As Filed with the Securities and Exchange Commission on March 6, 1998
1933 Act File No. 333-30131
1940 Act File No. 811-08277
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. / 3 /
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. / 6 /
FRANKLIN FLOATING RATE TRUST
(Exact Name of Registrant as Specified in Charter)
777 MARINERS ISLAND BLVD. SAN MATEO, CA 94404
(Address of Principal Executive Office)
Registrant's Telephone Number, Including Area Code (650) 312-2000
Harmon E. Burns, 777 Mariners Island Blvd., San Mateo, CA 94404
(NAME AND ADDRESS OF AGENT FOR SERVICE OF PROCESS)
With a copy to:
Merrill R. Steiner, Esq.
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
Approximate Date of Proposed Public offering:
If any securities being registered on this form will be offered on a delayed or
continuous basis in reliance on Rule 415 under the Securities Act of 1933, other
than securities offered in connection with a dividend reinvestment plan check
the following box. [x]
It is proposed that this filing will become effective (check
appropriate box)
[ ] when declared effective pursuant to section 8 (c)
[ ] immediately upon filing pursuant to paragraph (b)
[x] on April 1, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 486
[x] This post-effective amendment designates a new effective date for a
previously filed registration statement.
[ ] This Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act and the
Securities Act registration statement number of the earlier
effective registration statement for the same offering is ______.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- ------------------------------------------------------------------------------
Proposed Proposed
Title of Maximum Maximum
Securities Offering Aggregate Amount of
Being Amount Being Price Offering Registration
Registered Registered Per Unit(1) Price Fee
==============================================================================
Common Stock, par
value $0.01 10,000,000 SHARES $10.00 $100,000,000 $30,303*
-----------------
==============================================================================
(1) Estimated solely for the purpose of calculating the registration fee.
*Previously paid
FRANKLIN FLOATING RATE TRUST
PROSPECTUS
FORM N-2 CROSS REFERENCE SHEET
PART A - N-2
ITEM NUMBER CAPTION PROSPECTUS CAPTION
1. Outside Front Cover Outside Front Cover of Prospectus
2. Inside Front and Outside Not Applicable
Back Cover Page
3. Fee Table and Synopsis Expense Summary; Prospectus Summary
4. Financial Highlights Not Applicable
5. Plan of Distribution Outside Front Cover; Prospectus Summary;
How to Buy Common Shares; Description of
Common Shares
6. Selling Shareholders Not Applicable
7. Use of Proceeds Use of Proceeds from Sales of Common
Shares; What Kinds of Securities Does
the Fund Purchase?; Prospectus Summary
8. General Description of the Prospectus Summary; Information About
Registrant the Fund; What Kinds of Securities Does
the Fund Purchase?; What are the Risks
of This Investment; Description of
Common Shares
9. Management Who Manages the Fund?; Description of
Common Shares
10. Capital Stock, Long-Term Dividends and Distributions to
Debt, and Other Securities Shareholders; Taxation of the Fund and
Shareholders; Description of Common
Shares
11. Defaults and Arrears on Not Applicable
Senior Securities
12. Legal Proceedings Not Applicable
13. Table of Contents of the Table of Contents of Statement of
Statement of Additional Additional Information
Information
FRANKLIN FLOATING RATE TRUST
STATEMENT OF ADDITIONAL INFORMATION
FORM N-2 CROSS REFERENCE SHEET
PART B - N-2
ITEM NUMBER CAPTION SAI CAPTION
14. Cover Page Not Applicable
15. Table of Contents Cover Page
16. General Information and Table of Contents
History
17. Investment Objective and How does the Fund Invest its Assets?;
Policies What are the Risks of this Investment?;
Investment Restrictions
18. Management Officers and Trustees; Investment
Management and Other Services
19. Control Persons and Description of Common Shares
Principal Holders of
Securities
20. Investment Advisory and Investment Management and Other Services
Other Services
21. Brokerage Allocation and How does the Fund Buy Securities for its
Other Practices Portfolio?
22. Tax Status Additional Information on Distributions
and Taxes
23. Financial Statements Financial Statements
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
This Post-Effective Amendment No. 3 which relates to the Registrant's
previously filed Post-Effective Amendment No. 1, filed December 8, 1997,
including the Prospectus and Statement of Additional Information contained
therein, which are incorporated by reference herein, is being filed under
Rule 486(b)(1)(iii) to extend the date on which the amendment will become
effective automatically to April 1, 1998.
FRANKLIN FLOATING RATE TRUST
FORM N-2
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) FINANCIAL STATEMENTS:
Included in Part A: None
Included in Part B:
Report of Independent Auditors
Statement of Assets and Liabilities
(2) EXHIBITS:
The following exhibits are incorporated by reference, except
exhibits 2(g)(1), 2(g)(2), 2(h)(1), 2(h)(2), 2(j)(1), 2(j)(2),
2(j(3) and 2(p), which are attached herewith.
(a) (1) Agreement and Declaration of Trust
Filing: Registration Statement on Form N-2
File No. 333-30131
Filing Date: June 27, 1997
(2) Certificate of Trust
Filing: Post-Effective Amendment No. 1
Registration Statement on Form N-2
File No. 333-30131
Filing Date: December 8, 1997
(b) By-Laws
Filing: Registration Statement on Form N-2
File No. 333-30131
Filing Date: June 27, 1997
(c) Not Applicable
(d) Not Applicable
(e) Not Applicable
(f) Not Applicable
(g) (1) Management Agreement
(2) Fund Administration Agreement
(h) (1) Distribution Agreement
(2) Form of Dealer Agreement between Franklin/Templeton
Distributors, Inc. and Securities Dealers
(i) Not Applicable
(j) (1) Custodian Agreement
(2) Amendment dated May 7, 1997 to Master Custody
Agreement between Registrant and Bank of New York
dated February 16, 1996
(3) Amendment dated October 15, 1997 to Exhibit A in the
Master Custody Agreement between Registrant and Bank
of New York dated February 16, 1997
(k) Not Applicable
(l) Opinion and Consent of Counsel
Filing: Pre-Effective Amendment No. 2 to
Registration Statement on Form N-2
File No. 333-30131
Filing Date: October 8, 1997
(m) Not Applicable
(n) Consent of Independent Auditors
Filing: Post-Effective Amendment No. 1
Registration Statement on Form N-2
File No. 333-30131
Filing Date: December 8, 1997
(o) Not Applicable
(p) Form of Letter of Investment Intent
(q) Not Applicable
(r) Not Applicable
(s) Power of Attorney dated May 13, 1997
Filing: Registration Statement on Form N-2
File No. 333-30131
Filing Date: June 27, 1997
ITEM 25. MARKETING ARRANGEMENTS
None
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses to be incurred in
connection with the offering described in this Registration Statement:
Securities and Exchange Commission Fees.................... $ 30,303
Printing and Engraving Expenses............................ 8,800
Legal Fees................................................. 120,000
Accounting Expenses........................................ 4,000
Blue Sky Filing Fees and Expenses.......................... 12,000
Total...................................................... $175,103
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
Not Applicable
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
2
ITEM 29. INDEMNIFICATION
Under Article III, Section 7 of Registrant's Agreement and Declaration
of Trust, if any shareholder or former shareholder of Registrant (each, a
"Shareholder") shall be exposed to liability by reason of a claim or demand
relating to his or her being or having been a Shareholder, and not because of
his or her acts or omissions, the Shareholder or former Shareholder (or his
or her heirs, executors, administrators, or other legal representatives or in
the case of a corporation or other entity, its corporate or other general
successor) shall be entitled to be held harmless from and indemnified out of
the assets of the Registrant against all loss and expense arising from such
claim or demand.
Under Article VII, Section 2 of Registrant's Agreement and Declaration
of Trust, the Trustees of Registrant (each, a "Trustee," and collectively,
the "Trustees") shall not be responsible or liable in any event for any
neglect or wrong-doing of any officer, agent, employee, the investment
manager or principal underwriter of the Registrant, nor shall any Trustee be
responsible for the act or omission of any other Trustee, and the Registrant
out of its assets shall indemnify and hold harmless each and every Trustee
from and against any and all claims and demands whatsoever arising out of or
related to each Trustee's performance of his or her duties as a Trustee of
the Registrant; provided that nothing contained in Registrant's Agreement and
Declaration of Trust shall indemnify, hold harmless or protect any Trustee
from or against any liability to the Registrant or any Shareholder to which
he or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "1933 Act") may be permitted to Trustees,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the 1933 Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a Trustee,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such Trustee, officer or
controlling person in connection with securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court or appropriate
jurisdiction the question whether such indemnification is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Franklin Advisers, Inc.
See "Who Manages the Fund?"
The officers and directors of the Registrant's investment adviser also serve
as officers and/or directors for (1) the investment adviser's corporate
parent, Franklin Resources, Inc., 777 Mariners Island Blvd., San Mateo, CA
94404 and/or (2) other investment companies in the Franklin Templeton Group
of Funds. In addition, Mr. Charles B. Johnson was formerly a director of
General Host Corporation, Metro Center, One Station Place, Stamford, CT
06904-2045. For additional information please see Schedules A and D of Form
ADV of the Registrant's investment adviser (SEC File 801-26292) incorporated
herein by reference, which sets forth the officers and directors of the
Registrant's investment adviser and information as to any business,
profession, vocation or employment of a substantial nature engaged in by
those officers and directors during the past two years.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books or other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940, as amended, are kept by the
Registrant or its shareholder services agent, Franklin/Templeton Investor
Services, Inc., both of whose address is 777 Mariners Island Blvd., San
Mateo, CA 94404.
ITEM 32. MANAGEMENT SERVICES
Not Applicable
ITEM 33. UNDERTAKINGS
(1) Registrant undertakes to suspend the offering of its shares until
it amends its Prospectus if-
(a) subsequent to the effective date of this Registration
Statement, the net asset value declines more than 10% from
its net asset value as of the effective date of the
Registration Statement; or
(b) The net asset value increases to an amount greater than its
net proceeds as stated in the Prospectus.
(2) Registrant undertakes:
(a) to file, during any period in which offers or sales are
being made, a post-effective amendment to the registration
statement:
(1) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended
(the "Act");
(2) to reflect in the prospectus any facts or
events after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
and
(3) to include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement.
b. that, for the purpose of determining any liability under
the 1933 Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of those
securities at that time shall be deemed to be the initial
bona fide offering thereof; and
c. to remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
3. Registrant further undertakes to send by first class mail or
other means designed to ensure equally prompt delivery, within
two business days of receipt of a written or oral request, any
Statement of Additional Information.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to
Rule 486(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Mateo, and the State of California, on the 5th day of March 5, 1998.
FRANKLIN FLOATING RATE TRUST
(Registrant)
BY RUPERT H. JOHNSON, JR.*, PRESIDENT
Rupert H. Johnson, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
and on the dates indicated:
SIGNATURE TITLE DATE
CHARLES B. JOHNSON* Trustee & March 5, 1998
Charles B. Johnson Chairman of
the Board
FRANK H. ABBOTT, III* Trustee March 5, 1998
Frank H. Abbott, III
HARRIS J. ASHTON* Trustee March 5, 1998
Harris J. Ashton
RUPERT H. JOHNSON, JR.* Trustee March 5, 1998
Rupert H. Johnson, Jr. & President
MARTIN L. FLANAGAN* Principal March 5, 1998
Martin L. Flanagan Financial Officer
DIOMEDES LOO-TAM* Principal March 5, 1998
Diomedes Loo-Tam Accounting Officer
S. JOSEPH FORTUNATO* Trustee March 5, 1998
S. Joseph Fortunato
FRANK W. T. LAHAYE* Trustee March 5, 1998
Frank W. T. LaHaye
GORDON S. MACKLIN* Trustee March 5, 1998
Gordon S. Macklin
*BY Larry L. Greene, Attorney-in-Fact
(Pursuant to Power of Attorney previously filed)
FRANKLIN FLOATING RATE TRUST
REGISTRATION STATEMENT
EXHIBIT INDEX
Exhibit No. Description Location
EX-99.2(a)(1) Agreement and Declaration of Trust *
EX-99.2(a)(2) Certificate of Trust *
EX-99.2(b) By-Laws *
EX-99.2(g)(1) Form of Management Agreement Attached
EX-99.2(g)(2) Form of Fund Administration Agreement Attached
EX-99.2(h)(1) Form of Distribution Agreement Attached
EX-99.2(h)(2) Form of Dealer Agreement between Attached
Franklin/Templeton Distributors, Inc.
and Securities Dealers
EX-99.2(j)(1) Form of Custodian Agreement Attached
EX-99.2(j)(2) Amendment dated May 7, 1997 to Master Attached
Custody Agreement between Registrant
and Bank of New York dated February
16, 1996
EX-99.2(j)(3) Amendment dated October 15, 1997 to Attached
Exhibit A in the Master Custody
Agreement between Registrant and Bank
of New York dated February 16, 1997
EX-99.2(l) Opinion and Consent of Counsel *
EX-99.2(n) Consent of Independent Auditors *
EX-99.2(p) Letter of Investment Intent Attached
EX-99.2(s) Power of Attorney dated May 13, 1997 *
*Incorporated by Reference
FRANKLIN FLOATING RATE TRUST
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT made between FRANKLIN FLOATING RATE
TRUST, a Delaware business trust (the "Trust"), and FRANKLIN ADVISERS, INC.,
a California corporation, (the "Manager").
WHEREAS, the Trust has been organized and intends to operate as an
investment company registered under the Investment Company Act of 1940 (the
"1940 Act") for the purpose of investing and reinvesting its assets in
securities, as set forth in its Agreement and Declaration of Trust, its
By-Laws and its Registration Statements under the 1940 Act and the Securities
Act of 1933, all as heretofore and hereafter amended and supplemented; and
the Trust desires to avail itself of the services, information, advice,
assistance and facilities of an investment manager and to have an investment
manager perform various management, statistical, research, investment
advisory and other services for the Trust; and,
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, is engaged in the business of rendering
management, investment advisory, counseling and supervisory services to
investment companies and other investment counseling clients, and desires to
provide these services to the Trust.
