CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT ("Agreement") is made and entered into as of
April 1, 1995, by and between FRANKLIN PREMIER RETURN FUND, a California
corporation (the "Fund"), and BANK OF AMERICA NT & SA, a banking association
organized under the laws of the United States (the "Custodian").
RECITALS
A. The Fund is an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), and invests and reinvests in
Domestic Securities and Foreign Securities.
B. The Custodian is, and has represented to the Fund that the
Custodian is a "bank" as that term is defined in Section 2(a)(5) of the 1940 Act
and is eligible to receive and maintain custody of investment company assets
pursuant to Section 17(f) and Rule 17f-2 thereunder.
C. The Fund and the Custodian desire to provide for the retention of
the Custodian as a custodian of the assets of the Fund as the parties hereto may
determine from time-to-time, on the terms and subject to the provisions set
forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
Section 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings specified below:
"Board of Directors" shall mean the Board of Directors of the Fund.
"Business Day" with respect to any Domestic Security means any day,
other than a Saturday or Sunday, that is not a day on which banking institutions
are authorized or required by law to be closed in The City of New York and, with
respect to Foreign Securities, a London Business Day. "London Business Day"
shall mean any day on which dealings and deposits in U.S. dollars are transacted
in the London interbank market.
"Domestic Securities" shall have the meaning provided in Subsection
2.1 hereof.
"Executive Committee" shall mean the executive committee of the
Board of Directors.
"Foreign Custodian" shall have the meaning provided in Section 4.1
hereof.
"Foreign Securities" shall have the meaning provided in Section 2.1
hereof.
"Foreign Securities Depository" shall have the meaning provided in
Section 4.1 hereof.
"Securities" shall have the meaning provided in Section 2.1 hereof.
"Securities System" shall have the meaning provided in Section 3.1
hereof.
"Securities System Account" shall have the meaning provided in
Subsection 3.8(a) hereof.
"Shares" shall mean shares of capital stock of the Fund.
"Subcustodian" shall have the meaning provided in Subsection 3.7
hereof, but shall not include any Foreign Custodian.
"Transfer Agent" shall mean the duly appointed and acting transfer
agent for the Fund.
"Writing" shall mean a communication in writing, a communication by
telex, the Custodian's Global Custody Instruction SystemTM, facsimile
transmission, bankwire or other teleprocess or electronic instruction system
acceptable to the Custodian.
Section 2. APPOINTMENT OF CUSTODIAN; DELIVERY OF ASSETS
2.1 Appointment of Custodian. The Fund hereby appoints and
designates the Custodian as a custodian of the assets of the Fund including
cash, securities the Fund desires to be held within the United States ("Domestic
Securities") and securities it desires to be held outside the United States
("Foreign Securities"). Domestic Securities and Foreign Securities are sometimes
referred to herein, collectively, as "Securities." The Custodian hereby accepts
such appointment and designation and agrees that it shall maintain custody of
the assets of the Fund delivered to it hereunder in the manner provided for
herein.
2.2 Delivery of Assets. The Fund agrees to deliver to the Custodian
Securities and cash owned by the Fund, payments of income, principal or capital
distributions received by the Fund with respect to Securities owned by the Fund
from time to time, and the consideration received by it for such Shares or other
securities of the Fund as may be issued and sold from time to time. The
Custodian shall have no responsibility whatsoever for any property or assets of
the Fund held or received by the Fund and not delivered to the Custodian
pursuant to and in accordance with the terms hereof. All Securities accepted by
the Custodian on behalf of the Fund under the terms of this Agreement shall be
in "street name" or other good delivery form as determined by the Custodian.
2.3 Subcustodians. Upon receipt of Proper Instructions and a
certified copy of a resolution of the Board of Directors or of the Executive
Committee certified by the Secretary or an Assistant Secretary of the Fund, the
Custodian may from time to time appoint one or more Subcustodians or Foreign
Custodians to hold assets of the Fund in accordance with the provisions of this
Agreement.
2.4 No Duty to Manage. The Custodian, a Subcustodian or a Foreign
Custodian shall not have any duty or responsibility to manage or recommend
investments of the assets of the Fund held by them or to initiate any purchase,
sale or other investment transaction in the absence of Proper Instructions or
except as otherwise specifically provided herein.
Section 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO
ASSETS OF THE FUND HELD BY THE CUSTODIAN
3.1 Holding Securities. The Custodian shall hold and physically
segregate from any property owned by the Custodian, for the account of the Fund,
all non-cash property delivered by the Fund to the Custodian hereunder other
than Securities which, pursuant to Subsection 3.8 hereof, are held through a
registered clearing agency, a registered securities depository, the Federal
Reserve's book-entry securities system (referred to herein, individually, as a
"Securities System"), or held by a Subcustodian, Foreign Custodian or in a
Foreign Securities Depository.
