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EXHIBIT 8(b)
CUSTODIAN CONTRACT
Between
SCHWAB CAPITAL TRUST
on behalf of
THE PORTFOLIOS LISTED ON SCHEDULE C HERETO
and
STATE STREET BANK AND TRUST COMPANY
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TABLE OF CONTENTS
Page
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1. Employment of Custodian and Property to be
Held By It............................................. 1
2. Duties of the Custodian with Respect to Property of
the Funds Held by the Custodian in the United States... 2
2.1 Holding Securities.............................. 2
2.2 Delivery of Securities.......................... 2
2.3 Registration of Securities...................... 4
2.4 Bank Accounts................................... 4
2.5 Availability of Federal Funds................... 5
2.6 Collection of Income............................ 5
2.7 Payment of Fund Monies.......................... 5
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased.......... 7
2.9 Appointment of Agents........................... 7
2.10 Deposit of U.S. Securities in Securities System. 7
2.10A Fund Assets Held in the Custodian's Direct
Paper System............................. 8
2.11 Deposit of Mutual Fund Shares with Fund Agent... 9
2.12 Deposit of Schwab Mutual Fund Shares with Schwab 10
2.13 Segregated Account.............................. 11
2.14 Ownership Certificates for Tax Purposes......... 12
2.15 Proxies......................................... 12
2.16 Communications Relating to Portfolio Securities. 12
2.17 Reports to Trust by Independent Public
Accountants.............................. 12
3. Duties of the Custodian with Respect to Property of
the Funds Held Outside of the United States............ 13
3.1 Appointment of Foreign Sub-Custodians........... 13
3.2 Assets to be Held............................... 13
3.3 Foreign Securities Depositories................. 13
3.4 Holding Securities.............................. 13
3.5 Agreements with Foreign Banking Institutions.... 14
3.6 Access of Independent Accountants of the Trust.. 14
3.7 Reports by Custodian............................ 14
3.8 Transactions in Foreign Custody Account......... 14
3.9 Liability of Foreign Sub-Custodians............. 15
3.10 Liability of Custodian.......................... 15
3.11 Monitoring Responsibilities..................... 15
3.12 Branches of U.S. Banks.......................... 16
3.13 Tax Law......................................... 16
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4. Payments for Repurchases or Redemptions and Sales
of Shares of a Fund.................................... 16
5. Proper Instructions.................................... 17
6. Actions Permitted Without Express Authority............ 17
7. Evidence of Authority.................................. 17
8. Duties of Custodian with Respect to the Books of
Account and Calculations of Net Asset Value and
Net Income............................................. 18
9. Settlement Provisions.................................. 20
10. Records................................................ 24
11. Opinion of Trust's Independent Accountant.............. 25
12. Compensation of Custodian.............................. 25
13. Responsibility of Custodian............................ 25
14. Effective Period, Termination and Amendment............ 26
15. Successor Custodian.................................... 26
16. Interpretive and Additional Provisions................. 27
17. Massachusetts Law to Apply............................. 27
18. Prior Contracts........................................ 25
19. Limitation of Liability................................ 28
20. Shareholder Communications Election.................... 28
21. Additional Portfolios.................................. 29
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CUSTODIAN CONTRACT
This Contract between Schwab Capital Trust, a business trust
organized and existing under the laws of The Commonwealth of Massachusetts,
having its principal place of business at 000 Xxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000 , hereinafter called the "Trust", on behalf of the portfolios
listed on Schedule C hereto and any other portfolios which may be come subject
to this Contract pursuant to Section 21 hereof, and State Street Bank and Trust
Company, a Massachusetts trust company, having its principal place of business
at 000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, hereinafter called the
"Custodian",
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
Pursuant to the provisions of the Trust's Agreement and Declaration of
Trust, the Trust hereby employs the Custodian as the custodian of the assets of
each of the Portfolios of the Trust listed on Schedule C hereto, each
hereinafter referred to as a "Fund" and together with any other portfolios which
may become subject to this Contract, as the "Funds", including securities it
desires to be held in places within the United States ("domestic securities")
and securities it desires to be held outside the United States ("foreign
securities") as permitted by paragraph (c) (1) of Rule 17f-5 under the 1940 Act,
as amended (the "1940 Act").
Each Fund agrees to deliver to the Custodian all securities and cash
owned by it, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the Fund
from time to time, and the cash consideration received by it for such new or
treasury shares of capital stock, $.00001 par value, ("Shares") of such Fund as
may be issued or sold from time to time. The Custodian shall not be responsible
for any property of a Fund held or received by the Fund and not delivered to the
Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall from time to time employ one or more sub-custodians located
in the United States, but only in accordance with an applicable vote by the
Board of Trustees of the Trust, and provided that each agreement between the
Custodian and any sub-custodian shall provide that the sub-custodian will be
liable to the Custodian for losses arising from the negligence or willful
misconduct of the sub-custodian and the Custodian shall be responsible and
liable to the Fund on account of any actions or omissions of any sub-custodian
so employed to the same extent as such sub-custodian is liable to the Custodian.
The Custodian may employ as sub-custodians for the Fund's foreign securities and
other assets the foreign banking institutions and foreign securities
depositories designated in Schedule "A" hereto, but only in accordance with the
provisions of Article 3.
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2. Duties of the Custodian with Respect to Property of the Funds Held By
the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Fund all non-cash property to be held by it in
the United States, including all domestic securities owned by the Fund,
other than (a) securities which are maintained pursuant to Section 2.10
in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as " U.S. Securities System", (b)
commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the Custodian
pursuant to Section 2.10A, (c) securities which are maintained pursuant
to Section 2.11 in an account with the transfer agent for a mutual fund
whose shares are purchased by the Fund (a "Fund Agent") and (d)
securities which are maintained pursuant to Section 2.12 in an account
with Xxxxxxx Xxxxxx & Co. ("Schwab"), as sub-transfer agent for a mutual
fund whose shares are purchased by the Fund.
2.2 Delivery of Securities. The Custodian shall release and deliver domestic
securities owned by a Fund held by the Custodian, in a U.S. Securities
System account of the Custodian, in the Custodian's Direct Paper
book-entry system account ("Direct Paper System Account") or in an
account with a Fund Agent or at Schwab only upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Fund and
simultaneous receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a U.S. Securities System,
in accordance with the provisions of Section 2.10 hereof;
4) In the case of a sale of domestic mutual fund shares owned by a
Fund which are issued by funds for which Schwab does not act as
sub-transfer agent ("Mutual Fund Shares"), in accordance with the
provisions of Section 2.11 hereof;
5) In the case of a sale of domestic mutual fund shares owned by a
Fund which are issued by funds for which Schwab acts as
sub-transfer agent ("Schwab Mutual Fund Shares"), in accordance
with the provisions of Section 2.12 hereof;
6) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
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7) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
8) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange
for a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, in any such case, the new securities are to be
delivered to the Custodian;
9) Upon the sale of such securities for the account of the Fund, to
the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom;
10) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
11) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
12) For delivery in connection with any loans of securities made by
the Fund, but only against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund and
as set forth in the operating resolutions adopted by the Trust's
Board of Trustees or in the Fund's prospectus, which may be in
the form of cash or obligations issued by the United States
government, its agencies or instrumentalities, it being
understood that in connection with any loans for which collateral
is to be credited to the Custodian's account in the book-entry
system authorized by the U.S. Department of the Treasury, the
Custodian may rely on advice of credit received from the
book-entry system as evidence of receipt of such collateral;
13) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, but only against
receipt of amounts borrowed;
14) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered
under the Securities
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Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange,
or of any similar organization or organizations, regarding escrow
or other arrangements in connection with transactions by the
Fund;
15) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Fund;
16) Upon receipt of instructions from the Trust's transfer agent
("Transfer Agent"), for delivery to such Transfer Agent or to the
holders of shares in connection with distributions in kind, as
may be described from time to time in a Fund's currently
effective prospectus and statement of additional information
("prospectus"), in satisfaction of requests by holders of Shares
for repurchase or redemption; and
17) For any other proper corporate purpose, but only upon receipt of,
in addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees or of a duly authorized
Committee thereof signed by an officer of the Trust and certified
by the Secretary or an Assistant Secretary, specifying the
securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to
whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Fund or in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment of a nominee
to be used in common with other registered investment companies having
the same investment adviser as the Fund, or in the name or nominee name
of any agent appointed pursuant to Section 2.9 or in the name or nominee
name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of a Fund under the terms
of this Contract shall be in "street name" or other good delivery form.
If, however, a Fund directs the Custodian to maintain securities in
"street name", the Custodian shall utilize its best efforts only to
timely collect income due the Fund on such securities and to notify the
Fund on a best efforts basis only of relevant corporate actions
including, without limitation, pendency of calls, maturities, tender or
exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the Fund,
subject only to draft or order by
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the Custodian acting pursuant to the terms of this Contract, and shall
hold in such account or accounts, subject to the provisions hereof, all
cash received by it from or for the account of the Fund, other than cash
maintained by the Fund in a bank account established and used in
accordance with Rule 17f-3 under the 1940 Act. Funds held by the
Custodian for a Fund may be deposited by it to its credit as Custodian
in the Banking Department of the Custodian or in such other banks or
trust companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be
qualified to act as a custodian under the 1940 Act and that each such
bank or trust company and the funds to be deposited with each such bank
or trust company shall be approved by vote of a majority of the Board of
Trustees of the Trust. Such funds shall be deposited by the Custodian in
its capacity as Custodian and shall be withdrawable by the Custodian
only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between a Fund and
the Custodian, the Custodian shall, upon the receipt of Proper
Instructions, make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the Custodian in the
amount of checks received in payment for Shares of the Fund which are
deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to United States registered securities held hereunder to
which the Fund shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all income
and other payments with respect to United States bearer securities if,
on the date of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such income, as
collected, to the Fund's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on securities
held hereunder. Income due the Fund on domestic securities loaned
pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will promptly supply to the
Trust each list of Passive Foreign Investment Companies ("PFICs")
received by the Custodian from the Investment Company Institute from
time to time (it being understood that neither the Investment Company
Institute nor the Custodian has independently verified any of the
information contained in such lists).
