Exhibit 8
TAX-MANAGED GROWTH PORTFOLIO
October 23, 1995
Tax-Managed Growth Portfolio hereby adopts and agrees to become a party to the
attached Master Custodian Agreement as amended this date between the Xxxxx Xxxxx
Hub Portfolios and Investors Bank & Trust Company.
TAX-MANAGED GROWTH PORTFOLIO
BY: /s/ Xxxxxx X. Xxxx
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President
Accepted and agreed to:
INVESTORS BANK & TRUST COMPANY
BY: /s/ X. Xxxxxx
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Ex. Managing Director
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
3. Duties of the Custodian with Respect to
Property of the Trust......................................................4
A. Safekeeping and Holding of Property....................................4
B. Delivery of Securities...............................................4-7
C. Registration of Securities.............................................7
D. Bank Accounts..........................................................8
E. Payments for Interests, or Increases in Interests,
in the Trust..................................... . . . . . . . . . . .8
F. Investment and Availability of Federal Funds...........................8
G. Collections..........................................................8-9
H. Payment of Trust Monies............................................10-11
I. Liability for Payment in Advance of
Receipt of Securities Purchased....................................11-12
J. Payments for Repurchases or Redemptions
of Interests of the Trust.............................................12
K. Appointment of Agents by the Custodian................................12
L. Deposit of Trust Portfolio Securities in Securities
Systems ...........................................................12-14
M. Deposit of Trust Commercial Paper in an Approved
Book-Entry System for Commercial Paper.............................15-17
X. Xxxxxxxxxx Account....................................................17
O. Ownership Certificates for Tax Purposes...............................18
P. Proxies...............................................................18
Q. Communications Relating to Trust Portfolio ...........................18
Securities
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R. Exercise of Rights; Tender Offers..................................18-19
S. Depository Receipts...................................................19
T. Interest Bearing Call or Time Deposits................................20
U. Options, Futures Contracts and Foreign
Currency Transactions..............................................20-22
V. Actions Permitted Without Express Authority...........................22
4. Duties of Bank with Respect to Books of Account and
Calculations of Net Asset Value........................................22-23
5. Records and Miscellaneous Duties.......................................23-24
6. Opinion of Trust's Independent Public Accountants.........................24
7. Compensation and Expenses of Bank.........................................24
8. Responsibility of Bank.................................................24-25
9. Persons Having Access to Assets of the Trust...........................25-26
10. Effective Period, Termination and Amendment;
Successor Custodian....................................................26-27
11. Interpretive and Additional Provisions....................................27
12. Notices...................................................................27
13. Massachusetts Law to Apply................................................27
14. Adoption of the Agreement by the Trust....................................28
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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.
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(f) "Federal Book-Entry System" shall mean the book-entry system
referred to in Rule 17f-4(b) under the Investment Company Act of 1940 for United
States and federal agency securities (i.e., as provided in Subpart O of Treasury
Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, and the book-entry
regulations of federal agencies substantially in the form of Subpart O).
(g) "Approved Foreign Securities Depository" shall mean a foreign
securities depository or clearing agency referred to in Rule 17f-4 under the
Investment Company Act of 1940 for foreign securities but only if the Custodian
has received a certified copy of a resolution of the Board approving such
depository or clearing agency as a foreign securities depository for the Trust.
(h) "Approved Book-Entry System for Commercial Paper" shall mean a
system maintained by the Custodian or by a subcustodian employed pursuant to
Section 2 hereof for the holding of commercial paper in book-entry form but only
if the Custodian has received a certified copy of a resolution of the Board
approving the participation by the Trust in such system.
(i) The Custodian shall be deemed to have received "proper
instructions" in respect of any of the matters referred to in this Agreement
upon receipt of written or facsimile instructions signed by such one or more
person or persons as the Board shall have from time to time authorized to give
the particular class of instructions in question. Different persons may be
authorized to give instructions for different purposes. A certified copy of a
resolution of the Board may be received and accepted by the Custodian as
conclusive evidence of the authority of any such person to act and may be
considered as in full force and effect until receipt of written notice to the
contrary. Such instructions may be general or specific in terms and, where
appropriate, may be standing instructions. Unless the resolution delegating
authority to any person or persons to give a particular class of instructions
specifically requires that the approval of any person, persons or committee
shall first have been obtained before the Custodian may act on instructions of
that class, the Custodian shall be under no obligation to question the right of
the person or persons giving such instructions in so doing. Oral instructions
will be considered proper instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Trust shall cause all oral instructions to be
confirmed in writing. The Trust authorizes the Custodian to tape record any and
all telephonic or other oral instructions given to the Custodian. Upon receipt
of a certificate signed by two officers of the Trust as to the authorization by
the President and the Treasurer of the Trust accompanied by a detailed
description of the communication procedures approved by the President and the
Treasurer of the Trust, "proper instructions" may also include communications
effected directly between electromechanical or electronic devices provided that
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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
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
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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
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keep safely all property of the Trust and on behalf of
the Trust shall from time to time receive delivery of
Trust property for safekeeping. The Custodian shall
hold, earmark and segregate on its books and records for
the account of the Trust all property of the Trust,
including all securities, participation interests and
other assets of the Trust (1) physically held by the
Custodian, (2) held by any subcustodian referred to in
Section 2 hereof or by any agent referred to in
Paragraph K hereof, (3) held by or maintained in The
Depository Trust Company or in Participants Trust
Company or in an Approved Clearing Agency or in the
Federal Book-Entry System or in an Approved Foreign
Securities Depository, each of which from time to time
is referred to herein as a "Securities System", and (4)
held by the Custodian or by any subcustodian referred to
in Section 2 hereof and maintained in any Approved
Book-Entry System for Commercial Paper.
