CUSTODIAN AGREEMENT
AGREEMENT, made as of April 10, 1987, between Franklin Tax-Advantaged U.
S. Government Securities Fund, a California Limited Partnership (hereinafter
called the "Fund"), and Bank of America NT & SA, a national banking association
(hereinafter called the "Custodian").
WITNESSETH:
WHEREAS, the Fund is registered as an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a diversified,
open-end management company which will make shares of partnership interest (the
"Shares") available for purchase and desires that its securities and cash shall
be held and administered by the Custodian pursuant to the terms of this
Agreement; and
WHEREAS, the Custodian has an aggregate capital, surplus, and undivided
profits in excess of Two Million Dollars ($2,000,000) and has its functions and
physical facilities supervised by federal authority and is ready and willing to
serve pursuant to and subject to the terms of this Agreement:
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Fund and Custodian agree as follows:
Sec. 1. Definitions:
The word "securities" as used herein includes stocks, shares, bonds,
debentures, notes, mortgages and other obligations and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase, or subscribe for the same, or evidencing or representing any other
rights or interests therein, or in any property or assets.
The term "proper instructions" shall mean a request or direction by
telephone or any other communication device from an authorized Fund designee to
be followed by a certification in writing signed in the name of the Fund by any
two of the following persons: the President, a Vice-President, the Secretary and
Treasurer of the Fund, or any other persons duly authorized to sign by the
Managing General Partners of the Fund and for whom authorization has been
communicated in writing to the Custodian. The term "proper officers" shall mean
the officers authorized above to give proper instructions.
Sec. 2. Names, Titles and Signatures of Authorized Signers:
An officer or Managing General Partner of the Fund will certify to
Custodian the names and signatures of those persons authorized to sign in
accordance with Sec. 1 hereof, and on a timely basis, of any changes which
thereafter may occur.
Sec. 3. Receipt and Disbursement of Money:
Custodian shall open and maintain a separate account or accounts in the
name of the Fund, subject only to draft or order by Custodian acting pursuant to
the terms of this Agreement, ("Direct Demand Deposit Account"). Custodian shall
hold in such account or accounts, subject to the provisions hereof, all cash
received by it from or for the accounts of the Fund. This shall include, without
limitation, the proceeds from the sale of Shares of the Fund which shall be
received along with proper instructions from the Fund. All such payments
received by Custodian shall be converted to Federal Funds no later than the day
after receipt and deposited to such Direct Demand Deposit Account.
Custodian shall make payments of cash to, or for the account of, the Fund
from such cash or Direct Demand Deposit Account only (a) for the purchase of
securities for the portfolio of the Fund upon the delivery of such securities to
Custodian registered in the name of the Custodian or of the nominee or nominees
thereof, in the proper form for transfer, (b) for the redemption of Shares of
the Fund, (c) for the payment of interest, dividends, taxes, management or
supervisory fees or any operating expenses (including, without limitations
thereto, insurance premiums, fees for legal, accounting and auditing services),
(d) for payments in connection with the conversion, exchange or surrender of
securities owned or subscribed to by the Fund held by or to be delivered to
Custodian; or (e) for other proper Fund purposes. Before making any such payment
Custodian shall receive and may rely upon, proper instructions requesting such
payment and setting forth the purposes of such payment.
Custodian is hereby authorized to endorse and collect for the account of
the Fund all checks, drafts or other orders for the payment of money received by
Custodian for the account of the Fund.
Sec. 4. Holding of Securities:
Custodian shall hold all securities received by it for the account of the
Fund, pursuant to the provisions hereof, in accordance with the provisions of
Section 17(f) of the Investment Company Act of 1940 and the regulations
thereunder. All such securities are to be held or disposed of by the Custodian
for, and subject at all times to the proper instructions of, the Fund, pursuant
to the terms of this Agreement. The Custodian shall have no power of authority
to assign, hypothecate, pledge or otherwise dispose of any such securities and
investments, except pursuant to the proper instructions of the Fund and only for
the account of the Fund as set forth in Sec. 5 of this Agreement.