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties
hereto, the Custodian shall pay out monies of a Fund in the following
cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of the
Fund but only (a) against the simultaneous delivery of such
securities, or evidence of title to such options, futures
contracts or options on futures contracts, to the Custodian (or
any bank,
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banking firm or trust company doing business in the United States
or abroad which is qualified under the 1940 Act to act as a
custodian and has been designated by the Custodian as its agent
for this purpose) registered in the name of the Fund or in the
name of a nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in the case of a
purchase effected through a U.S. Securities System, in accordance
with the conditions set forth in Section 2.10 hereof; (c) in the
case of a purchase involving the Direct Paper System, in
accordance with the conditions set forth in Section 2.10A; (d) in
the case of a purchase of Mutual Fund Shares, in accordance with
the conditions set forth in Section 2.11 hereof; (c) in the case
of a purchase of Schwab Mutual Fund Shares, in accordance with
the conditions set forth in Section 2.12 hereof; (e) in the case
of repurchase agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer which is a member
of NASD, (i) against simultaneous delivery of the securities
either in certificate form or through a prior or simultaneous
entry crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against simultaneous delivery
of the receipt evidencing purchase by the Fund of securities
owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from the
Fund or (f) for transfer to a time deposit account of the Fund in
any bank, whether domestic or foreign if authorized in advance by
Xxxxxxx Xxxxxx Investment Management Inc. ("CSIM"); such transfer
may be effected prior to receipt of a confirmation from a broker
and/or the applicable bank, but only pursuant to Proper
Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Fund as
set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the
account of the Fund: interest, taxes, management, accounting,
transfer agent and legal fees, and operating expenses of the Fund
whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution
of the Board of Trustees of the
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Trust or of a duly authorized Committee thereof signed by an
officer of the Trust and certified by its Secretary or an
Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except for payments for securities held by a Fund Agent or Schwab as
contemplated by Sections 2.11 and 2.12 hereof, and as specifically
stated otherwise elsewhere in this Contract, in any and every case where
payment for purchase of domestic securities for the account of a Fund is
made by the Custodian in advance of receipt of the securities purchased
in the absence of specific written instructions from the Fund to so pay
in advance, the Custodian shall be absolutely liable to the Fund for
such securities to the same extent as if the securities had been
received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the 1940 Act to act as a
custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder. Neither
Schwab or any Fund Agent shall be deemed an agent or subcustodian of the
Custodian for purposes of this Section 2.9 or any other provision of
this Agreement.
2.10 Deposit of Securities in U.S. Securities Systems. The Custodian may
deposit and/or maintain domestic securities owned by a Fund in a
clearing agency registered with the Securities and Exchange Commission
under Section 17A of the Exchange Act, which acts as a securities
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "U.S. Securities System" in accordance with
applicable Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following provisions:
1) The Custodian may keep domestic securities of the Fund in a U.S.
Securities System, provided that such securities are represented
in an account ("Account") of the Custodian in the U.S. Securities
System which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to domestic securities
of the Fund which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to the
Fund;
3) The Custodian shall pay for domestic securities purchased for the
account of the Fund upon (i) receipt of advice from the U.S.
Securities System that such
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securities have been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Fund. The
Custodian shall transfer domestic securities sold for the account
of the Fund upon (i) receipt of advice from the U.S. Securities
System that payment for such securities has been transferred to
the Account, and (ii) the making of an entry on the records of
the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the U.S.
Securities System of transfers of domestic securities for the
account of the Fund shall identify the Fund, be maintained for
the Fund by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the Fund
in the form of a written advice or notice and shall furnish to
the Fund copies of daily transaction sheets reflecting each day's
transactions in the U.S. Securities System for the account of the
Fund.
4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the U.S. Securities System's accounting system,
internal accounting control and procedures for safeguarding
domestic securities deposited in the U.S. Securities System;
5) The Custodian shall have received the initial certificate
required by Article 14 hereof; and
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the U.S. Securities System by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of any
such loss or damage if and to the extent that the Fund has not
been made whole for any such loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System. The Custodian
may deposit and/or maintain securities owned by a Fund in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions;
2) The Custodian may keep securities of the Fund in the Direct Paper
System only if such securities are represented in an account
("Account") of the Custodian
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in the Direct Paper System which shall not include any assets of
the Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for the account
of the Fund upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to
the account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund upon the making of an entry on
the records of the Custodian to reflect such transfer and receipt
of payment for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's transaction in
the Direct Paper System for the account of the Fund; and
6) The Custodian shall promptly provide the Trust with any report on
its system of internal accounting control received by the
Custodian.
2.11 Deposit of Mutual Fund Shares with a Fund Agent. Mutual Fund Shares
shall be deposited and/or maintained with a Fund Agent acting as
transfer agent for such fund. Each such Fund Agent shall be deemed to be
a "depositary" for purposes of Rule 17f-4 of the Investment Company Act
of 1940. The Fund hereby directs the Custodian to deposit and/or
maintain such securities with a Fund Agent, subject to the following
provisions:
1) The Custodian may keep Mutual Fund Shares with a Fund Agent,
provided that such securities are represented in an account with
the Fund Agent, in the name of the Custodian as custodian of the
Fund, in which the Custodian shall not deposit any assets of the
Custodian other than assets held on behalf of the Fund;
2) The records of the Custodian with respect to Mutual Fund Shares
which are maintained with a Fund Agent shall identify by
book-entry those securities which the Fund or its investment
advisor identifies to the Custodian as belonging to the Fund;
3) The Custodian shall pay for Mutual Fund Shares purchased for the
account of the Fund upon (i) receipt of advice from the Fund'
investment adviser that such securities have been purchased and
will be transferred to the Custodian's account with the Fund
Agent, and (ii) the making of an entry on the records of
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the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall receive confirmation of
the purchase of such securities and the transfer of such
securities to the Custodian's account with the Fund Agent only
after such payment is made. The Custodian shall transfer Mutual
Fund Shares sold for the account of the Fund upon (i) receipt of
advice from the Fund's investment adviser that such securities
have been sold and that payment for such securities will be
transferred to the Custodian, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer and payment
for the account of the Fund. The Custodian will receive
confirmation of the sale of such securities and payment therefor
only after such securities are transferred. Copies of all advices
from a Fund Agent of transfers of Mutual Fund Shares for the
account of the Fund shall identify the Fund, be maintained for
the Fund by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the Fund
in the form of a written advice or notice and shall furnish to
the Fund copies of daily transaction sheets reflecting each day's
transactions with each Fund Agent for the account of the Fund;
and
4) The Custodian shall not be liable to the Fund for any loss or
damage to the Fund resulting from the maintenance of Mutual Fund
Shares with a Fund Agent except for losses resulting directly
from the negligence, misfeasance or misconduct of the Custodian
or any of its agents or of any of its or their employees.
2.12 Deposit of Schwab Mutual Fund Shares with Schwab. Schwab Mutual Fund
Shares shall be deposited and/or maintained in an account maintained
with Schwab as sub-transfer agent for the funds. Schwab shall be deemed
to be a "depositary" for purposes of Rule 17f-4 of the Investment
Company Act of 1940. The Fund hereby directs the Custodian to deposit
and/or maintain such securities with Schwab, subject to the following
provisions:
1) The Custodian shall keep Schwab Mutual Fund Shares with Schwab,
provided that such securities are represented in an account with
Schwab, in the name of the Custodian as custodian for the Fund,
in which the Custodian will not deposit any assets of the
Custodian other than assets held on behalf of the Fund and which
Schwab represents to the Custodian will not include any assets of
Schwab other than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of the Custodian with respect to Schwab Mutual Fund
Shares which are maintained with Schwab shall identify by
book-entry those securities which the Fund or its investment
advisor have identified to the Custodian as belonging to the
Fund;
3) The Custodian shall pay for Schwab Mutual Fund Shares purchased for the
account of the Fund upon (i) receipt of advice from the Fund' investment
adviser that such
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securities have been purchased and will be transferred to the
Custodian's account with Schwab, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall receive confirmation of the
purchase of such securities and the transfer of such securities to the
Custodian's account with Schwab only after such payment is made. The
Custodian shall transfer Schwab Mutual Fund Shares sold for the account
of the Fund upon (i) receipt of advice from the Fund's investment
adviser that such securities have been sold and that payment for such
securities will be transferred to the Custodian, and (ii) the making of
an entry on the records of the Custodian to reflect such transfer and
payment for the account of the Fund. The Custodian will receive
confirmation of the sale of such securities and payment therefor only
after such securities are transferred. Copies of all advices from Schwab
of transfers of Schwab Mutual Fund Shares for the account of the Fund
shall identify the Fund, be maintained for the Fund by the Custodian and
be provided to the Fund at its request. Upon request, the Custodian
shall furnish the Fund confirmation of each transfer to or from the
account of the Fund in the form of a written advice or notice and shall
furnish to the Fund copies of daily transaction sheets reflecting each
day's transactions with Schwab for the account of the Fund; and
4) The Custodian shall be not be liable to the Fund for any loss or damage
to the Fund resulting from maintenance of Schwab Mutual Fund Shares with
Schwab except for losses resulting directly from the negligence,
misfeasance or misconduct of the Custodian or any of its agents or of
any of its or their employees. The Fund acknowledges that the
maintenance of Schwab Mutual Fund Shares with Schwab as contemplated by
this Section 2.12 may be deemed to be "self-custody" for purposes of the
Investment Company Act of 1940 and the regulations thereunder.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for
and on behalf of a Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of
The Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Fund, (ii) for purposes of segregating cash or
government securities in connection with options purchased, sold or
written by the Fund or commodity futures contracts or options thereon
purchased or sold by the Fund, (iii) for the purposes of compliance by
the Fund with the procedures required by Investment Company Act Release
No. 10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts
by registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions, a
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certified copy of a resolution of the Board of Trustees of the Trust or
a duly authorized Committee thereof signed by an officer of the Trust
and certified by the Secretary or an Assistant Secretary, setting forth
the purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
2.14 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of a Fund held by it and in
connection with transfers of such securities.
