CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT ("Agreement") is made and entered into
as of June 12, 1991, by and between Franklin Balance Sheet Investment Fund, a
Massachusetts business trust (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, in Domestic Securities and Foreign Securities.
B. The Custodian is, and has represented to the Fund that the
Custodian is, a "bank" as that term is defined in Section 2(a)(5) of the
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 Fund and the Custodian desire to provide for the
retention of the Custodian as the custodian of the assets of the Fund, and such
subsequent series as the parties hereto may determine from time-to-time, on the
terms and subject to the provisions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
Section 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have
the respective meanings specified below:
"Agreement" shall mean this Custody Agreement.
"Board of Directors" shall mean the Board of Directors of the
Fund.
"Business Day" with respect to any Domestic Security means any
day, other than a Saturday or Sunday, that is not a day on which banking
institutions are authorized or required by law to be closed in The City of New
York and, with respect to Foreign Securities, a London Business Day. "London
Business Day" shall mean any day on which dealings and deposits in U.S. dollars
are transacted in the London interbank market.
"Custodian" shall mean Bank of America National Trust and Savings
Association.
"Domestic Securities" shall have the meaning provided in
Subsection 2.1 hereof.
"Executive Committee" shall mean the executive committee of the
Board of Directors.
"Foreign Custodian" shall have the meaning provided in Section
4.1 hereof.
"Foreign Securities" shall have the meaning provided in Section
2.1 hereof.
"Foreign Securities Depository" shall have the meaning provided
in Section 4.1 hereof.
"Fund" shall mean the Franklin Balance Sheet Investment Fund and
any separate series of the Fund hereinafter organized.
"Guidelines" shall have the meaning provided in Subsection 3.5(a)
hereof.
"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.
"Shares" shall mean shares of beneficial interest of the Fund.
"Subcustodian" shall have the meaning provided in Subsection 3.7
hereof, but shall not include any Foreign Custodian.
"Transfer Agent" shall mean the duly appointed and acting
transfer agent for the Fund.
"U.S." shall mean United States.
"Writing" shall mean a communication in writing, a communication
by telex, the Custodian's Global Custody Instruction SystemTM, facsimile
transmission, bankwire or other teleprocess or electronic instruction system
acceptable to the Custodian.
Section 2. APPOINTMENT OF CUSTODIAN; DELIVERY OF ASSETS
2.1 Appointment of Custodian. The Fund hereby appoints and
designates the Custodian as 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 are sometimes
referred to herein, collectively, as "Securities." The Custodian hereby accepts
such appointment and designation and agrees that it shall maintain custody of
the assets of the Fund delivered to it hereunder in the manner provided for
herein.
2.2 Delivery of Assets. The Fund agrees to deliver to the
Custodian Securities and cash owned by the Fund, payments of income, principal
or capital distributions received by the Fund with respect to Securities owned
by the Fund from time to time, and the consideration received by it for such
Shares or other securities of the Fund as may be issued and sold from time to
time. The Custodian shall have no responsibility whatsoever for any property or
assets of the Fund held or received by the Fund and not delivered to the
Custodian pursuant to and in accordance with the terms hereof. All Securities
accepted by the Custodian on behalf of the Fund under the terms of this
Agreement shall be in "street name" or other good delivery form as determined by
the Custodian.
2.3 Subcustodians. Upon receipt of Proper Instructions and a
certified copy of a resolution of the Board of Directors or of the Executive
Committee certified by the Secretary or an Assistant Secretary of the Fund, the
Custodian may from time to time appoint one or more Subcustodians or Foreign
Custodians to hold assets of the Fund in accordance with the provisions of this
Agreement.
2.4 No Duty to Manage. The Custodian, a Subcustodian or a
Foreign Custodian shall not have any duty or responsibility to manage or
recommend investments of the assets of the Fund held by them or to initiate any
purchase, sale or other investment transaction in the absence of Proper
Instructions or except as otherwise specifically provided herein.
Section 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO ASSETS OF THE
FUND HELD BY THE CUSTODIAN
3.1 Holding Securities. The Custodian shall hold and
physically segregate from any property owned by the Custodian, for the account
of the Fund, all non-cash property delivered by the Fund to the Custodian
hereunder other than Securities which, pursuant to Subsection 3.8 hereof, are
held through a registered clearing agency, a registered securities depository,
the Federal Reserve's book-entry securities system (referred to herein,
individually, as a "Securities System"), or held by a Subcustodian, Foreign
Custodian or in a Foreign Securities Depository.
