1
Exhibit 8(c)
CUSTODIAN SERVICES AGREEMENT TERMS AND CONDITIONS
This Agreement is made as of February 21, 1996, by and between SCHWAB
CAPITAL TRUST, (the "Fund"), a Massachusetts business trust, and PNC BANK,
NATIONAL ASSOCIATION ("PNC Bank"), a national banking association.
The Fund is registered as an open-end investment company under the
Investment Company Act of 1940 (the "1940" Act), as amended.
The Fund wishes to retain PNC Bank to provide custody services, and PNC
Bank wishes to furnish such services to each of the Fund's investment portfolios
listed on Schedule A, as attached hereto ("Portfolio(s)"), either directly or
through an affiliate or affiliates, as more fully described herein.
In consideration of the promises and mutual covenants herein
contained, the parties agree as follows:
1. Definitions.
(a) "Authorized Person". The term "Authorized Person" shall
mean any officer of the Fund and any other person, who is duly authorized by
the Fund's Governing Board, to give Oral and Written Instructions on behalf of
the Fund. Such persons are listed in the Certificate attached hereto as the
Authorized Persons Appendix.
(b) "Book-Entry System". The term "Book-Entry System" means
Federal Reserve Treasury book-entry system for United States and federal agency
securities, its successor or successors, and its nominee or nominees and any
book-entry system maintained by an exchange registered with the SEC under the
1934 Act.
2
(c) "CFTC". The term "CFTC" shall mean the Commodities
Futures Trading Commission.
(d) "Governing Board". The term "Governing Board" shall mean
the Fund's Board of Directors if the Fund is a corporation or the Fund's Board
of Trustees if the Fund is a trust, or, where duly authorized, a competent
committee thereof.
(e) "Oral Instructions". The term "Oral Instructions" shall
mean oral instructions received by PNC Bank from an Authorized Person or from a
person reasonably believed by PNC Bank to be an Authorized Person.
(f) "PNC Bank". The term "PNC Bank" shall mean PNC Bank or a
subsidiary or affiliate of PNC Bank.
(g) "SEC". The term "SEC" shall mean the Securities and
Exchange Commission.
(h) "Securities and Commodities Laws". The terms the "1933
Act" shall mean the Securities Act of 1933, the "1934 Act" shall mean the
Securities Exchange Act of 1934, the "1940 Act" shall mean the Investment
Company Act of 1940, as amended, and the "CEA" shall mean the Commodities
Exchange Act, as amended.
(i) "Shares". The term "Shares" shall mean the shares of
stock of any series or class of the Fund, or, where appropriate, units of
beneficial interest in a trust where the Fund is organized as a Trust.
(j) "Property". The term "Property" shall mean:
(i) any and all securities and other investment items
which the Fund may from time to time
2
3
deposit, or cause to be deposited, with PNC
Bank or which PNC Bank may from time to time
hold for the Fund;
(ii) All income in respect of any of such securities or
other investment items;
(iii) all proceeds of the sale of any of such securities
or investment items; and
(iv) all proceeds of the sale of securities issued by
the Fund, which are received by PNC Bank from time
to time, from or on behalf of the Fund.
(k) "Written Instructions". The term "Written Instructions"
shall mean written instructions signed by two Authorized Persons and received
by PNC Bank. The instructions may be delivered by hand, mail, tested telegram,
cable, telex or facsimile sending device.
2. Appointment. The Fund hereby appoints PNC Bank to provide
custodian services to each of the Portfolios listed in Schedule A, hereto, and
PNC Bank accepts such appointment and agrees to furnish such services. The
Fund may from time to time issue separate series or classes or classify and
reclassify shares of such series or classes. PNC Bank shall identify to each
such series or class property belonging to such series or class and in such
reports, confirmations and notices to the Fund called for under this Agreement
shall identify the series or class to which such report, confirmation or notice
pertains, if applicable.