2.15 Proxies. The Custodian shall, with respect to the securities held by it
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the
name of a Fund or a nominee of a Fund, all proxies, without indication
of the manner in which such proxies are to be voted, and shall promptly
deliver to the Fund's Adviser such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.16 Communications Relating to Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to a
Fund all written information (including, without limitation, pendency of
calls and maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written by the Fund and the maturity of futures contracts purchased or
sold by the Fund) received by the Custodian from issuers of the domestic
securities being held for the Fund. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund all written
information received by the Custodian from issuers of the domestic
securities whose tender or exchange is sought and from the party (or his
agents) making the tender or exchange offer. If the Fund desires to take
action with respect to any tender offer, exchange offer or any other
similar transaction, the Fund shall notify the Custodian at least three
business days prior to the date on which the Custodian is to take such
action.
2.17 Reports to Trust by Independent Public Accountants. The Custodian shall
provide the Trust, at such times as the Trust may reasonably require,
with reports by independent public accountants on the accounting system,
internal accounting control and procedures for safeguarding securities,
futures contracts and options on futures contracts, including domestic
securities deposited and/or maintained in a U.S. Securities System,
relating to the services provided by the Custodian under this Contract;
such reports shall be of sufficient scope and in sufficient detail as
may be required by the Trust to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if
there are no such inadequacies, the reports shall so state.
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3. Duties of the Custodian with Respect to Property of the Funds Held
Outside of the United States.
3.1 Appointment of Foreign Sub-Custodians. The Trust hereby authorizes and
instructs the Custodian to employ as sub-custodians for each Fund's
foreign securities and other assets maintained outside the United States
the foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt
of Proper Instructions, as defined in Section 5 of this Contract,
together with a certified resolution of the Trust's Board of Trustees,
the Custodian and the Trust may agree to amend Schedule A hereto from
time to time to designate additional foreign banking institutions and
foreign securities depositories to act as sub-custodian. Upon receipt of
Proper Instructions, a Fund may instruct the Custodian to cease the
employment of any one or more such sub-custodians for maintaining
custody of such Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the 1940 Act, and (b) cash and cash equivalents in such amounts as the
Custodian or a Fund may determine to be reasonably necessary to effect
the Fund's foreign securities transactions. The Custodian shall identify
on its books as belonging to the Fund, the foreign securities of the
Fund held by each foreign sub-custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon
in writing by the Custodian and the Trust, assets of a Fund shall be
maintained in a clearing agency which acts as a Securities depository or
in a book-entry system for the central handling of securities located
outside of the United States (each a "Foreign Securities System") only
through arrangements implemented by the foreign banking institutions
serving as foreign sub-custodians pursuant to the terms of Section 3.1
(Foreign Securities Systems and U.S. Securities Systems are collectively
referred to herein as the "Securities Systems."). Unless otherwise
authorized by the Board of Trustees of the Trust, such arrangements
shall include entry into written agreements containing the provisions
set forth in Section 3.5 hereof.
3.4 Holding Securities. The Custodian may hold securities and other non-cash
property for all of its customers, including the Trust, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i)
the records of the Custodian with respect to securities and other
non-cash property of the Fund which are maintained in such account shall
identify by book-entry those securities and other non-cash property
belonging to the Fund and (ii) the Custodian shall require that
securities and other non-cash property so held by the foreign
sub-custodian be held separately from any assets of the foreign
sub-custodian or of others.
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3.5 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall provide that: (a) a Fund's assets will
not be subject to any right, charge, security interest, lien or claim of
any kind in favor of the foreign banking institution or its creditors or
agents, except a claim of payment for their safe custody or
administration; (b) beneficial ownership of a Fund's assets will be
freely transferable without the payment of money or value other than for
custody or administration; (c) adequate records will be maintained
identifying the assets as belonging to each Fund; (d) officers of,
auditors employed by, or other representatives of the Custodian,
including to the extent permitted under applicable law the independent
public accountants for the Trust, will be given access to the books and
records of the foreign banking institution relating to its actions under
its written agreement with the Custodian; and (e) assets of a Fund held
by the foreign sub-custodian will be subject only to the instructions of
the Custodian or its agents.
3.6 Access of Independent Accountants of the Trust. Upon request of the
Trust, the Custodian will use its best efforts to arrange for the
independent accountants of the Trust to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its written
agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the Trust a daily
list of foreign securities and other assets of each Fund held by foreign
sub-custodians. In addition, the Custodian will supply to the Trust
periodic statements, on a monthly basis or more frequently if agreed
upon by the Trust and the Custodian, in respect of the foreign
securities and other assets of each Fund held by foreign sub-custodians,
including but not limited to an identification of entities having
possession of each Fund's securities and other assets and advices or
notifications of any transfers of securities to or from each custodial
account maintained by a foreign banking institution for the Custodian on
behalf of each Fund indicating, as to securities acquired for such Fund,
the identity of the entity having physical possession of such
securities.
3.8 Transactions in Foreign Custody Account (a) Except as otherwise provided
in paragraph (b) of this Section 3.8, the provision of Sections 2.2 and
2.7 of this Contract shall apply, mutatis mutandis to the foreign
securities of a Fund held outside the United States by foreign
sub-custodians. (b) Notwithstanding any provision of this Contract to
the contrary, settlement and payment for securities received for the
account of a Fund and delivery of securities maintained for the account
of a Fund may be effected in accordance with the customary established
securities trading or securities processing practices and procedures in
the jurisdiction or market in which the transaction occurs, including,
without limitation, delivering securities to the purchaser thereof or to
a dealer therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such
securities from such purchaser or dealer. (c) Foreign securities
maintained in the custody of a foreign sub-custodian may be maintained
in the name of such entity's nominee to the
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same extent as set forth in Section 2.3 of this Contract. The Trust
agrees to hold any such nominee harmless from any liability as a holder
of record of such securities other than liabilities arising out of the
negligence or willful misconduct of such nominee.
3.9 Liability of Foreign Sub-Custodians. Each written agreement pursuant to
which the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify and hold harmless the
Custodian and each Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institutions performance of such obligations. At the election of a Fund,
it shall be entitled to be subrogated to the rights of the Custodian
with respect to any claims against a foreign banking institution as a
consequence of any such loss, damage, cost, expense, liability or claim
if and to the extent that the Fund has not been made whole for any such
loss, damage, cost, expense, liability or claim.
3.10 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. Bank as contemplated by paragraph 3.12 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
respecting a Fund's foreign securities and cash and cash equivalents
held by a foreign sub-custodian pursuant to Section 3.2 hereof resulting
from nationalization, expropriation, currency restrictions, or acts of
war or terrorism or where the sub-custodian has otherwise exercised
reasonable care. Notwithstanding the foregoing provisions of this
paragraph 3.10, in delegating custody duties to State Street London
Ltd., the Custodian shall not be relieved of any responsibility to a
Fund for any loss due to such delegation, except such loss as may result
from (a) political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife or armed hostilities) or (b) other losses
(excluding a bankruptcy or insolvency of State Street London Ltd. not
caused by political risk) due to Acts of God, nuclear incident or other
losses under circumstances where the Custodian and State Street London
Ltd. have exercised reasonable care.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to the
Trust, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Trust in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Trust in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss involving the assets of a Fund or in
the case of any foreign sub-custodian not the subject of an exemptive
order from the Securities and Exchange Commission, is notified by such
foreign sub-custodian that there appears to be a substantial likelihood
that its shareholders' equity will decline below $200 million (U.S.
dollars or the equivalent thereof) or that its shareholders' equity has
declined below $200
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million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of a
Fund's assets is maintained in a foreign branch of a banking institution
which is a "bank" as defined by Section 2(a)(5) of the 1940 Act meeting
the qualifications set forth in Section 26(a) of said Act. The
appointment of any such branch as a sub-custodian shall be governed by
Article 1 of this Contract. (b) Cash held for the Fund in the United
Kingdom shall be maintained in an interest bearing account established
for the Fund with the Custodian's London branch, which account shall be
subject to the direction of the Custodian, State Street London Ltd. or
both.
