Schwab Strategic Trust (Form: N-1A/A, Received: 10/08/2009 06:01:29)

[PARTICIPANT]

SEI INVESTMENTS DISTRIBUTION CO.

FILE NOS. 333-160595 AND 811-22311
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 7, 2009

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933       þ
Pre-Effective Amendment No.      1
Post-Effective Amendment No.       o

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 þ
Amendment No. 1

SCHWAB STRATEGIC TRUST

(Exact Name of Registrant as Specified in Charter)

211 Main Street, San Francisco, California 94105
(Address of Principal Executive Offices) (Zip code)

(800) 648-5300

(Registrant’s Telephone Number, including Area Code)


NAME AND ADDRESS OF AGENT FOR SERVICE:		COPY TO:
Shelley A. Harding, Esq.		W. John McGuire, Esq.
Charles Schwab Investment Management, Inc.		Morgan, Lewis & Bockius LLP
211 Main Street		1111 Pennsylvania Avenue, N.W.
211MN-05-495		Washington, D.C. 20004
San Francisco, CA 94105

Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

Schwab International ETFs

Schwab ETFs ^™

Prospectus

November 3, 2009


	•		Schwab International Equity ETF™



	•		Schwab International Small-Cap Equity ETF™



	•		Schwab Emerging Markets Equity ETF™

As with all exchange traded funds, the Securities and Exchange Commission (SEC) has not approved these securities or passed on whether the information in this prospectus is adequate and accurate. Anyone who indicates otherwise is committing a federal crime.

Schwab International ETFs


ABOUT THE FUNDS			1

Schwab International Equity ETF™			2

Schwab International Small-Cap Equity ETF™			9

Schwab Emerging Markets Equity ETF™			16

Fund Management			23

INVESTING IN THE FUNDS			24

Share Trading Prices			25

Determination of Net Asset Value			25

Purchase and Redemption of Creation Units			26

Transaction Policies			28

Portfolio Holdings			29

Distributions and Taxes			29

-i-

ABOUT THE FUNDS

The funds described in this Prospectus are advised by Charles Schwab Investment Management, Inc. (the “Adviser”). Each of the funds is an “exchange traded fund” (“ETF”). ETFs are funds that trade like other publicly-traded securities. Because the composition of an index tends to be comparatively stable, index funds historically have shown low portfolio turnover compared to actively managed funds.

This strategy distinguishes an index fund from an “actively managed” fund. Instead of choosing investments for the fund based on portfolio management’s judgment, an index is used to determine which securities the fund should own.

Unlike shares of a mutual fund, shares of the funds are listed on a national securities exchange and trade at market prices that change throughout the day. The market price for each of the fund’s shares may be different from its net asset value per share (“NAV”). The funds have their own CUSIP numbers and trade on the NYSE Arca, Inc. under the following tickers:


Schwab International Equity ETF™		SCHF
Schwab International Small-Cap Equity ETF™		SCHC
Schwab Emerging Markets Equity ETF™		SCHE

The funds issue and redeem shares at their NAV only in large blocks of shares, typically 25,000 shares or more (“Creation Units”). These transactions are usually in exchange for a basket of securities and an amount of cash. As a practical matter, only institutions or large investors purchase or redeem Creation Units. Except when aggregated in Creation Units, shares of the funds are not redeemable securities.

A NOTE TO RETAIL INVESTORS

Shares can be purchased directly from the funds only in exchange for a basket of securities that is expected to be worth several million dollars. Most individual investors, therefore, will not be able to purchase shares directly from the funds. Instead, these investors will purchase shares in the secondary market through a brokerage account or with the assistance of a broker. Thus, some of the information contained in this Prospectus — such as information about purchasing and redeeming shares from the funds and references to transaction fees imposed on purchases and redemptions — is not relevant to most individual investors. Shares purchased or sold through a brokerage account or with the assistance of a broker may be subject to brokerage commissions and charges.

Except as explicitly described otherwise, the investment objective, the benchmark index and the investment policies of each of the funds may be changed without shareholder approval.

The funds’ performance will fluctuate over time and, as with all investments, future performance may differ from past performance.

-1-

Schwab International Equity ETF™

Ticker symbol: SCHF

Investment Objective

The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the FTSE Developed ex-US Index. ¹

Index

The fund’s benchmark index includes is comprised of large and mid capitalization companies in developed countries outside the United States, as defined by the index provider. The index defines the large and mid capitalization universe as approximately the top 90% of the eligible universe. As of June 30, 2009, the index was composed of 1,325 stocks in 23 developed market countries.

Strategy

To pursue its goal, the fund generally invests in stocks that are included in the index. It is the fund’s policy that under normal circumstances it will invest at least 90% of its net assets in these stocks, including depositary receipts representing securities of the index; which may be in the form of American Depositary receipts (“ADRs”), Global Depositary receipts (“GDRs”) and European Depositary receipts (“EDRs”). The fund will notify its shareholders at least 60 days before changing this policy. The fund will generally give the same weight to a given stock as the index does. However, when the Adviser believes it is appropriate to do so, such as to avoid purchasing odd-lots ( i.e. , purchasing less than the usual number of shares traded for a security), to address liquidity considerations with respect to a stock, for tax considerations or when purchasing ADRs, GDRs or EDRs in lieu of local securities, the Adviser may cause the fund’s weighting of a stock to be more or less than the index’s weighting of the stock. The fund may sell securities that are represented in the index in anticipation of their removal from the index. The fund does not hedge its exposure to foreign currencies beyond using forward foreign currency contracts to lock in exchange rates for the portfolio securities purchased or sold, but awaiting settlement. These transactions establish a rate of exchange that can be expected to be received upon settlement of the securities.


¹		Index ownership — “FTSE ^® ” is a trademark of The Financial Times Limited (“FT”) and the London Stock Exchange Plc (the “Exchange”) and is used by the fund under license. The Schwab International Equity ETF is not sponsored, endorsed, sold or promoted by FT or the Exchange and FT and the Exchange do not make any representation regarding the advisability of investing in shares of the fund. Fees payable under the license are paid by the Adviser.

represented in the index but the Adviser anticipates will be added to the index or as necessary to reflect various corporate actions (such as mergers and spin-offs), (b) other investment companies, and (c) forward foreign currency contracts, futures contracts, options on futures contracts, options and swaps. The fund may also invest in cash and cash equivalents, and may lend its securities to minimize the difference in performance that naturally exists between an index fund and its corresponding index.

Because it may not be possible or practicable to purchase all of the stocks in the index, the Adviser may attempt to replicate the total return of the index by using statistical sampling techniques. These techniques involve investing in a limited number of index securities which, when taken together, are expected to perform similarly to the index as a whole. These techniques are based on a variety of factors, including performance attributes, tax considerations, country weightings, capitalization, industry factors, risk factors and other characteristics. The fund generally expects that its portfolio will hold less than the total number of securities in the index, but reserves the right to hold as many securities as it believes necessary to achieve the fund’s investment objective.

The fund will concentrate its investments ( i.e. , hold 25% or more of its total assets) in a particular industry, group of industries or sector to approximately the same extent that its index is so concentrated. For purposes of this limitation, securities of the U.S. government (including its agencies and instrumentalities), and repurchase agreements collateralized by U.S. government securities are not considered to be issued by members of any industry.

The Adviser seeks to achieve, over time, a correlation between the fund’s performance and that of its index, before fees and expenses, of 95% or better. However, there can be no guarantee that the fund will achieve a high degree of correlation with the index. A number of factors may affect the fund’s ability to achieve a high correlation with its index, including the degree to which the fund utilizes a sampling technique. The correlation between the performance of the fund and its index may also diverge due to transaction costs, asset valuations, corporate actions (such as mergers and spin-offs), timing variances, and differences between the fund’s portfolio and the index resulting from legal restrictions (such as diversification requirements) that apply to the fund but not to the index.

Risks

Market Risk. Stock markets rise and fall daily. As with any investment whose performance is tied to these markets, the value of your investment in the fund will fluctuate, which means that you could lose money.

Investment Style Risk. The fund is not actively managed. Therefore, the fund follows the stocks included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund’s expenses, the fund’s performance is normally below that of the index.

trends and developments. The prices of securities issued by such companies may suffer a decline in response. In addition, the equity market tends to move in cycles which may cause stock prices to fall over short or extended periods of time.

Large-Cap and Mid-Cap Risk. Although the index encompasses stocks from many different sectors of the economy, its performance primarily reflects that of large- and mid-cap stocks. Both large- and mid-cap stocks tend to go in and out of favor based on market and economic conditions. However, stocks of mid-cap companies tend to be more volatile than those of large-cap companies because mid-cap companies tend to be more susceptible to adverse business or economic events than larger more established companies. During a period when large- and mid-cap stocks fall behind other types of investments- bonds or small-cap stocks, for instance-the fund’s performance also will lag those investments.

Foreign Investment Risk. The fund’s investments in securities of foreign issuers involve certain risks that are greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions, or changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges). In certain countries, legal remedies available to investors may be more limited than those available with respect to investments in the United States. The securities of some foreign issuers may be less liquid and, at times, more volatile than securities of comparable U.S. companies. The fund may also experience more rapid or extreme changes in value as compared to a fund that invests solely in securities of U.S. companies because the securities’ markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. There also is the risk that the cost of buying, selling, and holding foreign securities, including brokerage, tax, and custody costs, may be higher than those involved in domestic transactions.

Currency Risk. As a result of its investments in securities denominated in, and/or receiving revenues in, foreign currencies, the fund will be subject to currency risk. This is the risk that those currencies will decline in value relative to the U.S. Dollar, or, in the case of hedging positions, that the U.S. Dollar will decline in value relative to the currency hedged. In either event, the dollar value of an investment in the fund would be adversely affected. Currency exchange rates may fluctuate in response to factors extrinsic to that country’s economy, which makes the forecasting of currency market movements extremely difficult. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. These can result in losses to the fund if it is unable to deliver or receive currency or funds in settlement of obligations and could also cause hedges it has entered into to be rendered useless, resulting in full currency exposure as well as incurring transaction costs. Forward contracts on foreign currencies are not traded on exchanges; rather, a bank or dealer will act as agent or as principal in order to make or take future delivery of a specified lot of a particular currency for the fund’s account. The fund is subject to the risk of a principal’s failure, inability or refusal to perform with respect to such contracts.

Depositary Receipt Risk. Foreign securities also include ADRs, which are U.S. dollar-denominated receipts representing shares of foreign-based corporations. ADRs are issued by U.S.

banks or trust companies, and entitle the holder to all dividends and capital gains that are paid out on the underlying foreign shares. Foreign securities also include GDRs, which are similar to ADRs, but are shares of foreign-based corporations generally issued by international banks in one or more markets around the world. In addition, foreign securities includes EDRs, similar to GDRs, are shares of foreign-based corporations generally issued by European banks that trade on exchanges outside of the bank’s home country. Investment in ADRs, GDRs and EDRs may be less liquid than the underlying shares in their primary trading market and GDRs, many of which are issued by companies in emerging markets, may be more volatile.

Sampling Index Tracking Risk . The fund does not fully replicate the index and may hold securities not included in the index. As a result, the fund is subject to the risk that the Adviser’s investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. Because the fund utilizes a sampling approach it may not track the return of the index as well as it would if the fund purchased all of the equity securities in the index.

Tracking Error Risk . The fund’s return may not match the return of the index. For example, differences between the fund’s securities and those in the index, rounding of prices, changes to the index and regulatory requirements may cause tracking error, the divergence of the fund’s performance from that of its index. The fund also incurs fees and expenses while the index does not, which may result in tracking error.

Derivatives Risk. The principal types of derivatives used by the fund are options, futures, options on futures, swaps, and forward foreign currency contracts. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. A swap is an agreement whereby two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities and a predetermined amount.

The fund’s use of derivative instruments involves risks different from or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as leverage risk, market risk, and liquidity risk are discussed elsewhere in this section. The fund’s use of derivatives is also subject to credit risk, liquidity risk, lack of availability risk, valuation risk, correlation risk and tax risk. Credit risk is the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gain. These risks could cause the fund to lose more than the principal amount invested.

Liquidity Risk. A particular investment may be difficult to purchase or sell. The fund may be unable to sell illiquid securities at an advantageous time or price.

Leverage Risk. Certain fund transactions, such as derivatives, may give rise to a form of leverage and may expose the fund to greater risk. Leverage tends to magnify the effect of any decrease or

increase in the value of the fund’s portfolio securities. The use of leverage may cause the fund to liquidate portfolio positions when it would not be advantageous to do so in order to satisfy its obligations.

Securities Lending Risk. The fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When the fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in the collateral or delay in recover of the collateral if the borrower fails to return the security loaned or becomes insolvent. The fund will also bear the risk of any decline in value of securities acquired with cash collateral. The fund may pay lending fees to a party arranging the loan.

Concentration Risk. To the extent that the fund’s or the index’s portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector or asset class, the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more susceptible to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector or asset class.

Market Trading Risk. Although fund shares are listed on national securities exchanges, there can be no assurance that an active trading market for fund shares will develop or be maintained. If an active market is not maintained, investors may find it difficult to buy or sell fund shares. Trading of shares of the fund on a stock exchange may be halted if exchange officials deem such action appropriate, if the fund is delisted, or if the activation of marketwide “circuit breakers” halts stock trading generally. If the fund’s shares are delisted, the fund may seek to list its shares on another market, merge with another ETF, or redeem its shares at NAV. The Adviser believes that, under normal market conditions, large market price discounts or premiums to NAV will not be sustained because of arbitrage opportunities.

Shares of the Fund May Trade at Prices Other Than NAV. As with all ETFs, fund shares may be bought and sold in the secondary market at market prices. Although it is expected that the market price of the shares of the fund will approximate the fund’s NAV, there may be times when the market price and the NAV vary significantly. Thus, you may pay more than NAV when you buy shares of the fund in the secondary market, and you may receive less than NAV when you sell those shares in the secondary market.

The market price of fund shares during the trading day, like the price of any exchange-traded security, includes a “bid/ask” spread charged by the exchange specialist, market makers or other participants that trade the fund shares. The bid/ask spread on ETF shares is likely to be larger on ETFs that are traded less frequently. In addition, in times of severe market disruption, the bid/ask spread can increase significantly. At those times, fund shares are most likely to be traded at a discount to NAV, and the discount is likely to be greatest when the price of shares is falling fastest, which may be the time that you most want to sell your shares. The Adviser believes that, under normal market conditions, large market price discounts or premiums to NAV will not be sustained because of arbitrage opportunities.

Lack of Governmental Insurance or Guarantee. An investment in the fund is not a bank deposit and it is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

Performance

The fund is new and therefore does not have a performance history. Once the fund has completed a full calendar year of operations a bar chart and table will be included that will provide some indication of the risks of investing in the fund by showing the variability of the fund’s returns and comparing the fund’s performance to the index.

Fund Fees and Expenses

The following table describes what you could expect to pay as a fund investor. “Shareholder Fees” are charged to you directly by the fund. “Annual Operating Expenses” are paid out of fund assets, so their effect is included in the fund’s total return. You may also incur customary brokerage charges when buying or selling fund shares.

Fee table (%)


	Shares

Shareholder fees*
	None
Annual operating expenses **

Management fees
Distribution (12b-1) fees***		0.00	%
Other expenses****	None
Total annual operating expenses	0.XX%



*		Fees paid directly from your investment, but the fund may impose creation and redemption transaction fees to offset transaction costs associated with the issuance and redemption of Creation Units. A standard transaction fee of $15,000 is charged in connection with the creation or redemption of a Creation Unit on the day of the transaction. Cash purchases and redemptions of Creation Units are subject to an additional variable charge of up to four times the Additional Creation/Redemption Transaction Fee. See the “Creation and Redemption Transaction Fees for Creation Units” section further in this prospectus.


**		Expressed as a percentage of average net assets.


***		The fund has adopted a Distribution and Shareholder Services (12b-1) Plan pursuant to which the fund is subject to an annual 12b-1 fee of up to 0.25% of its average daily net assets. However, the Board has determined that no such fees will be charged prior to November 14, 2011 (more than 12 months from the commencement of the fund’s operations).


****		The fund’s Investment Advisory Agreement provides that the Adviser will pay the operating expenses of the fund, excluding interest expense, taxes, any brokerage expenses, future distribution fees or expenses (i.e., 12b-1 fees) and extraordinary or non-routine expenses.

Example

Designed to help you compare expenses, the example below uses the same assumptions as other fund prospectuses: a $10,000 investment, 5% return each year and that the fund’s operating expenses remain the same. The expenses would be the same whether you stayed in the fund or sold your shares at the end of each period. Your actual costs may be higher or lower.


1 year		3 years
$		$

Schwab International Small-Cap Equity ETF™

Ticker symbol : SCHC

Investment Objective

The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the FTSE Developed Small Cap ex-US Liquid Index. ²

Index

The fund’s benchmark index includes is comprised of small capitalization companies in developed countries outside the United States, as defined by the index provider. The index defines the small capitalization universe as approximately the bottom 10% of the eligible universe with a minimum free float capitalization of $150 million. As of June 30, 2009, the index was composed of 1820 stocks in 23 developed market countries.

Strategy



²		Index ownership — “FTSE ^® ” is a trademark of The Financial Times Limited (“FT”) and the London Stock Exchange Plc (the “Exchange”) and is used by the fund under license. The Schwab International Small-Cap Equity ETF is not sponsored, endorsed, sold or promoted by FT or the Exchange and FT and the Exchange do not make any representation regarding the advisability of investing in shares of the fund. Fees payable under the license are paid by the Adviser.

Under normal circumstances, the fund may invest up to 10% of its total assets in securities not included in its index. The principal types of these investments include those which the Adviser believes will help the fund track the index, such as investments in (a) securities that are not represented in the index but the Adviser anticipates will be added to the index or as necessary to reflect various corporate actions (such as mergers and spin-offs), (b) other investment companies, and (c) forward foreign currency contracts, futures contracts, options on futures contracts, options and swaps. The fund may also invest in cash and cash equivalents, and may lend its securities to minimize the difference in performance that naturally exists between an index fund and its corresponding index.

Risks

does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund’s expenses, the fund’s performance is normally below that of the index.

Equity Risk. The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. In addition, the equity market tends to move in cycles which may cause stock prices to fall over short or extended periods of time.

Small-Cap Risk . Historically, small-cap stocks have been riskier than large- and mid-cap stocks. Stock prices of smaller companies may be based in substantial part on future expectations rather than current achievements and may move sharply, especially during market upturns and downturns. Small-cap companies themselves may be more vulnerable to adverse business or economic events than larger, more established companies. During a period when small-cap stocks fall behind other types of investments – bonds or large-cap stocks, for instance – the fund’s performance also will lag those investments.

specified lot of a particular currency for the fund’s account. The fund is subject to the risk of a principal’s failure, inability or refusal to perform with respect to such contracts.

Depositary Receipt Risk. Foreign securities also include ADRs, which are U.S. dollar-denominated receipts representing shares of foreign-based corporations. ADRs are issued by U.S. banks or trust companies, and entitle the holder to all dividends and capital gains that are paid out on the underlying foreign shares. Foreign securities also include GDRs, which are similar to ADRs, but are shares of foreign-based corporations generally issued by international banks in one or more markets around the world. In addition, foreign securities includes EDRs, similar to GDRs, are shares of foreign-based corporations generally issued by European banks that trade on exchanges outside of the bank’s home country. Investment in ADRs, GDRs and EDRs may be less liquid than the underlying shares in their primary trading market and GDRs, many of which are issued by companies in emerging markets, may be more volatile.

Liquidity Risk. A particular investment may be difficult to purchase or sell. The fund may be unable to sell illiquid securities at an advantageous time or price.

Leverage Risk. Certain fund transactions, such as derivatives, may give rise to a form of leverage and may expose the fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of the fund’s portfolio securities. The use of leverage may cause the fund to liquidate portfolio positions when it would not be advantageous to do so in order to satisfy its obligations.

which may be the time that you most want to sell your shares. The Adviser believes that, under normal market conditions, large market price discounts or premiums to NAV will not be sustained because of arbitrage opportunities.

Lack of Governmental Insurance or Guarantee. An investment in the fund is not a bank deposit and it is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Performance

Fund Fees and Expenses

Fee table (%)


	Shares

Shareholder fees*
	None
Annual operating expenses **

Management fees
Distribution (12b-1) fees***		0.00	%
Other expenses****	None
Total annual operating expenses	0.XX%



*		Fees paid directly from your investment, but the fund may impose creation and redemption transaction fees to offset transaction costs associated with the issuance and redemption of Creation Units. A standard transaction fee of $15,000 is charged in connection with the creation or redemption of a Creation Unit on the day of the transaction. Cash purchases and redemptions of Creation Units are subject to an additional variable charge of up to four times the Additional Creation/Redemption Transaction Fee. See the “Creation and Redemption Transaction Fees for Creation Units” section further in this prospectus.


**		Expressed as a percentage of average net assets.


***		The fund has adopted a Distribution and Shareholder Services (12b-1) Plan pursuant to which the fund is subject to an annual 12b-1 fee of up to 0.25% of its average daily net assets. However, the Board has determined that no such fees will be charged prior to November 14, 2011 (More than 12 months from the commencement of the fund’s operations).


****		The fund’s Investment Advisory Agreement provides that the Adviser will pay the operating expenses of the fund, excluding interest expense, taxes, any brokerage expenses, future


		distribution fees or expenses (i.e., 12b-1 fees) and extraordinary or non-routine expenses.

Example


1 year		3 years
$		$

Schwab Emerging Markets Equity ETF™

Ticker symbol : SCHE

Investment Objective

The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the FTSE All-Emerging Index. ³

Index

The fund’s benchmark index includes is comprised of large and mid capitalization companies in emerging market countries, as defined by the index provider. The index defines the large and mid capitalization universe as approximately the top 90% of the eligible universe. As of June 30, 2009, the index was composed of 824 stocks in 23 emerging market countries.

Strategy

Under normal circumstances, the fund may invest up to 10% of its total assets in securities not included in its index. The principal types of these investments include those which the Adviser



³		Index ownership — “FTSE ^® ” is a trademark of The Financial Times Limited (“FT”) and the London Stock Exchange Plc (the “Exchange”) and is used by the fund under license. The Schwab Emerging Markets Equity ETF is not sponsored, endorsed, sold or promoted by FT or the Exchange and FT and the Exchange do not make any representation regarding the advisability of investing in shares of the fund. Fees payable under the license are paid by the Adviser.

believes will help the fund track the index, such as investments in (a) securities that are not represented in the index but the Adviser anticipates will be added to the index or as necessary to reflect various corporate actions (such as mergers and spin-offs), (b) other investment companies, and (c) forward foreign currency contracts, futures contracts, options on futures contracts, options and swaps. The fund may also invest in cash and cash equivalents, and may lend its securities to minimize the difference in performance that naturally exists between an index fund and its corresponding index.

Risks

Emerging Markets Risk. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting and reporting requirements, unreliable securities valuation and greater risk associated with the custody of securities. It is sometimes difficult to obtain and enforce court judgments in such countries and there is often a greater potential for nationalization and/or expropriation of assets by the government of an emerging market country. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in other countries. As a result, there will tend to be an increased risk of price volatility associated with the fund’s investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar.

response to factors extrinsic to that country’s economy, which makes the forecasting of currency market movements extremely difficult. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. These can result in losses to the fund if it is unable to deliver or receive currency or funds in settlement of obligations and could also cause hedges it has entered into to be rendered useless, resulting in full currency exposure as well as incurring transaction costs. Forward contracts on foreign currencies are not traded on exchanges; rather, a bank or dealer will act as agent or as principal in order to make or take future delivery of a specified lot of a particular currency for the fund’s account. The fund is subject to the risk of a principal’s failure, inability or refusal to perform with respect to such contracts.

section. The fund’s use of derivatives is also subject to credit risk, liquidity risk, lack of availability risk, valuation risk, correlation risk and tax risk. Credit risk is the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gain. These risks could cause the fund to lose more than the principal amount invested.

Liquidity Risk. A particular investment may be difficult to purchase or sell. The fund may be unable to sell illiquid securities at an advantageous time or price.

market price and the NAV vary significantly. Thus, you may pay more than NAV when you buy shares of the fund in the secondary market, and you may receive less than NAV when you sell those shares in the secondary market.

Performance

Fund Fees and Expenses

Fee table (%)


	Shares

Shareholder fees*
	None
Annual operating expenses **

Management fees
Distribution (12b-1) fees***		0.00	%
Other expenses****	None
Total annual operating expenses	0.XX%



*		Fees paid directly from your investment, but the fund may impose creation and redemption transaction fees to offset transaction costs associated with the issuance and redemption of Creation Units. A standard transaction fee of $8,000 is charged in connection with the creation or redemption of a Creation Unit on the day of the transaction. Cash purchases and redemptions of Creation Units are subject to an additional variable charge of up to four times



		the Additional Creation/Redemption Transaction Fee. See the “Creation and Redemption Transaction Fees for Creation Units” section further in this prospectus.


**		Expressed as a percentage of average net assets.


***		The fund has adopted a Distribution and Shareholder Services (12b-1) Plan pursuant to which the fund is subject to an annual 12b-1 fee of up to 0.25% of its average daily net assets. However, the Board has determined that no such fees will be charged prior to November 14, 2011 (More than 12 months from the commencement of the fund’s operations).


****		The fund’s Investment Advisory Agreement provides that the Adviser will pay the operating expenses of the fund, excluding interest expense, taxes, any brokerage expenses, future distribution fees or expenses (i.e., 12b-1 fees) and extraordinary or non-routine expenses.

Example


1 year		3 years
$		$

Fund Management

The investment adviser for the Schwab International ETFs is Charles Schwab Investment Management, Inc., (“CSIM”) 211 Main Street Street, San Francisco, CA 94105. Founded in 1989, the firm today serves as investment adviser for all of the Schwab Funds ^® and Laudus Funds ^® . The firm has more than $ billion under management. (All figures on this page are as of 08/31/09.)

As the investment adviser, the firm oversees the asset management and administration of the fund. As compensation for these services, the firm receives a management fee from the funds, expressed as a percentage of each fund’s average daily net assets.


Schwab International Equity ETF™				%
Schwab International Small-Cap Equity ETF™				%
Schwab Emerging Markets Equity ETF™				%

A discussion regarding the basis for the Board of Trustees’ approval of the funds’ investment advisory agreements will be available in the funds’ annual and/or semi-annual report.

Pursuant to the Investment Advisory Agreement between the Adviser and each fund, the Adviser will pay the operating expenses of the fund, excluding interest expense, taxes, any brokerage expenses, future distribution fees or expenses (i.e., 12b-1 fees) and extraordinary or non-routine expenses.

Jeffrey Mortimer, CFA, senior vice president and chief investment officer of the Adviser, is responsible for the overall management of each of the funds. Prior to joining the firm in October 1997, he worked for more than eight years in asset management.

Dustin Lewellyn, CFA, a managing director of the Adviser, oversees the Adviser’s management of ETFs. Prior to joining the firm in May 2009, he worked for two years as director of ETF product management and development at a major financial institution focused on asset and wealth management. Prior to that, he was a portfolio manager for institutional clients at a financial services firm for three years. In addition, he held roles in portfolio operations and product management at several large asset management firms for more than 6 years.

Agnes Hong, CFA, a managing director and portfolio manager of the Adviser, has day-to-day responsibility for the management of the funds. Prior to joining the firm in September 2009, she worked for more than 5 years as a portfolio manager for a major asset management firm.

Additional information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and the portfolio managers’ ownership of securities in the funds is available in the Statement of Additional Information.

Other Considerations

Distribution and Shareholder Services (12b-1) Plan. Each fund has adopted a Distribution and Shareholder Services (12b-1) Plan in accordance with Rule 12b-1 under the 1940 Act pursuant to which each fund is subject to an annual 12b-1 fee of up to 0.25% of the fund’s average daily net assets. The plan allows the funds to pay distribution and shareholder service fees to the funds’ distributor and other firms that provide distribution and shareholder services. However, the Board has determined that no such fees will be charged prior to November 14, 2011 (more than 12 months from the commencement of a fund’s operations). Because these fees would be paid out of each funds’ assets on an on-going basis, if payments are made in the future, these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.

Payments by the Adviser. The Adviser may, from time to time, at its own expense, compensate purchasers of Creation Units who have purchased substantial amounts of Creation Units and other financial institutions for administrative or marketing services. These payments may be made from profits received by the Adviser from management fees paid to the Adviser by the funds. Such activities by the Adviser may provide incentives to financial institutions to purchase or market shares of the funds. Additionally, these activities may give the Adviser additional access to sales representatives of such financial institutions, which may increase sales of fund shares.

Distributor. The Fund’s Distributor is SEI Investments Distribution Co. The Distributor, located at 1 Freedom Valley Drive, Oaks, PA 19456, is a broker-dealer registered with the Securities and Exchange Commission (“SEC”). The Distributor distributes Creation Units for the funds and does not maintain a secondary market in shares of the funds.

INVESTING IN THE FUNDS

On the following pages, you will find information on buying and selling shares. Most investors will invest in the funds through an intermediary by placing orders through their brokerage account at Charles Schwab & Co., Inc. (Schwab) or an account with another broker/dealer or other intermediary. Authorized Participants (as defined in “Transaction Policies,” below) may invest directly in the funds by placing orders for Creation Units through the funds’ transfer agent. Helpful information on taxes is included as well.

Shares of the funds trade on national securities exchanges and elsewhere during the trading day and can be bought and sold throughout the trading day like other shares of publicly traded securities. When buying or selling shares through a broker most investors will incur customary brokerage commissions and charges. In addition, you may incur the cost of the “spread” – that is, any difference between the bid price and the ask price.

Shares of the funds trade under the following trading symbols:


Schwab International Equity ETF		SCHF
Schwab International Small-Cap Equity ETF		SCHC
Schwab Emerging Markets Equity ETF		SCHE

Shares of the funds may be acquired or redeemed directly from the funds only in Creation Units or multiples thereof; as discussed in the “Creation and Redemption” section below. Once created, shares of the fund trade in the secondary market in amounts less than a Creation Unit. The funds do not impose any minimum investment for shares of the funds purchased on an exchange or in the secondary market. Except when aggregated in Creation Units, shares are not redeemable by the funds.

Share Trading Prices

As with other types of securities, the trading prices of shares in the secondary market can be affected by market forces such as supply and demand, economic conditions and other factors. The price you pay or receive when you buy or sell your shares in the secondary market may be more (a premium) or less (a discount) than the NAV of such shares.

The approximate value of shares of the funds are disseminated every fifteen seconds throughout the trading day by the national securities exchange on which the funds are listed or by other information providers. This approximate value should not be viewed as a “real-time” update of the NAV, because the approximate value may not be calculated in the same manner as the NAV, which is computed once per day. The approximate value generally is determined by using current market quotations and/or price quotations obtained from broker-dealers that may trade in the portfolio securities held by the funds. The funds and Adviser are not involved in, or responsible for, the calculation or dissemination of the approximate value and make no warranty as to its accuracy.

Determination of Net Asset Value

The NAV of the funds’ shares is calculated as of the close of regular trading on the New York Stock Exchange, generally 4:00 p.m. Eastern time, on each day the NYSE is open for trading (each, a “Business Day”). NAV per share is calculated by dividing the funds’ net assets by the number of funds’ shares outstanding.

In valuing their securities, the funds use market quotes or official closing prices if they are readily available. In cases where quotes are not readily available, the funds may value securities based on fair values developed using methods approved by the funds’ Board of Trustees (described below). When valuing fixed income securities with remaining maturities of more than 60 days, the funds use the value of the security provided by pricing services. The pricing services may value fixed income securities at an evaluated price by employing methodologies that utilize actual market transaction, broker-supplied valuations, or other methodologies designed to identify the market value for such securities. When valuing fixed income securities with remaining maturities of 60 days or less, the funds may use the security’s amortized cost, which approximates the security’s market value. When valuing an option, future or swap, the funds use the value provided by a pricing service, if available.

The funds’ Board of Trustees has adopted procedures, which include fair value methodologies, to fair value the funds’ securities when market prices are not “readily available” or are unreliable. For example, the funds may fair value a security when a security is de-listed or its trading is halted or suspended; when a security’s primary pricing source is unable or unwilling to provide a price; when a security’s primary trading market is closed during regular market hours; or when a security’s value is materially affected by events occurring after the close of the security’s primary trading market.

By fair valuing securities whose prices may have been affected by events occurring after the close of trading, the funds seek to establish prices that investors might expect to realize upon the current sales of these securities. The funds’ fair value methodologies seeks to ensure that the prices at which the funds’ shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders. Generally, when fair valuing a security, the funds will take into account all reasonably available information that may be relevant to a particular valuation including, but not limited to, fundamental analytical data regarding the issuer, information relating to the issuer’s business, recent trades or offers of the security, general and specific market conditions and the specific facts giving rise to the need to fair value the security. The funds make fair value determinations in good faith and in accordance with the fair value methodologies included in the Board adopted valuation procedures. Due to the subjective and variable nature of fair value pricing, there can be no assurance that the funds could obtain the fair value assigned to the security upon the sale of such security.

Shareholders of the funds should be aware that because foreign markets are often open on weekends and other days when the funds are closed, the value of the funds’ portfolio may change on days when it is not possible to buy or sell shares of the funds.

Transactions in funds’ shares will be priced at NAV only if you purchase or redeem shares directly from the funds in Creation Units. Fund shares that are purchased or sold on a national securities exchange will be effected at prevailing market prices, which may be higher or lower than NAV, and may be subject to brokerage commissions and charges. As described below, purchases and redemptions of Creation Units will be priced at the NAV next determined after receipt of the purchase or redemption order.

PURCHASE AND REDEMPTION OF CREATION UNITS

Creation and Redemption

The shares that trade in the secondary market are “created” at NAV. The funds issue and redeem shares only in Creation Units, which are large blocks of shares, typically 25,000 shares or more. Only institutional investors, who have entered into an authorized participant agreement (known as “Authorized Participants”), may purchase or redeem Creation Units. Creation Units generally are issued and redeemed in exchange for a specified basket of securities approximating the holdings of the funds and a designated amount of cash. Each Business Day, prior to the opening of trading, the funds publish the specific securities and designated amount of cash included in that day’s basket for the funds through the National Securities Clearing Corporation (“NSCC”) or other method of public dissemination. The funds reserve the right to accept or pay out a basket of securities or cash that differs from the published basket. The prices at which creations and redemptions occur are based on the next calculation of NAV after an order is received and deemed acceptable by the Distributor. Orders from Authorized Participants to create or redeem Creation Units will only be accepted on a Business Day and are also subject to acceptance by the funds and the Distributor.

Creations and redemptions must be made by an Authorized Participant or through a firm that is either a member of the Continuous Net Settlement System of the NSCC or a Depository Trust Company (“DTC”) participant, and in each case, must have executed an agreement with the Distributor with respect to creations and redemptions of Creation Unit aggregations. Information

about the procedures regarding creation and redemption of Creation Units is included in the funds’ Statement of Additional Information (“SAI”).

Authorized Participants and the Continuous Offering of Shares

Because new shares may be created and issued on an ongoing basis, at any point during the life of the funds, a “distribution,” as such term is used in the Securities Act of 1933 (“Securities Act”), may be occurring. Broker-dealers and other persons are cautioned that some activities on their part may, depending on the circumstances, result in them being deemed participants in a distribution in a manner that could render them statutory underwriters and subject to the prospectus-delivery and liability provisions of the Securities Act. Nonetheless, any determination of whether one is an underwriter must take into account all the relevant facts and circumstances of each particular case.

Broker-dealers should also note that dealers who are not “underwriters,” but are participating in a distribution (as contrasted to ordinary secondary transactions), and thus dealing with shares that are part of an “unsold allotment” within the meaning of Section 4(3)(C) of the Securities Act, would be unable to take advantage of the prospectus delivery exemption provided by Section 4(3) of the Securities Act. For delivery of prospectuses to exchange members, the prospectus delivery mechanism of Rule 153 under the Securities Act is only available with respect to transactions on a national securities exchange.

Creation and Redemption Transaction Fees for Creation Units

The funds may impose a creation transaction fee and a redemption transaction fee to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units of shares. The creation and redemption transaction fees applicable to the funds are listed below. The standard creation transaction fee is charged to each purchaser on the day such purchaser creates a Creation Unit. The standard fee is a single charge and will be the amount indicated below regardless of the number of Creation Units purchased by an investor on the same day. Similarly, the standard redemption transaction fee will be the amount indicated regardless of the number of Creation Units redeemed that day. Purchasers and redeemers of Creation Units for cash will be subject to an additional variable charge up to four times the additional amount shown below under “Additional Creation/Redemption Transaction Fee” to offset the transaction cost to the funds of buying portfolio securities. In addition, purchasers and redeemers of shares in Creation Units are responsible for payment of the costs of transferring securities to or out of the funds. From time to time, the Adviser may cover the cost of any transaction fees when believed to be in the best interests of the funds.

The following table also shows, as of November 3, 2009, the approximate value of one Creation Unit of the funds, including the standard creation and redemption transaction fee. These fees are payable only by investors who purchase shares directly from the funds. Retail investors who purchase shares through their brokerage account will not pay these fees. Investors who use the services of a broker or other such intermediary may pay fees for such services.


			Standard		Additional
	Approximate Value		Creation/Redemption		Creation/Redemption
Name of Fund	of One Creation Unit		Transaction Fee		Transaction Fee
Schwab International Equity ETF	$	2,500,000	$	15,000	$	20,000

Schwab International Small-Cap Equity ETF	$	2,500,000	$	15,000	$	20,000

Schwab Emerging Markets Equity ETF	$	2,500,000	$	8,000	$	20,000

Transaction Policies

Policy regarding short-term or excessive trading. The funds have adopted policies and procedures with respect to frequent purchases and redemptions of Creation Units of fund shares. However, because the funds are ETFs, only Authorized Participants are authorized to purchase and redeem shares directly with the funds. Because purchase and redemption transactions with Authorized Participants are an essential part of the ETF process and help keep ETF trading prices in line with NAV, the funds accommodate frequent purchases and redemptions by Authorized Participants. Frequent purchases and redemptions for cash may increase index tracking error and portfolio transaction costs and may lead to realization of capital gains. Frequent in-kind creations and redemptions do not give rise to these concerns. The funds reserve the right to reject any purchase order at any time.

The funds reserve the right to impose restrictions on disruptive, excessive, or short-term trading. Such trading is defined by the funds as purchases and sales of fund shares in amounts and frequency determined by the funds to be significant and in a pattern of activity that can potentially be detrimental to the funds and their shareholders, such as by diluting the value of the shareholders’ holdings, increasing fund transaction costs, disrupting portfolio management strategy, incurring unwanted taxable gains, or forcing funds to hold excess levels of cash. The funds may reject purchase or redemption orders in such instances. The funds also impose a transaction fee on Creation Unit transactions that is designed to offset the funds’ transfer and other transaction costs associated with the issuance and redemption of the Creation Units. Although the funds have adopted policies and procedures designed to discourage disruptive, excessive or short-term trading, there can be no guarantee that the funds will be able to identify and restrict investors that engage in such activities or eliminate the risks associated with such activities. In addition, the decisions to restrict trading are inherently subjective and involve judgement in their application. The funds may amend these policies and procedures in response to changing regulatory requirements or to enhance their effectiveness.

Investments by Registered Investment Companies. Section 12(d)(1) of the Investment Company Act of 1940 restricts investments by registered investment companies in the securities of other investment companies, including shares of the funds. Registered investment companies are permitted to invest in the funds beyond the limits set forth in section 12(d)(1), subject to certain terms and conditions set forth in an SEC exemptive order issued to the Schwab Strategic Trust, including that such investment companies enter into an agreement with the funds.

Portfolio holdings information

A description of the funds’ policies and procedures with respect to the disclosure of the funds’ portfolio securities is available in the funds’ SAI.

Distributions and Taxes

Any investment in the funds typically involves several tax considerations . The information below is meant as a general summary for U.S. citizens and residents. Because each person’s tax situation is different, you should consult your tax advisor about the tax implications of your investment in a fund. You also can visit the Internal Revenue Service (IRS) web site at www.irs.gov.

As a shareholder, you are entitled to your share of the dividends and gains your fund earns . Each fund distributes to its shareholders substantially all of its net investment income and net capital gains, if any, annually, although it may do so more frequently as determined by the Board of Trustees. These distributions typically are paid in December to all shareholders of record. During the fourth quarter of the year, typically in early November, an estimate of the funds’ year-end distribution, if any, may be made available on the funds’ website www.schwab.com/SchwabETFs.

Each fund reserves the right to declare special distributions if, in its reasonable discretion, such action is necessary or advisable to preserve its status as a regulated investment company or to avoid imposition of income or excise taxes on undistributed income or realized gains. Dividends and other distributions on shares of the funds are distributed on a pro rata basis to beneficial owners of such shares.

Unless you are investing through an IRA, 401(k) or other tax-advantaged retirement account, your fund distributions generally have tax consequences . Each fund’s net investment income and short-term capital gains are distributed as dividends and will be taxable as ordinary income or qualified dividend income. Other capital gain distributions are taxable as long-term capital gains, regardless of how long you have held your shares in the fund. Distributions generally are taxable in the tax year in which they are declared, whether you reinvest them or take them in cash.

Generally, any sale of your shares is a taxable event . A sale of your shares may give rise to a gain or loss. In general, any gain or loss realized upon a taxable disposition of shares will be treated as long-term capital gain or loss if the shares have been held for more than 12 months. Otherwise, the gain or loss on the taxable disposition of shares will be treated as short-term capital gain or loss. Absent further legislation, the reduced maximum rates on qualified dividend income and long-term capital gains will cease to apply to taxable years beginning after December 31, 2010. Any loss realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any long-term capital gain distributions received (or deemed received) by you with respect to the shares. All or a portion of any loss realized upon a taxable

disposition of shares will be disallowed if you purchase other substantially identical shares within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.

At the beginning of every year, the funds provide shareholders with information detailing the tax status of any distributions the funds paid during the previous calendar year. Schwab customers also receive information on distributions and transactions in their monthly account statements.

More on qualified dividend income and distributions. Dividends that are designated by the funds as qualified dividend income are eligible for a reduced maximum tax rate. Qualified dividend income is, in general, dividend income from taxable domestic corporations and certain foreign corporations. The funds expect that a portion of the funds’ ordinary income distributions will be eligible to be treated as qualified dividend income subject to the reduced tax rates.

If you are investing through a taxable account and purchase shares of the funds just before it declares a distribution, you may receive a portion of your investment back as a taxable distribution. This is because when the funds make a distribution, the share price is reduced by the amount of the distribution.

You can avoid “buying a dividend,” as it is often called, by finding out if a distribution is imminent and waiting until afterwards to invest. Of course, you may decide that the opportunity to gain a few days of investment performance outweighs the tax consequences of buying a dividend.

Shareholders in the funds may have additional tax considerations as a result of foreign tax payments made by the funds. Typically, these payments will reduce the funds’ dividends but will still be included in your taxable income. You may be able to claim a tax credit or deduction for your portion of foreign taxes paid by a fund, however.

Taxes on Creation and Redemption of Creation Units

An Authorized Participant who exchanges securities for Creation Units generally will recognize a gain or a loss equal to the difference between the market value of the Creation Units at the time of the exchange and the sum of the exchanger’s aggregate basis in the securities surrendered and the cash component paid. A person who redeems Creation Units will generally recognize a gain or loss equal to the difference between the exchanger’s basis in the Creation Units and the sum of the aggregate market value of the securities and the amount of cash received for such Creation Units. The Internal Revenue Service, however, may assert that a loss realized upon an exchange of securities for Creation Units cannot be deducted currently under the rules governing “wash sales,” or on the basis that there has been no significant change in economic position. Persons exchanging securities for Creation Units should consult a tax advisor with respect to whether wash sale rules apply and when a loss might be deductible.

Any capital gain or loss realized upon a redemption (or creation) of Creation Units is generally treated as long-term capital gain or loss if the funds’ shares (or securities surrendered) have been held for more than one year and as short-term capital gain or loss if the shares (or securities surrendered) have been held for one year or less.

If you purchase or redeem Creation Units, you will be sent a confirmation statement showing how many shares you purchased or sold and at what price. Persons purchasing or redeeming Creation Units should consult their own tax advisors with respect to the tax treatment of any creation or redemption transaction.

INDEX PROVIDER

CSIM has entered into a license agreement with FTSE to use the FTSE Developed ex-US Index, FTSE All-Emerging Index and FTSE Developed Small Cap ex-US Liquid Index (the “Indexes”). Fees payable under the license agreement are paid by CSIM. FTSE has no obligation to continue to provide the Indexes to CSIM beyond the term of the license agreement.

DISCLAIMER

The funds are not in any way sponsored, endorsed, sold or promoted by FTSE, FT or by the Exchange (together the “Licensor Parties”) and none of the Licensor Parties make any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the Indexes and/or the figure at which the said Index stands at any particular time on any particular day or otherwise. The Licensor Parties make no representation or warranty, express or implied, to the owners of shares of the funds or any member of the public regarding the advisability of trading in the funds. The Indexes are compiled and calculated by FTSE. None of the Licensor Parties shall be liable (whether in negligence or otherwise) to any person for any error in the Indexes and none of the Licensor Parties shall be under any obligation to advise any person of any error therein. FTSE ^® , FT-SE ^® , Footsie ^® , FTSE4Good ^® and techMARK ^® are trade marks of the Exchange and the FT and are used by FTSE under license. All-World ^® , All-Share ^® and All-Small ^® are trade marks of FTSE.

Shares of the funds are not sponsored, endorsed or promoted by NYSE Arca. NYSE Arca makes no representation or warranty, express or implied, to the owners of the shares of the funds or any member of the public regarding the ability of the funds to track the total return performance of the Underlying Index or the ability of the Underlying Index to track stock market performance. NYSE Arca is not responsible for, nor has it participated in, the determination of the compilation or the calculation of the Underlying Index, nor in the determination of the timing of, prices of, or quantities of shares of the funds to be issued, nor in the determination or calculation of the equation by which the shares are redeemable. NYSE Arca has no obligation or liability to owners of the shares of the funds in connection with the administration, marketing or trading of the shares of the funds.

failure; equipment or software malfunction; or any error, omission or delay in the reporting of transactions in one or more underlying securities. NYSE Arca makes no warranty, express or implied, as to results to be obtained by any person or entity from the use of any underlying index or data included therein and NYSE Arca makes no express or implied warranties, and disclaims all warranties of merchantability or fitness for a particular purpose with respect to shares of the funds or any underlying index or data included therein.

THE FUNDS AND CSIM DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEXES OR ANY DATA INCLUDED THEREIN AND SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. THE FUNDS AND CSIM MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF INDEXES OR ANY DATA INCLUDED THEREIN. THE FUNDS AND CSIM MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEXES OR ANY DATA INCLUDED THEREIN, WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE FUNDS AND CSIM HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

PRIVACY NOTICE
THIS IS NOT PART OF THE PROSPECTUS

A Commitment to Your Privacy

Your Privacy Is Not for Sale

We do not and will not sell your personal information to anyone, for any reason.

We are committed to protecting the privacy of information we maintain about you. Below are details about our commitment, including the types of information we collect and how we use and share that information. This Privacy Notice applies to you only if you are an individual who invests directly in the funds by placing orders through the funds’ transfer agent. If you place orders through your brokerage account at Charles Schwab & Co., Inc. or an account with another broker-dealer, investment advisor, 401(k) plan, employee benefit plan, administrator, bank or other financial intermediary, you are covered by the privacy policies of that financial institution and should consult those policies.

How We Collect Information About You

We collect personal information about you in a number of ways.

•

Application and registration information. We collect personal information from you when you open an account or utilize one of our services. We may also collect information about you from third parties such as consumer reporting agencies to verify your identity. The information we collect may include personal information, including your Social Security number, as well as details about your interests, investments and investment experience.

•

Transaction and experience information. Once your account has been opened, we collect and maintain personal information about your account activity, including your transactions, balances, positions and history. This information allows us to administer your account and provide the services you have requested.

•

Website usage . When you visit our websites, we may use devices known as “cookies,” graphic interchange format files (GIFs), or other similar web tools to enhance your web experience. These tools help us to recognize you, maintain your web session, and provide a more personalized experience. To learn more, please click the Privacy link on our website.

How We Share and Use Your Information

We provide access to information about you to our affiliated companies, outside companies and other third parties in certain limited circumstances, including:

• to help us process transactions for your account;

•

when we use other companies to provide services for us, such as printing and mailing your account statements;

•

when we believe that disclosure is required or permitted under law (for example, to cooperate with regulators or law enforcement, resolve consumer disputes, perform credit/authentication checks, or for risk control).

State Laws

We will comply with state laws that apply to the disclosure or use of information about you.

Safeguarding Your Information —Security Is a Partnership

We take precautions to ensure the information we collect about you is protected and is accessed only by authorized individuals or organizations.

Companies we use to provide support services are not allowed to use information about our shareholders for their own purposes and are contractually obligated to maintain strict confidentiality. We limit their use of information to the performance of the specific services we have requested.

We restrict access to personal information by our employees and agents. Our employees are trained about privacy and are required to safeguard personal information.

We maintain physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.

Contact Us

To provide us with updated information, report suspected fraud or identity theft, or for any other questions, please call one of the numbers below.