B. Delivery of Securities The Custodian shall release and
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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,
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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;
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
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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;
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7) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to
provisions for conversion of such securities, or
pursuant to any deposit agreement; provided that, in
any such case, the new securities and cash, if any,
are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof;
8) In the case of warrants, rights or similar
securities, the surrender thereof in connection
with the exercise of such warrants, rights or
similar securities, or the surrender of interim
receipts or temporary securities for definitive
securities; provided that, in any such case, the
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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;
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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
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Custodian (other than bearer securities) for the account
of the Trust shall be registered in the name of the
Trust or in the name of any nominee of the Trust or of
any nominee of the Custodian, or in the name or nominee
name of any agent appointed pursuant to Paragraph K
hereof, or in the name or nominee name of any
subcustodian employed pursuant to Section 2 hereof, or
in the name or nominee name of The Depository Trust
Company or Participants Trust Company or Approved
Clearing Agency or Federal Book-Entry System or Approved
Book-Entry System for Commercial Paper; provided, that
securities are held in an account of the Custodian or of
such agent or of such subcustodian containing only
assets of the Trust or only assets held by the Custodian
or such agent or such subcustodian as a custodian or
subcustodian or in a fiduciary capacity for customers.
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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
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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,
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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
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the Trust The Custodian shall make appropriate
---------
arrangements with the Transfer Agent of the Trust to
enable the Custodian to make certain it promptly
receives the cash or other consideration due to the
Trust for payment of interests in the Trust, or
increases in such interests, in accordance with the
governing documents and registration statement of the
Trust. The Custodian will provide prompt notification
to the Trust of any receipt by it of such payments.
F. Investment and Availability of Federal Funds Upon
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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
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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 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.
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H. Payment of Trust Monies Upon receipt of proper instructions,
which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out monies of the Trust in
the following cases only:
1) Upon the purchase of securities, participation
interests, options, futures contracts, forward
contracts and options on futures contracts
purchased for the account of the Trust but only
(a) against the receipt of
(i) such securities registered as provided in
Paragraph C hereof or in proper form for transfer
or
(ii) detailed instructions signed by an officer of
the Trust regarding the participation interests to
be purchased or
(iii)written confirmation of the purchase by the
Trust of the options, futures contracts, forward
contracts or options on futures contracts by the
Custodian (or by a subcustodian employed pursuant to
Section 2 hereof or by a clearing corporation of a
national securities exchange 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
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written procedures agreed to from time to time in
writing by the parties hereto;
2) When required in connection with the conversion,
exchange or surrender of securities owned by the
Trust as set forth in Paragraph B hereof;
3) When required for the reduction or redemption of
an interest in the Trust in accordance with the
provisions of Paragraph J hereof;
4) For the payment of any expense or liability incurred
by the Trust, including but not limited to the
following payments for the account of the Trust:
advisory fees, interest, taxes, management
compensation and expenses, accounting, transfer agent
and legal fees, and other operating expenses of the
Trust whether or not such expenses are to be in whole
or part capitalized or treated as deferred expenses;
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
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Securities Purchased In any and every case where
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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
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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
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that such securities have in fact been so transferred
-----------
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by book-entry and the written repurchase agreement is
received by the Custodian in due course; and except that if the
securities are to be purchased outside the United States,
payment may be made in accordance with procedures agreed to in
writing from time to time by the parties hereto.
J. Payments for Repurchases or Redemptions of Interests in
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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
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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
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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
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such agent shall not relieve the Custodian of any of
its responsibilities or liabilities hereunder, and as
between the Trust and the Custodian the Custodian shall
be fully responsible for the acts and omissions of any
such agent. For the purposes of this Agreement, any
property of the Trust held by any such agent shall be
deemed to be held by the Custodian hereunder.
L. Deposit of Trust Portfolio Securities in Securities
Systems The Custodian may deposit and/or maintain
securities owned by the Trust
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities Depository
-12-
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 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.
