CUSTODIAN AGREEMENT
THIS CUSTODIAN AGREEMENT ("Agreement") is made and entered into as of
January 24, 1994, by and between Franklin Tax-Advantaged High Yield Securities
Fund, a California Limited Partnership (the "Fund"), and Bank of America
National Trust and Savings Association, a banking association organized under
the laws of the United States (the "Custodian").
RECITALS
A. The Fund is an Investment Company registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), that invests and
reinvests, on behalf of its various series, in domestic and foreign securities.
B. The Fund and the Custodian desire to provide for the retention of
the Custodian as the custodian of the assets of the Fund, 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 l. APPOINTMENT OF CUSTODIAN; DELIVERY OF ASSETS
1.1 Appointment of Custodian. The Fund hereby appoints and
designates the Custodian as the custodian of the assets of the Fund including
cash, securities the Fund desires to be held within the United States ("domestic
securities") and securities it desires to be held outside the United States
("foreign securities"). Domestic securities and foreign securities ore sometimes
referred to herein, collectively, as "securities." The Custodian hereby accepts
such appointment and designation and agrees that it shall maintain custody of
the assets of the Fund delivered to it hereunder in the manner provided for
herein.
1.2 Delivery of Assets. The Fund agrees to deliver to the Custodian
securities and cash owned by the Fund, and payments of income, principal or
capital distributions received by the Fund with respect to securities owned by
the Fund from time to time, and the cash consideration received by it for such
shares of beneficial interest ("Shares"), of the Fund as may be issued and sold
from time to time. The Custodian shall have no responsibility whatsoever for any
property or assets of the Fund held or received by the Fund and not delivered to
the Custodian pursuant to and in accordance with the terms hereof. All
securities accepted by the Custodian on behalf of the Fund under the terms of
this Agreement shall be in "street name" or other good delivery form.
1.3 Subcustodians. Upon receipt of Proper Instructions (as defined
in Section 4 hereof) and a certified copy of a resolution of the Managing
General Partners of the Fund (the "Managing General Partners") or of the
Executive Committee of the Managing General Partners (the "Executive Committee")
certified by the Secretary or an Assistant Secretary of the Fund, the Custodian
may from time to time appoint one or more subcustodians, including "foreign
custodians" (as defined in Subsection 3.1 hereof), to hold assets of the Fund.
1.4 No Duty to Manage. The Custodian shall have no duty or
responsibility to manage or recommend investments of the assets of the Fund held
by it as custodian hereunder or to initiate any purchase, sale or other
investment transaction in the absence of Proper Instructions or except as
otherwise specifically provided herein.
Section 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO ASSETS
OF THE FUND HELD BY THE CUSTODIAN
2.1 Holding Securities. The Custodian shall hold and physically
segregate from any property owned by the Custodian, for the account of the Fund,
all non-cash property delivered by the Fund to the Custodian hereunder other
than securities which, pursuant to Subsection 2.8 hereof, are held through a
registered clearing agency, a registered securities depository or in the Federal
Reserve's book-entry securities system (referred to herein, individually, as a
"Securities System"), or in a "foreign securities depository" (as defined in
Section 3.1 hereof).
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by the Fund and held by the Custodian only upon receipt of
Proper Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
(a) except as otherwise provided herein, upon sale of such
securities for the account of the Fund and receipt by the Custodian
or a subcustodian or agent appointed by the Custodian of payment
therefor;
(b) upon the receipt of payment by the Custodian or a subcustodian
or agent appointed by the 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 2.8 hereof;
(d) to a tender agent or other authorized agent in connection with a
tender or other similar offer for securities owned by the Fund;
(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 or a subcustodian or agent appointed by
the Custodian hereunder;
(f) to the issuer thereof, or its agent, for transfer into the name
of the Fund, the nominee name of the Fund, a nominee name of the
Custodian, the name or nominee name of any agent appointed pursuant
to Subsection 2.7 or the name or nominee name of any subcustodian
appointed pursuant to Section 1 hereof; or for exchange for a
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, in any such case, the new securities are to be
delivered to the Custodian or a subcustodian or agent appointed by
the Custodian hereunder;
(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 or agent
appointed by the Custodian hereunder;
(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 or a subcustodian or agent appointed by
the Custodian hereunder;
(j) for delivery in connection with any loans of securities made by
the Fund, but only against receipt by the Custodian or a
subcustodian or agent appointed by the Custodian hereunder of
adequate collateral as determined by the Fund (and identified in the
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 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 or a subcustodian or agent appointed by the
Custodian hereunder of amounts borrowed;
(l) for delivery in accordance with the provisions of any agreement
among the Fund, the 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 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
("Transfer Agent") for the Fund, for delivery to such 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 Managing
General Partners 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.