3.2 Delivery of Securities. Except as otherwise provided in
Subsection 3.5 hereof, the Custodian, upon receipt of Proper Instructions, shall
release and deliver Securities owned by the Fund and held by the Custodian in
the following cases or as otherwise directed in Proper Instructions:
(a) except as otherwise provided herein,
upon sale of such Securities for the account of the Fund and
receipt by the Custodian, a Subcustodian or a Foreign
Custodian of payment therefor;
(b) upon the receipt of payment by the
Custodian, a Subcustodian or a Foreign Custodian in connection
with any repurchase agreement related to such Securities
entered into by the Fund;
(c) in the case of a sale effected through
a Securities System, in accordance with the provisions
of Subsection 3.8 hereof;
(d) to a tender agent or other authorized
agent in connection with (i) a tender or other similar offer
for Securities owned by the Fund, or (ii) a tender offer or
repurchase by the Fund of its own Shares;
(e) to the issuer thereof or its agent when
such Securities are called, redeemed, retired or otherwise
become payable; provided, that in any such case, the cash or
other consideration is to be delivered to the Custodian, a
Subcustodian or a Foreign Custodian;
(f) to the issuer thereof, or its agent, for
transfer into the name or nominee name of the Fund, the name
or nominee name of the Custodian, the name or nominee name of
any Subcustodian or Foreign Custodian; or for exchange for a
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of
units; provided that, in any such case, the new Securities are
to be delivered to the Custodian, a Subcustodian or Foreign
Custodian;
(g) to the broker selling the same for
examination in accordance with the "street delivery" custom;
(h) for exchange or conversion pursuant to
any plan of merger, consolidation, recapitalization, or
reorganization of the issuer of such Securities, or pursuant
to a conversion of such Securities; provided that, in any such
case, the new Securities and cash, if any, are to be delivered
to the Custodian or a Subcustodian;
(i) in the case of warrants, rights or
similar securities, the surrender thereof in connection with
the exercise of such warrants, rights or similar Securities or
the surrender of interim receipts or temporary Securities for
definitive Securities; provided that, in any such case, the
new Securities and cash, if any, are to be delivered to the
Custodian, a subcustodian or a Foreign Custodian;
(j) for delivery in connection with any
loans of Securities made by the Fund, but only against receipt
by the Custodian, a Subcustodian or a Foreign Custodian of
adequate collateral as determined by the Fund (and identified
in Proper Instructions communicated to the Custodian), which
may be in the form of cash or obligations issued by the United
States government, its agencies or instrumentalities, except
that in connection with any loans for which collateral is to
be credited to the account of the Custodian, a Subcustodian or
a Foreign Custodian in the Federal Reserve's book-entry
securities system, the Custodian will not be held liable or
responsible for the delivery of Securities owned by the Fund
prior to the receipt of such collateral;
(k) for delivery as security in connection
with any borrowings by the Fund requiring a pledge of assets
by the Fund, but only against receipt by the Custodian, a
Subcustodian or a Foreign Custodian of amounts borrowed;
(l) for delivery in accordance with the
provisions of any agreement among the Fund, the Custodian, a
Subcustodian or a Foreign Custodian and a broker-dealer
relating to compliance with the rules of registered clearing
corporations and of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Fund;
(m) for delivery in accordance with the
provisions of any agreement among the Fund, the Custodian, a
Subcustodian or a Foreign Custodian and a futures commission
merchant, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any contract
market, or any similar organization or organizations,
regarding account deposits in connection with transactions by
the Fund;
(n) upon the receipt of instructions from
the Transfer Agent for delivery to the Transfer Agent or to
the holders of Shares in connection with distributions in kind
in satisfaction of requests by holders of Shares for
repurchase or redemption; and
(o) for any other proper purpose, but only
upon receipt of Proper Instructions, and a certified copy of a
resolution of the Directors or of the Executive Committee
certified by the Secretary or an Assistant Secretary of the
Fund, specifying the securities to be delivered, setting forth
the purpose for which such delivery is to be made, declaring
such purpose to be a proper purpose, and naming the person or
persons to whom delivery of such securities shall be made.
3.3 Registration of Securities. Securities held by the Custodian, a
Subcustodian or a Foreign Custodian (other than bearer Securities) shall be
registered in the name or nominee name of the Fund, in the name or nominee name
of the Custodian or in the name or nominee name of any Subcustodian or Foreign
Custodian. The Fund agrees to hold the Custodian, any such nominee, Subcustodian
or Foreign Custodian harmless from any liability as a holder of record of such
Securities.