-13-
(d) The Custodian shall promptly send to the Trust any report
or other communication received or obtained by the Custodian
relating to the Securities System's accounting system, system
of internal accounting controls or procedures for safeguarding
securities deposited in the Securities System; the Custodian
shall promptly send to the Trust any report or other
communication relating to the Custodian's internal accounting
controls and procedures for safeguarding securities deposited
in any Securities System; and the Custodian shall ensure that
any agent appointed pursuant to Paragraph K hereof or any
subcustodian employed pursuant to Section 2 hereof shall
promptly send to the Trust and to the Custodian any report or
other communication relating to such agent's or subcustodian's
internal accounting controls and procedures for safeguarding
securities deposited in any Securities System. The Custodian's
books and records relating to the Trust's participation in
each Securities System will at all times during regular
business hours be open to the inspection of the Trust's
authorized officers, employees or agents.
(e) The Custodian shall not act under this Paragraph L in the
absence of receipt of a certificate of an officer of the Trust
that the Board has approved the use of a particular Securities
System; the Custodian shall also obtain appropriate assurance
from the officers of the Trust that the Board has annually
reviewed the continued use by the Trust of each Securities
System, and the Trust shall promptly notify the Custodian if
the use of a Securities System is to be discontinued; at the
request of the Trust, the Custodian will terminate the use of
any such Securities System as promptly as practicable.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the Trust
for any loss or damage to the Trust resulting from use of the
Securities System by reason of any negligence, misfeasance or
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.
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M. Deposit of Trust Commercial Paper in an Approved
------------------------------------------------
Book-Entry System for Commercial Paper Upon receipt of
--------------------------------------
proper instructions with respect to each issue of
direct issue commercial paper purchased by the Trust,
the Custodian may deposit and/or maintain direct issue
commercial paper owned by the Trust in any Approved
Book-Entry System for Commercial Paper, in each case
only in accordance with applicable Securities and
Exchange Commission rules, regulations, and no-action
correspondence, and at all times subject to the
following provisions:
(a) The Custodian may (either directly or through one or more
subcustodians employed pursuant to Section 2) keep commercial
paper of the Trust in an Approved Book-Entry System for
Commercial Paper, provided that such paper is issued in book
entry form by the Custodian or subcustodian on behalf of an
issuer with which the Custodian or subcustodian has entered
into a book-entry agreement and provided further that such
paper is maintained in a non-proprietary account ("Account")
of the Custodian or such subcustodian in an Approved
Book-Entry System for Commercial Paper which shall not include
any assets of the Custodian or such subcustodian or any other
person other than assets held by the Custodian or such
subcustodian as a fiduciary, custodian, or otherwise for its
customers.
(b) The records of the Custodian with respect to commercial
paper of the Trust which is maintained in an Approved
Book-Entry System for Commercial Paper shall identify by
book-entry each specific issue of commercial paper purchased
by the Trust which is included in the 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
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Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer or redemption and payment
for the account of the Trust. Copies of all notices, advices
and confirmations of transfers of commercial paper for the
account of the Trust shall identify the Trust, be maintained
for the Trust by the Custodian and be promptly provided to
the Trust at its request. The Custodian shall promptly send
to the Trust confirmation of each transfer to or from the
account of the Trust in the form of a written advice or
notice of each such transaction, and shall furnish to the
Trust copies of daily transaction sheets reflecting each
day's transactions in the System for the account of the
Trust on the next business day.
(d) The Custodian shall promptly send to the Trust any report
or other communication received or obtained by the Custodian
relating to each System's accounting system, system of
internal accounting controls or procedures for safeguarding
commercial paper deposited in the System; the Custodian shall
promptly send to the Trust any report or other communication
relating to the Custodian's internal accounting controls and
procedures for safeguarding commercial paper deposited in any
Approved Book-Entry System for Commercial Paper; and the
Custodian shall ensure that any agent appointed pursuant to
Paragraph K hereof or any subcustodian employed pursuant to
Section 2 hereof shall promptly send to the Trust and to the
Custodian any report or other communication relating to such
agent's or subcustodian's internal accounting controls and
procedures for safeguarding securities deposited in any
Approved Book-Entry System for Commercial Paper.
(e) The Custodian shall not act under this Paragraph M in the
absence of receipt of a certificate of an officer of the Trust
that the Board has approved the use of a particular Approved
Book-Entry System for Commercial Paper; the Custodian shall
also obtain appropriate assurance from the officers of the
Trust that the Board has annually reviewed the continued use
by the Trust of each Approved Book-Entry System for Commercial
Paper, and the Trust shall promptly notify the Custodian if
the use of an Approved Book-Entry System for Commercial Paper
is to be discontinued; at the request of the Trust, the
Custodian will terminate the use of any such System as
promptly as practicable.
(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.