3.13 Tax Law. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on a Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or
any state or political subdivision thereof. It shall be the
responsibility of the Trust to notify the Custodian of the obligations
imposed on a Fund or the Custodian as custodian of the Fund by the tax
law of jurisdictions other than those mentioned in the above sentence,
including responsibility for withholding and other taxes, assessments or
other governmental charges, certifications and governmental reporting.
The sole responsibility of the Custodian with regard to such tax law
shall be to use reasonable efforts to assist a Fund with respect to any
claim for exemption, reclaim or refund under the tax law of
jurisdictions for which the Fund has provided such information.
4. Payments for Repurchases or Redemptions and Sales of Shares of a Fund.
From such funds as may be available for the purpose but subject to the
limitations of the Trust's Agreement and Declaration of Trust and any applicable
votes of the Board of Trustees of the Trust pursuant thereto, the Custodian
shall, upon receipt of instructions from the Transfer Agent, make funds
available for payment to holders of Shares who have delivered to the Transfer
Agent a request for redemption or repurchase of their Shares. In connection with
the redemption or repurchase of Shares of a Fund, the Custodian is authorized
upon receipt of instructions from the Transfer Agent to wire funds to or through
a commercial bank designated by the redeeming shareholder(s). In connection with
the redemption or repurchase of Shares of a Fund, the Custodian shall honor
checks drawn on the Custodian by a holder of Shares, which checks have been
furnished by the Fund to the holder of Shares, when presented to the Custodian
in accordance with such procedures and controls as are mutually agreed upon from
time to time between the Trust and the Custodian. The Custodian shall receive
from the distributor for the Trust's Shares or from the Transfer Agent and
deposit into a Fund's account such payments as are received for Shares of the
Fund issued or sold from time to time by the Fund. The Custodian will provide
timely notification to a Fund and the Transfer Agent of any receipt by it of
payments for Shares of the Fund.
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5. Proper Instructions.
Unless otherwise provided in this Contract, the Custodian shall act only
upon Proper Instructions. Proper Instructions as used herein means a writing
signed or initialed by one or more person or persons as the Board of Trustees or
a duly authorized committee thereof shall have from time to time authorized.
Each such writing shall set forth the specific transaction or type of
transaction involved, including a specific statement of the purpose for which
such action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. Each Fund shall cause all oral instructions to be confirmed in
writing. The fact that confirming written instructions are not received by the
Custodian shall in no way invalidate the transactions authorized by the oral
instructions. Upon receipt of a certificate of the Secretary or an Assistant
Secretary of the Trust as to the authorization by the Board of Trustees of the
Trust or a duly authorized committee thereof accompanied by a detailed
description of procedures approved by the Board of Trustees, Proper Instructions
may include communications effected directly between electro-mechanical or
electronic devices provided that the Board of Trustees and the Custodian are
satisfied that such procedures afford adequate safeguards for a Fund's assets.
For purposes of this Section , Proper Instructions shall include duly authorized
instructions received by the Custodian pursuant to any three-party agreement
which requires a segregated asset account in accordance with Section 2.13.
6. Actions Permitted without Express Authority.
The Custodian may in its discretion and without express authority from
the Trust: 1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this Contract,
provided that all such payments shall be accounted for to the Trust; 2)
surrender securities in temporary form for securities in definitive form; 3)
endorse for collection, in the name of a Fund, checks, drafts and other
negotiable instruments; and 4) in general, attend to all non-discretionary
details in connection with the sale, exchange, substitution, purchase, transfer
and other dealings with the securities and property of a Fund except as
otherwise directed by the Board of Trustees of the Trust or a duly authorized
committee thereof.
7. Evidence of Authority.
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper reasonably
believed by it to be genuine and to have been properly executed by or on behalf
of the Trust or a Fund. The Custodian may receive and accept a certified copy of
a vote of the Board of Trustees of the Trust or a duly authorized committee
thereof as conclusive evidence (a) of the authority of any person to act in
accordance with such vote or (b) of any determination or of any action by the
Board of Trustees pursuant to the Trust's Agreement and Declaration of Trust as
described in such vote, and such vote may be considered as in full force and
effect until receipt by the Custodian of written notice to the contrary.
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8. Duties of Custodian with Respect to the Books of Account and Calculation
of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees of the Trust to keep
the books of account of each Fund and compute the net asset value per share of
the outstanding shares of each Fund and unless directed in writing to do
otherwise by the Trust, shall itself keep such books of account and compute such
net asset value per share. The Trust acknowledges and agrees that, with respect
to investments maintained with a Fund Agent or Schwab, the Fund Agent or Schwab
is the sole source of information on the number of shares of a fund held by it
on behalf of a Fund and that the Custodian has the absolute right to rely on
holdings information furnished by a Fund Agent or Schwab to the Custodian in
performing its duties under this Contract, including without limitation, the
duties set forth in this Section 8 and in Section 10 hereof. Provided that each
Fund Agent and Schwab have transmitted to the Custodian information as to the
number and nature of any mutual fund shares held by the Fund Agent or Schwab, as
applicable, on behalf of the Fund within the time and delivery requirements
specified by the Custodian, the records and calculations prepared and maintained
by the Custodian shall be made available to the Trust, in both written and
electronic format, each day within the time and delivery requirements specified
by the Trust. Unless otherwise directed in writing by the Trust, the Custodian
shall also calculate daily the net income of each Fund as described in the
Fund's currently effective prospectus and shall advise the Fund and the Transfer
Agent daily of the total amount of such net income and, if instructed in writing
by an officer of the Trust to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various components.
The calculations of net asset value per share and the daily income of each Fund
shall be made at the time or times described from time to time in each Fund's
currently effective prospectus. The records to be kept by the Custodian shall
include, but not be limited to:
(a) all books and records with respect to each Fund's books of
account;
(b) records of each Fund's securities transactions;
(c) all other books and records as the Custodian is required to
maintain pursuant to Rule 31a-1 of the 1940 Act including, but
not necessarily limited to the following:
(i) Journals containing an itemized daily record in detail of
all purchases and sales of securities, all receipts and
disbursements of cash, and all other debits and credits,
as required by subsection (b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense accounts
including interest accrued and interest received, as
required by subsection (b)(2)(i) of the Rule;
(iii) Separate ledger accounts required by subsection (b)(2)(ii)
and (iii) of the Rule; and
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(iv) A monthly trial balance of all ledger accounts except
shareholder account as required by subsection (b)(8) of
the Rule.
The Custodian will perform continuing accounting functions for each
Fund, including, without limitation, the following:
(i) Journalize each Fund's investment, capital share and
income and expense activities;
(ii) Verify investment buy/sell trade tickets when received
from the Fund's sub-adviser or investment adviser for
proper settlement;
(iii) Maintain individual ledgers for investment securities;
(iv) Maintain historical tax lots for each security;
(v) Reconcile cash and investment balances of the Fund with
the Custodian, and provide the Fund's investment adviser
with the beginning cash balance available for investment
purposes;
(vi) Update the cash availability throughout the day as
required by the Fund's investment adviser;
(vii) Post to and prepare the Fund's Statement of Assets and
Liabilities and the Statement of Operations;
(viii) Calculate various contractual expenses (e.g., advisory and
custody fees);
(ix) Utilize expense accruals provided by the Fund's investment
adviser;
(x) Control all disbursements from the Fund and authorize such
disbursements upon Proper Instructions;
(xi) Calculate realized and unrealized capital gains and losses
both for market and currency fluctuations;
(xii) Determine the Fund's net income;
(xiii) Obtain security market quotes from independent pricing
services approved by the Fund's investment adviser
pursuant to the price service authorization letter
attached hereto as Exhibit 2. If such quotes are
unavailable, then obtain such prices from the Fund's
investment
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adviser, and in either case calculate the market value of
each Fund's investments;
(xiv) Electronically transmit and/or mail a copy of the daily
portfolio valuation to the Fund's investment adviser;
(xv) Compute the net asset value of the Fund;
(xvi) As appropriate, compute the Fund's yields, total return,
expense ratios, Portfolio turnover rate, and, if required,
average dollar-weighted maturity; and
(xvii) Prepare a monthly financial statement, which will include
the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses
The Custodian will provide the Fund's investment adviser with the
following services:
(i) Assist with preparation of: Federal and State Tax Returns,
Excise Tax Returns, Annual and Semi-Annual Shareholder
Reports, Rules 24 (e)-2 and 24 (f)-2 Notices;
(ii) Assist in the review of registration statements; and
(iii) Assist in monitoring compliance with SubChapter M of the
Internal Revenue Code.
9. Settlement Provisions.
9.1 Except as otherwise provided in this Section 9, the Custodian shall
credit or debit the appropriate cash account of each Fund in connection
with the purchase, sale, maturity, redemption, or other disposition of
securities and other assets held for the time being in such Fund on an
actual settlement basis.
9.2 Unless a Fund instructs the Custodian in writing that transactions in a
specified market shall be settled on an actual settlement basis, the
purchase, sale, maturity, redemption or other disposition of securities
by such Fund in the markets listed on Schedule B hereto shall be settled
in the manner and subject to the terms and limitations described in
Sections 9.3 through 9.10 below. A transaction to which these
contractual settlement provisions applies shall be called a "Covered
Transaction".
