase agreement relating to such
securities entered into by the Trust;
(j) for other authorized transactions of the Trust or for other
proper corporate purposes; provided that before making such transfer, the
Bank will also receive a certified copy of resolutions of the Trustees of
the Trust, signed by an authorized officer of the Trust (other than the
officer certifying such resolution) and certified by its Secretary or
Assistant Secretary, specifying the portfolio securities to be delivered,
setting forth the transaction in or purpose for which such delivery is to
be made, declaring such transaction to be an authorized transaction of the
Trust or such purpose to be a proper corporate purpose, and naming the
person or persons to whom delivery of such securities shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 9 and Section 13 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections (a),
(b), (c), (e), (f), (g), (h) and (i) securities or cash receivable in
exchange therefor shall be delivered to the Bank.
8. REDEMPTIONS. In the case of payment of assets of the Trust held by the
Bank in connection with redemptions and repurchases by the Trust of outstanding
shares of beneficial interest, the Bank will rely on notification by the Trust's
transfer agent of receipt of a request for redemption and certificates, if
issued, in proper form for redemption before such payment is made. Payment shall
be made in accordance with the Declaration of Trust of the Trust, from assets
available for said purpose.
9. MERGER, DISSOLUTION, ETC. OF TRUST. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Trust into or the consolidation of the Trust with another investment company,
the sale by the Trust of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Trust and
distribution of its assets, the Bank will deliver the portfolio securites held
by it under this Agreement and disburse cash only upon the order of the Trust
set forth in an Officers' Certificate, accompanied by a certified copy of a
resolution of the Trustees of the Trust authorizing any of the foregoing
transactions. Upon completion of such delivery and disbursement and the payment
of the fees, disbursements and expenses of the Bank, this Agreement will
terminate.
10. Actions of Bank without prior Authorization. Notwithstanding anything
herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, it will without prior authorization or instruction
of the Trust or the transfer agent:
10.1 Receive and hold for the account of the Trust hereunder and
deposit in the account or accounts referred to in Section 6 hereof, all
income, dividends, interest and other payments or distribution of cash with
respect to the portfolio securities held thereunder,
10.2 Present for payment all coupons and other income items held by it
for the account of the Trust which call for payment upon presentation and
hold the cash received by it upon such payment for the account of the Trust
account or accounts referred to in Section 6 hereof;
10.3 Receive and hold for the account of the Trust hereunder and
deposit in the account or accounts referred to in Section 6 hereof all
securities received as a distribution on portfolio securities as a result
of a stock dividend, share split-up reorganization, recapitalization,
merger, consolidation, readjustment, distribution of rights and similar
securities issued with respect to any portfolio securities held by it
hereunder.
10.4 Execute as agent on behalf of the Trust all necessary ownership
and other certificates and affidavits required by the Internal Revenue Code
or the regulations of the Treasury Department issued thereunder, or by the
laws of any state, now or hereafter in effect, inserting the Trust's name
on such certificates as the owner of the securities covered thereby, to the
extent it may lawfully do so and as may be required to obtain payment in
respect thereof. The Bank will execute and deliver such certificates in
connection with portfolio securities delivered to it or by it under this
Agreement as may be required under the provisions of the Internal Revenue
Code and any Regulations of the Treasury Department issued thereunder, or
under the laws of any State;
10.5 Present for payment all portfolio securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it
upon payment for the account of the Trust in the account or accounts
referred to in Section 6 hereof; and
10.6 Exchange interim receipts or temporary securities for definitive
securities.
The Bank will use all reasonable effort to collect any funds which may
to its knowledge become collectible arising from such securities, including
dividends, -interest and other income, and to transmit to the Trust notice
actually received by it of any call for redemption, offer of exchange,
right of subscription, reorganization or other proceedings affecting such
securities.