Schwab ETFs ^tm direct investors: 1-800-435-4000
© 2009 Schwab ETF ^tm s. All rights reserved.

To learn more

This prospectus contains important information on the funds and should be read and kept for reference. You also can obtain more information from the following sources.

Annual and semi-annual reports, which are mailed to current fund investors, contain more information about the funds’ holdings and detailed financial information about the funds. Annual reports also contain information from the funds’ managers about strategies, recent market conditions and trends and their impact on fund performance.

The Statement of Additional Information (SAI) includes a more detailed discussion of investment policies and the risks associated with various investments. The SAI is incorporated by reference into the prospectus, making it legally part of the prospectus.

For a free copy of any of these documents or to request other information or ask questions about the funds, call Schwab ETFs ^tm at 1-800-435-4000. In addition, you may visit Schwab ETFs web site at www.schwab.com/SchwabETFProspectus for a free copy of a prospectus, SAI or an annual or semi-annual report.

The SAI, the funds’ annual and semi-annual reports and other related materials are available from the EDGAR Database on the SEC’s web site (http://www.sec.gov). You can obtain copies of this information, after paying a duplicating fee, by sending a request by e-mail to publicinfo@sec.gov or by writing the Public Reference Section of the SEC, Washington, D.C. 20549-1520. You can also review and copy information about the funds, including the funds’ SAI, at the SEC’s Public Reference Room in Washington, D.C. Call 1-202-551-8090 for information on the operation of the SEC’s Public Reference Room.

SEC File Number
Schwab International ETFs
811-22311

REG51683FLD-00

Prospectus
November 3, 2009

Schwab U.S. ETFs

Schwab ETFs™

Prospectus

November 3, 2009


	•		Schwab U.S. Broad Market ETF™



	•		Schwab U.S. Large-Cap ETF™



	•		Schwab U.S. Large-Cap Growth ETF™



	•		Schwab U.S. Large-Cap Value ETF™



	•		Schwab U.S. Small-Cap ETF™

Schwab U.S. ETFs


ABOUT THE FUNDS			1

Schwab U.S. Broad Market ETF™			2

Schwab U.S. Large-Cap ETF™			8

Schwab U.S. Large-Cap Growth ETF™			13

Schwab U.S. Large-Cap Value ETF™			18

Schwab U.S. Small-Cap ETF™			23

Fund Management			29

INVESTING IN THE FUNDS			30

Share Trading Prices			31

Determination of Net Asset Value			31

Purchase and Redemption of Creation Units			32

Transaction Policies			34

Portfolio Holdings			35

Distributions and Taxes			35

-i-

ABOUT THE FUNDS

The funds described in this Prospectus are advised by Charles Schwab Investment Management, Inc. (“CSIM” or the “Adviser”). Each of the funds is an “exchange traded fund” (“ETF”). ETFs are funds that trade like other publicly-traded securities. Because the composition of an index tends to be comparatively stable, index funds historically have shown low portfolio turnover compared to actively managed funds.


Schwab U.S. Broad Market ETF ^tm		SCHB
Schwab U.S. Large-Cap ETF ^tm		SCHX
Schwab U.S. Large-Cap Growth ETF ^tm		SCHG
Schwab U.S. Large-Cap Value ETF ^tm		SCHV
Schwab U.S. Small-Cap ETF ^tm		SCHA

The funds issue and redeem shares at their NAV only in large blocks of shares, typically 50,000 shares or more (“Creation Units”). These transactions are usually in exchange for a basket of securities and an amount of cash. As a practical matter, only institutions or large investors purchase or redeem Creation Units. Except when aggregated in Creation Units, shares of the funds are not redeemable securities.

A NOTE TO RETAIL INVESTORS

Except as explicitly described otherwise, the investment objective, the benchmark index and the investment policies of each of the funds may be changed without shareholder approval.

The funds’ performance will fluctuate over time and, as with all investments, future performance may differ from past performance.

-1-

Schwab U.S. Broad Market ETF™

Ticker symbol: SCHB

Investment Objective

The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Broad Stock Market Index ^SM . ¹

Index

The fund’s benchmark index includes the largest 2,500 publicly traded U.S. companies for which pricing information is readily available. The index is a float-adjusted market capitalization weighted index that reflects the shares of securities actually available to investors in the marketplace. As of June 30, 2009, the index was composed of 2,493 stocks.

Strategy

To pursue its goal, the fund generally invests in stocks that are included in the index. It is the fund’s policy that under normal circumstances it will invest at least 90% of its net assets in these stocks. The fund will notify its shareholders at least 60 days before changing this policy. The fund will generally give the same weight to a given stock as the index does. However, when the Adviser believes it is appropriate to do so, such as to avoid purchasing odd-lots ( i.e. , purchasing less than the usual number of shares traded for a security), for tax considerations, or to address liquidity considerations with respect to a stock, the Adviser may cause the fund’s weighting of a stock to be more or less than the index’s weighting of the stock. The fund may sell securities that are represented in the index in anticipation of their removal from the index.

Under normal circumstances, the fund may invest up to 10% of its net assets in securities not included in its index. The principal types of these investments include those which the Adviser believes will help the fund track the index, such as investments in (a) securities that are not represented in the index but the Adviser anticipates will be added to the index or as necessary to reflect various corporate actions (such as mergers and spin-offs), (b) other investment companies, and (c) futures contracts, options on futures contracts, options and swaps. The fund may also invest in cash and cash equivalents, and may lend its securities to minimize the difference in performance that naturally exists between an index fund and its corresponding index.



¹		Index ownership — “Dow Jones” and “The Dow Jones U.S. Broad Stock Market Index ^SM ” are trademarks of Dow Jones & Company, Inc. and have been licensed for use for certain purposes by CSIM. Fees payable under the license are paid by the Adviser. The Schwab U.S. Broad Market ETF, based on The Dow Jones U.S. Broad Stock Market Index ^SM , is not sponsored, endorsed, sold or promoted by Dow Jones and Dow Jones makes no representation regarding the advisability of trading in such product.

Because it may not be possible or practicable to purchase all of the stocks in the index, the Adviser may attempt to replicate the total return of the index by using statistical sampling techniques. These techniques involve investing in a limited number of index securities which, when taken together, are expected to perform similarly to the index as a whole. These techniques are based on a variety of factors, including performance attributes, tax considerations, capitalization, dividend yield, price/earnings ratio, industry factors, risk factors and other characteristics. The fund generally expects that its portfolio will hold less than the total number of securities in the index, but reserves the right to hold as many securities as it believes necessary to achieve the fund’s investment objective. The fund generally expects that its industry weightings, dividend yield and price/earnings ratio will be similar to those of the index.

Risks

Large-Cap and Mid-Cap Risk. Although the index encompasses stocks from many different sectors of the economy, its performance primarily reflects that of large- and mid-cap segments of the U.S. stock market. Both large- and mid-cap stocks tend to go in and out of favor based on market and economic conditions. However, stocks of mid-cap companies tend to be more volatile than those of large-cap companies because mid-cap companies tend to be more susceptible to adverse business or economic events than larger more established companies. During a period when large- and mid-cap U.S. stocks fall behind other types of investments – bonds or small-cap stocks, for instance – the fund’s performance also will lag those investments.

Derivatives Risk. The principal types of derivatives used by the fund are options, futures, options on futures and swaps. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. A swap is an agreement whereby two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities and a predetermined amount.

The fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as leverage risk, market risk and liquidity risk, are discussed elsewhere in this section. The fund’s use of derivatives is also subject to credit risk, liquidity risk, lack of availability risk, valuation risk, correlation risk and tax risk. Credit risk is the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund

to realize higher amounts of short-term capital gain. These risks could cause the fund to lose more than the principal amount invested.

Liquidity Risk. A particular investment may be difficult to purchase or sell. The fund may be unable to sell illiquid securities at an advantageous time or price.

ETFs that are traded less frequently. In addition, in times of severe market disruption, the bid/ask spread can increase significantly. At those times, fund shares are most likely to be traded at a discount to NAV, and the discount is likely to be greatest when the price of shares is falling fastest, which may be the time that you most want to sell your shares. The Adviser believes that, under normal market conditions, large market price discounts or premiums to NAV will not be sustained because of arbitrage opportunities.

Performance

Fund Fees and Expenses

Fee table (%)


	Shares

Shareholder fees*
	None
Annual operating expenses **

Management fees
Distribution (12b-1) fees***		0.00	%
Other expenses****	None
Total annual operating expenses	0.XX		%



*		Fees paid directly from your investment, but the fund may impose creation and redemption transaction fees to offset transaction costs associated with the issuance and redemption of Creation Units. A standard transaction fee of $1,500 is charged in connection with the creation or redemption of a Creation Unit on the day of the transaction. Cash purchases and redemptions of Creation Units are subject to an additional variable charge of up to four times the Additional Creation/Redemption Transaction Fee. See the “Creation and Redemption Transaction Fees for Creation Units” section further in this prospectus.


**		Expressed as a percentage of average net assets.


***		The fund has adopted a Distribution and Shareholder Services (12b-1) Plan pursuant to which the fund is subject to an annual 12b-1 fee of up to 0.25% of its average daily net assets. However, the Board has determined that no such fees will be charged prior to



		November 14, 2011, (more than 12 months from the commencement of the fund’s operations).


****		The fund’s Investment Advisory Agreement provides that the Adviser will pay the operating expenses of the fund, excluding interest expense, taxes, any brokerage expenses, future distribution fees or expenses (i.e., 12b-1 fees) and extraordinary or non-routine expenses.

Example


1 year		3 years
$		$

Schwab U.S. Large-Cap ETF™

Ticker symbol : SCHX

Investment Objective

The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Large-Cap Total Stock Market Index ^SM . ²

Index

The fund’s benchmark index includes the large-cap portion of the Dow Jones U.S. Total Stock Market Index ^SM actually available to investors in the marketplace. The Dow Jones U.S. Large-Cap Total Stock Market Index ^SM includes the components ranked 1-750 by full market capitalization. The index is a float-adjusted market capitalization weighted index. As of June 30, 2009, the index was composed of 743 stocks.

Strategy



²		Index ownership — “Dow Jones” and “The Dow Jones U.S. Large-Cap Total Stock Market Index ^SM ” are trademarks of Dow Jones & Company, Inc. and have been licensed for use for certain purposes by CSIM. Fees payable under the license are paid by the Adviser. The Schwab U.S. Large-Cap ETF, based on The Dow Jones U.S. Large-Cap Total Stock Market Index ^SM , is not sponsored, endorsed, sold or promoted by Dow Jones and Dow Jones makes no representation regarding the advisability of trading in such product.

Risks

Large-Cap Risk. The index’s performance primarily reflects that of the large-cap segment of the U.S. stock market. Large-cap stocks tend to go in and out of favor based on market and economic conditions. During a period when large-cap U.S. stocks fall behind other types of investments – bonds or small-cap stocks, for instance – the fund’s performance also will lag those investments.

Derivatives Risk. The principal types of derivatives used by the fund are options, futures, options of futures and swaps. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. A swap is an agreement whereby two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities and a predetermined amount.

The fund’s use of derivative instruments involves risks different from or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as leverage risk, market risk and liquidity risk, are discussed elsewhere in this section. The fund’s use of derivatives is also subject to credit risk, liquidity risk, lack of availability risk, valuation risk, correlation risk and tax risk. Credit risk is the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gain. These risks could cause the fund to lose more than the principal amount invested.

Liquidity Risk. A particular investment may be difficult to purchase or sell. The fund may be unable to sell illiquid securities at an advantageous time or price.

Performance

Fund Fees and Expenses

Fee table (%)


	Shares

Shareholder fees*
	None
Annual operating expenses **

Management fees
Distribution (12b-1) fees***		0.00	%
Other expenses****	None
Total annual operating expenses	0.XX		%



*		Fees paid directly from your investment, but the fund may impose creation and redemption transaction fees to offset transaction costs associated with the issuance and redemption of



		Creation Units. A standard transaction fee of $1,500 is charged in connection with the creation or redemption of a Creation Unit on the day of the transaction. Cash purchases and redemptions of Creation Units are subject to an additional variable charge of up to four times the Additional Creation/ Redemption Transaction Fee. See the “Creation and Redemption Transaction Fees for Creation Units” section further in this prospectus.


**		Expressed as a percentage of average net assets.


***		The fund has adopted a Distribution and Shareholder Services (12b-1) Plan pursuant to which the fund is subject to an annual 12b-1 fee of up to 0.25% of its average daily net assets. However, the Board has determined that no such fees will be charged prior to November 14, 2011 (more than 12 months from the commencement of the fund’s operations).


****		The fund’s Investment Advisory Agreement provides that the Adviser will pay the operating expenses of the fund, excluding interest expense, taxes, any brokerage expenses, future distribution fees or expenses (i.e., 12b-1 fees) and extraordinary or non-routine expenses.

Example


1 year		3 years
$		$

Schwab U.S. Large-Cap Growth ETF™

Ticker symbol : SCHG

Investment Objective

The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Large-Cap Growth Total Stock Market Index ^SM . ³

Index

The fund’s benchmark index includes the large-cap portion of the Dow Jones U.S. Total Stock Market Index ^SM actually available to investors in the marketplace. The Dow Jones U.S. Large-Cap Growth Total Stock Market Index ^SM includes the components ranked 1-750 by full market capitalization and that are classified as “growth” based on a number of factors. The index is a float-adjusted market capitalization weighted index. As of June 30, 2009, the index was composed of 433 stocks.

Strategy



³		Index ownership — “Dow Jones” and “The Dow Jones U.S. Large-Cap Growth Total Stock Market Index ^SM ” are trademarks of Dow Jones & Company, Inc. and have been licensed for use for certain purposes by CSIM. Fees payable under the license are paid by the Adviser. The Schwab U.S. Large-Cap Growth ETF, based on The Dow Jones U.S. Large-Cap Growth Total Stock Market Index ^SM , is not sponsored, endorsed, sold or promoted by Dow Jones and Dow Jones makes no representation regarding the advisability of trading in such product.

in cash and cash equivalents, and may lend its securities to minimize the difference in performance that naturally exists between an index fund and its corresponding index.

Risks

Growth Risk. The fund emphasizes a “growth” style of investing. The market values of growth stocks may be more volatile than other types of investments. Prices of growth stocks tend to reflect future expectations, and when those expectations are not met or change, share prices generally fall.

The returns on “growth” securities may not move in tandem with the returns on other styles of investing or the stock market in general.

The fund’s use of derivative instruments involves risks different from or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as leverage risk, market risk and liquidity risk, are discussed elsewhere in this section. The fund’s use of derivatives is also subject to credit risk, liquidity risk, lack of availability risk, valuation risk, correlation risk and tax risk. Credit risk is the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gain. These risks could cause the fund to lose more than the principal amount invested.

Liquidity Risk. A particular investment may be difficult to purchase or sell. The fund may be unable to sell illiquid securities at an advantageous time or price.

Performance

Fund Fees and Expenses

their effect is included in the fund’s total return.. You may also incur customary brokerage charges when buying or selling fund shares.

Fee table (%)


	Shares

Shareholder fees*
	None
Annual operating expenses **

Management fees
Distribution (12b-1) fees***		0.00	%
Other expenses****	None
Total annual operating expenses	0.XX		%



*		Fees paid directly from your investment, but the fund may impose creation and redemption transaction fees to offset transaction costs associated with the issuance and redemption of Creation Units. A standard transaction fee of $1,500 is charged in connection with the creation or redemption of a Creation Unit on the day of the transaction. Cash purchases and redemptions of Creation Units are subject to an additional variable charge of up to four times the Additional Creation /Redemption Transaction Fee. See the “Creation and Redemption Transaction Fees for Creation Units” section further in this prospectus.


**		Expressed as a percentage of average net assets.


***		The fund has adopted a Distribution and Shareholder Services (12b-1) Plan pursuant to which the fund is subject to an annual 12b-1 fee of up to 0.25% of its average daily net assets. However, the Board has determined that no such fees will be charged prior to November 14, 2011 (more than 12 months from the commencement of the fund’s operations).


****		The fund’s Investment Advisory Agreement provides that the Adviser will pay the operating expenses of the fund, excluding interest expense, taxes, any brokerage expenses, future distribution fees or expenses (i.e., 12b-1 fees) and extraordinary or non-routine expenses.

Example


1 year		3 years
$		$

Schwab U.S. Large-Cap Value ETF™

Ticker symbol : SCHV

Investment Objective

The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Large-Cap Value Total Stock Market Index ^SM . ⁴

Index

The fund’s benchmark index includes the large-cap portion of the Dow Jones U.S. Total Stock Market Index ^SM actually available to investors in the marketplace. The Dow Jones U.S. Large-Cap Value Total Stock Market Index ^SM includes the components ranked 1-750 by full market capitalization and that are classified as “value” based on a number of factors. The index is a float-adjusted market capitalization weighted index. As of June 30, 2009, the index was composed of 310 stocks.

Strategy



⁴		Index ownership — “Dow Jones” and “The Dow Jones U.S. Large-Cap Value Total Stock Market Index ^SM ” are trademarks of Dow Jones & Company, Inc. and have been licensed for use for certain purposes by CSIM. Fees payable under the license are paid by the Adviser. The Schwab U.S. Large-Cap Value ETF, based on The Dow Jones U.S. Large-Cap Value Total Stock Market Index ^SM , is not sponsored, endorsed, sold or promoted by Dow Jones and Dow Jones makes no representation regarding the advisability of trading in such product.

in cash and cash equivalents, and may lend its securities to minimize the difference in performance that naturally exists between an index fund and its corresponding index.

Risks

Value Risk. The fund emphasizes a “value” style of investing, which targets undervalued companies with characteristics for improved valuations. This style of investing is subject to the risk that the valuations never improve or that the returns on “value” securities may not move in tandem with the returns on other styles of investing or the stock market in general.

The fund’s use of derivative instruments involves risks different from or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as leverage risk, market risk and liquidity risk, are discussed elsewhere in this section. The fund’s use of derivatives is also subject to credit risk, liquidity risk, lack of availability risk, valuation risk, correlation risk and tax risk. Credit risk is the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gain. These risks could cause the fund to lose more than the principal amount invested.

Liquidity Risk. A particular investment may be difficult to purchase or sell. The fund may be unable to sell illiquid securities at an advantageous time or price.

price volatility and may be more susceptible to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector or asset class.

Performance

Fund Fees and Expenses

Fee table (%)


	Shares

Shareholder fees*
	None
Annual operating expenses **

Management fees
Distribution (12b-1) fees***		0.00	%
Other expenses****	None
Total annual operating expenses	0.XX		%



*		Fees paid directly from your investment, but the fund may impose creation and redemption transaction fees to offset transaction costs associated with the issuance and redemption of Creation Units. A standard transaction fee of $1,500 is charged in connection with the creation or redemption of a Creation Unit on the day of the transaction. Cash purchases and redemptions of Creation Units are subject to an additional variable charge of up to four times the Additional Creation/Redemption Transaction Fee. See the “Creation and Redemption Transaction Fees for Creation Units” section further in this prospectus.


**		Expressed as a percentage of average net assets.


***		The fund has adopted a Distribution and Shareholder Services (12b-1) Plan pursuant to which the fund is subject to an annual 12b-1 fee of up to 0.25% of its average daily net assets. However, the Board has determined that no such fees will be charged prior to November 14, 2011 (more than 12 months from the commencement of the fund’s operations).


****		The fund’s Investment Advisory Agreement provides that the Adviser will pay the operating expenses of the fund, excluding interest expense, taxes, any brokerage expenses, future distribution fees or expenses (i.e., 12b-1 fees) and extraordinary or non-routine expenses.

Example


1 year		3 years
$		$

Schwab U.S. Small-Cap ETF™

Ticker symbol : SCHA

Investment Objective

The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Small-Cap Total Stock Market Index ^SM . ⁶

Index

The fund’s benchmark index includes the small-cap portion of the Dow Jones U.S. Total Stock Market Index ^SM actually available to investors in the marketplace. The Dow Jones U.S. Small-Cap Total Stock Market Index ^SM includes the components ranked 751-2500 by full market capitalization. The index is a float-adjusted market capitalization weighted index. As of June 30, 2009, the index was composed of 1,750 stocks.

Strategy



⁶		Index ownership — “Dow Jones” and “The Dow Jones U.S. Small-Cap Total Stock Market Index ^SM ” are trademarks of Dow Jones & Company, Inc. and have been licensed for use for certain purposes by CSIM. Fees payable under the license are payable by the Adviser. The Schwab U.S. Small-Cap ETF, based on The Dow Jones U.S. Small-Cap Total Stock Market Index ^SM , is not sponsored, endorsed, sold or promoted by Dow Jones and Dow Jones makes no representation regarding the advisability of trading in such product.

Because it may not be possible or practicable to purchase all of the stocks in the index, the Adviser may attempt to replicate the total return of the index by using statistical sampling techniques. These techniques involve investing in a limited number of index securities which, when taken together, are expected to perform similarly to the index as a whole. These techniques are based on a variety of factors, including performance attributes, tax considerations, capitalization, dividend yield, price/earnings ratio, industry factors risk factors and other characteristics. The fund generally expects that its portfolio will hold less than the total number of securities in the index, but reserves the right to hold as many securities as it believes necessary to achieve the fund’s investment objective. The fund generally expects that its industry weightings, dividend yield and price/earnings ratio will be similar to those of the index.

Risks

The fund’s use of derivative instruments involves risks different from or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as leverage risk, market risk and liquidity risk, are discussed elsewhere in this section. The fund’s use of derivatives is also subject to credit risk, liquidity risk, lack of availability risk, valuation risk, correlation risk and tax risk. Credit risk is the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gain. These risks could cause the fund to lose more than the principal amount invested.

Liquidity Risk. A particular investment may be difficult to purchase or sell. The fund may be unable to sell illiquid securities at an advantageous time or price.

liquidate portfolio positions when it would not be advantageous to do so in order to satisfy its obligations.

Performance

Fund Fees and Expenses

Fee table (%)


	Shares

Shareholder fees*
	None
Annual operating expenses **

Management fees
Distribution (12b-1) fees***		0.00	%
Other expenses****	None
Total annual operating expenses	0.XX		%



*		Fees paid directly from your investment, but the fund may impose creation and redemption transaction fees to offset transaction costs associated with the issuance and redemption of Creation Units. A standard transaction fee of $1,500 is charged in connection with the creation or redemption of a Creation Unit on the day of the transaction. Cash purchases and redemptions of Creation Units are subject to an additional variable charge of up to four times the Additional Creation/Redemption Transaction Fee. See the “Creation and Redemption Transaction Fees for Creation Units” section further in this prospectus.


**		Expressed as a percentage of average net assets.


***		The fund has adopted a Distribution and Shareholder Services (12b-1) Plan pursuant to which the fund is subject to an annual 12b-1 fee of up to 0.25% of its average daily net assets. However, the Board has determined that no such fees will be charged prior to November 14, 2011 (more than 12 months from the commencement of the fund’s operations).


****		The fund’s Investment Advisory Agreement provides that the Adviser will pay the operating expenses of the fund, excluding interest expense, taxes, any brokerage expenses, future distribution fees or expenses (i.e., 12b-1 fees) and extraordinary or non-routine expenses.

Example


1 year		3 years
$		$

Fund Management

The investment adviser for the Schwab U.S. ETFs is Charles Schwab Investment Management, Inc., (“CSIM”) 211 Main Street, San Francisco, CA 94105. Founded in 1989, the firm today serves as investment adviser for all of the Schwab Funds ^® and Laudus Funds ^® . The firm has more than $ billion under management. (All figures on this page are as of 08/31/09.)

As the investment adviser, the firm oversees the asset management and administration of the funds. As compensation for these services, the firm receives a management fee from the funds, expressed as a percentage of each fund’s average daily net assets.


Schwab U.S. Broad Market ETF™				%
Schwab U.S. Large-Cap ETF™				%
Schwab U.S. Large-Cap Growth ETF™				%
Schwab U.S. Large-Cap Value ETF™				%
Schwab U.S. Small-Cap ETF™				%

A discussion regarding the basis for the Board of Trustees’ approval of the funds’ investment advisory agreements will be available in the funds’ annual and/or semi-annual report.

Other Considerations

Distribution and Shareholder Services (12b-1) Plan. Each fund has adopted a Distribution and Shareholder Services (12b-1) Plan in accordance with Rule 12b-1 under the 1940 Act pursuant to which each fund is subject to an annual 12b-1 fee of up to 0.25% of the fund’s average daily net assets. The plan allows the funds to pay distribution and shareholder service fees to the funds’ distributor and other firms that provide distribution and shareholder services. However, the Board has determined that no such fees will be charged prior to November 14, 2011 (more than 12 months from the commencement of a fund’s operations and shareholder). Because these fees would be paid out of each funds’ assets on an on-going basis, if payments are made in the future, these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.

INVESTING IN THE FUNDS

On the following pages, you will find information on buying and selling shares. Most investors will invest in the funds through an intermediary by placing orders through their brokerage account at Charles Schwab & Co., Inc. (“Schwab”) or an account with another broker/dealer or other intermediary. Authorized Participants (as defined in “Transaction Policies,” below) may invest directly in the funds by placing orders for Creation Units through the funds’ transfer agent (direct orders). Helpful information on taxes is included as well.

Shares of the funds trade under the following trading symbols:


Schwab U.S. Broad Market ETF™		SCHW
Schwab U.S. Large-Cap ETF™		SCHX
Schwab U.S. Large-Cap Growth ETF™		SCHG
Schwab U.S. Large-Cap Value ETF™		SCHV
Schwab U.S. Small-Cap ETF™		SCHA

Shares of the funds may be acquired or redeemed directly from the funds only in Creation Units or multiples thereof; as discussed in the “Creation and Redemption” section below. Once created, shares of the funds trade in the secondary market in amounts less than a Creation Unit. The funds do not impose any minimum investment for shares of the funds purchased on an exchange or in the secondary market. Except when aggregated in Creation Units, shares are not redeemable by the funds.

Share Trading Prices

As with other types of securities, the trading prices of shares in the secondary market can be affected by market forces such as supply and demand, economic conditions and other factors. The price you pay or receive when you buy or sell your shares in the secondary market may be more a premium or less a discount than the NAV of such shares.

The approximate value of shares of the funds are disseminated every fifteen seconds throughout the trading day by the national securities exchange on which the funds are listed or by other information providers. This approximate value should not be viewed as a “real-time” update of the NAV, because the approximate value may not be calculated in the same manner as the NAV, which is computed once per day. The approximate value generally is determined by using current market quotations and/or price quotations obtained from broker-dealers that may trade in the portfolio securities held by the funds. The funds and adviser are not involved in, or responsible for, the calculation or dissemination of the approximate value and make no warranty as to its accuracy.

Determination of Net Asset Value

example, the funds may fair value a security when a security is de-listed or its trading is halted or suspended; when a security’s primary pricing source is unable or unwilling to provide a price; when a security’s primary trading market is closed during regular market hours; or when a security’s value is materially affected by events occurring after the close of the security’s primary trading market. By fair valuing securities whose prices may have been affected by events occurring after the close of trading, the funds seek to establish prices that investors might expect to realize upon the current sales of these securities. The funds’ fair value methodologies seeks to ensure that the prices at which the funds’ shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders. Generally, when fair valuing a security, the funds will take into account all reasonably available information that may be relevant to a particular valuation including, but not limited to, fundamental analytical data regarding the issuer, information relating to the issuer’s business, recent trades or offers of the security, general and specific market conditions and the specific facts giving rise to the need to fair value the security. The funds make fair value determinations in good faith and in accordance with the fair value methodologies included in the Board adopted valuation procedures. Due to the subjective and variable nature of fair value pricing, there can be no assurance that the funds could obtain the fair value assigned to the security upon the sale of such security.

PURCHASE AND REDEMPTION OF CREATION UNITS

Creation and Redemption

about the procedures regarding creation and redemption of Creation Units is included in the funds’ Statement of Additional Information (“SAI”).

Authorized Participants and the Continuous Offering of Shares

Creation and Redemption Transaction Fees for Creation Units


			Standard		Additional
	Approximate Value		Creation/Redemption		Creation/Redemption
Name of Fund	of One Creation Unit		Transaction Fee		Transaction Fee
Schwab U.S. Broad Market ETF™	$	1,250,000	$	1,500	$	10,000

Schwab U.S. Large- Cap ETF™	$	1,250,000	$	500	$	10,000

Schwab U.S. Large- Cap Growth ETF™	$	1,250,000	$	500	$	10,000

Schwab U.S. Large- Cap Value ETF™	$	1,250,000	$	500	$	10,000

Schwab U.S. Small- Cap ETF ™	$	1,250,000	$	1,500	$	10,000

Transaction Policies

The funds reserve the right to impose restrictions on disruptive, excessive, or short-term trading. Such trading is defined by the funds as purchases and sales of fund shares in amounts and frequency determined by the funds to be significant and in a pattern of activity that can potentially be detrimental to the funds and their shareholders, such as by diluting the value of the shareholders’ holdings, increasing fund transaction costs, disrupting portfolio management strategy, incurring unwanted taxable gains, or forcing funds to hold excess levels of cash. The funds may reject purchase or redemption orders in such instances. The funds also impose a transaction fee on Creation Unit transactions that is designed to offset the funds’ transfer and other transaction costs associated with the issuance and redemption of the Creation Units. Although the funds have adopted policies and procedures designed to discourage disruptive, excessive or short-term trading, there can be no guarantee that the funds will be able to identify and restrict investors that engage in such activities or eliminate the risks associated with such activities. In addition, the decisions to restrict trading are inherently subjective and involve judgment in their application. The funds may amend these policies and procedures in response to changing regulatory requirements or to enhance their effectiveness.

Portfolio holdings information

A description of the funds’ policies and procedures with respect to the disclosure of the funds’ portfolio securities is available in the funds’ SAI.

Distributions and Taxes

As a shareholder, you are entitled to your share of the dividends and gains your fund earns . Dividends from net investment income, if any, are generally declared and paid quarterly by each fund. Distributions of net realized capital gains, if any, generally are declared and paid once a year, although the Trust may do so more frequently as determined by the Trustees of the Trust. The Trust reserves the right to declare special distributions if, in its reasonable discretion, such action is necessary or advisable to preserve its status as a regulated investment company (“RIC”) or to avoid imposition of income or excise taxes on undistributed income or realized gains. Dividends and other distributions on shares of the funds are distributed on a pro rata basis to beneficial owners of such shares. During the fourth quarter of the year, typically in early November, an estimate of the funds’ year-end net capital gains distribution, if any, may be made available on the funds’ website www.schwab.com/SchwabETFs.

More on qualified dividend income and distributions. Dividends that are designated by the funds as qualified dividend income are eligible for a reduced maximum tax rate. Qualified dividend income is, in general, dividend income from taxable domestic corporations and certain foreign corporations. The funds expects that a portion of the funds’ ordinary income distributions will be eligible to be treated as qualified dividend income subject to the reduced tax rates.

Taxes on Creation and Redemption of Creation Units

INDEX PROVIDER

Dow Jones Indexes, a business unit of Dow Jones & Company, Inc., is a full service index provider which develops, maintains and licenses indexes for use as benchmarks and as the basis of investment products. Dow Jones & Company is a News Corporation company (NYSE: NWS). Dow Jones is a leading provider of global business news and information services.

CSIM has entered into a license agreement with Dow Jones to use the Indexes (as defined below). Fees payable under the license agreement are paid by CSIM. Dow Jones has no obligation to continue to provide the Indexes to CSIM beyond the term of the license agreement.

DISCLAIMERS

The funds are not sponsored, endorsed, sold or promoted by Dow Jones. Dow Jones makes no representation or warranty, express or implied, to the owners of shares of the funds or any member of the public regarding the advisability of trading in the funds. Dow Jones’ only relationship to CSIM is the licensing of certain trademarks and trade names of Dow Jones and of the Dow Jones U.S. Broad Stock Market Index ^SM , Dow Jones U.S. Large-Cap Total Stock Market Index ^SM , Dow Jones U.S. Large-Cap Growth Total Stock Market Index ^SM , Dow Jones U.S. Large-Cap Value Total Stock Market Index ^SM , and Dow Jones U.S. Small-Cap Total Stock Market Index ^SM (the “Indexes”) which is determined, composed and calculated by Dow Jones without regard to CSIM or the funds, Dow Jones has no obligation to take the needs of CSIM or the owners of shares of the funds into consideration in determining, composing or calculating the Indexes. Dow Jones is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the shares of the funds to be listed or in the determination or calculation of the equation by which the shares of the funds are to be redeemable for cash. Dow Jones has no obligation or liability in connection with the administration, marketing or trading of the funds.

DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEXES OR ANY DATA INCLUDED THEREIN AND DOW JONES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONES MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY CSIM, OWNERS OF THE SHARES OF THE FUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF INDEXES OR ANY DATA INCLUDED THEREIN. DOW JONES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEXES OR ANY DATA INCLUDED THEREIN, WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN DOW JONES AND CSIM.

Shares of the funds are not sponsored, endorsed or promoted by NYSE Arca. NYSE Arca makes no representation or warranty, express or implied, to the owners of the shares of the funds or any

member of the public regarding the ability of the funds to track the total return performance of the Underlying Index or the ability of the Underlying Index to track stock market performance. NYSE Arca is not responsible for, nor has it participated in, the determination of the compilation or the calculation of the Underlying Index, nor in the determination of the timing of, prices of, or quantities of shares of the funds to be issued, nor in the determination or calculation of the equation by which the shares are redeemable. NYSE Arca has no obligation or liability to owners of the shares of the funds in connection with the administration, marketing or trading of the shares of the funds.

NYSE Arca shall have no liability for damages, claims, losses or expenses caused by any errors, omissions, or delays in calculating or disseminating any current index or portfolio value the current value of the portfolio of securities required to be deposited to the funds; the amount of any dividend equivalent payment or cash distribution to holders of shares of the funds; net asset value; or other information relating to the creation, redemption or trading of shares of the funds, resulting from any negligent act or omission by NYSE Arca, or any act, condition or cause beyond the reasonable control of NYSE Arca, including, but not limited to, an act of God; fire; flood; extraordinary weather conditions; war; insurrection; riot; strike; accident; action of government; communications or power failure; equipment or software malfunction; or any error, omission or delay in the reporting of transactions in one or more underlying securities. NYSE Arca makes no warranty, express or implied, as to results to be obtained by any person or entity from the use of any underlying index or data included therein and NYSE Arca makes no express or implied warranties, and disclaims all warranties of merchantability or fitness for a particular purpose with respect to shares of the funds or any underlying index or data included therein.

PRIVACY NOTICE
THIS IS NOT PART OF THE PROSPECTUS

A Commitment to Your Privacy

Your Privacy Is Not for Sale

We do not and will not sell your personal information to anyone, for any reason.

How We Collect Information About You

We collect personal information about you in a number of ways.

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How We Share and Use Your Information

We provide access to information about you to our affiliated companies, outside companies and other third parties in certain limited circumstances, including:

•

to help us process transactions for your account;

•

when we use other companies to provide services for us, such as printing and mailing your account statements;

•

State Laws

We will comply with state laws that apply to the disclosure or use of information about you.

Safeguarding Your Information —Security Is a Partnership

We take precautions to ensure the information we collect about you is protected and is accessed only by authorized individuals or organizations.

We restrict access to personal information by our employees and agents. Our employees are trained about privacy and are required to safeguard personal information.

We maintain physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.

Contact Us

To provide us with updated information, report suspected fraud or identity theft, or for any other questions, please call one of the numbers below.

Schwab ETFs ^TM direct investors: 1-800-435-4000

To learn more

This prospectus contains important information on the funds and should be read and kept for reference. You also can obtain more information from the following sources.

For a free copy of any of these documents or to request other information or ask questions about the funds, call Schwab ETFs ^™ at 1-800-435-4000. In addition, you may visit Schwab ETFs web site at www.schwab.com/SchwabETFProspectus for a free copy of a prospectus, SAI or an annual or semi-annual report.

SEC File Number
Schwab U.S. ETF Funds
811-22311

REG51682FLD-00

Prospectus
November 3, 2009

THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. THE STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.

STATEMENT OF ADDITIONAL INFORMATION

Schwab ETFs

Schwab U.S. Broad Market ETF ^™
Schwab U.S. Large-Cap ETF ^™
Schwab U.S. Large-Cap Growth ETF ^™
Schwab U.S. Large-Cap Value ETF ^™
Schwab U.S. Small-Cap ETF ^™

Schwab International Equity ETF ^™
Schwab International Small-Cap Equity ETF ^™
Schwab Emerging Markets Equity ETF ^™

November 3, 2009

The Statement of Additional Information (SAI) is not a prospectus. It should be read in conjunction with the funds’ prospectuses, each dated November 3, 2009 (as amended from time to time). To obtain a free copy of any of the prospectuses, please contact Schwab ETFs at 1-800-435-4000. For TDD service call 1-800-345-2550. The prospectus also may be available on the Internet at: http://www.schwab.com/SchwabETFProspectus.

Each fund is a series of the Schwab Strategic Trust (the trust). The funds are part of the Schwab complex of funds (“Schwab Funds®”).


INVESTMENT OBJECTIVES, STRATEGIES, RISKS AND LIMITATIONS			2

CONTINUOUS OFFERING			32

MANAGEMENT OF THE FUNDS			33

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES			34

INVESTMENT ADVISORY AND OTHER SERVICES			34

PORTFOLIO MANAGERS			37

BROKERAGE ALLOCATION AND OTHER PRACTICES			40

PROXY VOTING			44

DESCRIPTION OF THE TRUST			45

PURCHASE, REDEMPTION, DELIVERY OF SHAREHOLDER DOCUMENTS AND PRICING OF SHARES			46

TAXATION			52

APPENDIX -DESCRIPTION OF PROXY VOTING POLICY AND PROCEDURES

REG50329-00

INVESTMENT OBJECTIVES, STRATEGIES, RISKS AND LIMITATIONS

Investment Objectives

Each fund’s investment objective is not fundamental and therefore may be changed by the funds’ board of trustees without shareholder approval.

The Schwab U.S. Broad Market ETF™ seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Broad Stock Market Index.

The Schwab U.S. Large-Cap ETF™ seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Large-Cap Total Stock Market Index.

The Schwab U.S. Large-Cap Growth ETF™ seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Large-Cap Growth Total Stock Market Index.

The Schwab U.S. Large-Cap Value ETF™ seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Large-Cap Value Total Stock Market Index.

The Schwab U.S. Small-Cap ETF™ seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Small-Cap Total Stock Market Index.

The Schwab International Equity ETF™ seeks to track as closely as possible, before fees and expenses, the total return of the FTSE Developed ex-US Index.

The Schwab International Small-Cap Equity ETF™ seeks to track as closely as possible, before fees and expenses, the total return of the FTSE Developed Small Cap ex-US Liquid Index.

The Schwab Emerging Markets Equity ETF™ seeks to track as closely as possible, before fees and expenses, the total return of the FTSE All-Emerging Index.

There is no guarantee the funds will achieve their investment objectives.

Description of Benchmark Indices

The Schwab U.S. Broad Market ETF’s benchmark index, Dow Jones U.S. Broad Stock Market Index ^SM , includes the largest 2,500 publicly traded U.S. companies for which pricing information is readily available. The index is a float-adjusted market capitalization weighted index that reflects the shares of securities actually available to investors in the marketplace. As of June 30, 2009, the index was composed of 2,493 stocks.

The Schwab U.S. Large-Cap ETF’s benchmark index, Dow Jones U.S. Large-Cap Total Stock Market Index ^SM , includes the large-cap portion of the Dow Jones U.S. Total Stock Market Index actually available to investors in the marketplace. The Dow Jones U.S. Large-Cap Total Stock Market Index includes the components ranked 1-750 by full market capitalization. The index is a float-adjusted market capitalization weighted index. As of June 30, 2009, the index was comprised of 743 stocks.

The Schwab U.S. Large-Cap Growth ETF’s benchmark index, Dow Jones U.S. Large-Cap Growth Total Stock Market Index ^SM , includes the large-cap portion of the Dow Jones U.S. Total Stock Market Index actually available to investors in the marketplace. The Dow Jones U.S. Large-Cap Growth Total Stock Market Index includes the components ranked 1-750 by full market capitalization and that are classified as “growth” based on a number of factors. The index is a float-adjusted market capitalization weighted index. As of June 30, 2009, the index was comprised of 433 stocks.

The Schwab U.S. Large-Cap Value ETF’s benchmark index, Dow Jones U.S. Large-Cap Value Total Stock Market Index ^SM , includes the large-cap portion of the Dow Jones U.S. Total Stock Market Index actually available to investors in the marketplace. The Dow Jones U.S. Large-Cap Value Total Stock Market Index includes the components ranked 1-750 by full market capitalization and that are classified as “value” based on a number of factors. The index is a float-adjusted market capitalization weighted index. As of June 30, 2009, the index was comprised of 310 stocks.

The Schwab U.S. Small-Cap ETF’s benchmark index, Dow Jones U.S. Small-Cap Total Stock Market Index ^SM , includes the small-cap portion of the Dow Jones U.S. Total Stock Market Index actually available to investors in the marketplace. The Dow Jones U.S. Small-Cap Total Stock Market Index includes the components ranked 751-2500 by full market capitalization. The index is a float-adjusted market capitalization weighted index. As of June 30, 2009, the index was comprised of 1,750 stocks.

The Schwab International Equity ETF’s benchmark, the FTSE Developed ex-US Index, is comprised of large and mid capitalization companies in developed countries outside the United States, as defined by the index provider. The index defines the large and mid capitalization universe as approximately the top 90% of the eligible universe. As of June 30, 2009, the index was composed of 1,325 stocks in 23 developed market countries.

The Schwab International Small-Cap Equity ETF’s benchmark, the FTSE Developed Small Cap ex-US Liquid Index, is comprised of small capitalization companies in developed countries outside the United States, as defined by the index provider. The index defines the small capitalization universe as approximately the bottom 10% of the eligible universe with a minimum free float capitalization of $150 million. As of June 30, 2009, the index was composed of 1820 stocks in 23 developed market countries.

The Schwab Emerging Markets Equity ETF’s benchmark, the FTSE All-Emerging Index, is comprised of large and mid capitalization companies in emerging market countries, as defined by the index provider. The index defines the large and mid capitalization universe as approximately the top 90% of the eligible universe. As of June 30, 2009, the index was composed of 824 stocks in 23 emerging market countries.

Dow Jones Indexes, a business unit of Dow Jones & Company, Inc., is a full service index provider which develops, maintains and licenses indexes for use as benchmarks and as the basis of investment products. Dow Jones & Company, Inc. is a News Corporation company (NYSE: NWS). Dow Jones is a leading provider of global business news and information services. Dow Jones’ only relationship to the funds and CSIM (as defined herein) is the licensing of certain

trademarks and trade names of Dow Jones and of the Dow Jones U.S. Broad Stock Market Index ^SM , Dow Jones U.S. Large-Cap Total Stock Market Index ^SM , Dow Jones U.S. Large-Cap Growth Total Stock Market Index ^SM , Dow Jones U.S. Large-Cap Value Total Stock Market Index ^SM , and Dow Jones U.S. Small-Cap Total Stock Market Index ^SM (the “Dow Jones Indexes”). The funds are not sponsored, endorsed, sold or promoted by Dow Jones.

DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE DOW JONES INDEXES OR ANY DATA INCLUDED THEREIN AND DOW JONES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONES MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY CSIM, OWNERS OF THE SHARES OF THE FUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF DOW JONES INDEXES OR ANY DATA INCLUDED THEREIN. DOW JONES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DOW JONES INDEXES OR ANY DATA INCLUDED THEREIN, WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN DOW JONES AND CSIM.

FTSE International Limited (“FTSE”) is an independent company whose sole business is the creation and management of indexes and associated data services. FTSE is a joint venture between The Financial Times Limited (“FT”) and the London Stock Exchange Plc (the “Exchange”). FTSE calculates more than 60,000 indexes daily, including more than 600 real-time indexes. “FTSE ^tm ” is a trademark jointly owned by the Exchange and FT and is used by FTSE under license. FTSE is not affiliated with the funds, CSIM (as defined herein), the Distributor (as defined herein) or any of their respective affiliates. The funds are not sponsored, endorsed, sold or promoted by FTSE, FT or the Exchange. FTSE, FT and the Exchange make no representation or warranty, express or implied, to the owners of shares of the funds or any member of the public regarding the advisability of trading in the funds, and make no warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Indexes and/or the figure at which the said FTSE Index stands at any particular time on any particular day or otherwise.

Shares of the funds are not sponsored, endorsed or promoted by NYSE Arca. NYSE Arca makes no representation or warranty, express or implied, to the owners of the shares of the funds or any member of the public regarding the ability of the funds to track the total return performance of the underlying index or the ability of the underlying index to track stock market performance. NYSE Arca is not responsible for, nor has it participated in, the determination of the compilation or the calculation of the underlying index, nor in the determination of the timing of, prices of, or quantities of shares of the funds to be issued, nor in the determination or calculation of the equation by which the shares are redeemable. NYSE Arca has no obligation or liability to owners of the shares of the funds in connection with the administration, marketing or trading of the shares of the funds.

Fund Investment Policies

The Schwab U.S. Broad Market ETF™ will, under normal circumstances, invest at least 90% of its net assets in the stocks of its benchmark index. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The Schwab U.S. Large-Cap ETF™ will, under normal circumstances, invest at least 90% of its net assets in the stocks of its benchmark index. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The Schwab U.S. Large-Cap Growth ETF™ will, under normal circumstances, invest at least 90% of its net assets in the stocks of its benchmark index. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The Schwab U.S. Large-Cap Value ETF™ will, under normal circumstances, invest at least 90% of its net assets in the stocks of its benchmark index. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The Schwab U.S. Small-Cap ETF™ will, under normal circumstances, invest at least 90% of its net assets in the stocks of its benchmark index. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The Schwab International Equity ETF™ will, under normal circumstances, invest at least 90% of its net assets in the stocks of its benchmark index, including depositary receipts representing securities of the index; which may be in the form of American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts (“EDRs”). The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The Schwab International Small-Cap Equity ETF™ will, under normal circumstances, invest at least 90% of its net assets in the stocks of its benchmark index, including depositary receipts representing securities of the index; which may be in the form of ADRs, GDRs and EDRs. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

The Schwab Emerging Markets Equity ETF™ will, under normal circumstances, invest at least 90% of its net assets in the stocks of its benchmark index, including depositary receipts representing securities of the index; which may be in the form of ADRs, GDRs and EDRs. The fund will notify its shareholders at least 60 days before changing this policy. For purposes of this policy, net assets mean net assets plus the amount of any borrowings for investment purposes.

Investments, Risks and Limitations

The following investment strategies, risks and limitations supplement those set forth in the prospectus and may be changed without shareholder approval unless otherwise noted. Also, policies and limitations that state a maximum percentage of assets that may be invested in a security or other asset, or that set forth a quality standard, shall be measured immediately after and as a result of a fund’s acquisition of such security or asset unless otherwise noted. Thus, except with respect to limitations on borrowing and futures and option contracts, any subsequent change in values, net assets or other circumstances does not require a fund to sell an investment if it could not then make the same investment.

Principal Investment Strategy Investments

Unless otherwise indicated, the following investments may be used as part of each fund’s principal investment strategy.

Concentration means that substantial amounts of assets are invested in a particular industry or group of industries. Concentration increases investment exposure to industry risk. For example, the automobile industry may have a greater exposure to a single factor, such as an increase in the price of oil, which may adversely affect the sale of automobiles and, as a result, the value of the industry’s securities. As part of each fund’s principal investment strategy, each fund will not concentrate its investments in a particular industry or group of industries, except that each fund will concentrate to approximately the same extent that its benchmark index concentrates in the securities of such particular industry or group of industries.

Depositary Receipts (Principal investments for Schwab International Equity ETF, Schwab International Small-Cap Equity ETF and Schwab Emerging Markets Equity ETF. Permissible non-principal investments for each other fund). Depositary receipts include American Depositary Receipts (ADRs) as well as other “hybrid” forms of ADRs, such as European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs), are certificates evidencing ownership of shares of a foreign issuer. Depositary receipts may be sponsored or unsponsored. These certificates are issued by depository banks and generally trade on an established market in the United States or elsewhere. The underlying shares are held in trust by a custodian bank or similar financial institution in the issuer’s home country. The depository bank may not have physical custody of the underlying securities at all times and may charge fees for various services,

including forwarding dividends and interest and corporate actions. ADRs are alternatives to directly purchasing the underlying foreign securities in their national markets and currencies. However, ADRs continue to be subject to many of the risks associated with investing directly in foreign securities.

Investments in the securities of foreign issuers may subject a fund to investment risks that differ in some respects from those related to investments in securities of U.S. issuers. Such risks include future adverse political and economic developments, possible imposition of withholding taxes on income, possible seizure, nationalization or expropriation of foreign deposits, possible establishment of exchange controls or taxation at the source or greater fluctuation in value due to changes in exchange rates. Foreign issuers of securities often engage in business practices different from those of domestic issuers of similar securities, and there may be less information publicly available about foreign issuers. In addition, foreign issuers are, generally speaking, subject to less government supervision and regulation and different accounting treatment than are those in the United States.