3
4
3. Delivery of Documents. The Fund has provided or, where
applicable, will provide PNC Bank with the following:
(a) certified or authenticated copies of the resolutions
of the Fund's Governing Board, approving the
appointment of PNC Bank or its affiliates to provide
services;
(b) a copy of the Fund's most recent effective
registration statement;
(c) a copy of the Fund's advisory agreement or
agreements;
(d) a copy of the Fund's distribution agreement or
agreements;
(e) a copy of the Fund's administration agreements if
PNC Bank is not providing the Fund with such services;
(f) copies of any shareholder servicing agreements made
in respect of the Fund; and
(g) certified or authenticated copies of any and all
amendments or supplements to the foregoing.
4. Compliance with Government Rules and Regulations.
PNC Bank undertakes to comply with all applicable requirements of the
1933 Act, the 1934 Act, the 1940 Act, and the CEA, and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to all
duties to be performed by PNC Bank hereunder. Except as specifically set forth
herein, PNC Bank assumes no responsibility for such compliance by the Fund.
4
5
5. Instructions. Unless otherwise provided in this Agreement, PNC
Bank shall act only upon Oral and Written Instructions. PNC Bank shall be
entitled to rely upon any Oral and Written Instructions it receives from an
Authorized Persons (or from a person reasonably believed by PNC Bank to be an
Authorized Person) pursuant to this Agreement. PNC Bank may assume that any
Oral or Written Instructions received hereunder are not in any way inconsistent
with the provisions of organizational documents or this Agreement or of any
vote, resolution or proceeding of the Fund's Governing Board or of the Fund's
shareholders.
The Fund agrees to forward to PNC Bank Written Instructions confirming
Oral Instructions so that PNC Bank receives the Written Instructions by the
close of business on the same day that such Oral Instructions are received. The
fact that such confirming Written Instructions are not received by PNC Bank
shall in no way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions.
The Fund further agrees that PNC Bank shall incur no liability to the
Fund in acting upon Oral or Written Instructions provided such instructions
reasonably appear to have been received from an Authorized Person.
6. Right to Receive Advice.
(a) Advice of the Fund. If PNC Bank is in doubt as to any
action it should or should not take, PNC Bank may request directions or advice,
including Oral or Written Instructions, from the Fund.
5
6
(b) Advice of Counsel. If PNC Bank shall be in doubt as to
any questions of law pertaining to any action it should or should not take, PNC
Bank may request advice at its own cost from such counsel of its own choosing
(who may be counsel for the Fund, the Fund's advisor or PNC Bank, at the option
of PNC Bank).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral or Written Instructions PNC Bank receives from the
Fund, and the advice it receives from counsel, PNC Bank shall be entitled to
rely upon and follow the advice of counsel.
(d) Protection of PNC Bank. PNC Bank shall be protected in
any action it takes or does not take in reliance upon directions, advice or
Oral or Written Instructions it receives from the Fund or from counsel to the
Fund and which PNC Bank believes, in good faith, to be consistent with those
directions, advice or Oral or Written Instructions.
Nothing in this paragraph shall be construed so as to impose an
obligation upon PNC Bank (I) to seek such directions, advice or Oral or Written
Instructions, or (ii) to act in accordance with such directions, advice or Oral
or Written Instructions unless, under the terms of other provisions of this
Agreement, the same is a condition of PNC Bank's properly taking or not taking
such action.
7. Records. The books and records pertaining to the Fund, which are
in the possession of PNC Bank, shall be the property of the Fund. Such books
and records shall be prepared and maintained
6
7
as required by the 1940 Act and other applicable securities laws, rules and
regulations. The Fund, or the Fund's Authorized Persons, shall have access to
such books and records at all time during PNC Bank's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by PNC Bank to the Fund or to an Authorized Person of the
Fund, at the Fund's expense.
8. Confidentiality. PNC Bank agrees to keep confidential all
records of the Fund and information relative to the Fund and its Shareholders
(past, present and potential), unless the release of such records or information
is otherwise consented to, in writing, by the Fund. The Fund agrees that such
consent shall not be unreasonably withheld. The Fund further agrees that,
should PNC Bank be required to provide such information or records to duly
constituted authorities (who may institute civil or criminal contempt
proceedings for failure to comply), PNC Bank shall not be required to seek the
Fund's consent prior to disclosing such information.