If portfolio securities upon which such income is payable are in
default or payment is refused after due demand or presentation, the Bank
will notify the Trust in writing of any default or refusal to pay within
two business days from the day on which it receives knowledge of such
default or refusal. In addition, the Bank will send the Trust a written
report once each month showing any income on any portfolio security held by
it which is more than ten days overdue on the date of such report and which
has not previously been reported.
11. MAINTENANCE OF RECORDS: FUND EVALUATION: ACCOUNTING SERVICES. The Bank
will maintain records with respect to transactions for which the Bank is
responsible pursuant to the terms and conditions of this Agreement, and in
compliance with the applicable rules and regulations of the Investment Company
Act of 1940 as amended, or any other applicable laws or rules, and will furnish
the Trust daily with a statement of condition of the Trust. The tank will
furnish to the Trust at the end of every month, the close of each quarter of the
Trust's fiscal year, and at any other time upon receipt of reasonable notice, a
list of the portfolio securities and the aggregate amount of cash held by it for
the Trust. The books and records of the Bank pertaining to its actions under
this Agreement and reports by the Bank or its independent accountants concerning
its accounting system, procedures for safeguarding securities and internal
accounting controls will be open to inspection and audit at reasonable times by
officers of or auditors employed by the Trust and will be preserved by the Bank
in the manner and in accordance with the applicable rules and regulations under
the Investment Company Act of 1940 and any other applicable laws or rules.
As custodian the Bank shall have and perform the following powers and
duties:
11.1 To keep the books of account and render statements or copies from
time to time as reasonably requested by the Treasurer or any executive off
cer of the Trust
11.2 To compute and, unless otherwise directed by the Trustees of the
Trust, determine as of the close of business on the New York Stock Exchange
on each day on which said Exchange is open for unrestricted trading and as
of such other hours, if any, as may be authorized by said Trustees the net
asset value and the public offering price of a share of capital stock of
the Trust, such determination to be made in accordance with the provisions
of the Declaration of Trust of the Trust and Prospectus and Statement of
Additional Information relating to the Trust, as they may from time to time
be amended, and any applicable resolutions of the Trustees of the Trust at
the time in force and applicable; and promptly to notify the Trust, or such
other persons as the Trust may request of the results of such computation
and determination. In computing the net asset value hereunder, the Bank may
rely in good faith upon information furnished to it by any Authorized
Person in respect of (i) the manner of accrual of the liabilities of the
Trust and in respect of liabilities of the Trust not appearing on its books
of account kept by the Bank, (ii) reserves, if any, authorized by the
Trustees or that no such reserves have been authorized, (iii) the source of
the quotations to be used in computing the net asset value, (iv) the value
to be assigned to any security for which no price quotations are available,
and (v) the method of computation of the public offering price on the basis
of the net asset value of the shares, and the Bank shall not be responsible
for any loss occasioned by such reliance or for any good faith reliance on
any quotations received from a source pursuant to (iii) above.
11.3 To assist generally in the preparation of reports to shareholders
and others, audits of accounts, and other ministerial matters of like
nature.
12. CONCERNING THE BANK.
12.1 PERFORMANCE OF DUTIES. In performing its duties hereunder and any
other duties listed on any Schedule hereto, if any, the Bank will be
entitled to receive and act upon the advice of independent counsel of its
own selection, which may be counsel for the Trust, and will be without
liability for any action
taken or thing done or omitted to be done in accordance with this Agreement
in good faith in conformity with such advice. In the performance of its
duties hereunder, the Bank will be protected and not be liable, and will be
indemnified and saved harmless, by the Manager, for any action taken or
omitted to be taken by it in good faith reliance upon the terms of this
Agreement, any Officers' Certificate, Proper Instructions, resolution of
the Trustees, telegram, notice, request, certificate or other instrument
reasonably believed by the Bank to be genuine and for any other loss to the
Bank or the Trust except in the case of the Bank's negligence, willful
misfeasance or bad faith in the performance of its duties or reckless
disregard of its obligations and duties hereunder. Notwithstanding anything
herein to the contrary, in the event that the Bank is entitled to
indemnification from the Manager pursuant to the terms hereof and the Bank
is not promptly or fully indemnified, the Trust agrees that the Trust shall
indemnify the Bank in accordance with the provisions hereof, and all
references to the Manager in this Section 12.1 shall be deemed to refer to
the Trust.
