Westore
OPERATING PROCEDURES AMENDMENT TO THE OPERATING AGREEMENT
This Amendment ("Amendment"), made as of June 16, 2003, amends the
Operating Agreement between Xxxxxxx Xxxxxx and Co., Inc. ("Schwab") and each
registered investment company ("Fund Company") and each of the series or classes
of shares ("Fund(s)"), which are parties thereto, made as of November 27, 1995,
as amended thereafter ("Operating Agreement").
WHEREAS, Schwab wishes to restate and consolidate all the amendments to
operating procedures and/or Exhibit A to the Operating Agreement ("Operating
Procedures"), while also making certain amendments to the terms of those
Operating Procedures, so that all the operating procedures affecting the
Account(s) are stated in one document; and
WHEREAS, the Operating Procedures may be amended by Schwab on 40 days
notice to Fund Company, and Schwab has provided this executed Amendment to Fund
Company 40 days prior to its effective date.
NOW THEREFORE, in consideration of the mutual promises in the Operating
Agreement, the Operating Procedures are hereby amended as follows:
1. Exhibit A to the Operating Agreement, as amended, is hereby deleted in
its entirety and the Exhibit A attached hereto shall be inserted as Exhibit A to
the Operating Agreement.
2. All prior amendments to the Operating Procedures which have not
previously been terminated, including but not limited to, if applicable, the
Order Placement Procedures Amendment, the NSCC Procedures Amendment, and the
Retirement Plan Same Day Exchange Processing Amendment, are hereby terminated,
and are replaced in their entirety by the attached Exhibit A.
3. This Amendment replaces the Operating Procedures, including all
amendments to its terms made subsequent to its effective date, and shall become
effective on June 16, 2003. In the event of any conflict between the terms of
this Amendment and the terms of any previous amendment to the Operating
Agreement which is not specifically terminated in Section 2 of this Amendment,
this Amendment shall control.
IN WITNESS WHEREOF, this Amendment has been executed by a duly authorized
representative of Schwab.
XXXXXXX XXXXXX & CO., INC.
By: /s/ Xxxx Xxxxx
--------------------------------
Xxxx Xxxxx
Senior Vice President
Asset Management Client Services
Date: May 1, 2003
EXHIBIT A
TO THE OPERATING AGREEMENT
Operating Procedures
1. The Account.
a. Registration. Schwab will open an Account with each Fund. The
Account shall be registered:
Xxxxxxx Xxxxxx & Co., Inc.
Special Custody Account for the Exclusive Benefit of Customers
Attention: Mutual Funds
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
The Account will be set up for the reinvestment of capital gains and dividend
distributions, unless otherwise specified by Schwab in writing.
b. Identification. The Fund shall designate the Account with account
numbers. Account numbers will be the means of identification when the parties
are transacting in the Account.
c. Possession and Control. The parties acknowledge that the Account
is an omnibus account in Xxxxxx'x name with shares held by any number of
beneficial owners. The parties agree that all Fund shares held by Schwab on
behalf an MFMP investor shall be carried in a custody account for the exclusive
benefit of customers and shall not be subject to any right, charge, security
interest, lien or other claim against Schwab in favor of the Funds or Fund
Company.
d. No Closure. The Account shall be kept open on the Fund's books
regardless of a lack of activity or small position size, except to the extent
that Schwab takes specific action to close the Account, or to the extent the
Fund's prospectus reserves the right to close accounts that are inactive. In the
latter case, Fund Company will give prior notice to Schwab before closing any
Account.
e. Additional Accounts. Schwab has the right to open additional
Accounts from time to time to accommodate other investment options and features,
and to consolidate existing accounts if and when appropriate to meet the needs
of the MFMP. In the event that it is necessary for Schwab to open an account
with a Fund for the payment of distributions in cash, the term "Account" shall
mean both the account for the reinvestment of capital gains and dividend
distributions and the account for the payment of distributions in cash. Fund
Company agrees that it will not establish additional accounts for Schwab without
Xxxxxx'x prior written instruction.
f. Reservation of Right to Move Shares. Schwab reserves the right to
issue instructions to each Fund to move shares from one Account opened by Schwab
to another Account opened by Schwab.
g. Reconciliation.
(i) Schwab will verify, on a next day basis, purchase and
redemption orders for Fund shares placed for the Account with each Fund. All
activity in the Account must be reflected. Therefore, any "as of" activity must
be shown with its corresponding "as of" date.
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(ii) Schwab must receive statements on or before the eighth
Business Day of each month, even if there has been no activity in the Account
during the period, unless Schwab can verify transactions by electronic
transmission.
(iii) The parties agree to notify each other and correct any
error in the Account with any Fund upon discovery. If an error is not corrected
by the day following discovery, each party agrees to make best efforts to avoid
this from hindering any routine daily operational activity.
