Form of agreement subject to completion
E*TRADE Funds
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Re: Rule 17f-5 ("Rule 17f-5") and Rule 17f-7 ("Rule 17f-7") Under
the Investment Company Act of 1940 (the "1940 Act")
Dear Sirs:
Reference is made to the Custodian Services Agreement dated as of
__________(the "Fund Custody Agreement") by and between PFPC Trust Company
("PFPC") and E*TRADE Funds (the "Fund")./1/
The Fund desires to appoint PFPC, pursuant solely to the terms and conditions
set forth in this document, to serve as the Foreign Custody Manager with
respect to the portfolios set forth on Exhibit A hereto (each a "Portfolio")
and to provide analysis to the Portfolios with respect to foreign securities
depositories and foreign clearing agencies.
1. Rule 17f-5
1.1. With respect to the "Foreign Assets" (as defined in Rule 17f-5(a)(2))
in such jurisdictions as the Fund and PFPC may agree from time to time, the
Fund hereby delegates to PFPC and PFPC hereby accepts the delegation to it, of
the obligation to serve as the Portfolios' "Foreign Custody Manager" (as
defined in Rule 17f-5(a)(3)). As the Portfolios' Foreign Custody Manager, PFPC
shall provide for the following:
a. selection of "Eligible Foreign Custodians" (as defined in Rule
17f-5(a)(1)) to serve as foreign custodians and placement and
maintenance of the Portfolios' Foreign Assets with such Eligible
Foreign Custodians;
b. in selecting an Eligible Foreign Custodian, a determination that the
Portfolios' Foreign Assets placed and maintained in the care of the
Eligible Foreign Custodian shall be subject to reasonable care, based
on the standards applicable to custodians in the relevant market,
after consideration of all factors relevant to the safekeeping of
such Foreign Assets including, without limitation, those factors set
forth in Rule 17f-5(c)(l)(i)-(iv);
c. entering into a written contract with each Eligible Foreign Custodian
selected by PFPC hereunder;
d. a determination that the written contract with each Eligible Foreign
Custodian will provide reasonable care for the Portfolios' Foreign
Assets, based on the standards applicable to custodians in the
relevant market and after consideration of all factors relevant to
the safekeeping of such Foreign Assets (including, without
limitation, those factors set forth in
--------
/1/ WE NEED TO REVIEW THE SUBCUSTODIAL SERVICES AGREEMENT WITH CITIBANK.
Form of agreement subject to completion
Rule 17f-5(c)(1)(i)-(iv)), and that each such contract satisfies the
requirements of Rule 17f-5(c)(2);
e. provision of written reports (i) notifying the Fund's board of
trustees (the "Board") of the placement of the Portfolios' Foreign
Assets with a particular Eligible Foreign Custodian, such reports to
be provided at such time as the Board deems reasonable and
appropriate, but not less often than quarterly, and (ii) promptly
notifying the Board of any material change in the arrangements with
an Eligible Foreign Custodian; and
f. establishment of a system to monitor (i) the appropriateness of
maintaining the Portfolios' Foreign Assets with a particular Eligible
Foreign Custodian selected hereunder and (ii) the performance of the
governing contractual arrangements; it being understood, however,
that in the event PFPC shall determine that the arrangement with any
Eligible Foreign Custodian would no longer afford the Portfolios'
Foreign Assets reasonable care (as defined in Section 1.1(b) above)
or would no longer be governed by a written contract providing for
such care, PFPC shall promptly so advise the Fund.
PFPC shall not be responsible for the duties described in this Section 1.1
with respect to any foreign securities depository or foreign clearing agency.
1.2. In acting as a Foreign Custody Manager for a Portfolio, PFPC shall
exercise reasonable care, prudence and diligence such as a person having
responsibility for the safekeeping of such Portfolio's Foreign Assets would
exercise in each jurisdiction where PFPC acts as Foreign Custody Manager for
such Portfolio hereunder. PFPC shall be liable to a Portfolio for any loss or
damage suffered by the Portfolio as a result of the performance of PFPC's
duties under this Section 1 where such loss or damage results from an act of
negligence or willful misconduct on the part of PFPC hereunder; provided that
the liability of PFPC hereunder shall [not exceed the fair market value of any
loss of assets resulting from such negligence or willful misconduct, at the
time of such negligence or willful misconduct.] [Are we comfortable with this?]