The Bank may employ agents in the performance of its duties hereunder,
including, upon receipt of Proper Instructions, subcustodians, provided
that any such subcustodian meets at least the minimum qualifications
required by Section 17(f)(1) of the Investment Company Act of 1940 to act
as a custodian of the Trust's assets; and provided further that the Bank
shall have no more or less responsibility or liability to the Trust on
account of any actions or omissions of any sub-custodian so employed than
any such sub-custodian has to the Bank, and the Bank shall indemnify the
Trust for any loss to the Trust resulting from the acts or omissions of any
subcustodian to the extent that the Bank is so indemnified by the
subcustodian.
In order that the indemnification provision contained in this section
12.1 shall apply, however, it is understood that if in any case the Manager
or the Trust may be asked to indemnify or save the Bank harmless, the
Manager and Trust shall be fully and promptly advised of all pertinent
facts concerning the situation in question, and it is further understood
that the Bank will use all reasonable care to identify and notify the
Manager and Trust promptly concerning any situation which presents or
appears likely to present the probability of such claim for
indemnification. The Manager or the Trust, as the case may be, shall have
the option to defend the Bank against any claim which may be the subject of
this indemnification, and in the event that the Manager or the Trust so
elects it will so notify the Bank and thereupon the Manager or the Trust,
as the case may be, shall take over the complete defense of the claim, and
the Bank shall in such situations incur no further legal or other expenses
in connection with such claim, provided however, if the defendants in any
such action include both (i) the Manager or the Trust and (ii) the Bank,
and the Bank shall have reasonably concluded that there may be legal
defenses available to it which are different from or additional to those
available to the Manager or the Trust, as the case may be, the Bank shall
have the right to select separate counsel to assert such legal defenses and
to otherwise participate in the defense of such action on behalf of the
Bank with such cost to be borne by. the party hereto ultimately liable with
respect to such claim. The Bank shall in no case confess any claim or make
any compromise in any case in which the Manager or the Trust will be asked
to indemnify the Bank except with the' prior written consent of the Manager
or the Trust, as the case may be, which consent shall not be unreasonably
withheld. The Manager or the Trust, as the case may be, shall not settle
any claim without the Bank's prior written consent, provided however that
the Bank shall not unreasonably withhold its consent.
The Trust shall pay all fees and expenses of any subcustodian.
The Bank will be under no duty or obligation to inquire into and will
not be liable for.
(a) the validity of the issue of any portfolio securities
purchased by or for the Trust, the legality of the purchases thereof or the
propriety of* the price incurred therefor,
(b) the legality of any sale of any portfolio securities by or
for the Trust or the propriety of the amount for which the same are sold,
(c) the legality of an issue or sale of any shares of beneficial
interest of the Trust or the sufficiency of the amount to be received
therefor,
(d) the legality of the repurchase of any shares of beneficial
interest of the Trust or the propriety of the amount to be paid therefore
except as specifically set forth on any Schedule hereto;
(e) the legality of the declaration of any dividend by the Trust
or the legality of the distribution of any portfolio securities as payment
in kind of such dividend; or
(f) any property or moneys of the Trust unless and until received
by it, and any such property or moneys delivered or paid by it pursuant to
the terms hereof.
Moreover, the Bank will not be under any duty or obligation to
ascertain whether any portfolio securities at any time delivered to or held
by it for the account of the Trust are such as may properly be held by the
Trust under the provisions of its Declaration of Trust, any federal or
state statutes or any rule or regulation of any governmental agency.
