EXHIBIT 7
CUSTODY AGREEMENT
Agreement made as of this ____ day of ____, 2000, between MASTER BASIC
VALUE TRUST, a Delaware business trust organized and existing under the laws of
the State of Delaware, having its principal office and place of business at ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇ (hereinafter called the "Trust"),
and THE BANK OF NEW YORK, a New York corporation authorized to do a banking
business, having its principal office and place of business at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth,
the Trust and the Custodian agree as follows:
Article I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1. "Authorized Persons" shall be deemed to include any person, whether or
not such person is an officer or employee of the Trust, duly authorized by the
Board of Trustees of the Trust to execute any Certificate, instruction, notice
or other instrument on behalf of the Trust and listed in the Certificate annexed
hereto as Appendix A or such other Certificate as may be received by the
Custodian from time to time.
2. "BookEntry System" shall mean the Federal Reserve/Treasury bookentry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
3. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.
4. "Certificate" shall mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement to be given to the Custodian
which is actually received by the Custodian and signed on behalf of the Trust by
any two Authorized Persons, and the term Certificate shall also include
Instructions.
5. "Clearing Member" shall mean a registered brokerdealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
brokerdealer reasonably believed by the Custodian to be such a clearing member.
6. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII herein.
7. "Composite Currency Unit" shall mean the European Currency Unit or any
other composite unit consisting of the aggregate of specified amounts of
specified Currencies as such unit may be constituted from time to time.
8. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.
9. "Currency" shall mean money denominated in a lawful currency of any
country or the European Currency Unit.
10. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository"
shall further mean and include any other person authorized to act as a
depository under the Investment Company Act of 1940, its successor or successors
and its nominee or nominees, specifically identified in a certified copy of a
resolution of the Trust's Board of Trustees specifically approving deposits
therein by the Custodian.
11. "Financial Futures Contract" shall mean the firm commitment to buy or
sell fixed income securities including, without limitation, U.S. Treasury Bills,
U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of deposit,
and Eurodollar certificates of deposit, during a specified month at an agreed
upon price.
12. "Futures Contract" shall mean a Financial Futures Contract and/or Stock
Index Futures Contracts.
13. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
14. "FX Transaction" shall mean any transaction for the purchase by one
party of an agreed amount in one Currency against the sale by it to the other
party of an agreed amount in another Currency.
15. "Instructions" shall mean instructions communications transmitted by
electronic or telecommunications media including S.W.I.F.T., computer-to-
computer interface, dedicated transmission line, facsimile transmission signed
by an Authorized Person and tested telex.
16. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Trust for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Trust, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Trust shall be deposited and withdrawn from time to time in connection with
such transactions as the Trust may from time to time determine. Securities held
in the BookEntry System or the Depository shall be deemed to have been deposited
in, or withdrawn from, a Margin Account upon the Custodian's effecting an
appropriate entry in its books and records.
2
17. "Money Market Security" shall be deemed to include, without limitation,
certain Reverse Repurchase Agreements, debt obligations issued or guaranteed as
to interest and principal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to the same and bank time deposits, where the purchase and sale of such
securities normally requires settlement in federal Trusts on the same day as
such purchase or sale.
18. "O.C.C." shall mean the Options Clearing Corporation, a clearing agency
registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
19. "Option" shall mean a Call Option, Covered Call Option, Stock Index
Option and/or a Put Option.
20. "Oral Instructions" shall mean verbal instructions actually received by
the Custodian from an Authorized Person or from a person reasonably believed by
the Custodian to be an Authorized Person.
21. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.
22. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Trust sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
23. "Security" shall be deemed to include, without limitation, Money Market
Securities, Call Options, Put Options, Stock Index Options, Stock Index Futures
Contracts, Stock Index Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Reverse Repurchase Agreements, common stocks
and other securities having characteristics similar to common stocks, preferred
stocks, debt obligations issued by state or municipal governments and by public
authorities, (including, without limitation, general obligation bonds, revenue
bonds, industrial bonds and industrial development bonds), bonds, debentures,
notes, mortgages or other obligations, and any certificates, receipts, warrants
or other instruments representing rights to receive, purchase, sell or subscribe
for the same, or evidencing or representing any other rights or interest
therein, or any property or assets, and agreements representing corporate loans
and interests therein as defined form time to time in the Trust's prospectus or
statement of additional information.
24. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Trust specifically allocated
to such Series shall be deposited and withdrawn from time to time in
3
accordance with Certificates received by the Custodian in connection with such
transactions as the Trust may from time to time determine.
25. "Series" shall mean the various portfolios, if any, of the Trust listed
on Appendix B hereto as amended from time to time.
26. "Shares" shall mean the shares of beneficial interest of the Trust,
each of which is, in the case of a Trust having Series, allocated to a
particular Series.
27. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.
28. "Stock Index Option" shall mean an exchange traded option entitling the
holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
Article II.
APPOINTMENT OF CUSTODIAN
1. The Trust hereby constitutes and appoints the Custodian as custodian of
the Securities and money at any time owned by the Trust during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth.
Article III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Trust will deliver or cause to be delivered to the Custodian
all Securities and all money owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate and apart. The
Custodian will not be responsible for any Securities and money not actually
received by it. The Custodian will be entitled to reverse any credits made on
the Trust's behalf where such credits have been previously made and money is not
finally collected. The Trust shall deliver to the Custodian a certified
resolution of the Board of Trustees of the Trust, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the Custodian on a
continuous and ongoing basis to deposit in the BookEntry System all Securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the BookEntry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in the Depository,
the Trust shall deliver to the Custodian a certified resolution of the Board of
Trustees of the Trust, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate actually received by the
Custodian to deposit in the
4
Depository all Securities specifically allocated to such Series eligible for
deposit therein, and to utilize the Depository to the extent possible with
respect to such Securities in connection with its performance hereunder,
including, without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns of
Securities collateral. Securities and money deposited in either the BookEntry
System or the Depository will be represented in accounts which include only
assets held by the Custodian for customers, including, but not limited to,
accounts in which the Custodian acts in a fiduciary or representative capacity
and will be specifically allocated on the Custodian's books to the separate
account for the applicable Series. Prior to the Custodian's accepting, utilizing
and acting with respect to Clearing Member confirmations for Options and
transactions in Options for a Series as provided in this Agreement, the
Custodian shall have received a certified resolution of the Trust's Board of
Trustees, substantially in the form of Exhibit C hereto, approving, authorizing
and instructing the Custodian on a continuous and ongoing basis, until
instructed to the contrary by a Certificate actually received by the Custodian,
to accept, utilize and act in accordance with such confirmations as provided in
this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all money received by it for the account of the Trust with respect to such
Series. Money credited to a separate account for a Series shall be disbursed by
the Custodian only:
(a) as hereinafter provided;
(b) pursuant to Certificates setting forth the name and address of the
person to whom the payment is to be made, the Series account from which payment
is to be made and the purpose for which payment is to be made; or
(c) in payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian shall
furnish the Trust with confirmations and a summary, on a per Series basis, of
all transfers to or from the account of the Trust for a Series, either hereunder
or with any cocustodian or subcustodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the account of
the Trust for a Series, the Custodian shall also by bookentry or otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the BookEntry System or the
Depository. At least monthly and from time to time, the Custodian shall furnish
the Trust with a detailed statement, on a per Series basis, of the Securities
and money held by the Custodian for the Trust.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
BookEntry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Trust, in the
name of any duly appointed registered nominee of the Custodian as the Custodian
may from time to time determine, or in the name of the BookEntry System or the
Depository or their successor
5
or successors, or their nominee or nominees. The Trust agrees to furnish to the
Custodian appropriate instruments to enable the Custodian to hold or deliver in
proper form for transfer, or to register in the name of its registered nominee
or in the name of the BookEntry System or the Depository any Securities which it
may hold hereunder and which may from time to time be registered in the name of
the Trust. The Custodian shall hold all such Securities specifically allocated
to a Series which are not held in the BookEntry System or in the Depository in a
