KENTUCKY TAX FREE PORTFOLIO
January 29, 1993
Kentucky Tax Free Portfolio hereby adopts and agrees to become a party to
the attached Master Custodian Agreement between the ▇▇▇▇▇ ▇▇▇▇▇ Hub
Portfolios and Investors Bank & Trust Company.
KENTUCKY TAX FREE PORTFOLIO
By/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_________________________
President
Accepted and agreed to:
INVESTORS BANK & TRUST COMPANY
BY:/s/▇.▇. ▇▇▇▇▇▇
---------------------------
Title: Vice President
MASTER CUSTODIAN AGREEMENT
between
▇▇▇▇▇ ▇▇▇▇▇ HUB PORTFOLIOS
and
INVESTORS BANK & TRUST COMPANY
TABLE OF CONTENTS
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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
▇. ▇▇▇▇▇▇▇▇▇▇ 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.
(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 the President and Treasurer of the Trust and the
Custodian are satisfied that such procedures afford adequate safeguards
for the Trust's assets. In performing its duties generally, and more
particularly in connection with the purchase, sale and exchange of
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securities made by or for the Trust, the Custodian may take cognizance of
the provisions of the governing documents and registration statement of
the Trust as the same may from time to time be in effect (and resolutions
or proceedings of the holders of interests in the Trust or the Board),
but, nevertheless, except as otherwise expressly provided herein, the
Custodian may assume unless and until notified in writing to the contrary
that so-called proper instructions received by it are not in conflict with
or in any way contrary to any provisions of such governing documents and
registration statement, or resolutions or proceedings of the holders of
interests in the Trust or the Board.
(j) The term "Vote" when used with respect to the Board or the
Holders of Interests in the Trust shall include a vote, resolution,
consent, proceeding and other action taken by the Board or Holders in
accordance with the Declaration of Trust or By-Laws of the Trust.
2. Employment of Custodian and Property to be Held by It
The Trust hereby appoints and employs the Bank as its Custodian and
Agent in accordance with and subject to the provisions hereof, and the
Bank hereby accepts such appointment and employment. The Trust agrees to
deliver to the Custodian all securities, participation interests, cash and
other assets owned by it, and all payments of income, payments of
principal and capital distributions and adjustments received by it with
respect to all securities and participation interests owned by the Trust
from time to time, and the cash consideration received by it from time to
time in exchange for an interest in the Trust or for an increase in such
an interest. The Custodian shall not be responsible for any property of
the Trust held by the Trust and not delivered by the Trust to the
Custodian. The Trust will also deliver to the Bank from time to time
copies of its currently effective declaration of trust, by-laws,
registration statement and placement agent agreement with its placement
agent, together with such resolutions, and other proceedings of the Trust
as may be necessary for or convenient to the Bank in the performance of
its duties hereunder.
The Custodian may from time to time employ one or more subcustodians
to perform such acts and services upon such terms and conditions as shall
be approved from time to time by the Board. Any such subcustodian so
employed by the Custodian shall be deemed to be the agent of the
Custodian, and the Custodian shall remain primarily responsible for the
securities, participation interests, moneys and other property of the
Trust held by such subcustodian. Any foreign subcustodian shall be a bank
or trust company which is an eligible foreign custodian within the meaning
of Rule 17f-5 under the Investment Company Act of 1940, and the foreign
custody arrangements shall be approved by the Board and shall be in
accordance with and subject to the provisions of said Rule. For the
purposes of this Agreement, any property of the Trust held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the
Custodian under the terms of this Agreement.
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3. Duties of the Custodian with Respect to Property of the Trust
A. Safekeeping and Holding of Property The Custodian shall keep
safely all property of the Trust and on behalf of the Trust
shall from time to time receive delivery of Trust property for
safekeeping. The Custodian shall hold, earmark and segregate on
its books and records for the account of the Trust all property
of the Trust, including all securities, participation interests
and other assets of the Trust (1) physically held by the
Custodian, (2) held by any subcustodian referred to in Section 2
hereof or by any agent referred to in Paragraph K hereof, (3)
held by or maintained in The Depository Trust Company or in
Participants Trust Company or in an Approved Clearing Agency or
in the Federal Book-Entry System or in an Approved Foreign
Securities Depository, each of which from time to time is
referred to herein as a "Securities System", and (4) held by the
Custodian or by any subcustodian referred to in Section 2 hereof
and maintained in any Approved Book-Entry System for Commercial
Paper.