12.2 Fees and Expenses of Bank. The Manager will pay or reimburse the
Bank from time to time for any transfer taxes payable upon transfer of
portfolio securities made hereunder, and for all necessary proper
disbursements, expenses and charges made or incurred by the Bank in the
performance of this Agreement (including any duties listed on any Schedule
hereto, if any) including any indemnities for any loss, liabilities or
expense to the Bank as provided above. For the services rendered by the
Bank hereunder, the Manager will pay to the Bank such compensation or fees
at such rate and at such times as shall be agreed upon in writing by the
parties from time to time. The Bank will also be entitled to reimbursement
by the Manager for all reasonable expenses incurred in conjunction with
termination of this Agreement by the Trust. To the extent the Manager is
not obligated pursuant to an agreement with the Trust to pay the fees and
expenses of the Bank hereunder, the Trust shall be responsible for such
obligations of the Manager set forth in this section 12.2.
12.3 Advances by Bank. The Bank may, in its sole discretion, advance
funds on behalf of any Fund to make any payment permitted by this Agreement
upon receipt of any proper authorization required by this Agreement for
such payments by the Fund. Should such a payment or payments, with advanced
funds, result in an overdraft (due to insufficiencies of the Fund's Account
with the Bank, or for any other reason) this Agreement deems-any such or
related indebtedness, a loan made by the Bank to such Fund payable on
demand and bearing interest at the current rate charged by the Bank for
such loans unless the Trust shall provide the Bank with agreed upon
compensating balances. Provided, however, that any such payment or payments
by the Bank shall only be deemed a loan made by the Bank to a Fund to the
extent such payment or payments do not exceed 10% of the value (taken at
the lower of cost or current value) of such Fund's total assets (not
including the amount borrowed) at the time such payment or payments are
made, and are made to facilitate the meeting of redemption requests which
might otherwise require the untimely disposition of portfolio investments
or for extraordinary or emergency purposes. To secure any such payments
deemed to be loans in accordance with the foregoing, the Trust hereby
grants to the Bank a security interest in and pledges to the Bank
securities held by the Bank on behalf of the Fund on whose behalf such
payments were made, in an amount not to exceed the lesser of the dollar
amount deemed to constitute a loan or ten percent of such Fund's total
assets (taken at cost), the specific securities to be designated in writing
from time to time by the Trust or the Manager, and provided, further, that
(1) if from time to time neither the Trust nor the Manager shall have
designated in writing specific securities in an amount at least equal to
the lesser of the dollar amount deemed to constitute a loan or ten percent
of the particular Fund's total assets, or (2) if as a result of the
delivery by the Bank out of its custody, pursuant to Proper Instructions,
of any securities previously so designated, the remaining amount of
securities so designated shall be less than the lesser of the dollar amount
deemed to constitute a loan or ten percent of such Fund's total assets,
then the Bank shall have a security interest in the securities of such
Fund, in an amount that, taken together with amounts of securities from
time to time designated in writing by the Trust or the Manager that have
not been delivered out of the custody of the Bank pursuant to Proper
Instructions, does not exceed the lesser of the dollar amount deemed to
constitute a loan or ten percent of such Fund's total assets. Should the
Trust fail to repay promptly any such advances, the Bank shall be entitled
to use available cash and to dispose of pledged securities and property as
is necessary to repay any such advances.
13. TERMINATION.
13.1 This Agreement may be terminated at any time without penalty upon
sixty days written notice delivered by either party to the other by means
of registered mail, and upon the expiration of such sixty days this
Agreement will terminate; provided, however, that the effective date of
such termination may be postponed to a date not more than ninety days from
the date of delivery of such notice (i) by the Bank in order to prepare for
the transfer by the Bank of all of the assets of the Trust held hereunder,
and (ii) by the Trust in order to give the Trust an opportunity to make
suitable arrangements for a successor custodian. At any time after the
termination of this Agreement, the Trust will, at its request, have access
to the records of the Bank relating to the performance of its duties as
custodian.