separate account in the name of such Series physically segregated at all times
from those of any other person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the BookEntry System or the Depository with respect to Securities
held hereunder and therein deposited, shall with respect to all Securities held
for the Trust hereunder in accordance with preceding paragraph 4:
(a) collect all income, dividends and distributions due or payable;
(b) give notice to the Trust and present payment and collect the amount
payable upon such Securities which are called, but only if either (i) the
Custodian receives a written notice of such call, or (ii) notice of such call
appears in one or more of the publications listed in Appendix C annexed hereto,
which may be amended at any time by the Custodian without the prior notification
or consent of the Trust;
(c) present for payment and collect the amount payable upon all Securities
which mature;
(d) surrender Securities in temporary form for definitive Securities;
(e) execute, as custodian, any necessary declarations or certificates of
ownership under the Federal Income Tax Laws or the laws or regulations of any
other taxing authority now or hereafter in effect;
(f) hold directly, or through the BookEntry System or the Depository with
respect to Securities therein deposited, for the account of a Series, all rights
and similar securities issued with respect to any Securities held by the
Custodian for such Series hereunder; and
(g) deliver to the Trust all notices, proxies, proxy soliciting materials,
consents and other written information (including, without limitation, notices
of tender offers and exchange offers, pendency of calls, maturities of
Securities and expiration of rights) relating to Securities held pursuant to
this Agreement which are actually received by the Custodian, such proxies and
other similar materials to be executed by the registered owner (if Securities
are registered otherwise than in the name of the Trust), but without indicating
the manner in which proxies or consents are to be voted.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the BookEntry System or the Depository, shall:
(a) execute and deliver to such persons as may be designated in such
Certificate proxies, consents, authorizations, and any other instruments whereby
the authority of the Trust as owner
6
of any Securities held by the Custodian hereunder for the Series specified in
such Certificate may be exercised;
(b) deliver any Securities held by the Custodian hereunder for the Series
specified in such Certificate in exchange for other Securities or cash issued or
paid in connection with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the exercise of any
conversion privilege and receive and hold hereunder specifically allocated to
such Series any cash or other Securities received in exchange;
(c) deliver any Securities held by the Custodian hereunder for the Series
specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series such
certificates of deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of the Series specified
in such Certificate, and take such other steps as shall be stated in such
Certificate to be for the purpose of effectuating any duly authorized plan of
liquidation, reorganization, merger, consolidation or recapitalization of the
Trust; and
(e) present for payment and collect the amount payable upon Securities not
described in preceding paragraph 5(b) of this Article which may be called as
specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Trust stating, that any such instruments or certificates
are available. The Trust shall deliver to the Custodian such a Certificate no
later than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply with Section
17(f) of the Investment Company Act of 1940, as amended, in connection with the
purchase, sale, settlement, closing-out or writing of Futures Contracts,
Options, or Futures Contract Options by making payments or deliveries specified
in Certificates received by the Custodian in connection with any such purchase,
sale, writing, settlement or closing-out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by brokers,
dealers, or futures commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures commission merchant, in
bookentry form or otherwise, in the name of the Custodian (or any nominee of the
Custodian) as custodian for the Trust, provided, however, that notwithstanding
the foregoing, payments to or deliveries from the Margin Account, and payments
with respect to Securities to which a Margin Account relates, shall be made in
accordance with the terms and conditions of the Margin Account Agreement.
Whenever any such instruments or certificates are available, the Custodian
shall, notwithstanding any provision in this Agreement to the contrary, make
payment for any Futures Contract, Option, or Futures Contract Option for which
such instruments or such certificates are available only against the delivery to
the Custodian of such instrument or such certificate, and deliver any
7
Futures Contract, Option or Futures Contract Option for which such instruments
or such certificates are available only against receipt by the Custodian of
payment therefor. Any such instrument or certificate delivered to the Custodian
shall be held by the Custodian hereunder in accordance with, and subject to, the
provisions of this Agreement.
Article IV.
PURCHASE AND SALE OF INVESTMENTS OF THE TRUST OTHER THAN OPTIONS, FUTURES
CONTRACTS AND FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Trust, other than a
purchase of an Option, a Futures Contract, or a Futures Contract Option, the
Trust shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to each such purchase: (a) the Series to
which such Securities are to be specifically allocated; (b) the name of the
issuer and the title of the Securities; (c) the number of shares or the
principal amount purchased and accrued interest, if any; (d) the date of
purchase and settlement; (e) the purchase price per unit; (f) the total amount
payable upon such purchase; (g) the name of the person from whom or the broker
through whom the purchase was made, and the name of the clearing broker, if any;
and (h) the name of the broker to whom payment is to be made. The Custodian
shall, upon receipt of Securities purchased by or for the Trust, pay to the
broker specified in the Certificate out of the money held for the account of
such Series the total amount payable upon such purchase, provided that the same
conforms to the total amount payable as set forth in such Certificate or Oral
Instructions.
2. Promptly after each sale of Securities by the Trust, other than a sale
of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Trust shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a Certificate or
Oral Instructions, specifying with respect to each such sale: (a) the Series to
which such Securities were specifically allocated; (b) the name of the issuer
and the title of the Security; (c) the number of shares or principal amount
sold, and accrued interest, if any; (d) the date of sale; (e) the sale price per
unit; (f) the total amount payable to the Trust upon such sale; (g) the name of
the broker through whom or the person to whom the sale was made, and the name of
the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the Securities
specifically allocated to such Series to the broker specified in the Certificate
against payment of the total amount payable to the Trust upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
Article V.
OPTIONS
1. Promptly after the purchase of any Option by the Trust, the Trust shall
deliver to the Custodian a Certificate specifying with respect to each Option
purchased: (a) the Series to which such Option is specifically allocated; (b)
the type of Option (put or call); (c) the name of the issuer and the title and
number of shares subject to such Option or, in the case of a Stock Index Option,
the stock index to which such Option relates and the number of Stock Index
Options purchased; (d) the expiration date; (e) the exercise price; (f) the
dates of purchase and settlement;
8
(g) the total amount payable by the Trust in connection with such purchase; (h)
the name of the Clearing Member through whom such Option was purchased; and (i)
the name of the broker to whom payment is to be made. The Custodian shall pay,
upon receipt of a Clearing Member's statement confirming the purchase of such
Option held by such Clearing Member for the account of the Custodian (or any
duly appointed and registered nominee of the Custodian) as custodian for the
Trust, out of money held for the account of the Series to which such Option is
to be specifically allocated, the total amount payable upon such purchase to the
Clearing Member through whom the purchase was made, provided that the same
conforms to the total amount payable as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Trust pursuant to
paragraph 1 hereof, the Trust shall deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the Series to which such Option
was specifically allocated; (b) the type of Option (put or call); (c) the name
of the issuer and the title and number of shares subject to such Option or, in
the case of a Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options sold; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Trust
upon such sale; and (h) the name of the Clearing Member through whom the sale
was made. The Custodian shall consent to the delivery of the Option sold by the
Clearing Member which previously supplied the confirmation described in
preceding paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the Trust, provided that
the same conforms to the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Trust of any Call Option purchased by
the Trust pursuant to paragraph 1 hereof, the Trust shall deliver to the
Custodian a Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Trust upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the money held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Trust of any Put Option purchased by
the Trust pursuant to paragraph 1 hereof, the Trust shall deliver to the
Custodian a Certificate specifying with respect to such Put Option: (a) the
Series to which such Put Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Put Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid to the Trust upon such exercise; and
(g) the name of the Clearing Member through whom such Put Option was exercised.
The Custodian shall, upon receipt of the amount payable upon the exercise of the
Put Option, deliver or direct the Depository to deliver the Securities
specifically allocated to such Series, provided the same conforms to the amount
payable to the Trust as set forth in such Certificate.
9
5. Promptly after the exercise by the Trust of any Stock Index Option
purchased by the Trust pursuant to paragraph 1 hereof, the Trust shall deliver
to the Custodian a Certificate specifying with respect to such Stock Index
Option: (a) the Series to which such Stock Index Option was specifically
allocated; (b) the type of Stock Index Option (put or call); (c) the number of
Options being exercised; (d) the stock index to which such Option relates; (e)
the expiration date; (f) the exercise price; (g) the total amount to be received
by the Trust in connection with such exercise; and (h) the Clearing Member from
whom such payment is to be received.