3.2 Delivery of Securities. Except as otherwise provided in
Subsection 3.5 hereof, the Custodian, upon receipt of Proper Instructions, shall
release and deliver Securities owned by the Fund and held by the Custodian in
the following cases or as otherwise directed in Proper Instructions:
(a) except as otherwise provided herein, upon sale of such
Securities for the account of the Fund and receipt by the Custodian, a
Subcustodian or a Foreign Custodian of payment therefor;
(b) upon the receipt of payment by the Custodian, a
Subcustodian or a Foreign Custodian in connection with any repurchase agreement
related to such Securities entered into by the Fund;
(c) in the case of a sale effected through a Securities
System, in accordance with the provisions of Subsection 3.8 hereof;
(d) to a tender agent or other authorized agent in connection
with (i) a tender or other similar offer for Securities owned by the Fund, or
(ii) a tender offer or repurchase by the Fund of its own Shares;
(e) to the issuer thereof or its agent when such Securities
are called, redeemed, retired or otherwise become payable; provided, that in any
such case, the cash or other consideration is to be delivered to the Custodian,
a Subcustodian or a Foreign Custodian;
(f) to the issuer thereof, or its agent, for transfer into the
name or nominee name of the Fund, the name or nominee name of the Custodian, the
name or nominee name of any Subcustodian or Foreign Custodian; or for exchange
for a different number of bonds, certificates or other evidence representing the
same aggregate face amount or number of units; provided that, in any such case,
the new Securities are to be delivered to the Custodian, a Subcustodian or
Foreign Custodian;
(g) to the broker selling the same for examination in
accordance with the "street delivery" custom;
(h) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, or reorganization of the issuer of such
Securities, or pursuant to a conversion of such Securities; provided that, in
any such case, the new Securities and cash, if any, are to be delivered to the
Custodian or a Subcustodian;
(i) in the case of warrants, rights or similar securities, the
surrender thereof in connection with the exercise of such warrants, rights or
similar Securities or the surrender of interim receipts or temporary Securities
for definitive Securities; provided that, in any such case, the new Securities
and cash, if any, are to be delivered to the Custodian, a subcustodian or a
Foreign Custodian;
(j) for delivery in connection with any loans of Securities
made by the Fund, but only against receipt by the Custodian, a Subcustodian or a
Foreign Custodian of adequate collateral as determined by the Fund (and
identified in Proper Instructions communicated to the Custodian), which may be
in the form of cash or obligations issued by the United States government, its
agencies or instrumentalities, except that in connection with any loans for
which collateral is to be credited to the account of the Custodian, a
Subcustodian or a Foreign Custodian in the Federal Reserve's book-entry
securities system, the Custodian will not be held liable or responsible for the
delivery of Securities owned by the Fund prior to the receipt of such
collateral;
(k) for delivery as security in connection with any borrowings
by the Fund requiring a pledge of assets by the Fund, but only against receipt
by the Custodian, a Subcustodian or a Foreign Custodian of amounts borrowed;
(l) for delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, a Subcustodian or a Foreign Custodian
and a broker-dealer relating to compliance with the rules of registered clearing
corporations and of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund;
(m) for delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, a Subcustodian or a Foreign Custodian
and a futures commission merchant, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any contract market, or any similar
organization or organizations, regarding account deposits in connection with
transactions by the Fund;
(n) upon the receipt of instructions from the Transfer Agent
for delivery to the Transfer Agent or to the holders of Shares in connection
with distributions in kind in satisfaction of requests by holders of Shares for
repurchase or redemption; and
(o) for any other proper purpose, but only upon receipt of
Proper Instructions, and a certified copy of a resolution of the Board of
Directors or of the Executive Committee certified by the Secretary or an
Assistant Secretary of the Fund, specifying the securities to be delivered,
setting forth the purpose for which such delivery is to be made, declaring such
purpose to be a proper purpose, and naming the person or persons to whom
delivery of such securities shall be made.
3.3 Registration of Securities. Securities held by the Custodian, a
Subcustodian or a Foreign Custodian (other than bearer Securities) shall be
registered in the name or nominee name of the Fund, in the name or nominee name
of the Custodian or in the name or nominee name of any Subcustodian or Foreign
Custodian. The Fund agrees to hold the Custodian, any such nominee, Subcustodian
or Foreign Custodian harmless from any liability as a holder of record of such
Securities.
3.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts for the Fund, subject only to draft or order by the
Custodian acting pursuant to the terms of this Agreement, and shall hold in such
account or accounts, subject to the provisions hereof, all cash received by it
hereunder from or for the account of the Fund, other than cash maintained by the
Fund in a bank account established and used in accordance with Rule 17f-3 under
the 1940 Act. Funds held by the Custodian for the Fund may be deposited by it to
its credit as Custodian in the banking departments of the Custodian, a
Subcustodian or a Foreign Custodian. It is understood and agreed by the
Custodian and the Fund that the rate of interest, if any, payable on such funds
(including foreign currency deposits) that are deposited with the Custodian may
not be a market rate of interest and that the rate of interest payable by the
Custodian to the Fund shall be agreed upon by the Custodian and the Fund from
time to time. Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that capacity.
