AMENDMENT No. 2, dated July 23, 1998 to the custody agreements (each an
"Agreement"), between each of the Xxxxxxxxx finds listed on Schedule A hereto
(each a "Fund"), with each having a place of business at 000 Xxxx Xxxxxxx Xxxx.,
Xx. Xxxxxxxxxx, XX 00000, and The Chase Manhattan Bank ("Chase"), having a place
of business at 000 Xxxx Xxx., Xxx Xxxx, XX 00000-0000.
It is hereby agreed as follows:
Section 1. Except as modified hereby, the Agreement is confirmed in all
respects. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Agreement. This Amendment supersedes in all
respects the Amendment between the parties, dated March 2, 1998, which shall
have no further force or effect as of the date hereof.
Section 2. The Agreement is amended as follows:
Delete all of Section 2 of the Agreement after subsection (B.) thereof, and
insert, in lieu thereof, the following:
(C.) Fund's board of directors (or equivalent body) (hereinafter "Board")
hereby delegates to Chase, and Chase hereby accepts the delegation to it of, the
obligation to perform as Fund's "Foreign Custody Manager" (as that term is
defined in Securities and Exchange Commission ("SEC") rule 17f-5(a)(2)), both
for the purpose of selecting Eligible Foreign Custodians (as that term is
defined herein) to hold Securities and Cash and of evaluating the contractual
arrangements with such Eligible Foreign Custodians (as set forth in SEC rule
17f-5(c)(2)); provided that, the term Eligible Foreign Custodian shall not
include any "Compulsory Depository." A Compulsory Depository shall mean a
Foreign Securities Depository or clearing agency the use of which is compulsory
because: (1) its use is required by law or regulation, (2) securities cannot be
withdrawn from the depository, or (3) maintaining securities outside the
depository is not consistent with prevailing custodial practices in the country
which the depository serves. Compulsory Depositories used by Chase as of the
date hereof are set forth in Appendix 1-A hereto, and as the same may be amended
on notice to Fund from time to time.
(i) In connection with the foregoing, Chase shall:
(1) provide written reports notifying Fund's Board of the placement of
Securities and Cash with particular Eligible Foreign Custodians and of any
material change in the arrangements with such Eligible Foreign Custodians,
with such reports to be provided to Fund's Board at such times as the Board
deems reasonable and appropriate based on the circumstances of Fund's
foreign custody arrangements;
(2) exercise such reasonable care, prudence and diligence in performing as
Fund's Foreign Custody Manager as a person having responsibility for the
safekeeping of Securities and Cash would exercise;
(3) in selecting an Eligible Foreign Custodian, first have determined that
Securities and Cash placed and maintained in the safekeeping of such
Eligible Foreign Custodian shall be subject to reasonable care, based on
the standards applicable to custodians in the relevant market, after having
considered all factors relevant to the safekeeping of such Securities and
Cash, including, without limitation, those factors set forth in SEC rule
17f-5(c)(1)(i)-(iv);
(4) determine that the written contract with the Eligible Foreign Custodian
requires that the Eligible Foreign Custodian will provide reasonable care
for Securities and Cash based on the standards applicable to custodians in
the relevant market; provided that, in the case of an Eligible Foreign
Custodian that is a non-Compulsory Depository or clearing agency, such
determination shall only be made to the extent required by SEC rule 17f-5
as in effect from time to time and where so required shall be made based on
such contract, the rules or established practices or procedures of the
Depository, or any combination thereof; and
(5) have established a system to monitor the continued appropriateness of
maintaining Securities and Cash with particular Eligible Foreign Custodians
and of the governing contractual arrangements. Chase shall also monitor
Compulsory Depositories and shall advise Fund of any material negative
change in the performance of, or arrangements with, any Compulsory
Depository as the same would adversely affect the custody of assets. With
respect to monitoring Compulsory Depositories, Chase shall use its
reasonable efforts to obtain the information with respect to the factors
set forth on Schedule 1-C hereto: (i) by November 20, 1998 with respect to
any Compulsory Depository in a country in which Securities are held as of
the date hereof; (ii) to the extent feasible in light of the circumstances
then prevailing in a given country in which Securities are held, no later
than 90 days after the establishment of, or a determination by Chase that a
depository has become, a Compulsory Depository in such country; and (iii)
to the extent feasible in light of the circumstances then prevailing in a
given country, no later than 90 days after the first placement of
Securities after the date hereof with a Subcustodian where such country has
a Compulsory Depository. Chase shall advise Fund when, to Chase's knowledge
based on such reasonable efforts, there is a negative answer with respect
to a Compulsory Depository as to any of such factors. In connection with
the foregoing: (i) Fund acknowledges and agrees that Chase's agreements
with Eligible Foreign Custodians do not, as of the date hereof, comply with
factor (i) on Schedule 1-C and that Chase shall not amend such agreements
to so comply unless Rule 17f-5 is amended or interpreted by the Securities
and Exchange Commission to incorporate such a factor into the Rule with
respect to Compulsory Depositories; and (ii) to the extent that Rule 17f-5
is amended or interpreted by the Securities and Exchange Commission to
incorporate materially one or more of (i)-(viii), Chase shall be obligated
to obtain the relevant information on such incorporated factors rather than
being limited only to using its reasonable efforts to do so.