6. Whenever the Trust writes a Covered Call Option, the Trust shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Covered Call Option: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Trust; (f) the date such Covered Call Option was written; and (g) the name of
the Clearing Member through whom the premium is to be received. The Custodian
shall deliver or cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or direct the
Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Trust, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian and not
deposited with the Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Trust and described in the
preceding paragraph of this Article is exercised, the Trust shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable to the Trust
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct the Depository to deliver, the underlying Securities as specified in
the Certificate against payment of the amount to be received as set forth in
such Certificate.
8. Whenever the Trust writes a Put Option, the Trust shall promptly deliver
to the Custodian a Certificate specifying with respect to such Put Option: (a)
the Series for which such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Trust; (f) the date such Put Option is written;
(g) the name of the Clearing Member through whom the premium is to be received
and to whom a Put Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in the Senior Security Account for such Series;
and (i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for such
Series. The Custodian shall, after making the deposits into the Collateral
Account specified in the Certificate, issue a Put Option guarantee letter
substantially in the form utilized by the Custodian
10
on the date hereof, and deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no obligation to
issue any Put Option guarantee letter or similar document if it is unable to
make any of the representations contained therein.
9. Whenever a Put Option written by the Trust and described in the
preceding paragraph is exercised, the Trust shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Trust upon such delivery;
(e) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the money held for the account
of the Series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set forth
in such Certificate against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Trust writes a Stock Index Option, the Trust shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Stock Index Option: (a) the Series for which such Stock Index Option was
written; (b) whether such Stock Index Option is a put or a call; (c) the number
of options written; (d) the stock index to which such Option relates; (e) the
expiration date; (f) the exercise price; (g) the Clearing Member through whom
such Option was written; (h) the premium to be received by the Trust; (i) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Senior Security Account for such
Series; (j) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Collateral Account
for such Series; and (k) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in a
Margin Account, and the name in which such account is to be or has been
established. The Custodian shall, upon receipt of the premium specified in the
Certificate, make the deposits, if any, into the Senior Security Account
specified in the Certificate, and either (1) deliver such receipts, if any,
which the Custodian has specifically agreed to issue, which are in accordance
with the customs prevailing among Clearing Members in Stock Index Options and
make the deposits into the Collateral Account specified in the Certificate, or
(2) make the deposits into the Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Trust and described in
the preceding paragraph of this Article is exercised, the Trust shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
such information as may be necessary to identify the Stock Index Option being
exercised; (c) the Clearing Member through whom such Stock Index Option is being
exercised; (d) the total amount payable upon such exercise, and whether such
amount is to be paid by or to the Trust; (e) the amount of cash and/or amount
and kind of Securities, if any, to be withdrawn from the Margin Account; and (f)
the amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series; and the
11
amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series; and the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the money held for the account of the Series to which
such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Trust purchases any Option identical to a previously
written Option described in paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Trust shall promptly
deliver to the Custodian a Certificate specifying with respect to the Option
being purchased: (a) that the transaction is a Closing Purchase Transaction; (b)
the Series for which the Option was written; (c) the name of the issuer and the
title and number of shares subject to the Option, or, in the case of a Stock
Index Option, the stock index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by the Trust;
(f) the expiration date; (g) the type of Option (put or call); (h) the date of
such purchase; (i) the name of the Clearing Member to whom the premium is to be
paid; and (j) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified Margin Account, or
the Senior Security Account for such Series. Upon the Custodian's payment of the
premium and the return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Option being
liquidated through the Closing Purchase Transaction, the Custodian shall remove,
or direct the Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Trust and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Trust pursuant to paragraph 3 of Article III herein,
and upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
Article VI.
FUTURES CONTRACTS
1. Whenever the Trust shall enter into a Futures Contract, the Trust
shall deliver to the Custodian a Certificate specifying with respect to such
Futures Contract, (or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is being entered;
(b) the category of Futures Contract (the name of the underlying stock index or
financial instrument); (c) the number of identical Futures Contracts entered
into; (d) the delivery or settlement date of the Futures Contract(s); (e) the
date the Futures Contract(s) was (were) entered into and the maturity date; (f)
whether the Trust is buying (going long) or selling (going short) on such
Futures Contract(s); (g) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series; (h) the name of the broker, dealer, or futures commission merchant
through whom the Futures Contract was entered into; and (i) the amount of fee or
commission, if any, to be paid and the name of the broker, dealer, or futures
commission merchant to whom such amount is to be paid. The Custodian shall make
the
12
deposits, if any, to the Margin Account in accordance with the terms and
conditions of the Margin Account Agreement. The Custodian shall make payment out
of the money specifically allocated to such Series of the fee or commission, if
any, specified in the Certificate and deposit in the Senior Security Account for
such Series the amount of cash and/or the amount and kind of Securities
specified in said Certificate.
2. Any variation margin payment or similar payment required to be made by
the Trust to a broker, dealer, or futures commission merchant with respect to an
outstanding Futures Contract, shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
3. Any variation margin payment or similar payment from a broker, dealer,
or futures commission merchant to the Trust with respect to an outstanding
Futures Contract, shall be received and dealt with by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
4. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Trust until delivery or settlement is made on such Futures
Contract, the Trust shall deliver to the Custodian a Certificate specifying: (a)
the Futures Contract and the Series to which the same relates; (b) with respect
to a Stock Index Futures Contract, the total cash settlement amount to be paid
or received, and with respect to a Financial Futures Contract, the Securities
and/or amount of cash to be delivered or received; (c) the broker, dealer, or
futures commission merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be withdrawn from the
Senior Security Account for such Series. The Custodian shall make the payment or
delivery specified in the Certificate, and delete such Futures Contract from the
statements delivered to the Trust pursuant to paragraph 3 of Article III herein.
5. Whenever the Trust shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Trust shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Trust pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
6. Notwithstanding any other provision in this Agreement to the contrary,
the Custodian shall deliver cash and Securities to a futures commission merchant
upon receipt of a Certificate from the Trust specifying: (a) the name of the
futures commission merchant; (b) the specific cash and Securities to be
delivered; (c) the date of such delivery; and (d) the date of the agreement
between the Trust and such futures commission merchant entered pursuant to Rule
17f-6 under the Investment Company ▇▇▇ ▇▇▇▇, as amended. Each delivery of such a
Certificate by the Trust shall constitute (x) a representation and warranty by
the Trust that the Rule 17f-6 agreement has been duly authorized, executed and
delivered by the Trust and the futures commission merchant
13
and complies with Rule 17f-6, and (y) an agreement by the Trust that the
Custodian shall not be liable for the acts or omissions of any such futures
commission merchant.