2.3 Registration of Securities. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name of the
Fund, in the name of any nominee of the Fund, in the name of any nominee of the
Custodian or in the name or nominee name of any agent appointed pursuant to
Subsection 2.7 or in the name or nominee name of any subcustodian appointed by
the Custodian pursuant to the terms hereof. The Fund agrees to hold the
Custodian any such agent, nominee or subcustodian harmless from any liability as
a holder of record of such securities.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the name of the Fund, subject only to draft or order
by the Custodian acting pursuant to the terms of this Agreement, and shall hold
in such aCcount or accounts, subject to the provisions hereof, all cash received
by it from or for the account of the Fund, other than cash maintained by the
Fund in a bank account established and used in accordance with Rule l7f-3 under
the Investment Company Act. Funds held by the Custodian for the Fund may be
deposited by it to its credit as Custodian in the banking department of the
Custodian or, upon receipt of Proper Instructions, in other banks or trust
companies: provided, however, that every such bank or trust company shall be
qualified to act as a custodian of the assets of the Fund under the Investment
Company Act. It is understood and agreed by the Custodian and the Fund that the
rate of interest payable on such funds (including foreign currency deposits)
that are deposited with the Custodian may not be a market rate of interest and
that the rate of interest payable by the Custodian to the Fund shall be agreed
upon by the Custodian and the Fund from time to time. Such funds shall be
deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 Collection of Income; Trade Settlement; Crediting of Accounts.
The Custodian shall collect income payable with respect to securities owned by
the Fund, settle securities trades for the account of the Fund and credit and
debit the Fund's account with the Custodian in connection therewith as follows:
(a) The Custodian shall effect the purchase of a security by
charging the account of the Fund on the contractual settlement date.
The Custodian shall have no liability of any kind to any person,
including the Fund, if the Custodian effects payment on behalf of
the Fund as provided for herein or in Proper Instructions, and the
seller or selling broker fails to deliver the securities purchased.
(b) The Custodian shall effect the sale of a security by delivering
a certificate or other indicia of ownership, and shall credit the
account of the Fund with the proceeds of such sale on the
contractual settlement date. The Custodian shall have no liability
of any kind to any person, including the Fund, if the Custodian
delivers such a certificate(s) or other indicia of ownership as
provided for herein or in Proper Instructions, and the purchaser or
purchasing broker fails to effect payment to the Fund within a
reasonable time period, as determined by the Custodian in its sole
discretion. In such event, the Custodian shall be entitled to
reimbursement of the amount so credited to the account of the Fund
in connection with such sale.
(c) The Fund is responsible for ensuring that the Custodian receives
timely and accurate 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 accurate instructions.
(d) The Custodian shall credit the account of the Fund with interest
income payable on interest bearing foreign securities on payable
date. Interest income on cash balances will be credited monthly to
the account of the Fund on the first business day (on which the
Custodian is open for business) following the end of each month.
Interest income on any other securities and dividends and other
amounts payable' with respect to securities shall be credited to the
account of the Fund when received by the Custodian or a foreign
custodian. The Custodian shall not be required, however, 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 2.2(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 2.2(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.