9. Cooperation with Accountants. PNC Bank shall cooperate with the
Fund's independent public accountants and shall take all reasonable action in
the performance of its obligations under this Agreement to ensure that the
necessary information is made available to such accountants for the expression
of their opinion, as required by the Fund.
10. Disaster Recovery. PNC Bank shall enter into and shall maintain
in effect with appropriate parties one or more agreements
7
8
making reasonable provision for emergency use of electronic data processing
equipment to the extent appropriate equipment is available. In the event of
equipment failures, PNC Bank shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions but shall have no liability
with respect thereto.
11. Compensation. As compensation for services rendered by PNC Bank
during the term of this Agreement, the Fund will pay to PNC Bank a fee or fees
as may be agreed to in writing by the Fund and PNC Bank from time to time.
12. Indemnification. The Fund agrees to indemnify and hold harmless
PNC Bank and its affiliates from all taxes, charges, expenses, assessment,
claims and liabilities (including, without limitation, liabilities arising
under the 1933 Act, the 1934 Act, the 1940 Act, the CEA, and any state and
foreign securities and blue sky laws, and amendments thereto), and expenses,
including (without limitation) reasonable attorneys' fees and disbursements,
arising directly or indirectly from any action which PNC Bank takes or does not
take (I) at the request or on the direction of or in reliance on the advice of
the Fund or (ii) upon Oral or Written Instructions. Neither PNC Bank, nor any
of its affiliates, shall be indemnified against any liability to the Fund or
its shareholders (or any expenses incident to such liability) arising out of
PNC Bank's or it's affiliates' own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties and obligations under this
Agreement.
8
9
13. Responsibility of PNC Bank. PNC Bank shall be under no duty to
take any action on behalf of the Fund except as specifically set forth herein
or as may be specifically agreed to by PNC Bank, in writing. PNC Bank shall be
obligated to exercise reasonable care and diligence in the performance of its
duties hereunder, to act in good faith and to use its best effort, within
reasonable limits, in performing Services provided for under this Agreement.
PNC Bank shall be responsible for damages arising out of its failure to perform
its duties under this Agreement arising out of PNC Bank's gross negligence.
Without limiting the generality of the foregoing or of any other
provision of this Agreement, PNC Bank, in connection with its duties under this
Agreement, shall not be under any duty or obligation to inquire into and shall
not be liable for (a) the validity or invalidity or authority or lack thereof
of any Oral or Written Instruction, notice or other instrument which conforms
to the applicable requirements of this Agreement, and which PNC Bank reasonably
believes to be genuine; or (b) losses, delays or errors or loss of data
occurring by reason of circumstances beyond PNC Bank's control, including
without limitation acts of civil or military authority, national emergencies,
labor difficulties, fire, flood or catastrophe, acts of God, insurrection, war,
riots or failure of the mails, transportation, communication or power supply.
9
10
14. Description of Services.
(a) Delivery of the Property. The Fund will deliver or
arrange for delivery to PNC Bank, all the property it owns, including cash
received as a result of the distribution of its shares, during the period that
is set forth in this Agreement. PNC Bank will not be responsible for such
property until actual receipt.
(b) Receipt and Disbursement of Money. PNC Bank, acting upon
Written Instructions, shall open and maintain separate account(s) in the name
of each Portfolio using all cash received from or for the account of such
Portfolio, subject to the terms of this Agreement. In addition, upon Written
Instructions, PNC Bank shall open separate custodial accounts for each separate
series, portfolio or class of the Fund and shall hold in such account(s) all
cash received from or for the accounts of the Fund specifically designated to
each separate series, portfolio or class.
PNC Bank shall make cash payments from or for the account of the Fund
only for:
(i) purchases of securities in the name of each
Portfolio or PNC Bank or PNC Bank's nominee as
provided in sub-paragraph j and for which PNC Bank
has received a copy of the broker's or dealer's
confirmation or payee's invoice, as appropriate;
(ii) purchase or redemption of shares of each Portfolio
delivered to PNC Bank;
10
11
(iii) payment of, subject to Written Instructions,
interest, taxes, administration, accounting,
distribution, advisory, management fees or similar
expenses which are to be borne by each Portfolio;
(iv) payment to, subject to receipt of Written
Instructions, the Fund's transfer agent, as agent
for the shareholders, an amount equal to the
amount of dividends and distributions stated in
the Written Instructions to be distributed in cash
by the transfer agent to shareholders, or, in lieu
of paying the Fund's transfer agent, PNC Bank may
arrange for the direct payment of cash dividends
and distributions to shareholders in accordance
with procedures mutually agreed upon from time to
time by and among the Fund, PNC Bank and the
Fund's transfer agent.