3.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts for the Fund, subject only to draft or order
by the Custodian acting pursuant to the terms of this Agreement, and shall hold
in such account or accounts, subject to the provisions hereof, all cash received
by it hereunder from or for the account of the Fund, other than cash maintained
by the Fund in a bank account established and used in accordance with Rule 17f-3
under the Investment Company Act. Funds held by the Custodian for the Fund may
be deposited by it to its credit as Custodian in the banking departments of the
Custodian, a Subcustodian or a Foreign Custodian. It is understood and agreed by
the Custodian and the Fund that the rate of interest, if any, payable on such
funds (including foreign currency deposits) that are deposited with the
Custodian may not be a market rate of interest and that the rate of interest
payable by the Custodian to the Fund shall be agreed upon by the Custodian and
the Fund from time to time. Such funds shall be deposited by the Custodian in
its capacity as Custodian and shall be withdrawable by the Custodian only in
that capacity.
3.5 Collection of Income; Trade Settlement; Crediting of
Accounts. The Custodian shall collect income payable with respect to Securities
owned by the Fund, settle Securities trades for the account of the Fund and
credit and debit the Fund's account with the Custodian in connection therewith
as follows:
(a) Upon receipt of Proper Instructions, the
Custodian shall effect the purchase of a Security by charging
the account of the Fund on the contractual settlement date;
provided, however, that in the case of Foreign Securities,
Proper Instructions are provided to the Custodian by the Fund
prior to the contractual settlement date in accordance with,
and within the time period specified in the "Global Custody
Guidelines for the Franklin Balance Sheet Investment Fund"
(the "Guidelines") as adopted for the use of this Fund, as may
be amended by the Custodian from time to time in its sole
discretion. The Custodian shall have no liability of any kind
to any person, including the Fund, if the Custodian effects
payment on behalf of the Fund as provided for herein or in
Proper Instructions, and the seller or selling broker fails to
deliver the Securities purchased.
(b) Upon receipt of Proper Instructions, the
Custodian shall effect the sale of a Security by delivering a
certificate or other indicia of ownership, and shall credit
the account of the Fund with the proceeds of such sale on the
contractual settlement date; provided, however, that in the
case of Foreign Securities, Proper Instructions are provided
to the Custodian by the Fund prior to the contractual
settlement date in accordance with, and within the time period
specified in, the Guidelines. The Custodian shall have no
liability of any kind to any person, including the Fund, if
the Custodian delivers such a certificate(s) or other indicia
of ownership as provided for herein or in Proper Instructions,
and the purchaser or purchasing broker fails to effect payment
to the Fund within a reasonable time period, as determined by
the Custodian in its sole discretion. In such event, the
Custodian shall be entitled to reimbursement of the amount so
credited to the account of the Fund in connection with such
sale.
(c) The Fund is responsible for ensuring
that the Custodian receives timely and accurate Proper
Instructions to enable the Custodian to effect settlement of
any purchase or sale. If the Custodian does not receive such
instructions within the required time period, the Custodian
shall have no liability of any kind to any person, including
the Fund, for failing to effect settlement on the contractual
settlement date. However, the Custodian shall use its best
reasonable efforts to effect settlement as soon as possible
after receipt of Proper Instructions.
(d) The Custodian shall credit the account
of the Fund with interest income payable on interest bearing
Securities on payable date. Interest income on cash balances
will be credited monthly to the account of the Fund on the
first Business Day (on which the Custodian is open for
business) following the end of each month. Dividends and other
amounts payable with respect to Domestic Securities and
Foreign Securities shall be credited to the account of the
Fund when received by the Custodian. The Custodian shall not
be required to commence suit or collection proceedings or
resort to any extraordinary means to collect such income and
other amounts payable with respect to Securities owned by the
Fund. The collection of income due the Fund on Domestic
Securities loaned pursuant to the provisions of Subsection
3.2(j) shall be the responsibility of the Fund. The Custodian
will have no duty or responsibility in connection therewith,
other than to provide the Fund with such information or data
as may be necessary to assist the Fund in arranging for the
timely delivery to the Custodian of the income to which the
Fund is entitled. The Custodian shall have no liability to any
person, including the Fund, if the Custodian credits the
account of the Fund with such income or other amounts payable
with respect to Securities owned by the Fund (other than
Securities loaned by the Fund pursuant to Subsection 3.2(j)
hereof) and the Custodian subsequently is unable to collect
such income or other amounts from the payors thereof within a
reasonable time period, as determined by the Custodian in its
sole discretion. In such event, the Custodian shall be
entitled to reimbursement of the amount so credited to the
account of the Fund.