Article VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the
Trust, the Trust shall promptly deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series to which
such Option is specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other information as
may be necessary to identify the Futures Contract underlying the Futures
Contract Option purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the amount of premium to be paid by
the Trust upon such purchase; (h) the name of the broker or futures commission
merchant through whom such option was purchased; and (i) the name of the broker,
or futures commission merchant, to whom payment is to be made. The Custodian
shall pay out of the money specifically allocated to such Series, the total
amount to be paid upon such purchase to the broker or futures commissions
merchant through whom the purchase was made, provided that the same conforms to
the amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by
the Trust pursuant to paragraph 1 hereof, the Trust shall promptly deliver to
the Custodian a Certificate specifying with respect to each such sale: (a)
Series to which such Futures Contract Option was specifically allocated; (b) the
type of Futures Contract Option (put or call); (c) the type of Futures Contract
and such other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Trust
upon such sale; and (h) the name of the broker or futures commission merchant
through whom the sale was made. The Custodian shall consent to the cancellation
of the Futures Contract Option being closed against payment to the Custodian of
the total amount payable to the Trust, provided the same conforms to the total
amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Trust pursuant to
paragraph 1 of this article is exercised by the Trust, the Trust shall promptly
deliver to the Custodian a Certificate specifying: (a) the Series to which such
Futures Contract Option was specifically allocated; (b) the particular Futures
Contract Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Trust; (g)
the amount, if any, to be received by the Trust; and the amount of cash and/or
the amount and kind of Securities to be deposited in the Senior Security Account
for such Series. The Custodian shall make, out of the money and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits, if any, to be made to the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
4. Whenever the Trust writes a Futures Contract Option, the Trust shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract
14
Option (put or call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract underlying the
Futures Contract Option; (d) the expiration date; (e) the exercise price; (f)
the premium to be received by the Trust; (g) the name of the broker or futures
commission merchant through whom the premium is to be received; and (h) the
amount of cash and/or the amount and kind of Securities, if any, to be deposited
in the Senior Security Account for such Series. The Custodian shall, upon
receipt of the premium specified in the Certificate, make out of the money and
Securities specifically allocated to such Series the deposits into the Senior
Security Account, if any, as specified in the Certificate. The deposits, if any,
to be made to the Margin Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Trust which is a
call is exercised, the Trust shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Trust upon such exercise; (f) the net total amount, if any, payable by the Trust
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Trust,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which is written by the Trust and
which is a put is exercised, the Trust shall promptly deliver to the Custodian
a Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Trust upon such
exercise; (f) the net total amount, if any, payable by the Trust upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Trust,
if any, specified in the Certificate, make out of the money and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7. Whenever the Trust purchases any Futures Contract Option identical to
a previously written Futures Contract Option described in this Article in order
to liquidate its position as a writer of such Futures Contract Option, the Trust
shall promptly deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) the Series to which such Option
is specifically allocated; (b) that the transaction is a closing transaction;
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Option Contract; (d) the
exercise price; (e) the premium
15
to be paid by the Trust; (f) the expiration date; (g) the name of the broker or
futures commission merchant to whom the premium is to be paid; and (h) the
amount of cash and/or the amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series. The Custodian shall effect the
withdrawals from the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased by
the Trust and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Trust pursuant to
paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Trust through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.
10. Notwithstanding any other provision in this Agreement to the contrary,
the Custodian shall deliver cash and Securities to a futures commission merchant
upon receipt of a Certificate from the Trust specifying: (a) the name of the
futures commission merchant; (b) the specific cash and Securities to be
delivered; (c) the date of such delivery; and (d) the date of the agreement
between the Trust and such futures commission merchant entered pursuant to Rule
17f-6 under the Investment Company ▇▇▇ ▇▇▇▇, as amended. Each delivery of such
a Certificate by the Trust shall constitute (x) a representation and warranty by
the Trust that the Rule 17f-6 agreement has been duly authorized, executed and
delivered by the Trust and the futures commission merchant and complies with
Rule 17f-6, and (y) an agreement by the Trust that the Custodian shall not be
liable for the acts or omissions of any such futures commission merchant.
Article VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the Trust, the Trust
shall promptly deliver to the Custodian a Certificate specifying: (a) the Series
for which such short sale was made; (b) the name of the issuer and the title of
the Security; (c) the number of shares or principal amount sold, and accrued
interest or dividends, if any; (d) the dates of the sale and settlement; (e) the
sale price per unit; (f) the total amount credited to the Trust upon such sale,
if any, (g) the amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in which such Margin
Account has been or is to be established; (h) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in a Senior Security
Account, and (i) the name of the broker through whom such short sale was made.
The Custodian shall upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Trust upon such sale, if
any, as specified in the Certificate is held by such broker for the account of
the Custodian (or any nominee of the Custodian) as custodian of the Trust, issue
a receipt or make the deposits into the Margin Account and the Senior Security
Account specified in the Certificate.
16
2. In connection with the closingout of any short sale, the Trust shall
promptly deliver to the Custodian a Certificate specifying with respect to each
such closing-out: (a) the Series for which such transaction is being made; (b)
the name of the issuer and the title of the Security; (c) the number of shares
or the principal amount, and accrued interest or dividends, if any, required to
effect such closingout to be delivered to the broker; (d) the dates of
closingout and settlement; (e) the purchase price per unit; (f) the net total
amount payable to the Trust upon such closingout; (g) the net total amount
payable to the broker upon such closingout; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the Margin Account;
(i) the amount of cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name of the broker
through whom the Trust is effecting such closingout. The Custodian shall, upon
receipt of the net total amount payable to the Trust upon such closingout, and
the return and/or cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closedout, pay out of the money held for
the account of the Trust to the broker the net total amount payable to the
broker, and make the withdrawals from the Margin Account and the Senior Security
Account, as the same are specified in the Certificate.
Article IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Trust enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Trust shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate or Oral Instructions
specifying: (a) the Series for which the Reverse Repurchase Agreement is
entered; (b) the total amount payable to the Trust in connection with such
Reverse Repurchase Agreement and specifically allocated to such Series; (c) the
broker or dealer through or with whom the Reverse Repurchase Agreement is
entered; (d) the amount and kind of Securities to be delivered by the Trust to
such broker or dealer; (e) the date of such Reverse Repurchase Agreement; and
(f) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a Senior Security
Account for such Series in connection with such Reverse Repurchase Agreement.
The Custodian shall, upon receipt of the total amount payable to the Trust
specified in the Certificate or Oral Instructions make the delivery to the
broker or dealer, and the deposits, if any, to the Senior Security Account,
specified in such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Trust shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions to the Custodian specifying: (a)
the Reverse Repurchase Agreement being terminated and the Series for which same
was entered; (b) the total amount payable by the Trust in connection with such
termination; (c) the amount and kind of Securities to be received by the Trust
and specifically allocated to such Series in connection with such termination;
(d) the date of termination; (e) the name of the broker or dealer with or
through whom the Reverse Repurchase Agreement is to be terminated; and (f) the
amount of cash and/or the amount and kind of Securities to be withdrawn from the
Senior Securities Account for such Series. The Custodian shall, upon receipt of
the amount and kind of Securities to be received by the Trust specified in the
Certificate or Oral Instructions, make the payment to the broker or dealer, and
the withdrawals, if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.
17
Article X.
LOAN OF PORTFOLIO SECURITIES OF THE TRUST
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Trust shall deliver
or cause to be delivered to the Custodian a Certificate specifying with respect
to each such loan: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the title of the
Securities, (c) the number of shares or the principal amount loaned, (d) the
date of loan and delivery, (e) the total amount to be delivered to the Custodian
against the loan of the Securities, including the amount of cash collateral and
the premium, if any, separately identified, and (f) the name of the broker,
dealer, or financial institution to which the loan was made. The Custodian shall
deliver the Securities thus designated to the broker, dealer or financial
institution to which the loan was made upon receipt of the total amount
designated as to be delivered against the loan of Securities. The Custodian may
accept payment in connection with a delivery otherwise than through the
BookEntry System or Depository only in the form of a certified or bank cashier's
check payable to the order of the Trust or the Custodian drawn on New York
Clearing House Trusts and may deliver Securities in accordance with the customs
prevailing among dealers in securities.
2. Promptly after each termination of the loan of Securities by the
Trust, the Trust shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the money held for the account of the Trust, the total amount
payable upon such return of Securities as set forth in the Certificate.
Article XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for which
such deposit or withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior Security Account for such Series.
In the event that the Trust fails to specify in a Certificate the Series, the
name of the issuer, the title and the number of shares or the principal amount
of any particular Securities to be deposited by the Custodian into, or withdrawn
from, a Senior Securities Account, the Custodian shall be under no obligation to
make any such deposit or withdrawal and shall so notify the Trust.
2. The Custodian shall make deliveries or payments from a Margin Account
to the broker, dealer, futures commission merchant or Clearing Member in whose
name, or for whose benefit, the account was established as specified in the
Margin Account Agreement.
18
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Trust within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Trust with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Trust with respect to such Margin Account.