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9.3 With respect to a Covered Transaction that represents a purchase, the
Custodian shall debit the Fund's cash account in accordance with Proper
Instructions as of the time and date that monies would ordinarily be
required to settle such a transaction in the applicable market as set
forth on Schedule B hereto. Such amounts shall be recredited to the
Fund's appropriate cash account upon the Fund's notice to the Custodian
that it has canceled the Covered Transaction.
9.4 With regard to the settlement of a Covered Transaction which is a sale,
maturity, redemption or other disposition, provisional credit of an
amount equal to the net sale, maturity, redemption or other disposition
proceeds of the transaction (hereinafter called the "Settlement Amount")
shall be made to the Fund as if the Settlement Amount is received as of
the time and date that monies would ordinarily be required to settle
such transaction in the applicable market as set forth on Schedule B.
The provisional credit will be made if the Custodian has received Proper
Instructions or reasonable notice of the Covered Transaction, as
applicable, and if the Custodian or its agents are in possession of the
asset associated with the Covered Transaction in good deliverable form
and are not aware of any facts which would lead them to reasonably
believe that the Covered Transaction will not settle in the time period
ordinarily applicable to transactions in the applicable market as set
forth on Schedule B. In the event that the Custodian determines not to
provide a provisional credit in respect of a particular transaction, the
Custodian will promptly notify the Fund of this determination. The
provisional credit shall not be more than the Settlement Amount.
9.5 With respect to each Covered Transaction for which the Custodian shall
procure that the Settlement Amount be credited to the Fund, the
following provisions shall apply .
(a) Simultaneously with the making of the provisional credit, all
right and title to any asset purchased or sold, as applicable in
the Covered Transaction together with the Fund's contractual
rights against the Fund's counterparty in the Covered Transaction
shall vest in the Custodian.
(b) Subject to the general terms of this Agreement, the Custodian
shall perform the Fund's obligations to a counterparty under any
contract that is associated with the Covered Transaction.
(c) Notwithstanding Section 9.5(b), the Custodian shall remain the
beneficial owner of the assets concerned under a Covered
Transaction and the beneficiary of any contract associated
therewith and shall not be bound to complete such Covered
Transaction until (i) actual receipt of the Settlement Amount for
which provisional credit shall have been given in accordance with
Subsection 9.4 or, (ii) where such provisional credit is reversed
in accordance with Subsection 9.6 or 9.7, the Fund's liability to
the Custodian in respect of such reversal shall have been
satisfied in full. In relation to any such securities located in
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Germany, the ownership held by the Custodian shall be governed by
the German law and shall be agreed to be "Sicherungseiggentum".
(d) Upon the satisfaction of Subsection 9.5(c)(i) the legal and
beneficial ownership in the securities concerned shall pass from
the Custodian in accordance with the terms of the contract
associated with the Covered Transaction and the Settlement Amount
received in accordance with the contract shall inure to the
benefit of the Custodian. In such event, the benefit of all
dividends, interest and other distributions which are declared,
or which are paid or payable on the securities under the terms of
the contract associated with the Covered Transaction shall pass
in accordance with the terms of such contract.
9.6 The Custodian shall have the right, upon sending notice to the Fund, to
reverse any provisional credit given in accordance with Subsection 9.4
above in the event that the actual proceeds of such transaction have not
been received by the Custodian, its agents or its sub-custodians within
thirty days of having made the provisional credit or at any time when
the Custodian believes for reasonable cause that such Covered
Transaction will not settle in accordance with its terms (in which case
the notice required here will contain a description of such cause),
whereupon a sum equal to the Settlement Amount shall become payable by
the Fund to the Custodian and, if not paid by the Fund within five (5)
days after receipt of the notice required hereunder, may be debited from
any cash account held for benefit of the Fund in accordance with the
terms of any notice given hereunder. In the case that the Custodian
shall make the debit allowed by this subsection or that the Fund shall
otherwise return the Settlement Amount, in consideration for such debit
or other return, Custodian shall transfer to the account of the Fund
assets of the same type, nominal value, description, issue and amount as
the assets transferred to the Custodian under subsection 9.5(a) above
("Equivalent Assets"), which assets shall be described in the notice
given to the Fund as provided above in this Section 9.6. Further in such
event, the Custodian shall subrogate to the Fund the rights involved in
any contract associated with the Covered Transaction that were assigned
to it under Subsection 9.5(a). The amount of any dividends, interest and
other distributions with respect to assets associated with the Covered
Transactions that have accrued to the benefit of the Custodian shall be
set off against the Settlement Amount.
9.7 In the event that the Custodian is unable to debit the Fund and the Fund
fails to pay any sums due to the Custodian at the time the same becomes
payable in accordance with Section 9.5 and such failure is not cured
upon notice of such failure to the Fund or if any of the following
conditions occurs, the Custodian may charge the Fund for reasonable
costs and expenses associated with the provisional credit and the
provisions of Section 9.8 will apply:
(a) If a final judgment for the payment of money shall be rendered
against the Fund and such judgment shall not have been discharged
or its execution stayed
22
26
pending appeal within sixty days of entry or such judgment shall
not have been discharged within sixty days of expiration of any
such stay;
(b) the Fund passing a resolution for its voluntary winding-up
(otherwise than for the purpose of corporate reconstruction or
amalgamation);
(c) the presentation of a petition for the winding-up of or the
making of an administration order in relation to the Fund;
(d) the appointment of a receiver or administrator over any of the
assets of the Fund;
(e) the Fund ceasing or threatening to cease to carry on its
business;
(f) the Fund calling a meeting of its creditors pursuant to Section
98 of the Insolvency Act 1986 (or any statutory modification or
re-enactment thereof for the time being in force) or any similar
law affecting the Fund in its own jurisdiction.
9.8 If an event outlined in Subsection 9.7 occurs:
(a) The obligation of the Custodian to deliver Equivalent Assets in
accordance with Section 9.6 shall cease;
(b) the value of the Equivalent Assets shall be established by
reference to the last available bid price thereof on the most
appropriate market at the date and time of such event ("Value
Date");
(c) the value of the Fund's obligations in respect of payment of any
sums which have become repayable in accordance with Subsection
9.5 and 9.6 shall be established as of the Value Date), such
value to be increased by any cost of funds expense allowable to
the Custodian under Subsection 9.7 and reduced by the amount of
any dividends, interest or other distributions in connection with
the assets associated with the Covered Transaction that have
accrued to the Custodian under these settlement provisions, any
amount in non-U.S. currency shall be converted into US dollars at
the Custodian's prevailing exchange rate for the currencies
concerned on Value Date;
(d) the values established under Subsection 9.8(b) shall be offset
against the value established under 9.8(c) as of the Value Date;
(e) the amount by which the greater of the amounts calculated
pursuant to Subsection 9.8(b) and (c) exceeds the lower amount so
calculated shall be payable as of Value Date by the party having
the claim valued at the lower amount pursuant to the foregoing.
23
27
9.9 The Custodian shall not be obliged to transfer any sums credited to the
Fund in accordance with Subsection 9.4 to or to the order or benefit of
the Fund while any amount which is payable to the Custodian under the
terms of Sections 9.5 through 9.8.
9.10 The operation of the set-off provisions in accordance with Subsection
9.6 or 9.7 shall be without prejudice to any other remedies provided
herein or under any applicable law. The Fund agrees that the Custodian
shall have a right of set-off against cash held for the Fund in any
currency for any amount provided to the Fund by the Custodian hereunder
or from time to time arising out of or in connection with this Contract
and/or the operation of any account hereunder and the Custodian shall
have the right to debit the Fund with all or part of such sums and apply
or appropriate the cash in or towards the discharge of such amounts in
such manner and order as the Custodian reasonably sees fit. For the
purposes of this right of set-off, the Custodian may make such currency
conversions or effect any transactions in such currencies at then
prevailing rates as it thinks fit at such times as it reasonably thinks
proper and may effect any transfers between, or entries on, any account
comprised in the Account as the Custodian considers proper.
10. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Trust and each Fund under the 1940 Act, with particular
attention to Section 31 thereof and Rules 31a-1 and 31a-2 and Rule 17f-5
thereunder. All such records shall be the property of the Trust and shall at all
times during the regular business hours of the Custodian be open for inspection
and copying by duly authorized officers, employees or agents of the Trust, the
Trust's independent accountants and employees and agents of the Securities and
Exchange Commission. The Custodian shall (on a daily basis) supply the Fund with
a tabulation of securities owned by the Fund and held by the Custodian. The
Custodian shall make available to the Trust such tabulations of securities owned
by each Fund, in both written and electronic format, each day within the time
and delivery requirements specified by the Trust. The Custodian agrees to keep
confidential all records of the Funds and information relative to each Fund and
its shareholders (past, present and potential), unless the release of such
records or information is otherwise consented to, in writing, by the Trust. The
Trust agrees that such consent shall not be unreasonably withheld. The Trust
further agrees that, should the Custodian be required to provide such
information or records to duly constituted authorities (who may institute civil
or criminal contempt proceedings for failure to comply), the Custodian shall not
be required to seek the Trust's prior written consent before disclosing such
information, but shall instead notify an officer of the Trust and obtain the
officer's oral consent prior to disclosing the information, which consent shall
be timely and not unreasonably withheld.