In the event that the SEC adopts standards or criteria different from those
set forth in Schedule 1-C, the above provisions and Schedule 1-C shall be
deemed to be amended to conform to the standards or criteria adopted by the
SEC, it being understood that the time within which Chase must furnish the
required information shall be a reasonable time in light of such
differences.
Subject to (i)(1)-(4) and the first sentence of (5) above, Chase is hereby
authorized to place and maintain Securities and Cash on behalf of Fund with
Eligible Foreign Custodians pursuant to a written contract deemed appropriate by
Chase.
(ii) Except as expressly provided herein, Fund shall be responsible to
assure that the maintenance of Securities and Cash hereunder complies with the
rules, regulations, interpretations and exemptive orders promulgated by or under
the authority of the SEC.
(iii) Chase represents to Fund that it is a U.S. Bank as defined in Rule
17f-5(a)(7). Fund represents to Chase that: (1) the Securities and Cash being
placed and maintained in Chase's custody are subject to the Investment Company
Act of 1940, as amended (the "1940 Act"), as the same may be amended from time
to time; (2) its Board has determined that it is reasonable to rely on Chase to
perform as Fund's Foreign Custody Manager; and (3) its Board or its investment
adviser shall have determined that Fund may maintain Securities and Cash in each
country in which Fund's Securities and Cash shall be held hereunder and
determined to accept the risks arising therefrom (including, but not limited to,
a country's financial infrastructure (and including any Compulsory Depository
operating in such country), prevailing custody and settlement practices, laws
applicable to the safekeeping and recovery of Securities and Cash held in
custody, and the likelihood of nationalization, currency controls and the like)
(collectively ("Country Risk")). Nothing contained herein shall require Chase to
make any selection that would entail consideration of Country Risk.
(iv) Chase shall assist Fund in monitoring Country Risk by furnishing such
information relating to the Country Risk as is specified in Appendix 1-B hereto.
Fund hereby acknowledges that: (1) such information is solely designed to inform
Fund of market conditions and procedures and is not intended as a recommendation
to invest or not invest in particular markets; and (2) Chase has gathered the
information from sources it considers reliable, but that Chase shall have no
responsibility for inaccuracies or incomplete information except to the extent
negligently obtained by Chase.
Section 3. Add the following at the end of Section 3(d):
and which shall be limited to Eligible Foreign Custodians as defined in
(i)-(ii) and (v) of the definition of Eligible Foreign Custodians contained
herein; provided that, for purposes of the sections of this Agreement
addressing Chase liability (including, but not limited to, Sections 7, 10,
14, and 16-17), Foreign Bank shall not include any Foreign Bank as to which
Chase has not acted as Foreign Custody Manager.
Section 4. Add the following at the end of Section 3(e):
and which shall be limited to Eligible Foreign Custodians as defined in
(iii) and (iv)-(v) of the definition of Eligible Foreign Custodians
contained herein; provided that, for purposes of the sections of this
Agreement addressing Chase liability (including, but not limited to,
Sections 7, 10, 14, and 16-17) the term Foreign Securities Depository shall
not include any Compulsory Depository or any non-compulsory depository as
to which Chase has not acted as Foreign Custody Manager.