B. Delivery of Securities The Custodian shall release and deliver
securities or participation interests owned by the Trust held
(or deemed to be held) by the Custodian or maintained in a
Securities System account or in an Approved Book-Entry System
for Commercial Paper account only upon receipt of proper
instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1) Upon sale of such securities or participation
interests for the account of the Trust, but only
against receipt of payment therefor; if delivery
is made in Boston or New York City, payment
therefor shall be made in accordance with
generally accepted clearing house procedures or
by use of Federal Reserve Wire System procedures;
if delivery is made elsewhere payment therefor
shall be in accordance with the then current
"street delivery" custom or in accordance with
such procedures agreed to in writing from time to
time by the parties hereto; if the sale is
effected through a Securities System, delivery
and payment therefor shall be made in accordance
with the provisions of Paragraph L hereof; if the
sale of commercial paper is to be effected
through an Approved Book-Entry System for
Commercial Paper, delivery and payment therefor
shall be made in accordance with the provisions
of Paragraph M hereof; if the securities are to
be sold outside the United States, delivery 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,
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the term "sale" shall include the disposition of
a portfolio security (i) upon the exercise of an
option written by the Trust and (ii) upon the
failure by the Trust to make a successful bid
with respect to a portfolio security, the
continued holding of which is contingent upon the
making of such a bid;
2) Upon the receipt of payment in connection with any
repurchase agreement or reverse repurchase agreement
relating to such securities and entered into by the
Trust;
3) To the depository agent in connection with tender or
other similar offers for portfolio securities of the
Trust;
4) To the issuer thereof or its agent when such
securities or participation interests are called,
redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian or
any subcustodian employed pursuant to Section 2
hereof;
5) To the issuer thereof, or its agent, for transfer into
the name of the Trust or into the name of any nominee
of the Custodian or into the name or nominee name of
any agent appointed pursuant to Paragraph K hereof or
into the name or nominee name of any subcustodian
employed pursuant to Section 2 hereof; or for exchange
for a different number of bonds, certificates or other
evidence representing the same aggregate face amount
or number of units; provided that, in any such case,
the new securities or participation interests are to
be delivered to the Custodian or any subcustodian
employed pursuant to Section 2 hereof;
6) To the broker selling the same for examination in
accordance with the "street delivery" custom; provided
that the Custodian shall adopt such procedures as the
Trust from time to time shall approve to ensure their
prompt return to the Custodian by the broker in the
event the broker elects not to accept them;
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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 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 Custodian
(other than bearer securities) for the account of the Trust
shall be registered in the name of the Trust or in the name of
any nominee of the Trust or of any nominee of the Custodian, or
in the name or nominee name of any agent appointed pursuant to
Paragraph K hereof, or in the name or nominee name of any
subcustodian employed pursuant to Section 2 hereof, or in the
name or nominee name of The Depository Trust Company or
Participants Trust Company or Approved Clearing Agency or
Federal Book-Entry System or Approved Book-Entry System for
Commercial Paper; provided, that securities are held in an
account of the Custodian or of such agent or of such
subcustodian containing only assets of the Trust or only assets
held by the Custodian or such agent or such subcustodian as a
custodian or subcustodian or in a fiduciary capacity for
customers. All certificates for securities accepted by the
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Custodian or any such agent or subcustodian on behalf of the
Trust shall be in "street" or other good delivery form or shall
be returned to the selling broker or dealer who shall be advised
of the reason thereof.
D. Bank Accounts The Custodian shall open and maintain a separate
bank account or accounts in the name of the Trust, subject only
to draft or order by the Custodian acting in pursuant to the
terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Trust other than cash
maintained by the Trust in a bank account established and used
in accordance with Rule 17f-3 under the Investment Company Act
of 1940. Funds held by the Custodian for the Trust may be
deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust
companies as the Custodian may in its discretion deem necessary
or desirable; provided, however, that every such bank or trust
company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank or
trust company shall be approved in writing by two officers of
the Trust. Such funds shall be deposited by the Custodian in
its capacity as Custodian and shall be subject to withdrawal
only by the Custodian in that capacity.
E. Payments for Interests, or Increases in Interests, in the Trust
The Custodian shall make appropriate arrangements with the
Transfer Agent of the Trust to enable the Custodian to make
certain it promptly receives the cash or other consideration due
to the Trust for payment of interests in the Trust, or increases
in such interests, in accordance with the governing documents
and registration statement of the Trust. The Custodian will
provide prompt notification to the Trust of any receipt by it of
such payments.
F. Investment and Availability of Federal Funds Upon agreement
between the Trust and the Custodian, the Custodian shall, upon
the receipt of proper instructions, which may be continuing
instructions when deemed appropriate by the parties, invest in
such securities and instruments as may be set forth in such
instructions on the same day as received all federal funds
received after a time agreed upon between the Custodian and the
Trust.
G. Collections The Custodian shall promptly collect all income and
other payments with respect to registered securities held
hereunder to which the Trust shall be entitled either by law or
pursuant to custom in the securities business, and shall
promptly collect all income and other payments with respect to
bearer securities if, on the date of payment by the issuer, such
securities are held by the Custodian or agent thereof and shall
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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
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agreement by the bank or broker-dealer to
repurchase such securities from the Trust; or (e)
with respect to securities purchased outside of
the United States, in accordance with written
procedures agreed to from time to time in writing
by the parties hereto;
2) When required in connection with the conversion,
exchange or surrender of securities owned by the
Trust as set forth in Paragraph B hereof;
3) When required for the reduction or redemption of
an interest in the Trust in accordance with the
provisions of Paragraph J hereof;
4) For the payment of any expense or liability
incurred by the Trust, including but not limited
to the following payments for the account of the
Trust: advisory fees, interest, taxes,
management compensation and expenses, accounting,
transfer agent and legal fees, and other
operating expenses of the Trust whether or not
such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For distributions or payment to Holders of
Interest in the Trust; and
6) For any other proper corporate purpose, but only
upon receipt of, in addition to proper
instructions, a certified copy of a resolution of
the Board, specifying the amount of such payment,
setting forth the purpose for which such payment
is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person
or persons to whom such payment is to be made.