6. Promptly after the close of business on each business day in which
cash and/or Securities are maintained in a Collateral Account for any Series,
the Custodian shall furnish the Trust with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding the
delivery to the Trust of such statement, the Trust shall furnish to the
Custodian a Certificate specifying the then market value of the Securities
described in such statement. In the event such then market value is indicated to
be less than the Custodian's obligation with respect to any outstanding Put
Option guarantee letter or similar document, the Trust shall promptly specify in
a Certificate the additional cash and/or Securities to be deposited in such
Collateral Account to eliminate such deficiency.
Article XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Trust shall furnish to the Custodian a copy of the resolution of
the Board of Trustees of the Trust, certified by the Secretary or any Assistant
Secretary, either (i) setting forth with respect to the Series specified therein
the date of the declaration of a dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the Dividend Agent and
any sub-dividend agent or codividend agent of the Trust on the payment date, or
(ii) authorizing with respect to the Series specified therein the declaration of
dividends and distributions on a daily basis and authorizing the Custodian to
rely on Oral Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall be determined,
the amount payable per Share of
19
such Series to the shareholders of record as of that date and the total amount
payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral Instructions
or Certificate, as the case may be, the Custodian shall pay out of the money
held for the account of each Series the total amount payable to the Dividend
Agent and any subdividend agent or codividend agent of the Trust with respect to
such Series.
Article XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Trust shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying: (a) the Series, the number of Shares
sold, trade date, and price; and (b) the amount of money to be received by the
Custodian for the sale of such Shares and specifically allocated to the separate
account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Custodian shall pay, out of the money held for
the account of such Series, all original issue or other taxes required to be
paid by the Trust in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Trust desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall furnish to the Custodian a
Certificate specifying: (a) the number and Series of Shares redeemed; and (b)
the amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent out of the moneys held in the separate account in
the name of the Series the total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Trust, the Custodian,
unless otherwise instructed by a Certificate, shall, upon receipt of an advice
from the Trust or its agent setting forth that the redemption is in good form
for redemption in accordance with the check redemption procedure, honor the
check presented as part of such check redemption privilege out of the money held
in the separate account of the Series of the Shares being redeemed.
Article XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance Trusts on
behalf of any Series which results in an overdraft because the money held by the
Custodian in the separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities specifically allocated to
such Series, as set forth in a Certificate or Oral Instructions, or which
20
results in an overdraft in the separate account of such Series for some other
reason, or if the Trust is for any other reason indebted to the Custodian with
respect to a Series, such overdraft or indebtedness shall be deemed to be a loan
made by the Custodian to the Trust for such Series payable on demand and shall
bear interest from the date incurred at a rate per annum (based on a 360 day
year for the actual number of days involved) equal to 1/2% over Custodian's
prime commercial lending rate in effect from time to time, such rate to be
adjusted on the effective date of any change in such prime commercial lending
rate but in no event to be less than 6% per annum. In addition, the Trust
hereby agrees that the Custodian shall have a continuing lien, security
interest, and security entitlement in and to any property including any
investment property or any financial asset specifically allocated to such Series
at any time held by it for the benefit of such Series or in which the Trust may
have an interest which is then in the Custodian's possession or control or in
possession or control of any third party acting in the Custodian's behalf. The
Trust authorizes the Custodian, in its sole discretion, at any time to charge
any such overdraft or indebtedness together with interest due thereon against
any balance of account standing to such Series' credit on the Custodian's books.
In addition, the Trust hereby covenants that on each Business Day on which
either it intends to enter a Reverse Repurchase Agreement and/or otherwise
borrow from a third party, or which next succeeds a Business Day on which at the
close of business the Trust had outstanding a Reverse Repurchase Agreement or
such a borrowing, it shall prior to 9 a.m., New York City time, advise the
Custodian, in writing, of each such borrowing, shall specify the Series to which
the same relates, and shall not incur any indebtedness not so specified other
than from the Custodian.
2. The Trust will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Trust against
delivery of a stated amount of collateral. The Trust shall promptly deliver to
the Custodian a Certificate specifying with respect to each such borrowing: (a)
the Series to which such borrowing relates; (b) the name of the bank, (c) the
amount and terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Trust, or other loan
agreement, (d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the total
amount payable to the Trust on the borrowing date, (g) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities, and (h) a statement specifying whether such loan is for
investment purposes or for temporary or emergency purposes and that such loan is
in conformance with the Investment Company Act of 1940 and the Trust's
prospectus. The Custodian shall deliver on the borrowing date specified in a
Certificate the specified collateral and the executed promissory note, if any,
against delivery by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as set forth in the
Certificate. The Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note or loan
agreement. The Custodian shall deliver such Securities as additional collateral
as may be specified in a Certificate to collateralize further any transaction
described in this paragraph. The Trust shall cause all Securities released from
collateral status to be returned directly to the Custodian, and the Custodian
shall receive from
21
time to time such return of collateral as may be tendered to it. In the event
that the Trust fails to specify in a Certificate the Series, the name of the
issuer, the title and number of shares or the principal amount of any particular
Securities to be delivered as collateral by the Custodian, the Custodian shall
not be under any obligation to deliver any Securities.
Article XV.
INSTRUCTIONS
1. With respect to any software provided by the Custodian to a Trust in
order for the Trust to transmit Instructions to the Custodian (the "Software"),
the Custodian grants to such Trust a personal, nontransferable and nonexclusive
license to use the Software solely for the purpose of transmitting Instructions
to, and receiving communications from, the Custodian in connection with its
account(s). The Trust shall use the Software solely for its own internal and
proper business purposes, and not in the operation of a service bureau, and
agrees not to sell, reproduce, lease or otherwise provide, directly or
indirectly, the Software or any portion thereof to any third party without the
prior written consent of the Custodian. The Trust acknowledges that the
Custodian and its suppliers have title and exclusive proprietary rights to the
Software, including any trade secrets or other ideas, concepts, know how,
methodologies, or information incorporated therein and the exclusive rights to
any copyrights, trademarks and patents (including registrations and applications
for registration of either) or statutory or legal protections available with
respect thereof. The Trust further acknowledges that all or a part of the
Software may be copyrighted or trademarked (or a registration or claim made
therefor) by the Custodian or its suppliers. The Trust shall not take any
action with respect to the Software inconsistent with the foregoing
acknowledgments, nor shall the Trust attempt to decompile, reverse engineer or
modify the Software. The Trust may not copy, sell, lease or provide, directly
or indirectly, any of the Software or any portion thereof to any other person or
entity without the Custodian's prior written consent. The Trust may not remove
any statutory copyright notice, or other notice including the software or on any
media containing the Software. The Trust shall reproduce any such notice on any
reproduction of the Software and shall add statutory copyright notice or other
notice to the Software or media upon the Bank's request. Custodian agrees to
provide reasonable training, instruction manuals and access to Custodian's "help
desk" in connection with the Trust's user support necessary to use of the
Software. At the Trust's request, Custodian agrees to permit reasonable testing
of the Software by the Trust.
2. The Trust shall obtain and maintain at its own cost and expense all
equipment and services, including but not limited to communications services,
necessary for it to utilize the Software and transmit Instructions to the
Custodian. The Custodian shall not be responsible for the reliability,
compatibility with the Software or availability of any such equipment or
services or the performance or nonperformance by any nonparty to this Custody
Agreement.
3. The Trust acknowledges that the Software, all data bases made
available to the Trust by utilizing the Software (other than data bases relating
solely to the assets of the Trust and transactions with respect thereto), and
any proprietary data, processes, information and documentation (other than which
are or become part of the public domain or are legally required to be made
available to the public) (collectively, the "Information"), are the exclusive
and confidential property of the Custodian. The Trust shall keep the Information
confidential by using the same care and discretion that the Trust uses with
respect to its own confidential property and trade secrets and shall neither
make nor permit any disclosure without the prior
22
written consent of the Custodian. Upon termination of this Agreement or the
Software license granted hereunder for any reason, the Trust shall return to the
Custodian all copies of the Information which are in its possession or under its
control or which the Trust distributed to third parties. The provisions of this
Article shall not affect the copyright status of any of the Information which
may be copyrighted and shall apply to all Information whether or not
copyrighted.