(v) payments, upon receipt Written Instructions, in
connection with the conversion, exchange or
surrender of securities owned or subscribed to
by each Portfolio and held by or delivered to
PNC Bank;
(vi) payments of the amounts of dividends received with
respect to securities sold short;
(vii) payments made to a sub-custodian pursuant to
11
12
provisions in sub-paragraph c of this Agreement;
and
(viii) payments, upon Written Instructions made for
other proper Fund purposes. PNC Bank is hereby
authorized to endorse and collect all check,
drafts or other orders for the payment of money
received as custodian for the account of the Fund.
(c) Receipt of Securities.
(i) PNC Bank shall hold all securities received by it
for or for the account of each Portfolio in a
separate account that physically segregates such
securities from those of any other persons, firms
or corporations. All such securities shall be
held or disposed of only upon Written Instructions
of the Fund pursuant to the terms of this
Agreement. PNC Bank shall have no power or
authority to assign, hypothecate, pledge or
otherwise dispose of any such securities or
investment, except upon the express terms of this
Agreement and upon Written Instructions,
accompanied by a certified resolution of the
Fund's Governing Board, authorizing the
transaction. In no case may any member of the
Fund's Board of Trustees, or any officer, employee
or agent of
12
13
the Fund withdraw any securities.
At PNC Bank's own expense and for its own
convenience, PNC Bank may enter into sub-custodian
agreements with other United States banks or trust
companies to perform duties described in this
sub-paragraph c. Such bank or trust company shall
have an aggregate capital, surplus and undivided
profits, according to its last published report,
of at least one million dollars ($1,000,000), if
it is a subsidiary or affiliate of PNC Bank, or at
least fifty million dollars ($50,000,000) if such
bank or trust company is not a subsidiary or
affiliate of PNC Bank. In addition, such bank or
trust company must agree to comply with the
relevant provisions of the 1940 Act and other
applicable rules and regulations. PNC Bank shall
remain responsible for the performance of all of
its duties as described in this Agreement and
shall hold the Fund harmless from its own acts or
omissions, under the standards of care provided
for herein, or of any sub-custodian chosen by PNC
Bank under the terms of this sub-paragraph c.
13
14
(d) Transactions Requiring Instructions. Upon receipt of
Oral or Written Instructions and not otherwise, PNC Bank, directly or through
the use of the Book-Entry System, shall:
(i) deliver any securities held for each Portfolio
against the receipt of payment for the sale of
such securities;
(ii) execute and deliver to such persons as may be
designated in such Oral or Written Instructions,
proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as
owner of any securities may be exercised;
(iii) deliver any securities 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 PNC Bank;
(iv) deliver any securities held for each Portfolio
against receipt of other securities or cash issued
or paid in connection with the liquidation,
reorganization, refinancing, tender offer, merger,
consolidation or recapitalization of any
corporation, or the exercise of any conversion
privilege;
(v) deliver any securities held for each Portfolio
14
15
to any protective committee, reorganization
committee or other person in connection with the
reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets
of any corporation, and receive and hold under the
terms of this Agreement such certificates of
deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such
delivery;
(vi) make such transfer or exchanges of the assets of
the Fund and take such other steps as shall be
stated in said Oral or Written Instructions to be
for the purpose of effectuating a duly authorized
plan of liquidation, reorganization, merger,
consolidation or recapitalization of such
Portfolio;
(vii) release securities belonging to a Portfolio to any
bank or trust company for the purpose of a pledge
or hypothecation to secure any loan incurred by
that Portfolio; provided, however, that securities
shall be released only upon payment to PNC Bank of
the monies borrowed, except that in cases where
additional collateral is required to secure a
borrowing already made subject to proper prior
authorization, further securities may be
15
16
released for that purpose; and repay such loan
upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the
note or notes evidencing the loan;
(viii) release and deliver securities owned by a
Portfolio in connection with any repurchase
agreement entered into on behalf of a Portfolio,
but only on receipt of payment therefor; and pay
out moneys of a Portfolio in connection with such
repurchase agreements, but only upon the delivery
of the securities;
(ix) release and deliver or exchange securities owned
by a Portfolio in connection with any conversion
of such securities, pursuant to their terms, into
other securities;
(x) release and deliver securities owned by a
Portfolio for the purpose of redeeming in kind
shares of a Portfolio upon delivery thereof to PNC
Bank; and
(xi) release and deliver or exchange securities
owned by a Portfolio for other corporate purposes.
