AMENDMENT, dated as of MAY 1, 2001 to the custody agreements (each an
"Agreement"), between the Franklin Xxxxxxxxx funds listed on Schedule A hereto
(each a "Fund"), having a place of business at 000 XXXXXXXX' XXXXXX XXXX, XXX
XXXXX, XX 00000, and The Chase Manhattan Bank ("Bank"), having a place of
business at 000 Xxxx Xxx., Xxx Xxxx, X.X. 00000-0000.
It is hereby agreed as follows:
Section 1.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.
Section 2. The Agreement is amended by deleting the Mutual Fund Rider
thereto and inserting, in lieu thereof, the following Rider:
I. Add the following after the first sentence of Section 3 of the
Agreement:
At the request of Fund, Bank may, but need not, add to Schedule B an
Eligible Foreign Custodian where Bank has not acted as Foreign Custody
Manager with respect to the selection thereof. Bank shall notify Fund in
the event that it elects to add any such entity.
II. Add the following language to the end of Section 3 of the Agreement:
(i) The term Subcustodian as used herein shall mean the following:
(a) a "U.S. Bank," which shall mean a U.S. bank as defined in rule
17f-5(a)(7) under the Investment Company Act of 1940, a amended (the
"1940 Act"); and
(b) an "Eligible Foreign Custodian," which, as defined in 1940 Act rule
17f-5(a)(1) and (5), shall mean (i) a banking institution or trust
company, incorporated or organized under the laws of a country other than
the United States, that is regulated as such by that country's government
or an agency thereof, and (ii) a majority-owned direct or indirect
subsidiary of a U.S. Bank or bank holding company which subsidiary is
incorporated or organized under the laws of a country other than the
United States. In addition, an Eligible Foreign Custodian shall also mean
any other entity that shall have been so qualified by exemptive order,
rule or other appropriate action of the SEC.
(ii) The term "securities depository" as used herein shall mean the
following when referring to a securities depository located:
(a) outside the U.S,. an "Eligible Securities Depository" which, in turn,
shall have the same meaning as in 1940 Act rule 17f-7(b)(1)(i)-(vi) as the
same may be amended from time to time, or that has otherwise been made
exempt by an SEC exemptive order, rule other appropriate SEC action,
except that prior to the compliance date with rule 17f-7 for a particular
securities depository the term "securities depository" shall be as defined
in (a)(1)(ii)-(iii) of the 1997 amendments to rule 17f-5.
(b) in the U.S., a "securities depository" as defined in 1940 Act rule
17f-4(a).
(iii) For purposes of clarity, it is understood and agreed that the term
Subcustodian shall not include any securities depository. For purposes of the
provisions of the Agreement imposing liability on Bank, the term Subcustodian
shall not include any Eligible Foreign Custodian as to which Bank has not acted
as Foreign Custody Manager.
III. Add new Section 15 to the Agreement as follows:
15. COMPLIANCE WITH 1940 ACT RULE 17F-5 ("RULE 17F-5").
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(a) Fund's board of directors (or equivalent body) (hereinafter "Board")
hereby delegates to Bank, and Bank hereby accepts the delegation to it of, the
obligation to perform as Fund's "Foreign Custody Manager" (as that term is
defined in rule 17f-5(a)(3)), including for the purposes of: (i) selecting
"Eligible Foreign Custodians" (as that term is defined in rule 17f-5(a)(1), as
the same may be amended from time to time, or that have otherwise been exempted
by SEC exemptive order, rule other appropriate SEC action) to hold Fund's
"Foreign Assets," (as that term is defined in rule 17f-5 (a)(2)) and (ii)
evaluating the contractual arrangements with such Eligible Foreign Custodians
(as set forth in rule 17f-5(c)(2)), and (iii) monitoring such foreign custody
arrangements (as set forth in rule 17f-5(c)(3)).
(b) In connection with the foregoing, Bank shall:
(i) provide written reports notifying Fund's Board of the placement of
Foreign Assets with particular Eligible Foreign Custodians and of any
material change in the arrangements with such Eligible Foreign Custodians,
with such reports to be provided to Fund's Board at such times as the
Board deems reasonable and appropriate based on the circumstances of
Fund's foreign custody arrangements but until further notice from Fund
requesting a different schedule, such reports shall be provided not less
than quarterly in summary form, with a more detailed report annually.