3.5 Collection of Income; Trade Settlement; Crediting of Accounts.
The Custodian shall collect income payable with respect to Securities owned by
the Fund, settle Securities trades for the account of the Fund and credit and
debit the Fund's account with the Custodian in connection therewith as follows:
(a) Upon receipt of Proper Instructions, the Custodian shall
effect the purchase of a Security by charging the account of the Fund on the
contractual settlement date. The Custodian shall have no liability of any kind
to any person, including the Fund, if the Custodian effects payment on behalf of
the Fund as provided for herein or in Proper Instructions, and the seller or
selling broker fails to deliver the Securities purchased.
(b) Upon receipt of Proper Instructions, the Custodian shall
effect the sale of a Security by delivering a certificate or other indicia of
ownership, and shall credit the account of the Fund with the proceeds of such
sale on the contractual settlement date. The Custodian shall have no liability
of any kind to any person, including the Fund, if the Custodian delivers such a
certificate(s) or other indicia of ownership as provided for herein or in Proper
Instructions, and the purchaser or purchasing broker fails to effect payment to
the Fund within a reasonable time period, as determined by the Custodian in its
sole discretion. In such event, the Custodian shall be entitled to reimbursement
of the amount so credited to the account of the Fund in connection with such
sale.
(c) The Fund is responsible for ensuring that the Custodian
receives timely and accurate Proper Instructions to enable the Custodian to
effect settlement of any purchase or sale. If the Custodian does not receive
such instructions within the required time period, the Custodian shall have no
liability of any kind to any person, including the Fund, for failing to effect
settlement on the contractual settlement date. However, the Custodian shall use
its best reasonable efforts to effect settlement as soon as possible after
receipt of Proper Instructions.
(d) The Custodian shall credit the account of the Fund with
interest income payable on interest bearing Securities on the payable date.
Interest income on cash balances will be credited monthly to the account of the
Fund on the first Business Day (on which the Custodian is open for business)
following the end of each month. Dividends and other amounts payable with
respect to Domestic Securities and Foreign Securities shall be credited to the
account of the Fund when received by the Custodian. The Custodian shall not be
required to commence suit or collection proceedings or resort to any
extraordinary means to collect such income and other amounts payable with
respect to Securities owned by the Fund. The collection of income due the Fund
on Domestic Securities loaned pursuant to the provisions of Subsection 3.2(j)
shall be the responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund with such
information or data as may be necessary to assist the Fund in arranging for the
timely delivery to the Custodian of the income to which the Fund is entitled.
The Custodian shall have no liability to any person, including the Fund, if the
Custodian credits the account of the Fund with such income or other amounts
payable with respect to Securities owned by the Fund (other than Securities
loaned by the Fund pursuant to Subsection 3.2(j) hereof) and the Custodian
subsequently is unable to collect such income or other amounts from the payors
thereof within a reasonable time period, as determined by the Custodian in its
sole discretion. In such event, the Custodian shall be entitled to reimbursement
of the amount so credited to the account of the Fund.
3.6 Payment of Fund Monies. Upon receipt of Proper Instructions
the Custodian shall pay out monies of the Fund in the following cases or as
otherwise directed in Proper Instructions:
(a) upon the purchase of Securities, futures contracts or
options on futures contracts for the account of the Fund but only, except as
otherwise provided herein, (i) against the delivery of such securities, or
evidence of title to futures contracts or options on futures contracts, to the
Custodian or a Subcustodian registered pursuant to Subsection 3.3 hereof or in
proper form for transfer; (ii) in the case of a purchase effected through a
Securities System, in accordance with the conditions set forth in Subsection 3.8
hereof; or (iii) in the case of repurchase agreements entered into between the
Fund and the Custodian, another bank or a broker-dealer (A) against delivery of
the Securities either in certificated form to the Custodian or a Subcustodian or
through an entry crediting the Custodian's account at the appropriate Federal
Reserve Bank with such Securities or (B) against delivery of the confirmation
evidencing purchase by the Fund of Securities owned by the Custodian or such
broker-dealer or other bank along with written evidence of the agreement by the
Custodian or such broker-dealer or other bank to repurchase such Securities from
the Fund;
(b) in connection with conversion, exchange or surrender of
Securities owned by the Fund as set forth in Subsection 3.2 hereof;
(c) for the redemption or repurchase of Shares issued by the
Fund;
(d) for the payment of any expense or liability incurred by
the Fund, including but not limited to the following payments for the account of
the Fund: custodian fees, interest, taxes, management, accounting, transfer
agent and legal fees and operating expenses of the Fund whether or not such
expenses are to be in whole or part capitalized or treated as deferred expenses;
and
(e) for the payment of any dividends or distributions
declared by the Board of Directors with respect to the Shares.