PNC Bank must also receive a certified resolution
describing the nature of the corporate purpose and
the name and address of
16
17
the person(s) to whom delivery shall be made when
such action is pursuant to sub-paragraph d.(xi)
above.
(e) Use of Book-Entry System. The Fund shall deliver to PNC
Bank certified resolutions of the Fund's Governing Board approving, authorizing
and instructing PNC Bank on a continuous and on-going basis, to deposit in the
Book-Entry System all securities belonging to each Portfolio eligible for
deposit therein and to utilize the Book-Entry System to the extent possible in
connection with settlements of purchases and sales of securities by the Fund,
and deliveries and returns of securities loaned, subject to repurchase
agreements or used as collateral in connection with borrowings. PNC Bank shall
continue to perform such duties until it receives Written or Oral Instructions
authorizing contrary actions(s).
To administer the Book-Entry System properly, the following provisions
shall apply:
(i) With respect to securities of a Portfolio which
are maintained in the Book-Entry system,
established pursuant to this sub-paragraph e
hereof, the records of PNC Bank shall identify by
Book-Entry or otherwise those securities
belonging to a Portfolio. PNC Bank shall furnish
the Fund a detailed statement of the Property
held for the Fund under this Agreement at least
monthly and from
17
18
time to time and upon written request.
(ii) Securities and any cash of a Portfolio
deposited in the Book-Entry System will at
all times be segregated from any assets and
cash controlled by PNC Bank in other than a
fiduciary or custodian capacity but may be
commingled with other assets held in such
capacities. PNC Bank and its sub-custodian,
if any, will pay out money only upon receipt
of securities and will deliver securities
only upon the receipt of money.
(iii) All books and records maintained by PNC Bank
which relate to the Fund's participation in
the Book-Entry System will at all times
during PNC Bank's regular business hours be
open to the inspection of the Fund's duly
authorized employees or agents, and the Fund
will be furnished with all information in
respect of the services rendered to it as it
may require.
(iv) PNC Bank will provide the Fund with copies of
any report obtained by PNC Bank on the system
of internal accounting control of the
Book-Entry System promptly after receipt of
such a report by PNC Bank.
PNC Bank will also provide the Fund with
such reports on its own system of internal
control
18
19
as the Fund may reasonably request from time
to time.
(f) Registration of Securities. All Securities held for the
Fund which are issued or issuable only in bearer form, except such securities
held in the Book-Entry System, shall be held by PNC Bank in bearer form; all
other securities held for the Fund may be registered in the name of the Fund;
PNC Bank; the Book-Entry System; a sub-custodian; or any duly appointed
nominee(s) of the Fund, PNC Bank, Book-Entry system or sub-custodian. The Fund
reserves the right to instruct PNC Bank as to the method of registration and
safekeeping of the securities of each Portfolio. The Fund agrees to furnish to
PNC Bank appropriate instruments to enable PNC Bank to hold or deliver in
proper form for transfer, or to register its registered nominee or in the name
of the Book-Entry System, any securities which it may hold for the account of
each Portfolio and which may from time to time be registered in the name of the
Portfolio. PNC Bank shall hold all such securities which are not held in the
Book-Entry System in a separate account for each Portfolio in the name of each
Portfolio physically segregated at all times from those of any other person or
persons.