2.6 Payment of Fund Monies. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out monies of the Fund in the following cases only:
(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 or agent
appointed by the Custodian hereunder registered pursuant to
Subsection 2.3 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 2.8 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~r agent appointed by the Custodian
hereunder 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 2.2
hereof;
(c) for the redemption or repurchase of Shares issued by the
Fund as set forth in Subsection 2.2 hereof;
(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;
(e) for the payment of any dividends declared by the Board of
Directors; and
(f) for any other proper purpose, but only upon receipt of Proper
Instructions and a certified copy of a resolution of the Managing
General Partners or of the Executive Committee certified by its
Secretary or an Assistant Secretary, specifying the amount of such
payment, setting forth the purpose for which such payment is to be
made, declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
2.7 Appointment of Agents. The Custodian may at any time in its
discretion appoint (and may at any time remove) any other bank or trust company
which is itself qualified under the Investment Company Act to act as a
custodian, as its agent to carry out such of the provisions of this Section 2 as
the Custodian may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
2.8 Deposit of Securities in Securities Systems. The Custodian may
deposit and/or maintain domestic securities owned by the Fund in a Securities
System in accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, If any, and subject to the following
provisions:
(a) the Custodian may hold domestic securities of the Fund in a
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 securities belonging to the Fund;
(c) the Custodian shall pay for domestic securities purchased for
the account of the Fund upon Ii) receipt of advice from the
Securities System that such securities have been transferred to the
Securities System Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for
the account of the Fund. The Custodian shall transfer domestic
securities sold for the account of the Fund upon (A) receipt of
advice from the Securities System that payment for such securities
has been transferred to the Securities System Account, and (B) the
making of an entry on the records of the Custodian to reflect such
transfer and payment for the account of the Fund. Copies of all
advices from the Securities System of transfers of domestic
securities for the account of the Fund shall be maintained for the
Fund by the Custodian and be provided to the Fund at its request.
Upon request, the Custodian shall furnish the Fund confirmation of
each transfer to or from the account of the Fund in the form of a
written advice or notice; and
(d) upon request, the Custodian shall provide the Fund with any
report obtained by the Custodian on the Securities System's
accounting system, internal accounting control and procedures for
safeguarding domestic securities deposited in the Securities System.
2.9 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish end maintain a segregated account or accounts for and on
behalf of the Fund, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by the
Custodian pursuant to Section 2.8 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 segregation cash
or government 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 Managing General Partners 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.
2.10 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other payments with
respect to domestic securities of the Fund held by it and in connection with
transfers of such securities.
2.11 Proxies. The Custodian shall, with respect to the domestic
securities held hereunder, use its best reasonable efforts, consistent with
applicable law, to cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the name of
the Fund or a nominee of the Fund, all proxies, without indication of the manner
in which such proxies are to be voted, and shall promptly deliver to the Fund
such proxies, all proxy soliciting materials and all notices relating to such
securities.
2.12 Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Fund all written information
(including, without limitation, pendency of calls and maturities of domestic
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 the domestic securities being held for the Fund. With respect to
tender or exchange offers, the Custodian shall transmit promptly to the Fund all
written information received by the Custodian from issuers of the domestic
securities whose tender or exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Fund desires to take action with
respect to any tender offer, exchange offer or any other similar transaction,
the Fund shall notify the Custodian at least three business days prior to the
date of which the Custodian is to take such action.
2.13 Reports by Custodian. The Custodian shall supply to the Fund
daily, weekly and monthly reports as well as any other reports which the
Custodian and the Fund may agree upon from time to time.
Section 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO ASSETS
OF THE FUND HELD OUTSIDE OF THE UNITED STATES
3.1 Custody Outside of the United States, The Fund authorizes the
Custodian to hold foreign securities and cash in custody accounts which have
been established by the Custodian with (i) its foreign branches, (ii) foreign
banking institutions, foreign branches of United States banks and subsidiaries
of United States banks or bank holding companies (each a "foreign custodian")
and (iii) foreign securities depositories or clearing agencies (each a "foreign
securities depository"); provided, however, that the Managing General Partners
have approved in advance the use of each such Custodian branch, 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 Managing General
Partners or of the Executive Committee certified by the Secretary or an
Assistant Secretary of the Fund. Unless expressly provided to the contrary in
this Section 3, custody of foreign securities and assets held outside the United
States shall be governed by Section 2 hereof.
3.2 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) (l) of Rule l7f-5 under the Investment Company Act, and
(ii) cash and cash equivalents in such amounts as the Custodian or the Fund may
determine to be reasonably necessary to effect the Fund's foreign securities
transactions.
3.3 Foreign Securities Depositories. Except as may otherwise be
agreed upon in writing by the Custodian and the Fund, assets of the Fund shall
be maintained in foreign securities depositories only through arrangements
implemented by the Custodian or foreign custodians pursuant to the terms hereof.
3.4 Segregation of Securities. The Custodian shall identify on its
books and records as belonging to the Fund, the foreign securities of the Fund
held by each foreign subcustodian.