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is mutually agreed as follows:
l. EMPLOYMENT OF THE MANAGER. The Trust hereby employs the Manager to
manage the investment and reinvestment of the Trust's assets and to
administer its affairs, subject to the direction of the Board of Trustees and
the officers of the Trust, for the period and on the terms hereinafter set
forth. The Manager hereby accepts such employment and agrees during such
period to render the services and to assume the obligations herein set forth
for the compensation herein provided. The Manager shall for all purposes
herein be deemed to be an independent contractor and shall, except as
expressly provided or authorized (whether herein or otherwise), have no
authority to act for or represent the Trust or the Trust in any way or
otherwise be deemed an agent of the Trust.
2. OBLIGATIONS OF AND SERVICES TO BE PROVIDED BY THE MANAGER. The
Manager undertakes to provide the services hereinafter set forth and to
assume the following obligations:
A. INVESTMENT MANAGEMENT SERVICES.
(a) The Manager shall manage the Trust's assets
subject to and in accordance with the investment objectives and policies of
the Trust and any directions which the Trust's Board of Trustees may issue
from time to time. In pursuance of the foregoing, the Manager shall make all
determinations with respect to the investment of the Trust's assets and the
purchase and sale of its investment securities, and shall take such steps as
may be necessary to implement the same. Such determinations and services
shall include determining the manner in which any voting rights, rights to
consent to corporate action and any other rights pertaining to the Trust's
investment securities shall be exercised. The Manager shall render or cause
to be rendered regular reports to the Trust, at regular meetings of its Board
of Trustees and at such other times as may be reasonably requested by the
Trust's Board of Trustees, of (i) the decisions made with respect to the
investment of the Trust's assets and the purchase and sale of its investment
securities, (ii) the reasons for such decisions and (iii) the extent to which
those decisions have been implemented.
(b) The Manager, subject to and in accordance with any
directions which the Trust's Board of Trustees may issue from time to time,
shall place, in the name of the Trust, orders for the execution of the
Trust's securities transactions. When placing such orders, the Manager shall
seek to obtain the best net price and execution for the Trust, but this
requirement shall not be deemed to obligate the Manager to place any order
solely on the basis of obtaining the lowest commission rate if the other
standards set forth in this section have been satisfied. The parties
recognize that there are likely to be many cases in which different brokers
are equally able to provide such best price and execution and that, in
selecting among such brokers with respect to particular trades, it is
desirable to choose those brokers who furnish research, statistical,
quotations and other information to the Trust and the Manager in accordance
with the standards set forth below. Moreover, to the extent that it
continues to be lawful to do so and so long as the Board of Trustees
determines that the Trust will benefit, directly or indirectly, by doing so,
the Manager may place orders with a broker who charges a commission for that
transaction which is in excess of the amount of commission that another
broker would have charged for effecting that transaction, provided that the
excess commission is reasonable in relation to the value of "brokerage and
research services" (as defined in Section 28(e) (3) of the Securities
Exchange Act of 1934) provided by that broker.
Accordingly, the Trust and the Manager agree that the
Manager shall select brokers for the execution of the Trust's transactions
from among:
(i) Those brokers and dealers who provide quotations
and other services to the Trust, specifically including
the quotations necessary to determine the Trust's net
assets, in such amount of total brokerage as may
reasonably be required in light of such services; and
(ii) Those brokers and dealers who supply research,
statistical and other data to the Manager or its
affiliates which the Manager or its affiliates may
lawfully and appropriately use in their investment
advisory capacities, which relate directly to securities,
actual or potential, of the Trust, or which place the
Manager in a better position to make decisions in
connection with the management of the Trust's assets and
securities, whether or not such data may also be useful
to the Manager and its affiliates in managing other
portfolios or advising other clients, in such amount of
total brokerage as may reasonably be required. Provided
that the Trust's officers are satisfied that the best
execution is obtained, the sale of shares of the Trust
may also be considered as a factor in the selection of
broker-dealers to execute the Trust's portfolio
transactions.
(c) When the Manager has determined that the Trust
should tender securities pursuant to a "tender offer solicitation,"
Franklin/Templeton Distributors, Inc. ("Distributors") shall be designated as
the "tendering dealer" so long as it is legally permitted to act in such
capacity under the federal securities laws and rules thereunder and the rules
of any securities exchange or association of which Distributors may be a
member. Neither the Manager nor Distributors shall be obligated to make any
additional commitments of capital, expense or personnel beyond that already
committed (other than normal periodic fees or payments necessary to maintain
its corporate existence and membership in the National Association of
Securities Dealers, Inc.) as of the date of this Agreement. This Agreement
shall not obligate the Manager or Distributors (i) to act pursuant to the
foregoing requirement under any circumstances in which they might reasonably
believe that liability might be imposed upon them as a result of so acting,
or (ii) to institute legal or other proceedings to collect fees which may be
considered to be due from others to it as a result of such a tender, unless
the Trust shall enter into an agreement with the Manager and/or Distributors
to reimburse them for all such expenses connected with attempting to collect
such fees, including legal fees and expenses and that portion of the
compensation due to their employees which is attributable to the time
involved in attempting to collect such fees.
(d) The Manager shall render regular reports to the
Trust, not more frequently than quarterly, of how much total brokerage
business has been placed by the Manager, on behalf of the Trust, with brokers
falling into each of the categories referred to above and the manner in which
the allocation has been accomplished.
(e) The Manager agrees that no investment decision
will be made or influenced by a desire to provide brokerage for allocation in
accordance with the foregoing, and that the right to make such allocation of
brokerage shall not interfere with the Manager's paramount duty to obtain the
best net price and execution for the Trust.
B. PROVISION OF INFORMATION NECESSARY FOR PREPARATION OF
SECURITIES REGISTRATION STATEMENTS, AMENDMENTS AND OTHER MATERIALS. The
Manager, its officers and employees will make available and provide
accounting and statistical information required by the Trust in the
preparation of registration statements, reports and other documents required
by federal and state securities laws and with such information as the Trust
may reasonably request for use in the preparation of such documents or of
other materials necessary or helpful for the underwriting and distribution of
the Trust's shares.
C. OTHER OBLIGATIONS AND SERVICES. The Manager shall make
its officers and employees available to the Board of Trustees and officers of
the Trust for consultation and discussions regarding the administration and
management of the Trust and its investment activities.
3. EXPENSES OF THE TRUST. It is understood that the Trust will pay
all of its own expenses other than those expressly assumed by the Manager
herein, which expenses payable by the Trust shall include:
A. Fees and expenses paid to the Manager as provided herein;
B. Expenses of all audits by independent public accountants;
C. Expenses of transfer agent, registrar, custodian,
dividend disbursing agent and shareholder record-keeping services, including
the expenses of issue, repurchase or redemption of its shares;
D. Expenses of obtaining quotations for calculating the
value of the Trust's net assets;
E. Salaries and other compensations of executive officers of
the Trust who are not officers, directors, stockholders or employees of the
Manager or its affiliates;
F. Taxes levied against the Trust;
G. Brokerage fees and commissions in connection with the
purchase and sale of securities for the Trust;
H. Costs, including the interest expense, of borrowing
money;
I. Costs incident to meetings of the Board of Trustees and
shareholders of the Trust, reports to the Trust's shareholders, the filing of
reports with regulatory bodies and the maintenance of the Trust's legal
existence;
J. Legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
K. Trustees' fees and expenses to trustees who are not
directors, officers, employees or stockholders of the Manager or any of its
affiliates;
L. Costs and expense of registering and maintaining the
registration of the Trust and its shares under federal and any applicable
state laws; including the printing and mailing of prospectuses to its
shareholders;
M. Trade association dues; and
N. The Trust's pro rata portion of fidelity bond, errors and
omissions, and trustees and officer liability insurance premiums.
4. COMPENSATION OF THE MANAGER. The Trust shall pay a management
fee in cash to the Manager based upon a percentage of the value of the
Trust's managed assets, calculated as set forth below, as compensation for
the services rendered and obligations assumed by the Manager, during the
preceding month, on the first business day of the month in each year.
A. For purposes of calculating such fee, the value of the
net assets of the Trust shall be determined in the same manner as that Trust
uses to compute the value of its net assets in connection with the
determination of the net asset value of its shares, all as set forth more
fully in the Trust's current prospectus and statement of additional
information. To determine the Trust's managed assets, the Trust's net assets
shall be added to the value of any senior securities outstanding, including
but not limited to the value of any borrowings, debt securities or preferred
stock offering, provided that the amount of such borrowing or the proceeds of
such offering have been used to purchase portfolio securities for the Trust.
The rate of the management fee payable by the Trust shall be calculated daily
at the following annual rates:
0.80% of the average daily managed assets of the Trust
B. The management fee payable by the Trust shall be reduced
or eliminated to the extent that Distributors has actually received cash
payments of tender offer solicitation fees less certain costs and expenses
incurred in connection therewith and to the extent necessary to comply with
the limitations on expenses which may be borne by the Trust as set forth in
the laws, regulations and administrative interpretations of those states in
which the Trust's shares are registered. The Manager may waive all or a
portion of its fees provided for hereunder and such waiver shall be treated
as a reduction in purchase price of its services. The Manager shall be
contractually bound hereunder by the terms of any publicly announced waiver
of its fee, or any limitation of the Trust's expenses, as if such waiver or
limitation were fully set forth herein.
C. If this Agreement is terminated prior to the end of any
month, the accrued management fee shall be paid to the date of termination.
5. ACTIVITIES OF THE MANAGER. The services of the Manager to the
Trust hereunder are not to be deemed exclusive, and the Manager and any of
its affiliates shall be free to render similar services to others. Subject
to and in accordance with the Agreement and Declaration of Trust and By-Laws
of the Trust and Section 10(a) of the 1940 Act, it is understood that
trustees, officers, agents and shareholders of the Trust are or may be
interested in the Manager or its affiliates as directors, officers, agents or
stockholders; that directors, officers, agents or stockholders of the Manager
or its affiliates are or may be interested in the Trust as trustees,
officers, agents, shareholders or otherwise; that the Manager or its
affiliates may be interested in the Trust as shareholders or otherwise; and
that the effect of any such interests shall be governed by said Agreement and
Declaration of Trust, By-Laws and the 1940 Act.
6. LIABILITIES OF THE MANAGER.
A. In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties hereunder on the
part of the Manager, the Manager shall not be subject to liability to the
Trust or to any shareholder of the Trust for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security by the
Trust.
B. Notwithstanding the foregoing, the Manager agrees to
reimburse the Trust for any and all costs, expenses, and counsel and
trustees' fees reasonably incurred by the Trust in the preparation, printing
and distribution of proxy statements, amendments to its Registration
Statement, holdings of meetings of its shareholders or trustees, the conduct
of factual investigations, any legal or administrative proceedings (including
any applications for exemptions or determinations by the Securities and
Exchange Commission) which the Trust incurs as the result of action or
inaction of the Manager or any of its affiliates or any of their officers,
directors, employees or stockholders where the action or inaction
necessitating such expenditures (i) is directly or indirectly related to any
transactions or proposed transaction in the stock or control of the Manager
or its affiliates (or litigation related to any pending or proposed or future
transaction in such shares or control) which shall have been undertaken
without the prior, express approval of the Trust's Board of Trustees; or,
(ii) is within the control of the Manager or any of its affiliates or any of
their officers, directors, employees or stockholders. The Manager shall not
be obligated pursuant to the provisions of this Subparagraph 6(B), to
reimburse the Trust for any expenditures related to the institution of an
administrative proceeding or civil litigation by the Trust or a shareholder
seeking to recover all or a portion of the proceeds derived by any
stockholder of the Manager or any of its affiliates from the sale of his
shares of the Manager, or similar matters. So long as this Agreement is in
effect, the Manager shall pay to the Trust the amount due for expenses
subject to this Subparagraph 6(B) within 30 days after a bill or statement
has been received by the Manager therefor. This provision shall not be
deemed to be a waiver of any claim the Trust may have or may assert against
the Manager or others for costs, expenses or damages heretofore incurred by
the Trust or for costs, expenses or damages the Trust may hereafter incur
which are not reimbursable to it hereunder.
C. No provision of this Agreement shall be construed to
protect any trustee or officer of the Trust, or director or officer of the
Manager, from liability in violation of Sections 17(h) and (i) of the 1940
Act.
7. RENEWAL AND TERMINATION.
A. This Agreement shall become effective on the date written
below and shall continue in effect for two (2) years thereafter, unless
sooner terminated as hereinafter provided and shall continue in effect
thereafter for periods not exceeding one (1) year so long as such
continuation is approved at least annually (i) by a vote of a majority of the
outstanding voting securities of the Trust or by a vote of the Board of
Trustees of the Trust, and (ii) by a vote of a majority of the Trustees of
the Trust who are not parties to the Agreement (other than as Trustees of the
Trust), cast in person at a meeting called for the purpose of voting on the
Agreement.
B. This Agreement:
(i) may at any time be terminated without the payment
of any penalty either by vote of the Board of Trustees of the Trust or by
vote of a majority of the outstanding voting securities of the Trust on 60
days' written notice to the Manager;
(ii) shall immediately terminate with respect to the
Trust in the event of its assignment; and
(iii) may be terminated by the Manager on 60 days'
written notice to the Trust.
C. As used in this Paragraph the terms "assignment,"
"interested person" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth for any such terms in the 1940
Act.
D. Any notice under this Agreement shall be given in
writing addressed and delivered, or mailed post-paid, to the other party at
any office of such party.
E. Unless otherwise agreed by the Manager, upon
termination of this Agreement, the Trust shall cease to use the "Franklin"
name and logo.
8. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
9. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and effective on the 16th day of September, 1997.
FRANKLIN FLOATING RATE TRUST
By: /s/ Deborah R. Gatzek
Deborah R. Gatzek
Vice President & Secretary
FRANKLIN ADVISERS, INC.
By: /s/ Harmon E. Burns
Harmon E. Burns
Executive Vice President
FUND ADMINISTRATION AGREEMENT
AGREEMENT dated as of September 16, 1997 between FRANKLIN
FLOATING RATE TRUST, a Delaware business trust (the "Trust"), and FRANKLIN
TEMPLETON SERVICES, INC. (the "Administrator").
In consideration of the mutual agreements herein made, the
parties hereby agree as follows:
(1) The Administrator agrees, during the life of this Agreement, to
provide the following services to the Trust:
(a) providing office space, telephone, office equipment and
supplies for the Trust;
(b) providing trading desk facilities for the Trust, unless
these facilities are provided by the Trust's investment adviser;
(c) authorizing expenditures and approving bills for payment on
behalf of the Trust;
(d) supervising preparation of periodic reports to
Shareholders, notices of dividends, capital gains distributions and tax
credits; and attending to routine correspondence and other communications
with individual Shareholders when asked to do so by the Trust's shareholder
servicing agent or other agents of the Trust;
(e) coordinating the daily pricing of the Trust's investment
portfolio, including collecting quotations from pricing services engaged by
the Trust; providing fund accounting services, including preparing and
supervising publication of daily net asset value quotations, periodic
earnings reports and other financial data;
(f) monitoring relationships with organizations serving the
Fund, including custodians, transfer agents, public accounting firms, law
firms, printers and other third party service providers;
(g) supervising compliance by the Trust with recordkeeping
requirements under the federal securities laws, including the 1940 Act, and
the rules and regulations thereunder, supervising compliance with
recordkeeping requirements imposed by state laws or regulations, and
maintaining books and records for the Trust (other than those maintained by
the custodian and transfer agent);
(h) preparing and filing of tax reports including the Trust's
income tax returns, and monitoring the Trust's compliance with subchapter M
of the Internal Revenue Code, and other applicable tax laws and regulations;
(i) monitoring the Trust's compliance with: 1940 Act and other
federal securities laws, and rules and regulations thereunder; state and
foreign laws and regulations applicable to the operation of investment
companies; the Trust's investment objectives, policies and restrictions; and
the Code of Ethics and other policies adopted by the Trust's Board of
Trustees or ("Board") or by the Adviser and applicable to the Trust;
(j) providing executive, clerical and secretarial personnel
needed to carry out the above responsibilities; and
(k) preparing regulatory reports, including without limitation
NSARs, proxy statements and U.S. and foreign ownership reports.
Nothing in this Agreement shall obligate the Trust to pay any compensation to
the officers of the Trust. Nothing in this Agreement shall obligate the
Administrator to pay for the services of third parties, including attorneys,
auditors, printers, pricing services or others, engaged directly by the Trust
to perform services on behalf of the Trust.
(2) The Trust agrees to pay to the Administrator as compensation for
such services a monthly fee equal on an annual basis to 0.15% of the first
$200 million of the average daily net assets of the Trust during the month
preceding each payment, reduced as follows: on such net assets in excess of
$200 million up to $700 million, a monthly fee equal on an annual basis to
0.135%; on such net assets in excess of $700 million up to $1.2 billion, a
monthly fee equal on an annual basis to 0.10%; and on such net assets in
excess of $1.2 billion, a monthly fee equal on an annual basis to 0.075%.
From time to time, the Administrator may waive all or a portion of its fees
provided for hereunder and such waiver shall be treated as a reduction in the
purchase price of its services. The Administrator shall be contractually
bound hereunder by the terms of any publicly announced waiver of its fee, or
any limitation of each affected Trust's expenses, as if such waiver or
limitation were fully set forth herein.
(3) This Agreement shall remain in full force and effect through for
one year after its execution and thereafter from year to year to the extent
continuance is approved annually by the Board of the Trust.
(4) This Agreement may be terminated by the Trust at any time on
sixty (60) days' written notice without payment of penalty, provided that
such termination by the Trust shall be directed or approved by the vote of a
majority of the Board of the Trust in office at the time or by the vote of a
majority of the outstanding voting securities of the Trust (as defined by the
1940 Act); and shall automatically and immediately terminate in the event of
its assignment (as defined by the 1940 Act).
(5) In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Administrator, or of reckless disregard of its
duties and obligations hereunder, the Administrator shall not be subject to
liability for any act or omission in the course of, or connected with,
rendering services hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their duly authorized officers.
FRANKLIN FLOATING RATE TRUST
By: /s/ Deborah R. Gatzek
Deborah R. Gatzek
Vice President & Secretary
FRANKLIN TEMPLETON SERVICES, INC.
By: /s/ Harmon E. Burns
Harmon E. Burns
Executive Vice President
FRANKLIN FLOATING RATE TRUST
777 Mariners Island Blvd.
San Mateo, California 94404
Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404
Re: Distribution Agreement
Gentlemen:
We (the "Fund") are a corporation or business trust operating as a
continuously offered closed-end management investment company or "mutual
fund", which is registered under the Investment Company Act of 1940 (the
"1940 Act") and whose shares are registered under the Securities Act of 1933
(the "1933 Act"). We desire to issue one or more series or classes of our
authorized but unissued shares of capital stock or beneficial interest (the
"Shares") to authorized persons in accordance with applicable Federal and
State securities laws. The Fund's Shares may be made available in one or
more separate series, each of which may have one or more classes.
You have informed us that your company is registered as a broker-dealer under
the provisions of the Securities Exchange Act of 1934 and that your company
is a member of the National Association of Securities Dealers, Inc. You have
indicated your desire to act as the exclusive selling agent and distributor
for the Shares. We have been authorized to execute and deliver this
Distribution Agreement ("Agreement") to you by a resolution of our Board of
Directors or Trustees ("Board") passed at a meeting at which a majority of
Board members, including a majority who are not otherwise interested persons
of the Fund and who are not interested persons of our investment adviser, its
related organizations or with you or your related organizations, were present
and voted in favor of the said resolution approving this Agreement.
1. APPOINTMENT OF UNDERWRITER. Upon the execution of this Agreement
and in consideration of the agreements on your part herein expressed and upon
the terms and conditions set forth herein, we hereby appoint you as the
exclusive sales agent for our Shares and agree that we will deliver such
Shares as you may sell. You agree to use your best efforts to promote the
sale of Shares, but are not obligated to sell any specific number of Shares.
However, the Fund and each series retain the right to make direct sales
of its Shares without sales charges consistent with the terms of the then
current prospectus and statement of additional information (hereinafter,
collectively, "prospectus") and applicable law, and to engage in other
legally authorized transactions in its Shares which do not involve the sale
of Shares to the general public. Such other transactions may include,
without limitation, transactions between the Fund or any series or class and
its shareholders only, transactions involving the reorganization of the Fund
or any series, and transactions involving the merger or combination of the
Fund or any series with another corporation or trust.
2. INDEPENDENT CONTRACTOR. You will undertake and discharge your
obligations hereunder as an independent contractor and shall have no
authority or power to obligate or bind us by your actions, conduct or
contracts except that you are authorized to promote the sale of Shares. You
may appoint sub-agents or distribute through dealers or otherwise as you may
determine from time to time, but this Agreement shall not be construed as
authorizing any dealer or other person to accept orders for sale or
repurchase on our behalf or otherwise act as our agent for any purpose.
3. OFFERING PRICE. Shares shall be offered for sale at a price
equivalent to the net asset value per share of that series and class plus any
applicable percentage of the public offering price as sales commission or as
otherwise set forth in our then current prospectus. On each business day on
which the New York Stock Exchange is open for business, we will furnish you
with the net asset value of the Shares of each available series and class
which shall be determined in accordance with our then effective prospectus.
All Shares will be sold in the manner set forth in our then effective
prospectus and statement of additional information, and in compliance with
applicable law.
4. COMPENSATION.
A. SALES COMMISSION. To the extent set forth in the Fund's then
current prospectus, you shall be entitled to charge a sales commission on the
sale or repurchase, as appropriate, of each series and class of the Fund's
Shares in the amount of any applicable initial, deferred or contingent
deferred sales charge. You may allow any subagents or dealers such
commissions or discounts from and not exceeding the total sales commission as
you shall deem advisable, so long as any such commissions or discounts are
set forth in the Fund's then current prospectus to the extent required by
applicable federal and state securities laws. You may make payments to
sub-agents or dealers from your own resources, subject to the following
conditions: (a) any such payments shall not create any obligation for or
recourse against the Fund or any series or class, and (b) the terms and
conditions of any such payments are consistent with our prospectus and
applicable federal and state securities laws and are disclosed in our
prospectus or statement of additional information to the extent such laws may
require.
B. EARLY WITHDRAWAL CHARGE. Your compensation as principal
underwriter under this Agreement shall be the Early Withdrawal Charges, if
any, that are collected on the Shares as set forth in the Fund's then current
prospectus.
5. TERMS AND CONDITIONS OF SALES. Shares shall be offered for sale
only in those jurisdictions where they have been properly registered or are
exempt from registration, and only to those groups of people which the Board
may from time to time determine to be eligible to purchase such shares.
6. ORDERS AND PAYMENT FOR SHARES. Orders for Shares shall be
directed to the Fund's shareholder services agent, for acceptance on behalf
of the Fund. At or prior to the time of delivery of any of our Shares you
will pay or cause to be paid to the custodian of the Fund's assets, for our
account, an amount in cash equal to the net asset value of such Shares.
Sales of Shares shall be deemed to be made when and where accepted by the
Fund's shareholder services agent. The Fund's custodian and shareholder
services agent shall be identified in its prospectus.
7. PURCHASES FOR YOUR OWN ACCOUNT. You shall not purchase our
Shares for your own account for purposes of resale to the public, but you may
purchase Shares for your own investment account upon your written assurance
that the purchase is for investment purposes and that the Shares will not be
resold except through repurchase by us.
8. SALE OF SHARES TO AFFILIATES. You may sell our Shares at net
asset value to certain of your and our affiliated persons pursuant to the
applicable provisions of the federal securities statutes and rules or
regulations thereunder (the "Rules and Regulations"), including Rule 22d-1
under the 1940 Act, as amended from time to time.
9. ALLOCATION OF EXPENSES. We will pay the expenses:
(a) Of the preparation of the audited and certified financial
statements of our company to be included in any
Post-Effective Amendments ("Amendments") to our
Registration Statement under the 1933 Act or 1940 Act,
including the prospectus, or in reports to existing
shareholders;
(b) Of the preparation, including legal fees, and printing of
all Amendments or supplements filed with the Securities and
Exchange Commission, including the copies of the
prospectuses included in the Amendments and the first 10
copies of the definitive prospectuses or supplements
thereto, other than those necessitated by your (including
your "Parent's") activities or Rules and Regulations
related to your activities where such Amendments or
supplements result in expenses which we would not otherwise
have incurred;
(c) Of the preparation, printing and distribution of any
reports or communications which we send to our existing
shareholders; and
(d) Of filing and other fees to Federal and State securities
regulatory authorities necessary to continue offering our
Shares.
You will pay the expenses:
(a) Of printing the copies of the prospectuses and any
supplements thereto which are necessary to continue to
offer our Shares;
(b) Of the preparation, excluding legal fees, and printing of
all Amendments and supplements to our prospectuses if the
Amendment or supplement arises from your (including your
"Parent's") activities or Rules and Regulations related to
your activities and those expenses would not otherwise have
been incurred by us;
(c) Of printing additional copies, for use by you as sales
literature, of reports or other communications which we
have prepared for distribution to our existing
shareholders; and
(d) Incurred by you in advertising, promoting and selling our
Shares.
10. FURNISHING OF INFORMATION. We will furnish to you such
information with respect to each series and class of Shares, in such form and
signed by such of our officers as you may reasonably request, and we warrant
that the statements therein contained, when so signed, will be true and
correct. We will also furnish you with such information and will take such
action as you may reasonably request in order to qualify our Shares for sale
to the public under the Blue Sky Laws of jurisdictions in which you may wish
to offer them. We will furnish you with annual audited financial statements
of our books and accounts certified by independent public accountants, with
semi-annual financial statements prepared by us, with registration statements
and, from time to time, with such additional information regarding our
financial condition as you may reasonably request.
11. CONDUCT OF BUSINESS. Other than our currently effective
prospectus, you will not issue any sales material or statements except
literature or advertising which conforms to the requirements of Federal and
State securities laws and regulations and which have been filed, where
necessary, with the appropriate regulatory authorities. You will furnish us
with copies of all such materials prior to their use and no such material
shall be published if we shall reasonably and promptly object.
You shall comply with the applicable Federal and State laws and
regulations where our Shares are offered for sale and conduct your affairs
with us and with dealers, brokers or investors in accordance with the Rules
of Fair Practice of the National Association of Securities Dealers, Inc.
12. OTHER ACTIVITIES. Your services pursuant to this Agreement shall
not be deemed to be exclusive, and you may render similar services and act as
an underwriter, distributor or dealer for other investment companies in the
offering of their shares.
13. TERM OF AGREEMENT. This Agreement shall become effective on the
date of its execution, and shall remain in effect for a period of two (2)
years. The Agreement is renewable annually thereafter, with respect to the
Fund or, if the Fund has more than one series, with respect to each series,
for successive periods not to exceed one year (i) by a vote of (a) a majority
of the outstanding voting securities of the Fund or, if the Fund has more
than one series, of each series, or (b) by a vote of the Board, AND (ii) by a
vote of a majority of the members of the Board who are not parties to the
Agreement or interested persons of any parties to the Agreement (other than
as members of the Board), cast in person at a meeting called for the purpose
of voting on the Agreement.
