AMENDMENT, dated July 24, 1996 to the July 28, 1995 custody agreement
("Agreement") between the Franklin Xxxxxxxxx International Trust (formerly known
as Franklin International Trust) on behalf of Xxxxxxxxx Foreign Smaller
Companies Fund (formerly known as Franklin International Equity Fund)
("Customer"), having a place of business at 000 Xxxxxxxx Xxxxxx Xxxxxxxxx, Xxx
Xxxxx, XX 00000, and The Chase Manhattan Bank, N.A. ("Bank"), having a place of
business at Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxx Xxxx, X.X. 00000
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 as follows by adding the following
as new ss.15:
"(a) "CMBI" shall mean Chase Manhattan Bank International, an
indirect wholly-owned subsidiary of Bank, located in Moscow, Russia, and any
nominee companies appointed by it.
"(b) "International Financial Institution" shall mean any bank
in the top 1,000 (together with their affiliated companies) as measured by "Tier
1" capital or any xxxxxx/dealer in the top 100 as measured by capital.
"(c) "Negligence" shall mean the failure to exercise
"Reasonable Care".
"(d) "No-Action Letter" shall mean the response of the
Securities and Exchange Commission's Office of Chief Counsel of Investment
Management, dated April 18, 1995, in respect of the Xxxxxxxxx Russia Fund,
Inc. (SEC Ref. No. 95-151-CC, File No. 811-8788) providing "no-action" relief
under ss.17(f) of The Investment Company Act of 1940, as amended, and SEC Rule
17f-5 thereunder, in connection with custody of such Xxxxxxxxx Russia Fund,
Inc.'s investments in Russia Securities.
"(e) "Reasonable Care" shall mean the use of reasonable care
under the applicable circumstances as measured by the custodial practices
prevailing in Russia of International Financial Institutions acting as
custodians for their institutional investor clients in Russia.
"(f) "Registrar Company" shall mean any entity providing share
registration services to an issuer of Russian Securities.
"(g) "Registrar Contract" shall mean a contract between CMBI
and a Registrar Company (and as the same may be amended from time to time)
containing INTER ALIA, the contractual provisions described at paragraphs
(a)-(e) on pps. 5-6 of the No-Actioon Letter.
"(h) "Russian Security" shall mean a Security issued by a
Russian issuer.
"(i)" 'Share Extract" shall mean: (i) an extract of its share
registration books issued by a Registrar Company indicating an investor's
ownership of a security; and (ii) a form prepared by CMBI or its agent in those
cases where a Registrar Company is unwilling to issue a Share Extract.
Section 3. Section 6(a) of the Agreement is amended by adding the
following at the end thereof: "With respect to Russia, payment for Russian
Securities shall not be made prior to the issuance of the Share Extract relating
to such Russian Security. Delivery of Russian Securities may be made in
accordance with the Customary or established securities trading or securities
processing practices and procedures in Russia. Delivery of Russian Securities
may also be made in any manner specifically required by Instructions acceptable
to the Bank. Customer shall promptly supply such transaction and settlement
information as may be requested by Bank or CMBI in connection with particular
transactions."
Section 4. Section 8 of the Agreement is amended by adding a new
paragraph to the end thereof as follows: "It is understood and agreed that Bank
need only use its reasonable efforts with respect to performing the functions
described in the ss.8 with respect to Russian Securities.
Section 5. Section 12(a)(i) of the Agreement is amended with respect to
Russian custody by deleting the phrase "reasonable care" wherever it appears and
substituting, in lieu thereof, the phrase "Reasonable Care".
Section 6. Section 12(a)(i) of the Agreement is further amended with
respect to Russian custody by inserting the following at the end of the first
sentence thereof: "; provided that, with respect to Russian Securities Bank's
responsibilities shall be limited to safekeeping of relevant Share Extracts."
Section 7. Section 12(a)(i) of the Agreement is further amended with
respect to Russian custody by inserting the following after the second sentence
thereof: "Delegation by Bank to CMBI shall not relieve Bank of any
responsibility to Customer for any loss due to such delegation, and Bank shall
be liable for any loss or claim arising out of or in connection with the
performance by CMBI of such delegated duties to the same extent as if Bank had
itself provided the custody services hereunder. In connection with the
foregoing, neither Bank nor CMBI shall assume responsibility for, and neither
shall be liable for, any action or inaction of any Registrar Company and no
Registrar Company shall be, or shall be deemed to be, Bank, CMBI, a
Subcustodian, a securities depository or the employee, agent or personnel of any
of the foregoing. To the extent that CMBI employs agents to perform any of the
functions to be performed by Bank or CMBI with respect to Russian Securities,
neither Bank nor CMBIshall be responsible for any act, omission, default or for
the solvency of any such agent unless the appointment of such agent was made
with Negligence or in bad faith, except that where Bank or CMBI uses (I) an
affiliated nominee or (ii) an agent to perform the share registration or share
confirmation functions described in paragraphs (a)-(e) on pps. 5-6 or the
No-Action Letter, and, to the extent applicable to CMBI, the share registration
functions described on pps. 2-3 of the No-Action Letter, Bank and CMBI shall be
liable to Customer as if CMBI were responsible for performing such services
itself.