3.5 Agreements with Foreign Custodians. Each agreement with a
foreign custodian shall provide generally that: (a) the Fund's assets will not
be subject to any right, charge, security interest, lien or claim of any kind in
favor of the foreign custodian or its creditors, except a claim of payment for
their safe custody or administration; (b) beneficial ownership for the Fund's
assets will be freely transferable without the payment of money or value other
than for custody or administration; (c) adequate records will be maintained
identifying the assets as belonging to the Fund: (d) the independent public
accountants for the Fund, will be given access to the records of the foreign
custodian relating to the assets of the Fund or confirmation of the contents of
those records; (e) the disposition of assets of the Fund held by the foreign
custodian will be subject only to the instructions of the Custodian or its
agents; (f) the foreign custodian shall indemnify and hold harmless the
Custodian and the Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the foreign banking
institution's performance of its obligations under such agreement; (g) to the
extent practicable, the Fund's assets will be adequately insured in the event of
loss; and (h) the Custodian will receive periodic reports with respect to the
safekeeping of the Fund's assets, including notification of any transfer to or
from the Fund's account.
3.6 Access of Independent Accountants of the Fund. Upon request of
the Fund, the Custodian will use its best reasonable efforts to arrange for the
independent accountants of the Fund to be afforded access to the books and
records of any foreign custodian insofar as such books and records relate to the
custody by any such foreign custodian of assets of the Fund.
3.7 Transactions in Foreign Custody Accounts. Upon receipt of Proper
Instructions, the Custodian shall instruct the appropriate foreign custodian to
transfer, exchange or deliver foreign securities owned by the Fund, but except
to the extent explicitly provided herein only in any of the cases specified in
Subsection 2.2. Upon receipt of Proper Instructions, the Custodian shall pay out
or instruct the appropriate foreign custodian to pay out monies of the Fund in
any of the cases specified in Subsection 2.6. Notwithstanding anything herein to
the contrary, settlement and payment for securities received for the account of
the Fund and delivery of securities maintained for the account of the Fund may
be effected in accordance with the customary or established securities trading
or securities processing practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the expectation of receiving
later payment for such securities from such purchaser or dealer. Securities
maintained in the custody of a foreign custodian may be maintained in the name
of such entity's nominee to the same extent as set forth in Section 2.3 of this
Agreement and the Fund agrees to hold any such nominee harmless from any
liability as a holder of record of such securities.
3.8 Liability of Foreign Custodian. Each agreement between the
Custodian and a foreign custodian shall require the foreign custodian to
exercise reasonable care in the performance of its duties and to indemnify and
hold harmless the Custodian and the Fund from and against any loss, damage,
cost, expense, liability or claim arising out of or in connection with the
foreign custodian's performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights of the Custodian with
respect to any claims against a foreign custodian as a consequence of any such
loss, damage, cost, expense, liability or claim if and to the extent that the
Fund has not been made whole for any such loss, damage, cost, expense, liability
or claim.
3.9 Monitoring Responsibilities. The Custodian will promptly inform
the Fund in the event that the Custodian learns of a material adverse change in
the financial condition of a foreign custodian or is notified by (i) a foreign
banking institution employed as a foreign custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline below U.S.
$200 million (in each case computed in accordance with generally accepted United
States accounting principles), or (ii) a subsidiary of a United States bank or
bank holding company acting as a foreign custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline below U.S.
$100 million or that its shareholders' equity has declined below U.S. $100
million (in each case computed in accordance with generally accepted United
States accounting principles).
Section 4. PROPER INSTRUCTIONS
As used in this Agreement, the term "Proper Instructions" means
instructions of the Fund received by the Custodian, via telephone, telex,
facsimile transmission, bank wire or other teleprocess or electronic instruction
system acceptable to the Custodian 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 writing by
an Authorized Person (which confirmation may bear the facsimile signature of
such Person), but the Fund will hold the Custodian harmless for its failure to
send such confirmation in writing, the failure of such confirmation to conform
to the telephone instructions received or the Custodian's failure to produce
such confirmation at any subsequent time. Unless otherwise expressly provided,
all Proper Instructions shall continue in full force and effect until cancelled
or superseded. If the Custodian requires test arrangements, authentication
methods or other security devices to be used with respect to Proper
Instructions, any Proper Instructions given by the Fund thereafter shall be
given and processed in accordance with such terms and conditions for the use of
such arrangements, methods or devices as the Custodian may xxx into effect and
modify from time to time. The Fund shall safeguard any testkeys, identification
codes or other security devices which the Custodian shall make available to it.