3.6 Payment of Fund Monies. Upon receipt of Proper Instructions
the Custodian shall pay out monies of the Fund in the following cases or as
otherwise directed in Proper Instructions:
(a) upon the purchase of Securities, futures
contracts or options on futures contracts for the account of
the Fund but only, except as otherwise provided herein, (i)
against the delivery of such securities, or evidence of title
to futures contracts or options on futures contracts, to the
Custodian or a Subcustodian registered pursuant to Subsection
3.3 hereof or in proper form for transfer; (ii) in the case of
a purchase effected through a Securities System, in accordance
with the conditions set forth in Subsection 3.8 hereof; or
(iii) in the case of repurchase agreements entered into
between the Fund and the Custodian, another bank or a
broker-dealer (A) against delivery of the Securities either in
certificated form to the Custodian or a Subcustodian or
through an entry crediting the Custodian's account at the
appropriate Federal Reserve Bank with such Securities or (B)
against delivery of the confirmation evidencing purchase by
the Fund of Securities owned by the Custodian or such
broker-dealer or other bank along with written evidence of the
agreement by the Custodian or such broker-dealer or other bank
to repurchase such Securities from the Fund;
(b) in connection with conversion, exchange or
surrender of Securities owned by the Fund as set forth in
Subsection 3.2 hereof;
(c) for the redemption or repurchase of Shares
issued by the Fund;
(d) for the payment of any expense or liability
incurred by the Fund, including but not limited to the following
payments for the account of the Fund: custodian fees, interest,
taxes, management, accounting, transfer agent and legal fees and
operating expenses of the Fund whether or not such expenses are
to be in whole or part capitalized or treated as deferred
expenses; and
(e) for the payment of any dividends or
distributions declared by the Board of Directors with respect to
the Shares.
3.7 Appointment of Subcustodians. The Custodian may, upon
receipt of Proper Instructions, appoint another bank or trust company, which is
itself qualified under the 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 the Custodian may from time to time direct;
provided, however, that the appointment of any Subcustodian shall not relieve
the Custodian of its responsibilities or liabilities hereunder.
3.8 Deposit of Securities in Securities Systems. The Custodian
may deposit and/or maintain Domestic Securities owned by the Fund in a
Securities System in accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and regulations, if any, and subject to
the following provisions:
(a) the Custodian may hold Domestic
Securities of the Fund in the Depository Trust Company or the
Federal Reserve's book entry system or, upon receipt of Proper
Instructions, in another Securities System provided that such
securities are held in an account of the Custodian in the
Securities System ("Securities System Account") which shall
not include any assets of the Custodian other than assets held
as a fiduciary, custodian or otherwise for customers;
(b) the records of the Custodian with
respect to Domestic Securities of the Fund which are
maintained in a Securities System shall identify by book-entry
those Domestic Securities belonging to the Fund;
(c) the Custodian shall pay for Domestic
Securities purchased for the account of the Fund upon (i)
receipt of advice from the Securities System that such
securities have been transferred to the Securities System
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the account
of the Fund. The Custodian shall transfer Domestic Securities
sold for the account of the Fund upon (A) receipt of advice
from the Securities System that payment for such securities
has been transferred to the Securities System Account, and (B)
the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Fund.
Copies of all advices from the Securities System of transfers
of Domestic Securities for the account of the Fund shall be
maintained for the Fund by the Custodian and be provided to
the Fund at its request. Upon request, the Custodian shall
furnish the Fund confirmation of each transfer to or from the
account of the Fund in the form of a written advice or notice;
and
(d) upon request, the Custodian shall
provide the Fund with any report obtained by the Custodian on
the Securities System's accounting system, internal accounting
control and procedures for safeguarding domestic securities
deposited in the Securities System.
3.9 Segregated Account. The Custodian shall upon receipt of
Proper Instructions establish and maintain a segregated account or accounts for
and on behalf of the Fund, into which account or accounts may be transferred
cash and/or Securities, including Securities maintained in an account by the
Custodian pursuant to Section 3.8 hereof, (i) in accordance with the provisions
of any agreement among the Fund, the Custodian and a broker-dealer or futures
commission merchant, relating to compliance with the rules of registered
clearing corporations and of any national securities exchange (or the Commodity
Futures Trading Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund, (ii) for purposes of segregating cash
or securities in connection with options purchased, sold or written by the Fund
or commodity futures contracts or options thereon purchased or sold by the Fund
and (iii) for other proper corporate purposes, but only, in the case of this
clause (iii), upon receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board of Directors or of the Executive Committee
certified by the Secretary or an Assistant Secretary, setting forth the purpose
or purposes of such segregated account and declaring such purposes to be proper
corporate purposes.