3.7 Appointment of Subcustodians. The Custodian may, upon receipt of
Proper Instructions, appoint another bank or trust company, which is itself
qualified under the 1940 Act to act as a custodian (a "Subcustodian"), as the
agent of the Custodian to carry out such of the duties of the Custodian
hereunder as a Custodian may from time to time direct; provided, however, that
the appointment of any Subcustodian shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
3.8 Deposit of Securities in Securities Systems. The Custodian may
deposit and/or maintain Domestic Securities owned by the Fund in a Securities
System in accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to the following
provisions:
(a) the Custodian may hold Domestic Securities of the Fund in
the Depository Trust Company or the Federal Reserve's book-entry system or, upon
receipt of Proper Instructions, in another Securities System provided that such
securities are held in an account of the Custodian in the Securities System
("Securities System Account") which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or otherwise for
customers;
(b) the records of the Custodian with respect to Domestic
Securities of the Fund which are maintained in a Securities System shall
identify by book-entry those Domestic Securities belonging to the Fund;
(c) the Custodian shall pay for Domestic Securities purchased
for the account of the Fund upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Securities System
Account, and (ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund. The Custodian
shall transfer Domestic Securities sold for the account of the Fund upon (A)
receipt of advice from the Securities System that payment for such securities
has been transferred to the Securities System Account, and (B) the making of an
entry on the records of the Custodian to reflect such transfer and payment for
the account of the Fund. Copies of all advices from the Securities System of
transfers of Domestic Securities for the account of the Fund shall be maintained
for the Fund by the Custodian and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund confirmation of each transfer to
or from the account of the Fund in the form of a written advice or notice; and
(d) upon request, the Custodian shall provide the Fund with
any report obtained by the Custodian on the Securities System's accounting
system, internal accounting control and procedures for safeguarding domestic
securities deposited in the Securities System.
3.9 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for and on
behalf of the Fund, into which account or accounts may be transferred cash
and/or Securities, including Securities maintained in an account by the
Custodian pursuant to Section 3.8 hereof, (i) in accordance with the provisions
of any agreement among the Fund, the Custodian and a broker-dealer or futures
commission merchant, relating to compliance with the rules of registered
clearing corporations and of any national securities exchange (or the Commodity
Futures Trading Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund, (ii) for purposes of segregating cash
or securities in connection with options purchased, sold or written by the Fund
or commodity futures contracts or options thereon purchased or sold by the Fund
and (iii) for other proper corporate purposes, but only, in the case of this
clause (iii), upon receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board of Directors or of the Executive Committee
certified by the Secretary or an Assistant Secretary, setting forth the purpose
or purposes of such segregated account and declaring such purposes to be proper
corporate purposes.
3.10 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other payments with
respect to domestic securities of the Fund held by it and in connection with
transfers of such securities.
3.11 Proxies. The Custodian shall, with respect to the Securities
held hereunder, promptly deliver to the Fund all proxies, all proxy soliciting
materials and all notices relating to such Securities. If the Securities are
registered otherwise than in the name of the Fund or a nominee of the Fund, the
Custodian shall use its best reasonable efforts, consistent with applicable law,
to cause all proxies to be promptly executed by the registered holder of such
Securities in accordance with Proper Instructions.
3.12 Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Fund all written information
(including, without limitation, pendency of calls and maturities of Securities
and expirations of rights in connection therewith and notices of exercise of put
and call options written by the Fund and the maturity of futures contracts
purchased or sold by the Fund) received by the Custodian from issuers of
Securities being held for the Fund. With respect to tender or exchange offers,
the Custodian shall transmit promptly to the Fund all written information
received by the Custodian from issuers of the Securities whose tender or
exchange is sought and from the party (or its agents) making the tender or
exchange offer. If the Fund desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the Fund shall notify
the Custodian at least three Business Days prior to the date of which the
Custodian is to take such action.
3.13 Reports by Custodian. Custodian shall each business day furnish
the Fund with a statement summarizing all transactions and entries for the
account of the Fund for the preceding day. At the end of every month Custodian
shall furnish the Fund with a list of the portfolio securities showing the
quantity of each issue owned, the cost of each issue and the market value of
each issue at the end of each month. Such monthly report shall also contain
separate listings of (a) unsettled trades and (b) when-issued securities.
Custodian shall furnish such other reports as may be mutually agreed upon from
time-to-time.