Any payment to the Fund under this Section 1.2 shall limit the Fund's right and
ability to enforce any rights under the Fund Custody Agreement for loss of such
assets. Notwithstanding anything else in this document, PFPC shall not be
liable for any indirect, special, consequential or general damages (regardless
of whether PFPC was aware of the possibility thereof) or for any damages caused
by reason of circumstances beyond its reasonable control, including without
limitation acts of God; action or inaction of civil or military authority;
public enemy; war; terrorism; riot; fire; flood; sabotage; epidemics; labor
disputes; civil commotion; interruption, loss or malfunction of utilities,
transportation, computer or communications capabilities; insurrection; or
elements of nature. PFPC shall be indemnified by a Portfolio for any damages
PFPC may incur in connection with the provision by PFPC of the services set
forth in this Section 1 with respect to such Portfolio (provided PFPC will not
be indemnified for damages which are the result of PFPC's failure to comply
with its liability standard of care set forth in the Fund Custody Agreement).
This Section 1.2 shall survive termination of this document.
1.3. In acting as a Foreign Custody Manager, PFPC shall not supervise,
recommend or advise the Fund relative to the investment, purchase, sale,
retention or disposition of any assets in any particular country, including
with respect to prevailing country risks.
Form of agreement subject to completion
2. Rule 17f-7
2.1. (a) The Fund appoints PFPC to provide the Portfolios (or their
respective duly-authorized investment managers or investment advisers) with an
analysis (in form and substance as reasonably determined by PFPC) of the
custody risks associated with maintaining assets with each foreign securities
depository or foreign clearing agency listed on Exhibit B hereto (as the same
may be changed by PFPC from time to time) in accordance with Rule
17f-7(a)(1)(i)(A). PFPC shall provide for the monitoring of such custody risks
on a continuing basis and in such manner as PFPC deems reasonable, and shall
provide for prompt notification to the Portfolios (or their respective
duly-authorized investment managers or investment advisers) of any adverse
material changes in such risks in accordance with Rule 17f-7(a)(1)(i)(B).
(b) Only an entity that PFPC has determined satisfies the requirements
of Rule 17f-7(b)(1) as an "Eligible Securities Depository" (as defined in Rule
17f-7(b)(1)) will be included by PFPC on Exhibit B hereto (as the same may be
changed by PFPC from time to time). In such manner as PFPC deems reasonable,
PFPC shall give the Portfolios prompt notice of any material change known to
PFPC that would adversely affect PFPC's determination that an entity is an
Eligible Securities Depository.
2.2. In performing its obligations under this Section 2, PFPC may obtain
information from sources PFPC believes to be reliable, but PFPC does not
warrant its completeness or accuracy and has no duty to verify or confirm any
such information. PFPC is not obligated to make any determination regarding
whether any Eligible Securities Depository provides reasonable care for a
Portfolio's Foreign Assets or to provide any information or evaluation
comparing any Eligible Securities Depository to any other securities depository
or any existing or proposed standards for securities depositories.
2.3. The Fund acknowledges that the Portfolios may maintain assets only at
the foreign securities depositories or foreign clearing agencies listed on
Exhibit B hereto (as the same may be changed by PFPC from time to time). If a
Portfolio maintains assets at a foreign securities depository or foreign
clearing agency listed on Exhibit B (including assets maintained by the
Portfolio at the time this document is entered into) or a Portfolio enters into
a transaction with respect to assets that as a matter of practice are or may be
maintained at a foreign securities depository or foreign clearing agency listed
on Exhibit B, such action will (unless the Fund provides written notice to PFPC
specifically stating that a particular foreign securities depository or foreign
clearing agency is not acceptable to it) serve as the Fund's acknowledgement
that such foreign securities depository or foreign clearing agency is
acceptable to it. [Should there be prompt notice of any change in Exhibit B?]