-16-
(g) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the Trust
for any loss or damage to the Trust resulting from use of any
Approved Book-Entry System for Commercial Paper by reason of
any negligence, misfeasance or misconduct of the Custodian or
any of its agents or subcustodians or of any of its or their
employees or from any failure of the Custodian or any such
agent or subcustodian to enforce effectively such rights as it
may have against the System, the issuer of the commercial
paper or any other person; at the election of the Trust, it
shall be entitled to be subrogated to the rights of the
Custodian with respect to any claim against the System, the
issuer of the commercial paper or any other person which the
Custodian may have as a consequence of any such loss or damage
if and to the extent that the Trust has not been made whole
for any such loss or damage.
N. Segregated Account The Custodian shall upon receipt of
------------------
proper instructions establish and maintain a segregated
account or accounts for and on behalf of the Trust,
into which account or accounts may be transferred cash
and/or securities, including securities maintained in
an account by the Custodian pursuant to Paragraph L
hereof, (i) in accordance with the provisions of any
agreement among the Trust, the Custodian and any
registered broker-dealer (or any futures commission
merchant), relating to compliance with the rules of the
Options Clearing Corporation and of any registered
national securities exchange (or of the Commodity
Futures Trading Commission or of any contract market or
commodities exchange), or of any similar organization
or organizations, regarding escrow or deposit or other
arrangements in connection with transactions by the
Trust, (ii) for purposes of segregating cash or U.S.
Government securities in connection with options
purchased, sold or written by the Trust or futures
contracts or options thereon purchased or sold by the
Trust, (iii) for the purposes of compliance by the
Trust with the procedures required by Investment
Company Act Release No. 10666, or any subsequent
release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated
accounts by registered investment companies and (iv)
for other proper purposes, but only, in the case of
--------
clause (iv), upon receipt of, in addition to proper
instructions, a certificate signed by two officers of
the Trust, setting forth the purpose such segregated
account and declaring such purpose to be a proper
purpose.
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O. Ownership Certificates for Tax Purposes The Custodian shall
execute ownership and other certificates and affidavits for
all federal and state tax purposes in connection with receipt
of income or other payments with respect to securities of the
Trust held by it and in connection with transfers of
securities.
P. Proxies The Custodian shall, with respect to the
-------
securities held by it hereunder, cause to be promptly
delivered to the Trust all forms of proxies and all
notices of meetings and any other notices or
announcements or other written information affecting or
relating to the securities, and upon receipt of proper
instructions shall execute and deliver or cause its
nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the
Custodian nor its nominee shall vote upon any of the
securities or execute any proxy to vote thereon or give
any consent or take any other action with respect
thereto (except as otherwise herein provided) unless
ordered to do so by proper instructions.
Q. Communications Relating to Trust Portfolio Securities
-----------------------------------------------------
The Custodian shall deliver promptly to the Trust all
written information (including, without limitation,
pendency of call and maturities of securities and
participation interests and expirations of rights in
connection therewith and notices of exercise of call
and put options written by the Trust and the maturity
of futures contracts purchased or sold by the Trust)
received by the Custodian from issuers and other
persons relating to the securities and participation
interests being held for the Trust. With respect to
tender or exchange offers, the Custodian shall deliver
promptly to the Trust all written information received
by the Custodian from issuers and other persons
relating to the securities and participation interests
whose tender or exchange is sought and from the party
(or his agents) making the tender or exchange offer.
R. Exercise of Rights; Tender Offers In the case of
---------------------------------
tender offers, similar offers to purchase or exercise
rights (including, without limitation, pendency of
calls and maturities of securities and participation
interests and expirations of rights in connection
therewith and notices of exercise of call and put
options and the maturity of futures contracts)
affecting or relating to securities and participation
interests held by the Custodian under this Agreement,
the Custodian shall have responsibility for promptly
notifying the Trust of all such offers in accordance
with the standard of reasonable care set forth in
Section 8 hereof. For all such offers for which the
Custodian is responsible as provided in this Paragraph
R, the Trust shall have responsibility for providing
-18-
the Custodian with all necessary instructions in timely fashion.
Upon receipt of proper instructions, the Custodian shall timely
deliver to the issuer or trustee thereof, or to the agent of
either, warrants, puts, calls, rights or similar securities for
the purpose of being exercised or sold upon proper receipt
therefor and upon receipt of assurances satisfactory to the
Custodian that the new securities and cash, if any, acquired by
such action are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof. Upon receipt
of proper instructions, the Custodian shall timely deposit
securities upon invitations for tenders of securities upon proper
receipt therefor and upon receipt of assurances satisfactory to
the Custodian that the consideration to be paid or delivered or
the tendered securities are to be returned to the Custodian or
subcustodian employed pursuant to Section 2 hereof.