Section 4. CERTAIN DUTIES OF THE CUSTODIAN WITH RESPECT TO ASSETS OF THE FUND
HELD OUTSIDE THE UNITED STATES
4.1 Custody outside the United States. The Fund authorizes the
Custodian to hold Foreign Securities and cash in custody accounts which have
been established by the Custodian with (i) its foreign branches, (ii) foreign
banking institutions, foreign branches of United States banks and subsidiaries
of United States banks or bank holding companies (each a "Foreign Custodian")
and (iii) Foreign Securities depositories or clearing agencies (each a "Foreign
Securities Depository"); provided, however, that the Board of Directors or the
Executive Committee has approved in advance the use of each such Foreign
Custodian and Foreign Securities Depository and the contract between the
Custodian and each Foreign Custodian and that such approval is set forth in
Proper Instructions and a certified copy of a resolution of the Board of
Directors or of the Executive Committee certified by the Secretary or an
Assistant Secretary of the Fund. Unless expressly provided to the contrary in
this Section 4, custody of Foreign Securities and assets held outside the United
States by the Custodian, a Foreign Custodian or through a Foreign Securities
Depository shall be governed by Section 3 hereof.
4.2 Assets to be Held. The Custodian shall limit the securities and
other assets maintained in the custody of its foreign branches, Foreign
Custodians and Foreign Securities Depositories to: (i) "foreign securities," as
defined in paragraph (c) (1) of Rule 17f-5 under the 1940 Act, and (ii) cash and
cash equivalents in such amounts as the Custodian or the Fund may determine to
be reasonably necessary to effect the Fund's Foreign Securities transactions.
4.3 Foreign Securities Depositories. Except as may otherwise be
agreed upon in writing by the Custodian and the Fund, assets of the Fund shall
be maintained in Foreign Securities Depositories only through arrangements
implemented by the Custodian or Foreign Custodians pursuant to the terms hereof.
4.4 Segregation of Securities. The Custodian shall identify on its
books and records as belonging to the Fund, the Foreign Securities of the Fund
held by each Foreign Custodian.
4.5 Agreements with Foreign Custodians. Each agreement with a
Foreign Custodian shall provide generally that: (a) the Fund's assets will not
be subject to any right, charge, security interest, lien or claim of any kind in
favor of the Foreign Custodian or its creditors, except a claim of payment for
their safe custody or administration; (b) beneficial ownership for the Fund's
assets will be freely transferable without the payment of money or value other
than for custody or administration; (c) adequate records will be maintained
identifying the assets as belonging to the Fund; (d) the independent public
accountants for the Fund will be given access to the records of the Foreign
Custodian relating to the assets of the Fund or confirmation of the contents of
those records; (e) the disposition of assets of the Fund held by the Foreign
Custodian will be subject only to the instructions of the Custodian or its
agents; (f) the Foreign Custodian shall indemnify and hold harmless the
Custodian and the Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the Foreign Custodian's
performance of its obligations under such agreement; (g) to the extent
practicable, the Fund's assets will be adequately insured in the event of loss;
and (h) the Custodian will receive periodic reports with respect to the
safekeeping of the Fund's assets, including notification of any transfer to or
from the Fund's account.
4.6 Access of Independent Accountants of the Fund. Upon request of
the Fund, the Custodian will use its best reasonable efforts to arrange for the
independent accountants of the Fund to be afforded access to the books and
records of any Foreign Custodian insofar as such books and records relate to the
custody by any such Foreign Custodian of assets of the Fund.
4.7 Transactions in Foreign Custody Accounts. Upon receipt of Proper
Instructions, the Custodian shall instruct the appropriate Foreign Custodian to
transfer, exchange or deliver Foreign Securities owned by the Fund, but, except
to the extent explicitly provided herein, only in any of the cases specified in
Subsection 3.2. Upon receipt of Proper Instructions, the Custodian shall pay out
or instruct the appropriate Foreign Custodian to pay out monies of the Fund in
any of the cases specified in Subsection 3.6. Notwithstanding anything herein to
the contrary, settlement and payment for Foreign Securities received for the
account of the Fund and delivery of Foreign Securities maintained for the
account of the Fund 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, delivering 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. Foreign Securities maintained in the custody of a Foreign
Custodian may be maintained in the name of such entity or its nominee name to
the same extent as set forth in Section 3.3 of this Agreement and the Fund
agrees to hold any Foreign Custodian and its nominee harmless from any liability
as a holder of record of such securities.
4.8 Liability of Foreign Custodian. Each agreement between the
Custodian and a Foreign Custodian shall require the Foreign Custodian to
exercise reasonable care in the performance of its duties and to indemnify and
hold harmless the Custodian and the Fund from and against any loss, damage,
cost, expense, liability or claim arising out of or in connection with the
Foreign Custodian's performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights of the Custodian with
respect to any claims against a Foreign Custodian as a consequence of any such
loss, damage, cost, expense, liability or claim if and to the extent that the
Fund has not been made whole for any such loss, damage, cost, expense, liability
or claim.