3.10 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other payments
with respect to domestic securities of the Fund held by it and in connection
with transfers of such securities.
3.11 Proxies. The Custodian shall, with respect to the
Securities held hereunder, promptly deliver to the Fund all proxies, all proxy
soliciting materials and all notices relating to such Securities. If the
Securities are registered otherwise than in the name of the Fund or a nominee of
the Fund, the Custodian shall use its best reasonable efforts, consistent with
applicable law, to cause all proxies to be promptly executed by the registered
holder of such Securities in accordance with Proper Instructions.
3.12 Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Fund all written information
(including, without limitation, pendency of calls and maturities of Securities
and expirations of rights in connection therewith and notices of exercise of put
and call options written by the Fund and the maturity of futures contracts
purchased or sold by the Fund) received by the Custodian from issuers of
Securities being held for the Fund. With respect to tender or exchange offers,
the Custodian shall transmit promptly to the Fund all written information
received by the Custodian from issuers of the Securities whose tender or
exchange is sought and from the party (or its agents) making the tender or
exchange offer. If the Fund desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the Fund shall notify
the Custodian at least three Business Days prior to the date of which the
Custodian is to take such action.
3.13 Reports by Custodian. The Custodian shall supply to the
Fund the daily, weekly and monthly reports described in the Guidelines as well
as any other reports which the Custodian and the Fund may agree upon from time
to time.
Section 4.CERTAIN DUTIES OF THE CUSTODIAN WITH RESPECT TO ASSETS
OF THE FUND HELD OUTSIDE THE UNITED STATES
4.1 Custody outside the United States. The Fund authorizes the
Custodian to hold Foreign Securities and cash in custody accounts which have
been established by the Custodian with (i) its foreign branches, (ii) foreign
banking institutions, foreign branches of United States banks and subsidiaries
of United States banks or bank holding companies (each a "Foreign Custodian")
and (iii) Foreign Securities depositories or clearing agencies (each a "Foreign
Securities Depository"); provided, however, that the Board of Directors or the
Executive Committee has approved in advance the use of each such Foreign
Custodian and Foreign Securities Depository and the contract between the
Custodian and each Foreign Custodian and that such approval is set forth in
Proper Instructions and a certified copy of a resolution of the Board of
Directors or of the Executive Committee certified by the Secretary or an
Assistant Secretary of the Fund. Unless expressly provided to the contrary in
this Section 4, custody of Foreign Securities and assets held outside the United
States by the Custodian, a Foreign Custodian or through a Foreign Securities
Depository shall be governed by Section 3 hereof.
4.2 Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the custody of its foreign branches,
Foreign Custodians and Foreign Securities Depositories to: (i) "foreign
securities", as defined in paragraph (c) (1) of Rule 17f-5 under the 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.
4.3 Foreign Securities Depositories. Except as may otherwise
be agreed upon in writing by the Custodian and the Fund, assets of the Fund
shall be maintained in Foreign Securities Depositories only through arrangements
implemented by the Custodian or Foreign Custodians pursuant to the terms hereof.
4.4 Segregation of Securities. The Custodian shall identify on
its books and records as belonging to the Fund, the Foreign Securities of the
Fund held by each Foreign Custodian.
4.5 Agreements with Foreign Custodians. Each agreement with a
Foreign Custodian shall provide generally that: (a) the Fund's assets will not
be subject to any right, charge, security interest, lien or claim of any kind in
favor of the Foreign Custodian or its creditors, except a claim of payment for
their safe custody or administration; (b) beneficial ownership for the Fund's
assets will be freely transferable without the payment of money or value other
than for custody or administration; (c) adequate records will be maintained
identifying the assets as belonging to the Fund; (d) the independent public
accountants for the Fund, will be given access to the records of the Foreign
Custodian relating to the assets of the Fund or confirmation of the contents of
those records; (e) the disposition of assets of the Fund held by the Foreign
Custodian will be subject only to the instructions of the Custodian or its
agents; (f) the Foreign Custodian shall indemnify and hold harmless the
Custodian and the Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the Foreign Custodian's
performance of its obligations under such agreement; (g) to the extent
practicable, the Fund's assets will be adequately insured in the event of loss;
and (h) the Custodian will receive periodic reports with respect to the
safekeeping of the Fund's assets, including notification of any transfer to or
from the Fund's account.
4.6 Access of Independent Accountants of the Fund. Upon
request of the Fund, the Custodian will use its best reasonable efforts to
arrange for the independent accountants of the Fund to be afforded access to the
books and records of any Foreign Custodian insofar as such books and records
relate to the custody by any such Foreign Custodian of assets of the Fund.