Notwithstanding any provision of this Agreement to the contrary,
the Custodian shall take all necessary action, unless otherwise
directed to the contrary by proper instructions, to comply with
the terms of all mandatory or compulsory exchanges, calls,
tenders, redemptions, or similar rights of security ownership, and
shall thereafter promptly notify the Trust in writing of such
action.
S. Depository Receipts The Custodian shall, upon receipt
-------------------
of proper instructions, surrender or cause to be
surrendered foreign securities to the depository used
by an issuer of American Depository Receipts or
International Depository Receipts (hereinafter
collectively referred to as "ADRs") for such
securities, against a written receipt therefor
adequately describing such securities and written
evidence satisfactory to the Custodian that the
depository has acknowledged receipt of instructions to
issue with respect to such securities 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.
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T. Interest Bearing Call or Time Deposits The Custodian
--------------------------------------
shall, upon receipt of proper instructions, place
interest bearing fixed term and call deposits with the
banking department of such banking institution (other
than the Custodian) and in such amounts as the Trust
may designate. Deposits may be denominated in U.S.
Dollars or other currencies. The Custodian shall
include in its records with respect to the assets of
the Trust appropriate notation as to the amount and
currency of each such deposit, the accepting banking
institution and other appropriate details and shall
retain such forms of advice or receipt evidencing the
deposit, if any, as may be forwarded to the Custodian
by the banking institution. Such deposits shall be
deemed portfolio securities of the Trust for the
purposes of this Agreement, and the Custodian shall be
responsible for the collection of income from such
accounts and the transmission of cash to and from such
accounts.
U. Options, Futures Contracts and Foreign Currency
Transactions
1. Options. The Custodian shall, upon receipt of proper
instructions and in accordance with the provisions of any
agreement between the Custodian, any registered broker-dealer
and, if necessary, the Trust, relating to compliance with the
rules of the Options Clearing Corporation or of any registered
national securities exchange or similar organization or
organizations, receive and retain confirmations or other
documents, if any, evidencing the purchase or writing of an
option on a security or securities index or other financial
instrument or index by the Trust; deposit and maintain in a
segregated account for the Trust, either physically or by
book-entry in a Securities System, securities subject to a
covered call option written by the Trust; and release and/or
transfer such securities or other assets only in accordance
with a notice or other communication evidencing the
expiration, termination or exercise of such covered option
furnished by the Options Clearing Corporation, the securities
or options exchange on which such covered option is traded or
such other organization as may be responsible for handling
such options transactions. The Custodian and the broker-dealer
shall be responsible for the sufficiency of assets held in the
Trust's segregated account in compliance with applicable
margin maintenance requirements.
-20-
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 mark-to-market payments) intended to
secure the Trust's performance of its obligations under any
futures contracts purchased or sold or any options on futures
contracts written by 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
mark-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
-21-
made available to the Custodian for the purpose, the
Custodian may (if determined necessary by the Custodian to
consummate a particular transaction on behalf and for the
account of the Trust) make free outgoing payments of cash in
the form of U.S. dollars or foreign currency before receiving
confirmation of a 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
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
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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 bill, repurchase agreement, subscription right, security, participation
interests or other asset or property for which market quotations are not readily
available. The Custodian shall also compute and determine at such time or times
as the Trust may designate the portion of each item which has significance for a
holder of an interest in the Trust in computing and determining its federal
income tax liability including, but not limited to, each item of income, expense
and realized and unrealized gain or loss of the Trust which is attributable for
Federal income tax purposes to each such holder.
5. Records and Miscellaneous Duties
The Bank shall create, maintain and preserve all records relating to
its activities and obligations under this Agreement in such manner as will meet
the obligations of the Trust under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Trust. All books of account and
records maintained by the Bank in connection with the performance of its duties
under this Agreement shall be the property of the Trust, shall at all times
during the regular business hours of the Bank be open for inspection by
authorized officers, employees or agents of the Trust, and in the event of
termination of this Agreement shall be delivered to the Trust or to such other
person or persons as shall be designated by the Trust. Disposition of any
account or record after any required period of preservation shall be only in
accordance with specific instructions received from the Trust. The Bank shall
assist generally in the preparation of reports to 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,
-23-
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
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.
-24-
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.
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.
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(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 Custodian by giving notice as described above to the Custodian in the event
the Custodian assigns this Agreement to another party without consent of the
noninterested Trustees of the Trust, or (ii) immediately terminate this
Agreement in the event of the appointment of a conservator or receiver for the
Custodian by the Federal Deposit Insurance Corporation or by the Banking
Commissioner of The Commonwealth of Massachusetts or upon the happening of a
like event at the direction of an appropriate regulatory agency or court of
competent jurisdiction. Upon termination of the Agreement, the Trust shall pay
to the Custodian such compensation as may be due as of the date of such
termination (and shall likewise reimburse the Custodian for its costs, expenses
and disbursements).