24
28
11. Opinion of Trust's Independent Accountant.
The Custodian shall take all reasonable action to assist the Trust in
obtaining from year to year favorable opinions from the Trust's independent
accountants with respect to its activities hereunder in connection with the
preparation of the Trust's Form N-1A, and Form N-SAR and/or other reports to the
Securities and Exchange Commission and with respect to any other requirements of
the Commission. The Custodian shall act as liaison with the Fund's independent
accountants and shall provide them with account analyses, fiscal year summaries,
and other audit-related schedules. The Custodian shall take all reasonable
action in the performance of its obligations under this Contract to assure that
the necessary information is made available to such accountants for the
expression of their opinion, as such may be required by the Trust from time to
time. The Custodian will also provide Fund information to, and act as the
liaison with industry reporting services such as NASDAQ, Morningstar and Lipper
Analytical Services as designated by the Trust from time to time.
12. Compensation of Custodian.
The Custodian shall be entitled to such compensation for its services
and expenses as Custodian as set forth in Exhibit 1 hereto, as amended as agreed
upon from time to time between the Trust and the Custodian.
13. Responsibility of Custodian.
So long as and to the extent that it exercises reasonable care, the
Custodian shall not be responsible to the Trust for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Trust for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel acceptable to the Trust
(who may be counsel for the Trust) on all matters pertaining to its
responsibilities hereunder, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
If any Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the reasonable opinion of the Custodian, result in the Custodian or its nominee
being liable for the payment of money or incurring material liability of some
other form, the Trust, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
25
29
If any Fund requires the Custodian or its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement),
or in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of such Fund shall be security
therefor and should such Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of such
Fund's assets to the extent necessary to obtain reimbursement of the amount owed
by the Fund to the Custodian. The Custodian shall give the Fund prior written
notice of its intention to utilize Fund assets pursuant to this Section 13 and
the Fund shall have the right to pay or to designate to the Custodian the assets
to be utilized; provided, that if the Fund does not do so promptly, the
Custodian shall be entitled to designate the assets to be utilized.
14. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual, written agreement of the parties hereto, and may
be terminated by either party by an instrument in writing delivered or mailed,
postage prepaid, to the other party, such termination to take effect on the date
stated therein, which date shall not be sooner than sixty (60) days after the
date of such delivery or mailing; provided, however that (a) the Custodian shall
not act under Section 2.10 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees of the Trust has approved the initial use of a particular Securities
System as required by Rule 17f-4 under the 1940 Act; and (b) the Custodian shall
not act under Section 2.10A hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees has approved the initial use of the Direct Paper System; and provided
further, however, that the Trust shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Trust's Agreement and Declaration of Trust, and further provided, that
the Trust may at any time by action of its Board of Trustees (i) substitute
another bank or trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this Contract in the event
of the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its reasonable and related costs, expenses
and disbursements.
15. Successor Custodian.
If a successor custodian shall be appointed by the Board of Trustees of
the Trust, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the
26
30
Custodian, duly endorsed and in the form for transfer, all securities then held
by it hereunder and shall transfer to an account of the successor custodian all
of each Fund's securities held in a Securities System, at a Fund Agent or at
Schwab.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Trustees of the Trust, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the 1940 Act, doing business in Boston,
Massachusetts, of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by the Custodian
and all instruments held by the Custodian relative thereto and all other
property held by it under this Contract and to transfer to an account of such
successor custodian all of each Fund's securities held in any Securities System,
at a Fund Agent or at Schwab. Thereafter, such bank or trust company shall be
the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Trust to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and the
Trust may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Agreement and Declaration of Trust of the Trust. No interpretive or
additional provision made as provided in the preceding sentence shall be deemed
to be an amendment of this Contract.
17. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of the Commonwealth of
Massachusetts.
27
31
18. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the Funds' assets.
19. Limitation of Liability
The names "Schwab Capital Trust" and "Trustees of Schwab Capital Trust"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Declaration of
Trust, to which reference is hereby made and a copy of which is on file at the
office of the Secretary of the Commonwealth of Massachusetts and elsewhere as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "Schwab Capital Trust" entered into in the name or on
behalf thereof by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, interest holders or representatives of the Trust personally, but bind
only the assets of the Trust, and all persons dealing with any series of units
of interest of the Trust must look solely to the assets of the Trust belonging
to such series for the enforcement of any claims against the Trust.
20. Shareholder Communications Election
Exchange Act Rule 14b-2 requires banks which hold securities for the
account of customers to respond to requests by issuers of securities for the
names, addresses and holdings of beneficial owners of securities of that issuer
held by the bank unless the beneficial owner has expressly objected to
disclosure of this information. In order to comply with the rule, the Custodian
needs the Fund to indicate whether it authorizes the Custodian to provide the
Fund's name, address, and share position to requesting companies whose
securities the Fund owns. If the Fund tells the Custodian "no", the Custodian
will not provide this information to requesting companies. If the Fund tells the
Custodian "yes" or does not check either "yes" or "no" below, the Custodian is
required by the rule to treat the Fund as consenting to disclosure of this
information for all securities owned by the Fund or any funds or accounts
established by the Fund. For the Fund's protection, the Rule prohibits the
requesting company from using the Fund's name and address for any purpose other
than corporate communications. Please indicate below whether the Fund consents
or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name, address, and
share positions.
NO [X] The Custodian is not authorized to release the Fund's name, address, and
share positions.
28
32
21. Additional Funds
In the event that the Trust establishes one or more series of Shares in
addition to the portfolios listed on Schedule C hereto with respect to which it
desires to have the Custodian render services as custodian under the terms
hereof, it shall so notify the Custodian in writing, and if the Custodian agrees
in writing to provide such services, such series of Shares shall become a Fund
hereunder.
IN WITNESS WHEREOF, each of the parties has caused this instrument
to be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed as of the 1st day of October, 1996.
ATTEST SCHWAB CAPITAL TRUST
/s/ X. X. XXXXXXX By /s/ TAI-XXXX XXXX
------------------------ -------------------------------------
Tai-Xxxx Xxxx
Treasurer and Principal Financial Officer
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ XXXXXX XXXXX By /s/ XXXXXX X. XXXXX
------------------- -------------------------------------
Xxxxxx X. Xxxxx
Executive Vice President
Xxxxxxx Xxxxxx & Co., Inc. hereby
acknowledges and agrees to the provisions of the foregoing agreement relating to
Schwab Mutual Fund Shares and Xxxxxx'x representations and responsibilities with
respect thereto, including without limitation Sections 2.12 and 8 hereof:
XXXXXXX XXXXXX & CO., INC.
By: /s/ TAI-XXXX XXXX
__________________________
Title: Vice President
_________________________
29
33
SCHEDULE A
17F-5 APPROVAL
The Board of Directors/Trustees of Schwab Capital Trust on behalf of the
portfolios listed on Schedule C has approved certain foreign banking
institutions and foreign securities depositories within State Street's Global
Custody Network for use as subcustodians for the Fund's securities, cash and
cash equivalents held outside of the United States. Board approval is as
indicated by the Fund's Authorized Officer:
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
-------- ------- ------------ ------------------
______ Argentina Citibank, N.A. Caja de Valores S.A.
TC Australia Westpac Banking Corporation Austraclear Limited;
------ Reserve Bank Information and
Transfer System (RITS)
TC Austria GiroCredit Bank Aktiengesellschaft Oesterreichische Kontrollbank AG
------ der Sparkassen (Wertpapiersammelbank Division)
______ Bangladesh Standard Chartered Bank None
TC Belgium Generale Bank Caisse Interprofessionnelle de Depots
------ et de Virements de Titres S.A. (CIK);
Banque Nationale de Belgique
______ Botswana Barclays Bank of Botswana Limited None
______ Brazil Citibank, N.A. Bolsa de Valores de Sao Paulo (Bovespa);
Banco Central do Brasil,
Systema Especial de Liquidacao e
Custodia (SELIC)
TC Canada Canada Trustco Mortgage Company The Canadian Depository
------ for Securities Limited (CDS)
______ Chile Citibank, N.A. None
34
SCHEDULE A: 17F-5 APPROVAL
PAGE 2
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
-------- ------- ------------ ------------------
______ People's The Hongkong and Shanghai Shanghai Securities Central Clearing and
Republic Banking Corporation Limited, Registration Corporation (SSCCRC);
of China
Shanghai and Shenzhen branches Shenzhen Securities Central Clearing Co., Ltd. (SSCC)
______ Colombia Cititrust Colombia S.A. None
Sociedad Fiduciaria
______ Cyprus Barclays Bank PLC None
Cyprus Offshore Banking Unit
______ Czech Ceskoslovenska Obchodni Stredisko cennych papiru(SCP);
Republic Banka A.S.
Czech National Bank (CNB)
TC Denmark Den Danske Bank Vaerdipapircentralen - The Danish
------ Securities Center (VP)
______ Ecuador Citibank, N.A. None
______ Egypt National Bank of Egypt None
TC Finland Xxxxxx Bank Limited The Central Share Register of
------ Finland
TC France Banque Paribas Societe Interprofessionnelle
------ pour la Compensation des
Valeurs Mobilieres (SICOVAM);
Banque de France,
Saturne System
TC Germany Dresdner Bank AG The Deutscher Kassenverein AG
------
______ Ghana Barclays Bank of Ghana Limited None
______ Greece National Bank of Greece S.A The Central Securities Depository
(Apothetirion Titlon A.E.)
35
SCHEDULE A: 17F-5 APPROVAL
PAGE 3
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
-------- ------- ------------ ------------------
TC Hong Kong Standard Chartered Bank The Central Clearing and
------ Settlement System (CCASS)
______ Hungary Citibank Budapest Rt. The Central Depository and Clearing
House (Budapest) Ltd. (KELER Ltd.)