13.2 In the event of the termination of this Agreement, the Bank will
immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer
of all cash and the delivery of all portfolio securities duly endorsed and
all records maintained under Section 11 to the successor custodian when
appointed by the Trust. The obligation of the Bank to deliver and transfer
over the assets of the Trust held by it directly to such successor
custodian will commence as soon as such successor is appointed and will
continue until completed as aforesaid. If the Trust does not select a
successor custodian within ninety (90) days from the date of delivery of
notice of termination the Bank may, subject to the provisions of subsection
13.3 of this Section, deliver the portfolio securities and cash of the
Trust held by the Bank to a bank or trust company of its own selection
which meets the requirements of Section 17(f)(1) of the Investment Company
Act of 1940 and has a reported capital, surplus and undivided profits
aggregating not less than $25,000,000, to be held as the property of the
Trust under terms similar to those on which they were held by the Bank,
whereupon such bank or trust company so selected by the Bank will become
the successor custodian of such assets of the Trust with the same effect as
though selected by the Trustees of the Trust.
13.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Trust may furnish the Bank with an order of
the Trust advising that a successor custodian cannot be found willing and
able to act upon reasonable and customary terms and that there has been
submitted to the shareholders of the Trust the question of whether the
Trust will be liquidated or will function without a custodian for the
assets of the Trust held by the Bank. In that event the Bank will deliver
the portfolio securities and cash of the Trust held by it, subject as
aforesaid, in accordance with one of such alternatives which may be
approved by the requisite vote of shareholders, upon receipt by the Bank of
a copy of the minutes of the meeting of shareholders at which action was
taken, certified by the Trust's Secretary.
14. NOTICES. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to it at
its office at the address set forth below; namely:
(a) In the case of notices sent to the Trust to:
GMO Trust
x/x Xxxxxxxx, Xxxx, Xxx Xxxxxxxx & Co.
00 Xxxxx Xxxxx
0xx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxx X. Salem
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust
Company
Financial Product Services
Xxx Xxxxxxx Xxxxx X.X. Xxx
0000 Xxxxxx, Xxxxxxxxxxxxx
00000-0000
or at such other place as such party may from time to time
designate in writing.
15. AMENDMENTS. This Agreement may not be altered or amended, except by an
instrument in writing, executed by both parties, and in the case of the Trust,
such alteration or amendment will be authorized and approved by its Trustees.
16. PARTIES. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Trust
without the written consent of the Bank or by the Bank without the written
consent of the Trust, authorized and approved by its Trustees; and provided
further that termination proceedings pursuant to Section 13 hereof will not be
deemed to be an assignment within the meaning of this provision.
17. GOVERNING LAW. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts.
18. LIMITATION OF LIABILITY. The term GMO Trust means and refers to the
Trustees from time to time serving under the Agreement and Declaration of Trust
of the Trust dated June 24, 1985, as the same may subsequently thereto have
been, or subsequently hereto be, amended. It is expressly agreed that the
obligations of the Trust hereunder shall not be binding upon any of the
Trustees, shareholders, nominees, officers, agents or employees of the Trust,
personally, but shall bind only the trust property of the Trust as provided in
the Agreement and Declaration of Trust of the Trust. The execution and delivery
of this Agreement have been authorized by the Trustees of the Trust and this
Agreement has been signed by an authorized officer of the Trust, acting as such,
and neither such authorization by such Trustees nor such execution and delivery
by such officer shall be deemed to have been made by any of them, but shall bind
only the trust property of the Trust as provided in the Agreement and
Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate and their respective corporate seals to be affixed hereto
as of the date first above written by their respective officers thereunto duly
authorized.
GMO TRUST
By:
------------------------------------
Attest:
-------------------------------------
Grantham, Mayo, Van Otterloo & Co.
