November 20, 2006
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 November 20,
2006 (the "Fund Custody Agreement") by and between PFPC Trust Company ("PFPC")
and E*TRADE Funds (the "Fund").
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
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. 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.
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). PFPC will promptly inform the Fund of
any change to Exhibit B hereto to the extent such change would require updated
trading instructions from the Fund.
(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.
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. 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
(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 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's use of such an entity will not release PFPC of its duties under this
document and provided further that PFPC shall be liable for the actions or
omissions of such an entity to the same extent that PFPC is liable to the Fund
for its own actions or omissions under this document.
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 This document shall be effective as of the date hereof and shall
automatically terminate upon termination of the Fund Custody Agreement. PFPC may
also terminate this document at any time upon 60 days prior notice to the Fund
so long as, upon such termination PFPC enters into a subsequent agreement with
the Fund providing for similar services.
3.5 This document shall be governed by the laws of the State of New York,
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.
Very truly yours,
PFPC TRUST COMPANY
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
Agreed and Accepted:
E*TRADE FUNDS
By: /s/ Xxxxxxxxx Xxxxxxxxx
-----------------------------
Name: Xxxxxxxxx Xxxxxxxxx
-----------------------------
Title: President
-----------------------------
Exhibit A
E*Trade International Index Fund
E*TRADE S&P 500 Index Fund
E*TRADE Technology Index Fund
E*TRADE Xxxxxxx 2000 Index Fund
E*TRADE Kobren Growth Fund
E*TRADE Delphi Value Fund
Exhibit B
Eligible Securities Depositories
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COUNTRY DEPOSITORY
------- ----------
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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)
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Egypt Misr for Clearing Settlement and Central Depository (MCSD)
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Egypt Bank of Egypt
--------------------------------------------------------------------------------
Estonia Estonian Central Depository for Securities
--------------------------------------------------------------------------------
Euroclear Euroclear S.A./N.V.
--------------------------------------------------------------------------------
Finland Finnish Central Securities Depository (APK)
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France Euroclear France
--------------------------------------------------------------------------------
Germany Clearstream Banking AG (Frankfurt)
--------------------------------------------------------------------------------
Greece Central Securities Depository SA (CSD)
--------------------------------------------------------------------------------
Greece Bank of Greece Securities Settlement System (BOGS)
--------------------------------------------------------------------------------
Hong Kong Central MoneyMarket Unit (CMU)
--------------------------------------------------------------------------------
Hong Kong Hong Kong Securities Clearing Company Limited (HKSCC)
--------------------------------------------------------------------------------
Hungary The Central Depository and Clearing House Ltd. (KELER Ltd.)
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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)
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Indonesia Penyelesaian Transaksi Pasar Uang - Bank of Indonesia (BoI)
--------------------------------------------------------------------------------
Indonesia PK Kustodia Sentral Efek Indonesia (KSEI)
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Ireland Euroclear SA/NV and United Kingdom - Crest
--------------------------------------------------------------------------------
Israel Tel Aviv Stock Exchange-Clearinghouse (SECH)
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Italy Xxxxx Xxxxxx (MT)
--------------------------------------------------------------------------------
Japan Bank of Japan (BOJ)
--------------------------------------------------------------------------------
Japan Japan Securities Depository Center (JASDEC)
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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
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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)
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Poland National Bank of Poland (NBP)
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Portugal Interbolsa
--------------------------------------------------------------------------------
Qatar Doha Securities Market (DSM)
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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)
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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)
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Venezuela Central Bank - Banco Central de Venezuela (BCV)
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