The Custodian may electronically record any Proper Instructions given by
telephone, and any other telephone discussions, with respect to its activities
hereunder. As used in this Agreement, the term "Authorized Persons" means such
officers or such agents of the Fund as have been designated by a resolution of
the Managing General Partners or of the Executive Committee, a certified copy of
which has been provided to the Custodian, to act on behalf of the Fund under
this Agreement. Each of such persons shall continue to be an Authorized Person
until such time as the Custodian receives Proper Instructions that any such
officer or agent is no longer an Authorized Person.
Section 5. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund:
(a) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Agreement, provided that all such payments shall be accounted for to
the Fund;
(b) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
(c) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase, transfer
and other dealings with the securities and property of the Fund
except as otherwise directed by the Managing General Partners of the
Fund.
Section 6. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions (in
Writing or oral), notice, request, consent, certificate or other instrument or
paper believed by it to be genuine and to have been properly given or executed
by or on behalf of the Fund. The Custodian may receive and accept a certified
copy of a resolution of the Managing General Partners 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 Managing General Partners 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 to the
contrary.
Section 7. DUTY OF CUSTODIAN TO SUPPLY INFORMATION
The Custodian shall cooperate with and supply necessary information in its
possession to the entity or entities appointed by the Managing General Partners
to keep the books of account of the Fund and/or compute the net asset value per
share of the outstanding shares of the Fund.
Section 8. 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 Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by the Fund and held by the Custodian and shall, when requested to do so
by the Fund and for such compensation as shall be agreed upon between the Fund
and the Custodian, include certificate numbers in such tabulations.
Section 9. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.
Section 10. RESPONSIBILITY OF CUSTODIAN
The Custodian shall be responsible for the performance of only such duties
as are set forth herein or contained in Proper Instructions and shall use
reasonable care in carrying out such duties. The Custodian shall be liable to
the Fund for any loss which shall occur as the result of the failure of a
foreign custodian or a foreign securities depository engaged by such custodian
or the Custodian to exercise reasonable care with respect to the safekeeping of
securities and other assets of the Fund to the same extent that the Custodian
would be liable to the Fund if the Custodian itself were holding such securities
and other assets. In the event of any loss to the Fund by reason of the failure
of the Custodian, a foreign custodian or a foreign securities depository engaged
by such 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 but shall be indemnified by, and
shall be without liability to, the Fund for any action taken or omitted by the
Custodian in good faith without negligence. The Custodian shall be entitled to
rely, and may act, on advice of counsel (who may be counsel for the Fund) on all
matters and shall be without liability far any action reasonably taken or
omitted pursuant to such advice. The Custodian need not maintain any insurance
for the benefit of the Fund.
All collections of funds or other property paid or distributed in respect
of securities held by the Custodian, agent, subcustodian or foreign custodian
hereunder shall be made at the risk of the Fund. The Custodian shall have no
liability for any loss occasioned by delay in the actual receipt of notice by
the Custodian, agent, subcustodian or by a foreign custodian of any payment,
redemption or other transaction regarding securities in respect of which the
Custodian has agreed to take action as provided in Section 2 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 Managing
General Partners and may rely on the genuineness of any such documents which it
may in good faith believe to be validly executed. The Custodian shall not be
liable for any loss resulting from, or caused by, the direction of the Fund to
maintain custody of any securities or cash in a foreign country including, but
not limited to, losses resulting from nationalization, expropriation, currency
restrictions, civil disturbance, acts of war or terrorism, insurrection,
revolution, nuclear fusion, fission or radiation or other similar occurrences or
events beyond the control of the Custodian. Finally, the Custodian shall not be
liable for any taxes, including interest and penalties with respect thereto,
that may be levied or assessed upon or in respect of any assets of the Fund held
by the Custodian.