______ India Deutsche Bank AG None
______ The Hongkong and Shanghai None
Banking Corporation Limited
TC Indonesia Standard Chartered Bank None
------
______ Ireland Bank of Ireland None;
The Central Bank of Ireland,
The Gilt Settlement Office (GSO)
______ Israel Bank Hapoalim B.M. The Clearing House of the
Tel Aviv Stock Exchange
TC Italy Xxxxxx Guaranty Trust Company Monte Titoli S.p.A.;
------ (Present Subcustodian)
Banca d'Italia
TC Banque Paribas Monte Titoli S.p.A.;
------ (Future Subcustodian) Banca d'Italia
_______ Ivory Coast Societe Generale de Banques None
en Cote d'Ivoire
TC Japan The Daiwa Bank, Limited Japan Securities Depository
------ Center (JASDEC);
Bank of Japan Net System
TC The Fuji Bank, Limited Japan Securities Depository
------ Center (JASDEC);
Bank of Japan Net System
TC The Sumitomo Trust Japan Securities Depository
------ & Banking Co., Ltd. Center (JASDEC);
Bank of Japan Net System
36
SCHEDULE A: 17F-5 APPROVAL
PAGE 4
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
-------- ------- ------------ ------------------
______ Jordan The British Bank of the Middle East None
______ Kenya Barclays Bank of Kenya Limited None
______ Republic of SEOULBANK Korea Securities Depository (KSD)
Korea
TC Malaysia Standard Chartered Bank Malaysian Central Depository Sdn.
------ Malaysia Berhad Bhd. (MCD)
______ Mauritius The Hongkong and Shanghai None
Banking Corporation Limited
______ Mexico Citibank Mexico, S.A. S.D. INDEVAL, S.A. de C.V.
(Instituto para el Deposito de
Valores);
Banco de Mexico
______ Morocco Banque Commerciale du Maroc None
TC Netherlands MeesPierson N.V. Nederlands Centraal Instituut voor
______ Giraal Effectenverkeer B.V. (NECIGEF)
TC New Zealand ANZ Banking Group New Zealand Central Securities
------ (New Zealand) Limited Depository Limited (NZCSD)
TC Norway Christiania Bank og Verdipapirsentralen - The Norwegian
------ Kreditkasse Registry of Securities (VPS)
______ Pakistan Deutsche Bank AG None
______ Peru Citibank, N.A. Caja de Valores (CAVAL)
TC Philippines Standard Chartered Bank None
------
______ Poland Citibank Poland S.A. The National Depository of Securities
(Krajowy Depozyt Papierow
Wartosciowych);
National Bank of Poland
37
SCHEDULE A: 17F-5 APPROVAL
PAGE 5
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
-------- ------- ------------ ------------------
______ Portugal Banco Comercial Portugues Central de Valores Mobiliarios (Central)
______ Russia Credit Suisse, Zurich None
via Credit Suisse (Moscow) Limited
TC Singapore The Development Bank The Central Depository (Pte)
______ of Singapore Ltd. Limited (CDP)
______ Slovak Ceskoslovenska Obchodna Stredisko Cennych Papierov (SCP);
Republic Banka A.S.
National Bank of Slovakia
______ South Africa Standard Bank of South Africa The Central Depository Limited
Limited
TC Spain Banco Santander, S.A. Servicio de Compensacion y
______ Liquidacion de Valores, S.A. (SCLV);
Banco de Espana,
Anotaciones en Cuenta
______ Sri Lanka The Hongkong and Shanghai Central Depository System
Banking Corporation Limited (Pvt) Limited
______ Swaziland Barclays Bank of Swaziland Limited None
TC Sweden Skandinaviska Enskilda Banken Vardepapperscentralen VPC AB -
______ The Swedish Central Securities
Depository
TC Switzerland Union Bank of Switzerland Schweizerische Effekten - Giro AG
______ (SEGA)
______ Taiwan Central Trust of China The Taiwan Securities Central
- R.O.C. Depository Company, Ltd. (TSCD)
TC Thailand Standard Chartered Bank Thailand Securities Depository
______ Company Limited (TSD)
______ Turkey Citibank, X.X. Xxxxx ve Saklama Bankasi A.S.
(TAKASBANK);
Central Bank of Turkey
38
SCHEDULE A: 17F-5 APPROVAL
Page 6
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
-------- ------- ------------ ------------------
TC United State Street Bank and Trust Company None;
______ Kingdom The Bank of England,
The Central Gilts Office (CGO);
The Central Moneymarkets Office (CMO)
______ Uruguay Citibank, N.A. None
______ Venezuela Citibank, N.A. None
______ Zambia Barclays Bank of Zambia Limited Lusaka Central Depository (LCD)
______ Zimbabwe Barclays Bank of Zimbabwe Limited None
TC Euroclear (The Euroclear System)/State Street London Limited
______
XX Xxxxx (Cedel Bank, societe anonyme)/State Street London Limited
______
CERTIFIED BY:
/s/ TAI-XXXX XXXX 10-1-96
----------------------------- ------------------------
FUND'S AUTHORIZED OFFICER DATE
39
SCHEDULE B
The standard settlement periods for securities transactions in foreign
markets for purposes of Section 9 of the Custodian Contract between Schwab
Capital Trust on behalf of the portfolios listed on Schedule C shall be as
follows:
Country Settlement Period
------- -----------------
(TD = Trade Date)
Australia TD plus 5
Austria Second Monday after TD
Belgium Forward market equities- next
fortnightly settlement period
Cash market securities-
TD plus 3
Canada TD plus 5
Denmark TD plus 3
France Forward market equities-
last business day of month
Cash market securities-
TD plus 5
Germany TD plus 2
Hong Kong TD plus 2
Italy Forward market equities- next two-
week settlement cycle
Cash market equities-
TD plus 3
Japan TD plus 3
Netherlands TD plus 5
New Zealand TD plus 5
Norway TD plus 3
40
Singapore TD plus 5
Spain Friday of week following TD
Sweden TD plus 3
Switzerland Forward market equities-
Last trading day of month
Cash market securities-
TD plus 3
United Kingdom Next fixed fortnightly
settlement date
Euroclear-Cedel Book-entry entirely within
Euroclear- Cedel-TD plus 5
Cross-border or physical
settlements-applicable
market settlement period
41
SCHEDULE C
1. Schwab OneSource(R) Portfolios - International
2. Schwab OneSource(R) Portfolios - Growth Allocation
3. Schwab OneSource(R) Portfolios - Balanced Allocation
42
EXHIBIT 1
---------
STATE STREET BANK AND TRUST COMPANY
Fee Schedule
Schwab OneSource Portfolios - International
Schwab OneSource Portfolios - Growth Allocation
Schwab OneSource Portfolios - Balanced Allocation
----------------------------------------------------------------------------
1. Administration
Custody, Portfolio and Fund Accounting Service - Maintain custody of
fund assets. Settle portfolio purchases and sales. Report buy and sell
fails. Determine and collect portfolio income. Make cash disbursements
and report cash transactions. Maintain investment ledgers, provide
selected portfolio transactions, position and income reports. Maintain
general ledger and capital stock accounts. Prepare daily trials balance.
Calculate net asset value daily. Provide selected general ledger
reports. Market value quotations will be provided via State Street's
Automated Pricing Service.
ANNUAL FEES PER PORTFOLIO
Fees for Direct Investments* Annual fees
---------------------------- -----------
(in basis points)
First $50 Million 3 Basis Points
Next $50 Million 2 Basis Points
Excess over $100 Million 1 Basis Point
Fund of Funds
Annual administration fee for fund purchases $15,000.00
*All asset based administration fees will be waived for three months
from the commencement of operations of the fund.
II. Global Custody (Direct Investments) - Comprised of asset charges and
transaction charges
Asset charges all foreign locations
(in Basis Points)
First $50 Million 7 Basis Points
Over $50 Million 5 Basis Points
Transaction Charges
(all foreign equity and bond trades) $ 28.00
III. Portfolio Trades - For each line item processed
State Street Bank Repos $ 7.00
DTC or Fed Book Entry $ 10.00
New York Physical Settlements $ 20.00
Maturity Collections. $ 8.00
43
PTC Purchase, Sale, Deposit or Withdrawal $ 20.00
All other trades $ 16.00
Fund of fund trades $ 8.00
IV. Options
Option charge for each option written or
closing contract, per issue per broker $ 25.00
Option expiration charge, per issue,
per broker $ 15.00
Option exercised charge, per issue,
per broker $ 15.00
V. Interest Rate Futures
Transactions - no security movement $ 8.00
VI. Holding Charge
For each issue maintain - monthly charge $ 1.00
VII. Principal Reduction Payments
Per Paydown $ 10.00
VIII. Dividend Charges
(For items held at the request of traders
over record date in street form) $ 50.00
IX. Special Services
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, extraordinary security shipments and
the preparation of special reports will be subject to negotiation. Fees
for automated pricing, yield calculation and other special items will be
negotiated separately.
