CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT ("Agreement") is made and entered into as of January
18, 1989, by and between Franklin Principal Maturity Trust, a Massachusetts
business trust (the "Trust"), 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 Trust is a closed-end investment company registered under the
Investment Company Act that invests and reinvests in Domestic Securities
and Foreign Securities.
B. The Trust and the Custodian desire to provide for the retention of
the Custodian as the custodian of the assets of the Trust 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 Trustees" shall mean the board of trustees of the Trust.
"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 Trustees.
"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.
"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 Trust.
"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 Trust.
"Trust" shall mean Franklin Principal Maturity Trust, a Massachusetts
business trust.
"Writing" shall mean a communication in writing, a communication by
telex, the Custodian's Global Custody Instruction System TM, 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 Trust hereby appoints and designates
the Custodian as the custodian of the assets of the Trust including cash,
securities the Trust 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 Trust delivered to it hereunder in
the manner provided for herein.
2.2 DELIVERY OF ASSETS. The Trust agrees to deliver to the Custodian
Securities and cash owned by the Trust, payments of income, principal or
capital distributions received by the Trust with respect to Securities
owned by the Trust from time to time, and the consideration received by it
for such Shares or other securities of the Trust as may be issued and sold
from time to time. The Custodian shall have no responsibility whatsoever
for any property or assets of the Trust held or received by the Trust 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 Trust
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 Trustees or of the Executive Committee
certified by the Secretary or an Assistant Secretary of the Trust, the
Custodian may from time to time appoint one or more Subcustodians or
Foreign Custodians to hold assets of the Trust 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 Trust held by them 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 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
Trust, all non-cash property delivered by the Trust 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 Trust 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 Trust 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 Trust;
(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
Trust, or (ii) a tender offer or repurchase by the Trust 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 Trust, 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 Trust, but only against receipt by the Custodian, a
Subcustodian or a Foreign Custodian of adequate collateral as
determined by the Trust (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 Trust prior to
the receipt of such collateral;
(k) for delivery as security in connection with any borrowings by
the Trust requiring a pledge of assets by the Trust, but only against
receipt by the Custodian, a Subcustodian or a Foreign Custodian of
amounts borrowed;
(1) for delivery in accordance with the provisions of any
agreement among the Trust, 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 Trust;
(m) for delivery in accordance with the provisions of any
agreement among the Trust, 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
Trust; and
(n) following conversion of the Trust to an open-end investment
company, 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.
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 Trust, in the name or nominee
name of the Custodian or in the name or nominee name of any Subcustodian or
Foreign Custodian. The Trust 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 Trust, 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 Trust, other
than cash maintained by the Trust 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 Trust may be deposited by it to its credit as
Custodian in the banking department of the Custodian, a Subcustodian or a
Foreign Custodian. It is understood and agreed by the Custodian and the
Trust 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 Trust shall be agreed upon by the Custodian and the Trust
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 Trust, settle Securities trades for the account of the Trust and credit
and debit the Trust'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 Trust
on the contractual settlement date; provided, however, that in the
case of Foreign Securities, Proper Instructions are provided to the
Custodian by the Trust prior to the contractual settlement date in
accordance with, and within the time period specified in, the "Global
Custody Guidelines for Franklin Principal Maturity Trust (the
"Guidelines"), as amended by the Custodian from time to time in its
sole discretion. A copy of the Guidelines has been delivered by the
Custodian to the Trust. The Custodian shall have no liability of any
kind to any person, including the Trust, if the Custodian effects
payment on behalf of the Trust 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 Trust 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 Trust 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 Trust, 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 Trust 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 Trust in
connection with such sale.
(c) The Trust 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 Trust, 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 Trust 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 Trust 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 Trust 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 Trust. The collection of income due the Trust
on Domestic Securities loaned pursuant to the provisions of Subsection
3.2(j) shall be the responsibility of the Trust. The Custodian will
have no duty or responsibility in connection therewith, other than to
provide the Trust with such information or data as may be necessary to
assist the Trust in arranging for the timely delivery to the Custodian
of the income to which the Trust is entitled. The Custodian shall have
no liability to any person, including the Trust, if the Custodian
credits the account of the Trust with such income or other amounts
payable with respect to Securities owned by the Trust (other than
Securities loaned by the Trust 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 Trust.