2. Authorization to Receive Orders on Fund's Behalf.
a. Authorization of Schwab. Fund Company hereby designates and
authorizes Schwab to receive purchase and redemption orders in proper form
("Orders") from MFMP investors on the Fund's behalf for purposes of Rule 22c-1
under the 1940 Act, so that any such MFMP investor will receive the share price
next computed by the Fund after the time at which such MFMP investor places its
Order with Schwab.
b. Authorization of Sub-Designees. Fund Company further agrees that
Schwab may designate and authorize such intermediaries as it deems necessary,
appropriate or desirable ("Sub-Designees"), to receive Orders from their
customers on the Fund's behalf for purposes of Rule 22c-1 under the 1940 Act, so
that any such customer will receive the share price next computed by the Fund
after the time at which such customer places its Order with Sub-Designee. Schwab
shall be liable to Fund Company and the Funds for compliance with the terms of
this Section 2.b. to the same extent as if Schwab itself had acted or failed to
act instead of the Sub-Designee.
c. Fund Company Representations and Warranties. In connection with
this Section 2, Fund Company represents and warrants to Schwab that all
necessary legal and other actions have been taken to authorize Schwab and any
Sub-Designee to receive purchase and redemption Orders from MFMP investors on
behalf of the Funds for purposes of Rule 22c-1 under the 1940 Act by each Fund's
board of directors or board of trustees, and that it will cause each Fund's
board of directors or board of trustees to take such necessary legal and other
actions regarding the annual review of such authorization.
x. Xxxxxx Representations and Warranties. In connection with this
Section 2, Schwab represents and warrants that:
(i) Xxxxxx'x internal control structure over the processing
and transmission of Orders for Fund transactions is suitably designed to prevent
or detect on a timely basis Orders received after Market Close from being
aggregated with Orders received before Market Close, and to minimize errors that
could result in late transmission of Orders to the Funds;
(ii) Schwab will review annually the adequacy of its Internal
Control Procedures and will change and modify them as necessary to maintain
their adequacy.
(iii) Each Sub-Designee will be required to adopt and
implement written internal controls adequate to prevent or detect on a timely
basis Orders received after Market Close from being aggregated with Orders
received before Market Close ("Sub-Designee Internal Control Procedures");
(i) Each Sub-Designee will be required to review annually the
adequacy of its Sub-Designee Internal Control Procedures and to change and
modify them as necessary to maintain their adequacy.
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(v) Upon request by Fund Company, Schwab will provide Fund
Company with a description of its Internal Control Procedures and a
certification from Schwab that they are adequate as of the most recent annual
review as well as a certification that each Sub-Designee has adopted and
implemented Sub-Designee Internal Control Procedures that are adequate as of the
most recent annual review.
e. Plan Orders. For purposes of processing the Orders of retirement
plans for which The Xxxxxxx Xxxxxx Trust Company ("CSTC") is trustee or
custodian of plan assets ("Plans"), Schwab shall designate and authorize CSTC as
its intermediary to receive Orders from Plans ("Plan Orders") on the Fund's
behalf under Section 2.b. above. For purposes of same day exchange processing of
Plan Orders for those Plans electing to participate, Schwab shall also designate
and authorize the entities acting as record-keepers to such Plans
("Recordkeepers"), as further intermediaries, to receive instructions for
purchase and redemption of Fund shares in proper form from the persons
authorized to direct investment of Plan assets ("Instructions"), from which are
derived Orders (also "Plan Orders"), on the Fund's behalf under Section 2.b.
above. The parties agree that Plan Orders shall be treated as Orders under the
Operating Procedures except as set forth in Section 4 below.
3. NSCC.
a. In General. Unless otherwise agreed to by the parties, each
Account maintained at NSCC will be maintained in accordance with Matrix Level 3
(full broker control) as designated by the NSCC.
b. NSCC Covenants. Schwab and Fund Company agree (i) to perform any
and all duties, functions, procedures and responsibilities assigned to them by
NSCC rules, procedures or other requirements relating to Fund/SERV ("NSCC
Fund/SERV Rules"), Defined Contribution Clearance & Settlement ("NSCC DCC&S
Rules"), and Networking ("NSCC Networking Rules"), as applicable, in a competent
manner; (ii) to maintain facilities, equipment and skilled personnel sufficient
to perform the foregoing activities; (iii) that any information provided to the
other party through Fund/SERV, DCC&S, or Networking will be accurate, complete,
and in the format prescribed by the NSCC; and (iv) to adopt, implement and
maintain procedures reasonably designed to ensure the accuracy of all
transmissions through Fund/SERV, DCC&S, or Networking and to limit the access
to, and the inputting of data into, Fund/SERV, DCC&S, and Networking to persons
specifically authorized by the party.
c. Fund/SERV and DCC&S Transactions. On each Business Day, Fund
Company agrees (i) to accept and effect changes in its records upon receipt of
purchase, redemption and registration instructions from Schwab electronically
through Fund/SERV and DCC&S; (ii) to process any instructions received from
Schwab through Fund/SERV and DCC&S in a timely manner; and (iii) to confirm or
reject any Fund purchase or redemption Order received from Schwab through
Fund/SERV and DCC&S prior to the next opening of the New York Stock Exchange
("Market Open") or to notify Schwab prior to Market Open of any event, such as a
systems failure of Fund Company or the NSCC, that would prohibit Fund Company
from confirming or rejecting such an Order. Fund Company acknowledges and agrees
that its confirmation of any Fund purchase or redemption Order received from
Schwab through Fund/SERV and DCC&S will be an acceptance of such Order, and that
such acceptance may be revoked only upon Xxxxxx'x receipt of a revocation of
acceptance prior to Market Open. If Fund Company does not confirm or reject an
Order prior to Market Open or notify Schwab as provided in this Section prior to
Market Open, such Order will be deemed confirmed and accepted by Fund Company
immediately upon Market Open.