Although the two types of depositary receipt facilities (unsponsored or sponsored) are similar, there are differences regarding a holder’s rights and obligations and the practices of market participants. A depository may establish an unsponsored facility without participation by (or acquiescence of) the underlying issuer; typically, however, the depository requests a letter of non-objection from the underlying issuer prior to establishing the facility. Holders of unsponsored depositary receipts generally bear all the costs of the facility. The depository usually charges fees upon the deposit and withdrawal of the underlying securities, the conversion of dividends into U.S. dollars or other currency, the disposition of non-cash distributions, and the performance of other services. The depository of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the underlying issuer or to pass through voting rights to depositary receipt holders with respect to the underlying securities.

Sponsored depositary receipt facilities are created in generally the same manner as unsponsored facilities, except that sponsored depositary receipts are established jointly by a depository and the underlying issuer through a deposit agreement. The deposit agreement sets out the rights and responsibilities of the underlying issuer, the depository, and the depositary receipt holders. With sponsored facilities, the underlying issuer typically bears some of the costs of the depositary receipts (such as dividend payment fees of the depository), although most sponsored depositary receipts holders may bear costs such as deposit and withdrawal fees. Depositories of most sponsored depositary receipts agree to distribute notices of shareholder meetings, voting instructions, and other shareholder communications and information to the depositary receipt holders at the underlying issuer’s request.

Derivative Instruments are commonly defined to include securities or contracts whose values depend on (or “derive” from) the value of one or more other assets such as securities, currencies, or commodities. These “other assets” are commonly referred to as “underlying assets.” The principal types of derivatives used by the funds are swaps, options, futures, options on futures and, with respect to the Schwab International Equity ETF, Schwab International Small-Cap Equity ETF and Schwab Emerging Markets Equity ETF, forward foreign currency contracts.

A derivative instrument generally consists of, is based upon, or exhibits characteristics similar to options or forward contracts. Options and forward contracts are considered to be the basic “building blocks” of derivatives. For example, forward-based derivatives include forward contracts, as well as exchange-traded futures. Option-based derivatives include privately negotiated, over-the-counter (OTC) options (including caps, floors, collars, and options on forward and swap contracts) and exchange-traded options on futures. Diverse types of derivatives may be created by combining options or forward contracts in different ways, and applying these structures to a wide range of underlying assets. Risk management strategies include investment techniques designed to facilitate the sale of portfolio securities, manage the average duration of the portfolio or create or alter exposure to certain asset classes, such as equity, other debt or foreign securities.

Each fund may allocate up to 10% of its net assets to derivatives investments.

Diversification involves investing in a wide range of securities and thereby spreading and reducing the risks of investment. Each fund is a series of an open-end investment management company with limited redeemability. The funds are diversified exchange traded funds.

Emerging or Developing Markets (Principal investment for Schwab Emerging Markets Equity ETF only. Permissible non-principal investment for all other funds.) Emerging or developing markets exist in countries that are considered to be in the initial stages of industrialization. The risks of investing in these markets are similar to the risks of international investing in general, although the risks are greater in emerging and developing markets. Countries with emerging or developing securities markets tend to have economic structures that are less stable than countries with developed securities markets. This is because their economies may be based on only a few industries and their securities markets may trade a small number of securities. Prices on these exchanges tend to be volatile, and securities in these countries historically have offered greater potential for gain (as well as loss) than securities of companies located in developed countries.

Equity Securities represent ownership interests in a company, and are commonly called “stocks.” Equity securities historically have outperformed most other securities, although their prices can fluctuate based on changes in a company’s financial condition, market conditions and political, economic or even company-specific news. When a stock’s price declines, its market value is lowered even though the intrinsic value of the company may not have changed. Sometimes factors, such as economic conditions or political events, affect the value of stocks of companies of the same or similar industry or group of industries, and may affect the entire stock market.

Types of equity securities include common stocks, preferred stocks, convertible securities, warrants, ADRs, EDRs, and interests in real estate investment trusts, (for more information on real estate investment trusts, “REITs”, see the section entitled “Real Estate Investment Trusts”).

Common stocks, which are probably the most recognized type of equity security, represent an equity or ownership interest in an issuer and usually entitle the owner to voting rights in the

election of the corporation’s directors and any other matters submitted to the corporation’s shareholders for voting, as well as to receive dividends on such stock. The market value of common stock can fluctuate widely, as it reflects increases and decreases in an issuer’s earnings. In the event an issuer is liquidated or declares bankruptcy, the claims of bond owners, other debt holders and owners of preferred stock take precedence over the claims of common stock owners.

Preferred stocks are a permissible non-principal investment for each fund. Preferred stocks represent an equity or ownership interest in an issuer but do not ordinarily carry voting rights, though they may carry limited voting rights. Preferred stocks normally have preference over the corporation’s assets and earnings, however. For example, preferred stocks have preference over common stock in the payment of dividends. Preferred stocks normally pay dividends at a specified rate. However, preferred stock may be purchased where the issuer has omitted, or is in danger of omitting, payment of its dividend. Such investments would be made primarily for their capital appreciation potential. In the event an issuer is liquidated or declares bankruptcy, the claims of bond owners take precedence over the claims of preferred and common stock owners. Certain classes of preferred stock are convertible into shares of common stock of the issuer. By holding convertible preferred stock, a fund can receive a steady stream of dividends and still have the option to convert the preferred stock to common stock. Preferred stock is subject to many of the same risks as common stock and debt securities.

Convertible securities are a permissible non-principal investment for each fund. Convertible securities are typically preferred stocks or bonds that are exchangeable for a specific number of another form of security (usually the issuer’s common stock) at a specified price or ratio. A convertible security generally entitles the holder to receive interest paid or accrued on bonds or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. A corporation may issue a convertible security that is subject to redemption after a specified date, and usually under certain circumstances. A holder of a convertible security that is called for redemption would be required to tender it for redemption to the issuer, convert it to the underlying common stock or sell it to a third party. The convertible structure allows the holder of the convertible bond to participate in share price movements in the company’s common stock. The actual return on a convertible bond may exceed its stated yield if the company’s common stock appreciates in value and the option to convert to common stocks becomes more valuable.

Convertible securities typically pay a lower interest rate than nonconvertible bonds of the same quality and maturity because of the convertible feature. Convertible securities are also rated below investment grade (“high yield”) or are not rated, and are subject to credit risk.

Prior to conversion, convertible securities have characteristics and risks similar to nonconvertible debt and equity securities. In addition, convertible securities are often concentrated in economic sectors, which, like the stock market in general, may experience unpredictable declines in value, as well as periods of poor performance, which may last for several years. There may be a small trading market for a particular convertible security at any given time, which may adversely impact market price and a fund’s ability to liquidate a particular security or respond to an economic event, including deterioration of an issuer’s creditworthiness.

Convertible preferred stocks are nonvoting equity securities that pay a fixed dividend. These securities have a convertible feature similar to convertible bonds, but do not have a maturity date. Due to their fixed income features, convertible securities provide higher income potential than the issuer’s common stock, but typically are more sensitive to interest rate changes than the underlying common stock. In the event of a company’s liquidation, bondholders have claims on company assets senior to those of shareholders; preferred shareholders have claims senior to those of common shareholders.

Convertible securities typically trade at prices above their conversion value, which is the current market value of the common stock received upon conversion, because of their higher yield potential than the underlying common stock. The difference between the conversion value and the price of a convertible security will vary depending on the value of the underlying common stock and interest rates. When the underlying value of the common stocks declines, the price of the issuer’s convertible securities will tend not to fall as much because the convertible security’s income potential will act as a price support. While the value of a convertible security also tends to rise when the underlying common stock value rises, it will not rise as much because their conversion value is more narrow. The value of convertible securities also is affected by changes in interest rates. For example, when interest rates fall, the value of convertible securities may rise because of their fixed income component.

Warrants are a permissible non-principal investment for each fund. Warrants are types of securities usually issued with bonds and preferred stock that entitle the holder to purchase a proportionate amount of common stock at a specified price for a specific period of time. The prices of warrants do not necessarily move parallel to the prices of the underlying common stock. Warrants have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer. If a warrant is not exercised within the specified time period, it will become worthless and a fund will lose the purchase price it paid for the warrant and the right to purchase the underlying security.

Initial Public Offering. As part of its non-principal investment strategy, each fund may purchase shares issued as part of, or a short period after, a company’s initial public offering (“IPOs”), and may at times dispose of those shares shortly after their acquisition. A fund’s purchase of shares issued in IPOs exposes it to the risks associated with companies that have little operating history as public companies, as well as to the risks inherent in those sectors of the market where these new issuers operate. The market for IPO issuers has been volatile, and share prices of newly-public companies have fluctuated significantly over short periods of time.

Master Limited Partnerships (“MLPs”). As part of its non-principal investment strategy, each fund may purchase units of MLPs. MLPs are limited partnerships or limited liability companies, whose partnership units or limited liability interests are listed and traded on a U.S. securities exchange, and are treated as publicly traded partnerships for federal income tax purposes. To qualify to be treated as a partnership for tax purposes, an MLP must receive at least 90% of its income from qualifying sources as set forth in Section 7704(d) of the Internal Revenue Code of 1986, as amended (the “Code”). These qualifying sources include activities such as the exploration, development, mining, production, processing, refining, transportation, storage and marketing of mineral or natural resources. MLPs generally have two classes of owners, the general partner and limited partners. MLPs that are formed as limited liability companies generally have two analogous classes of owners, the managing member and

the members. For purposes of this section, references to general partners also apply to managing members and references to limited partners also apply to members. The general partner is typically owned by a major energy company, an investment fund, the direct management of the MLP or is an entity owned by one or more of such parties. The general partner may be structured as a private or publicly traded corporation or other entity. The general partner typically controls the operations and management of the MLP through an equity interest of as much as 2% in the MLP plus, in many cases, ownership of common units and subordinated units. Limited partners own the remainder of the MLP through ownership of common units and have a limited role in the MLP’s operations and management.

MLPs are typically structured such that common units and general partner interests have first priority to receive quarterly cash distributions up to an established minimum amount (“minimum quarterly distributions” or “MQD”). Common and general partner interests also accrue arrearages in distributions to the extent the MQD is not paid. Once common and general partner interests have been paid, subordinated units receive distributions of up to the MQD; however, subordinated units do not accrue arrearages. Distributable cash in excess of the MQD paid to both common and subordinated units is distributed to both common and subordinated units generally on a pro rata basis. The general partner is also eligible to receive incentive distributions if the general partner operates the business in a manner which results in distributions paid per common unit surpassing specified target levels. As the general partner increases cash distributions to the limited partners, the general partner receives an increasingly higher percentage of the incremental cash distributions. A common arrangement provides that the general partner can reach a tier where it receives 50% of every incremental dollar paid to common and subordinated unit holders. These incentive distributions encourage the general partner to streamline costs, increase capital expenditures and acquire assets in order to increase the partnership’s cash flow and raise the quarterly cash distribution in order to reach higher tiers. Such results benefit all security holders of the MLP.

General partner interests of MLPs are typically retained by an MLP’s original sponsors, such as its founders, corporate partners, entities that sell assets to the MLP and investors such as us. A holder of general partner interests can be liable under certain circumstances for amounts greater than the amount of the holder’s investment in the general partner interest. General partner interests often confer direct board participation rights and in many cases, operating control, over the MLP. These interests themselves are not publicly traded, although they may be owned by publicly traded entities. General partner interests receive cash distributions, typically 2% of the MLP’s aggregate cash distributions, which are contractually defined in the partnership agreement. In addition, holders of general partner interests typically hold incentive distribution rights (“IDRs”), which provide them with a larger share of the aggregate MLP cash distributions as the distributions to limited partner unit holders are increased to prescribed levels. General partner interests generally cannot be converted into common units. The general partner interest can be redeemed by the MLP if the MLP unitholders choose to remove the general partner, typically with a supermajority vote by limited partner unitholders.

Exchange Traded Funds (“ETFs”) such as the funds or Standard and Poor’s Depositary Receipts (“SPDRs”) Trust, are investment companies that typically are registered under the Investment Company Act of 1940 (“1940 Act”) as open-end fund as is the funds’ case or unit investment trusts (“UITs”). ETFs are actively traded on national securities exchanges and are generally based on specific domestic and foreign market indices. Shares of an ETF may be bought and sold through the day at market prices, which may be higher or lower than the shares’ net asset value. An “index-based ETF” seeks to track the performance of an index holding in its portfolio either the contents of the index or a representative sample of the securities in the index. Because ETFs are based on an underlying basket of stocks or an index, they are subject to the same market fluctuations as these types of securities in volatile market swings. ETFs, like mutual funds, have expenses associated with their operation, including advisory fees. When a fund

invests in an ETF, in addition to directly bearing expenses associated with its own operations, it will bear a pro rata portion of the ETF’s expenses. As with any exchange listed security, ETF shares purchased in the secondary market are subject to customary brokerage charges.

Foreign Securities (Principal investment of the Schwab International Equity ETF, Schwab International Small-Cap Equity ETF and Schwab Emerging Markets Equity ETF only. Permissible non-principal investment for all other funds). Foreign securities involve additional risks, including foreign currency exchange rate risks, because they are issued by foreign entities, including foreign governments, banks and corporations or because they are traded principally overseas. Foreign securities in which a fund may invest include foreign entities that are not subject to uniform accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to U.S. corporations. In addition, there may be less publicly available information about foreign entities. Foreign economic, political and legal developments, as well as fluctuating foreign currency exchange rates and withholding taxes, could have more dramatic effects on the value of foreign securities. For example, conditions within and around foreign countries, such as the possibility of expropriation or confiscatory taxation, political or social instability, diplomatic developments, change of government or war could affect the value of foreign investments. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position.

Foreign securities typically have less volume and are generally less liquid and more volatile than securities of U.S. companies. Fixed commissions on foreign securities exchanges are generally higher than negotiated commissions on U.S. exchanges, although a fund will endeavor to achieve the most favorable overall results on portfolio transactions. There is generally less government supervision and regulation of foreign securities exchanges, brokers, dealers and listed companies than in the United States, thus increasing the risk of delayed settlements of portfolio transactions or loss of certificates for portfolio securities. There may be difficulties in obtaining or enforcing judgments against foreign issuers as well. These factors and others may increase the risks with respect to the liquidity of a fund, and its ability to meet a large number of shareholder redemption requests.

Foreign markets also have different clearance and settlement procedures and, in certain markets, there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Such delays in settlement could result in temporary periods when a portion of the assets of a fund is uninvested and no return is earned thereon. The inability to make intended security purchases due to settlement problems could cause a fund to miss attractive investment opportunities. Losses to a fund arising out of the inability to fulfill a contract to sell such securities also could result in potential liability for a fund.

Investments in the securities of foreign issuers may be made and held in foreign currencies. In addition, a fund may hold cash in foreign currencies. These investments may be affected favorably or unfavorably by changes in currency rates and in exchange control regulations, and may cause a fund to incur costs in connection with conversions between various currencies. The

rate of exchange between the U.S. dollar and other currencies is determined by the forces of supply and demand in the foreign exchange market as well as by political and economic factors. Changes in the foreign currency exchange rates also may affect the value of dividends and interest earned, gains and losses realized on the sale of securities, and net investment income and gains, if any, to be distributed to shareholders by a fund.

Forward Foreign Currency Exchange Contracts ( Schwab International Equity ETF, Schwab International Small-Cap Equity ETF and Schwab Emerging Markets Equity ETF only) involve the purchase or sale of foreign currency at an established exchange rate, but with payment and delivery at a specified future time. Many foreign securities markets do not settle trades within a time frame that would be considered customary in the U.S. stock market. Therefore, a fund may engage in forward foreign currency exchange contracts in order to secure exchange rates for portfolio securities purchased or sold, but awaiting settlement. These transactions do not seek to eliminate any fluctuations in the underlying prices of the securities involved. Instead, the transactions simply establish a rate of exchange that can be expected when a fund settles its securities transactions in the future. Forwards involve certain risks. For example, if the counterparties to the contracts are unable to meet the terms of the contracts or if the value of the foreign currency changes unfavorably, a fund could sustain a loss.

Futures Contracts are instruments that represent an agreement between two parties that obligates one party to buy, and the other party to sell, specific instruments at an agreed-upon price on a stipulated future date. In the case of futures contracts relating to an index or otherwise not calling for physical delivery at the close of the transaction, the parties usually agree to deliver the final cash settlement price of the contract. A fund may purchase and sell futures contracts based on securities, securities indices and foreign currencies, interest rates, or any other futures contracts traded on U.S. exchanges or boards of trade that the Commodities Future Trading Commission (“CFTC”) licenses and regulates on foreign exchanges. Consistent with CFTC regulations, the trust has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a pool operator under the Commodity Exchange Act.

A fund must maintain a small portion of its assets in cash to process shareholder transactions in and out of it and to pay its expenses. In order to reduce the effect this otherwise uninvested cash would have on its performance, a fund may purchase futures contracts. Such transactions allow a fund’s cash balance to produce a return similar to that of the underlying security or index on which the futures contract is based. Also, a fund may purchase or sell futures contracts on a specified foreign currency to “fix” the price in U.S. dollars of the foreign security it has acquired or sold or expects to acquire or sell. A fund may enter into futures contracts for other reasons as well.

When buying or selling futures contracts, a fund must place a deposit with its broker equal to a fraction of the contract amount. This amount is known as “initial margin” and must be in the form of liquid debt instruments, including cash, cash-equivalents and U.S. government securities. Subsequent payments to and from the broker, known as “variation margin” may be made daily, if necessary, as the value of the futures contracts fluctuate. This process is known as “marking-to-market.” The margin amount will be returned to a fund upon termination of the futures contracts

assuming all contractual obligations are satisfied. Because margin requirements are normally only a fraction of the amount of the futures contracts in a given transaction, futures trading can involve a great deal of leverage. In order to avoid this, a fund will earmark or segregate assets for any outstanding futures contracts as may be required under the federal securities laws.

While a fund intends to purchase and sell futures contracts in order to simulate full investment, there are risks associated with these transactions. Adverse market movements could cause a fund to experience substantial losses when buying and selling futures contracts. Of course, barring significant market distortions, similar results would have been expected if a fund had instead transacted in the underlying securities directly. There also is the risk of losing any margin payments held by a broker in the event of its bankruptcy. Additionally, a fund incurs transaction costs (i.e. brokerage fees) when engaging in futures trading. To the extent a fund also invests in futures in order to simulate full investment, these same risks apply.

When interest rates are rising or securities prices are falling, a fund may seek, through the sale of futures contracts, to offset a decline in the value of their current portfolio securities. When rates are falling or prices are rising, a fund, through the purchase of futures contracts, may attempt to secure better rates or prices than might later be available in the market when they effect anticipated purchases. Similarly, a fund may sell futures contracts on a specified currency to protect against a decline in the value of that currency and their portfolio securities that are denominated in that currency. A fund may purchase futures contracts on a foreign currency to fix the price in U.S. dollars of a security denominated in that currency that a fund has acquired or expects to acquire.

Futures contracts normally require actual delivery or acquisition of an underlying security or cash value of an index on the expiration date of the contract. In most cases, however, the contractual obligation is fulfilled before the date of the contract by buying or selling, as the case may be, identical futures contracts. Such offsetting transactions terminate the original contracts and cancel the obligation to take or make delivery of the underlying securities or cash. There may not always be a liquid secondary market at the time a fund seeks to close out a futures position. If a fund is unable to close out its position and prices move adversely, a fund would have to continue to make daily cash payments to maintain its margin requirements. If a fund had insufficient cash to meet these requirements it may have to sell portfolio securities at a disadvantageous time or incur extra costs by borrowing the cash. Also, a fund may be required to make or take delivery and incur extra transaction costs buying or selling the underlying securities. A fund seeks to reduce the risks associated with futures transactions by buying and selling futures contracts that are traded on national exchanges or for which there appears to be a liquid secondary market.

With respect to futures contracts that are not legally required to “cash settle,” a fund may cover the open position by setting aside or earmarking liquid assets in an amount equal to the market value of the futures contracts. With respect to futures contracts that are required to “cash settle,” however, a fund is permitted to set aside or earmark liquid assets in an amount equal to the fund’s daily marked to market (net) obligation, if any, (in other words, the fund’s daily net liability, if any) rather than the market value of the futures contracts. By setting aside assets or earmarking equal to only its net obligation under cash-settled futures, a fund will have the ability to employ

leverage to a greater extent than if the fund were required to set aside or earmark assets equal to the full market value of the futures contract.

Indexing Strategies involve tracking the securities represented in, and therefore the performance of, an index. Each fund normally will invest primarily in the securities of its index. Moreover, each fund seeks to invest so that its portfolio performs similarly to that of its index. Each fund will seek a correlation between its performance and that of its index of 0.95 or better. Correlation for each fund is calculated daily, according to a mathematical formula (“R-squared) which measures correlation between a fund’s portfolio and benchmark index returns. A perfect correlation of 1.0 is unlikely as the funds incur operating and trading expenses unlike their indices. The Board will monitor each fund’s correlation to its index on a periodic basis. If determined to be in the best interest of a fund and its shareholders, the Board may determine to substitute a different index for the index a fund currently tracks, such determination to be made by the Board based on its evaluation of all pertinent facts and circumstances, including the review of any period(s) of time for which a fund did not achieve its intended correlation and the reasons for such non-correlation. The Board has not established any particular time period of non-correlation that would cause the Board to automatically consider substituting a different index for the index a fund currently tracks.

Money Market Securities are high-quality, short term debt securities that may be issued by entities such as the U.S. government, corporations and financial institutions (like banks). Money market securities include commercial paper, certificates of deposit, banker’s acceptances, notes and time deposits. Certificates of deposit and time deposits are issued against funds deposited in a banking institution for a specified period of time at a specified interest rate. Banker’s acceptances are credit instruments evidencing a bank’s obligation to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the full amount of the instrument upon maturity. Commercial paper consists of short term, unsecured promissory notes issued to finance short term credit needs.

Money market securities pay fixed, variable or floating rates of interest and are generally subject to credit and interest rate risks. The maturity date or price of and financial assets collateralizing a security may be structured in order to make it qualify as or act like a money market security. These securities may be subject to greater credit and interest rate risks than other money market securities because of their structure. Money market securities may be issued with puts or sold separately, sometimes called demand features or guarantees, which are agreements that allow the buyer to sell a security at a specified price and time to the seller or “put provider.” When a fund buys a put, losses could occur as a result of the costs of the put or if it exercises its rights under the put and the put provider does not perform as agreed.

A fund may keep a portion of its assets in cash for business operations. In order to reduce the effect this otherwise uninvested cash would have on its performance, a fund may invest in money market securities. A fund may also invest in money market securities to the extent it is consistent with its investment objective.

Options Contracts generally provide the right to buy or sell a security, commodity, futures contract or foreign currency in exchange for an agreed upon price. If the right is not exercised after a specified period, the option expires and the option buyer forfeits the money paid to the option seller.

A call option gives the buyer the right to buy a specified number of shares of a security at a fixed price on or before a specified date in the future. For this right, the call option buyer pays the call option seller, commonly called the call option writer, a fee called a premium. Call option buyers are usually anticipating that the price of the underlying security will rise above the price fixed with the call writer, thereby allowing them to profit. If the price of the underlying security does not rise, the call option buyer’s losses are limited to the premium paid to the call option writer. For call option writers, a rise in the price of the underlying security will be offset in part by the premium received from the call option buyer. If the call option writer does not own the underlying security, however, the losses that may ensue if the price rises could be potentially unlimited. If the call option writer owns the underlying security or commodity, this is called writing a covered call. All call and put options written by a fund will be covered, which means that a fund will own the securities subject to the option so long as the option is outstanding or a fund will earmark or segregate assets for any outstanding option contracts.

A put option is the opposite of a call option. It gives the buyer the right to sell a specified number of shares of a security at a fixed price on or before a specified date in the future. Put option buyers are usually anticipating a decline in the price of the underlying security, and wish to offset those losses when selling the security at a later date. All put options a fund writes will be covered, which means that a fund will earmark or segregate cash, U.S. government securities or other liquid securities with a value at least equal to the exercise price of the put option. The purpose of writing such options is to generate additional income for a fund. However, in return for the option premium, a fund accepts the risk that they may be required to purchase the underlying securities at a price in excess of the securities’ market value at the time of purchase.

A fund may purchase and write put and call options on any securities in which they may invest or any securities index or basket of securities based on securities in which they may invest. In addition, a fund may purchase and sell foreign currency options and foreign currency futures contracts and related options. A fund may purchase and write such options on securities that are listed on domestic or foreign securities exchanges or traded in the over-the-counter market. Like futures contracts, option contracts are rarely exercised. Option buyers usually sell the option before it expires. Option writers may terminate their obligations under a written call or put option by purchasing an option identical to the one it has written. Such purchases are referred to as “closing purchase transactions.” A fund may enter into closing sale transactions in order to realize gains or minimize losses on options they have purchased or wrote.

An exchange-traded currency option position may be closed out only on an options exchange that provides a secondary market for an option of the same series. Although a fund generally will purchase or write only those options for which there appears to be an active secondary market, there is no assurance that a liquid secondary market will exist for any particular option or at any particular time. If a fund is unable to effect a closing purchase transaction with respect to options it has written, it will not be able to sell the underlying securities or dispose of assets earmarked

or held in a segregated account until the options expire or are exercised. Similarly, if a fund is unable to effect a closing sale transaction with respect to options it has purchased, it would have to exercise the options in order to realize any profit and will incur transaction costs upon the purchase or sale of underlying securities.

Reasons for the absence of a liquid secondary market on an exchange include the following: (1) there may be insufficient trading interest in certain options; (2) an exchange may impose restrictions on opening transactions or closing transactions or both; (3) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options; (4) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (5) the facilities of an exchange or the Options Clearing Corporation (“OCC”) may not at all times be adequate to handle current trading volume; or (6) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), although outstanding options on that exchange that had been issued by the OCC as a result of trades on that exchange would continue to be exercisable in accordance with their terms.

The ability to terminate over-the-counter options is more limited than with exchange-traded options and may involve the risk that broker-dealers participating in such transactions will not fulfill their obligations. Until such time as the staff of the SEC changes its position, a fund will treat purchased over-the-counter options and all assets used to cover written over-the-counter options as illiquid securities, except that with respect to options written with primary dealers in U.S. government securities pursuant to an agreement requiring a closing purchase transaction at a formula price, the amount of illiquid securities may be calculated with reference to a formula the staff of the SEC approves.

Additional risks are involved with options trading because of the low margin deposits required and the extremely high degree of leverage that may be involved in options trading. There may be imperfect correlation between the change in market value of the securities held by a fund and the prices of the options, possible lack of a liquid secondary market, and the resulting inability to close such positions prior to their maturity dates.

A fund may write or purchase an option only when the market value of that option, when aggregated with the market value of all other options transactions made on behalf of a fund, does not exceed 5% of its net assets.

Securities Lending of portfolio securities is a common practice in the securities industry. A fund may engage in security lending arrangements. For example, a fund may receive cash collateral, and it may invest it in short term, interest-bearing obligations, but will do so only to the extent that it will not lose the tax treatment available to regulated investment companies. Lending portfolio securities involves risks that the borrower may fail to return the securities or provide additional collateral. Also, voting rights with respect to the loaned securities may pass with the lending of the securities.

A fund may loan portfolio securities to qualified broker-dealers or other institutional investors provided: (1) the loan is secured continuously by collateral consisting of U.S. government securities, letters of credit, cash or cash equivalents or other appropriate instruments maintained on a daily marked-to-market basis in an amount at least equal to the current market value of the securities loaned; (2) a fund may at any time call the loan and obtain the return of the securities loaned; (3) a fund will receive any interest or dividends paid on the loaned securities; and (4) the aggregate market value of securities loaned will not at any time exceed one-third of the total assets of a fund, including collateral received from the loan (at market value computed at the time of the loan).

Although voting rights with respect to loaned securities pass to the borrower, the lender retains the right to recall a security (or terminate a loan) for the purpose of exercising the security’s voting rights. Efforts to recall such securities promptly may be unsuccessful, especially for foreign securities or thinly traded securities such as small-cap stocks. In addition, because recalling a security may involve expenses to a fund, it is expected that a fund will do so only where the items being voted upon are, in the judgment of the investment adviser, either material to the economic value of the security or threaten to materially impact the issuer’s corporate governance policies or structure.

Securities of Other Investment Companies . Investment companies generally offer investors the advantages of diversification and professional investment management, by combining shareholders’ money and investing it in securities such as stocks, bonds and money market instruments. Investment companies include: (1) open-end funds (commonly called mutual funds) that issue and redeem their shares on a continuous basis; (2) closed-end funds that offer a fixed number of shares, and are usually listed on an exchange; and (3) unit investment trusts that generally offer a fixed number of redeemable shares. Certain open-end funds, closed-end funds and unit investment trusts are traded on exchanges.

Investment companies may make investments and use techniques designed to enhance their performance. These may include delayed-delivery and when-issued securities transactions; swap agreements; buying and selling futures contracts, illiquid, and/or restricted securities and repurchase agreements; and borrowing or lending money and/or portfolio securities. The risks of investing in a particular investment company will generally reflect the risks of the securities in which it invests and the investment techniques it employs. Also, investment companies charge fees and incur expenses.

The funds may buy securities of other investment companies, including those of foreign issuers, in compliance with the requirements of federal law or any SEC exemptive order. A fund may invest in investment companies that are not registered with the SEC or privately placed securities of investment companies (which may or may not be registered), such as hedge funds and offshore funds. Unregistered funds are largely exempt from the regulatory requirements that apply to registered investment companies. As a result, unregistered funds may have a greater ability to make investments, or use investment techniques, that offer a higher potential investment return (for example, leveraging), but which may carry high risk. Unregistered funds, while not regulated by the SEC like registered funds, may be indirectly supervised by the financial institutions (e.g., commercial and investment banks) that may provide them with loans

or other sources of capital. Investments in unregistered funds may be difficult to sell, which could cause a fund selling an interest in an unregistered fund to lose money. For example, many hedge funds require their investors to hold their investments for at least one year.

Federal law restricts the ability of one registered investment company to invest in another. As a result, the extent to which a fund may invest in another investment company may be limited. With respect to investments in other mutual funds, the SEC has granted the funds an exemption from the limitations of the 1940 Act that restrict the amount of securities of underlying mutual funds a fund may hold, provided that certain conditions are met. The conditions requested by the SEC were designed to address certain abuses perceived to be associated with funds of funds, including unnecessary costs (such as sales loads, advisory fees and administrative costs), and undue influence by a fund of funds over the underlying fund. The conditions apply only when a fund and its affiliates in the aggregate own more than 3% of the outstanding shares of any one underlying fund.

Under the terms of the exemptive order, each fund and its affiliates may not control a non-affiliated underlying fund. Under the 1940 Act, any person who owns beneficially, either directly or through one or more controlled companies, more than 25% of the voting securities of a company is assumed to control that company. This limitation is measured at the time the investment is made.

Small-Cap Stocks (Principal investment for Schwab U.S. Broad Market ETF, Schwab U.S. Small-Cap ETF and Schwab International Small-Cap Equity ETF only. Permissible non-principal investment for each other fund.) Small-cap stocks include common stocks issued by operating companies with market capitalizations that place them at the lower end of the stock market, as well as the stocks of companies that are determined to be small based on several factors, including the capitalization of the company and the amount of revenues. Historically, small company stocks have been riskier than stocks issued by large- or mid-cap companies for a variety of reasons. Small-companies may have less certain growth prospects and are typically less diversified and less able to withstand changing economic conditions than larger capitalized companies. Small-cap companies also may have more limited product lines, markets or financial resources than companies with larger capitalizations, and may be more dependent on a relatively small management group. In addition, small-cap companies may not be well known to the investing public, may not have institutional ownership and may have only cyclical, static or moderate growth prospects. Most small company stocks pay low or no dividends.

These factors and others may cause sharp changes in the value of a small company’s stock, and even cause some small-cap companies to fail. Additionally, small-cap stocks may not be as broadly traded as large- or mid-cap stocks, and a fund’s positions in securities of such companies may be substantial in relation to the market for such securities. Accordingly, it may be difficult for a fund to dispose of securities of these small-cap companies at prevailing market prices in order to meet redemptions. This lower degree of liquidity can adversely affect the value of these securities. For these reasons and others, the value of a fund’s investments in small-cap stocks is expected to be more volatile than other types of investments, including other types of stock investments. While small-cap stocks are generally considered to offer greater growth

opportunities for investors, they involve greater risks and the share price of a fund that invests in small-cap stocks may change sharply during the short term and long term.

Stock Substitution Strategy is a strategy, whereby each fund may, in certain circumstances, substitute a similar stock for a security in its index. For example, a stock issued by a foreign corporation and included in a fund’s index may not be available for purchase by a fund because the fund does not reside in the foreign country in which the stock was issued. However, the foreign corporation may have issued a series of stock that is sold only to foreign investors such as a fund. In these cases, a fund may buy that issue as a substitute for the security included in its index. Each fund may invest up to 10% of its assets in stocks that are designed to substitute for securities in its index.

Swap Agreements are privately negotiated over-the-counter derivative products in which two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities (referred to as the “underlying”) and a predetermined amount (referred to as the “notional amount”). The underlying for a swap may be an interest rate (fixed or floating), a currency exchange rate, a commodity price index, a security, group of securities or a securities index, a combination of any of these, or various other rates, assets or indices. Swap agreements generally do not involve the delivery of the underlying or principal, and a party’s obligations generally are equal to only the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the swap agreement.

Swap agreements can be structured to increase or decrease a fund’s exposure to long or short term interest rates, corporate borrowing rates and other conditions, such as changing security prices and inflation rates. They also can be structured to increase or decrease a fund’s exposure to specific issuers or specific sectors of the bond market such as mortgage securities. For example, if a fund agreed to pay a longer-term fixed rate in exchange for a shorter-term floating rate while holding longer-term fixed rate bonds, the swap would tend to decrease the fund’s exposure to longer-term interest rates. Swap agreements tend to increase or decrease the overall volatility of a fund’s investments and its share price and yield. Changes in interest rates, or other factors determining the amount of payments due to and from a fund, can be the most significant factors in the performance of a swap agreement. If a swap agreement calls for payments from a fund, the fund must be prepared to make such payments when they are due. In order to help minimize risks, a fund will earmark or segregate appropriate assets for any accrued but unpaid net amounts owed under the terms of a swap agreement entered into on a net basis. All other swap agreements will require a fund to earmark or segregate assets in the amount of the accrued amounts owed under the swap. A fund could sustain losses if a counterparty does not perform as agreed under the terms of the swap. A fund will enter into swap agreements with counterparties deemed creditworthy by the investment adviser. Swap counterparties will generally be primary dealers or banks rated single A or greater or subsidiaries of entities rated A or greater. The funds do not intend to enter swap agreements with counterparties that are unrated, unless they are subsidiaries of issuers that meet the minimum rating requirement.

In addition, as a non-principal investment, a fund may invest in swaptions, which are privately-negotiated option-based derivative products that are subject to the risks of both options and swap agreements, each of which are discussed elsewhere in this SAI. Swaptions give the holder the right to enter into a swap. A fund may use a swaption in addition to or in lieu of a swap involving a similar rate or index.

For purposes of applying a fund’s investment policies and restrictions (as stated in the prospectus and this SAI) swap agreements are generally valued by the fund at market value. The manner in which certain securities or other instruments are valued by a fund for purposes of applying investment policies and restrictions may differ from the manner in which those investments are valued by other types of investors.

Each fund may allocate up to 10% of its net assets to derivatives investments, which includes swaps and swaptions.

U.S. Government Securities are issued by the U.S. Treasury or issued or guaranteed by the U.S. government or any of its agencies or instrumentalities. Not all U.S. government securities are backed by the full faith and credit of the United States. Some U.S. government securities, such as those issued by the Federal National Mortgage Association (known as Fannie Mae), Federal Home Loan Mortgage Corporation (known as Freddie Mac), the Student Loan Marketing Association (known as Sallie Mae), and the Federal Home Loan Banks, are supported by a line of credit the issuing entity has with the U.S. Treasury. Others are supported solely by the credit of the issuing agency or instrumentality such as obligations issued by the Federal Farm Credit Banks Funding Corporation. There can be no assurance that the U.S. government will provide financial support to U.S. government securities of its agencies and instrumentalities if it is not obligated to do so under law. Of course U.S. government securities, including U.S. Treasury securities, are among the safest securities, however, not unlike other debt securities, they are still sensitive to interest rate changes, which will cause their yields and prices to fluctuate.

On September 7, 2008, the U.S. Treasury announced a federal takeover of Fannie Mae and Freddie Mac, placing the two federal instrumentalities in conservatorship. Under the takeover, the U.S. Treasury agreed to acquire $1 billion of senior preferred stock of each instrumentality and obtained warrants for the purchase of common stock of each instrumentality. Under this agreement, the U.S. Treasury has pledged to provide up to $100 billion per instrumentality as needed, including the contribution of cash capital to the instrumentalities in the event their liabilities exceed their assets. This is intended to ensure that the instrumentalities maintain a positive net worth and meet their financial obligations preventing mandatory triggering of receivership. Additionally, the U.S. Treasury has implemented a temporary program to purchase new mortgage-backed securities issued by the instrumentalities. This is intended to create more affordable mortgage rates for homeowners, enhance the liquidity of the mortgage market and potentially maintain or increase the value of existing mortgage-backed securities. The program expires in December 2009. No assurance can be given that the U.S. Treasury initiatives will be successful.

Non-Principal Investment Strategy Investments

The following investments may be used as part of each fund’s non-principal investment strategy:

Bankers’ Acceptances or notes are credit instruments evidencing a bank’s obligation to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the full amount of the instrument upon maturity. A fund will invest only in bankers’ acceptances of banks that have capital, surplus and undivided profits in the aggregate in excess of $100 million.

Borrowing . A fund may borrow money from banks for any purpose in an amount up to 1/3 of the fund’s total assets. The funds also may borrow money for temporary purposes in an amount not to exceed 5% of the funds’ total assets. Provisions of the 1940 Act, as amended, require the funds to maintain continuous asset coverage (that is, total assets including borrowings, less liabilities exclusive of borrowings) of 300% of the amount borrowed, with an exception for borrowings not in excess of 5% of a fund’s total assets made for temporary purposes. Any borrowings for temporary purposes in excess of 5% of a fund’s total assets must maintain continuous asset coverage. If the 300% asset coverage should decline as a result of market fluctuations or other reasons, the funds may be required to sell some of its portfolio holdings within three days to reduce the debt and restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell securities at that time.

A fund may borrow for temporary or emergency purposes; for example, a fund may borrow at times to meet redemption requests rather than sell portfolio securities to raise the necessary cash. The fund’s borrowings will be subject to interest costs. Borrowing can also involve leveraging when securities are purchased with the borrowed money. Leveraging creates interest expenses that can exceed the income from the assets purchased with the borrowed money. In addition, leveraging may magnify changes in the net asset value of a fund’s shares and in its portfolio yield. A fund will earmark or segregate assets to cover such borrowings in accordance with positions of the Securities and Exchange Commission (“SEC”). If assets used to secure a borrowing decrease in value, a fund may be required to pledge additional collateral to avoid liquidation of those assets.

A fund may establish lines-of-credit (“lines”) with certain banks by which it may borrow funds for temporary or emergency purposes. A borrowing is presumed to be for temporary or emergency purposes if it is repaid by a fund within 60 days and is not extended or renewed. A fund may use the lines to meet large or unexpected redemptions that would otherwise force a fund to liquidate securities under circumstances which are unfavorable to a fund’s remaining shareholders. A fund will pay a fee to the bank for using the lines.

Certificates of Deposit or time deposits are issued against funds deposited in a banking institution for a specified period of time at a specified interest rate. A fund will invest only in certificates of deposit of banks that have capital, surplus and undivided profits in the aggregate in excess of $100 million.

Commercial Paper consists of short term, promissory notes issued by banks, corporations and other institutions to finance short term credit needs. These securities generally are discounted but

sometimes may be interest bearing. Commercial paper, which also may be unsecured, is subject to credit risk.

Debt Securities are obligations issued by domestic and foreign entities, including governments and corporations, in order to raise money. They are basically “IOUs,” but are commonly referred to as bonds or money market securities. These securities normally require the issuer to pay a fixed, variable or floating rate of interest on the amount of money borrowed (“principal”) until it is paid back upon maturity.

Debt securities experience price changes when interest rates change. For example, when interest rates fall, the prices of debt securities generally rise. Also, issuers tend to pre-pay their outstanding debts and issue new ones paying lower interest rates.

Conversely, in a rising interest rate environment, prepayment on outstanding debt securities generally will not occur. This is known as extension risk and may cause the value of debt securities to depreciate as a result of the higher market interest rates. Typically, longer-maturity securities react to interest rate changes more severely than shorter-term securities (all things being equal), but generally offer greater rates of interest.

Debt securities also are subject to the risk that the issuers will not make timely interest and/or principal payments or fail to make them at all. This is called credit risk. Debt instruments also may be subject to price volatility due to market perception of future interest rates, the creditworthiness of the issuer and general market liquidity (market risk). Investment-grade debt securities are considered medium- or/and high-quality securities, although some still possess varying degrees of speculative characteristics and risks.

The funds will limit their investments in debt securities to those that are rated investment-grade, which means that the securities are rated by at least one Nationally Recognized Statistical Rating Organization (“NRSRO”), such as Standard & Poor’s Corporation, Moody’s Investors Service, Fitch, Inc. or Dominion Bond Rating Service, in one of the four highest rating categories (within which there may be sub-categories or gradations indicating relative standing). See Appendix A for a description of the ratings. The ratings of NRSROs represent their opinions as to the quality of the securities. It should be emphasized, however, that these ratings are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. Further, NRSROs may have conflicts of interest relating to the issuance of a credit rating and such conflicts may affect the integrity of the credit rating process or the methodologies used to develop credit ratings for securities. Such conflicts may include, but are not limited to, NRSROs being paid by issuers or underwriters to determine the credit ratings with respect to the securities they issue or underwrite, NRSROs being paid by issuers and underwriters for services in addition to the NRSROs determination of credit ratings; allowing persons with the NRSRO to directly own securities or money market instruments of, or having other direct ownership interests in, issuers or obligors subject to a credit rating determined by the NRSRO; and allowing persons within the NRSRO to have a business relationship that is more than an arms length ordinary course of business relationship with issuers or obligors subject to a credit rating determined by the NRSRO.

In addition, credit ratings are generally given to securities at the time of issuance. While the rating agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings given to securities at issuance do not necessarily represent ratings which would be given to these securities on a particular subsequent date. Accordingly, investors should note that the assignment of a rating to a security by a rating service may not reflect the effect of recent developments on the issuer’s ability to make interest and principal payments.

The market for these securities has historically been less liquid than investment grade securities.

Delayed-Delivery Transactions include purchasing and selling securities on a delayed-delivery or when-issued basis. These transactions involve a commitment to buy or sell specific securities at a predetermined price or yield, with payment and delivery taking place after the customary settlement period for that type of security. When purchasing securities on a delayed-delivery basis, a fund assumes the rights and risks of ownership, including the risk of price and yield fluctuations. Typically, no interest will accrue to a fund until the security is delivered. A fund will earmark or segregate appropriate liquid assets to cover its delayed-delivery purchase obligations. When a fund sells a security on a delayed-delivery basis, a fund does not participate in further gains or losses with respect to that security. If the other party to a delayed-delivery transaction fails to deliver or pay for the securities, a fund could suffer losses.

Foreign Currency Transactions (Non-principal investments of the Schwab International Equity ETF, the Schwab International Small-Cap Equity ETF and the Schwab Emerging Markets Equity ETF only). A fund may invest in foreign currency-denominated securities, may purchase and sell foreign currency options and foreign currency futures contracts and related options and may engage in foreign currency transactions on a spot (cash) basis at the rate prevailing in the currency exchange market at the time. A fund may engage in these transactions in order to protect against uncertainty in the level of future foreign exchange rates in the purchase and sale of securities. A fund may also use foreign currency options and futures to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another.

Buying and selling foreign currency options and foreign currency futures contracts and related options involves costs and may result in losses. The ability of a fund to engage in these transactions may be limited by tax considerations. Although these techniques tend to minimize the risk of loss due to declines in the value of the hedged currency, they tend to limit any potential gain that might result from an increase in the value of such currency. Transactions in these contracts involve certain other risks. Unanticipated fluctuations in currency prices may result in a poorer overall performance for a fund than if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between a fund’s holdings of securities denominated in a particular currency and the currency transactions into which a fund enters. Such imperfect correlation may cause a fund to sustain losses, which will prevent it from achieving a complete hedge or expose it to risk of foreign exchange loss.

Suitable hedging transactions may not be available in all circumstances and there can be no assurance that a fund will engage in such transactions at any given time or from time to time. Also, such transactions may not be successful and may eliminate any chance for a fund to benefit from favorable fluctuations in relevant foreign currencies.

A fund may buy or sell foreign currency options and foreign currency futures contracts and related options under the same circumstances, and such use is subject to the same risks and costs, as those set forth in the section “Forward Foreign Currency Exchange Contracts” with respect to the fund’s use of forward foreign currency exchange contracts.

Illiquid Securities generally are any securities that cannot be disposed of promptly and in the ordinary course of business within seven days at approximately the amount at which a fund has valued the instruments. The liquidity of a fund’s investments is monitored under the supervision and direction of the Board of Trustees. Each fund may not invest more than 15% of its net assets in illiquid securities. In the event that a subsequent change in net assets or other circumstances cause a fund to exceed this limitation, the fund will take steps to bring the aggregate amount of illiquid instruments back within the limitations as soon as reasonably practicable.

In making liquidity determinations before purchasing a particular security, the Adviser considers a number of factors including, but not limited to: the nature and size of the security; the number of dealers that make a market in the security; and data which indicates that a security’s price has not changed for a period of a week or longer. After purchase, it is the Adviser’s policy to maintain awareness of developments in the marketplace that could cause a change in a security’s liquid or illiquid status. Investments currently not considered liquid include repurchase agreements not maturing within seven days and certain restricted securities.

Interfund Borrowing and Lending . A fund may borrow money from and/or lend money to other funds/portfolios in the Schwab complex (“Schwab Funds ^® ), including funds/portfolios not discussed in this SAI or in the corresponding prospectus. All loans are for temporary or emergency purposes and the interest rates to be charged will be the average of the overnight repurchase agreement rate and the short term bank loan rate. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds/portfolios. These conditions include, for example, that a fund’s participation in the credit facility must be consistent with its investment policies and limitations and organizational documents; no fund may lend to another fund through the interfund lending facility if the loan would cause the aggregate outstanding loans through the credit facility to exceed 15% of the lending fund’s current net assets at the time of the loan; and that a fund’s interfund loans to any one fund shall not exceed 5% of the lending fund’s net assets. With respect to the funds discussed in this SAI, a fund lending to another fund may forego gains which could have been made had those assets been invested in securities of its applicable underlying index. The interfund lending facility is subject to the oversight and periodic review of the Board of Trustees.

Non-Publicly Traded Securities and Private Placements . A fund may receive in securities that are neither listed on a stock exchange nor traded over-the-counter, including privately placed securities. Such unlisted securities may involve a higher degree of business and financial risk that can result in substantial losses. As a result of the absence of a public trading market for these securities, they may be less liquid than publicly traded securities. Although these securities may be sold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid by a fund or less than what may be considered the fair value of such

securities. Furthermore, companies whose securities are not publicly traded may not be subject to the disclosure and other investor protection requirements which might be applicable if their securities were publicly traded. If such securities are required to be registered under the securities laws of one or more jurisdictions before being sold, a fund may be required to bear the expenses of registration. Though the funds do not intend to purchase these securities, they may receive such securities as a result of another transaction, such as the spin-off of a company’s subsidiary to a separate entity.

Promissory Notes are written agreements committing the maker or issuer to pay the payee a specified amount either on demand or at a fixed date in the future, with or without interest. These are sometimes called negotiable notes or instruments and are subject to credit risk. Bank notes are notes used to represent obligations issued by banks in large denominations.

Real Estate Investment Trusts (REITS) are pooled investment vehicles, which invest primarily in income producing real estate or real estate related loans or interests and, in some cases, manage real estate. REITs are sometimes referred to as equity REITs, mortgage REITs or hybrid REITs. An equity REIT invests primarily in properties and generates income from rental and lease properties and, in some cases, from the management of real estate. Equity REITs also offer the potential for growth as a result of property appreciation and from the sale of appreciated property. Mortgage REITs invest primarily in real estate mortgages, which may secure construction, development or long term loans, and derive income for the collection of interest payments. Hybrid REITs may combine the features of equity REITs and mortgage REITs. REITs are generally organized as corporations or business trusts, but are not taxed as a corporation if they meet certain requirements of Subchapter M of the Code. To qualify, a REIT must, among other things, invest substantially all of its assets in interests in real estate (including other REITs), cash and government securities, distribute at least 95% of its taxable income to its shareholders and receive at least 75% of that income from rents, mortgages and sales of property.