This Agreement may at any time be terminated by the Fund or by
any series without the payment of any penalty, (i) either by vote of the
Board or by vote of a majority of the outstanding voting securities of the
Fund or any series on 90 days' written notice to you; or (ii) by you on 90
days' written notice to the Fund; and shall immediately terminate with
respect to the Fund and each series in the event of its assignment.
14. SUSPENSION OF SALES. We reserve the right at all times to
suspend or limit the public offering of Shares upon two days' written notice
to you.
15. MISCELLANEOUS. This Agreement shall be subject to the laws of
the State of California and shall be interpreted and construed to further
promote the operation of the Fund as a closed-end investment company. This
Agreement shall supersede all Distribution Agreements and Amendments
previously in effect between the parties. As used herein, the terms "Net
Asset Value," "Offering Price," "Investment Company," "Closed-End Investment
Company," "Assignment," "Principal Underwriter," "Interested Person,"
"Parent," "Affiliated Person," and "Majority of the Outstanding Voting
Securities" shall have the meanings set forth in the 1933 Act or the 1940 Act
and the Rules and Regulations thereunder.
Nothing herein shall be deemed to protect you against any liability to us or
to our securities holders to which you would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of
your duties hereunder, or by reason of your reckless disregard of your
obligations and duties hereunder.
If the foregoing meets with your approval, please acknowledge your acceptance
by signing each of the enclosed copies, whereupon this will become a binding
agreement as of the date set forth below.
Very truly yours,
FRANKLIN FLOATING RATE TRUST
By: /s/ Deborah R. Gatzek
Deborah R. Gatzek
Vice President & Secretary
Accepted:
Franklin/Templeton Distributors, Inc.
By: /s/ Harmon E. Burns
Harmon E. Burns
Executive Vice President
DATED: September 16, 1997
DEALER AGREEMENT
Effective: May 1, 1995
Dear Securities Dealer:
Franklin/Templeton Distributors, Inc. ("we" or "us") invites you to participate
in the distribution of shares of the Franklin and Templeton mutual funds (the
"Funds") for which we now or in the future serve as principal underwriter,
subject to the terms of this Agreement. We will notify you from time to time of
the Funds which are eligible for distribution and the terms of compensation
under this Agreement. This Agreement supersedes any prior dealer agreements
between us, as stated in paragraph 18, below.
1. Licensing.
(a) You represent that you are a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD") and are presently licensed to
the extent necessary by the appropriate regulatory agency of each state in which
you will offer and sell shares of the Funds. You agree that termination or
suspension of such membership with the NASD, or of your license to do business
by any state or federal regulatory agency, at any time shall terminate or
suspend this Agreement forthwith and shall require you to notify us in writing
of such action. If you are not a member of the NASD but are a dealer subject to
the laws of a foreign country, you agree to conform to the rules of fair
practice of such association. This Agreement is in all respects subject to Rule
26 of the Rules of Fair Practice of the NASD which shall control any provision
to the contrary in this Agreement.
(b) You agree to notify us immediately in writing if at any time you are
not a member in good standing of the Securities Investor Protection Corporation
("SIPC").
2. Sales of Fund Shares. You may offer and sell shares of each Fund and class
only at the public offering price which shall be applicable to, and in effect at
the time of, each transaction. The procedures relating to all orders and the
handling of them shall be subject to the terms of the then current prospectus
and statement of additional information (hereafter, the "prospectus") and new
account application, including amendments, for each such Fund, and our written
instructions from time to time. This Agreement is not exclusive, and either
party may enter into similar agreements with third parties.
3. Duties of Dealer: In General. You agree:
(a) To act as principal, or as agent on behalf of your customers, in all
transactions in shares of the Funds except as provided in paragraph 4 hereof.
You shall not have any authority to act as agent for the issuer (the Funds), for
the Principal Underwriter, or for any other dealer in any respect, nor will you
represent to any third party that you have such authority or are acting in such
capacity.
(b) To purchase shares only from us or from your customers.
(c) To enter orders for the purchase of shares of the Funds only from us
and only for the purpose of covering purchase orders you have already received
from your customers or for your own bona fide investment.
(d) To maintain records of all sales and redemptions of shares made
through you and to furnish us with copies of such records on request.
(e) To distribute prospectuses and reports to your customers in
compliance with applicable legal requirements, except to the extent that we
expressly undertake to do so on your behalf.
(f) That you will not withhold placing customers' orders for shares so
as to profit yourself as a result of such withholding or place orders for shares
in amounts just below the point at which sales charges are reduced so as to
benefit from a higher sales charge applicable to an amount below the breakpoint.
(g) That if any shares confirmed to you hereunder are repurchased or
redeemed by any of the Funds within seven business days after such confirmation
of your original order, you shall forthwith refund to us the full concession
allowed to you on such orders. We shall forthwith pay to the appropriate Fund
our share, if any, of the "charge" on the original sale and shall also pay to
such Fund the refund from you as herein provided. We shall notify you of such
repurchase or redemption within a reasonable time after settlement. Termination
or cancellation of this Agreement shall not relieve you or us from the
requirements of this subparagraph.
(h) That if payment for the shares purchased is not received within the
time customary or the time required by law for such payment, the sale may be
canceled forthwith without any responsibility or liability on our part or on the
part of the Funds, or at our option, we may sell the shares which you ordered
back to the Funds, in which latter case we may hold you responsible for any loss
to the Funds or loss of profit suffered by us resulting from your failure to
make payment as aforesaid. We shall have no liability for any check or other
item returned unpaid to you after you have paid us on behalf of a purchaser. We
may refuse to liquidate the investment unless we receive the purchaser's signed
authorization for the liquidation.
(i) That you shall assume responsibility for any loss to the Funds
caused by a correction made subsequent to trade date, provided such correction
was not based on any error, omission or negligence on our part, and that you
will immediately pay such loss to the Funds upon notification.
(j) That if on a redemption which you have ordered, instructions in
proper form, including outstanding certificates, are not received within the
time customary or the time required by law, the redemption may be canceled
forthwith without any responsibility or liability on our part or on the part of
any Fund, or at our option, we may buy the shares redeemed on behalf of the
Fund, in which latter case we may hold you responsible for any loss to the Fund
or loss of profit suffered by us resulting from your failure to settle the
redemption.
4. Duties of Dealer: Retirement Accounts. In connection with orders for the
purchase of shares on behalf of an Individual Retirement Account, Self-Employed
Retirement Plan or other retirement accounts, by mail, telephone, or wire, you
shall act as agent for the custodian or trustee of such plans (solely with
respect to the time of receipt of the application and payments), and you shall
not place such an order until you have received from your customer payment for
such purchase and, if such purchase represents the first contribution to such a
plan, the completed documents necessary to establish the plan. You agree to
indemnify us and Franklin Templeton Trust Company and/or Templeton Funds Trust
Company as applicable for any claim, loss, or liability resulting from incorrect
investment instructions received from you which cause a tax liability or other
tax penalty.
5. Conditional Orders; Certificates. We will not accept from you any conditional
orders for shares of any of the Funds. Delivery of certificates for shares
purchased shall be made by the Funds only against constructive receipt of the
purchase price, subject to deduction for your concession and our portion of the
sales charge, if any, on such sale. No certificates will be issued unless
specifically requested.
6. Dealer Compensation.
(a) On each purchase of shares by you from us, the total sales charges
and your dealer concessions shall be as stated in each Fund's then current
prospectus, subject to NASD rules and applicable state and federal laws. Such
sales charges and dealer concessions are subject to reductions under a variety
of circumstances as described in the Funds' prospectuses. For an investor to
obtain these reductions, we must be notified at the time of the sale that the
sale qualifies for the reduced charge. If you fail to notify us of the
applicability of a reduction in the sales charge at the time the trade is
placed, neither we nor any of the Funds will be liable for amounts necessary to
reimburse any investor for the reduction which should have been effected.
(b) In accordance with the Funds' prospectuses, we or our affiliates
may, but are not obligated to, make payments to dealers from our own resources
as compensation for certain sales which are made at net asset value and are not
subject to any contingent deferred sales charges ("Qualifying Sales"). If you
notify us of a Qualifying Sale, we may make a contingent advance payment up to
the maximum amount available for payment on the sale. If any of the shares
purchased in a Qualifying Sale are redeemed within twelve months of the end of
the month of purchase, we shall be entitled to recover any advance payment
attributable to the redeemed shares by reducing any account payable or other
monetary obligation we may owe to you or by making demand upon you for repayment
in cash. We reserve the right to withhold advances to any dealer, if for any
reason we believe that we may not be able to recover unearned advances from such
dealer. In addition, dealers will generally be required to enter into a
supplemental agreement with us with respect to such compensation and the
repayment obligation prior to receiving any payments.
7. Redemptions. Redemptions or repurchases of shares will be made at the net
asset value of such shares, less any applicable deferred sales or redemption
charges, in accordance with the applicable prospectuses. Except as permitted by
applicable law, you agree not to purchase any shares from your customers at a
price lower than the redemption or repurchase prices then computed by the Funds.
You shall, however, be permitted to sell shares for the account of the record
owner to the Funds at the repurchase price then currently in effect for such
shares and may charge the owner a fair commission for handling the transaction.
8. Exchanges. Telephone exchange orders will be effective only for shares in
plan balance (uncertificated shares) or for which share certificates have been
previously deposited and may be subject to any fees or other restrictions set
forth in the applicable prospectuses. You may charge the shareholder a fair
commission for handling an exchange transaction. Exchanges from a Fund sold with
no sales charge to a Fund which carries a sales charge, and exchanges from a
Fund sold with a sales charge to a Fund which carries a higher sales charge may
be subject to a sales charge in accordance with the terms of each Fund's
prospectus. You will be obligated to comply with any additional exchange
policies described in each Fund's prospectus, including without limitation any
policy restricting or prohibiting "Timing Accounts" as therein defined.
9. Transaction Processing. All orders are subject to acceptance by us and by the
Fund or its transfer agent, and become effective only upon confirmation by us.
If required by law, each transaction shall be confirmed in writing on a fully
disclosed basis and if confirmed by us, a copy of each confirmation shall be
sent simultaneously to you if you so request. All sales are made subject to
receipt of shares by us from the Funds. We reserve the right in our discretion,
without notice, to suspend the sale of shares or withdraw the offering of shares
entirely. Telephone orders will be effected at the price(s) next computed on the
day they are received from you if, as set forth in each Fund's current
prospectus, they are received prior to the time the price of its shares is
calculated. Orders received after that time will be effected at the price(s)
computed on the next business day. All orders must be accompanied by payment in
U.S. dollars. Orders payable by check must be drawn payable in U.S. dollars on a
U.S. bank, for the full amount of the investment.
10. Multiple Classes. We may from time to time provide to you written compliance
guidelines or standards relating to the sale or distribution of Funds offering
multiple classes of shares with different sales charges and distribution-related
operating expenses. In addition, you will be bound by any applicable rules or
regulations of government agencies or self-regulatory organizations generally
affecting the sale or distribution of mutual funds offering multiple classes of
shares.
11. Rule 12b-1 Plans. You are also invited to participate in all Plans adopted
by the Funds (the "Plan Funds") pursuant to Rule 12b-1 under the 1940 Act.
To the extent you provide administrative and other services, including, but not
limited to, furnishing personal and other services and assistance to your
customers who own shares of a Plan Fund, answering routine inquiries regarding a
Fund, assisting in changing account designations and addresses, maintaining such
accounts or such other services as a Fund may require, to the extent permitted
by applicable statutes, rules, or regulations, we shall pay you a Rule 12b-1
servicing fee. To the extent that you participate in the distribution of Fund
shares which are eligible for a Rule 12b-1 distribution fee, we shall also pay
you a Rule 12b-1 distribution fee. All Rule 12b-1 servicing and distribution
fees shall be based on the value of shares attributable to customers of your
firm and eligible for such payment, and shall be calculated on the basis and at
the rates set forth in the compensation schedule then in effect. Without prior
approval by a majority of the outstanding shares of a Fund, the aggregate annual
fees paid to you pursuant to each Plan shall not exceed the amounts stated as
the "annual maximums" in each Fund's prospectus, which amount shall be a
specified percent of the value of the Fund's net assets held in your customers'
accounts which are eligible for payment pursuant to this Agreement (determined
in the same manner as each Fund uses to compute its net assets as set forth in
its effective Prospectus).
You shall furnish us and each Fund with such information as shall reasonably be
requested by the Boards of Directors, Trustees or Managing General Partners
(hereinafter referred to as "Directors") of such Funds with respect to the fees
paid to you pursuant to the Schedule. We shall furnish to the Boards of
Directors of the Plan Funds, for their review on a quarterly basis, a written
report of the amounts expended under the Plans and the purposes for which such
expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Plan Funds' Directors, including such persons
who are not interested persons of the Plan Funds and who have no financial
interest in the Plans or any related agreement ("Rule 12b-1 Directors"). The
Plans or the provisions of this Agreement relating to such Plans may be
terminated at any time by the vote of a majority of the Plan Funds' Boards of
Directors, including Rule 12b-1 Directors, or by a vote of a majority of the
outstanding shares of the Plan Funds, on sixty (60) days' written notice,
without payment of any penalty. The Plans or the provisions of this Agreement
may also be terminated by any act that terminates the Underwriting Agreement
between us and the Plan Funds, and/or the management or administration agreement
between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc. or their
affiliates and the Plan Funds. In the event of the termination of the Plans for
any reason, the provisions of this Agreement relating to the Plans will also
terminate.
Continuation of the Plans and provisions of this Agreement relating to such
Plans are conditioned on Rule 12b-1 Directors being ultimately responsible for
selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, Plan Funds are permitted to implement or continue Plans or the provisions
of this Agreement relating to such Plans from year-to-year only if, based on
certain legal considerations, the Boards of Directors are able to conclude that
the Plans will benefit the Plan Funds. Absent such yearly determination the
Plans and the provisions of this Agreement relating to the Plans must be
terminated as set forth above. In addition, any obligation assumed by a Fund
pursuant to this Agreement shall be limited in all cases to the assets of such
Fund and no person shall seek satisfaction thereof from shareholders of a Fund.