(g) Voting and Other Action. Neither PNC Bank nor its
nominee shall vote any of the securities held pursuant to this Agreement by or
for the account of the Fund, except in accordance with Written Instructions.
PNC Bank, directly or through the use of the Book-Entry System, shall execute
in blank and promptly
19
20
deliver all notice, proxies, and proxy soliciting materials to the registered
holder of such securities. If the registered holder is not the Fund then
Written or Oral Instructions must designate the person(s) who owns such
securities.
(h) Transactions Not Requiring Instructions. In the absence
of contrary Written Instructions, PNC Bank is authorized to take the following
actions:
(i) Collection of Income and Other Payments.
(A) collect and receive for the account
of each Portfolio, all income,
dividends, distributions, coupons,
option premiums, other payments and
similar items, included or to be
included in the Property, and, in
addition, promptly advise the Fund
of such receipt and credit such
income, as collected, to the Fund's
custodian account;
(B) endorse and deposit for collection,
in the name of the applicable
Portfolio, checks, drafts, or other
orders for the payment of money;
(C) receive and hold for the account of
each Portfolio all securities
received as a distribution on the
portfolio securities as a result of
a stock dividend, share split-up or
reorganization, recapitali-
20
21
zation, readjustment or other
rearrangement or distribution of
rights or similar securities issued
with respect to any portfolio
securities belonging to a Portfolio
held by PNC Bank hereunder;
(D) present for payment and collect the
amount payable upon all securities
which may mature or be called,
redeemed, or retired, or otherwise
become payable on the date such
securities become payable; and
(E) take any action which may be
necessary and proper in connection
with the collection and receipt of
such income and other payments and
the endorsement for collection of
checks, drafts, and other negotiable
instruments.
21
22
(ii) Miscellaneous Transactions.
(A) PNC Bank is authorized to deliver or cause
to be delivered Property against payment or
other consideration or written receipt
therefor in the following cases:
(1) for examination by a broker or
dealer selling for the account of a
Portfolio in accordance with street
delivery custom;
(2) for the exchange of interim receipts
or temporary securities for
definitive securities; and
(3) for transfer of securities into the
name of a Portfolio or PNC Bank or
nominee of either, or for exchange
of securities for a different number
of bonds, certificates, or other
evidence, representing the same
aggregate face amount or number of
units bearing the same interest
rate, maturity date and call
provisions, if any; provided that,
in any such case, the new securities
are to be delivered to PNC Bank.
22
23
(B) Unless and until PNC Bank receives Oral or
Written Instructions to the contrary, PNC
Bank shall:
(1) pay all income items held by it
which call for payment upon
presentation and hold the cash
received by it upon such payment for
the account of a Portfolio;
(2) collect interest and cash dividends
received, with notice to the Fund,
to the account of a Portfolio;
(3) hold for the account of a portfolio
all stock dividends, rights and
similar securities issued with
respect to any securities held by
us; and
(4) execute as agent on behalf of the
Fund all necessary ownership
certificates required by the
Internal Revenue Code or the Income
Tax Regulations of the United States
Treasury Department or under the
laws of any State now or hereafter
in effect, inserting the Fund's name
on such certificate as the owner of
the securities covered thereby, to
23
24
the extent it may lawfully do so.
(i) Segregated Accounts.
(i) PNC Bank shall upon receipt of Written or Oral
Instructions establish and maintain a segregated
accounts(s) on its records for and on behalf of
each Portfolio. Such account(s) may be used to
transfer cash and securities, including securities
in the Book-Entry System:
(A) for the purposes of compliance by the
Fund with the procedures required by a
securities or option exchange, providing
such procedures comply with the 1940 Act
and any releases of the SEC relating to
the maintenance of segregated accounts by
registered investment companies; and
(B) Upon receipt of Written Instructions, for
other proper corporate purposes.
(ii) PNC Bank may enter into separate custodial
agreements with various futures commission
merchants ("FCMs") that the Fund uses ("FCM
Agreement"). Pursuant to an FCM Agreement, the
Fund's margin deposits in any transactions
involving futures contracts and options on futures
contracts will be held by PNC Bank in accounts
("FCM Account") subject to the disposition by the
FCM involved in such
24
25
contracts and in accordance with the customer
contract between FCM and the Fund ("FCM
Contract"), SEC rules and the rules of the
applicable commodities exchange.