2.4. PFPC shall exercise reasonable care, prudence and diligence in
performing its duties pursuant to Section 2 hereof. PFPC shall be liable to a
Portfolio for any loss or damage suffered by the Portfolio as a result of the
performance of PFPC's duties under this Section 2 where such loss or damage
results from an act of negligence or willful misconduct on the part of PFPC
hereunder; provided that the liability of PFPC hereunder shall [not exceed the
fair market value of any loss of assets resulting from such negligence or
willful misconduct, at the time of such negligence or willful misconduct.] [Are
we comfortable with this?] Any payment to the Fund under this Section 2.4 shall
limit the Fund's right and ability to enforce any rights under the Fund Custody
Agreement for loss of such assets. Notwithstanding anything else in this
document, PFPC shall not be liable for any indirect, special, consequential or
general damages
Form of agreement subject to completion
(regardless of whether PFPC was aware of the possibility thereof) or by reason
of circumstances beyond its reasonable control, including without limitation
acts of God; action or inaction of civil or military authority; public enemy;
war; terrorism; riot; fire; flood; sabotage; epidemics; labor disputes; civil
commotion; interruption, loss or malfunction of utilities, transportation,
computer or communications capabilities; insurrection; or elements of nature.
PFPC shall be indemnified by a Portfolio for any damages PFPC may incur in
connection with the provision by PFPC of the services set forth in this
Section 2 with respect to such Portfolio (provided PFPC will not be indemnified
for damages which are the result of PFPC's failure to comply with its liability
standard of care set forth in the Fund Custody Agreement). This Section 2.4
shall survive termination of this document.
3. General
3.1. The Fund acknowledges that PFPC may utilize another entity to carry out
its obligations and other activities set forth herein; provided, however, that
PFPC shall remain primarily responsible and accountable to the Board for its
obligations and responsibilities under this Agreement.
3.2. Notwithstanding anything in the Fund Custody Agreement to the contrary,
the Fund hereby agrees that the Portfolios' assets may be maintained with any
Eligible Foreign Custodian referred to in Section 1.1 hereof and any foreign
securities depository or foreign clearing agency which is acceptable to the
Fund pursuant to Section 2.3 above (without the need to comply with any notice
or consent or other requirements which may be set forth in the Fund Custody
Agreement).
3.3 Notwithstanding anything in this document or in the Fund Custody
Agreement to the contrary, PFPC's liability for any action or omission of any
sub-custodian shall be as, and solely as, set forth in the Fund Custody
Agreement, and PFPC shall have no liability for any action or omission of any
securities depository or clearing agency.
3.4 (a) This Agreement shall be effective on the date first written above
and unless terminated pursuant to its terms shall continue for a period of
three (3) years (the "Initial Term"); provided, however, that the Fund may
terminate the Agreement prior to the conclusion of the Initial Term by
providing PFPC not less than ninety (90) days' written notice.
(b) Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year ("Renewal Terms")
each, unless the Fund or PFPC provides written notice to the other of its
intent not to renew. Such notice must be received not less than ninety
(90) days' prior to the expiration of the Initial Term or the then current
Renewal Term.
(c) In the event the Fund gives notice of termination, all expenses
associated with movement of records and materials and conversion thereof to a
successor service provider will be borne by the Fund and paid to PFPC prior to
any such conversion.
(d) In the event PFPC gives notice of termination, the Fund will be
reimbursed for reasonable out of pocket costs and expenses related to directly
to the Fund's conversion to another service provider.
(e) If for the thirty (30) days preceding the written notice referenced
below in this sentence a party hereto is guilty of a material failure to
perform its duties and obligations hereunder (a "Defaulting Party") the other
party (the "Non Defaulting Party") may give written notice thereof to the
Defaulting Party, and if such material failure shall not have been remedied
within sixty (60) days after such written notice is given, then the Non
Defaulting Party may terminate this Agreement by giving a written termination
notice to the Defaulting Party. In all cases, termination by the Non Defaulting
Party shall not constitute a waiver by the Non Defaulting Party of any other
rights it might have under this Agreement or otherwise against the Defaulting
Party.
(e) Notwithstanding anything contained in this Agreement to the
contrary, if a merger, consolidation, adoption, acquisition, change in control,
re-structuring, re-organization or any other similar action involving the Fund
or any affiliate (as defined under the 0000 Xxx) of the Fund results in the
Fund's giving notice to PFPC terminating it as the provider of any of the
services hereunder or otherwise terminating this Agreement before the
expiration of the then-current Initial or Renewal Term ("Early Termination"),
PFPC shall, if requested by the Fund, make a good faith effort to facilitate a
conversion to the Fund's successor service provider, provided that PFPC makes
no guarantee that it will be able to effect a conversion on the date(s)
requested by the Fund.