d. Networking. For each Account established and/or maintained
pursuant to Networking, Fund Company shall accept and effect changes in its
records upon receipt of
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instructions, communications and actions from Schwab electronically through
Networking without supporting documentation from Schwab or the beneficial owners
of Fund shares. Fund Company shall be responsible for processing any such
instructions, communications or actions from Schwab and for executing the
instructions of Schwab in a timely manner. Each Account will be maintained in
accordance with Matrix Level 3 (full broker control) as designated by the NSCC.
4. Trade Processing.
a. Transmission of Orders and Plan Orders. Schwab will transmit
Orders to Fund Company via NSCC in a Fund/SERV file format and will transmit
Plan Orders to Fund Company via NSCC in a DCC&S file format, except as stated
below. Schwab agrees that:
(i) Orders Transmitted Through NSCC's Fund/SERV. Except as set
forth in Sections 4.a.(iii) and 4.b.(i) below, (1) Orders received by Schwab or
a Sub-Designee prior to the close of the New York Stock Exchange (generally,
4:00 p.m. Eastern Time) ("Market Close") on any Business Day ("Day 1") (such
Orders are referred to herein as "Day 1 Trades") will be transmitted by Schwab
to Fund Company through NSCC in a Fund/SERV file format in the manner and within
the time frame permitted by NSCC Fund/SERV Rules on Day 1 (Schwab will notify
Fund Company of the need for exception processing under Section 4.b. by 8:00
p.m. Eastern on Day 1) ; and (2) Orders received by Schwab or a Sub-Designee at
or after Market Close on Day 1 (such Orders are referred to herein as "Day 2
Trades") will be transmitted by Schwab to Fund Company through NSCC in a
Fund/SERV file format in the manner and within the time frame permitted by NSCC
Fund/SERV Rules on the next Business Day ("Day 2") (Schwab will notify Fund
Company by 8:00 p.m. Eastern on Day 2 in the event of the need for exception
processing under Section 4.b.).
(ii) Plan Orders Transmitted Through NSCC's DCC&S. Except as
set forth in Sections 4.a.(iv) and 4.b.(ii) below (1) Plan Orders received by
CSTC prior to Market Close on Day 1 or derived from Instructions received by a
Recordkeeper prior to Market Close on Day 1(such Plan Orders are referred to
herein as "Day 1 Plan Trades") will be transmitted by Schwab to Fund Company
through NSCC in a DCC&S file format in the manner and within the time frame
permitted for such orders by NSCC DCC&S Rules ) on Day 2 (Schwab will notify
Fund Company by 8:00 a.m. Eastern on Day 2 in the event of the need for
exception processing under Section 4.b.); and (2) Plan Orders received by CSTC
at or after Market Close on Day 1 or derived from Instructions received by a
Recordkeeper at or after Market Close on Day 1 (such Plan Orders are referred to
herein as "Day 2 Plan Trades") will be transmitted by Schwab to Fund Company
through NSCC in a DCC&S file format in the manner and within the time frame
permitted for Plan Orders by NSCC DCC&S Rules )on Day 3 (Schwab will notify Fund
Company by 8:00 a.m. Eastern on Day 3 in the event of the need for exception
processing under Section 4.b.).
(iii) Orders Transmitted Outside NSCC's Fund/SERV. If
transmittal of Orders through NSCC in a Fund/SERV file format is not
operationally feasible in accordance with these Operating Procedures, except as
set forth in Section 4.b.(i) below, (1) Orders received by Schwab or a
Sub-Designee prior to Market Close on Day 1 will be transmitted by Schwab to the
Fund by other means by 8:00 p.m. Eastern Time on Day 1 (also "Day 1 Trades");
and (2) Orders received by Schwab or Sub-Designees at or after Market Close on
Day 1 will be transmitted by Schwab to the Fund by other means by 8:00 p.m.
Eastern Time on Day 2 (also "Day 2 Trades").
(iv) Plan Orders Transmitted Outside NSCC's DCC&S. If
transmittal of Plan Orders through NSCC in a DCC&S file format is not
operationally feasible under these Operating Procedures, (1) Plan Orders
received by CSTC prior to Market Close on Day 1 or derived from Instructions
received by a Recordkeeper prior to Market Close on Day 1 will be
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transmitted by Schwab to Fund Company by other means by 9:30 a.m. Eastern time
on Day 2 (also "Day 1 Plan Trades"); and (2) Plan Orders received by CSTC at or
after Market Close on Day 1 or derived from Instructions received by a
Recordkeeper at or after Market Close on Day 1 will be transmitted by Schwab to
Fund Company by other means by 9:30 a.m. Eastern time on Day 3 (also "Day 2 Plan
Trades").