4. The Custodian reserves the right to modify, at its own expense, the
Software from time to time without prior notice and the Trust shall install new
releases of the Software as the Custodian may direct. The Trust agrees not to
modify or attempt to modify the Software without the Custodian's prior written
consent. The Trust acknowledges that any modifications to the Software, whether
by the Trust or the Custodian and whether with or without the Custodian's
consent, shall become the property of the Custodian.
5. The Custodian and its manufacturers and suppliers make no warranties
or representations of any kind with regard to the Software or the method(s) by
which the Trust may transmit Instructions to the Custodian, express or implied,
including but not limited to any implied warranties of merchantability or
fitness for a particular purpose.
6. Export Restrictions. Export of the software is prohibited by United
States law. The Trust agrees that it will not under any circumstances resell,
divert, transfer, transship or otherwise dispose of the software (in any form)
in or to any other country. If the custodian delivers the software to the Trust
outside the United States, the software was exported from the United States in
accordance with export administrative regulations. Diversion contrary to U.S.
laws prohibited. The Trust hereby authorizes Custodian to report its name and
address to government agencies to which Custodian is required to provide such
information by law.
7. Where the method for transmitting Instructions by the Trust involves
an automatic systems acknowledgment by the Custodian of its receipt of such
Instructions, then in the absence of such acknowledgment the Custodian shall not
be liable for any failure to act pursuant to such Instructions, the Trust may
not claim that such Instructions were received by the Custodian, and the Trust
shall deliver a Certificate by some other means.
8. (a) The Trust agrees that where it delivers to the Custodian
Instructions hereunder, it shall be the Trust's sole responsibility to ensure
that only persons duly authorized by the Trust transmit such Instructions to the
Custodian. The Trust will cause all persons transmitting Instructions to the
Custodian to treat applicable user and authorization codes, passwords and
authentication keys with extreme care, and irrevocably authorizes the Custodian
to act in accordance with and rely upon Instructions received by it pursuant
hereto.
(b) The Trust hereby represents, acknowledges and agrees that it is fully
informed of the protections and risks associated with the various methods of
transmitting Instructions to the Custodian and that there may be more secure
methods of transmitting instructions to the Custodian than the method(s)
selected by the Trust. The Trust hereby agrees that the security procedures (if
any) to be followed in connection with the Trust's transmission of Instructions
provide to it a commercially reasonable degree of protection in light of its
particular needs and circumstances.
23
9. The Trust hereby represents, warrants and covenants to the Custodian
that this Agreement has been duly approved by a resolution of its Board of
Trustees, and that its transmission of Instructions pursuant hereto shall at all
times comply with the Investment Company Act.
10. The Trust shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable, and in any event within 24 hours after
the earliest of (i) discovery thereof, (ii) the Business Day on which discovery
should have occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest notice which
reflects such error, it being agreed that discovery and receipt of notice may
only occur on a business day. The Custodian shall promptly advise the Trust
whenever the Custodian learns of any errors, omissions or interruption in, or
delay or unavailability of, the Trust's ability to send Instructions.
11. Custodian will indemnify and hold harmless the Trust with respect to
any liability, damages, loss or claim incurred by or brought against Trust by
reason any claim or infringement against any patent, copyright, license or other
property right arising out or by reason of the Trust's use of the Software in
the form provided under this Section. Custodian at its own expense will defend
such action or claim brought against Trust to the extent that it is based on a
claim that the Software in the form provided by Custodian infringes any patents,
copyrights, license or other property right, provided that Custodian is provided
with reasonable written notice of such claim, provided that the Trust has not
settled, compromised or confessed any such claim without the Custodian's written
consent, in which event Custodian shall have no liability or obligation
hereunder, and provided Trust cooperates with and assists Custodian in the
defense of such claim. Custodian shall have the right to control the defense of
all such claims, lawsuits and other proceedings. If, as a result of any claim
of infringement against any patent, copyright, license or other property right,
Custodian is enjoined from using the Software, or if Custodian believes that the
System is likely to become the subject of a claim of infringement, Custodian at
its option may in its sole discretion either (a) at its expenses procure the
right for the Trust to continue to use the Software, or (b), replace or modify
the Software so as to make it non-infringing, or (c) may discontinue the license
granted herein upon written notice to Trust.
Article XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as sub-custodian
for each Series' Securities for which the primary market is outside the United
States ("Foreign Securities") and other assets, the foreign banking
institutions and foreign securities depositories and clearing agencies
designated on Schedule I hereto ("Foreign Sub-Custodians"). The Trust may
designate any additional foreign sub-custodian with which the Custodian has an
agreement for such entity to act as the Custodian's agent, as its sub-custodian
and any such additional foreign sub-custodian shall be deemed added to Schedule
I. Upon receipt of a Certificate from the Trust, the Custodian shall cease the
employment of any one or more Foreign Sub-Custodians for maintaining custody of
the Trust's assets and such Foreign Sub-Custodian shall be deemed deleted from
Schedule I.
24
2. Each delivery of a Certificate to the Custodian in connection with a
transaction involving the use of a Foreign Sub-Custodian shall constitute a
representation and warranty by the Trust that its Board of Trustees, or its
third party foreign custody manager as defined in Rule 17f-5 under the
Investment Company Act of 1940, as amended, if any, has determined that use of
such Foreign Sub-Custodian satisfies the requirements of such Investment Company
Act of 1940 and such Rule 17f-5 thereunder.
3. The Custodian shall identify on its books as belonging to each Series of
the Trust the Foreign Securities of such Series held by each Foreign Sub-
Custodian. At the election of the Trust, it shall be entitled to be subrogated
to the rights of the Custodian with respect to any claims by the Trust or any
Series against a Foreign Sub-Custodian as a consequence of any loss, damage,
cost, expense, liability or claim sustained or incurred by the Trust or any
Series if and to the extent that the Trust or such Series has not been made
whole for any such loss, damage, cost, expense, liability or claim.
4. Upon request of the Trust, the Custodian will, consistent with the terms
of the applicable Foreign Sub-Custodian agreement, use reasonable efforts to
arrange for the independent accountants of the Trust to be afforded access to
the books and records of any Foreign Sub-Custodian insofar as such books and
records relate to the performance of such Foreign Sub-Custodian under its
agreement with the Custodian on behalf of the Trust.
5. The Custodian will supply to the Trust from time to time, as mutually
agreed upon, statements in respect of the securities and other assets of each
Series held by Foreign Sub-Custodians, including but not limited to an
identification of entities having possession of each Series' Foreign Securities
and other assets, and advices or notifications of any transfers of Foreign
Securities to or from each custodial account maintained by a Foreign Sub-
Custodian for the Custodian on behalf of the Series.
6. The Custodian shall transmit promptly to the Trust all notices, reports
or other written information received pertaining to the Trust's Foreign
Securities, including without limitation, notices of corporate action, proxies
and proxy solicitation materials.
7. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any Series and
delivery of securities maintained for the account of such Series may be effected
in accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
8. Notwithstanding any other provision in this Agreement to the contrary,
with respect to any losses or damages arising out of or relating to any actions
or omissions of any Foreign Sub-Custodian the sole responsibility and liability
of the Custodian shall be to take appropriate action at the Trust's expense to
recover such loss or damage from the Foreign Sub-Custodian. It is expressly
understood and agreed that the Custodian's sole responsibility and liability
shall be limited to amounts so recovered from the Foreign Sub-Custodian.
25
Article XVII.
FX TRANSACTIONS
1. Whenever the Trust shall enter into an FX Transaction, the Trust shall
promptly deliver to the Custodian a Certificate or Oral Instructions specifying
with respect to such FX Transaction: (a) the Series to which such FX
Transaction is specifically allocated; (b) the type and amount of Currency to be
purchased by the Trust; (c) the type and amount of Currency to be sold by the
Trust; (d) the date on which the Currency to be purchased is to be delivered;
(e) the date on which the Currency to be sold is to be delivered; and (f) the
name of the person from whom or through whom such currencies are to be purchased
and sold. Unless otherwise instructed by a Certificate or Oral Instructions,
the Custodian shall deliver, or shall instruct a Foreign Sub-Custodian to
deliver, the Currency to be sold on the date on which such delivery is to be
made, as set forth in the Certificate, and shall receive, or instruct a Foreign
Sub-Custodian to receive, the Currency to be purchased on the date as set forth
in the Certificate.