3.5 This document shall be governed by the laws of the State of Delaware,
without regard to the conflict of laws principles thereof.
3.6 PFPC shall be paid such compensation for its services pursuant to this
document as agreed to in writing from time to time by the Fund and PFPC.
3.7 This document may not be amended without the written agreement of the
party against whom enforcement of such amendment is sought.
3.8 PFPC may assign its rights and obligations under this document to any
affiliate of PFPC or of The PNC Financial Services Group, Inc., provided that
PFPC gives the Fund 30 days' prior written notice of such assignment.
3.9 Notices relating to this document shall be addressed (a) if to PFPC, at
0000 Xxxxxxx Xxxxxxxxx, 0xx Xxxxx, Xxxxxxxxxxxx, XX 00000, Attention: Xxx
Xxxxxxxx, or such other address as PFPC shall provide to the Fund in writing or
(b) if to the Fund, at 0000 Xxxxxxxx Xxxxx, Xxxxx Xxxx, XX 00000, Attention:
Xxxxxxxxx Xxxxxxxxx, or such other address as the Fund shall provide to PFPC in
writing.
3.10 This document embodies the entire agreement and understanding between
the Fund and PFPC relating to the subject matter hereof and supercedes all
prior agreements and understandings between the Fund and PFPC relating to the
subject matter hereof.
3.11 This document may be executed in counterparts, each of which shall be
deemed an original, provided that such counterparts shall together constitute
only one instrument. The facsimile signature of any party to this document
shall constitute the valid and binding execution hereof by such party.
If the foregoing corresponds to your understanding of our agreement, please
indicate your acceptance by signing below.
Form of agreement subject to completion
Very truly yours,
PFPC TRUST COMPANY
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
Agreed and Accepted:
E*TRADE FUNDS
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
Dated: August__, 2006
Form of agreement subject to completion
Exhibit A
E*Trade International Index Fund
Form of agreement subject to completion
Exhibit B
Country Depositories
------- -----------------------------------------------------------------------
Argentina Caja de Valores S.A. (CDV)
Argentina Central de Registration y de Instrumentos de Endeamiento Publico (CRYL)
Australia Austraclear
Australia Clearing House Electronic Sub-Register System (CHESS)
Austria Oesterreichische Kontrollbank AG (OeKB)
Bahrain The Clearing, Settlement and Depository System (CSD)
Bangladesh Central Depository Bangladesh Limited
Belgium Euronext Brussels - CIK
Belgium National Bank of Belgium (NBB)
Bermuda Bermuda Securities Depository (BSD)
Brazil Companhia Brasileira de Liquidacao e Custodia (CBLC)
Brazil Central of Custody and Financial Settlement of Securities (CETIP)
Brazil Central Bank / Sestema Especial de Liquidacoa e Custodia (SELIC)
Bulgaria Central Securities Depository AD (CDAD)
Bulgaria Bulgarian National Bank's Government Securities Settlement System (BNB)
Canada Canadian Depository for Securities Ltd.
Chile Deposito Central de Valores SA (DCV)
China China Securities Depository and Clearing Corporation Limited
China China Securities Depository and Clearing Corporation Limited
Colombia Deposito Central de Valores (DCV)
Colombia Deposito Centralizado de Valores (DECEVAL)
Costa Rica Central de Valores de la Bolsa Nacional de Valores (CEVAL)
Croatia Central Depository Agency Inc. - Sredisnja Depozitarna Agencija (SDA)
Croatia Ministry of Finance (MoF)
Cyprus Cyprus Central Depository and Central Registry (CDCR)
Czech Czech National Bank (CNB)
Czech Stredisko Cennych Papiru (SCP)
Denmark Vaerdipapircentralen (VP)
Egypt Misr for Clearing Settlement and Central Depository (MCSD)
Egypt Bank of Egypt
Estonia Estonian Central Depository for Securities
Euroclear Euroclear S.A./N.V.