Section 5. Add the following definitions in appropriate alphabetic sequence
to Section 3 of the Agreement:
(1) a "U.S. Bank," shall mean a U.S. bank as defined in SEC rule
17f-5(a)(7).
(2) an "Eligible Foreign Custodian," shall mean (i) a banking institution
or trust company, incorporated or organized under the laws of a country
other than the United States, that is regulated as such by that country's
government or an agency thereof, (ii) a majority-owned direct or indirect
subsidiary of a U.S. Bank or bank holding company which subsidiary is
incorporated or organized under the laws of a country other than the United
States; (iii) a securities depository or clearing agency, incorporated or
organized under the laws of a country other than the United States, that
acts as a system for the central handling of securities or equivalent
book-entries in that country and that is regulated by a foreign financial
regulatory authority as defined under section 2(a)(50) of the 1940 Act,
(iv) a securities depository or clearing agency organized under the laws of
a country other than the United States when acting as a transnational
system ("Transnational Depository") for the central handling of securities
or equivalent book-entries, and (v) any other entity that shall have been
so qualified by exemptive order, rule or other appropriate action of the
SEC.
Section 6. Delete existing Section 5 of the Agreement and, insert, in lieu
thereof, the following:
At the request of Fund, Chase may, but need not, add an Eligible Foreign
Custodian that is a U.S. Bank, a Foreign Bank or Foreign Securities
Depository where Chase has not acted as Foreign Custody Manager with
respect to the selection thereof; provided that, any such entities shall
not be included for purposes of the sections of this Agreement addressing
Chase liability (including, but not limited to, Sections 7, 10, 14, and
16-17). Chase shall notify Fund in the event that it elects to add any such
entity.
*********************
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
TEMPLETON THE CHASE MANHATTAN BANK
(on behalf of each of the Funds
listed on Schedule A hereto)
By: /s/ Xxxxxxx X. Xxxxx By: /s/ Xxxxxx XxxxxxXxxxxx
---------------------- ------------------------
Name: Xxxxxxx X. Xxxxx Name: Xxxxxx XxxxxxXxxxxx
Title: Secretary Title: Vice President
By: /s/ Xxxx X. Xxx
----------------------
Name: Xxxx X. Xxx
Title: Vice President
Schedule A
XXXXXXXXX U.S. FUNDS
As of June 30, 1998
XXXXXXXXX GROWTH FUND, INC. ("TGF") - 12/31/86
XXXXXXXXX FUNDS, INC. ("TFI") - 2/11/86
Xxxxxxxxx World Fund
Xxxxxxxxx Foreign Fund
XXXXXXXXX GLOBAL SMALLER COMPANIES FUND, INC. ("TGSCF") - 5/15/96
TEMPLETON INCOME TRUST ("TIT") - 5/15/96
Xxxxxxxxx Global Bond Fund
XXXXXXXXX GLOBAL REAL ESTATE FUND ("TGREF") - 5/15/96
XXXXXXXXX CAPITAL ACCUMULATOR FUND, INC. ("TCAF") - 1/14/91
XXXXXXXXX DEVELOPING MARKETS TRUST ("TDMT") - 10/16/91
XXXXXXXXX AMERICAN TRUST, INC. ("TAT") - 2/26/91
TEMPLETON INSTITUTIONAL FUNDS, INC. ("TIFI") - 1/29/96
Xxxxxxxxx Foreign Equity Series
Xxxxxxxxx Growth Series
Xxxxxxxxx Emerging Markets Series
Xxxxxxxxx Emerging Fixed Income Series
TEMPLETON GLOBAL OPPORTUNITIES TRUST ("TGOT") - 1/18/90
TEMPLETON GLOBAL INVESTMENT TRUST ("TGIT") - 5/7/95
Xxxxxxxxx Growth and Income Fund
Xxxxxxxxx Global Infrastructure Fund
Xxxxxxxxx Americas Government Securities Fund
Xxxxxxxxx Greater European Fund
Xxxxxxxxx Latin America Fund
XXXXXXXXX EMERGING MARKETS FUND, INC. ("TEMF") - 2/1/87
XXXXXXXXX GLOBAL INCOME FUND, INC. ("TGIF") - 2/29/88
TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST ("TGG") - 10/22/88
XXXXXXXXX EMERGING MARKETS INCOME FUND, INC. ("TEMIF") - 9/17/93
XXXXXXXXX CHINA WORLD FUND, INC. ("TCWF") - 9/7/93
XXXXXXXXX EMERGING MARKETS APPRECIATION FUND, INC. ("TEMAF") - 4/22/94
XXXXXXXXX DRAGON FUND, INC. ("TDF") - 8/30/94
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC. ("TVF") - 9/15/94
XXXXXXXXX RUSSIA FUND, INC. ("TRF") - 6/15/95
TEMPLETON VARIABLE PRODUCTS SERIES FUND ("TVPSF") - 8/31/88 (amended & restated
2/23/96)
Templeton Money Market Fund
Templeton Bond Fund
Templeton Stock Fund