4.9 Monitoring Responsibilities.
(a) The Custodian will promptly inform the Fund in the event
that the Custodian learns of a material adverse change in the financial
condition of a Foreign Custodian or is notified by (i) a foreign banking
institution employed as a Foreign Custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline below $200
million or that its shareholders' equity has declined below $200 million (in
each case computed in accordance with generally accepted United States
accounting principles) and denominated in U.S. dollars, or (ii) a subsidiary of
a United States bank or bank holding company acting as a Foreign Custodian that
there appears to be a substantial likelihood that its shareholders' equity will
decline below $100 million or that its shareholders' equity has declined below
$100 million (in each case computed in accordance with generally accepted United
States accounting principles) and denominated in U.S. dollars.
(b) The custodian will furnish such information as may be
reasonably necessary to assist the Fund's Board of Directors in its annual
review and approval of the continuance of all contracts or arrangements with
Foreign Subcustodians.
Section 5. PROPER INSTRUCTIONS
As used in this Agreement, the term "Proper Instructions" means
instructions of the Fund received by the Custodian via telephone or in Writing
which the Custodian believes in good faith to have been given by Authorized
Persons (as defined below) or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Custodian may specify.
The Custodian reserves the right to require that any Proper Instructions
delivered to the Custodian by telephone shall promptly thereafter be confirmed
in Writing by an Authorized Person, but the Fund will hold the Custodian
harmless for its failure to send such confirmation in writing, the failure of
such confirmation to conform to the telephone instructions received or the
Custodian's failure to produce such confirmation at any subsequent time. Unless
otherwise expressly provided, all Proper Instructions shall continue in full
force and effect until canceled or superseded. If the Custodian requires test
arrangements, authentication methods or other security devices to be used with
respect to Proper Instructions, any Proper Instructions given by the Fund
thereafter shall be given and processed in accordance with such terms and
conditions for the use of such arrangements, methods or devices as the Custodian
may put into effect and modify from time to time. The Fund shall safeguard any
testkeys, identification codes or other security devices which the Custodian
shall make available to it. The Custodian may electronically record any Proper
Instructions given by telephone, and any other telephone discussions, with
respect to its activities hereunder. As used in this Agreement, the term
"Authorized Persons" means such officers or such agents of the Fund as have been
designated by a resolution of the Board of Directors or of the Executive
Committee, a certified copy of which has been provided to the Custodian, to act
on behalf of the Fund under this Agreement. Each of such persons shall continue
to be an Authorized Person until such time as the Custodian receives Proper
Instructions that any such officer or agent is no longer an Authorized Person.
Notwithstanding anything to the contrary contained in this
Agreement, if the Fund has executed or is otherwise bound by a funds transfer
service agreement, electronic trade payment service agreement, license agreement
for electronic access, MicroWire(R) service agreement or similar agreement, and
any related addenda and amendments thereto (each, a "Service Agreement"),
between the Fund and the Custodian, with regard to the transfer of funds to
and/or disbursement of funds from an account of the Fund, then any electronic
instruction on the part of the Fund and the Custodian's obligations relating
thereto shall be governed by the applicable Service Agreement. To the extent
that anything in this Agreement relating to electronic instructions to transfer
and/or disburse funds is inconsistent with any provision of the Service
Agreement, the Service Agreement shall control.
Section 6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from
the Fund:
(a) make payments to itself or others for minor expenses of
handling Securities or other similar items relating to its duties under this
Agreement, provided that all such payments shall be accounted for to the Fund;
(b) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
(c) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase, transfer and other
dealings with the Securities and property of the Fund except as otherwise
provided in Proper Instructions.
Section 7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions
(conveyed by telephone or in Writing), notice, request, consent, certificate or
other instrument or paper believed by it to be genuine and to have been properly
given or executed by or on behalf of the Fund. The Custodian may receive and
accept a certified copy of a resolution of the Board of Directors or Executive
Committee as conclusive evidence (a) of the authority of any person to act in
accordance with such resolution or (b) of any determination or of any action by
the Board of Directors or Executive Committee as described in such resolution,
and such resolution may be considered as in full force and effect until receipt
by the Custodian of written notice by an Authorized Person to the contrary.
Section 8. DUTY OF CUSTODIAN TO SUPPLY INFORMATION
The Custodian shall cooperate with and supply necessary information
in its possession (to the extent permissible under applicable law) to the entity
or entities appointed by the Board of Directors to keep the books of account of
the Fund and/or compute the net asset value per Share of the outstanding Shares
of the Fund.
