Exhibit (g)(xi)
AMENDED AND RESTATED RULE 17F-5 AND 17F-7 SERVICES AGREEMENT
This Agreement is made, as of September 25, 2003, separately by and between
each of Schwab Capital Trust, Schwab Investments, The Xxxxxxx Xxxxxx Family of
Funds and Schwab Annuity Portfolios (each a "Fund") and PFPC Trust Company
("PFPC ").
WHEREAS each Fund has retained PFPC to provide custody services to certain
of its investment portfolios (each a "Portfolio") pursuant to an Amended and
Restated Custodian Services Agreement dated September 25, 2003 (as the same may
be amended or amended and restated).
WHEREAS each Portfolio may from time to time determine to invest and
maintain some of its assets outside of the United States.
WHEREAS, subject to and in accordance with the provisions set forth in this
Agreement, each Fund wishes to appoint PFPC to serve as Foreign Custody Manager
under Securities and Exchange Commission Rule 17f-5 ("Rule 17f-5") under the
Investment Company Act of 1940 ("1940 Act") and to provide risk analysis and
monitoring required under sub-sections (a)(1)(i)(A) and (B) of Securities and
Exchange Commission Rule 17f-7 ("Rule 17f-7") under the 1940 Act.
WHEREAS, subject to and in accordance with the provisions set forth in this
Agreement, PFPC wishes to serve as Foreign Custody Manager under Rule 17f-5 and
provide risk analysis and monitoring required under sub-sections (a)(1)(i)(A)
and (B) of Rule 17f-7.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, each Fund and PFPC hereby agree as follows:
A. Foreign Custody Manager. With respect to "Foreign Assets" (as defined
below) in the jurisdictions listed on Schedule A hereto (as the same may be
changed by PFPC from time to time), PFPC will perform the duties of a "Foreign
Custody Manager" as set forth in Rule 17f-5, subject to and in accordance with
the provisions set out in this Agreement. In consideration of PFPC's agreement
to so perform, each Fund agrees to the provisions set forth in Paragraphs A and
C-L of this Agreement.
1. PFPC shall select, place and maintain "Foreign Assets" (as that term
is defined in Rule 17f-5(a)(2)) with an "Eligible Foreign Custodian" (defined in
this Agreement to mean an "eligible foreign custodian" as that term is defined
in Rule 17f-5(a)(1) as well as a foreign branch of a U.S. bank which foreign
branch is eligible to maintain Foreign Assets of registered investment companies
notwithstanding Rule 17f-5), provided that PFPC shall have determined that the
Foreign Assets will 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 Foreign Assets, including, without
limitation, those factors set forth in Rule 17f-5(c)(1)(i)-(iv).
1
2. PFPC will assure that each foreign custody arrangement with an
Eligible Foreign Custodian be governed by a written contract that PFPC has
determined provides for the reasonable care of Foreign Assets based on the
standards specified in Rule 17f-5(c)(1). Each such contract shall include,
without limitation, all of the provisions specified in Rule
17f-5(c)(2)(i)(A)-(F). Alternatively, each such contract may contain, in lieu of
any or all of the provisions specified in Rule 17f-5(c)(2)(i)(A)-(F), such other
provisions that PFPC reasonably determines will provide, in their entirety, the
same or a greater level of care and protection for a Fund's investments as the
specified provisions, in their entirety.
3. PFPC will establish and maintain a system for the regular monitoring
of the appropriateness of both maintaining the Foreign Assets with each Eligible
Foreign Custodian and the custody contractual arrangements with such Eligible
Foreign Custodians, it being understood, however, that in the event that PFPC
shall have determined that the existing Eligible Foreign Custodian in a given
country no longer affords reasonable care to Foreign Assets and that no other
Eligible Foreign Custodian in that country would afford reasonable care, PFPC
shall promptly so advise the applicable Fund and shall then act in accordance
with authorized instructions with respect to the disposition of the affected
Foreign Assets.