b. Transmission Exceptions. Notwithstanding Sections 4.a.(i) through
(iii) above, Fund Company agrees that:
(i) Next Day Transmittal of Orders. If Schwab is prevented
from transmitting Day 1 Trades to Fund Company through NSCC's Fund/SERV or
outside of NSCC's Fund/SERV on Day 1 due to unforeseen circumstances (such as
computer system failures experienced by Schwab, or the NSCC, natural
catastrophes, or other emergencies or human error), provided that Schwab
notifies Fund Company of such contingency prior to 8:00 p.m. Eastern Time on Day
1, Schwab may:
(1) transmit such Day 1 Trades to the Fund through NSCC
in a Fund/SERV file format prior to 8:00 p.m. Eastern Time on Day 2, provided
further that Schwab notifies Fund Company of the Day 1 Trade information prior
to Market Open on Day 2; or
(2) transmit such Day 1 Trades through means other than
NSCC's Fund/SERV prior to Market Open on Day 2;
(ii) Next Day Transmittal of Plan Orders. If Schwab is
prevented from transmitting Day 1 Plan Trades to Fund Company through NSCC in a
DCC&S file format in accordance with Section 4.a.(ii) due to unforeseen
circumstances (such as computer system failures experienced by Schwab or by the
NSCC, natural catastrophes, or other emergencies or human error), provided that
Schwab notifies Fund Company of such contingency by 8:00 a.m. Eastern on Day 2,
Schwab may transmit the Day 1 Plan Trades through means other than NSCC's DCC&S
by 9:30 a.m. Eastern time on Day 2; and
(iii) Rejected Trades Remediated. In the event that Fund
Company rejects a Day 1 Trade transmitted via NSCC in a Fund/SERV file format or
a Day 1 Plan Trade transmitted via NSCC in a DCC&S file format (or notifies
Schwab pursuant to Section 3.c.(iii) above that it would have rejected the Day 1
Trade or the Day 1 Plan Trade had there not been systems error), and the parties
agree that such rejection can be remediated by Schwab, Schwab may follow the
procedures for transmitting Orders set forth in Sections 4.b.(i)(1) or (2) above
for Day 1 Trades or the procedures for transmitting Plan Orders set forth in
Section 4.b.(ii) above for Day 1 Plan Trades.
5. Fund's Pricing of Orders. If timely transmitted by Schwab in accordance
with Section 4.a. above for regular processing, or in accordance with Section
4.b. above for exception processing upon notification, Fund Company agrees that
(a) Day 1 Trades and Day 1 Plan Trades will be effected at the net asset value
of each Fund's shares ("Net Asset Value") calculated as of Market Close on Day
1, and (b) Day 2 Trades and Day 2 Plan Trades will be effected at the Net Asset
Value calculated as of Market Close on Day 2. Fund Company agrees that,
consistent with the foregoing, Day 1 Trades and Day 1 Plan Trades will have been
received by the Fund prior to Market Close on Day 1, and Day 2 Trades and Day 2
Plan Trades will have been received by the Fund prior to Market Close on Day 2,
for all purposes, including, without limitation, settlement and effecting
distributions.
6. Order Settlement.
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a. Settlement Date. Schwab and Fund Company will settle Day 1 Trades
and Day 1 Plan Trades on Day 2, including settling Day 1 Trades and Day 1 Plan
Trades rejected and subsequently remediated prior to Market Open on Day 2
pursuant to Section 3.c.(iii), and will settle Day 2 Trades and Day 2 Plan
Trades on Day 3, including settling Day 2 Trades and Day 2 Plan Trades rejected
and subsequently remediated prior to Market Open on Day 3 pursuant to Section
3.c.(iii) (each, respectively, a "Settlement Date").
b. Method of Settlement. All Orders transmitted outside of Fund/SERV
shall be settled outside of Fund/SERV on the appropriate Settlement Date set
forth in Section 6.a. above. At Xxxxxx'x sole discretion, Schwab and Fund
Company shall settle Orders transmitted via Fund/SERV either outside of the
NSCC's money settlement process or through the NSCC's money settlement process
on the appropriate Settlement Date as set forth in Section 6.a. above.
c. Wire Settlement. With respect to settlement outside NSCC's money
settlement process,
(i) Schwab will transmit the aggregate purchase price of all
the purchase Orders for a given trade date to the Fund by wire transfer on the
appropriate Settlement Date;
(ii) Fund Company will cause the Fund(s) to send to Schwab the
aggregate proceeds of all redemption Orders for the Fund(s) placed by Schwab on
a given trade date on the appropriate Settlement Date. Such redemption proceeds
will be sent by wire transfer on the Settlement Date for the redemption Orders;
provided that Fund Company may, in its discretion, send such proceeds by check
if the aggregate amount is less than $250. Wire transfers of redemption proceeds
shall be separate from wire transfers for other purposes;
(iii) Each wire transfer of redemption proceeds shall
indicate, on the Fed Funds wire system, the amount thereof attributable to each
Fund; provided, however, that if the number of entries would be too great to be
transmitted through the Fed Funds wire system, Fund Company shall, on the day
the wire is sent, notify Schwab of such entries. The cost of the wire transfer
is the responsibility of the party sending the wire. The interest cost
associated with any delayed wire is the responsibility of the party sending the
wire and will be charged at the Federal Funds rate, or if applicable, as set
forth in Section 6.e. above for Fund Company; and
d. Notification of Extended Settlement. Should a Fund need to extend
settlement on an aggregate trade, Fund Company must contact Schwab by 7:00 p.m.