I. Liability for Payment in Advance of Receipt of Securities
Purchased In any and every case where payment for purchase of
securities for the account of the Trust is made by the Custodian
in advance of receipt of the securities purchased in the absence
of specific written instructions signed by two officers of the
Trust to so pay in advance, the Custodian shall be absolutely
liable to the Trust for such securities to the same extent as if
the securities had been received by the Custodian; except that
in the case of a repurchase agreement entered into by the Trust
with a bank which is a member of the Federal Reserve System, the
Custodian may transfer trusts to the account of such bank prior
to the receipt of (i) the securities in certificate form subject
to such repurchase agreement or (ii) written evidence that the
securities subject to such repurchase agreement have been
transferred by book-entry into a segregated non-proprietary
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account of the Custodian maintained with the Federal Reserve
Bank of Boston or (iii) the safekeeping receipt, provided that
such securities have in fact been so transferred by book-entry
and the written repurchase agreement is received by the
Custodian in due course; and except that if the securities are
to be purchased outside the United States, payment may be made
in accordance with procedures agreed to in writing from time to
time by the parties hereto.
J. Payments for Repurchases or Redemptions of Interests in the
Trust From such funds as may be available for the purpose, but
subject to any applicable resolutions of the Board and the
current procedures of the Trust, the Custodian shall, upon
receipt of written instructions from the Trust or from the
Trust's Transfer Agent, make funds and/or portfolio securities
available for payment to Holders of Interest in the Trust who
have caused the amount of their interests to be reduced, or for
their interest to be redeemed.
K. Appointment of Agents by the Custodian The Custodian may at any
time or times in its discretion appoint (and may at any time
remove) any other bank or trust company (provided such bank or
trust company is itself qualified under the Investment Company
Act of 1940 to act as a custodian or is itself an eligible
foreign custodian within the meaning of Rule 17f-5 under said
Act) as the agent of the Custodian to carry out such of the
duties and functions of the Custodian described in this Section
3 as the Custodian may from time to time direct; provided,
however, that the appointment of any such agent shall not
relieve the Custodian of any of its responsibilities or
liabilities hereunder, and as between the Trust and the
Custodian the Custodian shall be fully responsible for the acts
and omissions of any such agent. For the purposes of this
Agreement, any property of the Trust held by any such agent
shall be deemed to be held by the Custodian hereunder.
L. Deposit of Trust Portfolio Securities in Securities Systems The
Custodian may deposit and/or maintain securities owned by the
Trust
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities Depository
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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.
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(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
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Trust has not been made whole for any such loss or
damage.
M. Deposit of Trust Commercial Paper in an Approved Book-Entry
System for Commercial Paper Upon receipt of proper
instructions with respect to each issue of direct issue
commercial paper purchased by the Trust, the Custodian may
deposit and/or maintain direct issue commercial paper owned
by the Trust in any Approved Book-Entry System for
Commercial Paper, in each case only in accordance with
applicable Securities and Exchange Commission rules,
regulations, and no-action correspondence, and at all times
subject to the following provisions:
(a) The Custodian may (either directly or through one
or more subcustodians employed pursuant to Section 2)
keep commercial paper of the Trust in an Approved
Book-Entry System for Commercial Paper, provided that
such paper is issued in book entry form by the
Custodian or subcustodian on behalf of an issuer with
which the Custodian or subcustodian has entered into a
book-entry agreement and provided further that such
paper is maintained in a non-proprietary account
("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
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such commercial paper which is sold or cancel such
commercial paper which is redeemed for the account of
the Trust only upon contemporaneous (i) receipt of
notice or advice that payment for such paper has been
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
transfer or redemption and payment for the account of
the Trust. Copies of all notices, advices and
confirmations of transfers of commercial paper for the
account of the Trust shall identify the Trust, be
maintained for the Trust by the Custodian and be
promptly provided to the Trust at its request. The
Custodian shall promptly send to the Trust
confirmation of each transfer to or from the account
of the Trust in the form of a written advice or notice
of each such transaction, and shall furnish to the
Trust copies of daily transaction sheets reflecting
each day's transactions in the System for the account
of the Trust on the next business day.
(d) The Custodian shall promptly send to the Trust any
report or other communication received or obtained by the
Custodian relating to each System's accounting system,
system of internal accounting controls or procedures for
safeguarding commercial paper deposited in the System; the
Custodian shall promptly send to the Trust any report or
other communication relating to the Custodian's internal
accounting controls and procedures for safeguarding
commercial paper deposited in any Approved Book-Entry
System for Commercial Paper; and the Custodian shall ensure
that any agent appointed pursuant to Paragraph K hereof or
any subcustodian employed pursuant to Section 2 hereof
shall promptly send to the Trust and to the Custodian any
report or other communication relating to such agent's or
subcustodian's internal accounting controls and procedures
for safeguarding securities deposited in any Approved
Book-Entry System for Commercial Paper.