Like any investment in real estate, a REIT’s performance depends on many factors, such as its ability to find tenants for its properties, to renew leases, and to finance property purchases and renovations. In general, REITs may be affected by changes in underlying real estate values, which may have an exaggerated effect to the extent a REIT concentrates its investment in certain regions or property types. For example, rental income could decline because of extended vacancies, increased competition from nearby properties, tenants’ failure to pay rent, or incompetent management. Property values could decrease because of overbuilding, environmental liabilities, uninsured damages caused by natural disasters, a general decline in the neighborhood, losses due to casualty or condemnation, increases in property taxes, or changes in zoning laws. Ultimately, a REIT’s performance depends on the types of properties it owns and how well the REIT manages its properties. Additionally, declines in the market value of a REIT may reflect not only depressed real estate prices, but may also reflect the degree of leverage utilized by the REIT.

In general, during periods of rising interest rates, REITs may lose some of their appeal for investors who may be able to obtain higher yields from other income-producing investments, such as long term bonds. Higher interest rates also mean that financing for property purchases and improvements is more costly and difficult to obtain. During periods of declining interest

rates, certain mortgage REITs may hold mortgages that mortgagors elect to prepay, which can reduce the yield on securities issued by mortgage REITs. Mortgage REITs may be affected by the ability of borrowers to repay debts to the REIT when due and equity REITs may be affected by the ability of tenants to pay rent.

Like small-cap stocks in general, certain REITs have relatively small market capitalizations and their securities can be more volatile than—and at times will perform differently from—large-cap stocks. In addition, because small-cap stocks are typically less liquid than large-cap stocks, REIT stocks may sometimes experience greater share-price fluctuations than the stocks of larger companies. Further, REITs are dependent upon specialized management skills, have limited diversification, and are therefore subject to risks inherent in operating and financing a limited number of projects. By investing in REITs indirectly through a fund, a shareholder will bear indirectly a proportionate share of the REIT’s expenses in addition to their proportionate share of a fund’s expenses. Finally, REITs could possibly fail to qualify for tax-free pass-through of income under the Code or to maintain their exemptions from registration under the 1940 Act.

Repurchase Agreements are instruments under which a buyer acquires ownership of certain securities (usually U.S. government securities) from a seller who agrees to repurchase the securities at a mutually agreed-upon time and price, thereby determining the yield during the buyer’s holding period. Any repurchase agreements a fund enters into will involve a fund as the buyer and banks or broker-dealers as sellers. The period of repurchase agreements is usually short — from overnight to one week, although the securities collateralizing a repurchase agreement may have longer maturity dates. Default by the seller might cause a fund to experience a loss or delay in the liquidation of the collateral securing the repurchase agreement. A fund also may incur disposition costs in liquidating the collateral. In the event of a bankruptcy or other default of a repurchase agreement’s seller, a fund might incur expenses in enforcing its rights, and could experience losses, including a decline in the value of the underlying securities and loss of income. A fund will make payment under a repurchase agreement only upon physical delivery or evidence of book entry transfer of the collateral to the account of its custodian bank. Repurchase agreements are the economic equivalents of loans.

Restricted Securities are securities that are subject to legal restrictions on their sale. Restricted securities may be considered to be liquid if an institutional or other market exists for these securities. In making this determination, a fund, under the direction and supervision of the Board of Trustees will take into account various factors, including: (1) the frequency of trades and quotes for the security; (2) the number of dealers willing to purchase or sell the security and the number of potential purchasers; (3) dealer undertakings to make a market in the security; and (4) the nature of the security and marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). To the extent a fund invests in restricted securities that are deemed liquid, its general level of illiquidity may be increased if qualified institutional buyers become uninterested in purchasing these securities.

Short Sales may be used by a fund as part of its overall portfolio management strategies or to offset (hedge) a potential decline in the value of a security. A fund may engage in short sales that are either “against the box” or “uncovered.” A short sale is “against the box” if at all times during which the short position is open, a fund owns at least an equal amount of the securities or

securities convertible into, or has the right to acquire, at no added cost, the securities of the same issue as the securities that are sold short. A short sale against the box is a taxable transaction to a fund with respect to the securities that are sold short. “Uncovered” short sales are transactions under which a fund sells a security it does not own. To complete such transaction, a fund may borrow the security through a broker to make delivery to the buyer and, in doing so, a fund becomes obligated to replace the security borrowed by purchasing the security at the market price at the time of the replacement. A fund also may have to pay a fee to borrow particular securities, which would increase the cost of the security. In addition, a fund is often obligated to pay any accrued interest and dividends on the securities until they are replaced. The proceeds of the short sale position will be retained by the broker until a fund replaces the borrowed securities.

A fund will incur a loss if the price of the security sold short increases between the time of the short sale and the time the fund replaces the borrowed security and, conversely, the fund will realize a gain if the price declines. Any gain will be decreased, and any loss increased, by the transaction costs described above. A short sale creates the risk of an unlimited loss, as the price of the underlying securities could theoretically increase without limit, thus increasing the cost of buying those securities to cover the short position. If a fund sells securities short “against the box,” it may protect unrealized gains, but will lose the opportunity to profit on such securities if the price rises. The successful use of short selling as a hedging strategy may be adversely affected by imperfect correlation between movements in the price of the security sold short and the securities being hedged.

A fund’s obligation to replace the securities borrowed in connection with a short sale will be secured by collateral deposited with the broker that consists of cash or other liquid securities. In addition, a fund will earmark cash or liquid assets or place in a segregated account an amount of cash or other liquid assets equal to the difference, if any, between (1) the market value of the securities sold short, marked-to-market daily, and (2) any cash or other liquid securities deposited as collateral with the broker in connection with the short sale.

Investment Limitations

The investment limitations below may be changed only by vote of a majority of the outstanding voting securities of the applicable fund. Under the 1940 Act, a “vote of a majority of the outstanding voting securities” of a fund means the affirmative vote of the lesser of (1) more than 50% of the outstanding shares of the fund or (2) 67% or more of the shares present at a shareholders meeting if more than 50% of the outstanding shares are represented at the meeting in person or by proxy.

EACH FUND MAY NOT:

Purchase securities of an issuer, except as consistent with the maintenance of its status as an open-end diversified company under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

2)		Concentrate investments in a particular industry or group of industries, as concentration is defined under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time, except that each fund will concentrate to approximately the same extent that its benchmark index concentrates in the securities of such particular industry or group of industries.

3)		Purchase or sell commodities, commodities contracts or real estate, lend or borrow money, issue senior securities, underwrite securities issued by others, or pledge, mortgage or hypothecate any of its assets, except as permitted by (or not prohibited by) the 1940 Act or the rules or regulations thereunder or any exemption therefrom, as such statute, rules or regulations may be amended or interpreted from time to time.

THE FOLLOWING DESCRIPTIONS OF THE 1940 ACT MAY ASSIST INVESTORS IN UNDERSTANDING THE ABOVE POLICIES AND RESTRICTIONS.

BORROWING. The 1940 Act restricts an investment company from borrowing (including pledging, mortgaging or hypothecating assets) in excess of 33 1/3% of its total assets (not including temporary borrowings not in excess of 5% of its total assets). Transactions that are fully collateralized in a manner that does not involve the prohibited issuance of a “senior security” within the meaning of Section 18(f) of the 1940 Act, shall not be regarded as borrowings for the purposes of a fund’s investment restriction.

CONCENTRATION. The SEC has defined concentration as investing 25% or more of an investment company’s total assets in an industry or group of industries, with certain exceptions such as with respect to investments in obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities, or tax-exempt obligations of state or municipal governments and their political subdivisions.

DIVERSIFICATION. Under the 1940 Act and the rules, regulations and interpretations thereunder, a “diversified company,” as to 75% of its total assets, may not purchase securities of any issuer (other than obligations of, or guaranteed by, the U.S. government or its agencies, or instrumentalities or securities of other investment companies) if, as a result, more than 5% of its total assets would be invested in the securities of such issuer, or more than 10% of the issuer’s voting securities would be held by a fund.

LENDING. Under the 1940 Act, an investment company may only make loans if expressly permitted by its investment policies.

REAL ESTATE. The 1940 Act does not directly restrict an investment company’s ability to invest in real estate, but does require that every investment company have the fundamental investment policy governing such investments. Each fund has adopted the fundamental policy that would permit direct investment in real estate. However, each fund has a non-fundamental investment limitation that prohibits it from investing directly in real estate. This non-fundamental policy may be changed only by vote of a fund’s Board of Trustees.

SENIOR SECURITIES. Senior securities may include any obligation or instrument issued by an investment company evidencing indebtedness. The 1940 Act generally prohibits a fund from issuing senior securities, although it provides allowances for certain borrowings and certain other investments, such as short sales, reverse repurchase agreements, and firm commitment agreements , when such investments are “covered” or with appropriate earmarking or segregation of assets to cover such obligations.

UNDERWRITING. Under the 1940 Act, underwriting securities involves an investment company purchasing securities directly from an issuer for the purpose of selling (distributing) them or participating in any such activity either directly or indirectly. Under the 1940 Act, a diversified fund may not make any commitment as underwriter, if immediately thereafter the amount of its outstanding underwriting commitments, plus the value of its investments in securities of issuers (other than investment companies) of which it owns more than 10% of the outstanding voting securities, exceeds 25% of the value of its total assets.

THE FOLLOWING ARE NON-FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS, AND MAY BE CHANGED BY THE BOARD OF TRUSTEES.

EACH FUND MAY NOT:


1)		Invest more than 15% of its net assets in illiquid securities.

Sell securities short unless it owns the security or the right to obtain the security or equivalent securities, or unless it covers such short sale as required by current SEC rules and interpretations (transactions in futures contracts, options and other derivative instruments are not considered selling securities short).

Purchase securities on margin, except such short term credits as may be necessary for the clearance of purchases and sales of securities and provided that margin deposits in connection with futures contracts, options on futures or other derivative instruments shall not constitute purchasing securities on margin.

Borrow money except that a fund may (i) borrow money from banks or through an interfund lending facility, if any, only for temporary or emergency purposes (and not for leveraging) and (ii) engage in reverse repurchase agreements with any party; provided that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any borrowings that come to exceed this amount will be reduced to the extent necessary to comply with the limitation within three business days).

Lend any security or make any other loan if, as a result, more than 33 1/3% of its total assets would be lent to other parties (this restriction does not apply to purchases of debt securities or repurchase agreements).

Purchase securities (other than securities issued or guaranteed by the U.S. government, its agencies or instrumentalities) if, as a result of such purchase, 25% or more of the value of its total assets would be invested in any industry or group of industries (except that each fund

may purchase securities to the extent that the index the fund is designed to track is also so concentrated).

Purchase or sell commodities, commodity contracts or real estate, including interests in real estate limited partnerships, provided that a fund may (i) purchase securities of companies that deal in real estate or interests therein (including REITs); (ii) purchase securities of companies that deal in precious metals or interests therein; and (iii) purchase, sell and enter into futures contracts (including futures contracts on indices of securities, interest rates and currencies), options on futures contracts (including futures contracts on indices of securities, interest rates and currencies), warrants, swaps, forward contracts, foreign currency spot and forward contracts or other derivative instruments.

Policies and investment limitations that state a maximum percentage of assets that may be invested in a security or other asset, or that set forth a quality standard shall be measured immediately after and as a result of a fund’s acquisition of such security or asset, unless otherwise noted. Except with respect to limitations on borrowing and futures and option contracts, any subsequent change in net assets or other circumstances does not require a fund to sell an investment if it could not then make the same investment. With respect to the limitation on illiquid securities, in the event that a subsequent change in net assets or other circumstances cause a fund to exceed its limitation, a fund will take steps to bring the aggregate amount of illiquid instruments back within the limitations as soon as reasonably practicable.

CONTINUOUS OFFERING

The funds offer and issue shares at their net asset value per share (“NAV”) only in aggregations of a specified number of shares (“Creation Units”). The method by which Creation Units are created and trade may raise certain issues under applicable securities laws. Because new Creation Units are issued and sold by the funds on an ongoing basis, at any point a “distribution,” as such term is used in the Securities Act of 1933 the (“Securities Act”), may occur. Broker-dealers and other persons are cautioned that some activities on their part may, depending on the circumstances, result in their being deemed participants in a distribution in a manner which could render them statutory underwriters and subject them to the prospectus delivery requirement and liability provisions of the Securities Act.

For example, a broker-dealer firm or its client may be deemed a statutory underwriter if it takes Creation Units after placing an order with the fund’s distributor, breaks them down into constituent shares, and sells such shares directly to customers, or if it chooses to couple the creation of a supply of new shares with an active selling effort involving solicitation of secondary market demand for shares. A determination of whether one is an underwriter for purposes of the Securities Act must take into account all the facts and circumstances pertaining to the activities of the broker-dealer or its client in the particular case, and the examples mentioned above should not be considered a complete description of all the activities that could lead to categorization as an underwriter.

Broker-dealer firms should also note that dealers who are not “underwriters” but are effecting transactions in shares, whether or not participating in the distribution of shares, generally are required to deliver a prospectus. This is because the prospectus delivery exemption in

Section 4(3) of the Securities Act is not available in respect of such transactions as a result of Section 24(d) of the 1940 Act. Firms that incur a prospectus delivery obligation with respect to shares of the fund are reminded that, pursuant to Rule 153 under the Securities Act, a prospectus delivery obligation under Section 5(b)(2) of the Securities Act owed to an exchange member in connection with the sale on an exchange is satisfied by the fact that the prospectus is available at the exchange upon request. The prospectus delivery mechanism provided in Rule 153 is only available with respect to transactions on an exchange.

MANAGEMENT OF THE FUNDS

The funds are overseen by a Board of Trustees. The trustees are responsible for protecting shareholder interests. The trustees regularly meet to review the investment activities, contractual arrangements and the investment performance of the fund. The trustees did not meet during the most recent fiscal year.

Certain trustees are “interested persons.” A trustee is considered an interested person of the trust under the 1940 Act if he or she is an officer, director, or an employee of Charles Schwab Investment Management, Inc. (“CSIM”) or Charles Schwab & Co., Inc. (“Schwab”). A trustee also may be considered an interested person of the trust under the 1940 Act if he or she owns stock of The Charles Schwab Corporation, a publicly traded company and the parent company of CSIM.

As used herein the term “Family of Investment Companies” collectively refers to The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios, Schwab Capital Trust and Schwab Strategic Trust which, as of September 30, 2009, included 66 funds.

The tables below provide information about the trustees and officers for the trusts, which includes the funds, in this SAI. The “Fund Complex” includes The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Strategic Trust, Schwab Annuity Portfolios, Laudus Trust, and Laudus Institutional Trust. As of September 30, 2009, the Fund Complex included 81 funds. The address of each individual listed below is 211 Main Street, San Francisco, California 94105.

Management table to be provided by amendment.

Trustee Committees

The Board of Trustees has established certain committees and adopted Committee charters with respect to those committees, each as described below [to be provided by amendment].

Trustee Compensation

The following table provides estimated trustee compensation for the fiscal year ending August 31, 2009. Certain information provided relates to the Fund Complex, which included ___funds as of ___. [To be provided by amendment.]

Securities Beneficially Owned By Each Trustee

The following tables provide each trustee’s equity ownership of the fund and ownership of all registered investment companies overseen by each trustee in the Family of Investment Companies as of December 31, 2008. As of December 31, 2008, the Family of Investment Companies included [___] funds. [To be provided by amendment.]

Code of Ethics

The funds, the investment adviser and the distributor have adopted Codes of Ethics as required under the 1940 Act. Subject to certain conditions or restrictions, the Codes of Ethics permit the trustees, directors, officers or advisory representatives of the fund or the investment adviser or the directors or officers of the distributor to buy or sell directly or indirectly securities for their own accounts. This includes securities that may be purchased or held by the funds. Securities transactions by some of these individuals may be subject to prior approval of each entity’s Chief Compliance Officer or alternate. Most securities transactions are subject to quarterly reporting and review requirements.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of August 31, 2009, the officers and trustees of the trust, as a group owned, of record or beneficially, less than 1 % of the outstanding voting securities of the funds.

As of August 31, 2009, no persons or entities owned, of record or beneficially, more than 5% of the outstanding voting securities of any fund.

INVESTMENT ADVISORY AND OTHER SERVICES

Investment Adviser

CSIM, a wholly owned subsidiary of The Charles Schwab Corporation, 211 Main Street, San Francisco CA 94105, serves as the fund’s investment adviser pursuant to Investment Advisory Agreements (Advisory Agreement) between it and the trust. As a result of his ownership of administration The Charles Schwab Corporation, Charles Schwab may be deemed to be a controlling person of CSIM.

Advisory Agreement

A fund’s Advisory Agreement must be specifically approved initially for a 2 year term, and after the expiration of the 2 year term, at least annually (1) thereafter, by the vote of the trustees or by a vote of the shareholders of the fund, and (2) by the vote of a majority of the trustees who are not parties to the Advisory Agreement or “interested persons” of any party (the “Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval.

Each year, the Board of Trustees will call and hold a meeting to decide whether to renew the Advisory Agreement between the trust and CSIM with respect to any existing funds in the trust. In preparation for the meeting, the Board requests and reviews a wide variety of materials provided by the fund’ investment adviser, as well as extensive data provided by third parties.

As described below, the investment adviser is entitled to receive a fee from the funds, payable monthly, for its advisory and administrative services to the funds. The funds are new and have not yet paid any fees to CSIM. As compensation for these services, the firm receives a management fee from the funds expressed as a percentage of each fund’s average daily net assets.


FUND
Schwab U.S. Broad Market ETF™				%

Schwab U.S. Large-Cap ETF™				%

Schwab U.S. Large-Cap Growth ETF™				%

Schwab U.S. Large-Cap Value ETF™				%

Schwab U.S. Small-Cap ETF™				%

Schwab International Equity ETF™				%

Schwab International Small Cap Equity ETF™				%

Schwab Emerging Markets Equity ETF™				%

Pursuant to the Advisory Agreement, the Adviser is responsible for substantially all expenses of the funds, including the cost of transfer agency, custody, fund administration, legal, audit and other services, but excluding interest expense and taxes, brokerage expenses, future distribution fees or expenses (i.e., 12b-1 fees) and extraordinary expenses.

Distributor

SEI Investments Distribution Co. (the “Distributor”) is the principal underwriter and distributor of shares of the funds. Its principal address is 1 Freedom Valley Drive, Oaks, PA 19456. The Distributor has entered into agreement with the trust pursuant to which it distributes shares of the funds (the “Distribution Agreement”). The Distributor continually distributes shares of the funds on a best effort basis. The Distributor has no obligation to sell any specific quantity of fund shares. The Distribution Agreement will continue for two years from its effective date and is renewable annually in accordance with the 1940 Act. Shares are continuously offered for sale by the funds through the Distributor only in Creation Units, as described in the funds’ prospectuses. Shares in less than Creation Units are not distributed by the Distributor. The Distributor is a broker-dealer registered under the Securities Exchange Act of 1934 and a member of the Financial Industry Regulatory Authority. The Distributor is not affiliated with the trust, CSIM, or any stock exchange.

The Distribution Agreement provides that it may be terminated at any time, without the payment of any penalty, on at least sixty (60) days prior written notice to the other party. The Distribution Agreement will terminate automatically in the event of its “assignment” (as defined in the 1940 Act).

DISTRIBUTION AND SHAREHOLDER SERVICES PLAN

The funds have adopted a Distribution and Shareholder Services (12b-1) Plan applicable to the shares. Under the Distribution and Shareholder Services Plan, the Distributor, or other firms that provide distribution and shareholder services, may receive up to 0.25% of a fund’s assets attributable to shares as compensation for distribution and shareholder services pursuant to Rule 12b-1 of the 1940 Act. Distribution services may include: (i) services in connection with distribution assistance, or (ii) payments to financial institutions and other financial intermediaries, such as broker-dealers, mutual fund “supermarkets” and the Distributor’s affiliates and subsidiaries, as compensation for services or reimbursement of expenses incurred in connection with distribution assistance. The Distributor also will provide one or more of the following service activities: (i) maintaining accounts relating to shareholders that invest in shares (including Creation Units) of the funds; (ii) arranging for bank wires; (iii) responding to shareholder inquiries relating to the services performed by Distributor and/or service organizations; (iv) responding to inquiries from shareholders concerning their investment in shares (including Creation Units) of the funds; (v) assisting shareholders in changing dividend options, account designations and addresses; (vi) providing information periodically to shareholders showing their position in shares (including Creation Units) of the funds; (vii) forwarding shareholder communications from the funds such as proxies, shareholder reports, annual reports, and dividend distribution and tax notices to shareholders; (viii) processing purchase, exchange and redemption requests from shareholders and placing orders with the funds or its service providers; and (ix) processing dividend payments from the funds on behalf of shareholders. The Distributor may, at its discretion, retain a portion of such payments to compensate itself for distribution and shareholder services and distribution related expenses such as the costs of preparation, printing, mailing or otherwise disseminating sales literature, advertising, and prospectuses (other than those furnished to current shareholders of the funds), promotional and incentive programs, and such other marketing expenses that the Distributor may incur.

The Board has determined that no such fees will be charged prior to November 14, 2011. Because these fees would be paid out of each fund’s assets on an on-going basis, if payments are made in the future, these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.

Transfer Agent

State Street Bank and Trust Company, One Lincoln Street, Boston, Massachusetts 02111, serves as the funds’ transfer agent. As part of these services, the firm maintains records pertaining to the sale, redemption and transfer of the funds’ shares.

Custodian and Fund Accountants

State Street Bank and Trust Company, One Lincoln Street, Boston, Massachusetts 02111, serves as custodian and accountant for the funds.

The custodian is responsible for the daily safekeeping of securities and cash held or sold by the funds. The funds’ accountant maintains all books and records related to the funds’ transactions.

Independent Registered Public Accounting Firm

The fund’s independent registered public accounting firm, PricewaterhouseCoopers LLP, audits and reports on the annual financial statements of the fund and reviews certain regulatory reports and the funds’ federal income tax return. They also perform other professional, accounting, auditing, tax and advisory services when the trust engages them to do so. Their address is Three Embarcadero Center, San Francisco, CA 94111-4004.

Legal Counsel

Morgan, Lewis & Bockius LLP represents the trust with respect to certain legal matters.

PORTFOLIO MANAGERS

Other Accounts . Each portfolio manager (collectively referred to as the “Portfolio Managers”) is responsible for the day-to-day management of certain accounts, as listed below. The accounts listed below are not subject to a performance-based advisory fee. The information below is provided as of August 31, 2009.


	Registered Investment
	Companies
	(this amount does not include
	the funds in this Statement of				Other Pooled
	Additional Information)				Investment Vehicles				Other Accounts
	Number of				Number of		Total		Number of
Name	Accounts		Total Assets		Accounts		Assets		Accounts		Total Assets
Jeffrey Mortimer			$

Dustin Lewellyn		0	$	0		0		0		0		0
Agnes Hong		0	$	0		0		0		0		0

Conflicts of Interest . A Portfolio Manager’s management of other accounts may give rise to potential conflicts of interest in connection with its management of the funds’ investments, on the one hand, and the investments of the other accounts, on the other. These other accounts include separate accounts and other mutual funds advised by CSIM (collectively, the “Other Managed Accounts”). The Other Managed Accounts might have similar investment objectives as the funds, track the same index the funds track or otherwise hold, purchase, or sell securities that are eligible to be held, purchased, or sold by the funds. While the Portfolio Managers’ management of Other Managed Accounts may give rise to the potential conflicts of interest listed below, CSIM does not believe that the conflicts, if any, are material or, to the extent any such conflicts are material, CSIM believes it has adopted policies and procedures that are designed to manage those conflicts in an appropriate way.

Knowledge of the Timing and Size of Fund Trades . A potential conflict of interest may arise as a result of the Portfolio Managers’ day-to-day management of the funds. Because of their positions with the funds, the Portfolio Managers know the size, timing, and possible market

impact of fund trades. It is theoretically possible that the Portfolio Managers could use this information to the advantage of the Other Managed Accounts they manage and to the possible detriment of the funds. However, CSIM has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time. Moreover, with respect to an index fund, which seeks to track its benchmark index, much of this information is publicly available. When it is determined to be in the best interest of both accounts, the Portfolio Managers may aggregate trade orders for the Other Managed Accounts, excluding Schwab Personal Portfolio Managed Accounts, with those of the funds. All aggregated orders are subject to CSIM’s aggregation and allocation policy and procedures, which provide, among other things, that (i) a Portfolio Manager will not aggregate orders unless he or she believes such aggregation is consistent with his or her duty to seek best execution; (ii) no account will be favored over any other account; (iii) each account that participates in an aggregated order will participate at the average security price with all transaction costs shared on a pro-rata basis; and (iv) if the aggregated order cannot be executed in full, the partial execution is allocated pro-rata among the participating accounts in accordance with the size of each account’s order.

Investment Opportunities . A potential conflict of interest may arise as a result of the Portfolio Managers’ management of the funds and Other Managed Accounts which, in theory, may allow them to allocate investment opportunities in a way that favors the Other Managed Accounts over the funds, which conflict of interest may be exacerbated to the extent that CSIM or the Portfolio Managers receive, or expect to receive, greater compensation from their management of the Other Managed Accounts than the funds. Notwithstanding this theoretical conflict of interest, it is CSIM’s policy to manage each account based on its investment objectives and related restrictions and, as discussed above, CSIM has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time and in a manner consistent with each account’s investment objectives and related restrictions. For example, while the Portfolio Managers may buy for an Other Managed Account securities that differ in identity or quantity from securities bought for the fund or refrain from purchasing securities for an Other Managed Account that they are otherwise buying for the fund in an effort to outperform its specific benchmark, such an approach might not be suitable for the fund given its investment objectives and related restrictions.

Compensation. Schwab compensates each CSIM Portfolio Manager for his or her management of the funds. Each portfolio manager’s compensation consists of a fixed annual (“base”) salary and a discretionary bonus. The base salary is determined considering compensation payable for a similar position across the investment management industry and an evaluation of the individual portfolio manager’s overall performance such as the portfolio manager’s contribution to the firm’s overall investment process, being good corporate citizens, and contributions to the firm’s asset growth and business relationships. The discretionary bonus is determined in accordance with the CSIM Equity and Fixed Income Portfolio Management Incentive Plan (the “Plan”), which is designed to reward consistent and superior investment performance relative to established benchmarks and/or industry peer groups. The Plan is an annual incentive plan that, at the discretion of Executive Management, provides quarterly advances against the corporate component of the Plan at a fixed rate that is standard for the employee’s level. Meanwhile, the portion of the incentive tied to fund performance is paid in its entirety following the end of the Plan year (i.e. the Plan does not provide advances against the portion of the Plan tied to fund performance) at management’s discretion based on their determination of whether funds are available under the Plan as well as factors such as the portfolio manager’s contribution to the firm’s overall

investment process, being good corporate citizens, and contribution to the firm’s asset growth and business relationships.

The Plan consists of two independent funding components: fund investment performance and the Charles Schwab Corporation’s (“CSC”) corporate performance. For the CSIM Fixed Income and Equity Portfolio Management Plan, 75% of the funding is based on fund investment performance and 25% of the funding is based in Schwab’s corporate performance. Funding for this Plan is pooled into separate incentive pools (one for Fixed Income portfolio managers and one for Equity portfolio managers) and then allocated to the plan participants by CSIM senior management. This allocation takes into account fund performance as well as the portfolio manager’s leadership, teamwork, and contribution to CSIM goals and objectives.

•		Fund Investment Performance




		Investment Performance will be determined based on each fund’s performance relative to an established industry peer group or benchmark. The peer group or benchmark will be determined by the CSIM “Peer Group Committee” comprised of officer representation from CSIM Product Development, Fund Administration and SCIR (Schwab Center for Investment Research) and approved by CSIM’s President and CSIM’s Chief Investment Officers. The peer group is reviewed on a regular basis and is subject to change in advance of each performance period (calendar year). Any changes will be communicated to affected participants as soon as is reasonably possible following the decision to change peer group or benchmark composition.


	•		At the close of the year, each fund’s performance will be determined by its 1-year and/or 1 and 3-year percentile standing within its designated peer group using standard statistical methods approved by CSIM senior management. Relative position and the respective statistical method used to determine percentile standing will result in a single performance percentile number for each fund to allow for comparisons over time and between funds. As each participant may manage and/or support a number of funds, there will be several fund performance percentiles for each participant that may be considered in arriving at the incentive compensation annual payout.


•		Schwab Corporate Performance



		CSC’s corporate plan (the “Corporate Plan”) is an annual plan, which provides for discretionary awards aligned with company and individual performance. Funding for the Corporate Plan is determined at the conclusion of the calendar year using a payout rate that is applied to the Company’s pre-tax operating margin before variable compensation expense. The exact payout rate will vary and will be determined by Executive Management and recommended to the Compensation Committee of the Board of Directors for final approval. Funding will be capped at 200% of the Corporate Plan.


•		Incentive Allocation



		At year-end, the full-year funding for both components of the Plan will be pooled together. This total pool will then be allocated to plan participants by CSIM senior management based on their assessment of a variety of performance factors. Factors considered in the allocation process will include, but are not limited to, fund performance relative to benchmarks, individual performance against key objectives, contribution to overall group results, team work, and collaboration between Analysts and Portfolio Managers.

The Portfolio Managers’ compensation is not based on the value of the assets held in a fund’s portfolio. Mr. Lewellyn will be compensated solely under the Corporate Plan until December 31, 2009. Effective

January 1, 2010, Mr. Lewellyn will be compensated under the CSIM Equity and Fixed Income Portfolio Management Incentive Plan.

Ms. Hong will be compensated under the CSIM Equity and Fixed Income Portfolio Management Incentive Plan.

Ownership of Fund Shares. Because the funds had not commenced operations prior to the date of this SAI, no information regarding the Portfolio Managers’ “beneficial ownership” of shares of the funds has been included. This information will appear in a future version of the SAI.

BROKERAGE ALLOCATION AND OTHER PRACTICES
Portfolio Turnover

For reporting purposes, a fund’s portfolio turnover rate is calculated by dividing the value of purchases or sales of portfolio securities for the fiscal year, whichever is less, by the monthly average value of portfolio securities the fund owned during the fiscal year. When making the calculation, all securities whose maturities at the time of acquisition were one year or less (“short-term securities”) are excluded.

A 100% portfolio turnover rate would occur, for example, if all portfolio securities (aside from short-term securities) were sold and either repurchased or replaced once during the fiscal year.

Typically, funds with high turnover (such as 100% or more) tend to generate higher capital gains and transaction costs, such as brokerage commissions. Since these are new funds there are no portfolio turnover rates.

Portfolio Holdings Disclosure

The funds’ Board of Trustees has approved policies and procedures that govern the timing and circumstances regarding the disclosure of funds’ portfolio holdings information to shareholders and third parties. These policies and procedures are designed to ensure that disclosure of information regarding the funds’ portfolio securities is in the best interests of funds’ shareholders, and include procedures to address conflicts between the interests of the funds’ shareholders, on the one hand, and those of the funds’ investment adviser, principal underwriter or any affiliated person of the fund, its investment adviser, or its principal underwriter, on the other. Pursuant to such procedures, the Board has authorized the president of the funds to authorize the release of the funds’ portfolio holdings, as necessary, in conformity with the foregoing principles.

The Board exercises on-going oversight of the disclosure of fund portfolio holdings by overseeing the implementation and enforcement of each fund’s policies and procedures by the Chief Compliance Officer and by considering reports and recommendations by the Chief Compliance Officer concerning any material compliance matters. The Board will receive periodic updates, at least annually, regarding entities who may receive portfolio holdings information not available to other current or prospective fund shareholders in connection with the dissemination of information necessary for transactions in Creation Units, as contemplated by the exemptive relief and as discussed below.

Each fund discloses its complete portfolio holdings schedule in public filings with the SEC within 60-80 days after the end of each fiscal quarter and will provide that information to shareholders as required by federal securities laws and regulations thereunder. A fund may, however, voluntarily disclose all or part of its portfolio holdings other than in connection with the creation/redemption process, as discussed above, in advance of required filings with the SEC, provided that such information is made generally available to all shareholders and other interested parties in a manner that is consistent with the above policy for disclosure of portfolio holdings information. Such information may be made available through a publicly-available website or other means that make the information available to all likely interested parties contemporaneously.

The funds may disclose portfolio holdings information to certain persons and entities prior to and more frequently than the public disclosure of such information (“early disclosure”). The president of the funds may authorize early disclosure of portfolio holdings information to such parties at differing times and/or with different lag times provided that (a) the president of the funds determines that the disclosure is in the best interests of the funds and that there are no conflicts of interest between the funds’ shareholders and funds’ adviser and distributor; and (b) the recipient is, either by contractual agreement or otherwise by law, required to maintain the confidentiality of the information.

In addition, the funds’ service providers including, without limitation, the investment adviser, distributor, the custodian, fund accountant, transfer agent, auditor, proxy voting service provider, pricing information venders, publisher, printer and mailing agent may receive early disclosure of portfolio holdings information as frequently as daily in connection with the services they perform for the funds. Service providers will be subject to a duty of confidentiality with respect to any portfolio holdings information whether imposed by the provisions of the service provider’s contract with the trust or by the nature of its relationship with the trust.

Further, each business day, each fund’s portfolio holdings information is provided to the Distributor or other agent for dissemination through the facilities of the National Securities Clearing Corporation (“NSCC”) and/or other fee-based subscription services to NSCC members and/or subscribers to those other fee-based subscription services, including Authorized Participants (as defined below), and to entities that publish and/or analyze such information in connection with the process of purchasing or redeeming Creation Units or trading shares of funds in the secondary market. This information typically reflects each fund’s anticipated holdings on the following business day.

In addition, each fund discloses its portfolio holdings and the percentages they represent of the fund’s net assets at least monthly, and as often as each day the fund is open for business, at www.schwab.com/SchwabETFs.

Portfolio holdings information made available in connection with the creation/redemption process may be provided to other entities that provide services to the funds in the ordinary course of business after it has been disseminated to the NSCC. From time to time, information concerning portfolio holdings other than portfolio holdings information made available in connection with the creation/redemption process, as discussed above, may be provided to other entities that provide services to the funds, including rating or ranking organizations, in the

ordinary course of business, no earlier than one business day following the date of the information.

The funds’ policies and procedures prohibit the fund, the funds’ investment adviser or any related party from receiving any compensation or other consideration in connection with the disclosure of portfolio holdings information.

The funds may disclose non-material information including commentary and aggregate information about the characteristics of the funds in connection with or relating to the funds or its portfolio securities to any person if such disclosure is for a legitimate business purpose, such disclosure does not effectively result in the disclosure of the complete portfolio securities of any fund (which can only be disclosed in accordance with the above requirements), and such information does not constitute material non-public information. Such disclosure does not fall within the portfolio securities disclosure requirements outlined above.

Whether the information constitutes material non-public information will be made on a good faith determination, which involves an assessment of the particular facts and circumstances. In most cases commentary or analysis would be immaterial and would not convey any advantage to a recipient in making a decision concerning the funds. Commentary and analysis includes, but is not limited to, the allocation of the funds’ portfolio securities and other investments among various asset classes, sectors, industries, and countries, the characteristics of the stock components and other investments of the funds, the attribution of fund returns by asset class, sector, industry and country, and the volatility characteristics of the funds.

Portfolio Transactions

The investment adviser makes decisions with respect to the purchase and sale of portfolio securities on behalf of the funds. The investment adviser is responsible for implementing these decisions, including the negotiation of commissions and the allocation of principal business and portfolio brokerage. Purchases and sales of securities on a stock exchange or certain riskless principal transactions placed on NASDAQ are typically effected through brokers who charge a commission for their services. Purchases and sales of fixed income securities may be transacted with the issuer, the issuer’s underwriter, or a dealer. The funds do not usually pay brokerage commissions on purchases and sales of fixed income securities, although the price of the securities generally includes compensation, in the form of a spread or a mark-up or mark-down, which is not disclosed separately. The prices the fund pays to underwriters of newly-issued securities usually include a commission paid by the issuer to the underwriter. Transactions placed through dealers who are serving as primary market makers reflect the spread between the bid and asked prices. The money market securities in which the fund may invest are traded primarily in the over-the-counter market on a net basis and do not normally involve either brokerage commissions or transfer taxes. It is expected that the cost of executing portfolio securities transactions of the fund will primarily consist of dealer spreads and brokerage commissions.

The investment adviser seeks to obtain the best execution for the funds’ portfolio transactions. The investment adviser may take a number of factors into account in selecting brokers or dealers to execute these transactions. Such factors may include, without limitation, the following:

execution price; brokerage commission or dealer spread; size or type of the transaction; nature or character of the markets; clearance or settlement capability; reputation; financial strength and stability of the broker or dealer; efficiency of execution and error resolution; block trading capabilities; willingness to execute related or unrelated difficult transactions in the future; order of call; ability to facilitate short selling; provision of additional brokerage or research services or products; whether a broker guarantees that a fund will receive, on aggregate, prices at least as favorable as the closing prices on a given day when adherence to “market-on-close” pricing aligns with fund objectives; or whether a broker guarantees that a fund will receive the volume-weighted average price (VWAP) for a security for a given trading day (or portion thereof) when the investment adviser believe that VWAP execution is in the fund’s best interest. In addition, the investment adviser has incentive sharing arrangements with certain unaffiliated brokers who guarantee market-on-close pricing: on a day when such a broker executes transactions at prices better, on aggregate, than market-on-close prices, that broker may receive, in addition to his or her standard commission, a portion of the net difference between the actual execution prices and corresponding market-on-close prices for that day.

The investment adviser may cause the funds to pay a higher commission than otherwise obtainable from other brokers or dealers in return for brokerage or research services or products if the investment adviser believes that such commission is reasonable in relation to the services provided. In addition to agency transactions, the investment adviser may receive brokerage and research services or products in connection with certain riskless principal transactions, in accordance with applicable SEC and other regulatory guidelines. In both instances, these services or products may include: economic, industry, or company research reports or investment recommendations; subscriptions to financial publications or research data compilations; compilations of securities prices, earnings, dividends, and similar data; computerized databases; quotation equipment and services; research or analytical computer software and services; products or services that assist in effecting transactions, including services of third-party computer systems developers directly related to research and brokerage activities; and effecting securities transactions and performing functions incidental thereto (such as clearance and settlement). The investment adviser may use research services furnished by brokers or dealers in servicing all fund accounts, and not all services may necessarily be used in connection with the account that paid commissions or spreads to the broker or dealer providing such services.

The investment adviser may receive a service from a broker or dealer that has both a “research” and a “non-research” use. When this occurs, the investment adviser will make a good faith allocation, under all the circumstances, between the research and non-research uses of the service. The percentage of the service that is used for research purposes may be paid for with fund commissions or spreads, while the investment adviser will use its own funds to pay for the percentage of the service that is used for non-research purposes. In making this good faith allocation, the investment adviser faces a potential conflict of interest, but the investment adviser believe that the costs of such services may be appropriately allocated to their anticipated research and non-research uses.

The investment adviser may purchase for funds, new issues of securities in a fixed price offering. In these situations, the seller may be a member of the selling group that will, in addition to selling securities, provide the investment adviser with research services, in accordance with applicable rules and regulations permitting these types of arrangements. Generally, the seller will

provide research “credits” in these situations at a rate that is higher than that which is available for typical secondary market transactions. These arrangements may not fall within the safe harbor of Section 28(e) of the Securities Exchange Act of 1934.

The investment adviser may place orders directly with electronic communications networks or other alternative trading systems. Placing orders with electronic communications networks or other alternative trading systems may enable the funds to trade directly with other institutional holders. At times, this may allow the funds to trade larger blocks than would be possible trading through a single market maker.

The investment adviser may aggregate securities sales or purchases among two or more funds. The investment adviser will not aggregate transactions unless it believes such aggregation is consistent with its duty to seek best execution for each affected fund and is consistent with the terms of the investment advisory agreement for such fund. In any single transaction in which purchases and/or sales of securities of any issuer for the account of a fund are aggregated with other accounts managed by the investment adviser, the actual prices applicable to the transaction will be averaged among the accounts for which the transaction is effected, including the account of the fund.

In determining when and to what extent to use Schwab or any other affiliated broker-dealer as its broker for executing orders for the funds on securities exchanges, the investment adviser follows procedures, adopted by the funds’ Board of Trustees, that are designed to ensure that affiliated brokerage commissions (if relevant) are reasonable and fair in comparison to unaffiliated brokerage commissions for comparable transactions. The Board reviews the procedures annually and approves and reviews transactions involving affiliated brokers quarterly.

PROXY VOTING

The Board of Trustees of the trust has delegated the responsibility for voting proxies to CSIM through their Advisory Agreement. The Trustees have adopted CSIM’s Proxy Voting Policy and Procedures with respect to proxies voted on behalf of the various Schwab Fund portfolios. A description of CSIM’s Proxy Voting Policy and Procedures is included in the Appendix.

The trust is required to disclose annually each fund’s complete proxy voting record on Form N-PX. The fund’s proxy voting record for the most recent 12 month period ended June 30th will be available by visiting the Schwab website at www.schwab.com/SchwabETFs. A fund’s Form N-PX will also be available on the SEC’s website at www.sec.gov.

Brokerage Commissions

The funds are new and, therefore, for each of the last three fiscal years, the funds paid no brokerage commissions.

Regular Broker-Dealers

Each fund’s regular broker-dealers during its most recent fiscal year are: (1) the ten broker-dealers that received the greatest dollar amount of brokerage commissions from the fund; (2) the ten broker-dealers that engaged as principal in the largest dollar amount of portfolio transactions;

and (3) the ten broker-dealers that sold the largest dollar amount of the fund’s shares. The funds are new and, therefore, have not purchased securities issued by any regular broker-dealers.

DESCRIPTION OF THE TRUST

Each fund is a series of Schwab Strategic Trust, an open-end investment management company organized as a Delaware statutory trust on January 27, 2009.

The Declaration of Trust provides for the perpetual existence of the Trust. The Trust may, however, be terminated at any time by vote of at least two-thirds of the outstanding shares of each series of the Trust or by the vote of the Trustees.

Shareholders are entitled to one vote for each full share held (with fractional votes for fractional shares held) and will vote (to the extent provided herein) in the election of Trustees and the termination of the Trust and on other matters submitted to the vote of shareholders. Shareholders will vote by individual series on all matters except (i) when required by the 1940 Act, shares shall be voted in the aggregate and not by individual series and (ii) when the Trustees have determined that the matter affects only the interests of one or more series, then only shareholders of such series shall be entitled to vote thereon. Shareholders of one series shall not be entitled to vote on matters exclusively affecting another series, such matters including, without limitation, the adoption of or change in any fundamental policies or restrictions of the other series and the approval of the investment advisory contracts of the other series.

There will normally be no meetings of shareholders for the purpose of electing Trustees, except that in accordance with the 1940 Act (i) the Trust will hold a shareholders’ meeting for the election of Trustees at such time as less than a majority of the Trustees holding office have been elected by shareholders, and (ii) if, as a result of a vacancy in the Board of Trustees, less than two-thirds of the Trustees holding office have been elected by the shareholders, that vacancy may only be filled by a vote of the shareholders. In addition, Trustees may be removed from office by a written consent signed by the holders of two-thirds of the outstanding shares and filed with the Trust’s custodian or by a vote of the holders of two-thirds of the outstanding shares at a meeting duly called for the purpose, which meeting shall be held upon the written request of the holders of not less than 10% of the outstanding shares. Except as set forth above, the Trustees shall continue to hold office and may appoint successor Trustees. Voting rights are not cumulative.

The Trust may, without shareholder vote, restate, amend or otherwise supplement the Declaration of Trust. Shareholders shall have the right to vote on any amendment that could affect their right to vote, any amendment to the Amendments section, any amendment for which shareholder vote may be required by applicable law or by the Trust’s registration statement filed with the SEC, and on any amendment submitted to them by the Trustees.

Any series of the Trust may reorganize or merge with one or more other series of another investment company. Any such reorganization or merger shall be pursuant to the terms and conditions specified in an agreement and plan of reorganization authorized and approved by the Trustees and entered into by the relevant series in connection therewith. In addition, such

reorganization or merger may be authorized by vote of a majority of the Trustees then in office and, to the extent permitted by applicable law, without the approval of shareholders of any series.

Shareholders wishing to submit proposals for inclusion in a proxy statement for a future shareholder meeting should send their written submissions to the Trust at 1 Freedom Valley Drive, Oaks, PA 19456. Proposals must be received a reasonable time in advance of a proxy solicitation to be included. Submission of a proposal does not guarantee inclusion in a proxy statement because proposals must comply with certain federal securities regulations.

PURCHASE, REDEMPTION AND PRICING OF SHARES

CREATION AND REDEMPTION OF CREATION UNITS

The funds are open each day that the New York Stock Exchange (NYSE) is open (Business Days). The NYSE’s trading session is normally conducted from 9:30 a.m. Eastern time until 4:00 p.m. Eastern time, Monday through Friday, although some days, such as in advance of and following holidays, the NYSE’s trading session closes early. The following holiday closings are currently scheduled for 2009: New Year’s Day, Martin Luther King Jr.’s Birthday, Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Only orders that are received and deemed acceptable by the Distributor no later than the time specified by the Trust will be executed that day at the fund’s share price calculated that day. On any day that the NYSE closes early, the funds reserve the right to advance the time by which purchase and redemption orders must be received by the Distributor that day in order to be executed that day at that day’s share price.

Creation . The trust issues and sells shares of the funds only in Creation Units on a continuous basis through the Distributor, without a sales load, at the NAV next determined after receipt, on any Business Day, for an order received and deemed acceptable by the Distributor.

Fund Deposit . The consideration for purchase of Creation Units of the funds may consist of (i) the in-kind deposit of a designated portfolio of securities closely approximating the holdings of a fund (the “Deposit Securities”), and an amount of cash denominated in U.S. Dollars (the “Cash Component”) computed as described below. Together, the Deposit Securities and the Cash Component constitute the “Fund Deposit,” which represents the minimum initial and subsequent investment amount for a Creation Unit of a fund.

The funds may accept a basket of money market instruments, non-U.S. currency or cash denominated in U.S. dollars that differs from the composition of the published basket. The funds may permit or require the consideration for Creation Units to consist solely of cash or non-U.S. currency. The funds may permit or require the substitution of an amount of cash denominated in U.S. Dollars (i.e., a “cash in lieu” amount) to be added to the Cash Component to replace any Deposit Security. For example, the trust reserves the right to permit or require a “cash in lieu” amount where the delivery of the Deposit Security by the Authorized Participant (as described below) would be restricted under the securities laws or where the delivery of the Deposit Security to the Authorized Participant would result in the disposition of the Deposit Security by the Authorized Participant becoming restricted under the securities laws, or in certain other situations.

The Cash Component is sometimes also referred to as the “Balancing Amount.” The Cash Component serves the function of compensating for any differences between the NAV per Creation Unit and the value of the Deposit Securities. If the Cash Component is a positive number (i.e., the NAV per Creation Unit exceeds the value of the Deposit Securities), the creator will deliver the Cash Component. If the Cash Component is a negative number (i.e., the NAV per Creation Unit is less than the value of the Deposit Securities), the creator will receive the Cash Component. Computation of the Cash Component excludes any stamp duty tax or other similar fees and expenses payable upon transfer of beneficial ownership of the Deposit Securities, which shall be the sole responsibility of the Authorized Participant.

A fund or its agent, through the NSCC or otherwise, makes available on each Business Day, prior to the opening of business on the NYSE Arca, Inc. Exchange (currently 9:30 a.m., Eastern time), the current Fund Deposit for the fund. Such Deposit Securities are applicable, subject to any adjustments, in order to effect creations of Creation Units of the fund until such time as the next-announced composition of the Deposit Securities is made available.

Procedures for Creation of Creation Units . To be eligible to place orders with the Distributor and to create a Creation Unit of a fund, an entity must be a Depository Trust Company (“DTC”) participant, such as a broker-dealer, bank, trust company, clearing corporation or certain other organization, some of whom (and/or their representatives) own DTC (each a “DTC Participant”). DTC acts as securities depositary for the shares. The DTC Participant must have executed an agreement with the Distributor with respect to creations and redemptions of Creation Units (“Participant Agreement”). A DTC Participant that has executed a Participant Agreement is referred to as an “Authorized Participant.” Investors should contact the Distributor for the names of Authorized Participants that have signed a Participant Agreement. All shares of a fund, however created, will be entered on the records of DTC in the name of DTC or its nominee and deposited with, or on behalf of, DTC.

All orders to create shares must be placed for one or more Creation Units. Orders must be transmitted by an Authorized Participant pursuant to procedures set forth in the Participant Agreement. The date on which an order to create Creation Units (or an order to redeem Creation Units, as discussed below) is placed is referred to as the “Transmittal Date.” Orders must be transmitted by an Authorized Participant by telephone or other transmission method acceptable to the Distributor pursuant to procedures set forth in the Participant Agreement, as described below. Economic or market disruptions or changes, or telephone or other communication failure, may impede the ability to reach the Distributor or an Authorized Participant.

On days when the New York Stock Exchange or U.S. or non-U.S. bond markets close earlier than normal, a fund may require purchase orders to be placed earlier in the day. All questions as to the number of Deposit Securities to be delivered, and the validity, form and eligibility (including time of receipt) for the deposit of any tendered securities, will be determined by the trust, whose determination shall be final and binding.

If the Distributor does not receive both the required Deposit Securities and the Cash Component by the specified time on the settlement date, the trust may cancel or revoke acceptance of such order. Upon written notice to the Distributor, such canceled or revoked order may be resubmitted the following Business Day using the Fund Deposit as newly constituted to reflect the then

current NAV of a fund. The delivery of Creation Units so created generally will occur no later than the settlement date.