Eastern Time on trade date to discuss the extension. For purposes of determining
the length of settlement on an aggregate trade, Fund Company agrees to treat
shareholders that hold Fund shares through the Account the same as it treats all
other shareholders, including those that hold Fund shares directly with the Fund
and those that hold indirectly through another financial intermediary. Each
party shall be responsible for the interest cost associated with such party's
failure to settle trades in a timely fashion, which interest will be charged at
the Federal Funds rate or, if applicable, as set forth in Section 6.e. below for
Fund Company.
e. Interest on Late Settlement. If Fund Company does not settle
redemption orders on Settlement Date and has not contacted Schwab by 7:00 p.m.
Eastern Time on trade date to discuss such extension of settlement (even if such
extension is due to a systems problem unknown on trade date), then Schwab may,
at its option, take any or all of the actions set forth below.
(i) Charge interest on the amount of the redemption proceeds
due to it, as follows:
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(1) For the first day, (A) Schwab may charge Fund
Company interest at the Federal Funds "offered" rate for such day as published
in The Wall Street Journal if the amount does not exceed $1 million, or (B)
Schwab may charge Fund Company interest at the Prime Rate for such day as
published in The Wall Street Journal if the amount exceeds $1 million; and
(2) For each day following the first day, Schwab may
charge Fund Company interest at the Prime Rate for each such day as published in
The Wall Street Journal, plus 2% per annum; and
(ii) Upon notice to Fund Company, on any subsequent Settlement
Date and for so long as such redemption proceeds are due to it:
(1) Schwab may settle purchase orders and redemption
orders net of each other for such Fund; and/or
(2) Schwab may net any redemption proceeds still due to
it against any net or gross purchase amount due from it from such Fund.
f. Inability to Verify Redemption Proceeds. For settlement outside
of NSCC, in the event that a Fund cannot verify redemption proceeds, Fund
Company agrees to settle trades and forward redemption proceeds in accordance
with these Operating Procedures based on information provided by Schwab. Schwab
will be responsible for the accuracy of all trade information provided by it.
7. Distributions.
a. Payment Information Required. For each Account, Fund Company
shall provide all distribution and dividend information to Schwab in writing by
3:00 p.m. Eastern time, unless another time is agreed to in writing by the
parties, to enable Schwab to pay distributions to MFMP investors on or as close
to payable date as practicable. As to each Fund, Fund Company or such Fund shall
provide Schwab with (i) the record date, ex-dividend date, and payable date with
respect to a Fund as soon as practicable after it is announced, but no later
than three (3) Business Days prior to record date, (ii) the record date share
balance in the Omnibus Account and the distribution rate per share on the first
Business Day after record date, and (iii) the reinvest price per share as soon
as it is available. Other distribution information required by Schwab from time
to time for payment of distributions to its MFMP investors shall be provided by
Fund Company on such dates as are agreed upon between Schwab and Fund Company,
but no later than payable date.
b. Reinvest Account. For each Account designated for the
reinvestment of distributions and dividends, and for purposes of effecting cash
distributions and dividends through such Account for MFMP investors who have
elected through Schwab to receive their capital gains distributions and/or
dividends in cash, prior to 10:00 a.m., Eastern Time, on the next Business Day
following receipt of the reinvest price per share (R+1), Schwab shall give
notification to Fund Company in a manner agreed to by the parties of the
aggregate number of Fund shares which resulted from reinvestment of
distributions or dividends for MFMP investors who had elected to receive
distributions in cash. Fund Company shall make an adjusting reconciling
transaction to void the purchase of such number of shares at the reinvest price
per share. Schwab shall use the proceeds from such adjusting reconciling
transaction to pay the distribution or dividend in cash to MFMP investors who
have elected to receive such distributions or dividends in cash. Processing and
settlement of any adjusting reconciling transaction shall be by one of the
following methods, at Xxxxxx'x sole discretion:
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(i) Schwab shall include such adjusting reconciling
transaction in its Fund/SERV transmission on R+1, and Fund Company or Fund shall
pay the proceeds from such adjusting reconciling transaction through the NSCC's
money settlement process on the next Business Day (R+2); or
(ii) Fund Company or Fund shall wire the proceeds resulting
from such adjusting reconciling transaction to the designated Schwab bank
account on the same Business Day (R+1).
c. Cash Account. For any Account designated for the payment of
distributions and dividends in cash, Fund Company shall either, at Xxxxxx'x sole
discretion and upon Xxxxxx'x direction, (i) pay to Schwab through the NSCC's
money settlement process on R+2 the full amount of such capital gains
distributions and/or dividends, or (ii) wire to the designated Schwab bank
account the full amount of such capital gains distributions and/or dividends on
R+1.
d. Daily Dividend Funds Method of Accrual. Each Fund that pays daily
dividends shall accrue dividends commencing on the settlement date for the
purchase of Fund shares and terminating on, but including, the trade date for
the redemption of Fund shares.