You agree to waive payment of any amounts payable to you by us under a Fund's
Plan of Distribution pursuant to Rule 12b-1 until such time as we are in receipt
of such fee from the Fund.
The provisions of the Rule 12b-1 Plans between the Plan Funds and us, insofar as
they relate to Plans, shall control over the provisions of this Agreement in the
event of any inconsistency.
12. Registration of Shares. Upon request, we shall notify you of the states or
other jurisdictions in which each Fund's shares are currently registered or
qualified for sale to the public. We shall have no obligation to register or
qualify, or to maintain registration or qualification of, Fund shares in any
state or other jurisdiction. We shall have no responsibility, under the laws
regulating the sale of securities in any U.S. or foreign jurisdiction, for the
qualification or status of persons selling Fund shares or for the manner of sale
of Fund shares. Except as stated in this paragraph, we shall not, in any event,
be liable or responsible for the issue, form, validity, enforceability and value
of such shares or for any matter in connection therewith, and no obligation not
expressly assumed by us in this Agreement shall be implied. Nothing in this
Agreement, however, shall be deemed to be a condition, stipulation or provision
binding any person acquiring any security to waive compliance with any provision
of the Securities Act of 1933, or of the rules and regulations of the Securities
and Exchange Commission, or to relieve the parties hereto from any liability
arising under the Securities Act of 1933.
13. Additional Registrations. If it is necessary to register or qualify the
shares in any foreign jurisdictions in which you intend to offer the shares of
any Funds, it will be your responsibility to arrange for and to pay the costs of
such registration or qualification; prior to any such registration or
qualification, you will notify us of your intent and of any limitations that
might be imposed on the Funds, and you agree not to proceed with such
registration or qualification without the written consent of the Funds and of
ourselves.
14. Fund Information. No person is authorized to give any information or make
any representations concerning shares of any Fund except those contained in the
Fund's current prospectus or in materials issued by us as information
supplemental to such prospectus. We will supply prospectuses, reasonable
quantities of supplemental sale literature, sales bulletins, and additional
information as issued. You agree not to use other advertising or sales material
relating to the Funds except that which (a) conforms to the requirements of any
applicable laws or regulations of any government or authorized agency in the
U.S. or any other country, having jurisdiction over the offering or sale of
shares of the Funds, and (b) is approved in writing by us in advance of such
use. Such approval may be withdrawn by us in whole or in part upon notice to
you, and you shall, upon receipt of such notice, immediately discontinue the use
of such sales literature, sales material and advertising. You are not authorized
to modify or translate any such materials without our prior written consent.
15. Indemnification. You further agree to indemnify, defend and hold harmless
the Principal Underwriter, the Funds, their officers, directors and employees
from any and all losses, claims, liabilities and expenses arising out of (1) any
alleged violation of any statute or regulation (including without limitation the
securities laws and regulations of the United States or any state or foreign
country) or any alleged tort or breach of contract, in or related to the offer
and sale by you of shares of the Funds pursuant to this Agreement (except to the
extent that our negligence or failure to follow correct instructions received
from you is the cause of such loss, claim, liability or expense), (2) any
redemption or exchange pursuant to telephone instructions received from you or
your agent or employees, or (3) the breach by you of any of the terms and
conditions of this Agreement.
16. Termination; Succession; Amendment. Each party to this Agreement may cancel
its participation in this Agreement by giving written notice to the other
parties. Such notice shall be deemed to have been given and to be effective on
the date on which it was either delivered personally to the other parties or any
officer or member thereof, or was mailed postpaid or delivered to a telegraph
office for transmission to the other parties' Chief Legal Officers at the
addresses shown herein or in the most recent NASD Manual. This Agreement shall
terminate immediately upon the appointment of a Trustee under the Securities
Investor Protection Act or any other act of insolvency by you. The termination
of this Agreement by any of the foregoing means shall have no effect upon
transactions entered into prior to the effective date of termination. A trade
placed by you subsequent to your voluntary termination of this Agreement will
not serve to reinstate the Agreement. Reinstatement, except in the case of a
temporary suspension of a dealer, will only be effective upon written
notification by us. Unless terminated, this Agreement shall be binding upon each
party's successors or assigns. This Agreement may be amended by us at any time
by written notice to you and your placing of an order or acceptance of payments
of any kind after the effective date and receipt of notice of any such Amendment
shall constitute your acceptance of such Amendment.
17. Setoff; Dispute Resolution. Should any of your concession accounts with us
have a debit balance, we may offset and recover the amount owed from any other
account you have with us, without notice or demand to you. In the event of a
dispute concerning any provision of this Agreement, either party may require the
dispute to be submitted to binding arbitration under the commercial arbitration
rules of the NASD or the American Arbitration Association. Judgment upon any
arbitration award may be entered by any state or federal court having
jurisdiction. This Agreement shall be construed in accordance with the laws of
the State of California, not including any provision which would require the
general application of the law of another jurisdiction.
18. Acceptance; Cumulative Effect. This Agreement is cumulative and supersedes
any agreement previously in effect. It shall be binding upon the parties hereto
when signed by us and accepted by you. If you have a current dealer agreement
with us, your first trade or acceptance of payments from us after receipt of
this Agreement, as it may be amended pursuant to paragraph 16, above, shall
constitute your acceptance of its terms. Otherwise, your signature below shall
constitute your acceptance of its terms.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:
Greg Johnson, President
777 Mariners Island Blvd. San Mateo, CA 94404 Attention: Chief Legal Officer
(for legal notices only) 415/312-2000
700 Central Avenue St. Petersburg, Florida 33701-3628 813/823-8712
Dealer: If you have NOT previously signed a Dealer Agreement with us, please
complete and sign this section and return the original to us.
DEALER NAME
By:
(Signature)
Name:
Title:
Address:
Telephone:
NASD CRD #
Franklin Templeton Dealer #
(Internal Use Only)
95.89/104 (05/95)
MUTUAL FUND PURCHASE AND SALES AGREEMENT
FOR ACCOUNTS OF BANK AND TRUST COMPANY CUSTOMERS
Effective: July 1, 1995
1. INTRODUCTION
The parties to this Agreement are a bank or trust company ("Bank") and
Franklin/Templeton Distributors, Inc. ("FTDI"). This Agreement sets forth the
terms and conditions under which FTDI will execute purchases and redemptions of
shares of the Franklin or Templeton mutual funds for which FTDI now or in the
future serves as principal underwriter ("Funds"), at the request of the Bank
upon the order and for the account of Bank's customers ("Customers"). In this
Agreement, "Customer" shall include the beneficial owners of an account and any
agent or attorney-in-fact duly authorized or appointed to act on the owners'
behalf with respect to the account. FTDI will notify Bank from time to time of
the Funds which are eligible for distribution and the terms of compensation
under this Agreement. This Agreement is not exclusive, and either party may
enter into similar agreements with third parties. This Agreement supersedes any
prior agreements between the parties, as stated in paragraph 6(j), below.
2. REPRESENTATIONS AND WARRANTIES OF BANK
Bank warrants and represents to FTDI and the Funds that:
a) Bank is a "bank" as defined in Section 3(a)(6) of the Securities and Exchange
Act of 1934, as amended (the "34 Act"):
"The term 'bank' means (A) a banking institution organized under the laws
of the United States, (B) a member bank of the Federal Reserve System, (C) any
other banking institution, whether incorporated or not, doing business under the
law of any State or of the United States, a substantial portion of the business
of which consists of receiving deposits or exercising a fiduciary power similar
to those permitted to national banks under the authority of the Comptroller of
the Currency pursuant to the first section of Public Law 87-722 (12 U.S.C. 92a),
and which is supervised and examined by State or Federal authority having
supervision over banks, and which is not operated for the purpose of evading the
provisions of this title, and (D) a receiver, conservator, or other liquidating
agent of any institution or firm included in clauses (A), (B) or (C) of this
paragraph."
b) Bank is authorized to enter into this Agreement, and Bank's performance of
its obligations and receipt of consideration under this Agreement will not
violate any law, regulation, charter, agreement, or regulatory restriction to
which Bank is subject.
c) Bank has received all regulatory agency approvals and taken all legal and
other steps necessary for offering the services Bank will provide to Customers
in connection with this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL UNDERWRITER
FTDI warrants and represents to Bank that:
a) FTDI is a broker/dealer registered under the '34 Act.
b) FTDI is the principal underwriter of the Funds.
4. COVENANTS OF BANK
For each Transaction under this Agreement, Bank will:
a) be authorized to engage in the Transaction;
b) act as agent for the Customer;
c) act solely at the request of and for the account of the Customer;
d) not submit an order unless Bank has already received the order from the
Customer;
e) not submit a purchase order unless Bank has already delivered to the
Customer a copy of the then current prospectus for the Fund(s) whose
shares are to be purchased;
f) not withhold placing any Customer's order for the purpose of profiting from
the delay;
g) have no beneficial ownership of the securities in any purchase Transaction
(the Customer will have the full beneficial ownership), unless Bank is the
Customer (in which case, Bank will not engage in the Transaction unless the
Transaction is legally permissible for Bank); and
h) not accept or withhold any Fee otherwise allowed under Sections 5(d) and (e)
of this Agreement, if prohibited by the Employee Retirement Income Security Act
("ERISA") or trust or similar laws to which Bank is subject, in the case of
purchases or redemptions (hereinafter, "Transactions") of Fund shares involving
retirement plans, trusts, or similar accounts.
i) maintain records of all sales and redemptions of shares made through Bank and
to furnish FTDI with copies of such records on request.
j) distribute prospectuses, statements of additional information and reports to
Bank's customers in compliance with applicable legal requirements, except to the
extent that FTDI expressly undertakes to do so on behalf of Bank.
While this Agreement is in effect, Bank will:
k) not purchase any shares from any person at a price lower than the redemption
price then quoted by the applicable Fund;
l) repay FTDI the full Fee received by Bank under Sections 5(d) and (e) of this
Agreement, for any shares purchased under this Agreement which are repurchased
by the Fund within 7 business days after the purchase; in turn, FTDI shall pay
to the Fund the amount repaid by Bank and will notify Bank of any such
repurchase within a reasonable time;
m) in connection with orders for the purchase of shares on behalf of an
Individual Retirement Account, Self-Employed Retirement Plan or other retirement
accounts, by mail, telephone, or wire, Bank shall act as agent for the custodian
or trustee of such plans (solely with respect to the time of receipt of the
application and payments) and shall not place such an order until Bank has
received from its customer payment for such purchase and, if such purchase
represents the first contribution to such a plan, the completed documents
necessary to establish the plan. Bank agrees to indemnify FTDI and Franklin
Templeton Trust Company and/or Templeton Funds Trust Company as applicable for
any claim, loss, or liability resulting from incorrect investment instructions
received from Bank which cause a tax liability or other tax penalty.
n) be responsible for compliance with all laws and regulations, including those
of the applicable federal and state bank regulatory authorities, with regard to
Bank and Bank's Customers; and
o) immediately notify FTDI in writing at the address given below, should Bank
cease to be a bank as set forth in Section 2(a) of this Agreement.
5. TERMS AND CONDITIONS FOR TRANSACTIONS
a) Price
Transaction orders received from Bank will be accepted only at the public
offering price and in compliance with procedures applicable to each order as set
forth in the then current prospectus and statement of additional information
(hereinafter, collectively, "prospectus") for the applicable Fund. All orders
must be accompanied by payment in U.S. dollars. Orders payable by check must be
drawn payable in U.S. dollars on a U.S. bank, for the full amount of the
investment. All sales are made subject to receipt of shares by FTDI from the
Funds. FTDI reserves the right in its discretion, without notice, to suspend the
sale of shares or withdraw the offering of shares entirely.
b) Orders and Confirmations
All purchase orders are subject to acceptance or rejection by FTDI and by
the Fund or its transfer agent at their sole discretion, and become effective
only upon confirmation by FTDI. Transaction orders shall be made using the
procedures and forms required by FTDI from time to time. Orders received on any
business day after the time for calculating the price of Fund shares as set
forth in each Fund's current prospectus will be effected at the price determined
on the next business day. A written confirming statement will be sent to Bank
and to Customer upon settlement of each Transaction.
c) Multiple Class Guidelines
FTDI may from time to time provide to Bank written compliance guidelines
or standards relating to the sale or distribution of Funds offering multiple
classes of shares with different sales charges and distribution-related
operating expenses. In addition, Bank will be bound by any applicable rules or
regulations of government agencies or self-regulatory organizations generally
affecting the sale or distribution of mutual funds offering multiple classes of
shares.
d) Payments by Bank for Purchases
On the settlement date for each purchase, Bank shall either (i) remit the
full purchase price by wire transfer to an account designated by FTDI, or (ii)
following FTDI's procedures, wire the purchase price less the Fee allowed by
Section 5(e) of this Agreement. Twice monthly, FTDI will pay Bank Fees not
previously paid to or withheld by Bank. Each calendar month, FTDI, as
applicable, will prepare and mail an activity statement summarizing all
Transactions.
e) Fees and Payments
Where permitted by the prospectus for each Fund, a charge, concession, or
fee ("Fee") may be paid to Bank, related to services provided by Bank in
connection with Transactions. The amount of the Fee, if any, is set by the
relevant prospectus. Adjustments in the Fee are available for certain purchases,
and Bank is solely responsible for notifying FTDI when any purchase order is
qualified for such an adjustment. If Bank fails to notify FTDI of the
applicability of a reduction in the sales charge at the time the trade is
placed, neither FTDI nor any of the Funds will be liable for amounts necessary
to reimburse any investor for the reduction which should have been effected.
