EXHIBIT (g)(iii)
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 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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).
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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
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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 ▇▇▇▇ ▇▇▇) 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.
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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
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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 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 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.
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PFPC TRUST COMPANY
/s:/ ▇▇▇ ▇▇▇▇▇▇▇▇
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By: ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇
Title: President
SCHWAB CAPITAL TRUST
/s:/ Tai-▇▇▇▇ ▇▇▇▇
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By: Tai-▇▇▇▇ ▇▇▇▇
Title: Treasurer and Principal Financial Officer
SCHWAB INVESTMENTS
/s:/ Tai-▇▇▇▇ ▇▇▇▇
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By: Tai-▇▇▇▇ ▇▇▇▇
Title: Treasurer and Principal Financial Officer
THE ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ FAMILY OF FUNDS
/s:/ Tai-▇▇▇▇ ▇▇▇▇
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By: Tai-▇▇▇▇ ▇▇▇▇
Title: Treasurer and Principal Financial Officer
SCHWAB ANNUITY PORTFOLIOS
/s:/ Tai-▇▇▇▇ ▇▇▇▇
---------------------
By: Tai-▇▇▇▇ ▇▇▇▇
Title: Treasurer and Principal Financial Officer
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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
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇
SRI LANKA
SWEDEN
SWITZERLAND
TAIWAN
THAILAND
TURKEY
UNITED KINGDOM
URUGUAY
ZIMBABWE
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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
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PERU CAVALI
PHILIPPINES PCD;▇▇▇▇
▇▇▇▇▇▇ 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
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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.
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