Such FCM Agreements shall only be entered into
upon receipt of Written Instructions from the
Fund which state that:
(A) a customer agreement between the FCM and
the Fund has been entered into; and
(B) the Fund is in compliance with all the
rules and regulations of the CFTC.
Transfers of initial margin shall be made
into a FCM Account only upon Written
Instructions; transfers of premium and
variation margin may be made into a FCM
Account pursuant to Oral Instructions.
Transfers of funds from a FCM Account to
the FCM for which PNC Bank holds such an
account may only occur upon certification
by the FCM to PNC Bank that pursuant to
the FCM Agreement and the FCM Contract,
all conditions precedent to its right to
give PNC Bank such instructions have been
satisfied.
(iii) PNC Bank shall arrange for the establishment of
XXX custodian accounts for such
25
26
shareholders holding shares through XXX accounts,
in accordance with the Prospectus, the Internal
Revenue Code (including regulations), and with
such other procedures as are mutually agreed upon
from time to time by and among the Fund, PNC Bank
and the Fund's transfer agent.
(j) Purchases of Securities. PNC Bank shall settle purchased
securities upon receipt of Oral or Written Instructions from the Fund or its
investment advisor(s) that specify:
(i) the name of the issuer and the title of the
securities, including CUSIP number if applicable;
(ii) the number of shares or the principal amount
purchased and accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase;
(vi) the name of the person from whom or the broker
through whom the purchase was made; and
(vii) the Portfolio to which such purchase applies.
PNC Bank shall upon receipt of securities
purchased by or for a Portfolio pay out of the
moneys held for the account of a Portfolio the
total amount payable to the person from whom
26
27
or the broker through whom the purchase was made,
provided that the same conforms to the total
amount payable as set forth in such Oral or
Written Instructions.
(k) Sales of Securities. PNC Bank shall sell securities upon
receipt of Oral Instructions from the Fund that specify:
(i) the name of the issuer and the title of the
security, including CUSIP number if applicable;
(ii) the number of shares or principal amount sold, and
accrued interest, if any;
(iii) the date of trade, settlement and sale;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon
such sale;
(vi) the name of the broker through whom or the person
to whom the sale was made; and
(vii) the location to which the security must be
delivered and delivery deadline, if any.
PNC Bank shall deliver the securities upon receipt
of the total amount payable to the Fund upon such
sale, provided that the total amount payable is
the same as was set forth in the Oral or Written
Instructions. Subject to the foregoing, PNC Bank
may accept payment in
27
28
such form as shall be satisfactory to it, and may
deliver securities and arrange for payment in
accordance with the customs prevailing among
dealers in securities.
(l) Reports.
(i) PNC Bank shall furnish the Fund the following
reports:
(A) such periodic and special reports as the
Fund may reasonably request;
(B) a monthly statement summarizing all
transactions and entries for the
account of each Portfolio, listing
the portfolio securities belonging
to each Portfolio with the adjusted
average cost of each issue and the
market value at the end of such
month, and stating the cash account
of the Portfolio including
disbursement;
(C) the reports to be furnished to the Fund
pursuant to Rule 17f-4; and
(D) such other information as may be agreed
upon from time to time between the Fund
and PNC Bank.
(ii) PNC Bank shall transmit promptly to the Fund any
proxy statement, proxy material, notice of a call
or conversion or similar communication received by
it as custodian of
28
29
the Property. PNC Bank shall be under no other
obligation to inform the Fund as to such actions
or events.
(m) Collections. All collections of monies or other
property, in respect, or which are to become part of the Property (but not the
safekeeping thereof upon receipt by PNC Bank) shall be at the sole risk of the
Fund. If payment is not received by PNC Bank within a reasonable time after
proper demands have been made, PNC Bank shall notify the Fund in writing,
including copies of all demand letters, any written responses, memoranda of all
oral responses and to telephonic demands thereto, and await instructions from
the Fund. PNC Bank shall not be obliged to take legal action for collection
unless and until reasonably indemnified to its satisfaction.