This Agreement may be amended at any time by the written agreement of
the parties hereto. If a majority of the non-interested trustees of any of the
Trusts determines that the performance of the Custodian has been unsatisfactory
or adverse to the interests of Trust holders of any Trust or Trusts or that the
terms of the Agreement are no longer consistent with publicly available industry
standards, then the Trust or Trusts shall give written notice to the Custodian
of such determination and the Custodian shall have 60 days to (1) correct such
performance to the satisfaction of the non-interested trustees or (2)
renegotiate terms which are satisfactory to the non-interested trustees of the
Trusts. If the conditions of the preceding sentence are not met then the Trust
or Trusts may terminate this Agreement on sixty (60) days written notice.
-26-
The Board of the Trust shall, forthwith, upon giving or receiving
notice of termination of this Agreement, appoint as successor custodian, a bank
or trust company having the qualifications required by the Investment Company
Act of 1940 and the Rules thereunder. The Bank, as Custodian, Agent or
otherwise, shall, upon termination of the Agreement, deliver to such successor
custodian, all securities then held hereunder and all funds or other properties
of the Trust deposited with or held by the Bank hereunder and all books of
account and records kept by the Bank pursuant to this Agreement, and all
documents held by the Bank relative thereto. In the event that no written order
designating a successor custodian shall have been delivered to the Bank on or
before the date when such termination shall become effective, then the Bank
shall not deliver the securities, funds and other properties of the Trust to the
Trust but shall have the right to deliver to a bank or trust company doing
business in Boston, Massachusetts of its own selection meeting the above
required qualifications, all funds, securities and properties of the Trust held
by or deposited with the 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
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.
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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.
* * * * *
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TAX-MANAGED GROWTH PORTFOLIO
PROCEDURES FOR ALLOCATIONS
AND DISTRIBUTIONS
October 23, 1995
TABLE OF CONTENTS
PAGE
ARTICLE I--Introduction .......................................................1
ARTICLE II--Definitions .......................................................1
ARTICLE III--Capital Accounts
Section 3.1 Capital Accounts of Holders ...............................4
Section 3.2 Book Capital Accounts .....................................4
Section 3.3 Tax Capital Accounts ......................................4
Section 3.4 Compliance with Treasury Regulations ......................5
ARTICLE IV--Distributions of Cash and Assets
Section 4.1 Distributions of Distributable Cash .......................5
Section 4.2 Division Among Holders ....................................5
Section 4.3 Distributions Upon Liquidation of a Holder's
Interest in the Trust .....................................5
Section 4.4 Amounts Withheld ..........................................5
ARTICLE V--Allocations
Section 5.1 Allocation of Items to Book Capital Accounts ..............6
Section 5.2 Allocation of Taxable Income and Tax Loss
to Tax Capital Accounts....................................6
Section 5.3 Special Allocations to Book and Tax Capital
Accounts ..................................................7
Section 5.4 Other Adjustments to Book and Tax Capital
Accounts ..................................................7
Section 5.5 Timing of Tax Allocations to Book and Tax
Capital Accounts ..........................................7
Section 5.6 Redemptions During the Fiscal Year ........................8
ARTICLE VI--Withdrawals
Section 6.1 Partial Withdrawals .......................................8
Section 6.2 Redemptions ...............................................8
Section 6.3 Distribution in Kind.......................................8
ARTICLE VII--Liquidation
Section 7.1 Liquidation Procedure .....................................8
Section 7.2 Alternative Liquidation Procedure .........................9
Section 7.3 Cash Distributions Upon Liquidation .......................9
Section 7.4 Treatment of Negative Book Capital
Account Balance ...........................................9
PROCEDURES FOR
ALLOCATIONS AND DISTRIBUTIONS
OF
TAX-MANAGED GROWTH PORTFOLIO
(the "Trust")
ARTICLE I
Introduction
The Trust is treated as a partnership for federal income tax purposes.
These procedures have been adopted by the Trustees of the Trust and will be
furnished to the Trust's accountants for the purpose of allocating Trust gains,
income or loss and distributing Trust assets. The Trust will maintain its books
and records, for both book and tax purposes, using the accrual method of
accounting.
ARTICLE II
Definitions
Except as otherwise provided herein, a term referred to herein shall
have the same meaning as that ascribed to it in the Declaration. References in
this document to "hereof", "herein" and "hereunder" shall be deemed to refer to
this document in its entirety rather than the article or section in which any
such word appears.
"Book Capital Account" shall mean, for any Holder at any time in any
Fiscal Year, the Book Capital Account balance of the Holder on the first day of
the Fiscal Year, as adjusted each day pursuant to the provisions of Section 3.2
hereof.
"Capital Contribution" shall mean, with respect to any Holder, the
amount of money and the Fair Market Value of any assets actually contributed
from time to time to the Trust with respect to the Interest held by such Holder.