In accordance with the Funds' prospectuses, FTDI or its affiliates may,
but are not obligated to, make payments from their own resources to banks or
dealers as compensation for certain sales which are made at net asset value and
are not subject to any contingent deferred sales charges ("Qualifying Sales").
If Bank notifies FTDI of a Qualifying Sale, FTDI may make a contingent advance
payment up to the maximum amount available for payment on the sale. If any of
the shares purchased in a Qualifying Sale are redeemed within twelve months of
the end of the month of purchase, FTDI shall be entitled to recover any advance
payment attributable to the redeemed shares by reducing any account payable or
other monetary obligation FTDI may owe to Bank or by making demand upon Bank for
repayment in cash. FTDI reserves the right to withhold advances to any bank or
dealer, if for any reason it believes that it may not be able to recover
unearned advances from such bank or dealer. In addition, banks and dealers will
generally be required to enter into a supplemental agreement with FTDI with
respect to such compensation and the repayment obligation prior to receiving any
payments.
f) Rule 12b-1 Plans
Bank is also invited to participate in all Plans adopted by the Funds (the
"Plan Funds") pursuant to Rule 12b-1 under the 1940 Act.
To the extent Bank provides administrative and other services, including,
but not limited to, furnishing personal and other services and assistance to
Bank's customers who own shares of a Plan Fund, answering routine inquiries
regarding a Fund, assisting in changing account designations and addresses,
maintaining such accounts or such other services as a Fund may require, to the
extent permitted by applicable statutes, rules, or regulations, FTDI shall pay
Bank Rule 12b-1 fees. All Rule 12b-1 fees shall be based on the value of shares
attributable to customers of Bank and eligible for such payment, and shall be
calculated on the basis and at the rates set forth in the compensation schedule
then in effect. Without prior approval by a majority of the outstanding shares
of a Fund, the aggregate annual fees paid to Bank pursuant to each Plan shall
not exceed the amounts stated as the "annual maximums" in each Fund's
prospectus, which amount shall be a specified percent of the value of the Fund's
net assets held in Bank's customers' accounts which are eligible for payment
pursuant to this Agreement (determined in the same manner as each Fund uses to
compute its net assets as set forth in its effective Prospectus).
Bank shall furnish FTDI and each Fund with such information as shall
reasonably be requested by the Board of Directors, Trustees or Managing General
Partners (hereinafter referred to as "Directors") of such Funds with respect to
the fees paid to Bank pursuant to the Schedule. FTDI shall furnish to the Boards
of Directors of the Plan Funds, for their review on a quarterly basis, a written
report of the amounts expended under the Plans and the purposes for which such
expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Plan Funds' Directors, including such persons
who are not interested persons of the Plan Funds and who have no financial
interest in the Plans or any related agreement ("Rule 12b-1 Directors"). The
Plans or the provisions of this Agreement relating to such Plans may be
terminated at any time by the vote of a majority of the Plan Funds' Boards of
Directors, including Rule 12b-1 Directors, or by a vote of a majority of the
outstanding shares of the Plan Funds, on sixty (60) days' written notice,
without payment of any penalty. The Plans or the provisions of this Agreement
may also be terminated by any act that terminates the Underwriting Agreement
between FTDI and the Plan Funds, and/or the management or administration
agreement between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc.
or their affiliates and the Plan Funds. In the event of the termination of the
Plans for any reason, the provisions of this Agreement relating to the Plans
will also terminate.
Continuation of the Plans and provisions of this Agreement relating to
such Plans are conditioned on Rule 12b-1 Directors being ultimately responsible
for selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, Plan Funds are permitted to implement or continue Plans or the provisions
of this Agreement relating to such Plans from year-to-year only if, based on
certain legal considerations, the Boards of Directors are able to conclude that
the Plans will benefit the Plan Funds. Absent such yearly determination, the
Plans and the provisions of this Agreement relating to the Plans must be
terminated as set forth above. In addition, any obligation assumed by a Fund
pursuant to this Agreement shall be limited in all cases to the assets of such
Fund and no person shall seek satisfaction thereof from shareholders of a Fund.
Bank agrees to waive payment of any amounts payable to Bank by FTDI under a
Fund's Plan of Distribution pursuant to Rule 12b-1 until such time as FTDI is in
receipt of such fee from the Fund.
The provisions of the Rule 12b-1 Plans between the Plan Funds and FTDI,
insofar as they relate to Plans, shall control over the provisions of this
Agreement in the event of any inconsistency.
g) Other Distribution Services
From time to time, FTDI may offer telephone and other augmented services
in connection with Transactions under this Agreement. If Bank uses any such
service, Bank will be subject to the procedures applicable to the service,
whether or not Bank has executed any agreement required for the service.
h) Conditional Orders; Certificates
FTDI will not accept any conditional Transaction orders. Delivery of
certificates or confirmations for shares purchased shall be made by the Fund
conditional upon receipt of the purchase price, subject to deduction of any Fee.
No certificates will be issued unless specifically requested.
i) Cancellation of Orders
If payment for shares purchased is not received within the time customary
or the time required by law for such payment, the sale may be canceled without
notice or demand, and neither FTDI nor the Fund(s) shall have any responsibility
or liability for such a cancellation; alternatively, the unpaid shares may be
sold back to the Fund, and Bank shall be liable for any resulting loss to FTDI
or to the Fund(s). FTDI shall have no liability for any check or other item
returned unpaid to Bank after Bank has paid FTDI on behalf of a purchaser. FTDI
may refuse to liquidate the investment unless it receives the purchaser's signed
authorization for the liquidation.
j) Order Corrections
Bank shall assume responsibility for any loss to a Fund(s) caused by a
correction made subsequent to trade date, provided such correction was not based
on any error, omission or negligence on FTDI's part, and Bank will immediately
pay such loss to the Fund(s) upon notification.
k) Redemptions; Cancellation
Redemptions or repurchases of shares will be made at the net asset value
of such shares, less any applicable deferred sales or redemption charges, in
accordance with the applicable prospectuses. As agent, Bank may sell shares for
the account of the record owner to the Funds at the repurchase price then
currently in effect for such shares and may charge the owner a fair fee for
handling the transaction. If on a redemption which Bank has ordered,
instructions in proper form, including outstanding certificates, are not
received within the time customary or the time required by law, the redemption
may be canceled forthwith without any responsibility or liability on the part of
FTDI or any Fund, or at its option FTDI may buy the shares redeemed on behalf of
the Fund, in which latter case it may hold Bank responsible for any loss to the
Fund or loss of profit suffered by FTDI resulting from Bank's failure to settle
the redemption.
l) Exchanges
Telephone exchange orders will be effective only for shares in plan
balance (uncertificated shares) or for which share certificates have been
previously deposited and may be subject to any fees or other restrictions set
forth in the applicable prospectuses. Bank may charge the shareholder a fair fee
for handling an exchange transaction. Exchanges from a Fund sold with no sales
charge to a Fund which carries a sales charge, and exchanges from a Fund sold
with a sales charge to a Fund which carries a higher sales charge may be subject
to a sales charge in accordance with the terms of each Fund's prospectus. Bank
will be obligated to comply with any additional exchange policies described in
each Fund's prospectus, including without limitation any policy restricting or
prohibiting "Timing Accounts" as therein defined.
m) Qualification of Shares; Indemnification
Upon request, FTDI shall notify Bank of the states or other jurisdictions
in which each Fund's shares are currently registered or qualified for sale to
the public. FTDI shall have no obligation to register or qualify, or to maintain
registration or qualification of, Fund shares in any state or other
jurisdiction. FTDI shall have no responsibility, under the laws regulating the
sale of securities in any U.S. or foreign jurisdiction, for the qualification or
status of persons selling Fund shares or for the manner of sale of Fund shares.
Except as stated in this paragraph, FTDI shall not, in any event, be liable or
responsible for the issue, form, validity, enforceability and value of such
shares or for any matter in connection therewith, and no obligation not
expressly assumed by FTDI in this Agreement shall be implied. If it is necessary
to register or qualify shares of any Fund in any foreign jurisdictions in which
Bank intends to offer such shares, it will be Bank's responsibility to arrange
for and to pay the costs of such registration or qualification; prior to any
such registration or qualification Bank will notify FTDI of its intent and of
any limitations that might be imposed on the Funds and Bank agrees not to
proceed with such registration or qualification without the written consent of
the Funds and of FTDI.
Bank further agrees to indemnify, defend and hold harmless the Principal
Underwriter, the Funds, their officers, directors and employees from any and all
losses, claims, liabilities and expenses, arising out of (1) any alleged
violation of any statute or regulation (including without limitation the
securities laws and regulations of the United States or any state or foreign
country) or any alleged tort or breach of contract, in or related to the offer
and sale by Bank of shares of the Funds pursuant to this Agreement (except to
the extent that FTDI's negligence or failure to follow correct instructions
received from Bank is the cause of such loss, claim, liability or expense), (2)
any redemption or exchange pursuant to telephone instructions received from Bank
or its agents or employees, or (3) the breach by Bank of any of the terms and
conditions of this Agreement.
However, nothing in this Agreement shall be deemed to be a condition,
stipulation, or provision binding any person acquiring any security to waive
compliance with any provision of the Securities Act of 1933, or of the rules and
regulations of the Securities and Exchange Commission, or to relieve the parties
hereto from any liability arising under the Securities Act of 1933.
n) Prospectus and Sales Materials; Limit on Advertising
No person is authorized to give any information or make any
representations concerning shares of any Fund except those contained in the
Fund's current prospectus or in materials issued by FTDI as information
supplemental to such prospectus. FTDI will supply prospectuses, reasonable
quantities of supplemental sale literature, sales bulletins, and additional
information as issued. Bank agrees not to use other advertising or sales
material relating to the Funds except that which (a) conforms to the
requirements of any applicable laws or regulations of any government or
authorized agency in the U.S. or any other country, having jurisdiction over the
offering or sale of shares of the Funds, and (b) is approved in writing by FTDI
in advance of such use. Such approval may be withdrawn by FTDI in whole or in
part upon notice to Bank, and Bank shall, upon receipt of such notice,
immediately discontinue the use of such sales literature, sales material and
advertising. Bank is not authorized to modify or translate any such materials
without the prior written consent of FTDI.
o) Customer Information
(1) Definition. For purposes of this paragraph 5(h)(iv), 'Customer
Information' means customer names and other identifying information pertaining
to Bank's mutual fund customers which is furnished by Bank to FTDI in the
ordinary course of business under this Agreement. Customer Information shall not
include any information obtained from other sources.
(2) Permitted Uses. FTDI may use Customer Information to fulfill its
obligations under this Agreement, the Distribution Agreements between the Funds
and FTDI, the Funds' prospectuses, or other duties imposed by law. In addition,
FTDI or its affiliates may use Customer Information in communications to
shareholders to market the Funds or other investment products or services,
including without limitation variable annuities, variable life insurance, and
retirement plans and related services. FTDI may also use Customer Information if
it obtains Bank's prior written consent.
(3) Prohibited Uses. Except as stated above, FTDI shall not disclose
Customer Information to third parties, and shall not use Customer Information in
connection with any advertising, marketing or solicitation of any products or
services, provided that Bank offers or soon expect to offer comparable products
or services to mutual fund customers and have so notified FTDI.
(4) Survival; Termination. The agreements described in this paragraph
5(h)(iv) shall survive the termination of this Agreement, but shall terminate as
to any account upon FTDI's receipt of valid notification of either the
termination of that account with Bank or the transfer of that account to another
bank or dealer.
6. GENERAL
a) Successors and Assignments
This Agreement binds Bank and FTDI and their respective heirs, successors
and assigns. Bank may not assign its right and duties under this Agreement
without the advance, written authorization of FTDI.
b) Paragraph Headings
The paragraph headings of this Agreement are for convenience only, and
shall not be deemed to define, limit, or describe the scope or intent of this
Agreement.
c) Severability
Should any provision of this Agreement be determined to be invalid or
unenforceable under any law, rule, or regulation, that determination shall not
affect the validity or enforceability of any other provision of this Agreement.
d) Waivers
There shall be no waiver of any provision of this Agreement except a
written waiver signed by Bank and FTDI. No written waiver shall be deemed a
continuing waiver or a waiver of any other provision, unless the waiver
expresses such intention.
e) Sole Agreement
This Agreement is the entire agreement of Bank and FTDI and supersedes all
oral negotiations and prior writings.
f) Governing Law
This Agreement shall be construed in accordance with the laws of the State
of California, not including any provision which would require the general
application of the law of another jurisdiction, and shall be binding upon the
parties hereto when signed by FTDI and accepted by Bank, either by Bank's
signature in the space provided below or by Bank's first trade entered after
receipt of this Agreement.
g) Arbitration
Should any of Bank's concession accounts with FTDI have a debit balance,
FTDI may offset and recover the amount owed from any other account Bank has with
FTDI, without notice or demand to Bank. Either party may submit any dispute
under this Agreement to binding arbitration under the commercial arbitration
rules of the American Arbitration Association. Judgment upon any arbitration
award may be entered by any state or federal court having jurisdiction.
h) Amendments
FTDI may amend this Agreement at any time by depositing a written notice
of the amendment in the U.S. mail, first class postage pre-paid, addressed to
Bank's address given below. Bank's placement of any Transaction order or
acceptance of any payments after the effective date and receipt of notice of any
such amendment shall constitute Bank's acceptance of the amendment.
i) Term and Termination
This Agreement shall continue in effect until terminated. FTDI or Bank may
terminate this Agreement at any time by written notice to the other, but such
termination shall not affect the payment or repayment of Fees on Transactions
prior to the termination date. Termination also will not affect the indemnities
given under this Agreement.
j) Acceptance; Cumulative Effect
This Agreement is cumulative and supersedes any agreement previously in
effect. It shall be binding upon the parties hereto when signed by FTDI and
accepted by Bank. If Bank has a current agreement with FTDI, Bank's first trade
or acceptance of payments from FTDI after receipt of this Agreement, as it may
be amended pursuant to paragraph 6(h), above, shall constitute Bank's acceptance
of the terms of this Agreement. Otherwise, Bank's signature below shall
constitute Bank's acceptance of these terms.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:
Greg Johnson, President
777 Mariners Island Blvd. San Mateo, CA 94404 Attention: Chief Legal Officer
(for legal notices only)
415/312-2000
700 Central Avenue St. Petersburg, Florida 33701-3628
813/823-8712
To the Bank or Trust Company: If you have not previously signed an agreement
with us for the sale of mutual fund shares to your customers, please complete
and sign this section and return the original to us.