PNC Bank shall also notify the Fund as soon as reasonably practicable
whenever income due on securities is not collected in due course.
15. Duration and Termination. This Agreement shall continue in full
force and effect unless terminated as hereinafter provided or amended at any
time by mutual, written agreement of the parties hereto. This Agreement may be
terminated by either party by an instrument in writing delivered, faxed 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. In the event this Agreement is
terminated (pending appointment of a successor to PNC
29
30
Bank or vote of the shareholders of any Portfolio of the Fund to dissolve or to
function without a custodian of its cash, securities or other property), PNC
Bank shall not deliver cash, securities or other property of the applicable
Portfolio to the Portfolio or the Fund. It may deliver them to a bank or trust
company of PNC Bank's, having an aggregate capital, surplus and undivided
profits, as shown by its last published report, of not less than twenty million
dollars ($20,000,000), as a custodian for such Portfolio to be held under terms
similar to those of this Agreement. PNC Bank shall not be required to make any
such delivery or payment until full payment shall have been made to PNC Bank of
all of its fees, compensation, costs and expenses. PNC Bank shall have a
security interest in and shall have a right of setoff against Property in such
Portfolio's possession as security for the payment of such fees, compensation,
costs and expenses.
16. Notices. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed (a) if to PNC Bank at PNC
Bank's address, Airport Business Center, International Court 2, 000 Xxxxxxx
Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, marked for the attention of the
Custodian Services Department (or its successor) (b) if to the Fund, at the
address of the Fund; or (C) if to neither of the foregoing, at such other
address as shall have been notified to the sender of any such Notice or other
communication. If notice is sent by confirming telegram, cable, telex or
facsimile sending
30
31
device, it shall be deemed to have been given immediately. If notice is sent
by first-class mail, it shall be deemed to have been given five days after it
has been mailed. If notice is sent by messenger, it shall be deemed to have
been given on the day it is delivered.
17. Amendments. This Agreement, or any term hereof, may be
changed or waived only by a written amendment, signed by the party
against whom enforcement of such change or waiver is sought.
18. Delegation. PNC Bank may, with the prior written consent of the
Fund, which consent may not be unreasonably withheld, assign its rights and
delegate its duties hereunder to any wholly-owned direct or indirect subsidiary
of PNC Bank or PNC Financial Corp, provided that (I) PNC Bank provides the Fund
a minimum of thirty (30) days in which to decide and to consent by written
notice; (ii) the delegate agrees with PNC Bank to comply with all relevant
provisions of this Agreement and the 1940 Act; and (iii) PNC Bank and such
delegate promptly provide such information as the Fund may request, and respond
to such questions as the Fund may ask, relative to the delegation, including
(without limitation) the capabilities of the delegate.
19. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. Further Actions. Each party agrees to perform such further
acts and execute such further documents as are necessary to effectuate the
purposes hereof.
31
32
21. Miscellaneous. This Agreement embodies the entire agreement
and understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one more separate documents their agreement, if any, with respect
to delegated and/or Oral Instructions.
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
A copy of the Declaration of Trust of the Fund is on file with the
Secretary of the Commonwealth of Massachusetts and notice is hereby given by
the Fund by the undersigned officer of the Fund in his/her capacity as an
Officer of the Fund. The obligations of this Agreement shall only be binding
upon the assets and property of the Fund and shall not be binding upon any
Trustee, officer or shareholder of the Fund individually.
This Agreement shall be deemed to be a contract made in California and
governed by California law. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby. This Agreement shall be
binding and shall inure to the benefit of the parties hereto and their
respective successors.
32
33
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers designated below on the day and year first above
written.
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------
Xxxxxx X. Xxxxxxxx
Title: Vice President
SCHWAB CAPITAL TRUST
By: /s/ Xxxxxxx X. Xxxxx
---------------------------
Xxxxxxx X. Xxxxx
Title: Senior Vice President and
Chief Operating Officer
33
34
SCHEDULE A
Schwab S&P 500 Fund
34