2. Where the Currency to be sold is to be delivered on the same day as the
Currency to be purchased, as specified in the Certificate or Oral Instructions,
the Custodian or a Foreign Sub-Custodian may arrange for such deliveries and
receipts to be made in accordance with the customs prevailing from time to time
among brokers or dealers in Currencies, and such receipt and delivery may not be
completed simultaneously. The Trust assumes all responsibility and liability
for all credit risks involved in connection with such receipts and deliveries,
which responsibility and liability shall continue until the Currency to be
received by the Trust has been received in full.
3. Any FX Transaction effected by the Custodian in connection with this
Agreement may be entered with the Custodian, any office, branch or subsidiary of
The Bank of New York Company, Inc., or any Foreign Sub-Custodian acting as
principal or otherwise through customary banking channels. The Trust may issue
a standing Certificate with respect to FX Transaction but the Custodian may
establish rules or limitations concerning any foreign exchange facility made
available to the Trust. The Trust shall bear all risks of investing in
Securities or holding Currency. Without limiting the foregoing, the Trust
shall bear the risks that rules or procedures imposed by a Foreign Sub-Custodian
or foreign depositories, exchange controls, asset freezes or other laws, rules,
regulations or orders shall prohibit or impose burdens or costs on the transfer
to, by or for the account of the Trust of Securities or any cash held outside
the Trust's jurisdiction or denominated in Currency other than its home
jurisdiction or the conversion of cash from one Currency into another currency.
The Custodian shall not be obligated to substitute another Currency for a
Currency (including a Currency that is a component of a Composite Currency Unit)
whose transferability, convertibility or availability has been affected by such
law, regulation, rule or procedure. Neither the Custodian nor any Foreign Sub-
Custodian shall be liable to the Trust for any loss resulting from any of the
foregoing events.
Article XVIII.
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI, neither
the Custodian nor its nominee shall be liable for any loss or damage, including
counsel fees, resulting from its action or omission to act or otherwise, either
hereunder or under any Margin Account Agreement, except for any such loss or
damage arising out of its own negligence or willful
26
misconduct. In no event shall the Custodian be liable to the Trust or any third
party for special, indirect or consequential damages or lost profits or loss of
business, arising under or in connection with this Agreement, even if previously
informed of the possibility of such damages and regardless of the form of
action. The Custodian may, with respect to questions of law arising hereunder or
under any Margin Account Agreement, apply for and obtain the advice and opinion
of counsel to the Trust, or of its own counsel, at the expense of the Trust, and
shall be fully protected with respect to anything done or omitted by it in good
faith in conformity with such advice or opinion. The Custodian shall be liable
to the Trust for any loss or damage resulting from the use of the BookEntry
System or any Depository arising by reason of any negligence or willful
misconduct on the part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian shall
be under no obligation to inquire into, and shall not be liable for:
(a) the validity of the issue of any Securities purchased, sold, or
written by or for the Trust, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or received therefor;
(b) the legality of the sale or redemption of any Shares, or the propriety
of the amount to be received or paid therefor;
(c) the legality of the declaration or payment of any dividend by the
Trust;
(d) the legality of any borrowing by the Trust using Securities as
collateral;
(e) the legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that any cash collateral
delivered to it by a broker, dealer, or financial institution or held by it at
any time as a result of such loan of portfolio Securities of the Trust is
adequate collateral for the Trust against any loss it might sustain as a result
of such loan. The Custodian specifically, but not by way of limitation, shall
not be under any duty or obligation periodically to check or notify the Trust
that the amount of such cash collateral held by it for the Trust is sufficient
collateral for the Trust, but such duty or obligation shall be the sole
responsibility of the Trust. In addition, the Custodian shall be under no duty
or obligation to see that any broker, dealer or financial institution to which
portfolio Securities of the Trust are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Trust during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Trust in the event that such dividends or interest are not paid and
received when due; or
(f) the sufficiency or value of any amounts of money and/or Securities
held in any Margin Account, Senior Security Account or Collateral Account in
connection with transactions by the Trust. In addition, the Custodian shall be
under no duty or obligation to see that any broker, dealer, futures commission
merchant or Clearing Member makes payment to the Trust of any variation margin
payment or similar payment which the Trust may be entitled to receive from such
broker, dealer, futures commission merchant or Clearing Member, to see that any
payment received by the Custodian from any broker, dealer, futures commission
merchant or
27
Clearing Member is the amount the Trust is entitled to receive, or to notify the
Trust of the Custodian's receipt or nonreceipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the Custodian
of, any money, whether or not represented by any check, draft, or other
instrument for the payment of money, received by it on behalf of the Trust until
the Custodian actually receives and collects such money directly or by the final
crediting of the account representing the Trust's interest at the BookEntry
System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable for
ascertaining or acting upon any calls, conversions, exchange offers, tenders,
interest rate changes or similar matters relating to Securities held in the
Depository, unless the Custodian shall have actually received timely notice from
the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be redeemed, retired,
called or otherwise become payable. However, upon receipt of a Certificate from
the Trust of an overdue amount on Securities held in the Depository the
Custodian shall make a claim against the Depository on behalf of the Trust,
except that the Custodian shall not be under any obligation to appear in,
prosecute or defend any action, suit or proceeding in respect to any Securities
held by the Depository which in its opinion may involve it in expense or
liability, unless indemnity satisfactory to it against all expense and liability
be furnished as often as may be required.
5. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Trust from the Transfer Agent of
the Trust nor to take any action to effect payment or distribution by the
Transfer Agent of the Trust of any amount paid by the Custodian to the Transfer
Agent of the Trust in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign Sub-
Custodians pursuant to Article XVI appoint one or more banking institutions as
Depository or Depositories, as SubCustodian or SubCustodians, or as CoCustodian
or CoCustodians including, but not limited to, banking institutions located in
foreign countries, of Securities and money at any time owned by the Trust, upon
such terms and conditions as may be approved in a Certificate or contained in an
agreement executed by the Custodian, the Trust and the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to ascertain
whether any Securities at any time delivered to, or held by it or by any Foreign
Sub-Custodian, for the account of the Trust and specifically allocated to a
Series are such as properly may be held by the Trust or such Series under the
provisions of its then current prospectus, or (b) to ascertain whether any
transactions by the Trust, whether or not involving the Custodian, are such
transactions as may properly be engaged in by the Trust.
28
9. The Custodian shall be entitled to receive and the Trust agrees to pay
to the Custodian all outofpocket expenses and such compensation as may be agreed
upon from time to time between the Custodian and the Trust. The Custodian may
charge such compensation and any expenses with respect to a Series incurred by
the Custodian in the performance of its duties pursuant to such agreement
against any money specifically allocated to such Series. Unless and until the
Trust instructs the Custodian by a Certificate to apportion any loss, damage,
liability or expense among the Series in a specified manner, the Custodian shall
also be entitled to charge against any money held by it for the account of a
Series such Series' pro rata share (based on such Series, net asset value at the
time of the charge to the aggregate net asset value of all Series at that time)
of the amount of any loss, damage, liability or expense, including counsel fees,
for which it shall be entitled to reimbursement under the provisions of this
Agreement. The expenses for which the Custodian shall be entitled to
reimbursement hereunder shall include, but are not limited to, the expenses of
subcustodians and foreign branches of the Custodian incurred in settling outside
of New York City transactions involving the purchase and sale of Securities of
the Trust.
10. The Custodian shall be entitled to rely upon any Certificate, notice or
other instrument in writing received by the Custodian and reasonably believed by
the Custodian to be a Certificate. The Custodian shall be entitled to rely upon
any Oral Instructions actually received by the Custodian herein above provided
for. The Trust agrees to forward to the Custodian a Certificate or facsimile
thereof confirming such Oral Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian, whether by hand
delivery, telecopier or other similar device, or otherwise, by the close of
business of the same day that such Oral Instructions are given to the Custodian.