BANK or TRUST COMPANY
(Firm's name)
By:
(Signature)
Name:
Title:Address:
Telephone:
MASTER CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT ("Agreement") is made and entered into as
of February 16, 1996, by and between each Investment Company listed on
Exhibit A, for itself and for each of its Series listed on Exhibit A, and
BANK OF NEW YORK, a New York corporation authorized to do a banking business
(the "Custodian").
RECITALS
A. Each Investment Company is an investment company registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act") that invests and reinvests, for itself or on behalf of its Series, in
Domestic Securities and Foreign Securities.
B. The Custodian is, and has represented to each Investment
Company that the Custodian is, a "bank" as that term is defined in Section
2(a)(5) of the Investment Company Act of 1940, as amended, and is eligible to
receive and maintain custody of investment company assets pursuant to Section
17(f) and Rule 17f-2 thereunder.
C. The Custodian and each Investment Company, for itself and for
each of its Series, desire to provide for the retention of the Custodian as a
custodian of the assets of each Investment Company and each Series, 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 1.0 FORM OF AGREEMENT
Although the parties have executed this Agreement in the form of
a Master Custody Agreement for administrative convenience, this Agreement
shall create a separate custody agreement for each Investment Company and for
each Series designated on Exhibit A, as though each Investment Company had
separately executed an identical custody agreement for itself and for each of
its Series. No rights, responsibilities or liabilities of any Investment
Company or Series shall be attributed to any other Investment Company or
Series.
Section 1.1 DEFINITIONS
For purposes of this Agreement, the following terms shall have
the respective meanings specified below:
"Agreement" shall mean this Custody Agreement.
"Board" shall mean the Board of Trustees, Directors or Managing
General Partners, as applicable, of an Investment Company.
"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.
"Custodian" shall mean Bank of New York.
"Domestic Securities" shall have the meaning provided in
Subsection 2.1 hereof.
"Executive Committee" shall mean the executive committee of a
Board.
"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.
"Fund" shall mean an entity identified on Exhibit A as an
Investment Company, if the Investment Company has no series, or a Series.
"Investment Company" shall mean an entity identified on Exhibit A
under the heading "Investment Company."
"Investment Company Act" shall mean the Investment Company Act of
1940, as amended.
"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.
"Series" shall mean a series of an Investment Company which is
identified as such on Exhibit A.
"Shares" shall mean shares of beneficial interest of the
Investment Company.
"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 each Investment Company.
"Writing" shall mean a communication in writing, a communication
by telex, 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. Each Investment Company hereby
appoints and designates the Custodian as a custodian of the assets of each
Fund, including cash denominated in U.S. dollars or foreign currency
("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 each Fund delivered to it
hereunder in the manner provided for herein.
2.2 DELIVERY OF ASSETS. Each Investment Company may deliver to
the Custodian Securities and cash owned by the Funds, payments of income,
principal or capital distributions received by the Funds with respect to
Securities owned by the Funds from time to time, and the consideration
received by the Funds for such Shares or other securities of the Funds as may
be issued and sold from time to time. The Custodian shall have no
responsibility whatsoever for any property or assets of the Funds held or
received by the Funds 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 Funds under the terms of this Agreement shall be in "street
name" or other good delivery form as determined by the Custodian.
2.3 SUBCUSTODIANS. The Custodian may appoint BNY Western Trust
Company as a Subcustodian to hold assets of the Funds in accordance with the
provisions of this Agreement. In addition, upon receipt of Proper
Instructions and a certified copy of a resolution of the Board or of the
Executive Committee, and certified by the Secretary or an Assistant
Secretary, of an Investment Company, the Custodian may from time to time
appoint one or more other Subcustodians or Foreign Custodians to hold assets
of the affected Funds 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 any 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 FUNDS 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 each
Fund, all non-cash property delivered by each 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 a 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 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
appropriate Fund, in the name or nominee name of the Custodian or in the name
or nominee name of any Subcustodian or Foreign Custodian. Each 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 each 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 each Fund, other
than cash maintained by a Fund in a bank account established and used in
accordance with Rule 17f-3 under the Fund Act. Funds held by the Custodian
for a Fund may be deposited by it to its credit as Custodian in the banking
departments of the Custodian, a Subcustodian or a Foreign Custodian. Such
funds shall be deposited by the Custodian in its capacity as Custodian and
shall be withdrawable by the Custodian only in that capacity. In the event a
Fund's account for any reason becomes overdrawn, or in the event an action
requested in Proper Instructions would cause such an account to become
overdrawn, the Custodian shall immediately notify the affected Fund.
3.5 COLLECTION OF INCOME; TRADE SETTLEMENT; CREDITING OF
Accounts. The Custodian shall collect income payable with respect to
Securities owned by each Fund, settle Securities trades for the account of
each Fund and credit and debit each Fund's account with the Custodian in
connection therewith as stated in this Subsection 3.5. This Subsection shall
not apply to repurchase agreements, which are treated in Subsection 3.2(b),
above.
(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, and by making payment against delivery.
If the seller or selling broker fails to deliver the Security within a
reasonable period of time, the Custodian shall notify the Fund and credit the
transaction amount to the account of the Fund, but the Custodian shall have
no further liability or responsibility for the transaction.
(b) Upon receipt of Proper Instructions, the Custodian
shall effect the sale of a Security by withdrawing a certificate or other
indicia of ownership from the account of the Fund and by making delivery
against payment, and shall credit the account of the Fund with the amount of
such proceeds on the contractual settlement date. If the purchaser or the
purchasing broker fails to make payment within a reasonable period of time,
the Custodian shall notify the Fund, debit the Fund's account for any amounts
previously credited to it by the Custodian as proceeds of the transaction
and, if delivery has not been made, redeposit the Security into the account
of the Fund.
(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 payable date.
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 a 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 with respect to the Shares.
3.7 APPOINTMENT OF SUBCUSTODIANS. The Custodian may appoint BNY
Western Trust Company or, upon receipt of Proper Instructions, another bank
or trust company, which is itself qualified under the Investment Company 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 a 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 the 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 a 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 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 each 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 each 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 a Fund or a
nominee of a 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 each 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 each 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 a 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. The Custodian shall each business
day furnish each 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, the Custodian shall furnish each Fund with a list of the cash
and portfolio securities showing the quantity of the 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. The 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
FUNDS HELD OUTSIDE THE UNITED
STATES
4.1 CUSTODY OUTSIDE THE UNITED STATES. Each 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 appropriate Board or 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 or of the Executive Committee certified by the
Secretary or an Assistant Secretary of the appropriate Investment Company.
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 this Agreement, including 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 Fund Act, and (ii)
cash and cash equivalents in such amounts as the Custodian or an affected
Fund may determine to be reasonably necessary to effect the Fund's Foreign
Securities transactions.
4.3 OMITTED.
4.4 SEGREGATION OF SECURITIES. The Custodian shall identify on
its books and records as belonging to the appropriate Fund, the Foreign
Securities of each Fund held by each Foreign Custodian.
4.5 AGREEMENTS WITH FOREIGN CUSTODIANS. Each agreement between
the Custodian and a Foreign Custodian shall be substantially in the form as
delivered to the Investment Companies for their Boards' review, and shall not
be amended in a way that materially adversely affects any Fund without the
prior written consent of the Fund. Upon request, the Custodian shall certify
to the Funds that an agreement between the Custodian and a Foreign Custodian
meets the requirements of Rule 17f-5 under the 1940 Act.
4.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUNDS. Upon
request of a Fund, the Custodian will use its best reasonable efforts to
arrange for the independent accountants or auditors 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 a
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 a 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 a Fund and delivery of Foreign
Securities maintained for the account of a 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 each 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, unless otherwise mutually agreed to
by the Custodian and a Fund, require the Foreign Custodian to exercise
reasonable care or, alternatively, impose a contractual liability for breach
of contract without an exception based upon a standard of care in the
performance of its duties and to indemnify and hold harmless the Custodian
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, excepting, however, Citibank, N.A., and its subsidiaries and
branches, where the indemnification is limited to direct money damages and
requires that the claim be promptly asserted. At the election of a 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, unless such subrogation is prohibited by local
law.
4.9 MONITORING RESPONSIBILITIES.
(a) The Custodian will promptly inform each Fund in the
event that the Custodian learns of a material adverse change in the financial
condition of a Foreign Custodian or learns that a Foreign Custodian's
financial condition has declined or is likely to decline below the minimum
levels required by Rule 17f-5 of the 1940 Act.
(b) The custodian will furnish such information as may be
reasonably necessary to assist each Investment Company's Board 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 a 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. Any Proper Instructions delivered to the Custodian by telephone
shall promptly thereafter be confirmed in accordance with procedures, and
limited in subject matter, as mutually agreed upon by the parties. 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
Funds 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 Funds shall
safeguard any testkeys, identification codes or other security devices which
the Custodian shall make available to them. 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 a Fund as have been properly appointed pursuant to a resolution of the
appropriate Board or 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.
Section 6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority
from a 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 a Fund. The Custodian may
receive and accept a certified copy of a resolution of a Board 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 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 appropriate Board to keep the
books of account of a Fund and/or compute the net asset value per Share of
the outstanding Shares of a 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 Investment Company Act and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the appropriate
Investment Company 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 Investment Company and employees and agents of the
Securities and Exchange Commission. The Custodian shall, at a Fund's
request, supply the Fund with a tabulation of Securities and Cash 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 each Investment Company, on behalf of each Fund, and the Custodian.
In addition, should the Custodian in its discretion advance funds (to include
overdrafts) to or on behalf of a Fund pursuant to Proper Instructions, the
Custodian shall be entitled to prompt reimbursement of any amounts advanced.
In the event of such an advance, and to the extent permitted by the 1940 Act
and the Fund's policies, the Custodian shall have a continuing lien and
security interest in and to the property of the Fund in the possession or
control of the Custodian or of a third party acting in the Custodian's
behalf, until the advance is reimbursed. Nothing in this Agreement shall
obligate the Custodian to advance funds to or on behalf of a Fund, or to
permit any borrowing by a Fund except for borrowings for temporary purposes,
to the extent permitted by the Fund's policies.
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 a Fund for any loss which shall occur as the result of the
failure of a Foreign Custodian engaged directly or indirectly by 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. Nothing in this Agreement shall be read to
limit the responsibility or liability of the Custodian or a Foreign Custodian
for their failure to exercise reasonable care with regard to any decision or
recommendation made by the Custodian or Subcustodian regarding the use or
continued use of a Foreign Securities Depository. In the event of any loss
to a Fund by reason of the failure of the Custodian or a Foreign Custodian
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, and
shall not be liable for acts or omissions unless the same constitute
negligence or willful misconduct on the part of the Custodian or any Foreign
Custodian engaged directly or indirectly by the Custodian. Each 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 the Custodian or its nominess in connection with
the performance of this Agreement with respect to such Fund, 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.
The Custodian shall be entitled to rely, and may act, on advice of counsel
(who may be counsel for a 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 any 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 Funds. 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 and may rely on the genuineness of any
such documents which it may in good faith believe to be validly executed.
Notwithstanding the foregoing, the Custodian shall not be liable for any loss
resulting from, or caused by, the direction of a 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 any Fund
held by the Custodian.
Section 12. LIMITED LIABILITY OF EACH INVESTMENT COMPANY
The Custodian acknowledges that it has received notice of and
accepts the limitations of liability as set forth in each Investment
Company's Agreement and Declaration of Trust, Articles of Incorporation, or
Agreement of Limited Partnership. The Custodian agrees that each 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 Board Member, officer, employee, or
agent of the Fund or the Investment Company on behalf 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 each Investment
Company, on behalf of a Fund, or by the Custodian by 90 days notice in
Writing to the other provided that any termination by an Investment Company
shall be authorized by a resolution of the Board, 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 affected Funds held by the Custodian. If notice of
termination is given by the Custodian, the affected Investment Companies
shall, within 90 days following the giving of such notice, deliver to the
Custodian a certified copy of a resolution of the Boards specifying the names
of the persons to whom the Custodian shall deliver assets of the affected
Funds held by the Custodian. 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 90 days following the giving of a notice of
termination by the Custodian, the Custodian does not receive from the
affected Investment Companies certified copies of resolutions of the Boards
specifying the names of the persons to whom the Custodian shall deliver the
assets of the Funds held by the Custodian, 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 any Fund or (ii) be construed as or constitute a prohibition
against the provision by the Custodian or any of its affiliates to any 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 a Fund or Investment Company: if to the Custodian:
[Fund or Investment Company] The Bank of New York
c/o Franklin Resources, Inc. Mutual Fund Custody Manager
777 Mariners Island Blvd. BNY Western Trust Co.
San Mateo, CA 94404 550 Kearney St., Suite 60
Attention: Chief Legal Officer San Francisco, CA 94108
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 both 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
New York (without giving effect to principles of conflict of laws).
14.8 FORCE MAJEURE. Notwithstanding 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 Investment Companies, for themselves and for the Funds, and the
Custodian and their respective successors and assigns, if any.
14.14 PRE-EMPTION OF OTHER AGREEMENTS. In the event of any
conflict between this Agreement, including without limitation any amendments
hereto, and any other agreement which may now or in the future exist between
the parties, the provisions of this Agreement shall prevail.
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.