Sec. 5. Transfer, Exchange or Delivery, of Securities:
Custodian shall have sole power to release or to deliver any securities of
the Fund held by it pursuant to this Agreement. Custodian agrees to transfer,
exchange, or deliver securities held by it hereunder only (a) for the sales of
such securities for the account of the Fund upon receipt by Custodian of payment
therefor, (b) when such securities are called, redeemed or retired or otherwise
become payable, (c) for examination by any broker selling any such securities in
accordance with "street delivery" custom, (d) in exchange for or upon conversion
into other securities alone or other securities and cash whether pursuant to any
plan or merger, consolidation, reorganization, recapitalization or readjustment,
or otherwise, (e) on conversion of such securities pursuant to their terms into
other securities, (f) upon exercise of subscription, purchase or other similar
rights represented by such securities, (g) for the purpose of exchanging interim
receipts or temporary securities for definitive securities, (h) for the purpose
of redeeming in kind Shares of the Fund upon delivery thereof to Custodian, or
(i) for other proper Fund purposes. Any securities or cash receivable in
exchange for such deliveries made by Custodian, shall be deliverable to
Custodian. Before making any such transfer, exchange or delivery, the Custodian
shall receive, and may rely upon, proper instructions authorizing such transfer,
exchange or delivery and setting forth the purpose thereof.
Sec. 6. Other Actions of Custodians:
(a) The Custodian shall collect, receive and deposit income dividends,
interest and other payments or distribution of cash or property of whatever kind
with respect to the securities held hereunder; receive and collect securities
received as a distribution upon portfolio securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, consolidation,
merger, readjustment, distribution of rights and other items of like nature, or
otherwise, and execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with the collection of coupons upon
corporate securities, setting forth in any such certificate or affidavit the
name of the Fund as owner of such securities; and do all other things necessary
or proper in connection with the collection, receipt and deposit of such income
and securities, including without limiting the generality of the foregoing,
presenting for payment all coupons and other income items requiring presentation
and presenting for payment all securities which may be called, redeemed, retired
or otherwise become payable. Amounts to be collected hereunder shall be credited
to the account of the Fund according to the following formula:
(1) Periodic interest payments and final payments on maturities of
Federal instruments such as U.S. Treasury bills, bonds and notes; interest
payments and final payments on maturities of other money market instruments
including tax-exempt money market instruments payable in federal or depository
funds; and payments on final maturities of GNMA instruments, shall be credited
to the account of the Fund on payable or maturity date.
(2) Dividends on equity securities and interest payments, and
payments on final maturities of municipal bonds (except called bonds) shall be
credited to the account of the Fund on payable or maturity date plus one.
(3) Payments for the redemption of called bonds, including called
municipal bonds shall be credited to the account of the Fund on the payable date
except that called municipal bonds paid in other than Federal or depository
funds shall be credited on payable date plus one.
(4) Periodic payments of interest and/or of partial principal on
GNMA instruments (other than payments on final maturity) shall be credited to
the account of the Fund on payable date plus three.
(5) Proceeds of insurance in lieu of any payments on municipal
securities in default shall be credited to the account of the Fund on date of
receipt.
(6) Should the Custodian fail to credit the account of the Fund on
the date specified in paragraphs (1) - (5) above, the Fund may at its option,
require compensation from the Custodian of foregone interest (at the rate of
prime plus one) and for damages, if any.
(b) Payments to be received or to be paid in connection with purchase and
sale transactions shall be debited or credited to the account of the Fund on the
contract settlement date with the exception of "when-issued" municipal bonds.
Payments to be made for purchase by the Fund of when-issued municipal bonds
shall be debited to the account of the Fund on actual settlement date.
(1) In the event a payment is wrongfully debited to the account of
the Fund due to an error by the Custodian, the Custodian will promptly credit
such amount to the Fund, plus interest (prime plus one) and damages, if any.
(2) In the event a payment is credited to the account of the Fund
and the Custodian is unable to deliver securities being sold due to an error on
the part of the Fund, such payment shall be debited to the account of the Fund,
and an appropriate charge for costs of the transaction may be sent by the
Custodian to the Fund.
Sec. 7. Reports by Custodian:
Custodian shall each business day furnish the Fund with a statement
summarizing all transactions and entries for the account of the Fund for the
preceding day. At the end of every month Custodian shall furnish the Fund with a
list of the portfolio securities showing the quantity of each issue owned, the
cost of each issue and the market value of each issue at the end of each month.
Such monthly report shall also contain separate listings of (a) unsettled trades
and (b) when-issued securities. Custodian shall furnish such other reports as
may be mutually agreed upon from time to time.
Sec. 8. Compensation:
Custodian shall be paid as compensation for its services pursuant to this
Agreement such compensation as may from time to time be agreed upon in writing
between the two parties.
Sec. 9. Liabilities and Indemnifications:
(a) Custodian shall not be liable for any action taken in good faith upon
any proper instructions herein described or pursuant to a certified copy of any
resolution of the Managing General Partners of the Fund, and may rely on the
genuineness of any such document which it may in good faith believe to have been
validly executed.