3.6 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions the
Custodian shall pay out monies of the Trust 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 Trust 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
Trust 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 Trust 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 Trust;
(b) in connection with conversion, exchange or surrender of
Securities owned by the Trust as set forth in Subsection 3.2 hereof;
(c) for the redemption or repurchase of Shares issued by the
Trust;
(d) for the payment of any expense or liability incurred by the
Trust, including but not limited to the following payments for the
account of the Trust: custodian fees, interest, taxes, management,
accounting, transfer agent and legal fees and operating expenses of
the Trust 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 Trustees 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 Trust 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 Trust in
the Depository Trust Company or the Federal Reservels 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 Trust which are maintained in a Securities System
shall identify by book-entry those Domestic Securities belonging to
the Trust;
(c) the Custodian shall pay for Domestic Securities purchased for
the account of the Trust 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 Trust. The Custodian shall transfer Domestic Securities
sold for the account of the Trust 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 Trust. Copies of all advices from the
Securities System of transfers of Domestic Securities for the account
of the Trust shall be maintained for the Trust by the Custodian and be
provided to the Trust at its request. Upon request, the Custodian
shall furnish the Trust confirmation of each transfer to or from the
account of the Trust in the form of a written advice or notice; and
(d) upon request, the Custodian shall provide the Trust 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 Trust, 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 Trust, 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 Trust, (ii) for purposes of segregating cash or
securities in connection with options purchased, sold or written by the
Trust or commodity futures contracts or options thereon purchased or sold
by the Trust 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 Trustees 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 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.
3.11 COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES. The
Custodian shall transmit promptly to the Trust 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 Trust and the maturity of
futures contracts purchased or sold by the Trust) received by the Custodian
from issuers of Securities being held for the Trust. With respect to tender
or exchange offers, the Custodian shall transmit promptly to the Trust 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 Trust desires to take
action with respect to any tender offer, exchange offer or any other
similar transaction, the Trust shall notify the Custodian at least three
Business Days prior to the date of which the Custodian is to take such
action.
3.12 REPORTS BY CUSTODIAN. The Custodian shall supply to the Trust the
daily, weekly and monthly reports described in the Guidelines as well as
any other reports which the Custodian and the Trust 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 Trust 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 Trustees 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 Trustees or of the Executive Committee certified
by the Secretary or an Assistant Secretary of the Trust. 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 Trust may determine to be reasonably necessary to
effect the Trust's Foreign Securities transactions.
4.3 FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be agreed
upon in writing by the Custodian and the Trust, assets of the Trust 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 Trust, the Foreign Securities of the
Trust held by each Foreign Custodian.
4.5 AGREEMENTS WITH FOREIGN CUSTODIANS. Each agreement with a Foreign
Custodian shall provide generally that: (a) the Trust'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 Trust'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
Custodian; (d) the independent public accountants for the Trust, will be
given access to the records of the Foreign Custodian relating to the assets
of the Trust or confirmation of the contents of those records; (e) the
disposition of assets of the Trust 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
Trust 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
Trust'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 Trust's assets, including notification of any transfer to or from the
Trust's account.
4.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE TRUST. Upon request of
the Trust, the Custodian will use its best reasonable efforts to arrange
for the independent accountants of the Trust 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 Trust.
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
Trust, 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 Trust 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 Trust and
delivery of Foreign Securities maintained for the account of the Trust 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 Trust 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 Trust 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 Trust, 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 Trust has not been made whole for any such
loss, damage, cost, expense, liability or claim.
4.9 MONITORING RESPONSIBILITIES. The Custodian will promptly inform
the Trust 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 or that its shareholders' equity has
declined 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 5. PROPER INSTRUCTIONS
As used in this Agreement, the term "Proper Instructions" means
instructions of the Trust 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 Trust 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 Trust 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 Trust 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 Trust 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 Trust 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 Trust:
(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 Trust;
(b) endorse for collection, in the name of the Trust, 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 Trust
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 Trust. The
Custodian may receive and accept a certified copy of a resolution of the
Board of Trustees 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 Trustees 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 Trustees to keep the books of
account of the Trust and/or compute the net asset value per Share of the
outstanding Shares of the Trust.