(e) The Custodian shall not act under this Paragraph M in
the absence of receipt of a certificate of an officer of
the Trust that the Board has approved the use of a
particular Approved Book-Entry System for Commercial Paper;
the Custodian shall also obtain appropriate assurance from
the officers of the Trust that the Board has annually
reviewed the continued use by the Trust of each Approved
Book-Entry System for Commercial Paper, and the Trust shall
promptly notify the Custodian if the use of an Approved
Book-Entry System for Commercial Paper is to be
discontinued; at the request of the Trust, the Custodian
will terminate the use of any such System as promptly as
practicable.
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(f) The Custodian (or subcustodian, if the Approved
Book-Entry System for Commercial Paper is maintained by the
subcustodian) shall issue physical commercial paper or
promissory notes whenever requested to do so by the Trust
or in the event of an electronic system failure which
impedes issuance, transfer or custody of direct issue
commercial paper by book-entry.
(g) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the Trust
for any loss or damage to the Trust resulting from use of
any Approved Book-Entry System for Commercial Paper by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or subcustodians or of any
of its or their employees or from any failure of the
Custodian or any such agent or subcustodian to enforce
effectively such rights as it may have against the System,
the issuer of the commercial paper or any other person; at
the election of the Trust, it shall be entitled to be
subrogated to the rights of the Custodian with respect to
any claim against the System, the issuer of the commercial
paper or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent
that the Trust has not been made whole for any such loss or
damage.
N. Segregated Account The Custodian shall upon receipt of proper
instructions establish and maintain a segregated account or
accounts for and on behalf of the Trust, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Paragraph L hereof, (i) in accordance with the provisions of any
agreement among the Trust, the Custodian and any registered
broker-dealer (or any futures commission merchant), relating to
compliance with the rules of the Options Clearing Corporation
and of any registered national securities exchange (or of the
Commodity Futures Trading Commission or of any contract market
or commodities exchange), or of any similar organization or
organizations, regarding escrow or deposit or other arrangements
in connection with transactions by the Trust, (ii) for purposes
of segregating cash or U.S. 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
-17-
such segregated account and declaring such purpose to be a
proper purpose.
O. Ownership Certificates for Tax Purposes The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of the Trust
held by it and in connection with transfers of securities.
P. Proxies The Custodian shall, with respect to the securities
held by it hereunder, cause to be promptly delivered to the
Trust all forms of proxies and all notices of meetings and any
other notices or announcements or other written information
affecting or relating to the securities, and upon receipt of
proper instructions shall execute and deliver or cause its
nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian nor its
nominee shall vote upon any of the securities or execute any
proxy to vote thereon or give any consent or take any other
action with respect thereto (except as otherwise herein
provided) unless ordered to do so by proper instructions.
Q. Communications Relating to Trust Portfolio Securities The
Custodian shall deliver promptly to the Trust all written
information (including, without limitation, pendency of call and
maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Trust and the
maturity of futures contracts purchased or sold by the Trust)
received by the Custodian from issuers and other persons
relating to the securities and participation interests being
held for the Trust. With respect to tender or exchange offers,
the Custodian shall deliver promptly to the Trust all written
information received by the Custodian from issuers and other
persons relating to the securities and participation interests
whose tender or exchange is sought and from the party (or his
agents) making the tender or exchange offer.
R. Exercise of Rights; Tender Offers In the case of tender offers,
similar offers to purchase or exercise rights (including,
without limitation, pendency of calls and maturities of
securities and participation interests and expirations of rights
in connection therewith and notices of exercise of call and put
options and the maturity of futures contracts) affecting or
relating to securities and participation interests held by the
Custodian under this Agreement, the Custodian shall have
responsibility for promptly notifying the Trust of all such
offers in accordance with the standard of reasonable care set
forth in Section 8 hereof. For all such offers for which the
Custodian is responsible as provided in this Paragraph R, the
Trust shall have responsibility for providing the Custodian with
all necessary instructions in timely fashion. Upon receipt of
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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 made available to the Custodian for
the purpose, the Custodian may (if determined necessary by
-21-
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 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
-22-
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, 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
-23-
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.
(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
-25-
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 as hereinafter
provided, may be amended at any time by mutual agreement of the parties
hereto and may be terminated by either party 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, 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.
Unless the holders of a majority of the outstanding "voting
securities" of the Trust (as defined in the Investment Company Act of
1940) vote to have the securities, funds and other properties held
hereunder delivered and paid over to some other bank or trust company,
specified in the vote, having not less than $2,000,000 of aggregate
capital, surplus and undivided profits, as shown by its last published
report, and meeting such other qualifications for custodians set forth in
the Investment Company Act of 1940, the Board shall, forthwith, upon
giving or receiving notice of termination of this Agreement, appoint as
successor custodian, a bank or trust company having such qualifications.