4. PFPC shall provide to each Fund's Board of Trustees written reports
notifying the Board of the placement of the Fund's Foreign Assets with a
particular Eligible Foreign Custodian and of any material change in the Fund's
foreign custody arrangements, with the reports to be provided to the Board at
such times as the Board may deem reasonable and appropriate based on the
circumstances of the Fund's arrangements. Any report provided by PFPC pursuant
to this Sub-Paragraph A.4 may be in electronic form.
5. For purposes of clarity, it is understood and agreed that PFPC shall
not be responsible for any Foreign Custody Manager duties, including but not
limited to those described in Sub-Paragraphs A.1-4 above, with respect to any
securities depository.
6. In performing its duties under this Agreement, PFPC shall not
supervise, recommend or advise a Fund relative to the investment, purchase,
sale, retention or disposition of any Foreign Asset in any country, including
with respect to prevailing country risks. PFPC agrees to provide such
information in its possession as is specified in Schedule C hereto, as such
Schedule C may be amended from time to time between PFPC and a particular Fund.
In gathering such information, PFPC shall be subject to the standard of care set
forth in Paragraph D hereof, but shall not be deemed to warrant the specific
accuracy of such information. PFPC agrees to promptly notify a Fund at any time
that PFPC becomes aware of a material change to the information provided
pursuant to Schedule C, or if PFPC learns that any information previously
provided is incomplete or inaccurate. Each Fund hereby acknowledges that such
information is solely designed to inform the Fund of market conditions and
procedures and is not intended as a recommendation to invest or not invest in
particular markets.
B. Securities Depositories. PFPC will provide to the Funds the risk
analysis and monitoring required under sub-sections (a)(1)(i)(A) and (B) of Rule
17f-7 subject to and in accordance with the provisions set out in this
Agreement. In consideration of the provision of
2
such risk analysis and monitoring each Fund agrees to the provisions set forth
in Paragraphs B through L of this Agreement.
1. (a) As contemplated by Rule 17f-7, PFPC will provide a written
analysis (which may be in electronic form) to each Fund and its investment
adviser of the custody risks associated with maintaining the Fund's "Foreign
Assets" (as that term is defined in Rule 17f-5(a)(2) under the 0000 Xxx) with
each "Eligible Securities Depository" (as that term is defined in Rule
17f-7(b)(1)) listed on Schedule B hereto (as the same may be changed by PFPC
from time to time) and at which any Foreign Assets of the Fund are held or are
expected to be held. PFPC shall monitor the custody risks associated with
maintaining each applicable Fund's Foreign Assets at each such Eligible
Securities Depository on a continuing basis and shall promptly notify each
applicable Fund or its investment adviser in writing (which may be in electronic
form) of any material change in such risks.
(b) Based on the information available to it in the exercise of
diligence, PFPC shall determine the eligibility under Rule 17f-7(b)(1) of each
depository listed on Schedule B hereto (as the same may be changed by PFPC from
time to time) and shall promptly advise each Fund or its investment adviser in
writing (which may be in electronic form) if any such depository ceases to meet
the definition of an Eligible Securities Depository (as that term is defined in
Rule 17f-7(b)(1)).
(c) In performing its duties under this Sub-Paragraph B.1, PFPC
shall use reasonable care and may rely on such reasonable sources of information
as may be available including but not limited to the following (provided use of
the following are reasonable); (i) published ratings; (ii) information supplied
by an Eligible Foreign Custodian that is a participant in the applicable
depository; (iii) industry surveys or publications; and (iv) information
supplied by the depository itself, by its auditors (internal or external) or by
the relevant "Foreign Financial Regulatory Authority" (as that term is defined
in Section 2(a)(50) of the 1940 Act).
2. Each Fund acknowledges that it may maintain Foreign Assets only at
the depositories listed on Schedule B hereto (as the same may be changed by PFPC
from time to time). Each Fund agrees and acknowledges that its Foreign Assets
may be held at any of the depositories listed on Schedule B hereto; provided
that if any Fund provides written notice to PFPC specifically stating that a
particular depository is not acceptable to it, then such Fund will not be deemed
to have agreed and acknowledged that its Foreign Assets may be held by that
particular depository.