Section 11. LIMITED LIABILITY OF THE FUND
The Custodian acknowledges that it has received notice of and accepts the
limitations of the Fund's liability as set forth in its Agreement and
Declaration of Fund. The Custodian agrees that the Fund's obligation hereunder
shall be limited to the assets of the Fund, and that the Custodian shall not
seek satisfaction of any such obligation from the shareholders of the Fund nor
from any Partner, officer, employee, or agent of the Fund.
Section 12. EFFECTIVE PERIOD; TERMINATION
This Agreement shall become effective as of the date of its execution and
shall continue in full force and effect until terminated as hereinafter
provided. This Agreement may be terminated by the Fund or the Custodian by 60
days notice in Writing to the other provided that any termination by the Fund
shall be authorized by a resolution of the Managing General Partners, a
certified copy of which shall accompany such notice of termination, and provided
further, that such resolution shall specify the names of the persons to whom the
Custodian shall deliver the assets of the Fund held by it. If notice of
termination is given by the Custodian, the Fund shall, within 60 days following
the giving of such notice, deliver to the Custodian & certified copy of &
resolution of the Managing General Partners specifying the names of the persons
to whom the Custodian shall deliver assets of the Fund held by it. In either
case the Custodian will deliver such assets to the persons so specified, after
deducting therefrom any amounts which the Custodian determines to be owed to it
hereunder (including all costs and expenses of delivery or transfer of Fund
assets to the persons so specified). If within 60 days following the giving of a
notice of termination by the Custodian, the Custodian does not receive from the
Fund a certified copy of a resolution of the Managing General Partners
specifying the names of the persons to whom the custodian shall deliver the
assets of the Fund held by it, the Custodian, at its election, may deliver such
assets to a bank or trust company doing business in the State of California to
be held and disposed of pursuant to the provisions of this Agreement or may
continue to hold such assets until a certified copy of one or more resolutions
as aforesaid is delivered to the Custodian. The obligations of the parties
hereto regarding the use of reasonable care, indemnities and payment of fees and
expenses shall survive the termination of this Agreement.
Section 13. MISCELLANEOUS
13.1 Relationship. Nothing contained in this Agreement shall (i)
create any fiduciary, joint venture or partnership relationship between the
Custodian and the Fund or (ii) be construed as or constitute a prohibition
against the provision by the Custodian or any of its affiliates to the Trust or
the Fund of investment banking, securities dealing or brokerages services or any
other banking or financial services.
13.2 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.
13.3 Attorneys' Fees. If any lawsuit or other action or proceeding
relating to this Agreement is brought by a party hereto or by any Associate of a
party hereto against the other party hereto, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs and disbursements (in
addition to any other relief to which the prevailing party may be entitled),
13.4 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 ouch other address as the
intended recipient shall have specified in a written notice given to the other
parties hereto):
if to the Fund:
Franklin Tax-Advantaged High Yield
Securities Fund
c/o Franklin Resources, Inc.
000 Xxxxxxxx Xxxxxx Xxxx.
Xxx Xxxxx, XX 00000
Attention: Fund Manager
if to the Custodian:
Bank of America NT&SA
0000 Xxxxxx Xxxxxx
16th Floor, Dept. 5014
Xxx Xxxxxxxxx, XX 00000
13.5 Headings. The underlined headings that are 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.
13.6 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.
13.7 Governing Law. This Agreement shall be construed in
accordance with, and governed in all respects by, the laws of the State of
California (without giving effect to principles of conflict of laws).
13.8 Force Majeure. 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 an 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.
13.9 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.
13.10 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.
13.11 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.
13.12 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.
13.13 Parties in Interest. None of the provisions of this Agreement
is intended to provide any rights or remedies to any person other than the Fund
and the Custodian and their respective successors and assigns, if any.
13.14 Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto and supersedes all prior agreements and
understandings between the parties hereto relating to the subject matter hereof.
The parties acknowledge and agree that this Agreement relates only to the
custody of the assets of the Fund and not to the custody of the assets of any
other series or portfolio of the Fund.
13.15 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.
13.16 "Writing". The term "Writing" shall mean written
communication, telex, facsimile or any other commonly used electronic message
transmission facility.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first above written.
"Custodian": BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Its Vice President
"Fund": FRANKLIN TAX-ADVANTAGED
HIGH YIELD SECURITIES FUND
By: Xxxxxx X. Xxxxxxx, Xx.
Xxxxxx X. Xxxxxxx, Xx.
Its President