"Code" shall mean the U.S. Internal Revenue Code of 1986, as amended
from time to time, as well as any non-superseded provisions of the Internal
Revenue Code of 1954, as amended (or any corresponding provision or provisions
of succeeding law).
"Declaration" shall mean the Trust's Declaration of Trust, dated
October 23, 1995, 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.
2
"Registration Statement" shall mean the Registration Statement of the
Trust on Form N-1A as filed with the U.S. Securities and Exchange Commission
under the 1940 Act, as the same may be amended from time to time.
"Reserves" shall mean, with respect to any Fiscal Year, funds set aside
or amounts allocated during such period to reserves which shall be maintained in
amounts deemed sufficient by the Trustees for working capital and to pay taxes,
insurance, debt service, renewals, or other costs or expenses, incident to the
ownership of the Investments or to its operations.
"Tax Capital Account" shall mean, for any Holder at any time in any
Fiscal Year, the Tax Capital Account balance of the Holder on the first day of
the Fiscal Year, as adjusted each day pursuant to the provisions of Section 3.3
hereof.
"Tax-Exempt Income" shall mean income of the Trust for such Fiscal Year
or period that is exempt from federal income tax and not otherwise taken into
account in computing Profit or Loss.
"Tax Lot" shall mean securities or other property which are both
purchased or acquired, and sold or otherwise disposed of, as a unit.
"Taxable Income" or "Tax Loss" shall mean the taxable income or tax
loss of the Trust, determined in accordance with Section 703(a) of the Code, for
each Fiscal Year as determined for federal income tax purposes, together with
each of the Trust's items of income, gain, loss or deduction which is separately
stated or otherwise not included in computing taxable income and tax loss.
"Treasury Regulations" shall mean the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trust" shall mean Tax-Managed Growth Portfolio, a trust fund formed
under the law 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 Xxxxxx; 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.
4
The Trustees shall make any appropriate modifications in the event
unanticipated events might otherwise cause these procedures not to comply with
Treasury Regulations Section 1.704-1(b), including the requirements described in
Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(1) and Treasury Regulations
Section 1.704-1(b)(2)(iv). Such modifications are hereby incorporated into these
procedures by this reference as though
fully set forth herein.
ARTICLE IV
Distributions of Cash and Assets
4.1. Distributions of Distributable Cash. Except as otherwise provided
in Article VII hereof, Distributable Cash for each Fiscal Year may be
distributed to the Holders at such times, if any, and in such amounts as shall
be determined in the sole discretion of the Trustees. In exercising such
discretion, the Trustees shall distribute such Distributable Cash so that
Holders that are regulated investment companies can comply with the distribution
requirements set forth in Code Section 852 and avoid the excise tax imposed by
Code Section 4982.
4.2. Division Among Holders. All distributions to the Holders with
respect to any Fiscal Year pursuant to Section 4.1 hereof shall be made to the
Holders in proportion to the Taxable Income, Tax-Exempt Income or Tax Loss
allocated to the Holders with respect to such Fiscal Year pursuant to the terms
of these procedures.
4.3. Distributions Upon Liquidation of a Holder's Interest in the
Trust. Upon liquidation of a Holder's interest in the Trust, the proceeds will
be distributed to the Holder as provided in Section 5.6, Article VI, and Article
VII hereof. If such Holder has a negative book capital account balance, the
provisions of Section 7.4 will apply.
4.4. Amounts Withheld. All amounts withheld pursuant to the Code or any
provision of any state or local tax law with respect to any payment or
distribution to the Trust or the Holders shall be treated as amounts distributed
to such Holders pursuant to this Article IV for all purposes under these
procedures. The Trustees may allocate any such amount among the Holders in any
manner that is in accordance with applicable law.
ARTICLE V
Allocations
5.1. Allocation of Items to Book Capital Accounts.
(a) Increase in Net Unrealized Gains or Decrease in Net Unrealized
Losses. Any decrease in Net Unrealized Loss due to realization of items shall be
allocated to the Holder receiving the allocation of Loss, in the same amount,
under Section 5.1(c) hereof. Subject to Section 5.1(d) hereof, any increase in
Net Unrealized Gains or decrease in Net Unrealized Loss on any day during the
Fiscal Year shall be allocated to the Holders' Book Capital Accounts at the end
of such day, in proportion to the Holders' respective Book Capital Account
balances at the commencement of such day.
(b) Decrease in Net Unrealized Gains or Increase in Net Unrealized
Losses. Any decrease in Net Unrealized Gains due to realization of items shall
be allocated to the Holder receiving the allocation of Profit, in the same
amount, under Section 5.1(c) hereof. Subject to Section 5.1(d) hereof, any
decrease in Net Unrealized Gains or increase in Net Unrealized Loss on any day
during the Fiscal Year shall be allocated to the Holders' Book Capital Accounts
at the end of such day, in proportion to the Holders' respective Book Capital
Account balances at the commencement of such day.