X. Automated Pricing: This service provides daily securities pricing.
Monthly base fee per portfolio $375.00
Monthly Quote Charge (based on the average number of positions in the
portfolio)
- Municipal Bond via Xxxxxx Data $ 16.00
- Municipal Bond via Xxxxx information System $ 16.00
- Government, Corporate and Convertible
Bonds via Xxxxxxx Xxxxx $ 11.00
- Corporate and Government Bonds via
Xxxxxx Data $ 11.00
- Options, Futures and Private Placements $ 6.00
- Foreign Equities and Bonds via Extel Ltd $ 6.00
- Listed Equities, DTC Equities and Bonds $ 2.00
44
- Corporate, Municipal, Convertible and
Government Bonds, Adjustable Rate
Preferred Stocks via IDSI $ 6.00
- Fund of Fund purchases $ 4.00
XI. Balance Credits
A balance credit will be applied against the custody fee above based on
the 90 day T-Xxxx rate adjusted by the current Federal Reserve
requirements. The rate will be utilized against the average collected
balances in the Custody Demand Deposit Account maintained at State
Street. Excess balance credits will be carried forward from month to
month until December 31st.
XII. Out-of-Pocket Expenses
A billing for the recovery of applicable out-of-pocket expenses will be
made as of the end of each month. Out-of-pocket expenses include, but
are not limited to the following:
Telephone
Wire Charges ($5.25 per wire in and $5.00 out)
Postage and Insurance
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfers - $8.00 each
Transfer Fees
Sub-custodian Charges (Out of Pockets issued by Sub-Custodians)
Price Waterhouse Audit Letter
Federal Reserve Fee for Return Check items over $2,500 - $4.25
GNMA Transfer - $15.00 each
PTC Deposit/Withdrawal for same day turnaround - $50.00
Schwab Capital Trust State Street Bank & Trust Company
Schwab OneSource Portfolios - International;
Schwab OneSource Portfolios - Growth Allocation
Schwab OneSource Portfolios - Balanced Allocation
Signed: /s/ TAI-XXXX XXXX Signed: /s/ XXXXX XXXXX
--------------------------- -----------------------------
Name: Tai-Xxxx Xxxx Name: Xxxxx Xxxxx
--------------------------- ----------------------------
Title: Treasurer Title: Vice President
--------------------------- ----------------------------
Date: 10-3-96 Date: 9-30-96
--------------------------- ----------------------------
45
EXHIBIT 2
To: Mutual Fund Client
Re: PRICE SOURCE AUTHORIZATION
Reference is made to the Custodian Agreement dated __________________ between
Schwab Capital Trust on behalf of the portfolios listed on Schedule C thereto
(each a "Fund") and State Street Bank and Trust Company ("State Street").
Pursuant to the Custodian Agreement, the Fund has directed State Street to
calculate the net asset value of the Fund in accordance with the terms of the
Fund's currently effective prospectus.
The Fund hereby authorizes State Street to use the pricing sources specified on
the attached forms(s) as sources for securities' prices in calculating the net
asset value of the Fund. The Fund further agrees that State Street shall have no
liability for the incorrect data provided by the Fund's choice of pricing
sources, except as may arise from State Street's lack of reasonable care in:
- performing agreed upon tolerance checks as to the data furnished,
- calculating the net asset value of the Fund in accordance with the data
furnished to State Street, and
- State Street's performance of the agreed upon tolerance checks.
Kindly acknowledge the Fund's acceptance of the terms of this letter in the
space provided below.
Sincerely,
STATE STREET BANK AND TRUST COMPANY
By:_________________________________________
Vice President
Date:_______________________________________
The foregoing terms are hereby accepted.
SCHWAB CAPITAL TRUST
By: /s/ TAI-XXXX XXXX
________________________________________
Title: Treasurer and Principal Financial
Officer
_____________________________________
Date: October 4, 1996
______________________________________
00
XXXXX XXXXXX BANK - MUTUAL FUNDS
PRICE SOURCE AUTHORIZATION
FUND: Schwab Capital Trust: Schwab OneSource Portfolios- International; SIGNATURE:
--------------------------------------------------------------------- ------------------------------------------
Growth Allocation; Balanced Allocation
---------------------------------------
-------- ------ ---- ------ ------- -------- --------- --------- ------ ------- ------- ----------
SECURITY TELEKURS OPTIONS PRICE (3) (2) (1) (1)
TYPE NYSE NASDAQ REPORTING AUTHORITY MANUAL BACK-UP TOLERANCE
AMEX BID MEAN LS/BID LS/MEAN TELEKURS LS BID LS/MEAN QUOTES SOURCE INDEX PERCENTAGE
-------- ------ ---- ------ ------- -------- --------- --------- ------ ------- ------- ----------
I. LISTED EQUITIES Bridge S&P 500 5%
-------- ------ ---- ------ ------- -------- --------- --------- ------ ------- ------- ----------
II. OTC EQUITIES OA Bridge S&P 500 5%
-------- ------ ---- ------ ------- -------- --------- --------- ------ ------- ------- ----------
III. FOREIGN
EQUITIES FE,CN Reuters EAFE 5%
-------- ------ ---- ------ ------- -------- --------- --------- ------ ------- ------- ----------
IV. EQUITY OPTIONS
-------- ------ ---- ------ ------- -------- --------- --------- ------ ------- ------- ----------
V. FUTURES N/A
-------- ------ ---- ------ ------- -------- --------- --------- ------ ------- ------- ----------
INSTRUCTIONS: For each security type, allowed by the Fund prospectus, please
indicate the primary price source and a back-up source to be used in calculating
Net Asset Value for the Fund identified above. Also, please indicate a published
market index and tolerance range (in terms of percent) to be used for
reasonability testing. If you do not wish to use a published index please
indicate N/A but do not leave blank.
(1) * INDEX/TOLERANCE CHECK: The price movement for a particular security is
compared to the index movement. If the security price movement exceeds the index
movement by more than the percentage authorized on this form, then the security
price will be verified using the back-upsource authorized. The index and
tolerance information authorized here will be the basis for this reasonability
test.
(2) BACK-UP SOURCE: The following sources are available for back-up, price
verification and historical price and yield information: Bloomberg, Bridge,
Reuters, and Telerate. Please do not leave blank.
(3) MANUAL QUOTES AND PRIVATE PLACEMENTS: Please specify the source for private
placements or manual quotes as necessary. See page 3 to list additional
information if needed.
47
WP14104C
Page 2 of 3
STATE STREET BANK - MUTUAL FUNDS
PRICE SOURCE AUTHORIZATION
------- -------- --- ------ --- ----------- --- -----------
SECURITY TYPE MERRILL INTERACTIVE
XXXXX STANDARD XXXXXX DATA XXXXX
CAPITAL & POORS DATA SERVICES INFORMATION
MARKETS MEAN BID MEAN BID MEAN BID SYSTEMS
------- -------- --- ------ --- ----------- --- -----------
VI. LISTED BONDS
IS LAST SALE
REQUIRED
WHEN
AVAILABLE
YES_____
NO_______
------- -------- --- ------ --- ----------- --- -----------
VII. CORPORATE
BONDS
------- -------- --- ------ --- ----------- --- -----------
VIII. U.S. U2
GOVERNMENT
OBLIGATIONS
------- -------- --- ------ --- ----------- --- -----------
IX. MORTGAGE -
BACKED
SECURITIES
------- -------- --- ------ --- ----------- --- -----------
X. MUNICIPAL
BONDS
------- -------- --- ------ --- ----------- --- -----------
XI. FIXED INCOME
OPTIONS
------- -------- --- ------ --- ----------- --- -----------
XII. FOREIGN BONDS
------- -------- --- ------ --- ----------- --- -----------
----- ------ --------- -------- ----------
SECURITY TYPE
(3) (2) (1) (1)
IDC/ MANUAL BACK-UP TOLERANCE
EXTEL QUOTES QUOTES INDEX PERCENTAGE
----- ------ --------- -------- ----------
VI. LISTED BONDS
IS LAST SALE
REQUIRED
WHEN
AVAILABLE
YES_____
NO_______
----- ------ --------- -------- ----------
VII. CORPORATE
BONDS
----- ------ --------- -------- ----------
VIII. U.S. Bloomberg US 3%
GOVERNMENT Treasury
OBLIGATIONS
----- ------ --------- -------- ----------
IX. MORTGAGE -
BACKED
SECURITIES
----- ------ --------- -------- ----------
X. MUNICIPAL
BONDS
----- ------ --------- -------- ----------
XI. FIXED INCOME
OPTIONS
----- ------ --------- -------- ----------
XII. FOREIGN BONDS
----- ------ --------- -------- ----------
48
WP1404C/2
Page 3 of 3
STATE STREET BANK - MUTUAL FUNDS
PRICE SOURCE AUTHORIZATION
XIII. Private Placements and Other Manual Quotes Information
------------- ------------ ------ ----- ------------------------------
SECURITY TYPE ADVISOR BROKER OTHER ADDITIONAL INFORMATION:
CONTACT NAME, TELEPHONE NUMBER
------------- ------------ ------ ----- ------------------------------
FX London Close
------------- ------------ ------ ----- ------------------------------
------------- ------------ ------ ----- ------------------------------
------------- ------------ ------ ----- ------------------------------
------------- ------------ ------ ----- ------------------------------
------------- ------------ ------ ----- ------------------------------
------------- ------------ ------ ----- ------------------------------
------------- ------------ ------ ----- ------------------------------
------------- ------------ ------ ----- ------------------------------
------------- ------------ ------ ----- ------------------------------
------------- ------------ ------ ----- ------------------------------
INSTRUCTIONS: For all securities types which require manual quotes, please list
the source of the quotes and any additional information needed to obtain these
quotes.