Section 9. RECORDS
The Custodian shall create and maintain all records relating to its
activities under this Agreement which are required with respect to such
activities under Section 31 of the 1940 Act and Rules 31a-1 and 31a-2
thereunder. All such records shall be the property of the Fund and shall at all
times during the regular business hours of the Custodian be open for inspection
by duly authorized officers, employees or agents of the Fund and employees and
agents of the Securities and Exchange Commission. The Custodian shall, at the
Fund's request, supply the Fund with a tabulation of Securities owned by the
Fund and held by the Custodian and shall, when requested to do so by the Fund
and for such compensation as shall be agreed upon between the Fund and the
Custodian, include certificate numbers in such tabulations. Section 10.
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.
Section 11. RESPONSIBILITY OF CUSTODIAN
The Custodian shall be responsible for the performance of only such
duties as are set forth herein or contained in Proper Instructions and shall use
reasonable care in carrying out such duties. The Custodian shall be liable to
the Fund for any loss which shall occur as the result of the failure of a
Foreign Custodian or a Foreign Securities Depository engaged by such Foreign
Custodian or the Custodian to exercise reasonable care with respect to the
safekeeping of securities and other assets of the Fund to the same extent that
the Custodian would be liable to the Fund if the Custodian itself were holding
such securities and other assets. In the event of any loss to the Fund by reason
of the failure of the Custodian, a Foreign Custodian or a Foreign Securities
Depository engaged by such Foreign Custodian or the Custodian to utilize
reasonable care, the Custodian shall be liable to the Fund to the extent of the
Fund's damages, to be determined based on the market value of the property which
is the subject of the loss at the date of discovery of such loss and without
reference to any special conditions or circumstances. The Custodian shall be
held to the exercise of reasonable care in carrying out this Agreement. The Fund
agrees to indemnify and hold harmless the Custodian and its nominees from all
taxes, charges, expenses, assessments, claims and liabilities (including legal
fees and expenses) incurred by any of them in connection with the performance of
this Agreement, except such as may arise from any negligent action, negligent
failure to act or willful misconduct on the part of the indemnified entity or
any Foreign Custodian or Foreign Securities Depository. The Custodian shall be
entitled to rely, and may act, on advice of counsel (who may be counsel for the
Fund) on all matters and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. The Custodian need not maintain any
insurance for the benefit of the Fund.
All collections of funds or other property paid or distributed in
respect of Securities held by the Custodian, agent, Subcustodian or Foreign
Custodian hereunder shall be made at the risk of the Fund. The Custodian shall
have no liability for any loss occasioned by delay in the actual receipt of
notice by the Custodian, agent, Subcustodian or by a Foreign Custodian of any
payment, redemption or other transaction regarding securities in respect of
which the Custodian has agreed to take action as provided in Section 3 hereof.
The Custodian shall not be liable for any action taken in good faith upon Proper
Instructions or upon any certified copy of any resolution of the Board of
Directors and may rely on the genuineness of any such documents which it may in
good faith believe to be validly executed. The Custodian shall not be liable for
any loss resulting from, or caused by, the direction of the Fund to maintain
custody of any Securities or cash in a foreign country including, but not
limited to, losses resulting from nationalization, expropriation, currency
restrictions, civil disturbance, acts of war or terrorism, insurrection,
revolution, nuclear fusion, fission or radiation or other similar occurrences or
events beyond the control of the Custodian. Finally, the Custodian shall not be
liable for any taxes, including interest and penalties with respect thereto,
that may be levied or assessed upon or in respect of any assets of the Fund held
by the Custodian.
Section 12. LIMITED LIABILITY OF THE FUND
The Custodian acknowledges that it has received notice of and
accepts the limitations of the Fund's liability as set forth in its Articles of
Incorporation and By-Laws. The Custodian agrees that the Fund's obligation
hereunder shall be limited to the assets of the Fund, and that the Custodian
shall not seek satisfaction of any such obligation from the shareholders of the
Fund nor from any director, officer, employee, or agent of the Fund.
Section 13. EFFECTIVE PERIOD; TERMINATION
This Agreement shall become effective as of the date of its
execution and shall continue in full force and effect until terminated as
hereinafter provided. This Agreement may be terminated by the Fund or the
Custodian by 60 days notice in Writing to the other provided that any
termination by the Fund shall be authorized by a resolution of the Board of
Directors, a certified copy of which shall accompany such notice of termination,
and provided further, that such resolution shall specify the names of the
persons to whom the Custodian shall deliver the assets of the Fund held by it.