e. Daily Dividend Funds Required Information. For each Fund that
pays daily dividends, Fund Company shall provide to Schwab on a daily basis the
following record date information via the NSCC's Mutual Fund Profile Service,
Networking, or other mutually agreed upon means: daily rate, cumulative daily
rate for the period, account share balance, account accrual dividend amount (for
that day), weekend and holiday accrual methodology, account accrual dividend
amount (for period to date), and account transfers and period-to-date accrual
amounts.
f. Interest on Late Settlement of Distributions. If Fund Company has
not paid to Schwab the cash proceeds of the adjusting reconciling transaction
required in a reinvest Account under Section 7.b. or the cash proceeds required
in a cash Account under Section 7c, either through the NSCC's money settlement
process on R+2 or, at Xxxxxx'x direction, by wire transfer outside of the NSCC's
money settlement process on R+1 (each a "Due Date"), then Fund Company shall pay
interest, if charged by Schwab, on the amount of any cash proceeds outstanding
on or after the Due Date as set forth in Section 7.f.(i) and (ii) below.
Notification under Section 6.d. is not applicable to, and shall have no effect
on Xxxxxx'x rights under, this Section 7.f.
(i) For the Due Date, (1) Schwab may charge Fund Company
interest at the Federal Funds "offered" rate for such day as published in The
Wall Street Journal if the amount does not exceed $1 million, or (2) Schwab may
charge Fund Company interest at the Prime Rate for such day as published in The
Wall Street Journal if the amount exceeds $1 million.
(ii) For each day following the Due Date, Schwab may charge
Fund Company interest at the Prime Rate for each such day as published in The
Wall Street Journal, plus 2% per annum.
8. Transfer of Accounts.
a. ACATS-Fund/SERV Service. The parties agree to participate in the
NSCC's Automated Customer Account Transfer Services (ACATS)-Fund/SERV service.
Fund Company and Schwab shall process transfers between accounts held with
Schwab or other street name brokers or banks and the Accounts on the Fund's
records through NSCC's ACATS-Fund/SERV service immediately upon receipt of
instructions.
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b. Non-ACATS-Fund/SERV Transfers. For the purpose of expediting
transfers from accounts that must be processed outside of NSCC's ACAT-Fund/SERV
service, Fund Company agrees to transfer shares between accounts immediately
upon receipt of instructions for MFMP investors or other street name brokers
held directly with a Fund and the Account on the Fund's records by (i) accepting
change of dealer maintenance or transaction instruction through Networking, or
(ii) if Networking is not available, by accepting by facsimile transmission a
summary sheet of information indicating the customers' names, account numbers,
the Fund affected, and the number of shares to be re-registered or liquidated
("Summary Sheet").
c. Signature Guarantee. Schwab represents and warrants that for each
transfer and liquidation transfer it initiates pursuant to Sections 8.a. and b.
above, it holds each underlying instruction for re-registration or liquidation
signed by its customer, and that its customer's signature on such instruction is
signature guaranteed by Schwab pursuant to the New York Stock Exchange's
Medallion Signature Program. Schwab will retain these documents for the period
required by any applicable law rule or regulation.
d. Indemnification. Schwab agrees to indemnify and hold harmless
Fund Company, the Fund and each director, officer, employee and agent of Fund
Company ("indemnified person") from and against any and all Losses incurred by
any of them arising out of the impropriety of any transfer or liquidation
transfer initiated by it and effected by the Fund at Xxxxxx'x instruction in
reliance on this Section 8 to the same extent as provided under the New York
Stock Exchange's Medallion Signature Program, except to the extent such Losses
arise out of the failure of any indemnified person to comply with the
instructions provided by Schwab as set forth in Sections 8.a. and b. above.
e. Settlement of Liquidation Transfers. Fund Company agrees to
settle proceeds resulting from liquidation transfers with Schwab as set forth in
Section 6 above.
f. No Individual FBO Accounts. Fund Company shall process all
transfer and liquidation requests into the appropriate Account. At no time shall
any Fund establish any separate account registered to Schwab for the benefit of
an individual shareholder. In the event any such account is mistakenly opened,
Schwab reserves the right to instruct the Fund to move Fund shares to the
Account. Fund Company further agrees that it shall provide notification to
Schwab prior to effecting transfers of shares into the Account(s), and shall not
effect transfers of shares out the Account(s) without Xxxxxx'x instruction, as
provided in Sections 8.a. and b. above.
g. Qualified Custodian Status. Schwab represents and warrants that
it is qualified as a custodian to accept in the Accounts shares from Fund XXX,
Xxxxx or 401(k) accounts.
h. Confirmation of Transfers. Fund Company must confirm to Schwab
the completion of each transfer on the day it occurs. The confirming information
shall include the number of shares, date ("as of" date if unavoidable delay),
transaction date, account number of the customer and the Account, registration,
accrued dividends and account type (i.e., XXX, Xxxxx, 401(k), etc.).
i. Trailing Dividends. Transfer processing after record date but
prior to payable date will include all accrued dividends. Each Fund is
responsible for monitoring all completed full transfers for "trailing"
dividends. Should a "trailing" dividend appear in an account, a Fund shall send
such dividend to Schwab within five (5) Business Days, along with a specific
written notification thereof. Notification shall include details of the dividend
and customer, including the customer's social security number or taxpayer
identification number,
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and/or the account number for the Account to which the transfer was made.
j. Share Certificates. If MFMP investors submit share certificates
for transfer into their Xxxxxx brokerage accounts, Schwab will send such
certificates, properly endorsed to the applicable Fund, for transfer into the
Account with such Fund. Upon Xxxxxx'x request, Fund Company agrees to provide
the status of said certificates and book share balances.