(ii) exercise such reasonable care, prudence and diligence in performing
as Fund's Foreign Custody Manager as a person having responsibility for
the safekeeping of Foreign Assets would exercise;
(iii) in selecting an Eligible Foreign Custodian, first have determined
that Foreign Assets placed and maintained in the safekeeping of such
Eligible Foreign Custodian shall be subject to reasonable care, based on
the standards applicable to custodians in the relevant market, after
having considered all factors relevant to the safekeeping of such Assets,
including, without limitation, those factors set forth in rule
17f-5(c)(1)(i)-(iv);
(iv) determine that the written contract with the Eligible Foreign
Custodian requires that the Eligible Foreign Custodian will provide
reasonable care for Foreign Assets based on the standards applicable to
custodians in the relevant market as provided in rule 17f-5(c)(2); and
(v) have established a system to monitor the continued appropriateness of
maintaining Foreign Assets with particular Eligible Foreign Custodians and
performance of the governing contractual arrangements; it being
understood, however, that in the event that Bank shall have determined
that the existing Eligible Foreign Custodian in a given country would no
longer afford Foreign Assets reasonable care and that no other Eligible
Foreign Custodian in that country would afford reasonable care, Bank shall
promptly so advise Fund and shall then act in accordance with the
Instructions of Fund with respect to the disposition of the affected
Foreign Assets.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
Foreign Assets on behalf of Fund with Eligible Foreign Custodians pursuant to a
written contract deemed appropriate by Bank.
(c) Except as expressly provided herein and in Section 16 hereof, Fund
shall be solely responsible to assure that the maintenance of Foreign Assets
hereunder complies with the rules, regulations, interpretations and exemptive
orders promulgated by or under the authority of the SEC.
(d) Bank represents to Fund that it is a U.S. Bank as defined in rule
17f-5(a)(7). Fund represents to Bank that: (1) the Assets being placed and
maintained in Bank's custody are subject to the Investment Company Act of 1940,
as amended (the "1940 Act") as the same may be amended from time to time; (2)
its Board (or other governing body) has determined that it is reasonable to rely
on Bank to perform as Fund's Foreign Custody Manager; and (3) its Board (or
other governing body) or its investment adviser shall have determined that Fund
may maintain Foreign Assets in each country in which Fund's Foreign Assets shall
be held hereunder and determined to accept the risks arising therefrom
(including, but not limited to, a country's financial infrastructure, prevailing
custody and settlement practices, laws applicable to the safekeeping and
recovery of Foreign Assets held in custody, and the likelihood of
nationalization, currency controls and the like) (collectively ("Country
Risk")). Nothing contained herein shall require Bank to make any selection on
behalf of Fund that would entail consideration of Country Risk and, except as
may be provided in (e) below, to engage in any monitoring of Country Risk.
(e) Bank shall provide to Fund such information relating to Country Risk
as is specified in Schedule C hereto. Fund hereby acknowledges that: (i) such
information is solely designed to inform Fund of market conditions and
procedures and is not intended as a recommendation to invest or not invest in
particular markets; and (ii) Bank has gathered the information from sources it
considers reliable, but that Bank shall have no responsibility for inaccuracies
or incomplete information.
IV. Add the following language to the end of the first sentence of
Section 4(d) of the Agreement: "or, in the case of cash deposits, except for
liens or rights in favor of creditors of the Subcustodian arising under
bankruptcy, insolvency or similar laws."
V. Add a new Section 16 to the Agreement as follows:
16. COMPLIANCE WITH 1940 ACT RULE 17F-7 ("RULE 17F-7").
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(a) Bank shall, for consideration by Fund, provide an analysis in
accordance with rule 17f-7(a)(1)(i)(A) of the custody risks associated with
maintaining Fund's Foreign Assets with each Eligible Securities Depository used
by Bank as of the date hereof (or, in the case of an Eligible Securities
Depository not used by Bank as of the date hereof, prior to the initial
placement of Fund's Foreign Assets at such Depository) and at which any Foreign
Assets of Fund are held or are expected to be held. The foregoing analysis will
be provided to Fund and its investment adviser(s) ("Adviser") at Bank's Website.
In connection with the foregoing, either Fund or Adviser shall notify Bank of
any Eligible Securities Depositories at which it does not choose to have its
Foreign Assets held. Bank shall monitor the custody risks associated with
maintaining Fund's Foreign Assets at each such Eligible Securities Depository on
a continuing basis and shall promptly notify Fund or Adviser of any material
changes in such risks.
(b) Bank shall exercise reasonable care, prudence and diligence in
performing the requirements set forth in Section 16(a) above.
(c) Based on the information available to it in the exercise of diligence,
Bank shall determine the eligibility under rule 17f-7 of each depository before
including it on Appendix 1-B hereto and shall promptly advise Fund if any
Eligible Securities Depository ceases to be eligible. (Eligible Securities
Depositories used by Bank as of the date hereof are set forth in Appendix 1-B
hereto, and as the same may be amended on notice to Fund and Adviser from time
to time.)
(d) Bank need not commence performing any of the duties set forth in this
Section 16 prior to March 31, 2001, but Bank shall advise Fund and Adviser if it
is prepared to commence such duties prior to such date as to particular
depositories.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
[Fund] THE CHASE MANHATTAN BANK
By /S/ XXXXXX X. XXXXXXX By: /S/ XXXX X. XXXXX
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Name: Xxxxxx X. Xxxxxxx Name: Xxxx X. Xxxxx
Title: Vice President Title: Vice President
Date: 5/1/01 Date: 5/3/01