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 such vote has been adopted by the
Holders of Interest in the Trust and 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, having an
aggregate capital, surplus and undivided profits, as shown by its last
published report, of not less than $2,000,000, 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
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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 ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or to such other
address as the Trust may have designated to the Bank, in writing with a
copy to ▇▇▇▇▇ ▇▇▇▇▇ Management at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, or to Investors Bank & Trust Company, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ with a copy to ▇▇▇▇▇ ▇▇▇▇▇ Management at ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, 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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KENTUCKY TAX FREE PORTFOLIO
-----------------------
PROCEDURES FOR ALLOCATIONS
AND DISTRIBUTIONS
May 1, 1992
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
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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
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PROCEDURES FOR
ALLOCATIONS AND DISTRIBUTIONS
OF
KENTUCKY TAX FREE PORTFOLIO
(the "Trust")
-------------------------------
ARTICLE I
Introduction
------------
The Trust is treated as a partnership for federal income tax
purposes. These procedures have been adopted by the Trustees of the Trust
and will be furnished to the Trust's accountants for the purpose of
allocating Trust gains, income or loss and distributing Trust assets. The
Trust will maintain its books and records, for both book and tax purposes,
using the accrual method of accounting.
ARTICLE II
Definitions
-----------
Except as otherwise provided herein, a term referred to herein shall
have the same meaning as that ascribed to it in the Declaration.
References in this document to "hereof", "herein" and "hereunder" shall be
deemed to refer to this document in its entirety rather than the article
or section in which any such word appears.
"Book Capital Account" shall mean, for any Holder at any time in any
Fiscal Year, the Book Capital Account balance of the Holder on the first
day of the Fiscal Year, as adjusted each day pursuant to the provisions of
Section 3.2 hereof.
"Capital Contribution" shall mean, with respect to any Holder, the
amount of money and the Fair Market Value of any assets actually
contributed from time to time to the Trust with respect to the Interest
held by such Holder.
"Code" shall mean the U.S. Internal Revenue Code of 1986, as amended
from time to time, as well as any non-superseded provisions of the
Internal Revenue Code of 1954, as amended (or any corresponding provision
or provisions of succeeding law).
"Declaration" shall mean the Trust's Declaration of Trust, dated May
1, 1992, as amended from time to time.
"Designated Expenses" shall mean extraordinary Trust expenses
attributable to a particular Holder that are to be borne by such Holder.
"Distributable Cash" for any Fiscal Year shall mean the gross cash
proceeds from Trust activities, less the portion thereof used to pay or
establish Reserves, plus such portion of the Reserves as the Trustees, in
their sole discretion, no longer deem necessary to be held as Reserves.
Distributable Cash shall not be reduced by depreciation, amortization,
cost recovery deductions, or similar allowances.
"Fair Market Value" of a security, instrument or other asset on any
particular day shall mean the fair value thereof as determined in good
faith by or on behalf of the Trustees in the manner set forth in the
Registration Statement.
"Fiscal Year" shall mean an annual period determined by the Trustees
which ends on such day as is permitted by the Code.
"Holders" shall mean as of any particular time all holders of record
of Interests in the Trust.
"Interest(s)" shall mean the interest of a Holder in the Trust,
including all rights, powers and privileges accorded to Holders by the
Declaration, which interest may be expressed as a percentage, determined
by calculating, at such times and on such bases as the Trustees shall from
time to time determine, the ratio of each Holder's Book Capital Account
balance to the total of all Holders' Book Capital Account balances.
"Investments" shall mean all securities, instruments or other assets
of the Trust of any nature whatsoever, including, but not limited to, all
equity and debt securities, futures contracts, and all property of the
Trust obtained by virtue of holding such assets.
"Matched Income or Loss" shall mean Taxable Income, Tax-Exempt Income
or Tax Loss of the Trust comprising interest, original issue discount and
dividends and all other types of income or loss to the extent the Taxable
Income, Tax-Exempt Income, Tax Loss or Loss items not included in Tax Loss
arising from such items are recognized for tax purposes at the same time
that Profit or Loss are accrued for book purposes by the Trust.
"Net Unrealized Gain" shall mean the excess, if any, of the aggregate
Fair Market Value of all Investments over the aggregate adjusted bases,
for federal income tax purposes, of all Investments.
"Net Unrealized Loss" shall mean the excess, if any, of the aggregate
adjusted bases, for federal income tax purposes, of all Investments over
the aggregate Fair Market Value of all Investments.
"Profit" and "Loss" shall mean, for each Fiscal Year or other period,
an amount equal to the Taxable Income or Tax Loss for such Fiscal Year or
period with the following adjustments:
-2-
(i) Any Tax-Exempt Income shall be added to such Taxable
Income or subtracted from such Tax Loss; and
(ii) Any expenditures of the Trust for such year or period
described in Section 705(a)(2)(B) of the Code or treated as
expenditures under Section 705(a)(2)(B) of the Code pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not
otherwise taken into account in computing Profit or Loss or
specially allocated shall be subtracted from such Taxable Income
or added to such Tax Loss.
"Redemption" shall mean the complete withdrawal of an Interest of a
Holder the result of which is to reduce the Book Capital Account balance
of that Holder to zero.
"Registration Statement" shall mean the Registration Statement of the
Trust on Form N-1A as filed with the U.S. Securities and Exchange
Commission under the 1940 Act, as the same may be amended from time to
time.