Creation Units may be created in advance of receipt by the trust of all or a portion of the applicable Deposit Securities as described below. In these circumstances, the initial deposit will have a value greater than the NAV of the shares on the date the order is placed since, in addition to available Deposit Securities, U.S. cash (or an equivalent amount of non-U.S. currency) must be deposited in an amount equal to the sum of (i) the Cash Component, plus (ii) at least 102%, which the trust may change from time to time, of the market value of the undelivered Deposit Securities (the “Additional Cash Deposit”) with the fund pending delivery of any missing Deposit Securities. The Authorized Participant must deposit with the custodian the appropriate amount of federal funds by 10:00 a.m. New York time (or such other time as specified by the trust) on the settlement date. If the Distributor does not receive the Additional Cash Deposit in the appropriate amount by such time, then the order may be deemed to be rejected and the Authorized Participant shall be liable to a fund for losses, if any, resulting therefrom. An additional amount of U.S. cash (or an equivalent amount of non-U.S. currency) shall be required to be deposited with the Distributor, pending delivery of the missing Deposit Securities to the extent necessary to maintain the Additional Cash Deposit with the trust in an amount at least equal to 102%, which the trust may change from time to time, of the daily marked to market value of the missing Deposit Securities. To the extent that missing Deposit Securities are not received by the specified time on the settlement date, or in the event a marked-to-market payment is not made within one Business Day following notification by the Distributor that such a payment is required, the trust may use the cash on deposit to purchase the missing Deposit Securities. The Authorized Participant will be liable to the trust for the costs incurred by the trust in connection with any such purchases. These costs will be deemed to include the amount by which the actual purchase price of the Deposit Securities exceeds the market value of such Deposit Securities on the transmittal date plus the brokerage and related transaction costs associated with such purchases. The trust will return any unused portion of the Additional Cash Deposit once all of the missing Deposit Securities have been properly received by the Distributor or purchased by the trust and deposited into the trust. In addition, a transaction fee, as listed below, will be charged in all cases.

Acceptance of Orders for Creation Units . The trust reserves the absolute right to reject or revoke acceptance of a creation order transmitted to it by the Distributor in respect of a fund. For example, the trust may reject or revoke acceptance of an order, if (i) the order does not conform to the procedures set forth in the Participant Agreement; (ii) the investor(s), upon obtaining the shares ordered, would own 80% or more of the currently outstanding shares of a fund; (iii) the Deposit Securities delivered are not as disseminated through the facilities of the NSCC for that date by a fund as described above; (iv) acceptance of the Deposit Securities would have certain adverse tax consequences to a fund; (v) acceptance of the Fund Deposit would, in the opinion of counsel, be unlawful; (vi) acceptance of the Fund Deposit would otherwise, in the discretion of the trust or CSIM, have an adverse effect on the trust or the rights of beneficial owners; or (vii) in the event that circumstances outside the control of the trust, the custodian, the Distributor or CSIM make it for all practical purposes impossible to process creation orders. Examples of such circumstances include natural disaster, war, revolution; public service or utility problems such as fires, floods, extreme weather conditions and power outages resulting in telephone, telecopy and computer failures; market conditions or activities causing trading halts; systems

failures involving computer or other information systems affecting the trust, CSIM, the Distributor, DTC, NSCC, custodian (or sub-custodian) or any other participant in the creation process, and similar extraordinary events. The Distributor shall notify a prospective creator of a Creation Unit and/or the Authorized Participant acting on behalf of the creator of a Creation Unit of its rejection of the order of such person. The trust, custodian (or sub-custodian) and the Distributor are under no duty, however, to give notification of any defects or irregularities in the delivery of Fund Deposits nor shall any of them incur any liability for the failure to give any such notification.

Creation/Redemption Transaction Fee . The funds impose a “Transaction Fee” on investors purchasing or redeeming Creation Units. The Transaction Fee will be limited to amounts that have been determined by CSIM to be appropriate. The purpose of the Transaction Fee is to protect the existing shareholders of the funds from the dilutive costs associated with the purchase and redemption of Creation Units. Where the funds permit cash creations (or redemptions) or cash in lieu of depositing one or more Deposit Securities, the purchaser (or redeemer) may be assessed a higher Transaction Fee to offset the transaction cost to the funds of buying (or selling) those particular Deposit Securities. Transaction Fees will differ for the funds, depending on the transaction expenses related to the funds’ portfolio securities. Every purchaser of a Creation Unit will receive a prospectus that contains disclosure about the Transaction Fee, including the maximum amount of the Transaction Fee charged by the funds, which is four times the Additional Creation/Redemption Transaction Fee.

The following table sets forth the standard and additional creation/redemption transaction fee for the funds.


			Standard		Additional
	Approximate Value of One		Creation/Redemption		Creation/Redemption
Name of Fund	Creation Unit		Transaction Fee		Transaction Fee
Schwab U.S. Broad Market ETF	$	1,250,000	$	1,500	$	10,000
Schwab U.S. Large-Cap ETF	$	1,250,000	$	500	$	10,000
Schwab U.S. Large-Cap Growth ETF	$	1,250,000	$	500	$	10,000
Schwab U.S. Large-Cap Value ETF	$	1,250,000	$	500	$	10,000
Schwab U.S. Small-Cap ETF	$	1,250,000	$	1,500	$	10,000
Schwab International Equity ETF	$	2,500,000	$	15,000	$	20,000
Schwab International Small-Cap Equity ETF	$	2,500,000	$	15,000	$	20,000
Schwab Emerging Markets Equity ETF	$	2,500,000	$	8,000	$	20,000

Placement of Redemption Orders . The process to redeem Creation Units works much like the process to purchase Creation Units, but in reverse. Orders to redeem Creation Units of the fund must be delivered through an Authorized Participant. Investors other than Authorized Participants are responsible for making arrangements for a redemption request to be made through an Authorized Participant. Orders must be accompanied or followed by the requisite number of shares of the funds specified in such order, which delivery must be made to the Distributor no later than 10:00 a.m. New York time on the next Business Day following the Transmittal Date. All other procedures set forth in the Participant Agreement must be properly followed.

To the extent contemplated by an Authorized Participant’s agreement, in the event the Authorized Participant has submitted a redemption request but is unable to transfer all or part of the Creation Units to be redeemed to the Distributor, the Distributor will nonetheless accept the redemption request in reliance on the undertaking by the Authorized Participant to deliver the missing shares as soon as possible. Such undertaking shall be secured by the Authorized Participant’s delivery and maintenance of collateral consisting of cash having a value (marked to market daily) at least equal to 105%, which CSIM may change from time to time, of the value of the missing shares.

The current procedures for collateralization of missing shares require, among other things, that any cash collateral shall be in the form of U.S. dollars (or, at the discretion of the trust, non-U.S. currency in an equivalent amount) in immediately-available funds and shall be held by the custodian and marked to market daily. The fees of the custodian (and any sub-custodians) in respect of the delivery, maintenance and redelivery of the cash collateral shall be payable by the Authorized Participant. The trust, on behalf of the funds, is permitted to purchase the missing shares or acquire the Deposit Securities and the Cash Component underlying such shares at any time and will subject the Authorized Participant to liability for any shortfall between the cost to the trust of purchasing such shares, Deposit Securities or Cash Component and the value of the collateral.

If the requisite number of shares of the funds is not delivered on the Transmittal Date as described above the funds may reject or revoke acceptance of the redemption request. If it is not possible to effect deliveries of the Fund Securities, the trust may in its discretion exercise its option to redeem such shares in U.S. cash and the redeeming Authorized Participant will be required to receive its redemption proceeds in cash. In addition, an investor may request a redemption in cash that the fund may, in its sole discretion, permit. In either case, the investor will receive a cash payment equal to the NAV of its shares based on the NAV of shares of a fund next determined after the redemption request is received (minus a redemption transaction fee and additional charge for requested cash redemptions specified above, to offset the trust’s brokerage and other transaction costs associated with the disposition of Fund Securities). The funds may also, in their sole discretion, upon request of a shareholder, provide such redeemer a portfolio of securities that differs from the exact composition of the Fund Securities but does not differ in NAV.

Redemptions of shares for Fund Securities will be subject to compliance with applicable federal and state securities laws and the funds (whether or not it otherwise permits cash redemptions) reserve the right to redeem Creation Units for cash to the extent that the trust could not lawfully deliver specific Fund Securities upon redemptions or could not do so without first registering the Fund Securities under such laws.

The ability of the trust to effect in-kind creations and redemptions is subject, among other things, to the condition that, within the time period from the date of the order to the date of delivery of the securities, there are no days that are holidays in the applicable foreign market. For every occurrence of one or more intervening holidays in the applicable foreign market that are not holidays observed in the U.S. equity market, the redemption settlement cycle may be extended by the number of such intervening holidays. In addition to holidays, other unforeseeable closings in a foreign market due to emergencies may also prevent the trust from delivering securities within normal settlement period. The funds will not suspend or postpone redemption beyond seven days, except as permitted under Section 22(e) of the 1940 Act or pursuant to exemptive relief obtained by the trust. Section 22(e) provides that the right of redemption may be suspended or the date of payment postponed with respect to the funds (1) for any period during which the NYSE is closed (other than customary weekend and holiday closings); (2) for any period during which trading on the NYSE is suspended or restricted; (3) for any period during which an emergency exists as a result of which disposal of the shares of a fund’s portfolio securities or determination of its net asset value is not reasonably practicable; or (4) in such other circumstance as is permitted by the SEC.

Pricing of Shares

Each business day, the funds calculate their share price, or NAV, as of the close of the NYSE (generally, 4 p.m. Eastern time). This means that NAVs are calculated using the values of a fund’s portfolio securities as of the close of the NYSE. Such values are required to be determined in one of two ways: securities for which market quotations are readily available are required to be valued at current market value; and securities for which market quotations are not readily available are required to be valued at fair value using procedures approved by the Board of Trustees.

Shareholders of funds that invest in foreign securities should be aware that because foreign markets are often open on weekends and other days when the funds are closed, the value of some of a fund’s securities may change on days when it is not possible to buy or sell shares of the fund. The funds use approved pricing services to provide values for their portfolio securities. Current market values are generally determined by the approved pricing services as follows: generally securities traded on exchanges are valued at the last-quoted sales price on the exchange on which such securities are primarily traded, or, lacking any sales, at the mean between the bid and ask prices; generally securities traded in the over-the-counter market are valued at the last reported sales price that day, or, if no sales are reported, at the mean between the bid and ask prices. Generally securities listed on the NASDAQ National Market System are valued in accordance with the NASDAQ Official Closing Price. In addition, securities that are primarily traded on foreign exchanges are generally valued at the preceding closing values of such securities on their respective exchanges with these values then translated into U.S. dollars at the current exchange rate. Fixed income securities normally are valued based on valuations provided

by approved pricing services. Securities may be fair valued pursuant to procedures approved by the funds’ Board of Trustees when a security is de-listed or its trading is halted or suspended; when a security’s primary pricing source is unable or unwilling to provide a price; when a security’s primary trading market is closed during regular market hours; or when a security’s value is materially affected by events occurring after the close of the security’s primary trading market. The Board of Trustees regularly reviews fair value determinations made by the funds pursuant to the procedures.

NOTE: Transactions in fund shares will be priced at NAV only if you purchase or redeem shares directly from a fund in Creation Units. Fund shares are purchased or sold on a national securities exchange at market prices, which may be higher (premium) or lower (discount) than NAV.

TAXATION

Federal Tax Information for the Funds

This discussion of federal income tax consequences is based on the Code and the regulations issued thereunder as in effect on the date of this Statement of Additional Information. New legislation, as well as administrative changes or court decisions, may significantly change the conclusions expressed herein, and may have a retroactive effect with respect to the transactions contemplated herein.

It is each fund’s policy to qualify for taxation as a “regulated investment company” (RIC) by meeting the requirements of Subchapter M of the Code. By qualifying as a RIC, each fund expects to eliminate or reduce to a nominal amount the federal income tax to which it is subject. If a fund does not qualify as a RIC under the Code, it will be subject to federal income tax on its net investment income and any net realized capital gains. In addition, each fund could be required to recognize unrealized gains, pay substantial taxes and interest, and make substantial distributions before requalifying as a RIC.

Each fund is treated as a separate entity for federal income tax purposes and is not combined with the trust’s other funds. Each fund intends to qualify as a RIC so that it will be relieved of federal income tax on that part of its income that is distributed to shareholders. In order to qualify for treatment as a RIC, a fund must distribute annually to its shareholders at least 90% of its investment company taxable income (generally, net investment income plus the excess, if any, of net short-term capital gain over net long-term capital losses) and also must meet several additional requirements. Among these requirements are the following: (i) at least 90% of a fund’s gross income each taxable year must be derived from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income derived with respect to its business of investing in such stock or securities or currencies and net income derived from an interest in a qualified publicly traded partnership; (ii) at the close of each quarter of a fund’s taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. Government securities, securities of other RICs and other securities, with such other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of a fund’s assets and that does not represent more than 10% of the outstanding voting securities of such issuer; and (iii) at the close

of each quarter of a fund’s taxable year, not more than 25% of the value of its assets may be invested in securities (other than U.S. Government securities or the securities of other RICs) of any one issuer or of two or more issuers and which are engaged in the same, similar, or related trades or businesses if the fund owns at least 20% of the voting power of such issuers, or the securities of one or more qualified publicly traded partnerships.

Certain master limited partnerships may qualify as “qualified publicly traded partnerships” for purposes of the Subchapter M diversification rules described above. In order to do so, the master limited partnership must satisfy two requirements during the taxable year. First, the interests of such partnership either must be traded on an established securities market or must be readily tradable on a secondary market (or the substantial equivalent thereof). Second, less than 90% of the partnership’s gross income can consist of dividends, interest, payments with respect to securities loans, or gains from the sale or other disposition of stock or securities or foreign currencies, or other income derived with respect to its business of investing in such stock securities or currencies.

The Code imposes a non-deductible excise tax on RICs that do not distribute in a calendar year (regardless of whether they otherwise have a non-calendar taxable year) an amount equal to 98% of their “ordinary income” (as defined in the Code) for the calendar year plus 98% of their net capital gain for the one-year period ending on October 31 of such calendar year, plus any undistributed amounts from prior years. The non-deductible excise tax is equal to 4% of the deficiency. For the foregoing purposes, a fund is treated as having distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year. A fund may in certain circumstances be required to liquidate fund investments in order to make sufficient distributions to avoid federal excise tax liability at a time when the investment adviser might not otherwise have chosen to do so, and liquidation of investments in such circumstances may affect the ability of a fund to satisfy the requirements for qualification as a RIC.

Dividends and interest received from a fund’s holding of foreign securities may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. If the funds meet certain requirements, which include a requirement that more than 50% of the value of the funds total assets at the close of its respective taxable year consists of stocks or securities of foreign corporations, then the funds should be eligible to file an election with the Internal Revenue Service that may enable shareholders, in effect, to receive either the benefit of a foreign tax credit, or a tax deduction, with respect to any foreign and U.S. possessions income taxes paid to the funds, subject to certain limitations. Pursuant to this election, the funds will treat those taxes as dividends paid to its shareholders. Each such shareholder will be required to include a proportionate share of those taxes in gross income as income received from a foreign source and must treat the amount so included as if the shareholder had paid the foreign tax directly. The shareholder may then either deduct the taxes deemed paid by him or her in computing his or her taxable income or, alternatively, use the foregoing information in calculating any foreign tax credit the shareholder may be entitled to use against such shareholder’s federal income tax. If the funds make this election, the funds will report annually to its shareholders the respective amounts per share of the funds’ income from sources within, and taxes paid to, foreign countries and U.S. possessions.

The funds’ transactions in foreign currencies and forward foreign currency contracts will be subject to special provisions of the Internal Revenue Code that, among other things, may affect the character of gains and losses realized by the funds (i.e., may affect whether gains or losses are ordinary or capital), accelerate recognition of income to the funds and defer losses. These rules could therefore affect the character, amount and timing of distributions to shareholders. These provisions also may require the funds to mark-to-market certain types of positions in their portfolios (i.e., treat them as if they were closed out) which may cause the funds to recognize income without receiving cash with which to make distributions in amounts necessary to satisfy the RIC distribution requirements for avoiding income and excise taxes. The funds intend to monitor their transactions, intend to make the appropriate tax elections, and intend to make the appropriate entries in their books and records when they acquire any foreign currency or forward foreign currency contract in order to mitigate the effect of these rules so as to prevent disqualification of the funds as a RIC and minimize the imposition of income and excise taxes.

If the funds own shares in certain foreign investment entities, referred to as “passive foreign investment companies” or “PFIC,” the funds will be subject to one of the following special tax regimes: (i) the funds are liable for U.S. federal income tax, and an additional interest charge, on a portion of any “excess distribution” from such foreign entity or any gain from the disposition of such shares, even if the entire distribution or gain is paid out by the funds as a dividend to its shareholders; (ii) if the funds were able and elected to treat a PFIC as a “qualifying electing fund” or “QEF,” the funds would be required each year to include in income, and distribute to shareholders in accordance with the distribution requirements set forth above, the funds’ pro rata share of the ordinary earnings and net capital gains of the passive foreign investment company, whether or not such earnings or gains are distributed to the funds; or (iii) the funds may be entitled to mark-to-market annually shares of the PFIC, and in such event would be required to distribute to shareholders any such mark-to-market gains in accordance with the distribution requirements set forth above.

A fund’s transactions in futures contracts, forward contracts, foreign currency exchange transactions, options and certain other investment and hedging activities may be restricted by the Code and are subject to special tax rules. In a given case, these rules may accelerate income to a fund, defer its losses, cause adjustments in the holding periods of a fund’s assets, convert short-term capital losses into long-term capital losses or otherwise affect the character of a fund’s income. These rules could therefore affect the amount, timing and character of distributions to shareholders. Each fund will endeavor to make any available elections pertaining to these transactions in a manner believed to be in the best interest of a fund and its shareholders.

Each fund is required for federal income tax purposes to mark-to-market and recognize as income for each taxable year its net unrealized gains and losses on certain futures contracts as of the end of the year as well as those actually realized during the year. Gain or loss from futures and options contracts on broad-based indexes required to be marked to market will be 60% long-term and 40% short-term capital gain or loss. Application of this rule may alter the timing and character of distributions to shareholders. Each fund may be required to defer the recognition of losses on futures contracts, options contracts and swaps to the extent of any unrecognized gains on offsetting positions held by the fund. It is anticipated that any net gain realized from the

closing out of futures or options contracts will be considered gain from the sale of securities and therefore will be qualifying income for purposes of the 90% requirement described above. Each fund distributes to shareholders at least annually any net capital gains which have been recognized for federal income tax purposes, including unrealized gains at the end of the fund’s fiscal year on futures or options transactions. Such distributions are combined with distributions of capital gains realized on the fund’s other investments and shareholders are advised on the nature of the distributions.

With respect to investments in zero coupon securities which are sold at original issue discount and thus do not make periodic cash interest payments, a fund will be required to include as part of its current income the imputed interest on such obligations even though the fund has not received any interest payments on such obligations during that period. Because each fund distributes all of its net investment income to its shareholders, a fund may have to sell fund securities to distribute such imputed income which may occur at a time when the adviser would not have chosen to sell such securities and which may result in taxable gain or loss.

Federal Income Tax Information for Shareholders

The discussion of federal income taxation presented below supplements the discussion in each fund’s prospectus and only summarizes some of the important federal tax considerations generally affecting shareholders of the funds. Accordingly, prospective investors (particularly those not residing or domiciled in the United States) should consult their own tax advisors regarding the consequences of investing in the funds.

Any dividends declared by a fund in October, November or December and paid the following January are treated, for tax purposes, as if they were received by shareholders on December 31 of the year in which they were declared. In general, distributions by a fund of investment company taxable income (including net short-term capital gains), if any, whether received in cash or additional shares, will be taxable to you as ordinary income. A portion of these distributions may be treated as qualified dividend income (eligible for the reduced maximum rate to individuals of 15% (reduced rates apply to individuals in lower tax brackets)) to the extent that a fund receives qualified dividend income. Qualified dividend income is, in general, dividend income from taxable domestic corporations and certain foreign corporations (e.g., foreign corporations incorporated in a possession of the United States or in certain countries with a comprehensive tax treaty with the United States, or the stock of which is readily tradable on an established securities market in the United States). A dividend will not be treated as qualified dividend income to the extent that (i) the shareholder has not held the shares of the fund on which the dividend was paid for more than 60 days during the 121-day period that begins on the date that is 60 days before the date on which the shares of a fund become ex-dividend with respect to such dividend (and each fund also satisfies those holding period requirements with respect to the securities it holds that paid the dividends distributed to the shareholder), (ii) the shareholder is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to substantially similar or related property, or (iii) the shareholder elects to treat such dividend as investment income under section 163(d)(4)(B) of the Internal Revenue Code. Dividends received by each fund from a REIT or another RIC may be treated as qualified dividend income only to the extent the dividend distributions are attributable to qualified dividend income

received by such REIT or RIC. It is expected that dividends received by the fund from a REIT and distributed to a shareholder generally will be taxable to the shareholder as ordinary income.

Distributions from net capital gain (if any) that are designated as capital gains dividends are taxable as long-term capital gains without regard to the length of time the shareholder has held shares of a fund. However, if you receive a capital gains dividend with respect to fund shares held for six months or less, any loss on the sale or exchange of those shares shall, to the extent of the capital gains dividend, be treated as a long-term capital loss. Long-term capital gains also will be taxed at a maximum rate of 15%. Absent further legislation, the maximum 15% tax rate on qualified dividend income and long-term capital gains will cease to apply to taxable years beginning after December 31, 2010.

A fund will inform you of the amount of your ordinary income dividends and capital gain distributions, if any, at the time they are paid and will advise you of their tax status for federal income tax purposes, including what portion of the distributions will be qualified dividend income, shortly after the close of each calendar year.

If a fund makes a distribution to a shareholder in excess of a fund’s current and accumulated earnings and profits in any taxable year, the excess distribution will be treated as a return of capital to the extent of the shareholder’s tax basis in its shares, and thereafter, as capital gain. A return of capital is not taxable, but reduces a shareholder’s tax basis in its shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by the shareholder of its shares.

For corporate investors in a fund, dividend distributions a fund designates to be from dividends received from qualifying domestic corporations will be eligible for the 70% corporate dividends-received deduction to the extent they would qualify if the fund were a regular corporation. Distributions by a fund also may be subject to state, local and foreign taxes, which may differ from the federal income tax treatment described above.

A sale of shares in a fund may give rise to a gain or loss. In general, any gain or loss realized upon a taxable disposition of shares will be treated as long-term capital gain or loss if the shares have been held for more than 12 months. Otherwise, the gain or loss on the taxable disposition of shares will be treated as short-term capital gain or loss. Under current law, the maximum tax rate on long-term capital gains available to non-corporate shareholders is generally 15% for taxable years beginning before January 1, 2011. Any loss realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any long-term capital gain distributions received (or deemed received) by the shareholder with respect to the shares. All or a portion of any loss realized upon a taxable disposition of shares will be disallowed if other substantially identical shares of a fund are purchased within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.

An Authorized Participant who exchanges securities for Creation Units generally will recognize a gain or a loss. The gain or loss will be equal to the difference between the market value of the Creation Units at the time and the sum of the exchanger’s aggregate basis in the securities

surrendered plus the amount of cash paid for such Creation Units. A person who redeems Creation Units will generally recognize a gain or loss equal to the difference between the exchanger’s basis in the Creation Units and the sum of the aggregate market value of any securities received plus the amount of any cash received for such Creation Units. The Internal Revenue Service, however, may assert that a loss realized upon an exchange of securities for Creation Units cannot be deducted currently under the rules governing “wash sales,” or on the basis that there has been no significant change in economic position.

Any capital gain or loss realized upon the creation of Creation Units will generally be treated as long-term capital gain or loss if the securities exchanged for such Creation Units have been held for more than one year. Any capital gain or loss realized upon the redemption of Creation Units will generally be treated as long-term capital gain or loss if the shares comprising the Creation Units have been held for more than one year. Otherwise, such capital gains or losses will be treated as short-term capital gains or losses. In some circumstances, a redemption of Creation Units may be treated as resulting in a distribution to which section 301 of the Code applies, potentially causing amounts received by the shareholder in the redemption to be treated as dividend income rather than as a payment in exchange for Creation Units. The rules for determining when a redemption will be treated as giving rise to a distribution under section 301 of the Code and the tax consequences of Code section 301 distributions are complex. Persons purchasing or redeeming Creation Units should consult their own tax advisors with respect to the tax treatment of any creation or redemption transaction.

Certain tax-exempt shareholders, including qualified pension plans, individual retirement accounts, salary deferral arrangements, 401(k)s, and other tax-exempt entities, generally are exempt from federal income taxation except with respect to their unrelated business taxable income (“UBTI”). Under current law, each fund generally serves to block UBTI from being realized by their tax-exempt shareholders. However, notwithstanding the foregoing, tax-exempt shareholders could realize UBTI by virtue of its investment in the fund where, for example, (i) a fund invests in REITs that hold residual interests in real estate mortgage investment conduits (“REMICs”) or (ii) share in a fund constitutes debt-financed property in the hands of the tax-exempt shareholder within the meaning of section 514(b) of the Code, a tax-exempt shareholder could realize UBTI by virtue of its investment in the Fund. Charitable remainder trusts are subject to special rules and should consult their tax advisors. There are no restrictions preventing a fund from holding investments in REITs that hold residual interests in REMICs, and a fund may do so. The Internal Revenue Service has issued recent guidance with respect to these issues and prospective shareholders, especially charitable remainder trusts, are strongly encouraged to consult with their tax advisors regarding these issues.

Each fund has the right to reject an order to for Creation Units if the purchaser (or group of purchasers) would, upon obtaining the shares so ordered, own 80% or more of the outstanding shares of the fund and if, pursuant to section 351 of the Code, the respective fund would have a basis in the deposit securities different from the market value of such securities on the date of deposit. Each fund also has the right to require information necessary to determine beneficial Share ownership for purposes of the 80% determination.

Dividends paid by the funds to shareholders who are nonresident aliens or foreign entities will be subject to a 30% United States withholding tax unless a reduced rate of withholding or a withholding exemption is provided under applicable treaty law to the extent derived from investment income and short-term capital gain (other than “qualified short-term capital gain” described below) or unless such income is effectively connected with a U.S. trade or business carried on through a permanent establishment in the United States. Nonresident shareholders are urged to consult their own tax advisors concerning the applicability of the United States withholding tax and the proper withholding form(s) to be submitted to the funds. A non-U.S. shareholder who fails to provide an appropriate Internal Revenue Service Form W-8 may be subject to backup withholding at the appropriate rate.

The funds may, under certain circumstances, designate all or a portion of a dividend as an “interest-related dividend” that if received by a nonresident alien or foreign entity generally would be exempt from the 30% U.S. withholding tax, provided that certain other requirements are met. The funds may also, under certain circumstances, designate all or a portion of a dividend as a “qualified short-term capital gain dividend” which if received by a nonresident alien or foreign entity generally would be exempt from the 30% U.S. withholding tax, unless the foreign person is a nonresident alien individual present in the United States for a period or periods aggregating 183 days or more during the taxable year. In the case of Shares held through an intermediary, the intermediary may withhold even if the funds designate the payment as qualified net interest income or qualified short-term capital gain. Non-U.S. shareholders should contact their intermediaries with respect to the application of these rules to their accounts. The provisions relating to dividends to foreign persons would apply to dividends with respect to taxable years of the funds beginning after December 31, 2004 and before January 1, 2010.

The Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”) makes non-U.S. persons subject to U.S. tax on disposition of a U.S. real property interest as if he or she were a U.S. person. Such gain is sometimes referred to as “FIRPTA gain”. The Internal Revenue Code provides a look-through rule for distributions of “FIRPTA gain” by a RIC if all of the following requirements are met: (i) the RIC is classified as a “qualified investment entity” (a “qualified investment entity” includes a RIC if, in general, more than 50% of the RIC’s assets consists of interests in REITs and U.S. real property holding corporations); and (ii) you are a non-U.S. shareholder that owns more than 5% of a fund’s shares at any time during the one-year period ending on the date of the distribution. If these conditions are met, fund distributions to you are treated as gain from the disposition of a U.S. real property interest (“USRPI”), causing the distribution to be subject to U.S. withholding tax at a rate of 35%, and requiring that you file a nonresident U.S. income tax return. Also, such gain may be subject to a 30% branch profits tax in the hands of a non-U.S. shareholder that is a corporation. Even if a non-U.S. shareholder does not own more than 5% of a fund’s shares, fund distributions to you that are attributable to gain from the sale or disposition of a USRPI will be taxable as ordinary dividends subject to withholding at a 30% or lower treaty rate.

Disclosure for Non-U.S. Shareholders — Each fund will be required in certain cases to withhold at the applicable withholding rate and remit to the U.S. Treasury the withheld amount of taxable dividends paid to any shareholder who (1) fails to provide a correct taxpayer identification number certified under penalty of perjury; (2) is subject to withholding by the Internal Revenue

Service for failure to properly report all payments of interest or dividends; (3) fails to provide a certified statement that he or she is not subject to “backup withholding;” or (4) fails to provide a certified statement that he or she is a U.S. person (including a U.S. resident alien). Backup withholding is not an additional tax and any amounts withheld may be credited against the shareholder’s ultimate U.S. tax liability.

Foreign shareholders (i.e., nonresident alien individuals and foreign corporations, partnerships, trusts and estates) are generally subject to U.S. withholding tax at the rate of 30% (or a lower tax treaty rate) on distributions derived from net investment income and short-term capital gains; provided, however, that for a fund’s taxable year beginning after December 31, 2004 and not beginning after December 31, 2009, interest related dividends and short-term capital gain dividends generally will not be subject to U.S. withholding taxes. Distributions to foreign shareholders of such short-term capital gain dividends, of long-term capital gains and any gains from the sale or other disposition of shares of a fund generally are not subject to U.S. taxation, unless the recipient is an individual who either (1) meets the Code’s definition of “resident alien” or (2) is physically present in the U.S. for 183 days or more per year. Different tax consequences may result if the foreign shareholder is engaged in a trade or business within the United States. In addition, the tax consequences to a foreign shareholder entitled to claim the benefits of a tax treaty may be different than those described above.

Under U.S. Treasury regulations, if a shareholder recognizes a loss of $2 million or more for an
individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the Internal Revenue Service a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a RIC such as a fund are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all RICs. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Shareholders should consult their tax advisors to determine the applicability of these regulations in light of their individual circumstances.

Shareholders are urged to consult their tax advisors as to the state and local tax rules affecting investments in the funds.

Financial Statements

To be provided by amendment.

APPENDIX A — RATINGS OF INVESTMENT SECURITIES

From time to time, the fund may report the percentage of its assets that fall into the rating categories set forth below.

BONDS

Moody’s Investors Service

Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as “gilt edged.” Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.

Aa Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long term risk appear somewhat larger than the Aaa securities.

A Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future.

Baa Bonds which are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.

Ba Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.

B Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.

Standard & Poor’s Corporation

Investment Grade

AAA Debt rated ‘AAA’ has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong.

AA Debt rated ‘AA’ has a very strong capacity to pay interest and repay principal and differs from the highest rated debt only in small degree.

A Debt rated ‘A’ has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories.

BBB Debt rated ‘BBB’ is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories.

Speculative Grade

Debt rated ‘BB’ and ‘B’ is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.

BB Debt rated ‘BB’ has less near-term vulnerability to default than other speculative grade debt. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to inadequate capacity to meet timely interest and principal payments. The ‘BB’ rating category is also used for debt subordinated to senior debt that is assigned an actual or implied ‘BBB-’ rating.

B Debt rate ‘B’ has greater vulnerability to default but presently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions would likely impair capacity or willingness to pay interest and repay principal. The ‘B’ rating category also is used for debt subordinated to senior debt that is assigned an actual or implied ‘BB’ or ‘BB-’ rating.

Fitch, Inc.

Investment Grade Bond


AAA		Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events.


AA		Bonds considered to be investment grade and of very high credit quality. The obligor’s ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated ‘AAA’. Because bonds rated in the ‘AAA’ and ‘AA’ categories are not significantly vulnerable to foreseeable future developments, short term debt of these issuers is generally rated ‘F1+’.


A		Bonds considered to be investment grade and of high credit quality. The obligor’s ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings.


BBB		Bonds considered to be investment grade and of satisfactory credit quality. The obligor’s ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore impair timely payment. The likelihood that the


		ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings.

Speculative grade bond


BB		Bonds are considered speculative. The obligor’s ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified which could assist the obligor in satisfying its debt service requirements.


B		Bonds are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor’s limited margin of safety and the need for reasonable business and economic activity throughout the life of the issue.

Dominion Bond Rating Service

Bond and Long Term Debt Rating Scale

As is the case with all DBRS rating scales, long term debt ratings are meant to give an indication of the risk that the borrower will not fulfill its full obligations in a timely manner with respect to both interest and principal commitments. DBRS ratings do not take factors such as pricing or market risk into consideration and are expected to be used by purchasers as one part of their investment process. Every DBRS rating is based on quantitative and qualitative considerations that are relevant for the borrowing entity.

AAA: Highest Credit Quality
AA: Superior Credit Quality
A: Satisfactory Credit Quality

BBB: Adequate Credit Quality
BB: Speculative
B: Highly Speculative

CCC: Very Highly Speculative
CC: Very Highly Speculative
C: Very Highly Speculative

“ AAA ” Bonds rated “AAA” are of the highest credit quality, with exceptionally strong protection for the timely repayment of principal and interest. Earnings are considered stable, the structure of the industry in which the entity operates is strong, and the outlook for future profitability is favorable. There are few qualifying factors present which would detract from the performance of the entity, the strength of liquidity and coverage ratios is unquestioned and the entity has established a creditable track record of superior performance. Given the extremely tough definition which DBRS has established for this category, few entities are able to achieve a AAA rating.

“ AA ” Bonds rated “AA” are of superior credit quality, and protection of interest and principal is considered high. In many cases, they differ from bonds rated AAA only to a small degree. Given the extremely tough definition which DBRS has for the AAA category (which few companies are able to achieve), entities rated AA are also considered to be strong credits which typically

exemplify above-average strength in key areas of consideration and are unlikely to be significantly affected by reasonably foreseeable events.

“ A ” Bonds rated “A” are of satisfactory credit quality. Protection of interest and principal is still substantial, but the degree of strength is less than with AA rated entities. While a respectable rating, entities in the “A” category are considered to be more susceptible to adverse economic conditions and have greater cyclical tendencies than higher rated companies.

“ BBB ” Bonds rated “BBB” are of adequate credit quality. Protection of interest and principal is considered adequate, but the entity is more susceptible to adverse changes in financial and economic conditions, or there may be other adversities present which reduce the strength of the entity and its rated securities.

“ BB ” Bonds rated “BB” are defined to be speculative, where the degree of protection afforded interest and principal is uncertain, particularly during periods of economic recession. Entities in the BB area typically have limited access to capital markets and additional liquidity support and, in many cases, small size or lack of competitive strength may be additional negative considerations.

“ B ” Bonds rated “B” are highly speculative and there is a reasonably high level of uncertainty which exists as to the ability of the entity to pay interest and principal on a continuing basis in the future, especially in periods of economic recession or industry adversity.

“ CCC ” / “ CC ” / “ C ” Bonds rated in any of these categories are very highly speculative and are in danger of default of interest and principal. The degree of adverse elements present is more severe than bonds rated “B”. Bonds rated below “B” often have characteristics which, if not remedied, may lead to default. In practice, there is little difference between the “C” to “CCC” categories, with “CC” and “C” normally used to lower ranking debt of companies where the senior debt is rated in the “CCC” to “B” range.

“ D ” This category indicates Bonds in default of either interest or principal.

(“ high ”, “ low ”) grades are used to indicate the relative standing of a credit within a particular rating category. The lack of one of these designations indicates a rating which is essentially in the middle of the category. Note that “high” and “low” grades are not used for the AAA category.

COMMERCIAL PAPER AND SHORT-TERM DEBT RATING SCALE

Dominion Bond Rating Service

As is the case with all DBRS rating scales, commercial paper ratings are meant to give an indication of the risk that the borrower will not fulfill its obligations in a timely manner. DBRS ratings do not take factors such as pricing or market risk into consideration and are expected to be used by purchasers as one part of their investment process. Every DBRS rating is based on quantitative and qualitative considerations which are relevant for the borrowing entity.

R-1: Prime Credit Quality

R-2: Adequate Credit Quality

R-3: Speculative

All three DBRS rating categories for short term debt use “high”, “middle” or “low” as subset grades to designate the relative standing of the credit within a particular rating category. The following comments provide separate definitions for the three grades in the Prime Credit Quality area, as this is where ratings for active borrowers in Canada continue to be heavily concentrated.

“ R-1 (high) ” Short term debt rated “R-1 (high)” is of the highest credit quality, and indicates an entity which possesses unquestioned ability to repay current liabilities as they fall due. Entities rated in this category normally maintain strong liquidity positions, conservative debt levels and profitability which is both stable and above average. Companies achieving an “R-1 (high)” rating are normally leaders in structurally sound industry segments with proven track records, sustainable positive future results and no substantial qualifying negative factors. Given the extremely tough definition which DBRS has established for an “R-1 (high)”, few entities are strong enough to achieve this rating.

“ R-1 (middle) ” Short term debt rated “R-1 (middle)” is of superior credit quality and, in most cases, ratings in this category differ from “R-1 (high)” credits to only a small degree. Given the extremely tough definition which DBRS has for the “R-1 (high)” category (which few companies are able to achieve), entities rated “R-1 (middle)” are also considered strong credits which typically exemplify above average strength in key areas of consideration for debt protection.

“ R-1 (low) ” Short term debt rated “R-1 (low)” is of satisfactory credit quality. The overall strength and outlook for key liquidity, debt and profitability ratios is not normally as favorable as with higher rating categories, but these considerations are still respectable. Any qualifying negative factors which exist are considered manageable, and the entity is normally of sufficient size to have some influence in its industry.

“ R-2 (high) ”, “ R-2 (middle) ”, “ R-2 (low) ” Short term debt rated “R-2” is of adequate credit quality and within the three subset grades, debt protection ranges from having reasonable ability for timely repayment to a level which is considered only just adequate. The liquidity and debt ratios of entities in the “R-2” classification are not as strong as those in the “R-1” category, and the past and future trend may suggest some risk of maintaining the strength of key ratios in these areas. Alternative sources of liquidity support are considered satisfactory; however, even the strongest liquidity support will not improve the commercial paper rating of the issuer. The size of the entity may restrict its flexibility, and its relative position in the industry is not typically as strong as an “R-1 credit”. Profitability trends, past and future, may be less favorable, earnings not as stable, and there are often negative qualifying factors present which could also make the entity more vulnerable to adverse changes in financial and economic conditions.

“ R-3 (high) ”, “ R-3 (middle) ”, “ R-3 (low) ” Short term debt rated “R-3” is speculative, and within the three subset grades, the capacity for timely payment ranges from mildly speculative to doubtful. “R-3” credits tend to have weak liquidity and debt ratios, and the future trend of these ratios is also unclear. Due to its speculative nature, companies with “R-3” ratings would normally have very limited access to alternative sources of liquidity. Earnings would typically be very unstable, and the level of overall profitability of the entity is also likely to be low. The industry environment may be weak, and strong negative qualifying factors are also likely to be present.

SHORT TERM NOTES AND VARIABLE RATE DEMAND OBLIGATIONS

Moody’s Investors Service

Short term notes/variable rate demand obligations bearing the designations MIG-1/VMIG-1 are considered to be of the best quality, enjoying strong protection from established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. Obligations rated MIG-2/VMIG-3 are of high quality and enjoy ample margins of protection although not as large as those of the top rated securities.

Standard & Poor’s Corporation

An S&P SP-1 rating indicates that the subject securities’ issuer has a strong capacity to pay principal and interest. Issues determined to possess very strong safety characteristics are given a plus (+) designation. S&P’s determination that an issuer has a satisfactory capacity to pay principal and interest is denoted by an SP-2 rating.

Fitch, Inc.

Obligations supported by the highest capacity for timely repayment are rated F1+. An F1 rating indicates that the obligation is supported by a very strong capacity for timely repayment. Obligations rated F2 are supported by a good capacity for timely repayment, although adverse changes in business, economic, or financial conditions may affect this capacity.

COMMERCIAL PAPER

Moody’s Investors Service

Prime-1 is the highest commercial paper rating assigned by Moody’s. Issuers (or related supporting institutions) of commercial paper with this rating are considered to have a superior ability to repay short term promissory obligations. Issuers (or related supporting institutions) of securities rated Prime-2 are viewed as having a strong capacity to repay short term promissory obligations. This capacity will normally be evidenced by many of the characteristics of issuers whose commercial paper is rated Prime-1 but to a lesser degree.

Standard & Poor’s Corporation

A Standard & Poor’s Corporation (“S&P”) A-1 commercial paper rating indicates a strong degree of safety regarding timely payment of principal and interest. Issues determined to possess overwhelming safety characteristics are denoted A-1+. Capacity for timely payment on commercial paper rated A-2 is satisfactory, but the relative degree of safety is not as high as for issues designated A-1.

Fitch, Inc.

F1+ is the highest category, and indicates the strongest degree of assurance for timely payment. Issues rated F1 reflect an assurance of timely payment only slightly less than issues rated F1+. Issues assigned an F2 rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues in the first two rating categories.

Tax Efficiency

The Schwab 1000 Index ^{^®} Fund and Schwab Total Stock Market Index Fund employ specific investment strategies designed to minimize capital gain distributions while achieving each fund’s

investment objective. These strategies include selling the highest tax cost securities first, not re-balancing the portfolio to reflect changes in their indexes, trading only round-lots or large blocks of securities and focusing on individual tax lots in deciding when and how to manage the realization of capital gains. In addition, the investment adviser monitors, analyzes and evaluates each of these funds’ portfolio as well as market conditions to carefully manage necessary trading activity and to determine when there are opportunities to realize capital losses, which offset realized capital gains. These policies will be utilized to the extent they do not have a material effect on each fund’s ability to track or match the performance of its index. They may affect the composition of a fund’s index holdings as compared to the index. There can be no assurance that the investment adviser will succeed in avoiding realized net capital gains.

PART C: OTHER INFORMATION

ITEM 23. EXHIBITS.



(a)(1)		Certificate of Trust, dated January 27, 2009, of Schwab Strategic Trust (the “Registrant” or the “Trust”) is incorporated by reference to Exhibit (a)(1) of the Registrant’s Registration Statement, filed July 15, 2009.



(a)(2)		Registrant’s Agreement and Declaration of Trust, dated January 26, 2009, is incorporated by reference to Exhibit (a)(2) of the Registrant’s Registration Statement, filed July 15, 2009.



(b)		Registrant’s By-Laws, dated January 26, 2009, is incorporated by reference to Exhibit (b) of the Registrant’s Registration Statement, filed July 15, 2009.



(c)		Reference in made to Article 5 of the Registrant’s Agreement and Declaration of Trust.



(d)		Form of Advisory Agreement between the Registrant and Charles Schwab Investment Management, Inc. is filed herewith.



(e)		Form of Distribution Agreement between the Registrant and SEI Investments Distribution Co. is filed herewith.


(f)		Not applicable.


(g)(1)		Custodian Agreement between the Registrant and State Street Bank and Trust Company is filed herewith.



(2)		Form of Amendment to the Custodian Agreement between the Registrant and State Street Bank and Trust Company is filed herewith.



(h)(1)		Administration Agreement between the Registrant and Charles Schwab Investment Management, Inc. is filed herewith.





(2)		Transfer Agency Agreement between the Registrant and State Street Bank and Trust Company is filed herewith.



(3)		Form of Authorized Participant Agreement is filed herewith.



(4)		Master Fund Accounting and Services Agreement between the Registrant and State Street Bank and Trust Company is filed herewith.



(5)		Form of Amendment to the Master Fund Accounting and Services Agreement between the Registrant and State Street Bank and Trust Company is filed herewith.



(6)		Sub-Administration Agreement between the Charles Schwab Investment Management Company, Inc. and State Street Bank and Trust Company is filed herewith.



(7)		Form of Amendment of the Sub-Administration Agreement between the Charles Schwab Investment Management Company, Inc. and State Street Bank and Trust Company is filed herewith.


(i)		Opinion and Consent of Counsel, Morgan, Lewis & Bockius LLP to be filed by amendment.


(j)		Consent of Independent Registered Public Accounting Firm to be filed by amendment.


(k)		Not applicable.


(l)		None.



(m)		Form of Distribution and Shareholder Services Plan (12b-1 Plan) between the Registrant and SEI Investments Distribution Co. is filed herewith.


(n)		Not applicable.

(o)		Not applicable.


(p)(1)		Joint Code of Ethics for the Registrant and Charles Schwab Investment Management, Inc. is filed herewith.





(p)(2)		Code of Ethics of SEI Investments Distribution Co. is filed herewith.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT.

Not Applicable.

ITEM 25. INDEMNIFICATION.

Reference is made to Article VII of Registrant’s Declaration of Trust (Exhibit (a) filed July 15, 2009) and Article 11 of Registrant’s By-Laws

(Exhibit (b) filed July 15, 2009),

Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

The Registrant’s investment adviser, Charles Schwab Investment Management, Inc. (“CSIM”), a Delaware corporation, organized in October 1989, also serves as the investment manager to the Laudus Institutional Trust, Laudus Trust, Schwab Capital Trust, The Charles Schwab Family of Funds, Schwab Investments, and Schwab Annuity Portfolios, each an open-end, management investment company. The principal place of business of the investment adviser is 211 Main Street, San Francisco, CA 94105. The only business in which the investment adviser engages is that of investment adviser and administrator to the Schwab Capital Trust, The Charles Schwab Family of Funds, Schwab Investments, Schwab Annuity Portfolios and any other investment companies that Schwab may sponsor in the future, investment adviser to the Registrant, Laudus Trust and Laudus Institutional Trust and an investment adviser to certain non-investment company clients.

The business, profession, vocation or employment of a substantial nature in which each director and/or senior or executive officer of CSIM is or has been engaged during the past two fiscal years is listed below. The name of any company for which any director and/or senior or executive officer of the investment adviser serves as director, officer, employee, partner or trustee is also listed below.


Name and Position
with Adviser	Name of Other Company	Capacity
Charles R. Schwab, Chairman and Director	Charles Schwab & Co., Inc.	Chairman and Director
	The Charles Schwab Bank, N.A.	Chairman, Director
	The Charles Schwab Corporation	Chairman
	Schwab Holdings, Inc.	Chief Executive Officer
	Schwab International Holdings, Inc.	Chairman and Chief Executive Officer
	Schwab (SIS) Holdings, Inc. I	Chairman and Chief Executive Officer
	Charles Schwab Holdings (UK)	Chairman
	United States Trust Company of New York	Chairman, Director
	U.S. Trust Corporation	Chairman, Director
	All Kinds of Minds	Director
	Charles and Helen Schwab Foundation	Director
	Stanford University	Trustee

Randall W. Merk Director, President and Chief Executive Officer	Charles Schwab & Co., Inc.	Executive Vice President and President, Investment Management Services
	Schwab Funds	President, Chief Executive Officer
	Laudus Funds	Trustee
	Charles Schwab Worldwide Funds, PLC	Director
	Charles Schwab Asset Management (Ireland) Limited	Director
	Excelsior Funds	Trustee

Koji E. Felton, Senior Vice President, Chief Counsel and Corporate Secretary	Charles Schwab & Co., Inc.	Senior Vice President, Deputy General Counsel
	Schwab Funds	Chief Legal Officer and Secretary
	Excelsior Funds	Chief Legal Officer and Secretary


Name and Position
with Adviser	Name of Other Company	Capacity
Jeffrey M. Mortimer, Senior Vice President and Chief Investment Officer, Equities and Fixed Income	Schwab Funds	Senior Vice President and Chief Investment Officer, Equities and Fixed Income
	Laudus Funds	President, Chief Executive Officer and Chief Investment Officer

George Pereira, Senior Vice President and Chief Financial Officer	Laudus Funds	Chief Financial Officer
	Excelsior Funds	Chief Financial Officer and Chief Accounting Officer
	Mutual Fund Division, UST Advisers, Inc.	Chief Financial Officer
	Charles Schwab Worldwide Funds, PLC	Director
	Charles Schwab Asset Management (Ireland) Limited	Director

ITEM 27. PRINCIPAL UNDERWRITERS:

(a) SEI Investments Distribution Co. (the “Distributor”) is the principal underwriter of the Trust.

(b) Information with respect to each director, officer or partner of each principal underwriter is as follows. Unless otherwise noted, the business address of each director or officer is 1 Freedom Valley Drive, Oaks, PA 19456.


	Position and Office	Positions and Offices
Name	with Underwriter	with Registrant
William M. Doran	Director	None
Edward D. Loughlin	Director	None
Wayne M. Withrow	Director	None
Kevin Barr	President & Chief Executive Officer	None
Maxine Chou	Chief Financial Officer, Chief Operations Officer, & Treasurer	None
Karen LaTourette	Chief Compliance Officer, Anti-Money Laundering Officer & Assistant Secretary	None
John C. Munch	General Counsel & Secretary	None
Mark J. Held	Senior Vice President	None
Lori L. White	Vice President & Assistant Secretary	None
John Coary	Vice President & Assistant Secretary	None
John Cronin	Vice President	None
Robert Silvestri	Vice President	None

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.

All accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act, as amended, and the Rules thereunder will be maintained at the offices of:


1)		Schwab Strategic Trust, 211 Main Street, San Francisco, CA 94105


2)		Charles Schwab Investment Management, Inc., 211 Main Street, San Francisco, CA 94105


3)		Principal Underwriter — SEI Investments Distribution Co., 1 Freedom Valley Drive, Oaks, PA 19456



4)		Custodian — State Street Bank and Trust Company, One Lincoln Street, Boston, MA 02111


5)		Transfer Agent — State Street Bank and Trust Company, One Lincoln Street, Boston, MA 02111

ITEM 29. MANAGEMENT SERVICES.

None.

ITEM 30. UNDERTAKINGS.

Not applicable.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, State of California on the 7th day of October, 2009.


	SCHWAB CAPITAL TRUST Registrant
	/s/ Shelley A. Harding
	Shelley A. Harding, Trustee

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on this 7th day of October, 2009.


Signature		Title

/s/ Shelley A. Harding		Trustee
Shelley A. Harding

/s/ Randall W. Merk		President and Chief Executive Officer
Randall W. Merk

/s/ George Pereira		Treasurer and Principal Financial Officer
George Pereira

EXHIBIT INDEX



(d)		Advisory Agreement



(e)		Distribution Agreement



(g)(1)		Custodian Agreement



(2)		Amendment to the Custodian Agreement



(h)(1)		Administration Agreement



(2)		Transfer Agency Agreement



(3)		Authorized Participant Agreement



(4)		Master Fund Accounting and Services Agreement



(5)		Amendment to the Master Fund Accounting and Services Agreement



(6)		Sub-Administration Agreement



(7)		Amendment of the Sub-Administration Agreement



(m)		Distribution and Shareholder Services Plan (12b-1 Plan)



(p)(1)		Joint Code of Ethics for the Registrant



(p)(2)		Code of Ethics of SEI Investments Distribution Co.

ADVISORY AGREEMENT

ADVISORY AGREEMENT made as of ________, 2009 between Schwab Strategic Trust (the “Trust”), a Delaware statutory trust registered as an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), and Charles Schwab Investment Management, Inc., a Delaware corporation (the “Adviser”).

W I T N E S S E T H

WHEREAS, the Board of Trustees (the “Board” or “Trustees”) of the Trust has selected the Adviser to act as investment adviser to the Trust on behalf of the series set forth on Schedule A hereto, which may be amended by the parties pursuant to section 11 of this Agreement to add other series of the Trust (each such series appearing on Schedule A at any time being a “Fund” and all such series at that time being the “Funds” subject to this Agreement at that time), and to provide certain related services, as more fully set forth below, and to perform such services under the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the mutual covenants and benefits set forth herein, the Trust and the Adviser do hereby agree as follows:

1. The Adviser’s Services .

(a) Discretionary Investment Management Services . The Adviser shall act as investment adviser with respect to the Funds. In such capacity, the Adviser shall, subject to the supervision of the Board, regularly provide the Funds with investment research, advice and supervision and shall furnish continuously an investment program for the Funds, consistent with the respective investment objectives and policies of each Fund. The Adviser shall determine, from time to time, what securities shall be purchased for the Funds, what securities shall be held or sold by the Funds and what portion of the Funds’ assets shall be held uninvested in cash, subject always to the provisions of the Trust’s Agreement and Declaration of Trust and By-Laws and its registration statement on Form N-1A (the “Registration Statement”) under the 1940 Act, and under the Securities Act of 1933, as amended (the “1933 Act”), covering Fund shares, as filed with the Securities and Exchange Commission (the “Commission”), and to the investment objectives, policies and restrictions of the Funds, as each of the same shall be from time to time in effect. To carry out such obligations, the Adviser shall exercise full discretion and act for the Funds in the same manner and with the same force and effect as the Funds themselves might or could do with respect to purchases, sales or other transactions, as well as with respect to all other such things necessary or incidental to the furtherance or conduct of such purchases, sales or other transactions. No reference in this Agreement to the Adviser having full discretionary authority over each Fund’s investments shall in any way limit the right of the Board, in its sole discretion, to establish or revise policies in connection with the management of a Fund’s assets or to otherwise exercise its right to control the overall management of a Fund.

(b) Selection of Sub-Adviser(s) . The Adviser shall have the authority hereunder to select and retain sub-advisers, including an affiliated person (as defined under the 1940 Act) of the Adviser, for each of the Funds referenced in Schedule A to perform some or all of the services for which the Adviser is responsible pursuant to this Agreement. The Adviser shall supervise the activities of the sub-adviser(s), and the retention of a sub-adviser by the Adviser shall not relieve the Adviser of its responsibilities under this Agreement. Any such sub-adviser shall be, at all relevant times, registered as an investment adviser with the Commission, not subject to any statutory disqualification, and capable of performing its sub-advisory duties pursuant to a sub-advisory agreement approved by the Trust’s Board and, except as otherwise permitted by the 1940 Act or by rule or regulation, a vote of a majority of the outstanding voting securities of the applicable Fund. The Adviser will compensate the sub-adviser for its services to the Funds.

(c) Compliance . The Adviser agrees to comply with the requirements of the 1940 Act, the Investment Advisers Act of 1940, as amended (the “Advisers Act”), the 1933 Act, the Securities Exchange Act of 1934, as amended (the “1934 Act”), the Commodity Exchange Act, as amended, and the respective rules and regulations thereunder, as applicable, as well as with all other applicable federal and state laws, rules, regulations and case law that relate to the services and relationships described hereunder and to the conduct of its business as a registered investment adviser. The Adviser also agrees to comply with the objectives, policies and restrictions set forth in the Registration Statement, as amended or supplemented from time to time, of the Funds, and with any policies, guidelines, instructions and procedures approved by the Board and provided to the Adviser. In selecting each Fund’s portfolio securities and performing the Adviser’s obligations hereunder, the Adviser shall cause the Fund to comply with the diversification and source of income requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), for qualification as a regulated investment company. The Adviser shall maintain compliance procedures that it reasonably believes are adequate to ensure its compliance with the foregoing. No supervisory activity undertaken by the Board shall limit the Adviser’s full responsibility for any of the foregoing.

(d) Proxy Voting . The Board has the authority to determine how proxies with respect to securities that are held by the Funds shall be voted, and the Board has initially determined to delegate the authority and responsibility to vote proxies for each Fund’s securities to the Adviser. So long as proxy voting authority for a Fund has been delegated to the Adviser, the Adviser shall exercise its proxy voting responsibilities. The Adviser shall carry out such responsibility in accordance with any instructions that the Board shall provide from time to time, and at all times in a manner consistent with Rule 206(4)-6 under the Advisers Act and its fiduciary responsibilities to the Trust. The Adviser shall provide periodic reports and keep records relating to proxy voting as the Board may reasonably request or as may be necessary for the Funds to comply with the 1940 Act and other applicable law. Any such delegation of proxy voting responsibility to the Adviser may be revoked or modified by the Board at any time.

(e) Recordkeeping . The Adviser shall not be responsible for the provision of administrative, bookkeeping or accounting services to the Funds, except as may be otherwise provided or as may be necessary for the Adviser to supply to the Trust or its Board the information required to be supplied under this Agreement.

The Adviser shall maintain separate books and detailed records of all matters pertaining to Fund assets advised by the Adviser required by Rule 31a-1 under the 1940 Act (other than those records being maintained by any administrator, custodian or transfer agent appointed by the Funds) relating to its responsibilities provided hereunder with respect to the Funds, and shall preserve such records for the periods and in a manner prescribed therefore by Rule 31a-2 under the 1940 Act (the “Funds’ Books and Records”). The Funds’ Books and Records shall be available to the Board at any time upon request, shall be delivered to the Trust upon the termination of this Agreement and shall be available without delay during any day the Trust is open for business.

(f) Holdings Information and Pricing . The Adviser shall provide regular reports regarding Fund holdings, and may, on its own initiative, furnish the Trust and its Board from time to time with whatever information the Adviser believes is appropriate for this purpose. The Adviser agrees upon request to provide any pricing information of which the Adviser is aware to the Trust, its Board and/or any Fund pricing agent to assist in the determination of the fair value of any Fund holdings for which market quotations are not readily available or as otherwise required in accordance with the 1940 Act or the Trust’s valuation procedures for the purpose of calculating the Fund net asset value in accordance with procedures and methods established by the Board.

(g) Cooperation with Agents of the Trust . The Adviser agrees to cooperate with and provide reasonable assistance to the Trust, any Trust custodian or foreign sub-custodians, any Trust pricing agents and all other agents and representatives of the Trust, provide such information with respect to the Funds as they may reasonably request from time to time in the performance of their obligations, provide prompt responses to reasonable requests made by such persons and establish appropriate interfaces with each so as to promote the efficient exchange of information and compliance with applicable laws and regulations.

2. Code of Ethics . The Adviser has adopted a written code of ethics that it reasonably believes complies with the requirements of Rule 17j-1 under the 1940 Act, which it will provide to the Trust. The Adviser shall ensure that its Access Persons (as defined in the Adviser’s Code of Ethics) comply in all material respects with the Adviser’s Code of Ethics, as in effect from time to time. Upon request made from time to time, the Adviser shall provide the Trust with (i) a copy of the Adviser’s current Code of Ethics, as then in effect, and (ii) certification that it has adopted procedures reasonably necessary to prevent Access Persons from engaging in any conduct prohibited by the Adviser’s Code of Ethics as then in effect. Annually, the Adviser shall furnish a written report, which complies with the requirements of Rule 17j-1, concerning the Adviser’s Code of Ethics to the Trust. The Adviser shall respond to requests for

information from the Trust as to violations of the Code of Ethics by Access Persons and the sanctions imposed by the Adviser.

3. Information and Reporting . The Adviser shall provide the Trust and its respective officers with such periodic reports concerning the obligations the Adviser has assumed under this Agreement as the Trust may from time to time reasonably request.

(a) Compliance Reports . The Adviser may provide a quarterly report regarding each Fund’s compliance with its investment objectives and policies, applicable law, including, but not limited to the 1940 Act and Subchapter M of the Code, and the Fund’s policies, guidelines or procedures as applicable to the Adviser’s obligations under this Agreement. Upon request, the Adviser shall also provide the officers of the Trust with supporting certifications in connection with such certifications of Fund financial statements and disclosure controls pursuant to the Sarbanes-Oxley Act of 2002, as amended. The Adviser will promptly notify the Trust in the event that (i) the Adviser is served or otherwise receives notice of any action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board, or body, involving the affairs of the Trust (excluding class action suits in which a Fund is a member of the plaintiff class by reason of the Fund’s ownership of shares in the defendant) or the compliance by the Adviser with the federal or state securities laws or (ii) a change in control of the Adviser resulting in an “assignment” (as defined in of the 1940 Act) has occurred or is otherwise proposed to occur.

(b) Board and Filings Information . The Adviser will also provide the Trust with any information reasonably requested regarding its management of the Funds required for any meeting of the Board, or for any shareholder report, amended registration statement, proxy statement, prospectus supplement or other report required to be filed by the Trust with the Commission. The Adviser will make its officers and employees available to meet with the Board from time to time on due notice to review its investment management services to the Funds in light of current and prospective economic and market conditions and shall furnish to the Board such information as may reasonably be necessary in order for the Board to evaluate this Agreement or any proposed amendments thereto.

(c) Transaction Information . The Adviser shall furnish to the Trust such information concerning portfolio transactions as may be necessary to enable the Trust or its designated agent to perform such compliance testing on the Funds and the Adviser’s services as the Trust may, in its sole discretion, determine to be appropriate. The provision of such information by the Adviser to the Trust or its designated agent in no way relieves the Adviser of its own responsibilities under this Agreement.

4. Brokerage .

(a) Principal Transactions . In connection with purchases or sales of securities for the account of a Fund, neither the Adviser nor any of its directors, officers or

employees will act as a principal or agent or receive any commission except as permitted by the 1940 Act.

(b) Placement of Orders . The Adviser shall arrange for the placing of all orders for the purchase and sale of securities for a Fund’s account with brokers or dealers selected by the Adviser. In the selection of such brokers or dealers and the placing of such orders, the Adviser is directed at all times to seek for the Fund the best execution and net price available under the circumstances. It is also understood that it is desirable for the Fund that the Adviser have access to brokerage and research services provided by brokers who may execute brokerage transactions at a higher cost to the Fund than may result when allocating brokerage to other brokers, consistent with section 28(e) of the 1934 Act and any Commission staff interpretations thereof. Therefore, the Adviser is authorized to place orders for the purchase and sale of securities for a Fund with such brokers, subject to review by the Board from time to time with respect to the extent and continuation of this practice. It is understood that the services provided by such brokers may be useful to the Adviser in connection with its or its affiliates’ services to other clients.

(c) Aggregated Transactions . On occasions when the Adviser deems the purchase or sale of a security or futures contract to be in the best interest of a Fund as well as other clients of the Adviser, the Adviser may, to the extent permitted by applicable law and regulations, aggregate the orders for securities or futures contracts to be sold or purchased. In such event, the Adviser will allocate securities or futures contracts so purchased or sold, as well as the expenses incurred in the transaction, in the manner the Adviser reasonably considers to be equitable and consistent with its fiduciary obligations to the Fund and to such other clients under the circumstances.

(d) Affiliated Brokers . The Adviser or any of its affiliates may act as broker in connection with the purchase or sale of securities or other investments for a Fund, subject to: (i) the requirement that the Adviser seek to obtain best execution and price within the policy guidelines determined by the Board and set forth in the Fund’s current prospectus and Statement of Additional Information; (ii) the provisions of the 1940 Act; (iii) the provisions of the Advisers Act; (iv) the provisions of the 1934 Act; and (v) other provisions of applicable law. These brokerage services are not within the scope of the duties of the Adviser under this Agreement. Subject to the requirements of applicable law and any procedures adopted by the Board, the Adviser or its affiliates may receive brokerage commissions, fees or other remuneration from a Fund for these services in addition to the Adviser’s fees for services under this Agreement.

5. Allocation of Charges and Expenses . The Adviser will bear its own costs of providing services hereunder. The Adviser agrees to pay all expenses incurred by the Trust except for interest, taxes, brokerage and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, extraordinary or non-routine expenses, and distribution fees and expenses paid by the Trust under any distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act.

6. Representations, Warranties and Covenants . Each party represents and warrants to the other party that this Agreement has been duly authorized and executed by such party and, assuming due authorization and execution by the other party, constitutes such party’s legal, valid and binding obligation, enforceable against such party in accordance with its terms. The Adviser further represents and warrants to, and covenants with, the Trust as follows:

(a) Properly Registered . The Adviser is registered as an investment adviser under the Advisers Act, is subject to no statutory disqualification from such registration, and will remain so registered and will avoid such disqualification for the duration of this Agreement. The Adviser is not prohibited by the Advisers Act or the 1940 Act from performing the services contemplated by this Agreement, and to the best knowledge of the Adviser, there is no proceeding or investigation that is reasonably likely to result in the Adviser being prohibited from performing the services contemplated by this Agreement. The Adviser agrees to promptly notify the Trust of the occurrence of any event that would disqualify the Adviser from serving as an investment adviser to an investment company. The Adviser is in compliance in all material respects with all applicable federal and state law in connection with its investment management operations.

(b) ADV Disclosure . The Adviser has provided the Trust with a copy of its Part I of Form ADV as most recently filed with the Commission and its current Part II of Form ADV. The Adviser will provide the Trust with a current Form ADV at least once per year. The information contained in the Adviser’s Form ADV as amended from time to time is and will remain accurate and complete in all material respects and does not and will not omit to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.

(c) Fund Disclosure Documents . The Adviser has reviewed and will in the future review, the Registration Statement, and any amendments or supplements thereto, the annual or semi-annual reports to shareholders, and other reports filed with the Commission (collectively the “Disclosure Documents”) and represents and warrants that, with respect to disclosure about the Adviser, the manner in which the Adviser manages the Fund or information relating directly or indirectly to the Adviser, such Disclosure Documents contain or will contain, as of the date thereof, no untrue statement of any material fact and does not or will not omit, as of the date thereof, any statement of material fact required to be stated therein or necessary to make the statements contained therein not misleading.

(d) Use Of The Name “Schwab”. The Adviser has and shall have the right to use the name “Schwab” in connection with its services to the Trust and, subject to the terms set forth in section 7 of this Agreement, the Trust has and shall have the right to use the name “Schwab” in connection with the management and operation of the Funds. The Adviser is not aware of any threatened or existing actions, claims, litigation or proceedings that would adversely effect or prejudice the rights of the Adviser or the Trust to use the name “Schwab”.

(e) Insurance . The Adviser maintains errors and omissions insurance coverage in an appropriate amount and shall provide prior written notice to the Trust (i) of any material changes in its insurance policies or insurance coverage or (ii) if any material claims will be made on its insurance policies. Furthermore, the Adviser shall upon reasonable request provide the Trust with any information it may reasonably require concerning the amount of or scope of such insurance.

(f) No Detrimental Agreement . The Adviser represents and warrants that it has no arrangement or understanding with any person, other than the Trust, that would influence the decision of the Adviser with respect to its selection of securities for a Fund, and that all selections shall be done in accordance with what is in the best interest of the Fund.

(g) Conflicts . The Adviser shall act honestly, in good faith and in the best interests of the Trust including requiring any of its personnel with knowledge of Fund activities to place the interest of the Fund first, ahead of their own interests, in all personal trading scenarios that may involve a conflict of interest with the Funds, consistent with fiduciary duties under applicable law.

(h) Bring-Down . The representations and warranties in this section 6 shall be deemed to be made not only on the date that this Agreement is executed, but also at the time of delivery of the quarterly compliance report required by section 3(a), whether or not specifically referenced in such report.

7. The Name “Schwab”. The Adviser grants to the Trust a sublicense to use the name “Schwab” (the “Name”) as part of the name of any Fund. The foregoing authorization by the Adviser to the Trust to use the Name as part of the name of any Fund is not exclusive of the right of the Adviser itself to use, or to authorize others to use, the Name; the Trust acknowledges and agrees that, as between the Trust and the Adviser, the Adviser has the right to use, or authorize others to use, the Name. The Trust shall (1) only use the Name in a manner consistent with uses approved by the Adviser, (2) use its best efforts to maintain the quality of the services offered using the Name and (3) adhere to such other specific quality control standards as the Adviser may from time to time promulgate. At the request of the Adviser, the Trust will: (a) submit to Adviser representative samples of any promotional materials using the Name; and (b) change the name of any Fund within three months of its receipt of the Adviser’s request, or such other shorter time period as may be required under the terms of a settlement agreement or court order, so as to eliminate all reference to the Name and will not thereafter transact any business using the Name in the name of any Fund.

8. Adviser’s Compensation . The Funds shall pay to the Adviser, as compensation for the Adviser’s services hereunder, a fee, determined as described in Schedule A that is attached hereto and made a part hereof. Such fee shall be computed daily and paid not less than monthly in arrears by the Funds. The method for determining net assets of a Fund for purposes hereof shall be the same as the method for determining net assets for purposes of establishing the offering and redemption prices of Fund shares as described in the Fund’s prospectus. In the

event of termination of this Agreement, the fee provided in this section shall be computed on the basis of the period ending on the last business day on which this Agreement is in effect subject to a pro rata adjustment based on the number of calendar days elapsed in the current month as a percentage of the total number of calendar days in such month.

9. Independent Contractor . In the performance of its duties hereunder, the Adviser is and shall be an independent contractor and, unless otherwise expressly provided herein or otherwise authorized in writing, shall have no authority to act for or represent the Trust or any Fund in any way or otherwise be deemed to be an agent of the Trust or any Fund. If any occasion should arise in which the Adviser gives any advice to its clients concerning the shares of a Fund, the Adviser will act solely as investment counsel for such clients and not in any way on behalf of the Fund.

10. No Assignment . This Agreement shall automatically terminate, without payment of penalty in the event of its assignment (as defined in section 2(a)(4) of the 1940 Act); provided that termination shall not relieve the Adviser of any liability incurred hereunder.

11. Entire Agreement and Amendments.

(a) This Agreement represents the entire agreement among the parties with regard to the investment management matters described herein and may not be added to or changed orally and may not be modified or rescinded except by a writing signed by the parties hereto except as otherwise noted herein and in accordance with the 1940 Act, as applicable.

(b) Any amendment to this Agreement shall become effective with respect to a Fund upon the approval of the Adviser, the Board of the Trust, including a majority of Trustees of the Trust who are not “interested person” of the Trust or the Adviser (as defined in the 1940 Act), cast in person at a meeting called for the purpose of voting such approval and, if required under the 1940 Act, a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund.

(c) Any approval, amendment, or termination of this Agreement with respect to a Fund will not require the approval of any other Fund or the approval of a majority of the outstanding voting securities of the Trust, unless such approval is required by applicable law.

12. Duration and Termination .

(a) Termination of this Agreement pursuant to this section shall be without payment of any penalty. In the event of termination of this Agreement for any reason, the Adviser shall, immediately upon notice of termination or on such later date as may be specified in such notice, cease all activity on behalf of the Fund and with respect to any of its assets, except as otherwise required by any fiduciary duties of the Adviser under applicable law. In addition, the Adviser shall deliver the Fund Books and Records to the

Trust by such means and in accordance with such schedule as the Trust shall direct and shall otherwise cooperate, as reasonably directed by the Trust, in the transition of portfolio asset management to any successor of the Adviser.

(b) This Agreement shall become effective as of the date executed and shall remain in full force and effect continually thereafter, subject to renewal as provided in subparagraph (e), unless terminated automatically as set forth in Section 10 hereof or until terminated as provided in subparagraph (c) (d) or (e).

(c) The Trust may cause this Agreement to terminate either by vote of its Board or, with respect to any Fund, upon the affirmative vote of a majority of the outstanding voting securities of the Fund.

(d) The Adviser may at any time terminate this Agreement by not more than sixty (60) days’ nor less than thirty (30) days’ written notice delivered or mailed by registered mail, postage prepaid, to the Trust.

(e) This Agreement shall automatically terminate two years from the date of its execution unless its renewal is specifically approved at least annually thereafter by (i) a majority vote of the Trustees, including a majority vote of such Trustees who are not interested persons of the Trust or the Adviser, at a meeting called for the purpose of voting on such approval; or (ii) the affirmative vote of a majority of the outstanding voting securities of each Fund; provided, however, that if the continuance of this Agreement is submitted to the shareholders of the Funds for their approval and such shareholders fail to approve such continuance of this Agreement as provided herein, then the Adviser may continue to serve hereunder as to the Funds in a manner consistent with the 1940 Act and the rules and regulations thereunder.

13. Certain Definitions . For the purposes of this Agreement:

(a) The expression “affirmative vote of a majority of the outstanding voting securities” shall have the meaning set forth in the 1940 Act, subject, however, to such exemptions as may be granted by the Commission under the 1940 Act or any interpretations of the Commission staff.

(b) The terms “interested persons” and “assignment” shall have their respective meanings set forth in the 1940 Act, subject, however, to such exemptions as may be granted by the Commission under the 1940 Act or any interpretations of the Commission staff.

14. Liability of the Adviser . The Adviser shall indemnify and hold harmless the Trust, the Funds and all affiliated persons thereof (within the meaning of section 2(a)(3) of the 1940 Act) and all controlling persons thereof (as described in section 15 of the 1933 Act) against any and all losses, claims, damages and liabilities (including reasonable legal and other expenses) incurred in any action, suit, proceeding or investigation as and when incurred by any

of them by reason of or arising out of willful misconduct, bad faith or gross negligence, or by reason of or arising out of any violation of law, by the Adviser in the performance of its duties hereunder. The Adviser will not be liable to the Trust or to any Fund, or to any affiliated person or controlling person of any of them, for any loss, claim, damage or liability incurred by any of them in any action, suit, proceeding or investigation, or otherwise, by reason of or arising out of any investment decision, recommendation or other action taken or omitted by the Adviser under this Agreement lawfully, in good faith and in the absence of gross negligence.

15. Enforceability . Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms or provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.

16. Limitation of Liability . The parties to this Agreement acknowledge and agree that all litigation arising hereunder, whether direct or indirect, and of any and every nature whatsoever, shall be satisfied solely out of the assets of the affected Fund and that no Trustee, officer or employee or holder of shares of beneficial interest of the Fund or the Trust shall be personally liable for any of the foregoing liabilities. The Trust’s Certificate of Trust, as amended from time to time, is on file in the Office of the Secretary of State of the State of Delaware. Such Certificate of Trust and the Trust’s Agreement and Declaration of Trust describe in detail the respective responsibilities and limitations on liability of such Trustees, officers, employees and holders of shares of beneficial interest.

17. Jurisdiction . This Agreement shall be governed by and construed in accordance with the substantive laws of the State of California and the Adviser consents to the jurisdiction of courts, both state or federal, in California, with respect to any dispute under this Agreement.

18. Paragraph Headings . The headings of paragraphs contained in this Agreement are provided for convenience only, form no part of this Agreement and shall not affect its construction.

19. Services Not Exclusive. The services of the Adviser to the Trust hereunder are not to be deemed exclusive, and the Adviser shall be free to render similar services to others so long as its services hereunder are not impaired thereby.

20. Counterparts . This Agreement may be executed simultaneously 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.

[SIGNATURES FOLLOW ON NEXT PAGE]

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed on their behalf by their duly authorized officers as of the date first above written.

SCHWAB STRATEGIC TRUST,
on behalf of each Fund listed on Schedule A


By:
		Name:
		Title:

CHARLES SCHWAB INVESTMENT MANAGEMENT, INC.


By:
		Name:
		Title:

SCHEDULE A
to the
ADVISORY AGREEMENT
dated as of ______, 2009 between
SCHWAB STRATEGIC TRUST
and
CHARLES SCHWAB INVESTMENT MANAGEMENT, INC.

The Trust will pay to the Adviser as compensation for the Adviser’s services rendered, a fee, computed daily, at an annual rate, based on the average daily net assets of the respective Fund, in accordance the following fee schedule:


Fund		Rate
Schwab U.S. Broad Market ETF		*
Schwab U.S. Large-Cap ETF		*
Schwab U.S. Large-Cap Growth ETF		*
Schwab U.S. Large-Cap Value ETF		*
Schwab U.S. Small-Cap ETF		*
Schwab International Equity ETF		*
Schwab International Small-Cap Equity ETF		*
Schwab Emerging Markets Equity ETF		*


*		The Adviser will pay the operating expenses of the Fund, excluding interest expense, taxes, any brokerage expenses, future distribution fees or expenses (i.e., Rule 12b-1 fees), and extraordinary or non-routine expenses.

A-1

DISTRIBUTION AGREEMENT

THIS DISTRIBUTION AGREEMENT (this “ Agreement’ ) is made as of this day of 2009, by and between Schwab Strategic Trust (the “ Company ”), an open-end investment management company organized as a Delaware statutory trust, and SEI Investments Distribution Co. (the “ Distributor ”), a Pennsylvania corporation.

WHEREAS, the Company is registered as an investment company with the U.S. Securities and Exchange Commission (the “ SEC ”) under the Investment Company Act of 1940, as amended (the “ 1940 Act ”), and its shares of beneficial interest (“ Shares ”) are registered with the SEC under the Securities Act of 1933, as amended (the “ 1933 Act ”); and

WHEREAS, the Distributor is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934, as amended (the “ 1934 Act ”) and is a member of the Financial Industry Regulatory Authority (“ FINRA ”); and

WHEREAS, the Company intends to create and redeem groups of Shares of each class or series of the Company identified on Schedule A hereto, which may be amended by the parties pursuant to Section 9.15 of this Agreement to add groups of Shares of other classes or series of the Company (each such class or series appearing on Schedule A at any time being a “ Fund ” and all such classes and series being the “ Funds ” subject to this Agreement at that time) on a continuous basis at their net asset value only in aggregations constituting Creation Units (as defined in the Company’s Registration Statement); and

WHEREAS, the Shares of each Fund will be listed on one or more national securities exchanges (together, the “ Listing Exchanges ”);

WHEREAS, the Company desires to retain the Distributor to act as the distributor with respect to the issuance and distribution of Creation Units of each Fund, hold itself available to receive and process orders for such Creation Units in the manner set forth herein, and to enter into arrangements with broker-dealers who may break apart such Creation Units in order to solicit purchases of Shares as and in the manner provided in the Company’s Registration Statement.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained and intending to be legally bound, the parties hereby agree as follows:

SECTION 1 APPOINTMENT

The Company hereby appoints Distributor as its primary but non-exclusive distributor of Creation Units of the Funds and to provide other services in accordance with the terms set forth in this Agreement. Distributor accepts such appointment and agrees to furnish certain related services as set forth in this Agreement. Company shall timely perform all material obligations identified in this Agreement as obligations of the Company, including, without limitation, providing the Distributor with all marketing materials reasonably requested by the Distributor and giving all necessary consents or approvals in good faith and within a timely manner. Company will notify the Distributor as soon as reasonably practical in advance of any matter which could materially affect the Distributor’s performance of its duties and obligations under this Agreement, including any amendment to the Prospectus or Sales Materials (each as defined in Section 2 , below). Company will provide Distributor with a copy of each Prospectus as soon as reasonably possible prior to or contemporaneously with filing the same with an applicable regulatory body and with all Sales Materials as early as practical prior to their first use. Company will cooperate with requests from government regulators and the Distributor for information relating to customers and/or transactions involving the Creation Units, as permitted by law, in order for the Distributor to comply with its regulatory obligations. In the event Company, in its sole discretion, determines that it is in the interest of the Company to suspend or terminate the sale of any Creation Units, the Company shall promptly notify the Distributor of such fact in advance and in writing prior to the date on which the Company desires to

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cease offering the Creation Units.

SECTION 2 SOLICITATION OF SALES AND OTHER SERVICES

2.01 Solicitation of Sales . The Company grants to Distributor the right to sell its Creation Units authorized for issue at the applicable net asset value, in accordance with the Prospectus, as agent and on behalf of the Company, during the term of this Agreement and subject to the registration requirements of the 1933 Act, the rules and regulations of the SEC and the laws governing the sale of securities in the various states (“ Blue Sky Laws ”). In consideration of these rights granted to the Distributor, the Distributor agrees to use its best efforts in connection with the distribution of Creation Units of the Trust on a continuous basis; provided, however, that the Distributor shall not be prevented from entering into like arrangements with other issuers. As used in this Agreement, the term, “ Prospectus ” means any prospectus, registration statement, statement of additional information, proxy solicitation and tender offer materials, annual or other periodic report of the Company or any Fund of the Company including all amendments or supplements thereto. As used in this Agreement, “ Sales Materials ” means any advertising, marketing, shareholder communication, or promotional material generated by the Company or its investment adviser from time to time.

2.02 Other Services . Without limiting the foregoing, the Distributor will perform or supervise the performance by others of the services set forth herein, including those set forth in Schedule B hereto. If the Distributor delegates any obligations hereunder, it shall be solely responsible for ensuring all such delegates comply with all relevant terms of this Agreement and any non-compliance of such parties shall constitute a breach by Distributor.

SECTION 3 REPRESENTATIONS, WARRANTIES AND COVENANTS

3.01 Representations, Warranties and Covenants of the Company . The Company represents, warrants and covenants that:

(a) it is duly organized, validly existing and in good standing under the laws of the state of its formation, and has all requisite power under the laws of such state and applicable federal law to conduct its business as now being conducted and to perform its obligations as contemplated by this Agreement;

(b) this Agreement has been duly authorized by the board of trustees of the Company and, when executed and delivered by the Company, will constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms;

(c) it is not a party to any, and there are no, pending or threatened legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations or inquiries (collectively, “ Actions ”) of any nature against it, its advisor or its properties or assets which are expected, individually or in the aggregate, to have a material effect upon its ability to perform its obligations under this Agreement;

(d) it is an investment company that is duly registered under all applicable laws and regulations, including, without limitation the 1940 Act, and each Fund is a separate series of the Company;

(e) each Prospectus and piece of Sales Material has been prepared in accordance with all applicable laws and regulations and, at the time such Prospectus was filed with the SEC and became effective, no Prospectus will include an untrue statement of a material fact or omit to state a material fact that is required to be stated therein so as to make the statements contained in such Prospectus not misleading;

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3.02 Representations, Warranties and Covenants of Distributor . Distributor hereby represents, warrants and covenants that:

(a) it has full power, right and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby; the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by all requisite actions on its part, and no other proceedings on its part are necessary to approve this Agreement or to consummate the transactions contemplated hereby; this Agreement has been duly executed and delivered by it; this Agreement constitutes a legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties;

(b) all activities by Distributor and its partners, agents, and employees as distributor of the Creation Units of the Company shall comply with all applicable laws, rules and regulations, including, without limitation, all rules and regulations made or adopted pursuant to the 1940 Act by the SEC;

(c) it is not a party to any, and there are no, pending or threatened Actions of any nature against it or its properties or assets which are expected, individually or in the aggregate, to have a material effect upon its ability to perform its obligations under this Agreement, including, without limitation, the Actions involving certain leveraged exchange traded funds for whom Distributor serves as distributor and which the parties have discussed;

(d) it is a member of FINRA and agrees to abide by all of the rules and regulations of FINRA, including, without limitation, its Conduct Rules. The Distributor agrees to comply with all applicable federal and state laws, rules and regulations. The Distributor agrees to notify the Company immediately in the event of its expulsion or suspension by FINRA. Expulsion of the Distributor by FINRA will automatically terminate this Agreement immediately without notice. Suspension of the Distributor by FINRA will terminate this Agreement effective immediately upon written notice of termination to the Distributor from the Company;

(e) its anti-money laundering program (“ AML Program ”), at a minimum, (i) designates a compliance officer to administer and oversee the AML Program, (ii) provides ongoing employee training, (iii) includes an independent audit function to test the effectiveness of the AML Program, (iv) establishes internal policies, procedures, and controls that are tailored to its particular business, (v) includes a customer identification program consistent with the rules under Section 326 of the USA PATRIOT Act, (vi) provides for the filing of all necessary anti-money laundering reports including, but not limited to, currency transaction reports and suspicious activity reports, (vii) provides for screening all new and existing customers against the Office of Foreign Asset Control list and any other government list that is or becomes required under the USA PATRIOT Act, and (viii) allows for appropriate regulators to examine its anti-money laundering books and records. Notwithstanding the foregoing, the Trust acknowledges that the Authorized Participants (that is, a person authorized to purchase and redeem aggregations of a specified number of Shares of any Fund in accordance with the exemptive order noted below) are not “customers” for the purposes of 31 CFR 103;

(f) (i) it has in place compliance policies and procedures reasonably designed to ensure compliance with the Federal Securities Laws as that term is defined in Rule 38a-1 under the 1940 Act; (ii) it will upon request provide reports and certifications in a mutually agreed upon form to the Trust’s Chief Compliance Officer regarding the foregoing, and (iii) it will maintain appropriate records in accordance with Rule 38a-1;

(g) to the extent practicable and to the extent such documents are provided to the Distributor in advance, it will comply with any requirements of the Company’s registration statement, including any exemptive order’s issued to the Company;

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(h) to the extent practicable and to the extent such document is provided to the Distributor in advance, the Distributor will comply with the Company’s portfolio holdings disclosure policy in the event that the Distributor has access to the Company’s portfolio holdings prior to their public dissemination (such information shall in any event be treated as Confidential Information pursuant to Section 9.11 );

(i) it is not an “affiliated person” (as defined under the Investment Company Act of 1940, as amended) with any Listing Exchanges or any underlying index provider for any Fund.

(j) it shall not give any information or make any representations other than those contained in the current Prospectus or Sales Materials of the Company filed with the SEC or contained in shareholder reports or other material that may be prepared by or on behalf of the Company for the Distributor’s use; and

(k) it may prepare and distribute sales literature and other material as it may deem appropriate, provided that such literature and materials have been prepared in accordance with applicable rules and regulations, and, if necessary, filed with the appropriate regulatory agency and approved by the Company prior to use. Any use of Company’s names, logos, trademarks, and service marks shall be subject to Company’s prior written authorization, as described in Section 9.01 .

3.03 Disclaimer . EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 3 , EACH PARTY HEREBY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS AND IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF NON-INFRINGEMENT, TITLE, MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE.

SECTION 4 REGISTRATION OF SHARES

The Company agrees that it will take all action necessary to register or qualify Shares under the federal and state securities laws so that there will be available for sale the number of Shares necessary in connection with the number of Creation Units the Distributor may reasonably be expected to sell and to pay all fees associated with said registration. The Company will make available to the Distributor such number of copies of its Prospectus and Sales Materials as the Distributor may reasonably request. The Company will furnish to the Distributor copies of all information, financial statements and other papers which the Distributor may reasonably request for use in connection with the distribution of Creation Units of the Company. The Distributor shall deliver copies of the Prospectus of the Company as then amended or supplemented (or where appropriate, the product description, as approved by the Distributor, in lieu of such Prospectus) to authorized participants (and, upon request, copies of the statement of additional information), except where such delivery is not required by applicable law. In addition, the Distributor shall ensure that all requests to the Distributor for prospectuses and statements of additional information are fulfilled by providing information regarding such fulfillment requests to the relevant party designated by the Company.

SECTION 5 AGREEMENTS WITH AUTHORIZED PARTICIPANTS

The Distributor will enter into agreements (each, an “ Authorized Participant Agreement ”) with authorized participants for the creation and redemption of Creation Units of a Fund. Each authorized participant shall be a registered broker/dealer, a clearing agency registered with the SEC or a participant in the system for book-entry of the Depository Trust Company. Distributor shall only enter into Authorized Participant Agreements with participants who have been approved in writing by Company. Each Authorized Participant Agreement will include such terms and conditions as the Distributor and the Company’s investment advisor deem necessary or appropriate from time to time.

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SECTION 6 EXPENSES

6.01 Company Expenses . The Company will pay or cause its investment advisor to pay all fees and expenses (i) in connection with the preparation, setting in type and filing of any Prospectus or Sales Materials under the 1933 Act and amendments for the issue of its Shares or Creation Units; (ii) in connection with the qualification of Shares for sale in the various states in which the board of trustees of the Company will determine advisable to qualify such Shares for sale; (iii) of preparing, setting in type, printing and mailing any report or other communication to shareholders or authorized participants of the Company in their capacity as such; (iv) in connection with printing and mailing any Prospectus or Sales Materials to Distributor and (v) all other expenses incurred in connection with the issuance of the Shares and the Creation Units and listing of the Shares on the Listing Exchanges.

6.02 Distributor Expenses . The Distributor shall bear the following costs and expenses relating to the distribution of Creation Units of the Funds: (1) the costs of processing and maintaining records of creations of Creation Units; (2) the costs of maintaining the records required of a broker-dealer under the 1934 Act; (3) the expenses of maintaining its registration or qualification as a dealer or broker under federal or state laws; and (4) all other expenses incurred in connection with the distribution services contemplated herein, except as the parties mutually agree or as specifically provided in this Agreement or the Services Agreement, dated (“ Services Agreement ”) between the Distributor and the Company’s investment advisor.

SECTION 7 INDEMNIFICATION AND LIMITATION OF LIABILITY

7.01 Third Party Indemnification of Distributor.

(a) The Company agrees to indemnify, defend and hold harmless, the Distributor, each of its directors and officers and each person, if any, who controls the Distributor within the meaning of Section 15 of the 1933 Act from and against any loss, liability, claim, damages or expense, arising from a claim by a third party based upon (i) any person acquiring any Shares, based upon the ground that the Prospectus, any Sales Materials, a shareholder report or other information filed or made public by the Company (as from time to time amended) included an untrue statement of a material fact or omitted to state a material fact required to be stated or necessary in order to make the statements made not misleading; provided, however, that such indemnification shall not apply to the extent that such statement or omission was made in reasonable reliance upon, and in conformity with, information furnished to the Company by or on behalf of the Distributor; or (ii) Company’s breach of this Agreement.

(b) In no case (i) will this Section apply in any way to protect the Distributor against any liability to the Company or its Shareholders to which the Distributor or such person otherwise would be subject by reason of willful misfeasance, bad faith or negligence in the performance of its duties or by reason of breach of its obligations and duties under this Agreement, or (ii) shall the Company have any obligation under this Section with respect to any claim made against the Distributor or any person indemnified unless the Distributor or other person will have notified the Company in writing of the claim within a reasonable time after the summons or other first written notification giving information of the nature of the claim will have been served upon the Distributor or such other person (or after the Distributor or the person will have received notice of service on any designated agent).

(c) The Company will also not indemnify any indemnitee with respect to any untrue statement or omission made in the registration statement or prospectus with respect to Shares purchased after the effective date of such updated registration statement or prospectus (or an amendment thereof or supplement thereof) if an updated copy of the prospectus (or such amendment or supplement) that does not contain such untrue statement or omission was provided by the Company to the Distributor and the Distributor did not send or give such updated prospectus (or amendment or supplement) to the authorized participant asserting any such loss, liability, claim, damage or expense at or before the written purchase confirmation to such authorized participant in any case where such delivery is required by the 1933 Act

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and the Company had notified the Distributor of the amendment or supplement within a reasonable period of time prior to the sending of the confirmation.

(d) With respect to each Action for which the Company indemnifies the Distributor pursuant to this Section, the Company will assume all costs and expenses in the defense and shall have sole control of the defense and settlement negotiations. Distributor shall reasonably cooperate with Company in the defense, at Company’s sole expense. The indemnifying party shall not enter into any stipulated judgment or settlement that purports to bind the indemnified party without the indemnified party’s express written authorization, which shall not be unreasonably withheld or delayed. In the event that the Company fails to retain counsel in connection with the defense of a matter entitled to indemnification hereunder or the counsel retained is unwilling or unable to represent both the Company and the Distributor, either (a) the Company will select new counsel that is capable of representing both the Company and the Distributor or (b) the Distributor shall be entitled to retain separate counsel, at the Company’s expense, in connection with the Distributor’s defense of the applicable Action.

(e) The Distributor agrees to notify the Company promptly of the commencement of any litigation or proceedings against it or any of its officers in connection with the issue and sale of any of the Company’s Shares.

7.02 Third Party Indemnification of the Company .

(a) The Distributor agrees to indemnify, defend and hold harmless the Company, each of its trustees and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act, from and against any loss, liability, damages, claim or expense, arising from a claim by a third party based upon (i) the 1933 Act or any other statute or common law and arising by reason of any person acquiring any Shares and alleging a wrongful act of the Distributor or any of its employees or alleging that the Prospectus, any Sales Materials, a shareholder report or other information filed or made public by the Company (as from time to time amended) included an untrue statement of a material fact or omitted to state a material fact required to be stated or necessary in order to make the statements not misleading, insofar as the statement or omission was made in reasonable reliance upon and in conformity with information furnished to the Company by or on behalf of the Distributor; or (ii) Distributor’s breach of this Agreement.

(b) In no case (i) will this Section apply in any way to protect the Company or any other person against any liability to which the Company or such other person would otherwise be subject by reason of willful misfeasance, bad faith or negligence in the performance of its duties or by reason of its breach of its obligations and duties under this Agreement, or (ii) shall the Distributor have any obligation under this Section with respect to any claim made against the Company or any person indemnified unless the Company or person, as the case may be, will have notified the Distributor in writing of the claim within a reasonable time after the summons or other first written notification giving information of the nature of the claim will have been served upon the Company or upon any person (or after the Company or such person will have received notice of service on any designated agent).

(c) With respect to each Action for which the Distributor indemnifies the Company pursuant to this Section, the Distributor will assume all costs and expenses in the defense and shall have sole control of the defense and settlement negotiations. Company shall reasonably cooperate with Distributor in the defense, at Distributor’s sole expense. The indemnifying party shall not enter into any stipulated judgment or settlement that purports to bind the indemnified party without the indemnified party’s express written authorization, which shall not be unreasonably withheld or delayed. In the event that the Distributor fails to retain counsel in connection with the defense of a matter entitled to indemnification hereunder or the counsel retained is unwilling or unable to represent both the Distributor and the Company, either (a) the Distributor will select new counsel that is capable of representing both the Distributor and the Company or (b) the Company shall be entitled to retain separate counsel, at the Distributor’s expense, in connection with the Company’s defense of the applicable Action.

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(d) The Company agrees to notify the Distributor promptly of the commencement of any litigation or proceedings against it or any of its officers or trustees in connection with the issuance or sale of any of its Shares.

7.03 Consequential Damages . Except with regard to a breach of Section 9.11 , in no event and under no circumstances will either party to this Agreement be liable to anyone, including, without limitation, the other party, for consequential damages for any act or failure to act under any provision of this Agreement. For the avoidance of doubt, consequential damages awarded to or agreed to in settlement by the indemnifying party with a third party in connection with an indemnity obligation under this Agreement shall be deemed “direct damages” for purposes of this Section 7.03 .

SECTION 8 TERM AND TERMINATION

8.01 Term . This Agreement will be effective upon its execution, and, unless terminated as provided, will continue in force for two years and thereafter from year to year, provided that such annual continuance is approved by (i) either the vote of a majority of the board of trustees of the Company or the vote of a majority of the outstanding voting securities of each Fund and (ii) the vote of a majority of those trustees of the Company who are not parties to this Agreement, to any other distribution agreement relative to any securities of any Fund, or to the Company’s distribution plan for any Fund, or interested persons of any such party (the “ Qualified Trustees ”) cast in person at a meeting called for the purpose of voting on the approval.

8.02 Termination . This Agreement may be terminated at any time without penalty by a vote of a majority of the Qualified Trustees or by vote of a majority of the outstanding voting securities of the Company upon not less than sixty days prior written notice to the other party. This Agreement shall automatically terminate upon its assignment. As used in this paragraph, the terms “vote of a majority of the outstanding voting securities,” “assignment” and “interested person” will have the respective meanings specified in the 1940 Act. In the event the Company gives notice of termination, all expenses associated with the movement (or duplication) of records and materials and conversion thereof to a successor service provider, and all trailing expenses incurred by Distributor, will be borne by the Company. This Agreement may be terminated by the Distributor without penalty only upon termination of the Services Agreement in accordance with its terms. Either party may terminate this Agreement on written notice to the other party if the other party is in material breach of its obligations hereunder and fails to cure the breach within thirty (30) days of such written notice. In addition, either party may, in its sole discretion, elect to terminate this Agreement on written notice to the other party upon the bankruptcy or insolvency of the other party or upon the commencing voluntary or involuntary winding up, or upon the filing of any petition seeking the winding up of the other party. The following Sections shall survive any expiration or termination of this Agreement: 7, 8, and 9.

SECTION 9 MISCELLANEOUS

9.01 Publicity . During the term and at all times after the termination or expiration of this Agreement, Distributor shall not make any media release or other public announcement relating to or referring to this Agreement without the written consent of Company. Distributor shall acquire no right to use, and shall not use, without Company’s prior written consent, the terms or existence of this Agreement, the names, trade names, trademarks, service marks, artwork, designs, or copyrighted materials, of Company, its related or subsidiary companies, parent, employees, trustees, shareholders, assigns, successors or licensees: (a) in any advertising, publicity, press release, client list, presentation or promotion; (b) to express or to imply any endorsement of Distributor or Distributor’s services; or (c) in any manner other than expressly in accordance with this Agreement. The foregoing shall not limit disclosures that may be mandated by applicable law, but only to the extent such disclosure is expressly required for compliance.

9.02 Records . The books and records pertaining to the Company, which are in the

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possession or under the control of Distributor, will be the property of the Company. Such books and records will be prepared and maintained as required under the 1940 Act and other applicable securities laws, rules and regulations. The Company and its authorized persons will have access to such books and records at all times during the Distributor’s normal business hours. Upon the reasonable request of the Company, the Distributor will provide copies of such books and records to the Company or its authorized persons, at the Company’s expense. Distributor agrees to cooperate with the Company to assist Company in providing materials for and preparing, upon Company’s reasonable request, materials related to the services provided by the Distributor herein that are required by applicable law or regulation to be presented to the Company’s board of trustees.

9.03 Independent Contractor. The Distributor will undertake and discharge its obligations hereunder as an independent contractor. Neither Distributor nor any of its officers, directors, employees or representatives is or will be an employee of a Fund in connection with the performance of Distributor’s duties hereunder. Distributor will be responsible for its own conduct and the employment, control, compensation and conduct of its agents and employees, and for any injury to such agents or employees or to others through its agents and employees. Any obligations of Distributor hereunder may be performed by one or more third parties or affiliates of Distributor.

9.04 Notices . All notices provided for or permitted under this Agreement will be deemed effective upon receipt, and will be in writing and (a) delivered personally, (b) sent by commercial overnight courier with written verification of receipt, or (c) sent by certified or registered U.S. mail, postage prepaid and return receipt requested, to the party to be notified, at the address for such party set forth below. Notices to the Distributor will be sent to the attention of: General Counsel, SEI Investments Distribution Co., 1 Freedom Valley Drive, Oaks, Pennsylvania 19456. Notices to the Company will be sent to the attention of: George M. Pereira, Treasurer and Principal Financial Officer, Schwab Strategic Trust, 211 Main Street, San Francisco, California 94105, with a copy to Koji E. Felton, Senior Vice President and Deputy General Counsel, Charles Schwab & Co., 211 Main Street, San Francisco, California 94105.