4.7 Transactions in Foreign Custody Accounts. Upon receipt of
Proper Instructions, the Custodian shall instruct the appropriate Foreign
Custodian to transfer, exchange or deliver Foreign Securities owned by the Fund,
but, except to the extent explicitly provided herein, only in any of the cases
specified in Subsection 3.2. Upon receipt of Proper Instructions, the Custodian
shall pay out or instruct the appropriate Foreign Custodian to pay out monies of
the Fund in any of the cases specified in Subsection 3.6. Notwithstanding
anything herein to the contrary, settlement and payment for Foreign Securities
received for the account of the Fund and delivery of Foreign Securities
maintained for the account of the Fund may be effected in accordance with the
customary or established securities trading or securities processing practices
and procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser thereof or
to a dealer therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such securities from
such purchaser or dealer. Foreign Securities maintained in the custody of a
Foreign Custodian may be maintained in the name of such entity or its nominee
name to the same extent as set forth in Section 3.3 of this Agreement and the
Fund agrees to hold any Foreign Custodian and its nominee harmless from any
liability as a holder of record of such securities.
4.8 Liability of Foreign Custodian. Each agreement between the
Custodian and a Foreign Custodian shall require the Foreign Custodian to
exercise reasonable care in the performance of its duties and to indemnify and
hold harmless the Custodian and the Fund from and against any loss, damage,
cost, expense, liability or claim arising out of or in connection with the
Foreign Custodian's performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights of the Custodian with
respect to any claims against a Foreign Custodian as a consequence of any such
loss, damage, cost, expense, liability or claim if and to the extent that the
Fund has not been made whole for any such loss, damage, cost, expense, liability
or claim.
4.9 Monitoring Responsibilities.
(a) The Custodian will promptly inform the
Fund in the event that the Custodian learns of a material
adverse change in the financial condition of a Foreign
Custodian or is notified by (i) a foreign banking institution
employed as a Foreign Custodian that there appears to be a
substantial likelihood that its shareholders' equity will
decline below $200 million or that its shareholders' equity
has declined below $200 million (in each case computed in
accordance with generally accepted United States accounting
principles) and denominated in U.S. dollars, or (ii) a
subsidiary of a United States bank or bank holding company
acting as a Foreign Custodian that there appears to be a
substantial likelihood that its shareholders' equity will
decline below $100 million or that its shareholders' equity
has declined below $100 million (in each case computed in
accordance with generally accepted United States accounting
principles) and denominated in U.S. dollars.
(b) The custodian will furnish such
information as may be reasonably necessary to assist the
Fund's Board of Directors in its annual review and approval of
the continuance of all contracts or arrangements with Foreign
Subcustodians.
Section 5.PROPER INSTRUCTIONS
As used in this Agreement, the term "Proper Instructions"
means instructions of the Fund received by the Custodian via telephone or in
Writing which the Custodian believes in good faith to have been given by
Authorized Persons (as defined below) or which are transmitted with proper
testing or authentication pursuant to terms and conditions which the Custodian
may specify. Any Proper Instructions delivered to the Custodian by telephone
shall promptly thereafter be confirmed in Writing by an Authorized Person, but
the Fund will hold the Custodian harmless for its failure to send such
confirmation in writing, the failure of such confirmation to conform to the
telephone instructions received or the Custodian's failure to produce such
confirmation at any subsequent time. Unless otherwise expressly provided, all
Proper Instructions shall continue in full force and effect until 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 put into effect and modify from time to
time. The Fund shall safeguard any testkeys, identification codes or other
security devices which the Custodian shall make available to it. The Custodian
may electronically record any Proper Instructions given by telephone, and any
other telephone discussions, with respect to its activities hereunder. As used
in this Agreement, the term "Authorized Persons" means such officers or such
agents of the Fund as have been designated by a resolution of the Board of
trustees 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 6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority
from the Fund:
(a) make payments to itself or others for minor
expenses of handling Securities or other similar items relating
to its duties under this Agreement, provided that all such
payments shall be accounted for to the Fund;
(b) endorse for collection, in the name of the
Fund, checks, drafts and other negotiable instruments; and
(c) in general, attend to all non-discretionary
details in connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the Securities and
property of the Fund except as otherwise provided in Proper
Instructions.