If notice of termination is given by the Custodian, the Fund shall, within 60
days following the giving of such notice, deliver to the Custodian a certified
copy of a resolution of the Board of Directors specifying the names of the
persons to whom the Custodian shall deliver assets of the Fund held by it. In
either case the Custodian will deliver such assets to the persons so specified,
after deducting therefrom any amounts which the Custodian determines to be owed
to it hereunder (including all costs and expenses of delivery or transfer of
Fund assets to the persons so specified). If within 60 days following the giving
of a notice of termination by the Custodian, the Custodian does not receive from
the Fund a certified copy of a resolution of the Board of Directors specifying
the names of the persons to whom the Custodian shall deliver the assets of the
Fund held by it, the Custodian, at its election, may deliver such assets to a
bank or trust company doing business in the State of California to be held and
disposed of pursuant to the provisions of this Agreement or may continue to hold
such assets until a certified copy of one or more resolutions as aforesaid is
delivered to the Custodian. The obligations of the parties hereto regarding the
use of reasonable care, indemnities and payment of fees and expenses shall
survive the termination of this Agreement.
Section 14. MISCELLANEOUS
14.1 Relationship. Nothing contained in this Agreement shall (i)
create any fiduciary, joint venture or partnership relationship between the
Custodian and the Fund or (ii) be construed as or constitute a prohibition
against the provision by the Custodian or any of its affiliates to the Fund of
investment banking, securities dealing or brokerages services or any other
banking or financial services.
14.2 Further Assurances. Each party hereto shall furnish to the
other party hereto such instruments and other documents as such other party may
reasonably request for the purpose of carrying out or evidencing the
transactions contemplated by this Agreement.
14.3 Attorneys' Fees. If any lawsuit or other action or proceeding
relating to this Agreement is brought by a party hereto against the other party
hereto, the prevailing party shall be entitled to recover reasonable attorneys'
fees, costs and disbursements (including allocated costs and disbursements of
in-house counsel), in addition to any other relief to which the prevailing party
may be entitled.
14.4 Notices. Except as otherwise specified herein, each notice or
other communication hereunder shall be in Writing and shall be delivered to the
intended recipient at the following address (or at such other address as the
intended recipient shall have specified in a written notice given to the other
parties hereto):
if to the Fund:
Franklin Premier Return Fund
000 Xxxxxxxx Xxxxxx Xxxx.
X.X. Xxx 0000
Xxx Xxxxx, XX 00000-0000
Attention: Fund Manager
if to the Custodian:
Bank of America NT&SA
0000 Xxxxxx Xxxxxx
16th Floor, Dept. 5014
Xxx Xxxxxxxxx, XX 00000
14.5 Headings. The underlined headings contained herein are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the interpretation
hereof.
14.6 Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original and each of which, when taken
together, shall constitute one agreement.
14.7 Governing Law. This Agreement shall be construed in
accordance with, and governed in all respects by, the laws of the State of
California (without giving effect to principles of conflict of laws).
14.8 Force Majeure. Subject to the provisions of Section 11 hereof
regarding the Custodian's general standard of care, no failure, delay or default
in performance of any obligation hereunder shall constitute an event of default
or a breach of this agreement, or give rise to any liability whatsoever on the
part of one party hereto to the other, to the extent that such failure to
perform, delay or default arises out of a cause beyond the control and without
negligence of the party otherwise chargeable with failure, delay or default;
including, but not limited to: action or inaction of governmental, civil or
military authority; fire; strike; lockout or other labor dispute; flood; war;
riot; theft; earthquake; natural disaster; breakdown of public or common carrier
communications facilities; computer malfunction; or act, negligence or default
of the other party. This paragraph shall in no way limit the right of either
party to this Agreement to make any claim against third parties for any damages
suffered due to such causes.
14.9 Successors and Assigns. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
successors and assigns, if any.
14.10 Waiver. No failure on the part of any person to exercise any
power, right, privilege or remedy hereunder, and no delay on the part of any
person in the exercise of any power, right, privilege or remedy hereunder, shall
operate as a waiver thereof; and no single or partial exercise of any such
power, right, privilege or remedy shall preclude any other or further exercise
thereof or of any other power, right, privilege or remedy.
14.11 Amendments. This Agreement may not be amended, modified,
altered or supplemented other than by means of an agreement or instrument
executed on behalf of each of the parties hereto.
14.12 Severability. In the event that any provision of this
Agreement, or the application of any such provision to any person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
14.13 Parties in Interest. None of the provisions of this Agreement
is intended to provide any rights or remedies to any person other than the Fund
and the Custodian and their respective successors and assigns, if any.
14.14 Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto, and supersedes all prior custody agreements
between the parties hereto relating to the subject matter hereof to the extent
inconsistent herewith.
14.15 Variations of Pronouns. Whenever required by the context
hereof, the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; and the neuter
gender shall include the masculine and feminine genders.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
"Custodian": BANK OF AMERICA NT & SA
By /s/ illegible By /s/ Xxxxxx X. Xxxxxx
Its Assistant Vice President Its Vice President
"Fund": FRANKLIN PREMIER RETURN FUND
By Xxxxxxx X. Xxxxxx
Its Vice President