9.05 Dispute Resolution . Whenever either party desires to institute legal proceedings against the other party concerning this Agreement, it will provide written notice to that effect to such other party. The party providing such notice will refrain from instituting said legal proceedings for a period of thirty (30) days following the date of provision of such notice. During such period, the parties will attempt in good faith to amicably resolve their dispute by negotiation among their executive officers.

9.06 Entire Agreement; Amendments . This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement, draft or agreement or proposal with respect to the subject matter hereof. This Agreement or any part hereof may be amended or waived only by an instrument in writing signed by the party against which enforcement of such amendment or waiver is sought.

9.07 Governing Law . This Agreement will be governed by and construed in accordance with the laws of the state of Delaware without giving effect to any conflict of laws or choice of laws rules or principles thereof. To the extent that the applicable laws of the state of Delaware, or any of the provisions of this Agreement, conflict with the applicable provisions of the 1940 Act, the latter will control.

9.08 Counterparts . This Agreement may be executed in two or more counterparts, all of which will constitute one and the same instrument. Each such counterpart will be deemed an original, and it will not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. This Agreement will be deemed executed by both parties when any one or more counterparts hereof or thereof, individually or taken together, bears the original, scanned or facsimile signatures of each of the parties.

9.09 Force Majeure . No breach of any obligation of a party to this Agreement (other than obligations to pay amounts owed) will constitute an event of default or breach to the extent it arises out of

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a cause, existing or future, that is beyond the control and without negligence of the party otherwise chargeable with breach or default, including without limitation: war; act of terrorism, earthquake or natural disaster. Either party desiring to rely upon any of the foregoing as an excuse for default or breach will, when the cause arises, give to the other party prompt notice of the facts which constitute such cause; and, when the cause ceases to exist, give prompt notice thereof to the other party. If a force majeure prevents Distributor’s performance hereunder for more than thirty (30) days, Company may terminate this Agreement on written notice to Distributor.

9.10 Severability . Any provision of this Agreement that is determined to be invalid or unenforceable in any jurisdiction will be ineffective to the extent of such invalidity or unenforceability in such jurisdiction, without rendering invalid or unenforceable the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. If a court of competent jurisdiction declares any provision of this Agreement to be invalid or unenforceable, the parties agree that the court making such determination will have the power to reduce the scope, duration, or area of the provision, to delete specific words or phrases, or to replace the provision with a provision that is valid and enforceable and that comes closest to expressing the original intention of the parties, and this Agreement will be enforceable as so modified.

9.11 Confidential Information .

(a) General . The Distributor and the Company (in such capacity, the “ Receiving Party ”) acknowledge and agree to maintain the confidentiality of Confidential Information (as hereinafter defined) provided by the Distributor and the Company (in such capacity, the “ Disclosing Party ”) in connection with this Agreement. The Receiving Party will not disclose or disseminate the Disclosing Party’s Confidential Information to any Person other than those employees, affiliates, agents, contractors, subcontractors and licensees of the Receiving Party who have a need to know it in order to assist the Receiving Party in performing its obligations, or to permit the Receiving Party to exercise its rights under this Agreement. In addition, the Receiving Party (a) will take all reasonable steps to prevent unauthorized access to the Disclosing Party’s Confidential Information, and (b) will not use the Disclosing Party’s Confidential Information, or authorize other persons to use the Disclosing Party’s Confidential Information, for any purposes other than in connection with performing its obligations or exercising its rights hereunder. As used herein, “reasonable steps” means steps that a party takes to protect its own, similarly confidential or proprietary information of a similar nature, which steps will in no event be less than a reasonable standard of care.

(b) Confidential Information . The term “ Confidential Information ,” as used herein, will mean all business strategies, plans and procedures, proprietary information, methodologies, data and trade secrets, and other confidential information and materials (including, without limitation, any non-public personal information as defined in Regulation S-P) of the Disclosing Party, its affiliates, their respective clients or suppliers, or other Persons with whom they do business, that may be obtained by the Receiving Party from any source or that may be developed as a result of this Agreement.

(c) Exclusions . The provisions of this Section respecting Confidential Information will not apply to the extent, but only to the extent, that such Confidential Information is: (a) already known to the Receiving Party free of any restriction at the time it is obtained from the Disclosing Party, (b) subsequently learned from an independent third party free of any restriction and without breach of this Agreement; (c) or becomes publicly available through no wrongful act of the Receiving Party or any third party; (d) independently developed by or for the Receiving Party without reference to or use of any Confidential Information of the Disclosing Party; or (e) required to be disclosed pursuant to an applicable law, rule, regulation, government requirement or court order, or the rules of any stock exchange (provided, however, that the Receiving Party will advise the Disclosing Party (unless precluded by the applicable process from giving such notice) of such required disclosure promptly upon learning thereof in order to afford the Disclosing Party a reasonable opportunity to contest, limit and/or assist the Receiving Party in crafting such disclosure).

THIS DOCUMENT CONSTITUTES CONFIDENTIAL INFORMATION OF
SEI INVESTMENTS DISTRIBUTION CO.



Distribution Agreement (Exchange-Traded Fund)				Page 9

(d) Duties . The Receiving Party will advise its employees, agents, contractors, subcontractors and licensees, and will require its agents and affiliates to advise their employees, agents, contractors, subcontractors and licensees, of the Receiving Party’s obligations of confidentiality and non-use under this Section, and will be responsible for ensuring compliance by its and its affiliates’ employees, agents, contractors, subcontractors and licensees with such obligations. In addition, the Receiving Party will require all persons that are provided access to the Disclosing Party’s Confidential Information, other than the Receiving Party’s accountants and legal counsel, to execute confidentiality or non-disclosure agreements containing provisions substantially similar to those set forth in this Section. The Receiving Party will promptly notify the Disclosing Party in writing upon learning of any unauthorized disclosure or use of the Disclosing Party’s Confidential Information by such persons.

(e) Treatment of Confidential Information Upon Termination . Upon the Disclosing Party’s written request following the termination of this Agreement, the Receiving Party promptly will return to the Disclosing Party, or destroy, all Confidential Information of the Disclosing Party provided under or in connection with this Agreement, including all copies, portions and summaries thereof. Notwithstanding the foregoing sentence, (a) the Receiving Party may retain one copy of each item of the Disclosing Party’s Confidential Information for purposes of identifying and establishing its rights and obligations under this Agreement, for archival or audit purposes and/or to the extent required by applicable law, and (b) the Distributor will have no obligation to return or destroy Confidential Information of the Company that resides in save tapes of Distributor; provided, however, that in either case all such Confidential Information retained by the Receiving Party will remain subject to the provisions of Section 9.11 for so long as it is so retained. If requested by the Disclosing Party, the Receiving Party will certify in writing its compliance with the provisions of this paragraph.

9.12 Ownership . “ Company Intellectual Property ” shall mean any intellectual property provided by Company or its agents to Distributor for use in connection with this Agreement, including, but not limited to, any data, images, programming, computer code, photographs, illustrations, graphics, audio clips, video clips, or text. Distributor shall only use the Company Intellectual Property in the form provided by Company. Company hereby grants to Distributor, solely for the performance of this Agreement for Company’s benefit a non-exclusive, non-transferable, non-sublicensable right to access, operate, and use the Company Intellectual Property. Except for the foregoing limited license, nothing contained herein shall be construed as granting Distributor any right, title, or interest, express or implied, in or to any Company Intellectual Property. Company reserves all rights in the Company Intellectual Property.

9.13 Insurance . The Distributor agrees to maintain liability insurance coverage which is, in scope and amount, consistent with coverage customary in the industry for distribution activities similar to the distribution activities provided to the Company hereunder. The Distributor will notify the Company upon receipt of any notice of material, adverse change in the terms or provisions of its insurance coverage that may materially and adversely affect the Company’s rights hereunder. Such notification will include the date of change and the reason or reasons therefore. The Distributor will notify the Company of any material claims against it, whether or not covered by insurance that may materially and adversely affect the Company’s rights hereunder.

9.14 Trustees’ Limitation of Liability . The names “Schwab Strategic Trust” and “Trustees of Schwab Strategic Trust” refer respectively to the Delaware statutory trust created (the “ Trust ”) and the Trustees, as trustees but not individually or personally, acting from time to time under a Declaration of Trust dated as of January 26, 2009 to which reference is hereby made and a certificate of the Trust is on file at the office of the Secretary of State of Delaware and elsewhere as required by law, and to any and all amendments thereto. The obligations of “Schwab Strategic 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, shareholders or representatives of the Trust personally, but bind only the assets of the Trust, and all persons dealing with any series of shares 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.

THIS DOCUMENT CONSTITUTES CONFIDENTIAL INFORMATION OF
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Distribution Agreement (Exchange-Traded Fund)				Page 10

9.15 Additional Funds . In the event that the Company establishes one or more classes or series of exchange-traded funds in addition to the Funds listed on Schedule A , with respect to which the Company desires to have the Distributor render services under the terms hereof, it shall so notify the Distributor in writing; and, if the Distributor agrees in writing to provide such services, then each such additional class or series shall become a Fund hereunder, and Schedule A shall thereupon be amended to add the name of each such new Fund.

9.16 Use of Distributor’s Name . The Company will not use the name of the Distributor, or any of its affiliates, in any Prospectus, Sales Materials, and other material relating to the Company in any manner without the prior written consent of the Distributor (which will not be unreasonably withheld); provided, however, that the Distributor hereby approves all lawful uses of the names of the Distributor and its affiliates in the Prospectus and Sales Materials of the Company and in all other materials which merely refer in accurate terms to their appointment hereunder or which are required by applicable law, regulations or otherwise by the SEC, FINRA, or any state securities authority.

9.17 Non-Solicitation . During the term of this Agreement and continuing through the first anniversary of the termination of this Agreement, neither party shall actively solicit any employee of the other party who has performed any material obligations under this Agreement, and with whom the hiring party has had direct contact under this Agreement, without the other party’s written consent. Notwithstanding the foregoing, neither party shall be precluded from (i) hiring an employee of the other party who independently approaches the party, or (ii) conducting general recruiting activities, such as participation in job fairs or publishing advertisements in publications or on Web sites for general circulation. In the event of a violation of this provision, the hiring party’s sole and exclusive obligation, and the other party’s sole and exclusive remedy, shall be a one-time payment in the amount of twenty-five percent (25%) of the employee’s first year base salary.

*****

THIS DOCUMENT CONSTITUTES CONFIDENTIAL INFORMATION OF
SEI INVESTMENTS DISTRIBUTION CO.



Distribution Agreement (Exchange-Traded Fund)				Page 11

IN WITNESS WHEREOF, the Company and Distributor have each duly executed this Agreement, as of the day and year above written.


SCHWAB STRATEGIC TRUST						SEI INVESTMENTS DISTRIBUTION CO .

By:						By:

Name:						Name:
Title:						Title:

THIS DOCUMENT CONSTITUTES CONFIDENTIAL INFORMATION OF
SEI INVESTMENTS DISTRIBUTION CO.



Distribution Agreement (Exchange-Traded Fund)				Page 12

SCHEDULE A

List of Funds

Schwab U.S Large-Cap ETF

Schwab U.S Large-Cap Value ETF

Schwab U.S Large-Cap Growth ETF

Schwab U.S Small-Cap ETF

Schwab International Small-Cap Equity ETF

Schwab International Equity ETF

Schwab Emerging Markets Equity ETF

Schwab U.S Broad Markets ETF

This Schedule A shall include any additional Funds launched throughout the term for which substantially similar services are provided by the Distributor.

THIS DOCUMENT CONSTITUTES CONFIDENTIAL INFORMATION OF
SEI INVESTMENTS DISTRIBUTION CO.



Distribution Agreement (Exchange-Traded Fund)				Page 13

SCHEDULE B

List of Services

Contract Management

•

Coordinate and execute Authorized Participant Agreements pursuant to Section 5 of this Agreement

FINRA Review

•		Conduct timely FINRA filing of materials

•		Respond timely to FINRA comments on marketing materials

•		Provide copy of such FINRA comments to Company promptly upon receipt

Other Services

•		Forward any complaints concerning the Company received by the Distributor to the Company, assist in resolving such complaints, and maintain a log of such complaints as required by applicable law;

•		Keep and maintain all books and records relating to the services provided by the Distributor in accordance with applicable law.

THIS DOCUMENT CONSTITUTES CONFIDENTIAL INFORMATION OF
SEI INVESTMENTS DISTRIBUTION CO.



Distribution Agreement (Exchange-Traded Fund)				Page 14

EXECUTED

Amended and Restated Master Custodian Agreement

This Agreement is made as of October 17,2005 by and among each management investment company identified on Appendix A hereto (each such investment company and each management investment company made subject to this Agreement in accordance with Section 18.5 below, shall hereinafter be referred to as (the “ Fund ”), and State Street Bank and Trust Company, a Massachusetts trust company (the “ Custodian ”),

Witnesseth:

Whereas, each Fund may or may not be authorized to issue shares of common stock or shares of beneficial interest in separate series (“ Shares ”), with each such series representing interests in a separate portfolio of securities and other assets;

Whereas, each Fund so authorized intends that this Agreement be applicable to each of its series set forth on Appendix A hereto (such series together with all other series subsequently established by the Fund and made subject to this Agreement in accordance with Section 18.6 below, shall hereinafter be referred to as the “ Portfolio(s) ”).

Whereas, each Fund not so authorized intends that this Agreement be applicable to it and all references hereinafter to one or more “Portfolio(s)” shall be deemed to refer to such Fund(s); and

Now , Therefore, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:

Section 1. Employment of Custodian and Property to be Held by It

Each Fund hereby employs the Custodian as a custodian of assets of the Portfolios, including securities which the Fund, on behalf of the applicable Portfolio, 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 ”). The Custodian shall not be responsible for any property of a Portfolio which is not received by it or which is delivered out in accordance with Proper Instructions (as such term is defined in Section 7 hereof) including, without limitation, Portfolio property (i) held by brokers, private bankers or other entities on behalf of the Portfolio (each a “ Local Agent ”) or (ii) held by entities which have advanced monies to or on behalf of the Portfolio and which have received Portfolio property as security for such advance(s) (each a “ Pledgee ”), so long as the Custodian’s or its sub-custodian’s or agent’s or a Foreign Sub-Custodian’s negligence, bad faith or willful misconduct has not directly caused such non-receipt or delivery, as the case may be. With respect to uncertificated shares (the “ Underlying Shares ”) of registered “investment companies” (as defined in Section 3(a)(l) of the Investment Company Act of 1940, as amended from time to time (the “ 1940 Act ”)), whether in the same “group of investment companies” (as defined in Section 12(d)(l)(G)(ii) of the 1940 Act) or otherwise, including pursuant to Section 12(d)(1)(F) of the 1940 Act (hereinafter sometimes referred to as the “ Underlying Portfolios ”) the holding of confirmation statements that identify the shares as being recorded in the Custodian’s name on behalf of the Portfolios will be deemed custody for purposes hereof.

Upon receipt of Proper Instructions, the Custodian shall on behalf of the applicable Portfolio(s) 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 or the Board of Directors of the Fund (as appropriate, and in each case, the “ Board ”) on behalf of the applicable Portfolio(s) (each, a “Directed Sub-Custodian”), and provided that the Custodian shall have no more or less responsibility or liability to any Fund on account of any actions or omissions of any Directed Sub-Custodian so employed than any such Directed Sub-Custodian has to the Custodian.

The Custodian may place and maintain each Fund’s foreign securities with foreign banking institution sub-custodians employed by the Custodian and/or foreign securities depositories, all as designated in Schedules A and B hereto, but only in accordance with the applicable provisions of Sections 3 and 4 hereof.


Section 2.		Duties of the Custodian with Respect to Property of the Portfolios to be Held in the United States

Section 2.1 Holding Securities . The Custodian shall hold and physically segregate for the account of each Portfolio all non-cash property, to be held by it in the United States, including all domestic securities owned by such Portfolio other than (a) securities which are maintained pursuant to Section 2.8 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 (each, a “ U.S. Securities System ”) and (b) Underlying Shares owned by each Fund which are maintained pursuant to Section 2.10 hereof in an account with State Street Bank and Trust Company or such other entity which may from time to time act as a transfer agent for the Underlying Portfolios and with respect to which the Custodian is provided with Proper Instructions (the “ Underlying Transfer Agent ”).

Section 2.2 Delivery of Securities . The Custodian shall release and deliver domestic securities owned by a Portfolio held by the Custodian, in a U.S. Securities System account of the Custodian or in an account at the Underlying Transfer Agent, only upon receipt of Proper Instructions on behalf of the applicable Portfolio, 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 Portfolio and receipt of payment therefor;

	2)		Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Portfolio;

	3)		In the case of a sale effected through a U.S. Securities System, in accordance with the provisions of Section 2.8 hereof;

	4)		To the depository agent in connection with tender or other similar offers for securities of the Portfolio;

	5)		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;

	6)		To the issuer thereof, or its agent, for transfer into the name of the Portfolio 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 2.7 or into the name or nominee name of any sub-custodian appointed pursuant to Section 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;

	7)		Upon the sale of such securities for the account of the Portfolio, to the broker or its clearing agent, against a receipt, for examination in accordance with “street delivery” custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian’s or its own sub-custodian’s or agent’s or a Foreign Sub-Custodian’s negligence, bad faith or willful misconduct;

	8)		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;

	9)		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;

	10)		For delivery in connection with any loans of securities made by the Portfolio (a) against receipt of collateral as agreed from time to time by the Fund on behalf of the Portfolio, except 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 will not be held liable or responsible for the delivery of securities owned by the Portfolio prior to the receipt of such collateral or (b) to the lending agent, or the lending agent’s custodian, in accordance with written Proper Instructions (which may not provide for the receipt by the Custodian of collateral therefor) agreed upon from time to time by the Custodian and the Fund;

	11)		For delivery as security in connection with any borrowing by a Fund on behalf of a Portfolio requiring a pledge of assets by the Fund on behalf of such Portfolio;

	12)		For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the “ *Exchange Act* ”) and a member of The National Association of Securities Dealers, Inc. (the “ 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 on behalf of a Portfolio;

	13)		For delivery in accordance with the provisions of any agreement among a Fund on behalf of the Portfolio, 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 (the “ *CFTC* ”) and/or any contract market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Fund on behalf of a Portfolio;

	14)		For delivery as initial or variation margin in connection with futures or options on futures contracts entered into by the Fund on behalf of the Portfolio;

	15)		Upon the sale or other delivery of such investments (including, without limitation, to one or more additional custodians appointed by the Fund, and communicated to the Custodian from time to time via a writing duly executed by an authorized officer of the Fund, for the purpose of engaging in repurchase agreement transactions(s), each a “ *Repo Custodian* ”), and prior to receipt of payment therefor, as set forth in written Proper Instructions (such delivery in advance of payment, along with payment in advance of delivery made in accordance with Section 2.6(7), as applicable, shall each be referred to herein as a “ *Free Trade* ”), provided that such Proper Instructions shall set forth (a) the securities of the Portfolio to be delivered and (b) the person(s) to whom delivery of such securities shall be made;

	16)		Upon receipt of instructions from the Fund’s transfer agent (the “ *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 the currently effective prospectus and statement of additional information of the Fund related to the Portfolio (the “ *Prospectus* ”), in satisfaction of requests by holders of Shares for repurchase or redemption;

	17)		In the case of a sale processed through the Underlying Transfer Agent of Underlying Shares, in accordance with Section 2.10 hereof; and

	18)		For any other purpose, but only upon receipt of Proper Instructions from the Fund on behalf of the applicable Portfolio specifying (a) the securities of the Portfolio to be

delivered and (b) the person or persons to whom delivery of such securities shall be made.

Section 2.3 Registration of Securities . Domestic securities held by the Custodian (other than bearer securities) shall be registered in the name of the Portfolio or in the name of any nominee of a Fund on behalf of the Portfolio or of any nominee of the Custodian which nominee shall be assigned exclusively to the Portfolio, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered management investment companies having the same investment adviser as the Portfolio, or in the name or nominee name of any agent appointed pursuant to Section 2.7 or in the name or nominee name of any sub-custodian appointed pursuant to Section 1. All securities accepted by the Custodian on behalf of the Portfolio under the terms of this Agreement shall be in “street name” or other good delivery form. If, however, a Fund directs the Custodian to maintain securities in “street name” (i.e. other than registered or held as described above), 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.

Section 2.4 Bank Accounts . The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of each Portfolio of each Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Agreement, 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 Portfolio, other than cash maintained by the Portfolio in a bank account established and used in accordance with Rule 17f-3 under the 1940 Act. Funds held by the Custodian for a Portfolio 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 on behalf of each applicable Portfolio be approved by vote of a majority of the Board. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity.

Section 2.5 Collection of Income . Except with respect to Portfolio property released and delivered pursuant to Section 2.2(14) or purchased pursuant to Section 2.6(7), and subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to registered domestic securities held hereunder to which each Portfolio 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 bearer domestic 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 such Portfolio’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 each Portfolio on securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the applicable Fund. The Custodian will have no

duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Portfolio is properly entitled.

Section 2.6 Payment of Fund Monies . Upon receipt of Proper Instructions on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of a Portfolio in the following cases only:

	1)		Upon the purchase of domestic securities, options, futures contracts, options on futures contracts or other financial instruments for the account of the Portfolio but only (a) against the delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, 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 Portfolio 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 2.8 hereof; (c) in the case of a purchase of Underlying Shares, in accordance with the conditions set forth in Section 2.10 hereof; (d) in the case of repurchase agreements entered into between the applicable Fund on behalf of a Portfolio and the Custodian, or another bank, or a broker-dealer which is a member of NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian’s account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Portfolio of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Portfolio; or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined herein;

	2)		In connection with conversion, exchange or surrender of securities owned by the Portfolio as set forth in Section 2.2 hereof;

	3)		For the redemption or repurchase of Shares issued as set forth in Section 6 hereof;

	4)		For the payment of any expense or liability incurred by the Portfolio, including but not limited to the following payments for the account of the Portfolio: 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 on Shares declared pursuant to the Fund’s articles of incorporation or organization and by-laws or agreement or declaration of trust, as applicable, and Prospectus (collectively, “ *Governing Documents* ”);

	6)		For payment of the amount of dividends received in respect of securities sold short;

	7)		For delivery as initial or variation margin in connection with futures or options on futures contracts entered into by the Fund on behalf of the Portfolio;

	8)		Upon the purchase of domestic investments including, without limitation, repurchase agreement transactions involving delivery of Portfolio monies to Repo Custodian(s), and prior to receipt of such investments, as set forth in written Proper Instructions (such payment in advance of delivery, along with delivery in advance of payment made in accordance with Section 2.2(14), as applicable, shall each be referred to herein as a “ *Free Trade* ”), provided that such Proper Instructions shall also set forth (a) the amount of such payment and (b) the person(s) to whom such payment is made; and

	9)		For any other purpose, but only upon receipt of Proper Instructions from the Fund on behalf of the Portfolio specifying (a) the amount of such payment and (b) the person or persons to whom such payment is to be made.

Section 2.7 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 Section 2 as the Custodian may from time to time direct; provided, however, that the Custodian shall be fully responsible for the acts and omissions of such agents or sub-custodians to the same extent as if such act or omission were performed by the Custodian itself. The Underlying Transfer Agent shall not be deemed an agent or sub-custodian of the Custodian for purposes of this Section 2.7 or any other provision of this Agreement.

Section 2.8 Deposit of Fund Assets in U.S. Securities Systems . The Custodian may deposit and/or maintain securities owned by a Portfolio in a U.S. Securities System in compliance with the conditions of Rule 17f-4 under the 1940 Act, as amended from time to time.

Section 2.9 Segregated Account . The Custodian shall upon receipt of Proper Instructions on behalf of each applicable Portfolio, establish and maintain a segregated account or accounts for and on behalf of each such Portfolio, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Section 2.8 hereof, (a) in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, 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 CFTC or any registered contract market), or of

any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Portfolio, (b) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Portfolio or commodity futures contracts or options thereon purchased or sold by the Portfolio, (c) for the purposes of compliance by the Portfolio with the procedures required by Investment Company Act Release No. 10666, or any subsequent release of the U.S. Securities and Exchange Commission (the “ SEC ”), or interpretative opinion of the staff of the SEC, relating to the maintenance of segregated accounts by registered investment companies, and (d) for any other purpose in accordance with Proper Instructions.

Section 2.10 Deposit of Fund Assets with the Underlying Transfer Agent . Underlying Shares beneficially owned by the Fund, on behalf of a Portfolio, shall be deposited and/or maintained in an account or accounts maintained with an Underlying Transfer Agent and the Custodian’s only responsibilities with respect thereto shall be limited to the following:

	1)		Upon receipt of a confirmation or statement from an Underlying Transfer Agent that such Underlying Transfer Agent is holding or maintaining Underlying Shares in the name of the Custodian (or a nominee of the Custodian) for the benefit of a Portfolio, the Custodian shall identify by book-entry that such Underlying Shares are being held by it as custodian for the benefit of the Portfolio.

	2)		In respect of the purchase of Underlying Shares for the account of a Portfolio, upon receipt of Proper Instructions, the Custodian shall pay out monies of such Portfolio as so directed, and record such payment from the account of such Portfolio on the Custodian’s books and records.

	3)		In respect of the sale or redemption of Underlying Shares for the account of a Portfolio, upon receipt of Proper Instructions, the Custodian shall transfer such Underlying Shares as so directed, record such transfer from the account of such Portfolio on the Custodian’s books and records and, upon the Custodian’s receipt of the proceeds therefor, record such payment for the account of such Portfolio on the Custodian’s books and records.

The Custodian shall not be liable to the Fund for any loss or damage to the Fund or any Portfolio resulting from the maintenance of Underlying Shares with Underlying Transfer Agent except for loss or damage resulting directly from the negligence, bad faith or willful misconduct of the Custodian or any of its sub-custodians or agents or any Foreign Sub-Custodian or of any of its or their employees.

Section 2.11 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 each Portfolio held by it and in connection with transfers of securities.

Section 2.12 Proxies . Except with respect to Portfolio property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7), the Custodian shall, with respect to the domestic securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of the Portfolio or a nominee of the Portfolio, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Fund such proxies, all proxy soliciting materials and all notices relating to such securities.

Section 2.13 Communications Relating to Portfolio Securities . Except with respect to Portfolio property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7), and subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the applicable Fund for each Portfolio 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 on behalf of the Portfolio and the maturity of futures contracts purchased or sold by the Fund on behalf of the Portfolio) received by the Custodian from issuers of the securities being held for the Portfolio. With respect to tender or exchange offers, the Custodian shall transmit promptly to the applicable Fund all written information received by the Custodian from issuers of the securities whose tender or exchange is sought and from the party (or its agents) making the tender or exchange offer. Provided that the Custodian’s or its sub-custodian’s or agent’s or a Foreign Sub-Custodian’s own negligence, bad faith or willful misconduct has not directly prevented any of the following conditions from occurring, the Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with domestic securities or other property of the Portfolios at any time held by it unless (i) the Custodian is in actual possession of such domestic securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least three business days prior to the date on which the Custodian is to take action to exercise such right or power.

Section 3. Provisions Relating to Rules 17f-5 and 17f-7

Section 3.1. Definitions . As used throughout this Agreement, the capitalized terms set forth below shall have the indicated meanings:

“ Country Risk ” means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country’s political environment, economic and financial infrastructure (including any Eligible Securities Depository operating in the country), prevailing or developing custody and settlement practices, and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country.

“ Eligible Foreign Custodian ” has the meaning set forth in section (a)(1) of Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as defined in Rule 17f-5), a bank holding company meeting the requirements of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate action of the SEC), or a foreign branch of a Bank (as defined in Section 2(a)(5)

of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of the 1940 Act; the term does not include any Eligible Securities Depository.

“ Eligible Securities Depository ” has the meaning set forth in section (b)(1) of Rule 17f-7.

“ Foreign Assets ” means any of the Portfolios’ investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Portfolios’ transactions in such investments.

“ Foreign Custody Manager ” has the meaning set forth in section (a)(3) of Rule 17f-5.

“ Rule 17 f -5” means Rule 17f-5 promulgated under the 1940 Act.

“ Rule 17f-7 ” means Rule 17f-7 promulgated under the 1940 Act.

Section 3.2. The Custodian as Foreign Custody Manager .

3.2.1 Delegation to the Custodian as Foreign Custody Manager . Each Fund, by resolution adopted by its Board, hereby delegates to the Custodian, subject to Section (b) of Rule 17f-5, the responsibilities set forth in this Section 3.2 with respect to Foreign Assets of the Portfolios held outside the United States, and the Custodian hereby accepts such delegation as Foreign Custody Manager with respect to the Portfolios.

3.2.2 Countries Covered . The Foreign Custody Manager shall be responsible for performing the delegated responsibilities defined below only with respect to the countries and custody arrangements for each such country listed on Schedule A to this Agreement, which list of countries may be amended from time to time by any Fund with the agreement of the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule A the Eligible Foreign Custodians selected by the Foreign Custody Manager to maintain the assets of the Portfolios, which list of Eligible Foreign Custodians may be amended from time to time in the sole discretion of the Foreign Custody Manager. The Foreign Custody Manager will provide amended versions of Schedule A in accordance with Section 3.2.5 hereof.

Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account or to place or maintain Foreign Assets in a country listed on Schedule A, and the fulfillment by each Fund, on behalf of the applicable Portfolio(s), of the applicable account opening requirements for such country, the Foreign Custody Manager shall be deemed to have been delegated by such Fund’s Board on behalf of such Portfolio(s) responsibility as Foreign Custody Manager with respect to that country and to have accepted such delegation. Execution of this Agreement by each Fund shall be deemed to be a Proper Instruction to open an account, or to place or maintain Foreign Assets, in each country listed on Schedule A. Following the receipt of Proper Instructions directing the Foreign Custody Manager to close the account of a Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody Manager in a designated country, the delegation by the Board on behalf of such Portfolio to the Custodian as Foreign Custody Manager for that country shall be deemed to have

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been withdrawn and the Custodian shall immediately cease to be the Foreign Custody Manager with respect to such Portfolio with respect to that country.

The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written notice to the Fund. Forty-five days (or such longer period to which the parties agree in writing) after receipt of any such notice by the Fund, the Custodian shall have no further responsibility in its capacity as Foreign Custody Manager to the Fund with respect to the country as to which the Custodian’s acceptance of delegation is withdrawn.

3.2.3 Scope of Delegated Responsibilities :

(a) Selection of Eligible Foreign Custodians . Subject to the provisions of this Section 3.2, the Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager in each country listed on Schedule A, as amended from time to time. In performing its delegated responsibilities as Foreign Custody Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the country in which the Foreign Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation the factors specified in Rule 17f-5(c)(1).

(b) Contracts With Eligible Foreign Custodians . The Foreign Custody Manager shall determine that the contract governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).

(c) Monitoring . In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by the Foreign Custody Manager, the Foreign Custody Manager shall establish a system to monitor (i) the appropriateness of maintaining the Foreign Assets with such Eligible Foreign Custodian and (ii) the contract governing the custody arrangements established by the Foreign Custody Manager with the Eligible Foreign Custodian. As required by Rule 17f-5, in the event the Foreign Custody Manager determines that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer appropriate including, no longer meeting the requirements of Rule 17f-5, the Foreign Custody Manager shall notify the Board in accordance with Section 3.2.5 hereunder.

3.2.4 Guidelines for the Exercise of Delegated Authority . For purposes of this Section 3.2, the Board shall be deemed to have considered and determined to accept such Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for which the Custodian is serving as Foreign Custody Manager of the Portfolios.

3.2.5 Reporting Requirements . The Foreign Custody Manager shall report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the placement of such Foreign Assets with another Eligible Foreign Custodian by providing to the Board an amended

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Schedule A at the end of the calendar quarter in which an amendment to such Schedule has occurred. The Foreign Custody Manager shall make reasonably prompt written reports notifying the Board of any other material change in the foreign custody arrangements of the Portfolios described in this Section 3.2 after the occurrence of the material change.

3.2.6 Standard of Care as Foreign Custody Manager of a Portfolio . In performing the responsibilities delegated to it, the Foreign Custody Manager agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of assets of management investment companies registered under the 1940 Act would exercise.

3.2.7 Representations with Respect to Rule 17f-5 . The Foreign Custody Manager represents to each Fund that it is a U.S. Bank as defined in section (a)(7) of Rule 17f-5. Each Fund represents to the Custodian that its Board has determined that it is reasonable for such Board to rely on the Custodian to perform the responsibilities delegated pursuant to this Agreement to the Custodian as the Foreign Custody Manager of the Portfolios.

3.2.8 Effective Date and Termination of the Custodian as Foreign Custody Manager . Each Board’s delegation to the Custodian as Foreign Custody Manager of the Portfolios shall be effective as of the date hereof and shall remain in effect until terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective forty-five (45) days after receipt by the non-terminating party of such notice. The provisions of Section 3.2.2 hereof shall govern the delegation to and termination of the Custodian as Foreign Custody Manager of the Portfolios with respect to designated countries.

Section 3.3 Eligible Securities Depositories .

3.3.1 Analysis and Monitoring . The Custodian shall (a) provide the Fund (or its duly-authorized investment manager or investment adviser) with an analysis of the custody risks associated with maintaining assets with the Eligible Securities Depositories set forth on Schedule B hereto in accordance with section (a)(1)(i)(A) of Rule 17f-7, and (b) monitor such risks on a continuing basis, and promptly notify the Fund (or its duly-authorized investment manager or investment adviser) of any material change in such risks, in accordance with Section (a)(1)(i)(B) of Rule 17f-7.

3.3.2 Standard of Care . The Custodian agrees to exercise reasonable care, prudence and diligence in performing the duties set forth in Section 3.3.1.


Section 4.		Duties of the Custodian with Respect to Property of the Portfolios to be Held Outside the United States

Section 4.1 Definitions . As used throughout this Agreement, the capitalized terms set forth below shall have the indicated meanings:

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“ Foreign Securities System ” means an Eligible Securities Depository listed on Schedule B hereto.

“ Foreign Sub-Custodian ” means a foreign banking institution serving as an Eligible Foreign Custodian.

Section 4.2. Holding Securities . The Custodian shall identify on its books as belonging to the Portfolios the foreign securities held by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities for all of its customers, including the Portfolios, with any Foreign Sub-Custodian in an 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 foreign securities of the Portfolios which are maintained in such account shall identify those securities as belonging to the Portfolios and (ii), to the extent permitted and customary in the market in which the account is maintained, the Custodian shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.

Section 4.3. Foreign Securities Systems . Foreign securities shall be maintained in a Foreign Securities System in a designated country through arrangements implemented by the Custodian or a Foreign Sub-Custodian, as applicable, in such country.

Section 4.4. Transactions in Foreign Custody Account .

4.4.1. Delivery of Foreign Assets . The Custodian or a Foreign Sub-Custodian shall release and deliver foreign securities of the Portfolios held by the Custodian or such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:

	(i)		Upon the sale of such foreign securities for the Portfolio in accordance with commercially reasonable market practice in the country where such foreign securities are held or traded, including, without limitation: (A) delivery against expectation of receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System, in accordance with the rules governing the operation of the Foreign Securities System;

	(ii)		In connection with any repurchase agreement related to foreign securities;

	(iii)		To the depository agent in connection with tender or other similar offers for foreign securities of the Portfolios;

	(iv)		To the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable;

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	(v)		To the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee of the Custodian or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units;

	(vi)		To brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such foreign securities prior to receiving payment for such foreign securities except as may arise from the Custodian’s, its agent’s or sub-custodian’s or the Foreign Sub-Custodian’s own negligence, bad faith or willful misconduct;

	(vii)		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;

	(viii)		In the case of warrants, rights or similar foreign 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;

	(ix)		For delivery as security in connection with any borrowing by a Fund on behalf of a Portfolio requiring a pledge of assets by the Fund on behalf of such Portfolio;

	(x)		In connection with trading in options and futures contracts, including delivery as original margin and variation margin;

	(xi)		Upon the sale or other delivery of such foreign securities (including, without limitation, to one or more Repo Custodians) as a Free Trade, provided that applicable Proper Instructions shall set forth (A) the foreign securities to be delivered and (B) the person or persons to whom delivery shall be made;

	(xii)		In connection with the lending of foreign securities; and

	(xiii)		For any other purpose, but only upon receipt of Proper Instructions specifying (A) the foreign securities to be delivered and (B) the person or persons to whom delivery of such securities shall be made.

4.4.2. Payment of Portfolio Monies . Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of a Portfolio in the following cases only:

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	(i)		Upon the purchase of foreign securities for the Portfolio, unless otherwise directed by Proper Instructions, by (A) delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System;

	(ii)		In connection with the conversion, exchange or surrender of foreign securities of the Portfolio;

	(iii)		For the payment of any expense or liability of the Portfolio, including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees under this Agreement, legal fees, accounting fees, and other operating expenses;

	(iv)		For the purchase or sale of foreign exchange or foreign exchange contracts for the Portfolio, including transactions executed with or through the Custodian or its Foreign Sub-Custodians;

	(v)		In connection with trading in options and futures contracts, including delivery as original margin and variation margin;

	(vi)		Upon the purchase of foreign investments including, without limitation, repurchase agreement transactions involving delivery of Portfolio monies to Repo Custodian(s), as a Free Trade, provided that applicable Proper Instructions shall set forth (A) the amount of such payment and (B) the person or persons to whom payment shall be made;

	(vii)		For payment of part or all of the dividends received in respect of securities sold short;

	(viii)		In connection with the borrowing or lending of foreign securities; and

	(ix)		For any other purpose, but only upon receipt of Proper Instructions specifying (A) the amount of such payment and (B) the person or persons to whom such payment is to be made.

4.4.3. Market Conditions . Notwithstanding any provision of this Agreement to the contrary, settlement and payment for Foreign Assets received for the account of the Portfolios and delivery of Foreign Assets maintained for the account of the Portfolios may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or

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dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer.

The Custodian shall provide to each Board the information with respect to custody and settlement practices in countries in which the Custodian employs a Foreign Sub-Custodian described on Schedule C hereto at the time or times set forth on such Schedule. The Custodian may revise Schedule C from time to time, provided that no such revision shall result in a Board being provided with substantively less information than had been previously provided hereunder.

Section 4.5. Registration of Foreign Securities . The foreign securities maintained in the custody of a Foreign Sub-Custodian (other than bearer securities) shall be registered in the name of the applicable Portfolio or in the name of the Custodian or in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing, and the applicable Fund on behalf of such Portfolio agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a Portfolio under the terms of this Agreement unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice.

Section 4.6. Bank Accounts . The Custodian shall identify on its books as belonging to the applicable Fund cash (including cash denominated in foreign currencies) deposited with the Custodian. Where the Custodian is unable to maintain, or market practice does not facilitate the maintenance of, cash on the books of the Custodian, a bank account or bank accounts shall be opened and maintained outside the United States on behalf of a Portfolio with a Foreign Sub-Custodian. All accounts referred to in this Section shall be subject only to draft or order by the Custodian (or, if applicable, such Foreign Sub-Custodian) acting pursuant to the terms of this Agreement to hold cash received by or from or for the account of the Portfolio. Cash maintained on the books of the Custodian (including its branches, subsidiaries and affiliates), regardless of currency denomination, is maintained in bank accounts established under, and subject to the laws of, The Commonwealth of Massachusetts.

Section 4.7. Collection of Income . The Custodian shall use reasonable commercial efforts to collect all income and other payments with respect to the Foreign Assets held hereunder to which the Portfolios shall be entitled and shall credit such income, as collected, to the applicable Portfolio. In the event that extraordinary measures are required to collect such income, and the need for such measures is not directly caused by the Custodian, or its sub-custodian’s or agent’s or the Foreign Sub-Custodian’s negligence, bad faith or willful misconduct, the Fund and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures.

Section 4.8. Shareholder Rights . With respect to the foreign securities held pursuant to this Section 4, the Custodian shall use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject always to the laws, regulations and practical constraints that may exist in the country where such securities are issued. Each Fund acknowledges that local

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conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of such Fund to exercise shareholder rights.

Section 4.9. Communications Relating to Foreign Securities . The Custodian shall transmit promptly to the applicable Fund written information with respect to materials received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Portfolios (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in connection therewith). With respect to tender or exchange offers, the Custodian shall transmit promptly to the applicable Fund written information with respect to materials so received by the Custodian from issuers of the foreign securities whose tender or exchange is sought or from the party (or its agents) making the tender or exchange offer. Provided that the Custodian’s or its agent’s or sub-custodian’s or the Foreign Sub-Custodian’s own negligence, bad faith or willful misconduct has not directly prevented any of the following conditions from occurring, the Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with foreign securities or other property of the Portfolios at any time held by it unless (i) the Custodian or the respective Foreign Sub-Custodian is in actual possession of such foreign securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least three business days prior to the date on which the Custodian is to take action to exercise such right or power.

Section 4.10. Liability of Foreign Sub-Custodians . Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties, and to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Foreign Sub-Custodian’s performance of such obligations. At a Fund’s election, the Portfolios shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Portfolios have not been made whole for any such loss, damage, cost, expense, liability or claim. Such subrogation rights are in addition to any other rights and remedies that a Fund may have under this Agreement.

Section 4.11. Tax Law . The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on any Fund, the Portfolios or the Custodian as custodian of the Portfolios by the tax law of the United States or of any state or political subdivision thereof. It shall be the responsibility of each Fund to notify the Custodian of the obligations imposed on such Fund with respect to the Portfolios or the Custodian as custodian of the Portfolios by the tax law of countries 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 responsibilities of the Custodian with regard to such tax law shall be to use reasonable efforts to effect the withholding of local taxes and related charges with regard to market entitlement/payment in accordance with local law and subject to local market practice or custom and

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to assist the Fund with respect to any claim for exemption or refund under the tax law of countries for which such Fund has provided such information.

Section 4.12. Liability of Custodian . The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian to the same extent as set forth with respect to sub-custodians generally in this Agreement, it being specifically understood and agreed that any liability of the Custodian for the negligence, bad faith or willful misconduct of a Foreign Sub-Custodian shall be determined in light of the circumstances and practices prevailing in the jurisdiction where such Foreign Sub-Custodian’s act or omission occurred. Regardless of whether assets are maintained in the custody of a Foreign Sub-Custodian or a Foreign Securities System, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism, or any other loss where the Foreign Sub-Custodian has otherwise acted with reasonable care.

Section 5. Reserved .

Section 6. Payments for Sales or Repurchases or Redemptions of Shares.

The Custodian shall receive from the distributor of the Shares or from the Transfer Agent and deposit into the account of the appropriate Portfolio such payments as are received for Shares thereof issued or sold from time to time by the applicable Fund. The Custodian will provide timely notification to such Fund on behalf of each such Portfolio and the Transfer Agent of any receipt by it of payments for Shares of such Portfolio.

From such funds as may be available for the purpose, the Custodian shall, upon receipt of Proper Instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to 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, the Custodian is authorized upon receipt of Proper Instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection with the redemption or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by a 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 such Fund and the Custodian.

Section 7. Proper Instructions.

“ Proper Instructions ,” which may also be standing instructions, as such term is used throughout this Agreement shall mean instructions received by the Custodian from a Fund or a person or entity duly authorized by a Fund (“ Authorized Person ”). Such instructions may be in writing signed by the Authorized Person or may be in a tested communication or in a communication utilizing access

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codes effected between electro-mechanical or electronic devices or may be by such other means and utilizing such intermediary systems and utilities as may be agreed from time to time by the Custodian and the person(s) or entity giving such instruction, provided that the Fund has followed any security procedures agreed to from time to time by the applicable Fund and the Custodian including, but not limited to, the security procedures selected by the Fund via the form of Funds Transfer Addendum hereto. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by an Authorized Person with respect to the transaction involved; the Fund shall cause all oral instructions to be confirmed in writing. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian in accordance with any multi-party agreement which requires a segregated asset account in accordance with Section 2.9 hereof.

Concurrently with the execution of this Agreement, and from time to time thereafter, as appropriate, each Fund shall deliver to the Custodian, duly certified by any of such Fund’s Secretary, Assistant Secretary, Treasurer or Assistant Treasurer, a certificate setting forth the names, titles, signatures and scope of authority of all persons authorized to give Proper Instructions or any other notice, request, direction, instruction, certificate or instrument on behalf of the Fund. Such certificate may be accepted and relied upon by the Custodian as conclusive evidence of the facts set forth therein and shall be considered to be in full force and effect until receipt by the Custodian of a similar certificate to the contrary.

Section 8. Evidence of Authority

The Custodian shall be protected in acting upon any Proper Instruction, 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 applicable Fund. The Custodian may receive and accept a copy of a resolution certified by the Secretary or an Assistant Secretary of any Fund as conclusive evidence (a) of the authority of any person to act in accordance with such resolution or (b) of any determination or of any action by the applicable Board as described in such resolution, and such resolution may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary.

Section 9. Actions Permitted without Express Authority

The Custodian may in its discretion, without express authority from the applicable Fund on behalf of each applicable Portfolio:

Make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Agreement; provided that the Custodian has not received prior written notice from the applicable Fund that such payment has been disputed by the Fund on behalf of the Portfolio and provided, further, all such payments shall be accounted for to the Fund on behalf of the Portfolio;

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	2)		Surrender securities in temporary form for securities in definitive form;

	3)		Endorse for collection, in the name of the Portfolio, 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 the Portfolio except as otherwise directed by the applicable Board.

Section 10. Service Level Documents

The Fund and the Custodian may from time to time, in good faith, agree on certain performance measures by which the Custodian is expected to provide the services contemplated by this Agreement (“ Service Level Documents ”). The Service Level Documents are designed to provide metrics and other information which may be utilized by the parties to help measure performance. The parties agree Service Level Documents reflect performance measures as opposed to specific contractual obligations. Notwithstanding, the parties agree that (a) the Custodian’s inability to achieve such performance measures may give rise to grounds for termination pursuant to Section 16; and (b) the Custodian’s performance and/or non-performance of the services, separate and apart from the performance measures in the Service Level Documents, may give rise to any remedies in tort or contract that the Fund may assert against Custodian under the terms of this Agreement.

Section 11. Records

The Custodian shall with respect to each Portfolio create and maintain all records relating to its activities and obligations under this Agreement in such manner as will meet the obligations of each Fund under the 1940 Act, with particular attention to section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of such Fund and employees and agents of the SEC. The Custodian shall, at a Fund’s request, supply the Fund with a tabulation of securities owned by each Portfolio and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations. Each Fund acknowledges that, in creating and maintaining the records as set forth herein with respect to Portfolio property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7) hereof, the Custodian is authorized and instructed to rely upon information provided to it by the Fund, the Fund’s counterparty(ies), or the agents of either of them.

Section 12. Opinion of Fund’s Independent Accountant

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The Custodian shall take all reasonable action, as a Fund with respect to a Portfolio may from time to time request, to obtain from year to year favorable opinions from the Fund’s independent accountants with respect to its activities hereunder in connection with the preparation of the Fund’s Form N-1A or Form N-2, as applicable, and Form N-SAR or other annual reports to the SEC and with respect to any other requirements thereof.

Section 13. Reports to Fund by Independent Public Accountants

The Custodian shall provide the applicable Fund, on behalf of each of the Portfolios at such times as such Fund 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 securities deposited and/or maintained in a U.S. Securities System or a Foreign Securities System (either, a “ Securities System ”), relating to the services provided by the Custodian under this Agreement; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund 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.

Section 14. Compensation of Custodian

The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between each Fund on behalf of each applicable Portfolio and the Custodian.

Section 15. Responsibility of Custodian

So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement 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 Agreement, but shall be kept indemnified by and shall be without liability to any Fund for any action taken or omitted by it including, without limitation, acting in accordance with any Proper Instruction; provided the Custodian, its agents, sub-custodians or Foreign Sub-Custodians, as may be applicable in the instance of any particular act or omission, have acted in good faith without negligence or willful misconduct; and provided, further, that all references throughout this Agreement to the standard of care exercised by any Foreign Sub-Custodian (e.g. reasonable care, good faith, bad faith, negligence or willful misconduct) shall be construed in accordance with the circumstances and practices prevailing in the jurisdiction where such Foreign Sub-Custodian’s act or omission occurred. The

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Custodian shall be entitled to obtain, receive, rely on and act upon the advice of counsel on all matters. The Custodian shall be without liability for any action reasonably taken or omitted in good faith pursuant to the advice of (i) counsel for the Fund or (ii) at the expense of the Custodian, such other counsel as the Custodian may choose; provided, however, in the event that such advice is sought for any matter other than a matter which may be in dispute between the Custodian and the Fund, the Custodian shall utilize its best efforts to provide advance notice to the Fund of the identity of such counsel, and provided, further, with respect to the performance of any action or omission of any action upon such advice, the Custodian shall be required to conform to the applicable standard of care set forth in this Agreement. For the avoidance of doubt, it is hereby specifically understood and agreed that nothing in this section shall be construed as imposing upon the Custodian any obligation to seek such advice of counsel. The Custodian shall be without liability to any Fund or Portfolio for any loss, liability, claim or expense resulting from or caused by anything which is part of Country Risk (as defined in Section 3 hereof), including without limitation nationalization, expropriation, currency restrictions, or acts of war, revolution, riots or terrorism.