Section 7.EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any
instructions (conveyed by telephone or in Writing), notice, request, consent,
certificate or other instrument or paper believed by it to be genuine and to
have been properly given or executed by or on behalf of the Fund. The Custodian
may receive and accept a certified copy of a resolution of the Board of
Directors or Executive Committee as conclusive evidence (a) of the authority of
any person to act in accordance with such resolution or (b) of any determination
or of any action by the Board of Directors or Executive Committee as described
in such resolution, and such resolution may be considered as in full force and
effect until receipt by the Custodian of written notice by an Authorized Person
to the contrary.
Section 8. DUTY OF CUSTODIAN TO SUPPLY INFORMATION
The Custodian shall cooperate with and supply necessary
information in its possession (to the extent permissible under applicable law)
to the entity or entities appointed by the Board of Directors to keep the books
of account of the Fund and/or compute the net asset value per Share of the
outstanding Shares of the Fund.
Section 9.RECORDS
The Custodian shall create and maintain all records relating
to its activities under this Agreement which are required with respect to such
activities under Section 31 of the 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 10.COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for
its services and expenses as Custodian, as agreed upon from time to time between
the Fund and the Custodian.
Section 11. RESPONSIBILITY OF CUSTODIAN
The Custodian shall be responsible for the performance of only
such duties as are set forth herein or contained in Proper Instructions and
shall use reasonable care in carrying out such duties. The Custodian shall be
liable to the Fund for any loss which shall occur as the result of the failure
of a Foreign Custodian or a Foreign Securities Depository engaged by such
Foreign Custodian or the Custodian to exercise reasonable care with respect to
the safekeeping of securities and other assets of the Fund to the same extent
that the Custodian would be liable to the Fund if the Custodian itself were
holding such securities and other assets. In the event of any loss to the Fund
by reason of the failure of the Custodian, a Foreign Custodian or a Foreign
Securities Depository engaged by such Foreign Custodian or the Custodian to
utilize reasonable care, the Custodian shall be liable to the Fund to the extent
of the Fund's damages, to be determined based on the market value of the
property which is the subject of the loss at the date of discovery of such loss
and without reference to any special conditions or circumstances. The Custodian
shall be held to the exercise of reasonable care in carrying out this Agreement.
The Fund agrees to indemnify and hold harmless the Custodian and its nominees
from all taxes, charges, expenses, assessments, claims and liabilities
(including legal fees and expenses) incurred by any of them in connection with
the performance of this Agreement, except such as may arise from any negligent
action, negligent failure to act or willful misconduct on the part of the
indemnified entity or any Foreign Custodian or Foreign Securities Depository.
The Custodian shall be entitled to rely, and may act, on advice of counsel (who
may be counsel for the Fund) on all matters and shall be without liability for
any action reasonably taken or omitted pursuant to such advice. The Custodian
need not maintain any insurance for the benefit of the Fund.
All collections of funds or other property paid or distributed
in respect of Securities held by the Custodian, agent, Subcustodian or Foreign
Custodian hereunder shall be made at the risk of the Fund. The Custodian shall
have no liability for any loss occasioned by delay in the actual receipt of
notice by the Custodian, agent, Subcustodian or by a Foreign Custodian of any
payment, redemption or other transaction regarding securities in respect of
which the Custodian has agreed to take action as provided in Section 3 hereof.
The Custodian shall not be liable for any action taken in good faith upon Proper
Instructions or upon any certified copy of any resolution of the Board of
Directors and may rely on the genuineness of any such documents which it may in
good faith believe to be validly executed. The Custodian shall not be liable for
any loss resulting from, or caused by, the direction of the Fund to maintain
custody of any Securities or cash in a foreign country including, but not
limited to, losses resulting from nationalization, expropriation, currency
restrictions, civil disturbance, acts of war or terrorism, insurrection,
revolution, nuclear fusion, fission or radiation or other similar occurrences or
events beyond the control of the Custodian. Finally, the Custodian shall not be
liable for any taxes, including interest and penalties with respect thereto,
that may be levied or assessed upon or in respect of any assets of the Fund held
by the Custodian.
Section 00.XXXXXXX 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 Director, officer, employee, or agent of the Fund.
Section 13.EFFECTIVE PERIOD; TERMINATION
This Agreement shall become effective as of the date of its
execution and shall continue in full force and effect until terminated as
hereinafter provided. This Agreement may be terminated by the Fund or the
Custodian by 60 days notice in Writing to the other provided that any
termination by the Fund shall be authorized by a resolution of the Board of
Directors, a certified copy of which shall accompany such notice of termination,
and provided further, that such resolution shall specify the names of the
persons to whom the Custodian shall deliver the assets of the Fund held by it.