3. Notwithstanding the provisions of any arrangements between any Fund
and PFPC or otherwise, each Fund hereby agrees that its Foreign Assets may be
maintained with any Eligible Securities Depository listed on Schedule B hereto
(provided that if any Fund provides written notice to PFPC specifically stating
that a particular depository is not acceptable to it, then such Fund will not be
deemed to have agreed that its Foreign Assets may be maintained by that
particular depository). PFPC will not be deemed to have chosen any such Eligible
Securities Depositories.
3
C. Third Parties. Each Fund acknowledges that PFPC (at its own expense) may
utilize a third party to carry out PFPC's activities set forth herein, provided
however, that the appointment or use of a third party will not relieve PFPC of
its obligations and responsibilities to a Fund under this Agreement, and PFPC
will be responsible and liable to a Fund for the acts or omissions of such third
party to the same extent that PFPC would be responsible and liable to the Fund
if such acts or omissions were PFPC's own in providing the services set forth in
this Agreement to such Fund (provided that in no event will PFPC be liable to a
Fund for any indirect, special or consequential losses or damages (regardless of
whether PFPC or such third party was aware of the possibility thereof)).
D. Responsibility and Indemnification. In providing services pursuant to
this Agreement, PFPC shall exercise reasonable care, prudence and diligence
(such as a person having responsibility for the safekeeping of Foreign Assets
would exercise). PFPC will indemnify a Fund with respect to the services set
forth in this Agreement for the losses, liabilities and expenses suffered by the
Fund as a result of PFPC's (a) failure to exercise such reasonable care,
prudence and diligence (such as a person having responsibility for the
safekeeping of Foreign Assets would exercise), and (b) willful misfeasance, bad
faith, negligence or reckless disregard in carrying out its duties and
obligations under this Agreement, provided that in no event will PFPC be liable
to a Fund for any indirect, special or consequential losses or damages
(regardless of whether PFPC was aware of the possibility thereof). Each Fund
will indemnify PFPC for losses, liabilities and expenses suffered by PFPC with
respect to the matters set forth in this Agreement, except that a Fund will not
indemnify PFPC for such losses, liabilities and expenses arising out of PFPC's
(a) failure to exercise reasonable care, prudence and diligence (such as a
person having responsibility for the safekeeping of Foreign Assets would
exercise) in providing services to such Fund under this Agreement, or (b)
willful misfeasance, bad faith, negligence or reckless disregard of its duties
and obligations in providing services to such Fund under this Agreement,
provided that in no event will the Fund be liable for any indirect, special or
consequential losses or damages (regardless of whether the Fund was aware of the
possibility thereof).
E. Compensation. The fees for services rendered by PFPC under this
Agreement with respect to a particular Fund are included in the separate
custodian services fee letter between the Fund and PFPC in effect on the date
hereof, or as the same may be amended from time to time.
F. Integration. This Agreement shall supercede and replace any agreement
between PFPC and any Fund relating to PFPC's duties as Foreign Custody
Manager under Rule 17f-5 and relating to PFPC's duties to provide risk
analysis and monitoring required under sub-sections (a)(1)(i)(A) and (B) of
Rule 17f-7.
G. Choice of Law. This Agreement and the provisions hereof shall be
construed in accordance with the laws of the State of New York, without regard
to its conflict of laws principles. This Agreement may be executed in
counterparts, all of which when taken together shall constitute one contract.