"Reserves" shall mean, with respect to any Fiscal Year, funds set
aside or amounts allocated during such period to reserves which shall be
maintained in amounts deemed sufficient by the Trustees for working
capital and to pay taxes, insurance, debt service, renewals, or other
costs or expenses, incident to the ownership of the Investments or to its
operations.
"Tax Capital Account" shall mean, for any Holder at any time in any
Fiscal Year, the Tax Capital Account balance of the Holder on the first
day of the Fiscal Year, as adjusted each day pursuant to the provisions of
Section 3.3 hereof.
"Tax-Exempt Income" shall mean income of the Trust for such Fiscal
Year or period that is exempt from federal income tax and not otherwise
taken into account in computing Profit or Loss.
"Tax Lot" shall mean securities or other property which are both
purchased or acquired, and sold or otherwise disposed of, as a unit.
"Taxable Income" or "Tax Loss" shall mean the taxable income or tax
loss of the Trust, determined in accordance with Section 703(a) of the
Code, for each Fiscal Year as determined for federal income tax purposes,
together with each of the Trust's items of income, gain, loss or deduction
which is separately stated or otherwise not included in computing taxable
income and tax loss.
"Treasury Regulations" shall mean the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time
to time (including corresponding provisions of succeeding regulations).
"Trust" shall mean Kentucky Tax Free Portfolio, a trust fund formed
under the laws of the State of New York by the Declaration.
-3-
"Trustees" shall mean each signatory to the Declaration, so long as
such signatory shall continue in office in accordance with the terms
thereof, and all other individuals who at the time in question have been
duly elected or appointed and have qualified as Trustees in accordance
with the provisions thereof and are then in office.
The "1940 Act" shall mean the U.S. Investment Company Act of 1940, as
amended from time to time, and the rules and regulations thereunder.
ARTICLE III
Capital Accounts
----------------
3.1. Capital Accounts of Holders. A separate Book Capital Account
and a separate Tax Capital Account shall be maintained for each Holder
pursuant to Section 3.2 and Section 3.3. hereof, respectively. In the
event the Trustees shall determine that it is prudent to modify the manner
in which the Book Capital Accounts or Tax Capital Accounts, or any debits
or credits thereto, are computed in order to comply with the Treasury
Regulations, the Trustees may make such modification, provided that it is
not likely to have a material effect on the amounts distributable to any
Holder pursuant to Article VII hereof upon the dissolution of the Trust.
3.2. Book Capital Accounts. The Book Capital Account balance of each
Holder shall be adjusted each day by the following amounts:
(a) increased by any increase in Net Unrealized Gains or decrease in
Net Unrealized Losses allocated to such Holder pursuant to Section 5.1(a)
hereof;
(b) decreased by any decrease in Net Unrealized Gains or increase in
Net Unrealized Losses allocated to such Holder pursuant to Section 5.1(b)
hereof;
(c) increased or decreased, as the case may be, by the amount of
Profit or Loss, respectively, allocated to such Holder pursuant to
Section 5.1(c) hereof;
(d) increased by any Capital Contribution made by such ▇▇▇▇▇▇; 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.
-4-
3.3. Tax Capital Accounts. The Tax Capital Account balance of each
Holder shall be adjusted at the following times by the following amounts:
(a) increased daily by the adjusted tax bases of any Capital
Contribution made by such Holder to the Trust;
(b) increased daily by the amount of Taxable Income and Tax-Exempt
Income allocated to such Holder pursuant to Section 5.2 hereof at such
times as the allocations are made under Section 5.2 hereof;
(c) decreased daily by the amount of cash distributed to the Holder
pursuant to any of these procedures including any distribution made to
effect a withdrawal or Redemption; and
(d) decreased by the amount of Tax Loss allocated to such Holder
pursuant to Section 5.2 hereof at such times as the allocations are made
under Section 5.2 hereof.
3.4. Compliance with Treasury Regulations. The foregoing provisions
and other provisions contained herein relating to the maintenance of Book
Capital Accounts and Tax Capital Accounts are intended to comply with
Treasury Regulations Section 1.704-1(b), and shall be interpreted and
applied in a manner consistent with such Treasury Regulations.
The Trustees shall make any appropriate modifications in the event
unanticipated events might otherwise cause these procedures not to comply
with Treasury Regulations Section 1.704-1(b), including the requirements
described in Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(1) and
Treasury Regulations Section 1.704-1(b)(2)(iv). Such modifications are
hereby incorporated into these procedures by this reference as though
fully set forth herein.
ARTICLE IV
Distributions of Cash and Assets
--------------------------------
4.1. Distributions of Distributable Cash. Except as otherwise
provided in Article VII hereof, Distributable Cash for each Fiscal Year
may be distributed to the Holders at such times, if any, and in such
amounts as shall be determined in the sole discretion of the Trustees. In
exercising such discretion, the Trustees shall distribute such
Distributable Cash so that Holders that are regulated investment companies
can comply with the distribution requirements set forth in Code
Section 852 and avoid the excise tax imposed by Code Section 4982.
4.2. Division Among Holders. All distributions to the Holders with
respect to any Fiscal Year pursuant to Section 4.1 hereof shall be made to
the Holders in proportion to the Taxable Income, Tax-Exempt Income or Tax
Loss allocated to the Holders with respect to such Fiscal Year pursuant to
the terms of these procedures.