Templeton Asset Allocation Fund
Xxxxxxxxx International Fund
Xxxxxxxxx Developing Markets Fund
Mutual Discovery Investments Fund
Mutual Shares Investments Fund
Franklin Growth Investments Fund
Franklin Small Cap Investments Fund
Appendix 1-A
COMPULSORY DEPOSITORIES
See Attached
Appendix 1-B
INFORMATION REGARDING COUNTRY RISK
1. To aid Fund's board in its determinations regarding Country Risk, Chase
shall furnish board annually and upon the initial placing of Securities and Cash
into a country the following information (check items applicable):
A Opinions of local counsel concerning:
i. Whether applicable foreign law would restrict the access afforded
Fund's independent public accountants to books and records kept by an
eligible foreign custodian located in that country.
ii. Whether applicable foreign law would restrict the Fund's ability to
recover its assets in the event of the bankruptcy of an Eligible
Foreign Custodian located in that country.
iii. Whether applicable foreign law would restrict the Fund's ability to
recover assets that are lost while under the control of an Eligible
Foreign Custodian located in the country.
B. Written information concerning:
i. The likelihood of expropriation, nationalization, freezes, or
confiscation of Fund's assets.
ii. Whether difficulties in converting Fund's cash and cash equivalents to
U.S. dollars are reasonably foreseeable.
C. A market report with respect to the following topics:
(i) securities regulatory environment, (ii) foreign ownership
restrictions, (iii) foreign exchange, (iv) securities settlement and
registration, (v) taxation, and (vi) compulsory depositories
(including depository evaluation).
2. To aid Fund in monitoring Country Risk, Chase shall furnish the
following additional information:
As more fully described in the Foreign Custody Manager procedures, market
flashes, including with respect to changes in the information in market reports.
Appendix 1-C
FACTORS REGARDING COMPULSORY DEPOSITORIES
-----------------------------------------
(i) Whether the Eligible Foreign Custodian which is participating in the
Compulsory Depository has undertaken to adhere to the roles, practices
and procedures of such Compulsory Depository;
(ii) Whether no regulatory authority with oversight responsibility for the
Compulsory Depository has issued a public notice that the Compulsory
Depository is not in compliance with any material capital, solvency,
insurance or other similar financial strength requirements imposed by
such authority or, in the case of such notice having been issued, that
such notice has been withdrawn or the remedy of such noncompliance has
been publicly announced by the Compulsory Depository;
(iii)Whether no regulatory authority with oversight responsibility over
the Compulsory Depository has issued a public notice that the
Compulsory Depository is not in compliance with any material internal
controls requirement imposed by such authority or, in the case of such
notice having been issued, that such notice has been withdrawn or the
remedy of such noncompliance has been publicly announced by the
Compulsory Depository;
(iv) Whether the Compulsory Depository maintains Fund's assets deposited
with the Compulsory Depository by the Eligible Foreign Custodian
participant under no less favorable safekeeping conditions than those
that apply generally to other participants in the Compulsory
Depository;
(v) Whether the Compulsory Depository maintains records that segregate the
Compulsory Depository's own assets from the assets of participants in
the Compulsory Depository;
(vi) Whether the Compulsory Depository maintains records that identify the
assets of each of its participants;
(vii)Whether the Compulsory Depository provides periodic reports to its
participants with respect to the safekeeping of assets maintained by
the Compulsory Depository including by way of example, notification of
any transfer to or from participant accounts; and
(viii) Whether the Compulsory Depository is subject to periodic review,
such as audits by independent accountants or inspections by regulatory
authorities.