Delivery of an executed counterpart of this Agreement by facsimile transmission
shall be effective as delivery of a manually executed counterpart of this
Agreement. Each party hereto represents that it has taken all requisite action
(corporate or otherwise) to authorize the execution and delivery of this
Agreement. The captions in this Agreement are
4
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
H. Declarations of Trust. The respective names Schwab Capital Trust, Schwab
Investments, The Xxxxxxx Xxxxxx Family of Funds and Schwab Annuity Portfolios
refers to each of such respective Funds and its Trustees, as Trustees but not
individually or personally, acting under their respective Declarations of Trust
dated May 6, 1993, October 26, 1990, May 9, 1995 and January 21, 1994. The
obligations of any one of the aforementioned Funds entered into in the name of
or on behalf of a Portfolio of such Fund by any of the Trustees, representatives
or agents of such Fund are made not individually, but in such capacities. Such
obligations are not binding upon any of the Trustees, shareholders or
representatives of such Fund personally, but bind only the assets of such Fund
belonging to such Portfolio for the enforcement of any claims against such Fund.
I. Independent Transactions. Transactions entered into by one or more
Portfolios of the Funds are considered independent transactions and shall in no
way affect transactions entered into by any other Portfolio(s). Any amount owed
by the Funds with respect to any obligation arising out of the Agreement, as
amended, shall be paid only out of the assets and property of the particular
Portfolio(s) that entered into such transaction.
J. Each Fund represents that the Foreign Assets which are the subject
matter of this Agreement are subject to the 1940 Act. PFPC represents that
it is a U.S. Bank as defined in Rule 17f-5.
K. This Agreement may be terminated with respect to a particular Fund by
either such Fund or PFPC upon 60 days written notice to the other party.
L. PFPC is entering into this Agreement with each of the Funds separately,
and any duty, obligation or liability owed or incurred by PFPC with respect to a
particular Fund shall be owed or incurred solely with respect to that Fund, and
shall not in any way create any duty, obligation or liability with respect to
any other Fund. This Agreement shall be interpreted to carry out the intent of
the parties hereto that PFPC is entering into a separate arrangement with each
separate Fund.
IN WITNESS WHEREOF, each of the respective parties hereto have caused this
Agreement to be executed on the day and year first above written.
5
PFPC TRUST COMPANY
/s:/ Xxx Xxxxxxxx
-----------------------------
By: Xxx Xxxxxxxx, XX
Title: President
SCHWAB CAPITAL TRUST
/s:/ Tai-Xxxx Xxxx
-----------------------------
By: Tai-Xxxx Xxxx
Title: Treasurer and Principal Financial Officer
SCHWAB INVESTMENTS
/s:/ Tai-Xxxx Xxxx
-----------------------------
By: Tai-Xxxx Xxxx
Title: Treasurer and Principal Financial Officer
THE XXXXXXX XXXXXX FAMILY OF FUNDS
/s:/ Tai-Xxxx Xxxx
-----------------------------
By: Tai-Xxxx Xxxx
Title: Treasurer and Principal Financial Officer
SCHWAB ANNUITY PORTFOLIOS
/s:/ Tai-Xxxx Xxxx
-----------------------------
By: Tai-Xxxx Xxxx
Title: Treasurer and Principal Financial Officer
6
SCHEDULE A
FOREIGN CUSTODY MANAGER JURISDICTIONS
ARGENTINA
AUSTRALIA
AUSTRIA
BANGLADESH
BELGIUM
BERMUDA
BOTSWANA
BRAZIL
BULGARIA
CANADA
CHILE
CHINA
COLOMBIA
CROATIA
CZECH REPUBLIC
DENMARK
ECUADOR
EGYPT
FINLAND
FRANCE
GERMANY
GREECE
HONG KONG
HUNGARY
ICELAND
INDIA
INDONESIA
IRELAND
ISRAEL
ITALY
JAPAN
JORDAN
KAZAKHSTAN
LATVIA
LEBANON
LUXEMBOURG
MALAYSIA
MAURITIUS
MEXICO
MOROCCO
NETHERLANDS
NEW ZEALAND
NORWAY
PERU
PHILIPPINES
POLAND
PORTUGAL
SINGAPORE
XXXXXXXX
XXXXXXXX
XXXXX XXXXXX
0
XXXXX XXXXX
XXXXX
SRI LANKA
SWEDEN
SWITZERLAND
TAIWAN
THAILAND
TURKEY
UNITED KINGDOM
URUGUAY
ZIMBABWE
8
SCHEDULE B
FOREIGN SECURITIES DEPOSITORIES
COUNTRY DEPOSITORY
ARGENTINA CVSA;CRYL
AUSTRALIA Austraclear;CHESS:RBA
AUSTRIA OeKB
BELGIUM CIK;NBB
BERMUDA BSD
BRAZIL CBLC;CETIP;SELIC
BULGARIA BNB;CDAD
CANADA CDS
CHILE DCV
CHINA CSDCC Shanghai;CSDCC Shenzen
COLUMBIA DCV;DECEVAL
CROATIA SDA;CNB;Ministry of Finance
CZECH REPUBLIC CNB-TKD System;SCP
DENMARK VP
ECUADOR DECEVALE
EGYPT MISR
FINLAND FCSD
FRANCE Euroclear France
GERMANY CBF
GREECE Apotherion Titlon;BoG
HONG KONG CMU;HKSCC
HUNGARY KELER Ltd
ICELAND VBSI
INDIA NSDL;CDSL;RBI
INDONESIA PT KSEI;Bank Indonesia
IRELAND CREST
ISRAEL TASE
ITALY Monte Titoli S.P.A.
