Exhibit 99.B(H)(7)
XXXXX FARGO VARIABLE TRUST
SECURITIES LENDING AGREEMENT
This Agreement, made as of the 20th day of September, 1999, by and among
Xxxxx Fargo Variable Trust (the "Trust") on behalf of its funds now existing or
hereafter created (the "Funds"), Xxxxx Fargo Bank, N.A., as adviser for the
Funds ("Xxxxx Fargo") and Norwest Bank Minnesota, N.A., as custodian for the
Funds (the "Custodian").
WHEREAS, the Custodian has established a securities lending program (the
"Program") to permit its retirement plan, trust and custody clients to loan
securities;
WHEREAS, the Funds listed in Exhibit A desire to participate in the Program
and the Board of Trustees having approved their participation in the Program;
and
NOW, THEREFORE, the parties hereto agree as follows:
1. Adviser's Activities
--------------------
As investment adviser to the Funds, Xxxxx Fargo's responsibility with
respect to securities lending activities shall be to perform or
supervise the performance by sub-advisers or, to the extent delegated
by this Agreement, the Custodian, in accordance with securities lending
guidelines approved by the Board of Trustees of the Trust (the
"Guidelines"), of the following:
a. To negotiate or approve the terms and conditions of securities
loans entered into by the Funds.
b. To evaluate the creditworthiness of and select borrowers (the
"Borrowers").
c. To invest any cash collateral received from the Borrowers or
obtained through repurchase transactions with respect to non-cash
collateral received from the Borrowers.
d. To identify to the Custodian securities in the Funds that are
eligible to be loaned under the Program and securities that are not
eligible to b e loaned.
e. To provide to the Custodian a schedule of permitted lending rates.
f. To update all such information as necessary in consultation with
the Custodian.
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2. Delegation of Authority
-----------------------
Xxxxx Fargo hereby delegates to the Custodian the administration of the
Funds' securities lending activities, subject to the monitoring and
supervision of Xxxxx Fargo and/or the appropriate sub-advisers (the
"Advisers"), and the Custodian hereby accepts such delegation. Pursuant
to this delegation of authority:
a. The Custodian may only enter into loans on terms and conditions
approved by the Advisers (the "Securities Loan Agreement").
b. The Custodian may only enter into loans with entities whose
creditworthiness have been evaluated by the Advisers and who have
been approved by the Advisers to act as Borrowers.
c. The Custodian may only invest cash collateral received from the
Borrowers or obtained through repurchase arrangements with respect
to non-cash collateral in securities specified by the Adviser in
writing, as provided to the Custodian from time to time.
d. The Advisers retain full discretion and power to prevent any loan
from being made or to instruct the Custodian to terminate any loan
once made.
3. Custodian's Activities
----------------------
For the compensation described below and in accordance with the
Guidelines, and subject to the direction and supervision of the
Advisers, the Custodian undertakes the following:
a. To enter into a Securities Loan Agreement with each Borrower
setting forth the general terms governing loans made under the
Program.
b. To open an account (the "Account") for each Fund participating in
the Program. Each loan made will be made on behalf of and solely
for the benefit of an Account.
c. To implement loans consistent with its delegated authority and with
the Funds' prospectuses directly or through a finder, for a minimum
of one day but within the term as set forth in the Guidelines,
retaining the power to terminate the loan at any time unless
otherwise agreed with the Funds.
d. To require each loan when made to be collateralized in the amount
of 102% of the market value of any domestic securities loaned or
105% of the market value of any international securities loaned, as
the case may be, and accrued interest.
e. To xxxx each loaned security to market daily using the closing
valuation as of the prior business day. The Custodian shall use a
pricing service to
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obtain market valuation. If the market value of the given
collateral falls to 100% of the market value of the loaned security
plus accrued interest, the Custodian shall request additional
collateral from the Borrower to bring the collateralization back to
102% for any domestic securities loaned or 105% for any
international securities loaned. Collateral in excess of 102% or
105%, as the case may be, will be returned to the Borrower if
requested.
f. To receive and take possession of collateral in the form of cash,
government securities (as defined in the Investment Company Act of
1940 (the "Act")), irrevocable letters of credit issued by certain
approved banks, or such other collateral as may be permitted by the
Securities and Exchange Commission (the "Commission") or its staff.
To the extent permitted under the Act, and as interpreted by the
staff of the Commission or pursuant to any exemptive order
thereunder, cash received from all loans from Accounts may be
commingled for investment purposes. Such cash may be invested only
in securities approved in writing by the Advisers that are
permissible investments for each Fund.
g. Normally, securities loaned and cash or government securities
transferred as collateral will be processed, similar to security
purchases and sales, through the Depository Trust Company or a
Federal Reserve Bank or any other appropriate clearing organization
(the "Clearing Organization").