THE BANK OF NEW YORK
By: /S/ STEPHEN E. GRUNSTON
Name: Stephen E. Grunston
Title: Vice President
THE INVESTMENT COMPANIES LISTED ON EXHIBIT A TO THE AGREEMENT
By: /S/ DEBORAH R. GATZEK
Name: Deborah R. Gatzek
Title: Vice President
By: /S/ KAREN L. SKIDMORE
Name: Karen L. Skidmore
Title: Assistant Vice President
Their: VICE PRESIDENT & SECRETARY
AMENDMENT, dated May 7, 1997, to the Master Custody Agreement ("Agreement")
between each Investment Company listed on Exhibit A to the Agreement and The
Bank of New York dated February 16, 1996.
It is hereby agreed as follows:
A. Unless otherwise provided herein, all terms and conditions of the
Agreement are expressly incorporated herein by reference and, except as
modified hereby, the Agreement is confirmed in all respects. Capitalized
terms used herein without definition shall have the meanings ascribed to them
in the Agreement.
B. The Agreement shall be amended to add a new Section 4. 1 0 as
follows:
4.10 ADDITIONAL DUTIES WITH RESPECT TO RUSSIAN SECURITIES.
(a) Upon 3 business days prior written notice from a Fund that
it will invest in any security issued by a Russian issuer ("Russian
Security"), the Custodian shall to the extent required and in accordance with
the terms of the Subcustodian Agreement between the Custodian and Credit
Suisse ("Foreign Custodian") dated as of August 8, 1996 (the "Subcustodian
Agreement") direct the Foreign Custodian to enter into a contract ("Registrar
Contract") with the entity providing share registration services to the
Russian issuer ("Registrar") containing substantially the following
protective provisions:
(1) REGULAR SHARE CONFIRMATIONS. Each Registrar Contract
must establish the Foreign Custodian's right to conduct regular share
confirmations on behalf of the Foreign Custodian's customers.
(2) PROMPT RE-REGISTRATIONS. Registrars must be
obligated to effect re-registrations within 72 hours (or such other specified
time as the United States Securities and Exchange Commission (the "SEC") may
deem appropriate by rule, regulation, order or "no-action" letter) of
receiving the necessary documentation.
(3) USE OF NOMINEE NAME. The Registrar Contract must
establish the Foreign Custodian's right to hold shares not held directly in
the beneficial owner's name in the name of the Foreign Custodian's nominee.
(4) AUDITOR VERIFICATION. The Registrar Contract must
allow the independent auditors of the Custodian and the Custodian's clients
to obtain direct access to the share register for the independent auditors of
each of the Foreign Custodian's clients.
(5) SPECIFICATION OF REGISTRAR'S RESPONSIBILITIES AND
LIABILITIES. The
contract must set forth: (1) the Registrar's responsibilities with regard to
corporate actions and
other distributions; (ii) the Registrar's liabilities as established under
the regulations applicable to
the Russian share registration -system and (iii) the procedures for making a
claim against and
receiving compensation from the registrar in the event a loss is incurred.
(b) The Custodian shall, in accordance with the Subcustodian
Agreement, direct the Foreign Custodian to conduct regular share
confirmations, which shall require the Foreign Custodian to (1) request
either a duplicate share extract or some other sufficient evidence of
verification and (2) determine if the Foreign Custodian's records correlate
with those of the Registrar. For at least the first two years following the
Foreign Custodian's first use of a Registrar in connection with a Fund
investment, and subject to the cooperation of the Registrar, the Foreign
Custodian will conduct these share confirmations on at least a quarterly
basis, although thereafter they may be conducted on a less frequent basis,
but no less frequently than annually, if the Fund's Board of Directors, in
consultation with the Custodian, determine it appropriate.
(c) The Custodian shall, pursuant to the Subcustodian
Agreement, direct the Subcustodian to maintain custody of the Fund's share
register extracts or other evidence of verification obtained pursuant to
paragraph (b) above.
(d) The Custodian shall, pursuant to the Subcustodian
Agreement, direct the Foreign Custodian to comply with the rules,
regulations, orders and "no-action" letters of the SEC with respect to
(1) the receipt, holding, maintenance, release and
delivery of Securities; and
(2) providing notice to the Fund and its Board of
Directors of events specified in such rules, regulations, orders and letters.
(e) The Custodian shall have no liability for the action or
inaction of any Registrar or securities depository utilized in connection
with Russian Securities except to the extent that any such action or inaction
was the result of the Custodian's negligence. With respect to any costs,
expenses, damages, liabilities or claims, including attorneys' and
accountants' fees (collectively, "Losses") incurred by a Fund as a result of
the acts or the failure to act by any Foreign Custodian or its subsidiary in
Russia ("Subsidiary"), the Custodian shall take appropriate action to recover
such Losses from the Foreign Custodian or Subsidiary. The Custodian's sole
responsibility and liability to a Fund with respect to any Losses shall be
limited to amounts so received from the Foreign Custodian or Subsidiary
(exclusive of costs and expenses incurred by the Custodian) except to the
extent that such losses were the result of the Custodian's negligence.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
THE BANK OF NEW YORK
By: /s/ Stephen E. Grunston
Name: Stephen E. Grunston
Title:Vice President
THE INVESTMENT COMPANIES LISTED ON EXHIBIT A TO THE AGREEMENT
By: /s/ Deborah R. Gatzek
Name:Deborah R. Gatzek
Title: Vice President
By: /s/ Karen L. Skidmore
Name: Karen L. Skidmore
Title: Assistant Vice President
Amendment to Master Custody Agreement
The Bank of New York and each of the Investment Companies listed on Exhibit
A, for itself and on behalf of its specified series, hereby amend the Master
Custody Agreement dated as of February 16, 1996, by replacing Exhibit A with
the attached.
Dated as of: October 15, 1997
INVESTMENT COMPANIES
By: /s/ Deborah r. Gatzek
Deborah R. Gatzek
Title: Vice President & Secretary
THE BANK OF NEW YORK
By: /s/ Stephen E. Grunston
Title: Vice President
<TABLE>
<CAPTION>
THE BANK OF NEW YORK
MASTER CUSTODY AGREEMENT
EXHIBIT A
The following is a list of the Investment Companies and their respective Series for which the Custodian
shall serve under the Master Custody Agreement dated as of February 16, 1996.
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Adjustable Rate Securities Delaware Business Trust U.S. Government Adjustable Rate Mortgage
Portfolios Portfolio
Adjustable Rate Securities Portfolio
Franklin Asset Allocation Fund Delaware Business Trust
Franklin California Tax-Free Income Maryland Corporation
Fund, Inc.
Franklin California Tax-Free Trust Massachusetts Business Franklin California Insured Tax-Free Income
Trust Fund
Franklin California Tax-Exempt Money Fund
Franklin California Intermediate-Term Tax-Free
Income Fund
Franklin Custodian Funds, Inc. Maryland Corporation Growth Series
Utilities Series
Dynatech Series
Income Series
U.S. Government Securities Series
Franklin Equity Fund California Corporation
Franklin Federal Money Fund California Corporation
Franklin Federal Tax- Free Income California Corporation
Fund
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Franklin Gold Fund California Corporation
Franklin Government Securities Trust Massachusetts Business
Trust
Franklin High Income Trust Delaware Business Trust AGE High Income Fund
Franklin Investors Securities Trust Massachusetts Business Franklin Global Government Income Fund
Trust Franklin Short-Intermediate U.S. Gov't
Securities Fund
Franklin Convertible Securities Fund
Franklin Adjustable U.S. Government Securities
Fund
Franklin Equity Income Fund
Franklin Adjustable Rate Securities Fund
Franklin Managed Trust Massachusetts Business Franklin Corporate Qualified Dividend Fund
Trust Franklin Rising Dividends Fund
Franklin Investment Grade Income Fund
Franklin Institutional Rising Dividends Fund
Franklin Money Fund California Corporation
Franklin Municipal Securities Trust Delaware Business Trust Franklin Hawaii Municipal Bond Fund
Franklin California High Yield Municipal Fund
Franklin Washington Municipal Bond Fund
Franklin Tennessee Municipal Bond Fund
Franklin Arkansas Municipal Bond Fund
Franklin New York Tax-Free Income Delaware Business Trust
Fund
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Franklin New York Tax-Free Trust Massachusetts Business Franklin New York Tax-Exempt Money Fund
Trust Franklin New York Intermediate-Term Tax-Free
Income Fund
Franklin New York Insured Tax-Free Income Fund
Franklin Real Estate Securities Delaware Business Trust Franklin Real Estate Securities Fund
Trust
Franklin Strategic Mortgage Delaware Business Trust
Portfolio
Franklin Strategic Series Delaware Business Trust Franklin California Growth Fund
Franklin Strategic Income Fund
Franklin MidCap Growth Fund
Franklin Global Utilities Fund
Franklin Small Cap Growth Fund
Franklin Global Health Care Fund
Franklin Natural Resources Fund
Franklin Blue Chip Fund
Franklin Biotechnology Discovery Fund
Franklin Tax-Exempt Money Fund California Corporation
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Franklin Tax-Free Trust Massachusetts Business Franklin Massachusetts Insured Tax-Free Income
Trust Fund
Franklin Michigan Insured Tax-Free Income Fund
Franklin Minnesota Insured Tax-Free Income Fund
Franklin Insured Tax-Free Income Fund
Franklin Ohio Insured Tax-Free Income Fund
Franklin Puerto Rico Tax-Free Income Fund
Franklin Arizona Tax-Free Income Fund
Franklin Colorado Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin Pennsylvania Tax-Free Income Fund
Franklin High Yield Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin Oregon Tax-Free Income Fund
Franklin Texas Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
Franklin Alabama Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Connecticut Tax-Free Income Fund
Franklin Indiana Tax-Free Income Fund
Franklin Louisiana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
Franklin North Carolina Tax-Free Income Fund
Franklin New Jersey Tax-Free Income Fund
Franklin Kentucky Tax-Free Income Fund
Franklin Federal Intermediate-Term Tax-Free
Income Fund
Franklin Arizona Insured Tax-Free Income Fund
Franklin Florida Insured Tax-Free Income fund
Franklin Michigan Tax-Free Income Fund
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Franklin Templeton Fund Allocator Delaware Business Trust Franklin Templeton Conservative Target Fund
Series Franklin Templeton Moderate Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Global Trust Delaware Business Trust Franklin Templeton German Government Bond Fund
Franklin Templeton Global Currency Fund
Franklin Templeton Hard Currency Fund
Franklin Templeton High Income Currency Fund
Franklin Templeton International Delaware Business Trust Templeton Pacific Growth Fund
Trust Templeton Foreign Smaller Companies Fund
Franklin Templeton Money Fund Trust Delaware Business Trust Franklin Templeton Money Fund II
Franklin Value Investors Trust Massachusetts Business Franklin Balance Sheet Investment Fund
Trust Franklin MicroCap Value Fund
Franklin Value Fund
Franklin Valuemark Funds Massachusetts Business Money Market Fund
Trust Growth and Income Fund
Natural Resources Securities Fund
Real Estate Securities Fund
Utility Equity Fund
High Income Fund
Templeton Global Income Securities Fund
Income Securities Fund
U.S. Government Securities Fund
Zero Coupon Fund - 2000
Zero Coupon Fund - 2005
Zero Coupon Fund - 2010
Rising Dividends Fund
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Franklin Valuemark Funds Massachusetts Business Templeton Pacific Growth Fund
Trust Templeton International Equity Fund
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton Global Asset Allocation Fund
Small Cap Fund
Capital Growth Fund
Templeton International Smaller Companies Fund
Institutional Fiduciary Trust Massachusetts Business Money Market Portfolio
Trust Franklin U.S. Government Securities Money
Market Portfolio
Franklin U.S. Treasury Money Market Portfolio
Franklin Institutional Adjustable U.S.
Government Securities Fund
Franklin Institutional Adjustable Rate Securities Fund
Franklin U.S. Government Agency Money Market Fund
Franklin Cash Reserves Fund
The Money Market Portfolios Delaware Business Trust The Money Market Portfolio
The U.S. Government Securities Money Market Portfolio
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
CLOSED END FUNDS:
Franklin Multi-Income Trust Massachusetts Business
Trust
Franklin Principal Maturity Trust Massachusetts Business
Trust
Franklin Universal Trust Massachusetts Business
Trust
Franklin Floating Rate Trust Delaware Business Trust
</TABLE>
Franklin Resources, Inc.
777 Mariners Island Blvd.
P.O. Box 7777
San Mateo, CA 94403-7777
September 16, 1997
FRANKLIN FLOATING RATE TRUST
777 Mariners Island Blvd.
San Mateo, CA 94404
Gentlemen:
We propose to acquire 10,000 shares of beneficial interest (the
"Shares") of the Franklin Floating Rate Trust (the "Fund"), at a purchase
price of $10.00 per share for a total of $100,000. We will purchase the
Shares in a private offering prior to the effectiveness of the Form N-2
registration statement filed by the Fund under the Securities Act of 1933.
The Shares are being purchased pursuant to section 14 of the Investment
Company Act of 1940 to serve as the seed money for the Fund prior to the
commencement of the public offering of its shares.
In connection with such purchase, we understand that: (i) we, the
purchaser, intend to acquire the Shares for our own account as the sole
beneficial owner thereof and have no present intention of redeeming or
reselling the Shares so acquired; and (ii) in the event any of the initial
10,000 Shares are redeemed or repurchased during the first five years, the
Fund may charge against our redemption or repurchased proceeds a pro rata
portion of any unamortized organizational expenses which would be borne by
such Shares during the balance of the initial five-year period were they not
to be redeemed or repurchased.
We consent to the filing of this Investment Letter as an exhibit to the
form N-2 registration statement of the Fund.
Sincerely,
FRANKLIN RESOURCES, INC.
By:/s/ Harmon E. Burns
Harmon E. Burns
Executive Vice President