-5-
4.3. Distributions Upon Liquidation of a Holder's Interest in the
Trust. Upon liquidation of a Holder's interest in the Trust, the proceeds
will be distributed to the Holder as provided in Section 5.6, Article VI,
and Article VII hereof. If such Holder has a negative book capital
account balance, the provisions of Section 7.4 will apply.
4.4. Amounts Withheld. All amounts withheld pursuant to the Code or
any provision of any state or local tax law with respect to any payment or
distribution to the Trust or the Holders shall be treated as amounts
distributed to such Holders pursuant to this Article IV for all purposes
under these procedures. The Trustees may allocate any such amount among
the Holders in any manner that is in accordance with applicable law.
ARTICLE V
Allocations
-----------
5.1. Allocation of Items to Book Capital Accounts.
(a) Increase in Net Unrealized Gains or Decrease in Net Unrealized
Losses. Any decrease in Net Unrealized Loss due to realization of items
shall be allocated to the Holder receiving the allocation of Loss, in the
same amount, under Section 5.1(c) hereof. Subject to Section 5.1(d)
hereof, any increase in Net Unrealized Gains or decrease in Net Unrealized
Loss on any day during the Fiscal Year shall be allocated to the Holders'
Book Capital Accounts at the end of such day, in proportion to the
Holders' respective Book Capital Account balances at the commencement of
such day.
(b) Decrease in Net Unrealized Gains or Increase in Net Unrealized
Losses. Any decrease in Net Unrealized Gains due to realization of items
shall be allocated to the Holder receiving the allocation of Profit, in
the same amount, under Section 5.1(c) hereof. Subject to Section 5.1(d)
hereof, any decrease in Net Unrealized Gains or increase in Net Unrealized
Loss on any day during the Fiscal Year shall be allocated to the Holders'
Book Capital Accounts at the end of such day, in proportion to the
Holders' respective Book Capital Account balances at the commencement of
such day.
(c) Profit and Loss. Subject to Section 5.1(d) hereof, Profit and
Loss occurring on any day during the Fiscal Year shall be allocated to the
Holders' Book Capital Accounts at the end of such day in proportion to the
Holders' respective Book Capital Account balances at the commencement of
such day.
(d) Other Book Capital Account Adjustments.
(i) Any allocation pursuant to Section 5.1(a), (b) or (c)
above shall be prorated for increases in each Holder's Book
Capital Account resulting from Capital Contributions, or
distributions or withdrawals from the Trust or Redemptions by
-6-
the Trust occurring, during such Fiscal Year as of the day after
the Capital Contribution, distribution, withdrawal or Redemption
is accepted, made or effected by the Trust.
(ii) For purposes of determining the Profit, Loss, and Net
Unrealized Gain or Net Unrealized Loss or any other item
allocable to any Fiscal Year, Profit, Loss, and Net Unrealized
Gain or Net Unrealized Loss and any such other item shall be
determined by or on behalf of the Trustees using any reasonable
method under Code Section 706 and the Treasury Regulations
thereunder.
5.2. Allocation of Taxable Income and Tax Loss to Tax Capital
Accounts.
(a) Taxable Income and Tax Loss. Subject to Section 5.2(b) and
Section 5.3 hereof, which shall take precedence over this Section 5.2(a),
Taxable Income or Tax Loss for any Fiscal Year shall be allocated at least
annually to the Holders' Tax Capital Accounts as follows:
(i) First, Taxable Income and Tax Loss, whether
constituting ordinary income (or loss) or capital gain (or
loss), derived from the sale or other disposition of a Tax Lot
of securities or other property shall be allocated as of the
date such income, gain or loss is recognized for federal income
tax purposes solely in proportion to the amount of unrealized
appreciation (in the case of such income or capital gain, but
not in the case of any such loss) or depreciation (in the case
of any such loss, but not in the case of any such income or
capital gain) from that Tax Lot which was allocated to the
Holders' Book Capital Accounts each day that such securities or
other property was held by the Trust pursuant to Section 5.1(a)
and (b) hereof; and
(ii) Second, any remaining amounts at the end of the Fiscal
Year, to the Holders in proportion to their respective daily
average Book Capital Account balances determined for the Fiscal
Year of the allocation.
(b) Matched Income or Loss. Notwithstanding the provisions of
Section 5.2(a) hereof, Taxable Income, Tax-Exempt Income or Tax Loss
accruing on any day during the Fiscal Year constituting Matched Income or
Loss, shall be allocated daily to the Holders' Tax Capital Accounts solely
in proportion to and to the extent of corresponding allocations of Profit
or Loss to the Holders' Book Capital Accounts pursuant to the first
sentence of Section 5.1(c) hereof.
-7-
5.3. Special Allocations to Book and Tax Capital Accounts.
(a) The Designated Expenses computed for each Holder shall be
allocated separately (not included in the allocations of Matched Income or
Loss, Loss or Tax Loss) to the Book Capital Account and Tax Capital
Account of each Holder.
(b) If the Trust incurs any nonrecourse indebtedness, then
allocations of items attributable to nonrecourse indebtedness shall be
made to the Tax Capital Account of each Holder in accordance with the
requirements of Treasury Regulations Section 1.704-1(b)(4)(iv)(d).