(b) The Fund agrees to indemnify and hold harmless the Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and liabilities
(including counsel fees) incurred or assigned against it or its nominee in
connection with the performance of this Agreement, except such as may arise from
negligent action, negligent failure to act or willful misconduct of Custodian or
its nominee.
Sec. 10. Records:
The Custodian hereby acknowledges that all of the records it shall prepare
and maintain pursuant to this Agreement shall be the property of the Fund and,
if and to the extent applicable, of the principal underwriter of the Shares of
the Fund, and that upon proper instructions of the Fund or such principal
underwriter, if any, or both, it shall:
(a) Deliver said records to the Fund, principal underwriter or a successor
custodian, as appropriate:
(b) Provide the auditors of the Fund or principal underwriter or any
securities regulatory agency with a copy of such records without charge; and
provide the Fund and successor custodian with a reasonable number of reports and
copies of such records at a mutually agreed upon charge appropriate to the
circumstances.
(c) Permit any securities regulatory agency to inspect or copy during
normal business hours of the Custodian any such records.
Sec. 11. Appointment of Agents:
(a) The Custodian shall have the authority, in its discretion, to appoint
an agent or agents to do and perform any acts or things for and on behalf of the
Custodian, pursuant at all times to its instructions, as the Custodian is
permitted to do under this Agreement.
(b) Any agent or agents appointed to have physical custody of securities
held under this Agreement or any part thereof must be: (1) a bank or banks, as
that term is defined in Section 2(a)(5) of the 1940 Act, having an aggregate,
surplus and individual profits of not less than $2,000,000 (or such greater sum
as may then be required by applicable laws), or (2) a securities depository,
(the "Depository") as that term is defined in Rule 17f-4 under the 1940 Act,
upon proper instructions from the Fund and subject to any applicable
regulations, or (3) the book-entry system of the U.S. Treasury Department and
Federal Reserve Board, (the "System") upon proper instructions and subject to
any applicable regulations.
(c) With respect to portfolio securities deposited or held in the System
or the Depository Custodian shall:
1) hold such securities in a nonproprietary account which shall
not include securities owned by Custodian;
2) on each day on which there is a transfer to or from the Fund
in such portfolio securities, send a written confirmation to
the Fund;
3) upon receipt by Custodian, send promptly to the Fund (i) a
copy of any reports Custodian receives from the System or
the Depository concerning internal accounting controls, and
(ii) a copy of such reports on Custodian's systems of
internal accounting controls as the Fund may reasonably
request.
(d) The delegation of any responsibilities or activities by the Custodian
to any agent or agents shall not relieve the Custodian from any liability which
would exist if there were no such delegation.
Sec. 12. Assignment and Termination:
(a) This Agreement may not be assigned by the Fund or the Custodian
without written consent of the other party.
(b) Either the Custodian or the Fund may terminate this Agreement without
payment of any penalty, at any time upon one hundred twenty (120) days written
notice thereof delivered by the one to the other, and upon the expiration of
said one hundred twenty (120) days, this Agreement shall terminate; provided,
however, that this Agreement shall continue thereafter for such period as may be
necessary for the complete divestiture of all assets held hereinunder, as next
herein provided. In the event of such termination, the Custodian will
immediately upon the receipt or transmittal of such notice, as the case may be,
commence and prosecute diligently to completion the transfer of a11 cash and the
delivery of all portfolio securities, duly endorsed, to the successor of the
Custodian when appointed by the Fund. The Fund shall select such successor
custodian within sixty (60) days after the giving of such notice of termination,
and the obligation of the Custodian named herein to deliver and transfer over
said assets directly to such successor custodian shall commence as soon as such
successor is appointed and shall continue until completed, as aforesaid. At any
time after termination hereof the Fund may have access to the records of the
administration of this custodianship whenever the same may be necessary.
(c) If, after termination of the services of the Custodian, no successor
custodian has been appointed within the period above provided, the Custodian may
deliver the cash and securities owned by the Fund to a bank or trust company of
its own selection having an aggregate capital, surplus and undivided profits of
not less than Two Million Dollars ($2000,000) (or such greater sum as may then
be required by the laws and regulations governing the conduct by the Fund of its
business as an investment company) and having its functions and physical
facilities supervised by federal or state authority, to be held as the property
of the Fund under the terms similar to those on which they were held by the
retiring Custodian, whereupon such bank or trust company so selected by the
Custodian shall become the successor custodian with the same effect as though
selected by the Managing General Partners of the Fund.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above written.
Franklin Tax-Advantaged U.S.
Government Securities Fund
(A California Limited Partnership)
/s/ Xxxxxxx X. Xxxxxxx
By Xxxxxxx X. Xxxxxxx
Managing General Partner
Bank of America, NT & SA
/s/ illegible