JAPAN BoJ;JASDEC, Inc.
JORDAN SDC
KAZAKHSTAN KCSD
LATVIA Bank of Latvia;LCD
LEBANON Midclear;BDL
LUXEMBOURG CBL
MALAYSIA BNM;MCD
MAURITIUS CDS;Bank of Mauritius
MEXICO Indeval
MOROCCO MCLR
NETHERLANDS NECIGEF;NEIC
NEW ZEALAND NZCSD
NORWAY VPS
9
PERU CAVALI
PHILIPPINES PCD;XXXX
XXXXXX CRBS;NDS
PORTUGAL CVM
SINGAPORE CDP;MAS
SLOVAKIA NBS;SCP
SLOVENIA KDD
SOUTH AFRICA CDL;STRATE
SOUTH KOREA KSD
SPAIN Banco de Espana;SCLV
SRI LANKA CDS
SWEDEN VPC
SWITZERLAND SIS
TAIWAN TSCD
THAILAND TSDC
TRANSNATIONAL CBL;Euroclear
TURKEY CBT;Takasbank
UNITED KINGDOM CMO;CREST
10
Schedule C
1) PFPC shall furnish (or shall provide for such furnishing) to the Funds,
annually the following information (and shall furnish (or shall provide for
such furnishing) the following information relevant to a particular country
upon the initial placing by one of the Funds of Foreign Assets into that
country):
a) Any result of the annual compliance certification received by the third
party referenced in Section C of the Agreement from an Eligible Foreign
Custodian selected pursuant to Section A.1 of the Agreement that indicates
any impairment of: (i) access afforded a Fund's independent public
accountants to books and records kept by such Eligible Foreign Custodian;
(ii) a Fund's ability to recover its Foreign Assets in the event of
bankruptcy of such Eligible Foreign Custodian; or (iii) a Fund's ability
to recover Foreign Assets that are lost while under the control of such
Eligible Foreign Custodian. Nothing in the Agreement or this Schedule will
require PFPC to update the information provided pursuant to this item 1.a
more frequently than annually.
b) A market practice report which shall include without limitation the
following topics: (i) securities regulatory environment; (ii) foreign
ownership restrictions; (iii) foreign exchange; (iv) securities settlement
and registration; and (v) taxation.
c) Such information as to which PFPC has knowledge from the third party
referenced in Section C of the Agreement regarding prevailing country
risk, including: (i) the likelihood of expropriation, nationalization,
freezes or confiscation of Foreign Assets owned by registered investment
companies and, (ii) whether difficulties in converting a Fund's cash and
cash equivalents to U.S. dollars are reasonably foreseeable.
2) Global updates which include without limitation changes in the information
contained in the above market practice reports.
3) PFPC shall furnish additional information as a Fund's Board may request from
time to time with respect to foreign custody and settlement issues.
11