9. General.
a. Record Maintenance.
(i) Schwab maintains records for each of its customers who
holds Fund shares through the Account, which records include:
(1) Number of shares;
(2) Date, price and amount of purchases and redemptions
(including dividend reinvestments) and date and amounts of dividends paid for at
least the current year to date;
(3) Name and address of each of its customers, including
zip codes and social security numbers or taxpayer identification numbers;
(4) Records of distributions and dividend payments;
(5) Any transfers of shares; and
(6) Overall control records.
(ii) Schwab posts transactions in Fund shares to its
customers' brokerage accounts.
b. Shareholder Communication.
(i) Fund Company shall arrange with Schwab, or a mailing agent
designated or approved by Schwab, for the distribution of the materials listed
below to all of Xxxxxx'x customers who hold Fund shares, which distribution
shall be so arranged by Fund Company as to occur immediately upon the effective
date of the materials:
(1) All proxy or information statements prepared for
circulation to shareholders of record of such Fund;
(2) Annual reports;
(3) Semi-annual reports;
(4) Quarterly reports (if applicable); and
(5) All updated prospectuses, supplements and amendments
thereto.
Fund Company shall be responsible for providing the materials and for Schwab or
the mailing agent's fees in connection with this service as well as for timely
distribution. Fund Company agrees to have Schwab or the mailing agent
consolidate mailings of material to shareholders of more than one Fund if the
mailing is identical for all Funds in the Fund Company family.
(ii) In addition to the materials listed above, Fund Company agrees
to provide directly to Schwab all prospectuses, statements of additional
information and supplements and amendments thereto, and annual and other
periodic reports for each Fund in amounts reasonably requested by Schwab for
distribution to its customers. Fund Company is obligated to supply these
materials to Schwab in a timely manner so as to allow Schwab, at its own
expense, to send current prospectuses and statements of additional information
and periodic reports, immediately upon their effective dates, to customers and
prospective
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customers requesting them through Schwab. Schwab will also send a current Fund
prospectus with purchase trade confirmations for the initial purchase of a Fund.
Fund Company shall notify Schwab immediately of any change to a Fund's
prospectus.
(iii) If Schwab acts as clearing broker in an omnibus
relationship with a correspondent bank or broker ("Correspondent"), upon the
request of Schwab, Fund Company shall also provide to Schwab, in a timely
manner, sufficient supplies of Fund materials identified in Sections 9(b)(i) and
5(b)(ii) for Schwab to give to Correspondent for the distribution of such
materials to Correspondent's customers who hold Fund shares.
(iv) Fund Company shall ensure that the prospectus of each of
its Funds discloses that a broker may charge transaction fees on the purchase
and/or sale of Fund shares. Fund Company shall also ensure that either the
prospectus, or the statement of additional information ("SAI") if the SAI is
incorporated in the prospectus, of each of its Funds discloses that:
(1) the Fund has authorized one or more brokers to
receive on its behalf purchase and redemption Orders;
(2) such brokers are authorized to designate other
intermediaries to receive purchase and redemption Orders on the Fund's behalf;
(3) the Fund will be deemed to have received a purchase
or redemption Order when an authorized broker or, if applicable, a broker's
authorized designee, receives the Order;
(4) customer Orders will be priced at the Fund's Net
Asset Value next computed after they are received by an authorized broker or the
broker's authorized designee and accepted by the Fund;
(5) the performance of the Fund may be compared in
publications to the performance of various indices and investments for which
reliable performance data is available;
(6) the performance of the Fund may be compared in
publications to averages, performance rankings, or other information prepared by
recognized mutual fund statistical services; and
(7) the annual report contains additional performance
information and will be made available to investors upon request and without
charge.
(v) Schwab mails statements to its customers on a monthly
basis (or as to accounts in which there has been no activity in a particular
month, no less frequently than quarterly) showing, among other things, the
number of shares of each Fund owned by such customer and the net asset value of
each such Fund as of a recent date.
(vi) Schwab responds to customer inquiries regarding, among
other things, share prices, account balances, dividend amounts and dividend
payment dates. With respect to Fund shares purchased by customers, Schwab
provides average cost basis reporting to assist customers in the preparation of
income tax returns.
c. Dividend and Distribution Reporting.
(i) For annual tax reporting purposes, Fund Company shall
inform Schwab by January 15 of the portion of each Fund's distributions for the
previous calendar year that include dividends, capital gains, and tax
reclassifications; and by February 15, the portion of each Fund's distributions
for the previous calendar year that include foreign source income, tax exempt
income by state of origin or return of capital, U.S. government obligation
interest, creditable and non-creditable foreign tax, dividends eligible for the
corporate dividends received deductions, and redemption proceeds and throwback
dividends.