By:
------------------------------------
Attest:
-------------------------------------
Investors Bank & Trust Company
By:
------------------------------------
SCHEDULE A
CUSTODY OF FOREIGN
SECURITIES
The following provisions govern the maintenance of the Fund's foreign
securities, and cash incidental to transactions in such securities, which
pursuant to this Schedule A shall be held in the custody of certain foreign
banking institutions and foreign securities depositories acting as
sub-custodians in conformity with the requirements of Rule 17f-5 under the
Investment Company Act of 1940 (the "Act")
I. EUROCLEAR
1. APPOINTMENT OF EUROCLEAR AS SUB-CUSTODIAN. The Fund hereby authorizes
and instructs the Bank to employ the securities clearance and depository
facilities operated by Xxxxxx Guaranty Trust Company of New York in Brussels,
Belgium ("Euroclear"), to act as sub-custodian of the Fund pursuant to and
governed by the Terms and Conditions Governing the Euroclear System (the "Terms
and Conditions").
2. ASSETS TO BE HELD. The Bank shall limit the securities and other assets
maintained in Euroclear to those Euroclear eligible securities which are
"foreign securities", as defined in paragraph (c)(1) of Rule 17f--5 of the Act,
and to cash and cash equivalents in such amounts as the Bank or the Fund may
determine to be reasonably necessary to effect the Fund's foreign securities
transactions through Euroclear.
3. USE OF EUROCLEAR. Except as may other wise be agreed upon in writing by
the Bank and the Fund, the Fund authorizes the deposit in Euroclear of all
foreign securities of the Fund eligible for deposit therein and to utilize such
securities depository to the extent possible in connection with settlements of
purchases and sales of securities and deliveries and returns of securities,
until notified to the contrary pursuant to Section 9 hereunder.
4. SEGREGATION OF SECURITIES. The Bank shall identify on its books as
belonging to the Fund the foreign securities of the Fund held in Euroclear and
shall hold all securities of the Fund in an "Unencumbered Securities Account"
with Euroclear.
5. REPORTS BY BANK. The Bank shall supply the Fund from time to time, as
mutually agreed upon, statements in respect of the securities and other assets
of the Fund held in Euroclear as shall be made available to the Bank by
Euroclear.
6. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. Transactions with respect to
the securities and other assets of the Fund held in Euroclear shall be effected
pursuant to
Proper Instructions from the Fund to the Bank in accordance with the Terms and
Conditions.
7. TERMS AND CONDITIONS. The Fund acknowledges that the Bank, as a
participant in Euroclear, is subject to the Terms and Conditions, a copy of
which has been made available to the Fund. The Fund acknowledges that pursuant
to such Terms and Conditions, MorganGuaranty Brussels shall have the sole right
to exercise or assert any and all rights or claims in respect of actions or
omissions of, or the bankruptcy or insolvency of, any other depository,
clearance system or custodian utilized by Euroclear in connection with the
Fund's securities and other assets.
8. MONITORING RESPONSIBILITIES. The Bank shall furnish to the Fund
information made available to it by Euroclear concerning the Euroclear system
for use by the Fund in evaluating such system to ensure compliance with the
requirements of Rule 17f-5 of the Act The Bank shall promptly inform the Fund of
any material changes in the circumstances surrounding the foreign custody
arrangements provided by Euroclear as such information shall be made available
to the Bank by Euroclear or otherwise.
9. TERMINATION OF EUROCLEAR. Upon receipt of Proper Instructions, the Fund
may instruct the Bank to cease the employment of Euroclear for maintaining
custody of the Fund's assets, -and the Bank shall so cease to employ Euroclear
as soon as alternate custodial arrangements have been implemented.