If notice of termination is given by the Custodian, the Fund shall, within 60
days following the giving of such notice, deliver to the Custodian a certified
copy of a resolution of the Board of Directors specifying the names of the
persons to whom the Custodian shall deliver assets of the Fund held by it. In
either case the Custodian will deliver such assets to the persons so specified,
after deducting therefrom any amounts which the Custodian determines to be owed
to it hereunder (including all costs and expenses of delivery or transfer of
Fund assets to the persons so specified). If within 60 days following the giving
of a notice of termination by the Custodian, the Custodian does not receive from
the Fund a certified copy of a resolution of the Board of Directors specifying
the names of the persons to whom the Custodian shall deliver the assets of the
Fund held by it, the Custodian, at its election, may deliver such assets to a
bank or trust company doing business in the State of California to be held and
disposed of pursuant to the provisions of this Agreement or may continue to hold
such assets until a certified copy of one or more resolutions as aforesaid is
delivered to the Custodian. The obligations of the parties hereto regarding the
use of reasonable care, indemnities and payment of fees and expenses shall
survive the termination of this Agreement.
Section 14.MISCELLANEOUS
14.1 Relationship. Nothing contained in this Agreement shall
(i) create any fiduciary, joint venture or partnership relationship between the
Custodian and the Fund or (ii) be construed as or constitute a prohibition
against the provision by the Custodian or any of its affiliates to the Fund of
investment banking, securities dealing or brokerages services or any other
banking or financial services.
14.2 Further Assurances. Each party hereto shall furnish to
the other party hereto such instruments and other documents as such other party
may reasonably request for the purpose of carrying out or evidencing the
transactions contemplated by this Agreement.
14.3 Attorneys' Fees. If any lawsuit or other action or
proceeding relating to this Agreement is brought by a party hereto against the
other party hereto, the prevailing party shall be entitled to recover reasonable
attorneys' fees, costs and disbursements (including allocated costs and
disbursements of in-house counsel), in addition to any other relief to which the
prevailing party may be entitled.
14.4 Notices. Except as otherwise specified herein, each
notice or other communication hereunder shall be in Writing and shall be
delivered to the intended recipient at the following address (or at such other
address as the intended recipient shall have specified in a written notice given
to the other parties hereto):
if to the Fund :
Franklin Balance Sheet Investment 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
International Securities Services
00 Xxxxxx Xxxxxx
Xxxxxx XX0X XX
Xxxxxxx
Attention: Manager
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
California (without giving effect to principles of conflict of laws).
14.8 Force Majeure. Subject to the provisions of Section 11
hereof regarding the Custodian's general standard of care, no failure, delay or
default in performance of any obligation hereunder shall constitute an event of
default or a breach of this agreement, or give rise to any liability whatsoever
on the part of one party hereto to the other, to the extent that such failure to
perform, delay or default arises out of a cause beyond the control and without
negligence of the party otherwise chargeable with failure, delay or default;
including, but not limited to: action or inaction of governmental, civil or
military authority; fire; strike; lockout or other labor dispute; flood; war;
riot; theft; earthquake; natural disaster; breakdown of public or common carrier
communications facilities; computer malfunction; or act, negligence or default
of the other party. This paragraph shall in no way limit the right of either
party to this Agreement to make any claim against third parties for any damages
suffered due to such causes.
14.9 Successors and Assigns. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and assigns, if any.
14.10 Waiver. No failure on the part of any person to exercise
any power, right, privilege or remedy hereunder, and no delay on the part of any
person in the exercise of any power, right, privilege or remedy hereunder, shall
operate as a waiver thereof; and no single or partial exercise of any such
power, right, privilege or remedy shall preclude any other or further exercise
thereof or of any other power, right, privilege or remedy.
14.11 Amendments. This Agreement may not be amended, modified,
altered or supplemented other than by means of an agreement or instrument
executed on behalf of each of the parties hereto.
14.12 Severability. In the event that any provision of this
Agreement, or the application of any such provision to any person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
14.13 Parties in Interest. None of the provisions of this
Agreement is intended to provide any rights or remedies to any person other than
the Fund and the Custodian and their respective successors and assigns, if any.
14.14 Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto and supersedes all prior agreements and
understandings between the parties hereto relating to the subject matter hereof.
14.15 Variations of Pronouns. Whenever required by the context
hereof, the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; and the neuter
gender shall include the masculine and feminine genders.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above written.
"Custodian": BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ Xxxx X. Xxxxxx
Its Vice President
"Fund "Franklin Balance Sheet Investment Fund
By /s/ Xxxxxx X. Xxxxxxx
Its Vice President