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(ii) In conformance with its status as a broker/dealer holding
its customers securities in street name, Schwab shall prepare and file with the
appropriate governmental agencies, such information, returns and reports as are
required to be so filed for reporting (i) dividends and other distributions
made, (ii) amounts withheld on dividends and other distributions and payments
under applicable federal and state laws, rules and regulations and (iii) gross
proceeds of sales transactions as required.
d. Mergers, Splits and Reorganization Activities. Upon notice from
Fund Company as set forth in this Section 9.d., Schwab shall effect mergers,
splits, reverse splits and other corporate actions and reorganization activities
(collectively "Fund Events") of a Fund for its customers. The notice must state
the record date and type of Fund Event, and must be received by Schwab at least
three Business Days prior to the record date of the Fund Event. By 6:00 p.m.
Eastern time on the record date of such Fund Event, Fund Company shall provide
all relevant information related to the Fund Event, including, for example and
as applicable, factors, field inputs, the ratio of a split, and factor of merged
shares.
e. Pricing information. On every Business Day, Fund Company will
provide to Schwab prior to 7:00 p.m., Eastern Time, each Fund's closing Net
Asset Value and public offering price (if applicable) for that day and/or
notification of no price for that day. Fund Company shall provide such
information on a best efforts basis taking into consideration any extraordinary
circumstances arising at the Fund (e.g. natural disasters, etc.).
f. Notice of Closing. Fund Company will provide at least two (2)
days prior written notice to Schwab if Fund Company will be closed for business
on any Business Day or portion thereof from Market Open through Market Close.
g. Price, Distribution Rate and Other Errors.
(i) In the event adjustments are required to correct any error
in the computation of the Net Asset Value or public offering price of a Fund's
shares, in the distribution rate for a Fund's shares, or otherwise, Fund Company
shall notify Schwab upon discovering the need for such adjustments. Notification
may be made orally, but must be confirmed in writing.
(ii) Schwab and Fund Company shall agree promptly and in good
faith to a resolution of the error, and no adjustment for the error shall be
taken in the Account until such agreement is reached. Following resolution, upon
request by Schwab, Fund Company shall provide Schwab with written notification
of the resolution. The letter shall be written on Fund Company letterhead and
shall state for each day on which an error occurred the incorrect price or rate,
the correct price or rate, and the reason for the price or rate change. Fund
Company agrees that Schwab may send this writing, or derivation thereof, to
Xxxxxx'x MFMP investors whose accounts are affected by the price or rate change.
(iii) If an MFMP investor has received cash in excess of what
he or she is entitled, Schwab will, when requested by Fund Company, and to the
extent practicable and permitted by law, debit the customer's brokerage account
in the amount of such excess, but only to the extent of any cash in the account,
and repay it to the Fund. In no event, however, shall Schwab be liable to Fund
Company or the Fund for any such amounts, unless the error was caused Xxxxxx'x
breach of this Agreement or its willful misconduct or negligence in the
performance of, or failure to perform, its obligations under this Agreement.
Upon the request of Fund Company, Schwab shall provide Fund Company with the
name of Xxxxxx'x customer and other relevant information concerning the
customer's brokerage account to assist Fund Company in the collection from
Xxxxxx'x customer of any such excess amount not repaid to the Fund.
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(iv) If an adjustment is necessary to correct an error which
has caused Xxxxxx'x customers to receive dollars or shares less than that to
which they are entitled, the Fund shall, as appropriate and as mutually agreed
by the parties pursuant to Section 9.g.(ii) above, make all necessary
adjustments to the number of shares owned in the Account and/or distribute to
Schwab any and all amounts of the underpayment. Schwab will credit the
appropriate amount of such shares or payment to each MFMP investor.
(v) For purposes of making adjustments, including the
collection of overpayments, Fund Company agrees to treat shareholders that hold
Fund shares through the Account the same as it treats all other shareholders,
including those that hold Fund shares directly with the Fund and those that hold
indirectly through another financial intermediary. When making adjustments for
an error, a Fund shall not net transactions for that day in the Account.
h. Redemptions in Kind. Fund Company represents that each Fund that
has reserved the right to redeem in kind has filed Form N-18F-1 with the
Securities and Exchange Commission. For purposes of complying with the Fund's
election on Form N-18F-1, Fund Company agrees that it will treat as a
"shareholder" each shareholder that holds Fund shares through the Account,
provided that Schwab provides to Fund Company, upon request, the name or account
number, number of Fund shares and other relevant information for each such
shareholder. Fund Company acknowledges that treatment of Schwab as the sole
shareholder of Fund shares held in the Account for purposes of applying the
limits in Rule 18f-1 under the 1940 Act would be inconsistent with the intent of
Rule 18f-1 and the Fund's election on Form N-18F-1 and could unfairly prejudice
shareholders that hold Fund shares through the Account.
i. Suspension of Purchases. Upon notice to Fund Company, Schwab may
suspend purchases by any or all segments of MFMP investors of any or all classes
of Fund shares made available through the MFMP for any period of time.
j. New Processing Systems. Fund Company agrees to cooperate to the
extent possible with Schwab as Schwab develops and seeks to implement new
processing systems for the MFMP.