Section 8. Section 12(a)(ii) is amended with respect to Russian
custody by deleting the word "negligently" and substituting, in lieu thereof,
the word "Negligence".
Section 9. Section 12(a)(iii) is amended with respect to Russian
custody by deleting the word "negligence" and substituting, in lieu thereof, the
word "Negligence.
Section 10. Add anew Section 16 to the Agreement as follows:
"(a) Bank will advise Customer (and will update such advice
from time to time as changes occur) of those Registrar Companies with which CMBI
has entered into a Registrar Contract. Bank shall cause CMBI both to monitor
each Registrar Company and to promptly advise Customer and its investment
advisor when CMBI has actual knowledge of the occurrence of any one or more of
the events described in paragraphs (I)-(v) on pps. 8-9 of the No-Action Letter
with respect to a Registrar Company that serves in that capacity for any issuer
the shares of which are held by Customer.
"(b) Where Customer is considering investing in the Russian
Securities of an issuer as to which CMBI does not have a Registrar Contract with
the issuer's Registrar Company, Customer may request that Bank ask that CMBI
both consider whether it would be willing to attempt to enter into such a
Registrar Contract and to advise Customer of its willingness to do so. Where
CMBI has agreed to make such an attempt, Bank will advise Customer of the
occurrence of any one or more of the events described in paragraphs (i)-(iv) on
pps. 8-9 of the No-Action Letter of which CMBI has actual knowledge.
"(c) Where Customer is considering investing in the Russian
Securities of an issuer as to which CMBI has a Registrar Contract with the
issuer's Registrar Company, Customer may advise Bank of its interest in
investing in such issuer and, in such event, Bank will advise Customer of the
occurrence of any one or more of the events described in paragraphs (I)-(v) on
pps. 8-9 or the No-Action Letter of which CMBI has actual knowledge."
Section 11. Add a new Section 17 to theAgreement as follows: "Customer
shall pay for and hold Bank and CMBI harmless from any liability or loss
resulting from the imposition or assessment of any taxes or other governmental
charges, and any related expenses incurred by Bank, CMBI or their respective
agents with respect to income on Customer's Russian Securities.
Section 12. Add a new Section 18 to the Agreement as follows" "Customer
acknowledges that CMBI may not be able, in given cases and despite its
reasonable efforts, to obtain a Share Extract from a Registrar Company and CMBI
shall not be liable in any such event including with respect to any losses
resulting from such failure."
Section 13. Add a new Section 19 to the Agreement as follows" "Customer
acknowledges that it has received, reviewed and understands Bank's market report
for Russia, including, but not limited to, the risks described therein."
Section 14. Add a new Section 20 to the Agreement as follows: "Subject
to the cooperation of a Registrar Company, for at least the first two years
following CMBI's first use of a Registrar Company, Bank shall cause CMBI to
conduct share confirmations on at least a quarterly basis, although thereafter
confirmations may be conducted on a less frequent basis if Customer's Board of
Directors, in consultation with CMBI, determines it to be appropriate."
Section 15. Add a new Section 21 to the Agreement as follows: "Bank
shall cause CMBI to prepare for distribution to Customer's Board of Directors a
quarterly report identifying: (I) any concerns it has regarding the Russian
share registration system that should be brought to the attention of the Board
of Directors; and (ii) the steps CMBI has taken during the reporting period to
ensure that Customer's interests continue to be appropriately recorded."
Section 16. Add a new Section 22 to the Agreement as follows: "Except
as provided in new ss.16(b), the services to be provided by Bank hereunder will
be provided only in relation to Russian Securities for which CMBI has entered
into a Registrar Contract with the relevant Registrar Company."
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
FRANKLIN XXXXXXXXX INTERNATIONAL TRUST (formerly known as Franklin International
Trust), on behalf of XXXXXXXXX FOREIGN SMALLER COMPANIES FUND (formerly known
As Franklin International Equity Fund) THE CHASE MANHATTAN BANK, N.A.
By: /S/ X.X. XXXXXX By: /S/XXXXXX VANDEN-HANDEL
Name: Xxxxxxx X. Xxxxxx Name: Xxxxxx Vanden-Handel
Title: Vice President Title: Vice President
& Secretary
Date: July 24, 1996 Date: July 24, 1996