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 3la-1
and 3la-2 thereunder. All such records shall be the property of the Trust
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 Trust and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Trust's request, supply the Trust
with a tabulation of Securities owned by the Trust and held by the
Custodian and shall, when requested to do so by the Trust and for such
compensation as shall be agreed upon between the Trust 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 Trust 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 Trust 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 Trust to
the same extent that the Custodian would be liable to the Trust if the
Custodian itself were holding such securities and other assets. In the
event of any loss to the Trust 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 Trust to the extent of the Trust'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 Trust 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 Trust) 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 Trust.
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 Trust. 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 Trustees 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 Trust 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 Trust held by the Custodian.
Section 12. LIMITED LIABILITY OF THE TRUST
The Custodian acknowledges that it has received notice of and accepts
the limitations of the Trust's liability as set forth in its Agreement and
Declaration of Trust. The Custodian agrees that the Trust's obligation
hereunder shall be limited to the assets of the Trust, and that the
Custodian shall not seek satisfaction of any such obligation from the
shareholders of the Trust nor from any Trustee, officer, employee, or agent
of the Trust.
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 Trust or the Custodian by
60 days notice in Writing to the other provided that any termination by the
Trust shall be authorized by a resolution of the Board of Trustees, 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 Trust held by
it. If notice of termination is given by the Custodian, the Trust shall,
within 60 days following the giving of such notice, deliver to the
Custodian a certified copy of a resolution of the Board of Trustees
specifying the names of the persons to whom the Custodian shall deliver
assets of the Trust 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 Trust 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 Trust a certified copy of a resolution of the Board of Trustees
specifying the names of the persons to whom the Custodian shall deliver the
assets of the Trust 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 Trust 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 Trust 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 TRUST:
Franklin Principal Maturity Trust
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
Global Custody Services #8005
000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
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
Trust 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/ Illegible
Its Vice President
"Trust": FRANKLIN PRINCIPAL MATURITY TRUST
By /s/ Xxxxxxx X. Xxxxxx
Its Secretary
By /s/ Xxxxxx X. Xxxxx
Its Vice President
FRANKLIN PRINCIPAL MATURITY TRUST
List of Persons Authorized to Give Instructions
and Other Information
The address of Franklin Principal Maturity Trust (the "Fund") to which
notices may be sent is 000 Xxxxxxxx Xxxxxx Xxxxxxxxx, Xxx Xxxxx, Xxxxxxxxxx
00000.
The persons named below have been duly elected, have duly qualified, and
now are officers of the Fund, holding the respective offices below set opposite
their names, and the signatures set opposite their names are their genuine
signatures. Each such person has been authorized by the Board of Trustees to
give instructions on behalf of the Fund.
NAME POSITION SIGNATURE
Xxxxxxx X. Xxxxxxx President /s/ Xxxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx, Xx. Vice President /s/ Xxxxxx X. Xxxxxxx, Xx.
Xxxxxx X. Xxxxx Vice President /s/ Xxxxxx X. Xxxxx
Xxxxxxx X. Xxxxxxxxx Vice President /s/ Xxxxxxx X. Xxxxxxxxx
Treasurer & Chief
Financial & Accounting Officer
Xxxxxxx X. Xxxxxxxx Vice President /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxx X. XxXxx Vice President /s/ Xxxxxx X. XxXxx
R. Xxxxxx Xxxxxxxxx Vice President /s/ X. Xxxxxx Xxxxxxxxx
Xxxxxxx X. Xxxxxxx Vice President /s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxx Secretary /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx Xxx Assistant /s/ Xxxxxxx Xxx
Secretary
Xxxxxx Xxxxxxx Assistant /s/ Xxxxxx Xxxxxxx
Treasurer
The name and address of legal counsel for the Fund is Xxxxxx & Snow, 000
Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000.
The name and address of the Transfer Agent, Registrar and Dividend
Disbursing Agent with respect to the Fund's common shares of beneficial interest
is National Westminster Bank, NJ, Xxx Xxxxxxxx Xxxxx, Xxxxxx Xxxx, Xxx Xxxxxx
00000.
The name and address of the Custodian of the Fund's assets is Bank of
America NT & SA, 000 Xxxxx Xxxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000.
Witness my hand and the seal of the Fund this 19th day of January, 1989
By: /s/ Xxxxxxx X. Xxxxxx
Secretary
[SEAL OF FRANKLIN PRINCIPAL
MATURITY TRUST]