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:
6
(i) First, Taxable Income and Tax Loss, whether constituting
ordinary income (or loss) or capital gain (or loss), derived from the
sale or other disposition of a Tax Lot of securities or other property
shall be allocated as of the date such income, gain or loss is
recognized for federal income tax purposes solely in proportion to the
amount of unrealized appreciation (in the case of such income or
capital gain, but not in the case of any such loss) or depreciation (in
the case of any such loss, but not in the case of any such income or
capital gain) from that Tax Lot which was allocated to the Holders'
Book Capital Accounts each day that such securities or other property
was held by the Trust pursuant to Section 5.1(a) and (b) hereof; and
(ii) Second, any remaining amounts at the end of the Fiscal
Year, to the Holders in proportion to their respective daily average
Book Capital Account balances determined for the Fiscal Year of the
allocation.
(b) Matched Income or Loss. Notwithstanding the provisions of Section
5.2(a) hereof, Taxable Income, Tax-Exempt Income or Tax Loss accruing on any day
during the Fiscal Year constituting Matched Income or Loss, shall be allocated
daily to the Holders' Tax Capital Accounts solely in proportion to and to the
extent of corresponding allocations of Profit or Loss to the Holders' Book
Capital Accounts pursuant to the first sentence of Section 5.1(c) hereof.
5.3. Special Allocations to Book and Tax Capital Accounts.
(a) The Designated Expenses computed for each Holder shall be allocated
separately (not included in the allocations of Matched Income or Loss, Loss or
Tax Loss) to the Book Capital Account and Tax Capital Account of each Holder.
(b) If the Trust incurs any nonrecourse indebtedness, then allocations
of items attributable to nonrecourse indebtedness shall be made to the Tax
Capital Account of each Holder in accordance with the requirements of Treasury
Regulations Section 1.704-1(b)(4)(iv)(d).
(c) In accordance with Code Section 704(c) and the Treasury Regulations
thereunder, Taxable Income and Tax Loss with respect to any property contributed
to the capital of the Trust shall be allocated to the Tax Capital Account of
each Holder so as to take into account any variation between the adjusted tax
basis of such property to the Trust for federal income tax purposes and such
property's Fair Market Value at the time of contribution to the Trust.
5.4. Other Adjustments to Book and Tax Capital Accounts.
(a) Any election or other decision relating to such allocations shall
be made by the Trustees in any manner that reasonably reflects the purpose and
intention of these procedures.
(b) Each Holder will report its share of Trust income and loss for
federal income tax purposes in accordance with the allocations effected pursuant
to Section 5.2 hereof.
5.5. Timing of Tax Allocations to Book and Tax Capital Accounts.
Allocation of Taxable Income, Tax-Exempt Income and Tax Loss pursuant to Section
5.2 hereof for any Fiscal Year, unless specified above to the contrary, shall be
made only after corresponding adjustments have been made to the Book Capital
Accounts of the Holders for the Fiscal Year as provided pursuant to Section 5.1
hereof.
7
5.6. Redemptions During the Fiscal Year. If a Redemption occurs prior
to the end of a Fiscal Year, the Trust will treat the Fiscal Year as ended for
the purposes of computing the redeeming Holder's distributive share of Trust
items and allocations of all items to such Holder will be made as though each
Holder were receiving its allocable share of Trust items at such time. All items
so allocated to the redeeming Holder will be subtracted from the items to be
allocated among the other non-redeeming Holders at the actual end of the Fiscal
Year. All items allocated among the redeeming and non-redeeming Holders will be
made subject to the rules of Code Sections 702, 704, 706 and 708 and the
Treasury Regulations promulgated thereunder.
ARTICLE VI
Withdrawals
6.1. Partial Withdrawals. At any time any Holder shall be entitled to
request a withdrawal of such portion of the Interest held by such Holder as such
Holder shall request.
6.2. Redemptions. At any time a Holder shall be entitled to request a
Redemption of all of its Interest. A Holder's Interest may be redeemed at any
time during the Fiscal Year as provided in Section 6.3 hereof by a cash
distribution or, at the option of the Trust, by a distribution of assets.
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 may be sold by the Trust prior to the time at which the Holder
withdraws from the Trust.
6.3. Distribution in Kind. If a withdrawing Holder receives a
distribution in kind of its proportionate part of Trust property, then
unrealized income, gain, loss or deduction attributable to such property shall
be allocated among the Holders as if there had been a disposition of the
property on the date of distribution in compliance with the requirements of
Treasury Regulations Section 1.704-1(b)(2)(iv)(e). If a withdrawing Holder
receives securities other than its proportionate part of Trust Property then
unrealized income, gain or loss deduction attributable to such property shall be
allocated solely to such Holder as if there had been a disposition of the
property on the date of distribution.
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).
8
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.
9