(c) In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, Taxable Income and Tax Loss with respect to any
property contributed to the capital of the Trust shall be allocated to the
Tax Capital Account of each Holder so as to take into account any
variation between the adjusted tax basis of such property to the Trust for
federal income tax purposes and such property's Fair Market Value at the
time of contribution to the Trust.
5.4. Other Adjustments to Book and Tax Capital Accounts.
(a) Any election or other decision relating to such allocations
shall be made by the Trustees in any manner that reasonably reflects the
purpose and intention of these procedures.
(b) Each Holder will report its share of Trust income and loss for
federal income tax purposes in accordance with the allocations effected
pursuant to Section 5.2 hereof.
5.5. Timing of Tax Allocations to Book and Tax Capital Accounts.
Allocation of Taxable Income, Tax-Exempt Income and Tax Loss pursuant to
Section 5.2 hereof for any Fiscal Year, unless specified above to the
contrary, shall be made only after corresponding adjustments have been
made to the Book Capital Accounts of the Holders for the Fiscal Year as
provided pursuant to Section 5.1 hereof.
5.6. Redemptions During the Fiscal Year. If a Redemption occurs
prior to the end of a Fiscal Year, the Trust will treat the Fiscal Year as
ended for the purposes of computing the redeeming Holder's distributive
share of Trust items and allocations of all items to such Holder will be
made as though each Holder were receiving its allocable share of Trust
items at such time. All items so allocated to the redeeming Holder will
be subtracted from the items to be allocated among the other non-redeeming
Holders at the actual end of the Fiscal Year. All items allocated among
the redeeming and non-redeeming Holders will be made subject to the rules
of Code Sections 702, 704, 706 and 708 and the Treasury Regulations
promulgated thereunder.
-8-
ARTICLE VI
Withdrawals
-----------
6.1. Partial Withdrawals. At any time any Holder shall be entitled
to request a withdrawal of such portion of the Interest held by such
Holder as such Holder shall request.
6.2. Redemptions. At any time a Holder shall be entitled to request
a Redemption of all of its Interest. A Holder's Interest may be redeemed
at any time during the Fiscal Year as provided in Section 6.3 hereof by a
cash distribution or, at the option of a Holder, by a distribution of a
proportionate amount except for fractional shares of each Trust asset at
the option of the Trust. However, the Holder may be redeemed by a
distribution of a proportionate amount of the Trust's assets only at the
end of a Fiscal Year. However, if the Holder has contributed any property
to the Trust other than cash, if such property remains in the Trust at the
time the Holder requests withdrawal, then such property will be sold by
the Trust prior to the time at which the Holder withdraws from the Trust.
6.3. Distribution in Kind. If a withdrawing Holder receives a
distribution in kind of its proportionate part of Trust property, then
unrealized income, gain, loss or deduction attributable to such property
shall be allocated among the Holders as if there had been a disposition of
the property on the date of distribution in compliance with the
requirements of Treasury Regulations Section 1.704-1(b)(2)(iv)(e).
ARTICLE VII
Liquidation
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7.1. Liquidation Procedure. Subject to Section 7.4 hereof, upon
dissolution of the Trust, the Trustees shall liquidate the assets of the
Trust, apply and distribute the proceeds thereof as follows:
(a) first to the payment of all debts and obligations of the Trust
to third parties, including without limitation the retirement of
outstanding debt, including any debt owed to Holders or their affiliates,
and the expenses of liquidation, and to the setting up of any Reserves for
contingencies which may be necessary; and
(b) then in accordance with the Holders' positive Book Capital
Account balances after adjusting Book Capital Accounts for allocations
provided in Article V hereof and in accordance with the requirements
described in Treasury Regulations Section 1.704-1(b)(2) (ii)(b)(2).
7.2. Alternative Liquidation Procedure. Notwithstanding the
foregoing, if the Trustees shall determine that an immediate sale of part
or all of the Trust assets would cause undue loss to the Holders, the
Trustees, in order to avoid such loss, may, after having given
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notification to all the Holders, to the extent not then prohibited by the
law of any jurisdiction in which the Trust is then formed or qualified and
applicable in the circumstances, either defer liquidation of and withhold
from distribution for a reasonable time any assets of the Trust except
those necessary to satisfy the Trust's debts and obligations or distribute
the Trust's assets to the Holders in liquidation.
7.3. Cash Distributions Upon Liquidation. Except as provided in
Section 7.2 hereof, amounts distributed in liquidation of the Trust shall
be paid solely in cash.
7.4. Treatment of Negative Book Capital Account Balance. If a Holder
has a negative balance in its Book Capital Account following the
liquidation of its Interest, as determined after taking into account all
capital account adjustments for the Fiscal Year during which the
liquidation occurs, then such Holder shall restore the amount of such
negative balance to the Trust by the later of the end of the Fiscal Year
or 90 days after the date of such liquidation so as to comply with the
requirements of Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(3).
Such amount shall, upon liquidation, be paid to creditors of the Trust or
distributed to other Holders in accordance with their positive Book
Capital Account balances.
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