II. CITIBANK.
1. APPOINTMENT OF CITIBANK AS SUB-CUSTODIAN. The Fund hereby authorizes
and instructs the Bank to employ Citibank, N.A., a national bank organized and
existing under the laws of the United States, having its principal office and
place of business at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx ("Citibank") which has
established a global custody network for the custody of foreign securities (the
"Citibank Network") as sub-custodian for the Fund's securities and other assets
maintained outside the United States pursuant to the Sub-Custodial Agreement by
and between Citibank and the Bank (the "Citibank Agreement") a copy of which has
been provided to the Fund.
2. APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes the
Bank and Citibank to employ as sub-custodians for the Fund's securities and
other assets maintained outside the United States those eligible foreign
custodians as such term is defined in Rule 17f--5 of the Act (an "Eligible
Foreign Custodian") or the foreign branch offices of Citibank (a "Branch") which
are listed on Annex A hereto (the "Selected Foreign SubCustodians") pursuant to
agreements between Citibank and each of such Selected Foreign Sub-Custodians
(the "Sub-Custodial Agreement") as shall have been previously furnished to the
Fund by the Bank. Upon receipt of certified resolutions of the Fund's Board of
Directors, the Bank and the Fund may agree to amend Annex A hereto from time to
time to designate additional Eligible Foreign Sub-Custodians or Branches which
are part of the Citibank Network to act as sub-custodians.
3. ASSETS TO BE HELD. The Bank shall limit the securities and other assets
maintained through Citibank in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f--5 under the
Act, and (b) cash and cash equivalents in such amounts as the Bank or the Fund
may determine to be reasonably necessary to effect the Fund's foreign securities
transactions, subject to the provisions of Part I of this Schedule A, relating
to Euroclear eligible securities, and Part III of this Schedule A, relating to
securities to be held in Australia.
4. FOREIGN SECURITIES DEPOSITORIES. -Except as may other wise be agreed
upon in writing by the Bank and the Fund, the Fund authorizes the deposit in a
securities depository which is a Selected Foreign Sub-Custodian, all securities
of the Fund held in the Citibank Network eligible for deposit therein and to
utilize such securities depository to the extent possible in connection with
settlements of purchases and sales of securities and deliveries and returns of
securities.
5. SEGREGATION OF SECURITIES. The Bank shall identify on its books as
belonging to the Fund the foreign securities of the Fund held in the Citibank
Network, and Citibank shall identify in a separate account, pursuant to the
Citibank Agreement, all securities and moneys of the Fund.
6. AGREEMENTS WITH SELECTED FOREIGN' SUB-CUSTODIANS. Upon receiving
notification from Citibank, the Bank shall promptly notify the Fund of any
changes in the terms of the Sub-Custodial Agreements in effect with Citibank
with respect to Selected Foreign Sub-Custodians.
7. REPORTS BY BANK. The Bank shall supply the Fund from time to time, as
mutually agreed upon, statements in respect of the securities and other assets
of the Fund held in the Citibank Network, including but not limited to the
identification of entities having possession of the Fund's securities 'and other
assets and advices or notifications of any transfers of securities to or from
each account maintained on behalf of the Fund, as shall be made available to the
Bank by Citibank.
8. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. Transactions with respect to
the securities and other assets of the Fund held in the Citibank Network shall
be effected pursuant to Proper Instructions from the Fund to the Bank in
accordance with the Citibank Agreement. If at any time, at the request of the
Fund, any securities of the Fund shall be registered in the name of the nominee
-of the Selected Foreign Sub-Custodian, the Fund agrees to reimburse the Bank
for any expenses to which it may become liable pursuant to the Citibank
Agreement by reason of the registration of such securities in the name of such
nominee.
9. LIABILITY OF CITIBANK. The standard of care and the liability of
Citibank for its actions and the actions of Selected Foreign Sub-Custodians in
connection with the securities and other assets of the Fund held in the-Citibank
Network is set forth in the Citibank Agreement.