4. Allocation of Security Loans Among Participants
-----------------------------------------------
The Custodian maintains a list of securities available for lending
through the Program, including available Fund securities. The Custodian
will use reasonable efforts to allocate loans among participants in the
Program in a way that is fair to all participants, including the Funds.
As a result of this allocation, the Funds understand that a single
Borrower may be lent a significant portion, or all, of the Funds'
securities available for lending. The Funds also understand that other
Program participants may absorb all demand for particular securities
and that the Funds' securities may not be loaned even where identical
securities are being loaned by the Custodian as part of the Program on
behalf of other participants.
5. Termination of Any Security Loan
--------------------------------
A loan may be terminated by the Custodian or the Borrower at any time
pursuant to the Securities Loan Agreement covering the loan. The
Advisers may request the Custodian to terminate any loan of securities
for any reason at any time. Upon such loan termination, the Custodian
will take delivery or receive through a Clearing Organization the
securities to be returned. The Custodian will return to the Borrower
directly or through the Clearing Organization the collateral securing
the loan. The Securities Loan Agreement will provide for the return of
corporate securities no later than the third business day following
loan termination notice and, in the case of government
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securities, no later than the next business day following loan
termination notice. Notwithstanding the foregoing, the Custodian will
have a reasonable time after receiving the Advisers' loan termination
request to liquidate cash collateral investments prior to terminating
the loan.
6. Portfolio Investment Activity and Corporate Actions in Regard to Loaned
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Securities
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The Funds' Accounts are entitled to all cash dividends, stock
dividends, stock splits, rights of distribution, conversion privileges,
tender and exchange offers, and similar corporate actions with respect
to any loaned securities as if the securities had not been loaned.
During any period when securities are loaned, the Funds waive their
right to vote such securities. The Funds may regain the right to vote
securities by causing a timely termination of a loan in advance of the
record date established for determining stockholder entitlement to
vote. Any securities of the portfolio that are on loan may be sold by
the Advisers at any time. Upon receipt by the Custodian of notice from
the Advisers of any sale, the Custodian will initiate action to
terminate the loan of the securities sold. If such notice is not
received by the Custodian, the Custodian assumes no liability for the
failure of the transaction to settle on contractual settlement date.
7. Recordkeeping and Reporting
---------------------------
The Custodian will monitor daily the value of the loaned security and
the collateral. The Custodian will provide recordkeeping and accounting
services necessary for the operation of the Program. The Custodian will
keep security loan records separate from the Funds' custodial or
fiduciary portfolio records. The Custodian will credit income from each
loan to the Funds' Accounts at least once a month. The Custodian will
provide the Advisers with a detailed monthly report, which shall
include all loan activity, Borrowers to whom loans were made, and
income earned. The Custodian will also provide the Advisers with a list
of each Fund's securities lending positions on a daily basis and will
provide such other reports as the Advisers or the Board of Trustees of
the Trust may reasonably request.
8. Fees
----
In acting as Custodian for the Funds, the Custodian will receive a
transaction-based charge for every securities movement in the Account
associated with each loan (the "Transaction Charge"). The Transaction
Charge will be in the amounts shown on Exhibit B to this Agreement,
provided that, on a monthly basis, the aggregate Transaction Charge
shall not exceed 40% of the Account Revenues, as defined below. Total
Transaction Charges will be determined and charged monthly. As of the
effective date of this Agreement, an exemptive order (the "Order") is
being sought from the Commission, which would permit the Custodian to
receive a percentage of the Account Revenues.
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As used herein, "Account Revenues" means all revenue, in the form of
(a) earnings on the investment of cash collateral provided by a
Borrower in connection with a loan from an Account through the Program,
net of any agreed-upon amount payable to the Borrower out of such
earnings, or (b) separate lending fees payable by a Borrower when the
collateral provided by the Borrower is in the form of letters of credit
or government securities, in each case net of expenses. Until the Order
is obtained, and all conditions of the Order have been satisfied, the
Funds will retain all Account Revenues. After the Order is obtained,
and all conditions of the Order have been satisfied, the Funds will
receive 60% of the Account Revenues, and the Custodian will receive the
remaining 40% of the Account Revenues in lieu of the Transaction
Charge. Account Revenues will be calculated and credited monthly.