The Trust agrees that the fact that such confirming instructions are not
received, or that contrary instructions are received, by the Custodian shall in
no way affect the validity of the transactions or enforceability of the
transactions hereby authorized by the Trust. The Trust agrees that the
Custodian shall incur no liability to the Trust in acting upon Oral Instructions
given to the Custodian hereunder concerning such transactions provided such
instructions reasonably appear to have been received from an Authorized Person.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Trust which are in the
possession of the Custodian shall be the property of the Trust. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Trust, or the Trust's authorized representatives, shall have
access to such books and records during the Custodian's normal business hours.
Upon the reasonable request of the Trust, copies of any such books and records
shall be provided by the Custodian to the Trust or the Trust's authorized
representative, and the Trust shall reimburse the Custodian its expenses of
providing such copies. Upon reasonable
29
request of the Trust, the Custodian shall provide in hard copy or on microfilm,
whichever the Custodian elects, any records included in any such delivery which
are maintained by the Custodian on a computer disc, or are similarly maintained,
and the Trust shall reimburse the Custodian for its expenses of providing such
hard copy or microfilm.
13. The Custodian shall provide the Trust with any report obtained by the
Custodian on the system of internal accounting control of the BookEntry System,
the Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Trust may reasonably request from time to time.
14. The Trust agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or incurred because of or in
connection with this Agreement, including the Custodian's payment or nonpayment
of checks pursuant to paragraph 6 of Article XIII as part of any check
redemption privilege program of the Trust, except for any such liability, claim,
loss and demand arising out of the Custodian's own negligence or willful
misconduct.
15. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVI and XVII the Custodian may
deliver and receive Securities, and receipts with respect to such Securities,
and arrange for payments to be made and received by the Custodian in accordance
with the customs prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver Securities against
payment, delivery of such Securities and receipt of payment therefor may not be
completed simultaneously. The Trust assumes all responsibility and liability
for all credit risks involved in connection with the Custodian's delivery of
Securities pursuant to instructions of the Trust, which responsibility and
liability shall continue until final payment in full has been received by the
Custodian.
16. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
Article XIX.
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such termination,
which shall be not less than ninety (90) days after the date of giving of such
notice. In the event such notice is given by the Trust, it shall be accompanied
by a copy of a resolution of the Board of Trustees of the Trust, certified by
the Secretary or any Assistant Secretary, electing to terminate this Agreement
and designating a successor custodian or custodians, each of which shall be a
bank or trust company having not less than $2,000,000 aggregate capital, surplus
and undivided profits. In the event such notice is given by the Custodian, the
Trust shall, on or before the termination date, deliver to the Custodian a copy
of a resolution of the Board of Trustees of the Trust, certified by the
Secretary or any Assistant Secretary, designating a successor custodian or
custodians. In the absence of such designation by the Trust, the Custodian may
designate a successor custodian which shall be a bank or trust company having
not less than $2,000,000 aggregate capital, surplus and undivided profits. Upon
the date set forth in such notice this Agreement shall terminate, and the
30
Custodian shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor custodian all
Securities and money then owned by the Trust and held by it as Custodian, after
deducting all fees, expenses and other amounts for the payment or reimbursement
of which it shall then be entitled.
2. If a successor custodian is not designated by the Trust or the Custodian
in accordance with the preceding paragraph, the Trust shall upon the date
specified in the notice of termination of this Agreement and upon the delivery
by the Custodian of all Securities (other than Securities held in the BookEntry
System which cannot be delivered to the Trust) and money then owned by the Trust
be deemed to be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement, other than the duty
with respect to Securities held in the Book Entry System which cannot be
delivered to the Trust to hold such Securities hereunder in accordance with this
Agreement.
Article XX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Authorized Persons of the Trust under its seal, setting forth the names
and the signatures of the present Authorized Persons. The Trust agrees to
furnish to the Custodian a new Certificate in similar form in the event that any
such present Authorized Person ceases to be an Authorized Person or in the event
that other or additional Authorized Persons are elected or appointed. Until
such new Certificate shall be received, the Custodian shall be fully protected
in acting under the provisions of this Agreement upon Oral Instructions or
signatures of the Authorized Persons as set forth in the last delivered
Certificate.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at ▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place as the
Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Trust shall be sufficiently given if addressed
to the Trust and mailed or delivered to it at its office at the address for the
Trust first above written, or at such other place as the Trust may from time to
time designate in writing.
4. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Trust.
5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Trust without the written consent
of the Custodian, or by the Custodian without the written consent of the Trust,
authorized or approved by a resolution of the Trust's Board of Trustees.
6. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to
31
the jurisdiction of a state or federal court situated in New York City, New York
in connection with any dispute arising hereunder and hereby waives its right to
trial by jury.
7. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
MASTER BASIC VALUE TRUST
[SEAL] By:
Attest:
THE BANK OF NEW YORK
[SEAL] By:
Name:
Title:
Attest:
32
APPENDIX A
I, __________________________________, President and I,
____________________________, _________________ of MASTER BASIC VALUE TRUST, a
Delaware business trust (the "Trust"), do hereby certify that:
The following persons have been duly authorized in conformity with the Trust's
Declaration of Trust and ByLaws to execute any Certificate, instruction, notice
or other instrument on behalf of the Trust, and the signatures set forth
opposite their respective names are their true and correct signatures:
Name:
Signature:
Position:
▇▇
▇▇▇▇▇▇▇▇ ▇
Mercury Basic Value Fund, Inc.
34
APPENDIX C
I, , a Vice President with THE BANK OF NEW YORK do hereby
designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
▇▇ ▇▇▇▇▇▇ Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
35
EXHIBIT A
CERTIFICATION
The undersigned, ______________________, hereby certifies that he or she is the
duly elected and acting ________________ of MASTER BASIC VALUE TRUST, a Delaware
business trust (the "Trust"), and further certifies that the following
resolution was adopted by the Board of Trustees of the Trust at a meeting duly
held on __________________, 2000, at which a quorum was at all times present and
that such resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Trust dated as of
________________, 2000, (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis to deposit in the Book-Entry System, as
defined in the Custody Agreement, all securities eligible for deposit therein,
regardless of the Series to which the same are specifically allocated, and to
utilize the BookEntry System to the extent possible in connection with its
performance thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of MASTER BASIC
VALUE TRUST, as of the ____ day of July, 2000.
[SEAL]
36
EXHIBIT B
CERTIFICATION
The undersigned, _____________________, hereby certifies that he or she is the
duly elected and acting _____________________ of MASTER BASIC VALUE TRUST, a
Delaware business trust (the "Trust"), and further certifies that the following
resolution was adopted by the Board of Trustees of the Trust at a meeting duly
held on _________________, 2000, at which a quorum was at all times present and
that such resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Trust dated as of ____________,
2000, (the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary to deposit in the Depository, as defined in
the Custody Agreement, all securities eligible foe deposit therein, regardless
of the Series to which the same are specifically allocated, and to utilize the
Depository to the extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of purchases and
sales of securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of MASTER BASIC
VALUE TRUST, as of the _______day of July, 2000.
[SEAL]
37
EXHIBIT C
CERTIFICATION
The undersigned, _____________________, hereby certifies that he or she is the
duly elected and acting _____________________ of MASTER BASIC VALUE TRUST, a
Delaware business trust (the "Trust"), and further certifies that the following
resolution was adopted by the Board of Trustees of the Trust at a meeting duly
held on _________________, 2000, at which a quorum was at all times present and
that such resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Trust dated as of ____________,
2000, (the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary, to accept, utilize and act with respect to
Clearing Member confirmations for Options and transaction in Options, regardless
of the Series to which the same are specifically allocated, as such terms are
defined in the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of MASTER BASIC
VALUE TRUST, as of the _______day of July, 2000.
[SEAL]
38
SCHEDULE I
39