10. MONITORING RESPONSIBILITIES. The Bank shall furnish to the Fund
information made available to it by Citibank concerning the Selected Foreign
Sub-Custodians for use
by the Fund in evaluating such Selected Foreign Sub-Custodians to ensure
compliance with the requirements of Rule I7f--5 of the Act. The Bank shall
promptly inform the Fund of any material changes in the circumstances
surrounding the foreign custody arrangements provided by Citibank as such
information shall be made available to the Bank by Citibank.
11. Upon receipt of Proper Instructions, the Fund may instruct the Bank to
cease the employment of any one or more of such Selected Foreign Sub-Custodians
for maintaining custody of the Fund's assets, or to terminate Citibank as
Sub-Custodian of the Fund, and the Bank shall so cease to employ such
sub-custodian as soon as alternate custodial arrangements have been implemented.
III. NATIONAL AUSTRALIA BANK LIMITED.
1. APPOINTMENT OF NATIONAL AUSTRALIA BANK LIMITED AS SUB-CUSTODIAN. The
Fund hereby authorizes and instructs the Bank to employ National Australia Bank
Limited, a banking institution organized under the laws of Australia N.A.,
meeting the requirements of an eligible foreign custodian as that term is
defined in Rule 17f--5 of the Act, having its principal office and place of
business in Melbourne, Victoria, Australia (-NAB-) as sub-custodian for the
Fund's securities and other assets maintained in Australia and New Zealand
pursuant to the Master Subcustodian Agreement by and between NAB and the Bank
(the "NAB Agreement"), a copy of which has been made available to the Fund
2. ASSETS TO BE HELD. The Bank shall limit the securities and other assets
maintained at NAB to: (a) "foreign securities", as defined in paragraph (c)(1)
of Rule 17f-5 under the Act, the principal trading market for which is in
Australia or New Zealand and (b) cash and cash equivalents in such amounts as
the Bank or the Fund may determine to be reasonably necessary to effect the
Xxxx'x foreign securities transactions, subject to the provisions of Part I of
this Schedule A, relating to Euroclear eligible securities.
3. NATIONAL NOMINEES LIMITED. All securities of the Fund held by NAB shall
be registered in the name of its wholly-owned subsidiary, National Nominees
Limited.
4. SEGREGATION OF SECURITIES. The Bank shall identify on its books as
belonging to the Fund the foreign securities of the Fund held by NAB, and NAB
shall identify in a separate ' account, pursuant to the NAB Agreement, all
securities and moneys of the Fund.
5. REPORTS BY BANK. The Bank shall supply the Fund from time to time, as
mutually agreed upon, statements in respect of the securities and other assets
of the Fund held by NAB, including but not limited to advises or notifications
of any transfers of securities to or from each account maintained on behalf of
the Fund, as shall be made available to the Bank by NAB.
6. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. Transactions with respect to
the securities and other assets of the Fund held by NAB shall be effected
pursuant to Proper Instructions from the Fund to the Bank in accordance with the
NAB Agreement.
7. USE OF AUSTRACLEAR. Upon receipt of certified resolutions of the Fund's
Board of Directors authorizing the use of Austradear, a securities depository,
all securities of the Fund held by NAB and eligible for deposit therein may be
so deposited and held therein.
8. LIABILITY OF NAB. The standard of care and the liability of NAB for its
actions in connection with. the securities and other assets of the Fund held by
NAB is set forth in the NAB Agreement.
9. MONITORING RESPONSIBILITIES. The Bank shall furnish to the Fund
information made available to it by NAB concerning NAB for use by the Fund in
evaluating NAB and to ensure compliance with the requirements of Rule 17f-5 of
the Act. The Bank shall promptly inform the Fund of any material changes in the
circumstances surrounding the foreign custody arrangements provided by NAB as
such information shall be made available to the Bank by NAB.
10. TERMINATION. Upon receipt of Proper Instructions, the Fund may instruct
the Bank to cease the employment of NAB for maintaining custody of the Fund's
assets, and the Bank shall so cease to employ NAB as soon as alternate custodial
arrangements have been implemented.