9. Risk of Loss
------------
The Funds assume all risk of loss arising out of Borrower defaults on
return of lent securities, collateral deficiencies or collateral
investment loss, provided the terms and conditions of this Agreement
and the Guidelines have been observed by the Custodian. If the Borrower
defaults on the return of a lent security, in accordance with the
Securities Loan Agreement, the Funds or the Custodian, if authorized,
may purchase securities identical to the lent securities (or their
equivalent in the event of reorganization, recapitalization or merger
of the issuer of the borrowed security) and may apply the collateral to
the payment of the purchase price, expenses and other obligations under
the Securities Loan Agreement. The Custodian assumes all risk of loss
arising out of negligent operation of its Program or any failure by it
to observe the terms and conditions of this Agreement or the
Guidelines.
10. Termination
-----------
This Agreement may be terminated at any time by any party upon 60 days'
written notice to the others. Upon mutual agreement, the parties may
waive all or part of the notice period. The Custodian will terminate
all loans from the Funds' Accounts in accordance with the Security Loan
Agreement in time for lent securities to be returned to the Funds prior
to the effective date of any such termination.
11. Construction
------------
Each Fund shall be deemed to have entered into this Agreement severally
and not jointly, and the provisions of this Agreement shall be
construed accordingly. Each reference hereunder to the Funds or a Fund
shall be deemed a separate reference solely to the Fund to which a
particular loan under this Agreement relates. Under no circumstances
shall the rights, obligations or remedies hereunder with respect to a
particular Fund constitute a right, obligation or remedy applicable to
any other Fund. In particular, and
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without otherwise limiting the scope of this Section: (i) the
collateral and xxxx to market requirements specified in Section 3 of
this Agreement shall be calculated separately based solely upon the
loans entered into by each Fund; and (ii) the Custodian shall have no
right to set off claims against or amounts owed by one Fund by applying
property of another Fund.
12. Notices
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Notice to the Funds shall be directed and mailed as follows:
Xxxxx Fargo Variable Trust
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Xx.
With a copy to:
Xxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxxxxxxxx Xxxxxx, X.X., #0000
Xxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx
Notice to the Advisers shall be directed and mailed as follows:
Xxxxx Fargo Bank, N.A.
000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
With a copy to:
Xxxxx Fargo Bank, N.A.
000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: C. Xxxxx Xxxxxxx
Notice to the Custodian shall be directed and mailed as follows:
Norwest Bank Minnesota, N.A.
Investment Management & Trust- Securities Lending
Norwest Center
Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxx
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13. Section Headings
----------------
The headings of sections in this Agreement are inserted for convenience
of reference and shall not be deemed to be a part of or used in the
construction of this Agreement.
14. Governing Law
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This Agreement and all transactions hereunder shall be governed by,
interpreted, construed and enforced in accordance with the laws of the
State of California.
15. Successors and Assigns
----------------------
This Agreement shall be binding on and enforceable against the
successors and assigns of the parties. This Agreement may not be
assigned by any party without the prior written consent of the other
parties hereto.
16. Effective Date and Term
-----------------------
This Agreement shall be effective on the 20th day of September, 1999.
This Agreement shall continue in effect for one year, unless earlier
terminated in accordance with Section 10, and from year to year
thereafter provided it shall be renewed at least annually by the
Trust's Board of Trustees, including a majority of the Trust's
disinterested Trustees.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
XXXXX FARGO VARIABLE TRUST
By:/s/ Xxxxxxx X. Xxxxx, Xx.
--------------------------
Xxxxxxx X. Xxxxx, Xx.
Assistant Secretary
XXXXX FARGO BANK, N.A.
By:/s/ Xxxxxxx X. Xxxxx
---------------------
Xxxxxxx X. Xxxxx
Executive Vice President
By:/s/ Xxxxx Xxxxxxx
------------------
Xxxxx Xxxxxxx
Vice President
NORWEST BANK MINNESOTA, N.A.
By:/s/ P. Xxx Xxxxxxxxxx
----------------------
P. Xxx Xxxxxxxxxx
Executive Vice President
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Exhibit A
Funds of
Xxxxx Fargo Variable Trust
Asset Allocation Fund
Corporate Bond Fund
Equity Income Fund
Equity Value Fund
Growth Fund
International Equity Fund
Large Company Growth Fund
Money Market Fund
Small Cap Growth Fund
Approved by the Board of Trustees: August 19, 1999
Exhibit B
Fee Schedule for Securities Lending Activity
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$25.00 for each new loan and return
$5.00 for each debit xxxx and credit xxxx per loan
Reasonable hourly charges as required for special lending situations
Effective Date: September 20, 1999