Finland Finnish Central Securities Depository (APK)
France Euroclear France
Germany Clearstream Banking AG (Frankfurt)
Greece Central Securities Depository SA (CSD)
Greece Bank of Greece Securities Settlement System (BOGS)
Hong Xxxx Xxxxxxx XxxxxXxxxxx Xxxx (XXX)
Xxxx Xxxx Xxxx Xxxx Securities Clearing Company Limited (HKSCC)
Hungary The Central Depository and Clearing House Ltd. (KELER Ltd.)
Country Depositories
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Iceland Icelandic Securities Depository Limited
India National Securities Depository Limited (NSDL)
India Central Depository Services (India) Limited (CDSL)
India Reserve Bank of India (RBI)
Indonesia Penyelesaian Transaksi Pasar Uang - Bank of Indonesia (BoI)
Indonesia PK Kustodia Sentral Efek Indonesia (KSEI)
Ireland Euroclear SA/NV and United Kingdom - Crest
Israel Tel Aviv Stock Exchange-Clearinghouse (SECH)
Italy Monte Titoli (MT)
Japan Bank of Japan (BOJ)
Japan Japan Securities Depository Center (JASDEC)
Xxxxxx Xxxxxx Securities Depository Center
Kazakhstan CJSC Central Securities Depository of the Republic of Kazakhstan
Korea Korea Securities Depository (KSD)
Kuwait Kuwait Clearing Company (KCC)
Latvia Bank of Latvia (BOL)
Latvia Latvian Central Depository (LCD)
Lithuania Central Securities Depository of Lithuania (CSDL)
Luxembourg Clearstream Banking (Luxembourg)
Malaysia Bank Negara Malaysia (BNM)
Malaysia Malaysian Central Depository Sdn. Bhd. (MCD)
Malta Malta Central Securities Depository
Mauritius The Central Depository and Settlement Company (CDS)
Mauritius Bank of Mauritius
Mexico S.D. Indeval, S.A de CV
Morocco Maroclear
Netherlands Euroclear Netherlands - Necigef
Netherlands NIEC
New Zealand New Zealand Central Securities Depository (NZCSD)
Norway The Norwegian Central Securities Depository (VPS)
Oman Muscat Depository and Securities Registration Company (MDSRC)
Pakistan State Bank of Pakistan (SBP)
Pakistan Central Depository Company of Pakistan (CDC)
Peru CAVALI ICLV S.A.
Philippines Philippine Depository Trust Corporation)
Philippines Register of Scripless Securities (XxXX)
Poland National Depository for Securities (NDS)
Poland National Bank of Poland (NBP)
Portugal Interbolsa
Qatar Doha Securities Market (DSM)
Country Depositories
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Romania Bucharest Stock Exchange (BSE)
Romania Societatea Nationala de Compensare, Decontare si Depozitare Pentru Valori Mobiliare S.A. (SNCDD)
Russia Bank for Foreign trade of the Russian Federation (VTB)
Russia The National Depository Centre (NDC)
Russia Depository Clearing Company (DCC)
Singapore Central Depository Pte. Ltd.
Singapore Monetary Authority of Singapore
Slovakia National Bank of Slovalia (NBS)
Slovakia Stredisko cennych papierov SR,a.s (SCP)
Slovenia Central Securities Clearing and Depository Corporation (KDD)
South Africa Share Transactions Totally Electronic (STRATE)
Spain Iberclear
Sri Lanka Central Depository Systems Private Limited (CDS)
Sweden Vardepappercentralen (VPC)
Switzerland SIS SegaInterSettle AG
Taiwan Taiwan Securities Central Depository Co. Ltd. (TSCD)
Taiwan Taiwan Government Securities System (CGSS)
Thailand Thailand Securities Depository Co. Ltd. (TSD)
Thailand Bank of Thailand
Tunisia STICODEVAM
Turkey Central Bank of Turkey (CBT)
Turkey Takasbank ISE Settlement and Custody Bank Inc.
UK Central Moneymarkets office (CMO)
UK Crestco Limited
Ukraine Interregional Securities Union (MFS)
Ukraine National Bank of Ukraine (NBU)
United Arab Emirates Central Depository
Venezuela Caja Venezolana de Valores CA (CVV)
Venezuela Central Bank - Banco Central de Venezuela (BCV)