Except as may arise from the Custodian’s, its agent’s or sub-custodian’s or a Foreign Sub-Custodian’s negligence, bad faith or willful misconduct, the Custodian shall be without liability to any Fund for any loss, liability, claim or expense resulting from or caused by; (i) events or circumstances beyond the reasonable control of the Custodian or any sub-custodian or Securities System or any agent or nominee of any of the foregoing, including, without limitation, the interruption, suspension or restriction of trading on or the closure of any securities market, power or other mechanical or technological failures or interruptions, computer viruses or communications disruptions, work stoppages, natural disasters, or other similar events or acts; (ii) errors by any Fund or its duly authorized investment manager or investment adviser in their instructions to the Custodian provided such instructions have been in accordance with this Agreement; (iii) the insolvency of or acts or omissions by a Securities System; (iv) any delay or failure of any broker, agent or intermediary, central bank or other commercially prevalent payment or clearing system to deliver to the Custodian’s sub-custodian or agent securities purchased or in the remittance or payment made in connection with securities sold; (v) any delay or failure of any company, corporation, or other body in charge of registering or transferring securities in the name of the Custodian, any Fund, the Custodian’s sub-custodians, nominees or agents or any consequential losses arising out of such delay or failure to transfer such securities including non-receipt of bonus, dividends and rights and other accretions or benefits; (vi) delays or inability to perform its duties due to any disorder in market infrastructure with respect to any particular security or Securities System; and (vii) any provision of any present or future law or regulation or order of the United States of America, or any state thereof, or any other country, or political subdivision thereof or of any court of competent jurisdiction.

The Custodian shall implement and maintain reasonable disaster recovery and business continuity procedures that are reasonably designed to recover data processing systems, data communications facilities, information, data and other business related functions of the Custodian in a manner and time frame consistent with legal, regulatory and business requirements applicable to the Custodian in its provision of services hereunder. In the event of any disaster which causes a business interruption, the Custodian shall act in good faith and take reasonable steps to minimize service interruptions.

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If a Fund on behalf of a Portfolio requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund or the Portfolio being liable for the payment of money or incurring liability of some other form, such Fund on behalf of the Portfolio, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian (but not for the Custodian’s, its agent’s or sub-custodian’s or a Foreign Sub-Custodian’s negligence, bad faith or willful misconduct) in an amount and form reasonably satisfactory to it.

If a Fund requires the Custodian, 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 Agreement, except such as may arise from its or its nominee’s own negligent action, negligent failure to act, bad faith or willful misconduct, any property at any time held for the account of the applicable Portfolio shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of such Portfolio’s assets to the extent necessary to obtain reimbursement.

In no event shall any party hereto be liable for indirect, special or consequential damages.

The indemnifications contained herein shall survive the termination of this Agreement.

Section 16. Effective Period, Termination and Amendment

a. This Agreement shall become effective as of the date first above-written and shall remain in full force and effect for a period of three (3) years from such effective date (the “ Initial Term ” ), and thereafter shall automatically continue in full force and effect unless either party terminates this Agreement by written notice to the other party at least ninety (90) days prior to the date of termination.

b. During the Initial Term and thereafter, the Custodian may, at its discretion, terminate the Agreement for cause with respect to (1) one or more Portfolios; and/or (2) a Fund in its entirety by providing not less than 60 days prior written notice to the Fund upon occurrence of any of the following termination events:

	(A)		Fund has been convicted, pled guilty or pled no contest to criminal conduct in a criminal proceeding;

	(B)		Fund has been found to have violated federal or state law in an administrative or regulatory proceeding; provided such violation (1) involves unethical conduct; and (2) Custodian reasonably believes that such violation would have a material adverse impact on Custodian’s ability to perform services under this Agreement:

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	(C)		Fund has encountered financial difficulties which are evidenced by the authorization or commencement of, or involvement by way of pleading, answer, consent or acquiescence in, a voluntary or involuntary case under Title 11 of the United States Code, as from time to time is in effect, or any applicable law, other that said Title 11, of any jurisdiction relation to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors;

	(D)		Fund has been terminated for cause by the Custodian pursuant to the terms of (1) any fund accounting or administrative agreement between Custodian or Fund, or (2) any fund accounting, custody or administrative agreement between Custodian and Charles Schwab Investment Management, Inc. (“ *CSIM* ”) or any other investment company (other than the Fund) advised by CSIM;

	(E)		CSIM has been terminated for cause by the Custodian pursuant to the terms of any agreement between Custodian and CSIM;

	(F)		Fund attempts to assign this Agreement in violation of Section 18.3 of this Agreement; and

	(G)		Fund has committed a material breach of this Agreement, and such breach has not been remedied by the Fund within sixty days written notice of such breach by Custodian.

c. During the Initial Term and thereafter, Fund, at its discretion, may terminate this agreement for cause with respect to (1) one or more Portfolios; and/or (2) a Fund in its entirety by providing at least 60 days written notice to Custodian upon the occurrence of any of the following termination events;

	(A)		Custodian has been convicted, pled guilty or pled no contest to criminal conduct in any criminal proceeding in connection with the provision of fund administration, fund accounting and/or custody services to any client;

	(B)		Custodian has been found to have violated federal or state law in any administrative or regulatory proceeding; provided such violation (1) involves unethical behavior and (2) relates to the provision of fund administration, fund accounting and/or custody services to any client;

	(C)		Custodian has encountered financial difficulties which are evidenced by the authorization or commencement of, or involvement by way of pleading, answer, consent or acquiescence in, a voluntary or involuntary case under Title 11 of the United States Code, as from time to time is in effect, or any applicable law, other than said Title 11, of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors;

	(D)		Custodian has been terminated by the Fund for cause pursuant to the terms of (1) any fund administration or fund accounting agreement between Custodian and Fund, or (2) any fund

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			administration, custody or fund accounting agreement between Custodian and CSIM or any investment company (other than Fund) advised by CSIM;

	(E)		Custodian has been terminated by CSIM for cause pursuant to the terms of any sub-administrative agreement between Custodian and or its affiliates and CSIM;

	(F)		Custodian transfers fifty percent (50%) or more of any class of its voting securities; (2) transfers all, or substantially all, of its assets to a non-affiliate; or (3) attempts to assign this Agreement in violation of Section 10.3 of this Agreement; and

	(G)		In Fund’s reasonable opinion, Custodian has not achieved one or more of the performance measures set forth in any Service Level Document established pursuant to pursuant to Section 6 of this Agreement, and a plan or revised plan has not been put into place in accordance the following procedures: In the event that Fund reasonably believes that the Custodian has not met one or more of the performance measures set forth in any Service Level Document during any calendar quarter or other period of measurement as may be set forth in any Service Level Document, the Fund may, in its discretion, submit a written deficiency notice to Custodian outlining the performance deficiencies (“ *Deficiency Notice* ”). Such Deficiency Notice must be provided to Custodian within 20 days of the end of such quarter. After receipt of such notice, Custodian shall present the Fund with a written plan to address the deficiencies set forth in the Deficiency Notice (the “ *Plan* ”). Such Plan must be provided to Fund within 30 days after receipt of the Deficiency Notice. If Custodian fails to submit a Plan within such 30 day period, Fund may terminate the Agreement upon 60 days written notice to the Custodian. The Fund, in its discretion, may accept the Plan or reject the Plan (“ *Rejection Notice* ”). Such Rejection Notice must be submitted to the Custodian within 15 days after submission of the Plan. If Fund fails to provide a Rejection Notice within such 15 days period, it shall be presumed that Fund accepted the Plan. In the event, Fund submits a Rejection Notice, Custodian shall submit a revised plan (“ *Revised Plan* ”) to the Fund. Such Revised Plan must be provided to Fund within 30 days after provision of the Rejection Notice. If Custodian fails to submit a Revised Plan within such 30 day period, Fund may terminate the Agreement upon 60 days written notice to Custodian. The Fund, in its sole discretion, may accept the Revised Plan or reject the Revised Plan (“ *Denial Notice* ”). Any Denial Notice must be submitted to Custodian within 15 days after provision of the Revised Plan. If Fund fails to provide a Denial Notice within such 15 day period, it shall be presumed that Fund accepted the Revised Plan. If Fund provides a Denial Notice to Custodian, Fund may, in its sole discretion, terminate this Agreement upon 60 days written notice to Custodian. Such termination notice must be submitted to Custodian within 60 days after provision of the Denial Notice.

	(H)		Custodian has committed a material breach of this Agreement and such breach has not been remedied by the Custodian within sixty days written notice of such breach by Fund.

d. Termination of this Agreement with respect to any single given Portfolio or Fund shall in no way affect the continued validity of this Agreement with respect to any other Portfolio or Fund.

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e. Upon termination of this Agreement, the Fund shall pay to the Custodian such compensation and any reimbursable expenses as may be due and undisputed under the terms hereof as of the date of such termination, including reasonable out-of-pocket expenses associated with such termination. All out-of-pocket expenses associated under this sub-paragraph for which the Custodian seeks reimbursement must be pre-approved by the Fund in writing, such approval shall not be unreasonable withheld.

f. This Agreement may be modified or amended from time to time by mutual written agreement of the parties hereto.

Section 17. Successor Custodian

If a successor custodian for one or more Portfolios shall be appointed by the applicable Board, the Custodian shall, upon termination and receipt of Proper Instructions, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities of each applicable Portfolio then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each such Portfolio held in a Securities System or at the Underlying Transfer Agent.

If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of Proper Instructions, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such resolution.

In the event that no Proper Instructions designating a successor custodian or alternative arrangements 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 or New York, New York, 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 on behalf of each applicable Portfolio and all instruments held by the Custodian relative thereto and all other property held by it under this Agreement on behalf of each applicable Portfolio, and to transfer to an account of such successor custodian all of the securities of each such Portfolio held in any Securities System or at the Underlying Transfer Agent. Thereafter, such bank or trust company shall be the successor of the Custodian under this Agreement.

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 any Fund to provide Proper Instructions as aforesaid, 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 Agreement relating to the duties and obligations of the Custodian shall remain in full force and effect.

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Section 18. General

Section 18.1 Massachusetts Law to Apply . This Agreement shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts.

Section 18.2 Prior Agreements . This Agreement supersedes and terminates, as of the date hereof, all prior Agreements between each Fund on behalf of each of the Portfolios and the Custodian relating to the custody of such Fund’s assets.

Section 18.3 Assignment . This Agreement may not be assigned by (a) any Fund without the written consent of the Custodian or (b) by the Custodian without the written consent of each applicable Fund, except that any party may, without such consent, assign to an entity controlling, controlled by or under common control with such party or to a successor of all of or a substantial portion of its business.

Section 18.4 Interpretive and Additional Provisions . In connection with the operation of this Agreement, the Custodian and each Fund on behalf of each of the Portfolios, may from time to time agree on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions shall be in a writing signed by all 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 a Fund’s Governing Documents. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement.

Section 18.5 Additional Funds . In the event that any management investment company in addition to those listed on Appendix A hereto 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 management investment company shall become a Fund hereunder and be bound by all terms and conditions and provisions hereof including, without limitation, the representations and warranties set forth in Section 18.7 below.

Section 18.6 Additional Portfolios . In the event that any Fund establishes one or more series of Shares in addition to those set forth on Appendix A 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 Portfolio hereunder.

Section 18.7 The Parties . All references herein to the “Fund” are to each of the management investment companies listed on Appendix A hereto, and each management investment company made subject to this Agreement in accordance with Section 18.5 above, individually, as if this Agreement were between such individual Fund and the Custodian. In the case of a series

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corporation, trust or other entity, all references herein to the “Portfolio” are to the individual series or portfolio of such corporation, trust or other entity, or to such corporation, trust or other entity on behalf of the individual series or portfolio, as appropriate. Any reference in this Agreement to “the parties” shall mean the Custodian and such other individual Fund as to which the matter pertains. Each Fund hereby represents and warrants that (a) it is duly incorporated or organized and is validly existing in good standing in its jurisdiction of incorporation or organization; (b) it has the requisite power and authority under applicable law and its Governing Documents to enter into and perform this Agreement; (c) all requisite proceedings have been taken to authorize it to enter into and perform this Agreement; (d) this Agreement constitutes its legal, valid, binding and enforceable agreement; and (e) its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Fund or any law or regulation applicable to it.

Section 18.8 Remote Access Services Addendum . The Custodian and each Fund agree to be bound by the terms of the Remote Access Services Addendum hereto.

Section 18.9 Confidentiality .

a. Definition of term “Fund Confidential Information .” The term “ Fund Confidential Information ” means any information that Fund discloses, whether in writing, electronically or orally, to Custodian whether in tangible or intangible form which is identified as confidential at the time of disclosure or which by the circumstances of disclosure or nature of the information would be considered to be confidential. By way of example and not limitation, Fund Confidential Information includes: (i) any information concerning Fund’s, its agents or licensors’ technology, such as systems, source code, databases, hardware, software, programs, applications, engine protocols, routines, models, displays and manuals, including, without limitation, the selection, coordination, and arrangement of the contents thereof; and (ii) any information concerning Fund’s, its agents or licensors’ financial or business plans or operations, such as research activities and plans, marketing or sales plans, pricing or pricing strategies, operational techniques, internal controls, compliance policies, methods of operation, security procedures, strategic plans, customer information, and unpublished financial information, including information concerning revenues, profits and profit margins. Custodian agrees that Fund will have no obligation to specifically identify by any notice or other action any information to which the protection of this Agreement extends. Without limiting the foregoing, to the extent disclosed to the Custodian, portfolio holdings information of the Fund shall be deemed to be Confidential Information of the Fund until such time as such portfolio holdings information shall made in a public filing by the Fund. The Custodian shall not purchase or sell securities or other investments on the basis of confidential portfolio holdings information of the Fund provided to the Custodian and shall take reasonable steps to prevent any employee or agent of Custodian from purchasing or selling securities or other investments on the same basis.

b. Restrictions on Use . Without the prior written consent of Fund, Custodian will not use any portion of Fund Confidential Information for any purpose other than for the services provided under this Agreement. Custodian further agrees that:

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	(i)		it will hold Fund Confidential Information of Fund in the strictest confidence;

	(ii)		it will exercise the same care with respect to Fund Confidential Information as it exercises with respect to its own proprietary and confidential information;

	(iii)		it will not, without Fund’s prior written consent, copy or disclose to any third party any portion thereof;

	(iv)		it will notify immediately Fund of any unauthorized disclosure or use unless in and ownership of Fund Confidential Information resulting from such unauthorized disclosure or use by or through Custodian; and

	(v)		it will restrict dissemination of Fund Confidential Information to only those persons within or related to its organization who are involved in the delivery services provided under this Agreement, to Custodian’s regulatory authorities as required to comply with such regulatory authorities’ request or order, and to Custodian’s examiners, auditors, directors and legal counsel to the extent Custodian believes the same is reasonably required provided that Custodian makes reasonable effort to notify such parties as to the confidential nature of the Fund Confidential Information.

c. Exceptions . The foregoing shall not prohibit or limit Custodian’s use, disclosure, reproduction or dissemination of Fund Confidential Information which:

	(i)		is or becomes public domain information or material through no fault or breach on the part of Custodian;

	(ii)		as demonstrated by the written records of Custodian or otherwise, was already lawfully known (without restriction on disclosure) to Custodian prior to the information being disclosed to Custodian by Fund or any representative of Fund;

	(iii)		has been or is hereafter rightfully furnished to Custodian without restriction on disclosure by the Fund or a third person lawfully in possession thereof;

	(iv)		has been independently developed, by or for Custodian, without reference to Fund Confidential Information;

	(v)		is requested or required to be disclosed pursuant to any legal or regulatory proceeding, investigation, audit, examination, subpoena, civil investigative demand or other similar process, where required by law, regulation rule or self-regulatory organization rule, provided that, unless prohibited from doing so in such circumstance, the Custodian notifies Fund as promptly as possible so that Fund may to have a reasonable opportunity to obtain a protective order or other form of protection against disclosure. Notwithstanding any such disclosure by Custodian, such disclosure will not otherwise affect Custodian’s obligations hereunder with

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			respect to Fund Confidential Information so disclosed which is retained by Custodian;

	(vi)		is disclosed by the Custodian with the prior written consent of the applicable Fund to disclose, which consent shall not be unreasonably withheld; or

	(vii)		is Fund or Portfolio data aggregated by the Custodian with similar data of other customers of the Custodian (“ *Aggregated Data* ”) for the purposes of the Custodian’s construction of statistical models so long as such Aggregated Data represents such a sufficiently large sample that no Fund or Portfolio data can be identified either directly or by inference or implication.

Any Fund Confidential Information in the possession of Custodian that has been disclosed to it by Fund or any representative of Fund that is not within any of the exceptions above shall be considered confidential unless the Custodian may demonstrate otherwise by records, documentation or other reasonable means.

d. Equitable Relief . Custodian agrees and acknowledges that any breach of this Section 18.9 may cause Fund irreparable harm for which monetary damages would be inadequate. Accordingly, Fund will be entitled to seek injunctive or other equitable relief to remedy any threatened or actual breach of this Section 18.9 by Custodian, as well as monetary damages.

e. No Publicity . No party hereto will announce or disclose the existence of this Agreement, or its contents to any third party without the prior written consent of the other or except as may be required by law, in which case the party required to make such a disclosure will give the other party the maximum feasible prior notice of such disclosure.

Section 18.10 Notices . Any notice, instruction or other instrument required to be given hereunder may be delivered in person to the offices of the parties as set forth herein during normal business hours or delivered prepaid registered mail or by telex, cable or telecopy to the parties at the following addresses or such other addresses as may be notified by any party from time to time.


To any Fund:		[Name of Fund]
		101 Montgomery Street
		San Francisco, California 94104
		Attention: George M. Pereira, Treasurer and Principal Financial Officer
		Telephone: 415-636-3300
		Telecopy: 415-667-3800

With a copy to:		Koji E. Felton, Secretary
		101 Montgomery Street
		San Francisco, California 94104

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		Telephone: 415-636-3461
		Telecopy: 415-667-3440

To the Custodian:		State Street Bank and Trust Company
		1776 Heritage Drive
		North Quincy, Massachusetts 02171
		Attention: James M. Keenan, Vice President
		Telephone: 617-985-9422 Telecopy: 617-985-7575

Such notice, instruction or other instrument shall be deemed to have been served in the case of a registered letter at the expiration of five business days after posting, in the case of cable twenty-four hours after dispatch and, in the case of telex, immediately on dispatch and if delivered outside normal business hours it shall be deemed to have been received at the next time after delivery when normal business hours commence and in the case of cable, telex or telecopy on the business day after the receipt thereof. Evidence that the notice was properly addressed, stamped and put into the post shall be conclusive evidence of posting.

Section 18.11 Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all such counterparts taken together shall constitute one and the same Agreement.

Section 18.12 Severability . If any provision or provisions of this Agreement shall be held to be invalid, unlawful or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired.

Section 18.13 Reproduction of Documents . This Agreement and all schedules, addenda, exhibits, appendices, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.

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Section 18.14 Shareholder Communications Election . SEC 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 each Fund to indicate whether it authorizes the Custodian to provide such Fund’s name, address, and share position to requesting companies whose securities the Fund owns. If a Fund tells the Custodian “no,” the Custodian will not provide this information to requesting companies. If a 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 a 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 o		The Custodian is authorized to release the Fund’s name, address, and share positions.

NO þ		The Custodian is not authorized to release the Fund’s name, address, and share positions.

Section 18.15 Massachusetts Business Trust . With respect to any Fund which is a party to this Agreement and which is organized as a Massachusetts business trust (in each case a “ Trust ”), the term “Fund” (as used throughout this Agreement) means and refers to the trustees from time to time serving under the applicable trust agreement of such Trust, as the same may be amended from time to time (the “ Declaration of Trust ”). It is expressly agreed that the obligations of any such Trust hereunder shall not be binding upon any of the trustees, shareholders, nominees, officers, agents or employees of such Trust personally, but bind only the trust property of the Trust as set forth in the applicable Declaration of Trust. In the case of each Trust, the execution and delivery of this Agreement on behalf of the Trust has been authorized by the trustees, and signed by an authorized officer of the Trust, in each case acting in such capacity and not individually, and neither such authorization by the trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually, but shall only bind the trust property of the Trust as provided in its Declaration of Trust.

32.

Signature Page

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 date first above-written.


Fund Signature Attested to By :		EACH OF THE ENTITIES SET FORTH ON APPENDIX A HERETO

By: Name:	/s/ Alice L. Schulman Alice L. Schulman	By:	/s/ George M. Pereira George M. Pereira
Title:	* [Ass’t Secretary]		Treasurer and Principal Financial Officer

Signature Attested to By:		State Street Bank and Trust Company

By:	/s/ Stephanie L. Poster Stephanie L. Poster	By:	/s/ Joseph L. Hooley Joseph L. Hooley
	Vice President and Counsel		Executive Vice President

33.

APPENDIX A
TO
Master Custodian Agreement

July 1, 2006

Management Investment Companies Registered with the SEC and Portfolios thereof, If Any

Charles Schwab Family of Funds

Schwab Money Market Fund
Schwab Value Advantage Money Fund
Schwab Retirement Advantage Money Fund
Schwab Retirement Money Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Municipal Money Fund
Schwab California Municipal Money Fund
Schwab New York Municipal Money Fund
Schwab AMT Tax-Free Money Fund (formerly known as
Schwab Florida Municipal Money Fund)
Schwab Massachusetts Municipal Money Fund
Schwab Pennsylvania Municipal Money Fund
Schwab New Jersey Municipal Money Fund
Schwab Cash Reserves Fund
Schwab Advisor Cash Reserves Fund

Schwab Investments

Schwab Inflation Protected Fund (effective March 31, 2006)
Schwab 1000 Index Fund
Schwab Short-Term Bond Market Fund
Schwab Total Bond Market Fund
Schwab California Short/Intermediate Tax-Free Bond Fund
Schwab California Long-Term Tax-Free Bond Fund
Schwab Short/Intermediate Tax-Free Bond Fund
Schwab Long-Term Tax-Free Bond Fund
Schwab Yield Plus Fund
Schwab GNMA Fund
Schwab California Tax-Free YieldPlus Fund
Schwab Tax-Free YieldPlus Fund

Schwab Capital Trust

Schwab Premier Equity Fund
Schwab Core Equity Fund
Schwab Hedged Equity Fund
Laudus International MarketMasters Fund
Laudus U.S. MarketMasters Fund
Schwab Viewpoints Fund (formerly known as Laudus
Balanced MarketMasters Fund)
Laudus Small-Cap MarketMasters Fund

Schwab Annuity Portfolios

Schwab Money Market Portfolio

SCHEDULE A

STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS


Country		Subcustodian

Argentina		Citibank, N.A.

Australia		Westpac Banking Corporation

		Citibank Pty. Limited

Austria		Erste Bank der Österreichischen Sparkassen AG

Bahrain		HSBC Bank Middle East (as delegate of the Hongkong and Shanghai Banking Corporation Limited)

Bangladesh		Standard Chartered Bank

Belgium		BNP Paribas Securities Services, S.A.

Benin		via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast

Bermuda		The Bank of Bermuda Limited

Botswana		Barclays Bank of Botswana Limited

Brazil		Citibank, N.A.

Bulgaria		ING Bank N.V.

Burkina Faso		via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast

Canada		State Street Trust Company Canada

Cayman Islands		Scotiabank & Trust (Cayman) Limited

Chile		BankBoston, N.A.

People’s Republic		The Hongkong and Shanghai Banking Corporation Limited,

SCHEDULE A

STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS


Country		Subcustodian

of China		Shanghai and Shenzhen branches

Colombia		Cititrust Colombia S.A. Sociedad Fiduciaria

Costa Rica		Banco BCT S.A.

Croatia		Privredna Banka Zagreb d.d

Cyprus		Cyprus Popular Bank Ltd.

Czech Republic		Československá Obchodní Banka, A.S.

Denmark		Skandinaviska Enskilda Bankken AB, Sweden (operating through its Copenhagen branch)

Ecuador		Banco de la Producción S.A. PRODUBANCO

Egypt		HSBC Bank Egypt S.A.E. (as delegate of The Hongkong and Shanghai Banking Corporation Limited)

Estonia		AS Hansabank

Finland		Nordea Bank Finland Plc.

France		BNP Paribas Securities Services, S.A.

		Deutsche Bank AG, Netherlands (operating through its Paris branch)

Germany		Deutsche Bank AG

Ghana		Barclays Bank of Ghana Limited

Greece		National Bank of Greece S.A.

SCHEDULE A

STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS


Country		Subcustodian
Guinea-Bissau		via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast

Hong Kong		Standard Chartered Bank (Hong Kong) Limited

Hungary		HVB Bank Hungary Rt.

Iceland		Kaupthing Bank hf.

India		Deutsche Bank AG

		The Hongkong and Shanghai Banking Corporation Limited

Indonesia		Deutsche Bank AG

Ireland		Bank of Ireland

Israel		Bank Hapoalim B.M.

Italy		BNP Paribas Securities Services, S.A.

Ivory Coast		Société Générale de Banques en Côte d’Ivoire

Jamaica		Bank of Nova Scotia Jamaica Ltd.

Japan		Mizuho Corporate Bank Ltd.

		Sumitomo Mitsui Banking Corporation

Jordan		HSBC Bank Middle East (as delegate of the Hongkong and Shanghai Banking Corporation Limited)

Kazakhstan		HSBC Bank Kazakhstan (as delegate of the Hongkong and Shanghai Banking Corporation Limited)

SCHEDULE A

STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS


Country		Subcustodian
Kenya		Barclays Bank of Kenya Limited

Republic of Korea		Deutsche Bank AG

		The Hongkong and Shanghai Banking Corporation Limited

Latvia		A/s Hansabanka

Lebanon		HSBC Bank Middle East (as delegate of The Hongkong and Shanghai Banking Corporation Limited)

Lithuania		SEB Vilniaus Bankas AB

Malaysia		Standard Chartered Bank Malaysia Berhad

Mali		via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast

Malta		HSBC Bank Malta Plc.

Mauritius		The Hongkong and Shanghai Banking Corporation Limited

Mexico		Banco Nacional de México S.A.

Morocco		Attijariwafa bank

Namibia		Standard Bank Namibia Limited

Netherlands		Deutsche Bank N.V.

		KAS BANK N.V.

New Zealand		Westpac Banking Corporation

SCHEDULE A

STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS


Country		Subcustodian
Niger		via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast

Nigeria		Stanbic Bank Nigeria Limited

Norway		Nordea Bank Norge ASA

Oman		HSBC Bank Middle East Limited (as delegate of The Hongkong and Shanghai Banking Corporation Limited)

Pakistan		Deutsche Bank AG

Palestine		HSBC Bank Middle East Limited (as delegate of The Hongkong and Shanghai Banking Corporation Limited)

Panama		HSBC Bank (Panama) S.A.

Peru		Citibank del Péru, S.A.

Philippines		Standard Chartered Bank

Poland		Bank Handlowy w Warszawie S.A.

Portugal		Banco Comercial Português S.A.

Puerto Rico		Citibank N.A.

Qatar		HSBC Bank Middle East Limited (as delegate of The Hongkong and Shanghai Banking Corporation Limited)

Romania		ING Bank N.V.

Russia		ING Bank (Eurasia) ZAO, Moscow

SCHEDULE A

STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS


Country		Subcustodian
Senegal		via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast

Serbia		HVB Bank Serbia and Montenegro a.d.

Singapore		DBS Bank Limited

		United Overseas Bank Limited

Slovak Republic		Československá Obchodní Banka, A.S., pobocka zahranicnej banky v SR

Slovenia		Bank Austria Creditanstalt d.d. - Ljubljana

South Africa		Nedbank Limited

		Standard Bank of South Africa Limited

Spain		Santander Central Hispano Investment S.A.

Sri Lanka		The Hongkong and Shanghai Banking Corporation Limited

Swaziland		Standard Bank Swaziland Limited

Sweden		Skandinaviska Enskilda Banken AB

Switzerland		UBS AG

Taiwan — R.O.C.		Central Trust of China

Thailand		Standard Chartered Bank

Togo		via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast

Trinidad & Tobago		Republic Bank Limited

SCHEDULE A

STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS


Country		Subcustodian
Tunisia		Banque Internationale Arabe de Tunisie

Turkey		Citibank, A.S.

Uganda		Barclays Bank of Uganda Limited

Ukraine		ING Bank Ukraine

United Arab Emirates		HSBC Bank Middle East Limited (as delegate of The Hongkong and Shanghai Banking Corporation Limited)

United Kingdom		State Street Bank and Trust Company, United kingdom Branch

Uruguay		BankBoston, N.A.

Venezuela		Citibank, N.A.

Vietnam		The Hongkong and Shanghai Banking Corporation Limited

Zambia		Barclays Bank of Zambia Plc.

Zimbabwe		Barclays Bank of Zimbabwe Limited

SCHEDULE B

STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS


Country				Depositories
Argentina				Caja de Valores S.A.

Australia				Austraclear Limited

Austria				Oesterreichische Kontrollbank AG (Wertpapiersammelbank Division)

Bahrain				Clearing, Settlement, and Depository System of the Bahrain Stock Exchange

Bangladesh				Central Depository Bangladesh Limited

Belgium				Banque Nationale de Belgique

				Caisse Interprofessionnelle de Dépôts et de Virements de Titres, S.A.

Benin				Dépositaire Central — Banque de Règlement

Bermuda				Bermuda Securities Depository

Brazil				Central de Custódia e de Liquidação Financeira de Títulos Privados (CETIP)

				Companhia Brasileira de Liquidação e Custódia

				Sistema Especial de Liquidação e de Custódia (SELIC)

Bulgaria				Bulgarian National Bank

				Central Depository AD

Burkina Faso				Dépositaire Central — Banque de Règlement

Canada				The Canadian Depository for Securities Limited

Chile				Depósito Central de Valores S.A.

SCHEDULE B

STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS


Country		Depositories
People’s Republic	China Securities Depository and Clearing Corporation Limited
of China		Shanghai Branch

		China Securities Depository and Clearing Corporation Limited
		Shenzhen Branch

Colombia		Depósito Central de Valores

		Depósito Centralizado de Valores de Colombia S..A. (DECEVAL)

Costa Rica		Central de Valores S.A.

Croatia		Središnja Depozitarna Agencija d.d.

Cyprus		Central Depository and Central Registry

Czech Republic		Czech National Bank

		Stredisko cenných papíru — Ceská republika

Denmark	Værdipapircentralen (Danish Securities Center)

Egypt		Misr for Clearing, Settlement, and Depository S.A.E.

		Central Bank of Egypt

Estonia		AS Eesti Väärtpaberikeskus

Finland		Suomen Arvopaperikeskus

France		Euroclear France

Germany	Clearstream Banking AG, Frankfurt

Greece		Apothetirion Titlon AE — Central Securities Depository

		Bank of Greece,

SCHEDULE B

STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS


Country		Depositories
		System for Monitoring Transactions in Securities in Book-Entry Form

Guinea-Bissau		Dépositaire Central — Banque de Règlement

Hong Kong		Central Moneymarkets Unit

		Hong Kong Securities Clearing Company Limited

Hungary		Központi Elszámolóház és Értéktár (Budapest) Rt. (KELER)

Iceland		Icelandic Securities Depository Limited

India		Central Depository Services (India) Limited

		National Securities Depository Limited

		Reserve Bank of India

Indonesia		Bank Indonesia

		PT Kustodian Sentral Efek Indonesia

Israel		Tel Aviv Stock Exchange Clearing House Ltd. (TASE Clearinghouse)

Italy		Monte Titoli S.p.A.

Ivory Coast		Dépositaire Central — Banque de Règlement

Jamaica		Jamaica Central Securities Depository

Japan		Bank of Japan — Net System

		Japan Securities Depository Center (JASDEC) Incorporated

Jordan		Securities Depository Center

SCHEDULE B

STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS


Country		Depositories
Kazakhstan		Central Securities Depository

Kenya		Central Depository and Settlement Corporation Limited

		Central Bank of Kenya

Republic of Korea	Korea Securities Depository

Latvia		Latvian Central Depository

Lebanon		Banque du Liban

		Custodian and Clearing Center of Financial Instruments for Lebanon and the Middle East (Midclear) S.A.L.

Lithuania		Central Securities Depository of Lithuania

Malaysia	Bank Negara Malaysia

		Bursa Malaysia Depository Sdn. Bhd.

Mali		Dépositaire Central — Banque de Règlement

Malta		Central Securities Depository of the Malta Stock Exchange

Mauritius		Bank of Mauritius

		Central Depository and Settlement Co. Ltd.

Mexico		S.D. Indeval, S.A. de C.V.

Morocco	Maroclear

Namibia		Bank of Namibia

SCHEDULE B

STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS


Country		Depositories
Netherlands		Euroclear Nederland

New Zealand		New Zealand Central Securities Depository Limited

Niger		Dépositaire Central — Banque de Règlement

Nigeria		Central Securities Clearing System Limited

Norway		Verdipapirsentralen (Norwegian Central Securities Depository)

Oman		Muscat Depository & Securities Registration Company, SAOC

Pakistan		Central Depository Company of Pakistan Limited

		State Bank of Pakistan

Palestine	Clearing, Depository and Settlement, a department of the Palestine Stock Exchange

Panama		Central Latinoamericana de Valores, S.A. (LatinClear)

Peru		Caja de Valores y Liquidaciones, Institución de Compensación y Liquidación de Valores S.A

Philippines		Philippine Central Depository, Inc.

		Registry of Scripless Securities (ROSS) of the Bureau of Treasury

Poland		Rejestr Papierów Wartościowych

		Krajowy Depozyt Papierów Wartościowych S.A.

SCHEDULE B

STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS


Country		Depositories
Portugal		INTERBOLSA — Sociedade Gestora de Sistemas de Liquidação e de Sistemas Centralizados de Valores Mobiliários, S.A.

Qatar		Central Clearing and Registration (CCR), a department of the Doha Securities Market

Romania		Bucharest Stock Exchange Registry Division

		National Bank of Romania

		National Securities Clearing, Settlement and Depository Company

Russia		Vneshtorgbank, Bank for Foreign Trade of the Russian Federation

Senegal		Dépositaire Central — Banque de Règlement

Serbia		Central Registrar and Central Depository for Securities

Singapore		The Central Depository (Pte) Limited

		Monetary Authority of Singapore

Slovak Republic		Náodná banka slovenska

		Centralny depozitar cenných papierov SR, a.s.

Slovenia		KDD — Centralna klirinsko depotna druzba d.d.

South Africa		Share Transactions Totally Electronic (STRATE) Ltd.

Spain		IBERCLEAR

Sri Lanka		Central Depository System (Pvt) Limited

Sweden		Värdepapperscentralen VPC AB

SCHEDULE B

STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS


Country		Depositories
		(Swedish Central Securities Depository)

Switzerland		SegaIntersettle AG (SIS)

Taiwan — R.O.C.		Taiwan Securities Central Depository Company Limited

Thailand		Bank of Thailand

		Thailand Securities Depository Company Limited

Togo		Dépositaire Central — Banque de Règlement

Trinidad and Tobago		Trinidad and Tobago Central Bank

Tunisia		Société Tunisienne Interprofessionelle pour la Compensation et de Dépôts des Valeurs Mobilières (STICODEVAM)

Turkey		Central Bank of Turkey

		Takas ve Saklama Bankasi A.S. (TAKASBANK)

Uganda		Bank of Uganda

Ukraine		Mizhregionalny Fondovy Souz

		National Bank of Ukraine

United Arab Emirates		Clearing and Depository System, a department of the Dubai Financial Market

United Kingdom		CrestCo.

Uruguay		Banco Central del Uruguay

SCHEDULE B

STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS


Country		Depositories
Venezuela		Banco Central de Venezuela

		Caja Venezolana de Valores

Vietnam		Securities Registration, Clearing and Settlement, Depository Department of the Securities Trading Center

Zambia		Bank of Zambia

		LuSE Central Shares Depository Limited

TRANSNATIONAL

Euroclear

Clearstream Banking, S.A.

SCHEDULE C

MARKET INFORMATION


Publication/Type of Information		Brief Description
(scheduled frequency)

The Guide to Custody in World Markets (hardcopy annually and regular website updates)		An overview of settlement and safekeeping procedures, custody practices and foreign investor considerations for the markets in which State Street offers custodial services.

Global Custody Network Review (annually)		Information relating to Foreign Sub-Custodians in State Street’s Global Custody Network. The Review stands as an integral part of the materials that State Street provides to its U.S. mutual fund clients to assist them in complying with SEC Rule 17f-5. The Review also gives insight into State Street’s market expansion and Foreign Sub-Custodian selection processes, as well as the procedures and controls used to monitor the financial condition and performance of our Foreign Sub-Custodian banks.

Securities Depository Review (annually)		Custody risk analyses of the Foreign Securities Depositories presently operating in Network markets. This publication is an integral part of the materials that State Street provides to its U.S. mutual fund clients to meet informational obligations created by SEC Rule 17f-7.

Global Legal Survey (annually)		With respect to each market in which State Street offers custodial services, opinions relating to whether local law restricts (i) access of a fund’s independent public accountants to books and records of a Foreign Sub-Custodian or Foreign Securities System, (ii) a fund’s ability to recover in the event of bankruptcy or insolvency of a Foreign Sub-Custodian or Foreign Securities System, (iii) a fund’s ability to recover in the event of a loss by a Foreign Sub-Custodian or Foreign Securities System, and (iv) the ability of a foreign investor to convert cash and cash equivalents to U.S. dollars.

Subcustodian Agreements (annually)		Copies of the contracts that State Street has entered into with each Foreign Sub-Custodian that maintains U.S. mutual fund assets in the markets in which State Street offers custodial services.

Global Market Bulletin (daily or as necessary)		Information on changing settlement and custody conditions in markets where State Street offers custodial services. Includes changes in market and tax regulations, depository developments, dematerialization information, as well as other market changes that may impact State Street’s clients.

Foreign Custody Advisories (as necessary)		For those markets where State Street offers custodial services that exhibit special risks or infrastructures impacting custody, State Street issues market advisories to highlight those unique market factors which might impact our ability to offer recognized custody service levels.

Material Change Notices (presently on a quarterly		Informational letters and accompanying materials confirming State Street’s foreign custody arrangements, including a basis or as otherwise necessary) summary of material changes with Foreign Sub-Custodians that have occurred during the previous quarter. The notices also identify any material changes in the custodial risks associated with maintaining assets with Foreign Securities Depositories.

F UNDS T RANSFER A DDENDUM

OPERATING GUIDELINES

1. OBLIGATION OF THE SENDER: State Street is authorized to promptly debit Client’s account(s) upon the receipt of a payment order in compliance with the selected Security Procedure chosen for funds transfer and in the amount of money that State Street has been instructed to transfer. State Street shall execute payment orders in compliance with the Security Procedure and with the Client’s instructions on the execution date provided that such payment order is received by the customary deadline for processing such a request, unless the payment order specifies a later time. All payment orders and communications received after this time will be deemed to have been received on the next business day.

2. SECURITY PROCEDURE: The Client acknowledges that the Security Procedure it has designated on the Selection Form was selected by the Client from Security Procedures offered by State Street. The Client agrees that the Security Procedures are reasonable and adequate for its wire transfer transactions and agrees to be bound by any payment orders, amendments and cancellations, whether or not authorized, issued in its name and accepted by State Street after being confirmed by any of the selected Security Procedures. The Client also agrees to be bound by any other valid and authorized payment order accepted by State Street. The Client shall restrict access to confidential information relating to the Security Procedure to authorized persons as communicated in writing to State Street. The Client must notify State Street immediately if it has reason to believe unauthorized persons may have obtained access to such information or of any change in the Client’s authorized personnel. State Street shall verify the authenticity of all instructions according to the Security Procedure.

3. ACCOUNT NUMBERS: State Street shall process all payment orders on the basis of the account number contained in the payment order. In the event of a discrepancy between any name indicated on the payment order and the account number, the account number shall take precedence and govern. Financial institutions that receive payment orders initiated by State Street at the instruction of the Client may also process payment orders on the basis of account numbers, regardless of any name included in the payment order. State Street will also rely on any financial institution identification numbers included in any payment order, regardless of any financial institution name included in the payment order.

4. REJECTION: State Street reserves the right to decline to process or delay the processing of a payment order which (a) is in excess of the collected balance in the account to be charged at the time of State Street’s receipt of such payment order; (b) if initiating such payment order would cause State Street, in State Street’s sole judgment, to exceed any volume, aggregate dollar, network, time, credit or similar limits upon wire transfers which are applicable to State Street; or (c) if State Street, in good faith, is unable to satisfy itself that the transaction has been properly authorized.

5. CANCELLATION OR AMENDMENT: State Street shall use reasonable efforts to act on all authorized requests to cancel or amend payment orders received in compliance with the Security Procedure provided that such requests are received in a timely manner affording State Street reasonable opportunity to act. However, State Street assumes no liability if the request for amendment or cancellation cannot be satisfied.

6. ERRORS: State Street shall assume no responsibility for failure to detect any erroneous payment order provided that State Street complies with the payment order instructions as received and State Street complies with the Security Procedure. The Security Procedure is established for the purpose of authenticating payment orders only and not for the detection of errors in payment orders.

7. INTEREST AND LIABILITY LIMITS: State Street shall assume no responsibility for lost interest with respect to the refundable amount of any unauthorized payment order, unless State Street is notified of the unauthorized payment order within thirty (30) days of notification by State Street of the acceptance of such payment order. In no event shall State Street be liable for special, indirect or consequential damages, even if advised of the possibility of such damages and even for failure to execute a payment order.

8. AUTOMATED CLEARING HOUSE (“ACH”) CREDIT ENTRIES/PROVISIONAL PAYMENTS: When a Client initiates or receives ACH credit and debit entries pursuant to these Guidelines and the rules of the National Automated Clearing House Association and the New England Clearing House Association, State Street will act as an Originating Depository Financial Institution and/or Receiving Depository Institution, as the case may be, with respect to such entries. Credits given by State Street with respect to an ACH credit entry are provisional until State Street receives final settlement for such entry from the Federal Reserve Bank. If State Street does not receive such final settlement, the Client agrees that State Street shall receive a refund of the amount credited to the Client in connection with such entry, and the party making payment to the Client via such entry shall not be deemed to have paid the amount of the entry.

9. CONFIRMATION STATEMENTS: Confirmation of State Street’s execution of payment orders shall ordinarily be provided within 24 hours. Notice may be delivered through State Street’s proprietary information systems, such as, but not limited to Horizon and GlobalQuest _® , account statements, advices, or by facsimile or callback. The Client must report any objections to the execution of a payment order within 30 days.

F UNDS T RANSFER A DDENDUM

10. LIABILITY ON FOREIGN ACCOUNTS : State Street shall not be required to repay any deposit made at a non-U.S. branch of State Street, or any deposit made with State Street and denominated in a non-U.S. dollar currency, if repayment of such deposit or the use of assets denominated in the non-U.S. dollar currency is prevented, prohibited or otherwise blocked due to: (a) an act of war, insurrection or civil strife; (b) any action by a non-U.S. government or instrumentality or authority asserting governmental, military or police power of any kind, whether such authority be recognized as a defacto or a dejure government, or by any entity, political or revolutionary movement or otherwise that usurps, supervenes or otherwise materially impairs the normal operation of civil authority; or(c) the closure of a non-U.S. branch of State Street in order to prevent, in the reasonable judgment of State Street, harm to the employees or property of State Street. The obligation to repay any such deposit shall not be transferred to and may not be enforced against any other branch of State Street.

The foregoing provisions constitute the disclosure required by Massachusetts General Laws, Chapter 167D, Section 36.

While State Street is not obligated to repay any deposit made at a non-U.S. branch or any deposit denominated in a non-U.S. currency during the period in which its repayment has been prevented, prohibited or otherwise blocked, State Street will repay such deposit when and if all circumstances preventing, prohibiting or otherwise blocking repayment cease to exist.

11. MISCELLANEOUS: State Street and the Client agree to cooperate to attempt to recover any funds erroneously paid to the wrong party or parties, regardless of any fault of State Street or the Client, but the party responsible for the erroneous payment shall bear all costs and expenses incurred in trying to effect such recovery. These Guidelines may not be amended except by a written agreement signed by the parties.

F UNDS T RANSFER A DDENDUM

Security Procedure(s) Selection Form

Please select one or more of the funds transfer security procedures indicated below.

o SWIFT

SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a cooperative society owned and operated by member financial institutions that provides telecommunication services for its membership. Participation is limited to securities brokers and dealers, clearing and depository institutions, recognized exchanges for securities, and investment management institutions. SWIFT provides a number of security features through encryption and authentication to protect against unauthorized access, loss or wrong delivery of messages, transmission errors, loss of confidentiality and fraudulent changes to messages. SWIFT is considered to be one of the most secure and efficient networks for the delivery of funds transfer instructions.

Selection of this security procedure would be most appropriate for existing SWIFT members.

o Standing Instructions

Standing Instructions may be used where funds are transferred to a broker on the client’s established list of brokers with which it engages in foreign exchange transactions. Only the date, the currency and the currency amount are variable. In order to establish this procedure, State Street will send to the Client a list of the brokers that State Street has determined are used by the Client. The Client will confirm the list in writing, and State Street will verify the written confirmation by telephone. Standing Instructions will be subject to a mutually agreed upon limit. If the payment order exceeds the established limit, the Standing Instruction will be confirmed by telephone prior to execution.

o Remote Batch Transmission

Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU) data communications between the Client and State Street. Security procedures include encryption and or the use of a test key by those individuals authorized as Automated Batch Verifiers.

Clients selecting this option should have an existing facility for completing CPU-CPU transmissions. This delivery mechanism is typically used for high-volume business.

o Global Horizon Interchange _sm Funds Transfer Service

Global Horizon Interchange Funds Transfer Service (FTS) is a State Street proprietary microcomputer-based wire initiation system. FTS enables Clients to electronically transmit authenticated Fedwire, CHIPS or internal book transfer instructions to State Street.

This delivery mechanism is most appropriate for Clients with a low-to-medium number of transactions (5-75 per day), allowing Clients to enter, batch, and review wire transfer instructions on their PC prior to release to State Street.

o Telephone Confirmation (Callback)

Telephone confirmation will be used to verify all non-repetitive funds transfer instructions received via untested facsimile or phone. This procedure requires Clients to designate individuals as authorized initiators and authorized verifiers. State Street will verify that the instruction contains the signature of an authorized person and prior to execution, will contact someone other than the originator at the Client’s location to authenticate the instruction.

Selection of this alternative is appropriate for Clients who do not have the capability to use other security procedures.

o Repetitive Wires

For situations where funds are transferred periodically (minimum of one instruction per calendar quarter) from an existing authorized account to the same payee (destination bank and account number) and only the date and currency amount are variable, a repetitive wire may be implemented. Repetitive wires will be subject to a mutually agreed upon limit. If the payment order exceeds the established limit, the instruction will be confirmed by telephone prior to execution. Telephone confirmation is used to establish this process. Repetitive wire instructions must be reconfirmed annually.

This alternative is recommended whenever funds are frequently transferred between the same two accounts.

o Transfers Initiated by Facsimile

The Client faxes wire transfer instructions directly to State Street Mutual Fund Services. Standard security procedure requires the use of a random number test key for all transfers. Every six months the Client receives test key logs from State Street. The test key contains alpha-numeric characters, which the Client puts on each document faxed to State Street. This procedure ensures all wire instructions received via fax are authorized by the Client.

We provide this option for Clients who wish to batch wire instructions and transmit these as a group to State Street Mutual Fund Services once or several times a day.

F UNDS T RANSFER A DDENDUM

o Automated Clearing House (ACH)

State Street receives an automated transmission or a magnetic tape from a Client for the initiation of payment (credit) or collection (debit) transactions through the ACH network. The transactions contained on each transmission or tape must be authenticated by the Client. Clients using ACH must select one or more of the following delivery options:

o Global Horizon Interchange Automated Clearing House Service

Transactions are created on a microcomputer, assembled into batches and delivered to State Street via fully authenticated electronic transmissions in standard NACHA formats.

o Transmission from Client PC to State Street Mainframe with Telephone Callback

o Transmission from Client Mainframe to State Street Mainframe with Telephone Callback

o Transmission from DST Systems to State Street Mainframe with Encryption

o Magnetic Tape Delivered to State Street with Telephone Callback

State Street is hereby instructed to accept funds transfer instructions only via the delivery methods and security procedures indicated.

The selected delivery methods and security procedure(s) will be effective for payment orders initiated by our organization.

Key Contact Information

Whom shall we contact to implement your selection(s)?


CLIENT OPERATIONS CONTACT		ALTERNATE CONTACT



Name		Name



Address		Address



City/State/Zip Code		City/State/Zip Code



Telephone Number		Telephone Number



Facsimile Number		Facsimile Number



SWIFT Number



Telex Number



INSTRUCTION(S)		FUNDS TRANSFER ADDENDUM
TELEPHONE CONFIRMATION


Fund

Investment Adviser Charles Schwab Investment Management


Investment Sub-Adviser

Authorized Initiators

Please Type or Print

Please provide a listing of Fund officers or other individuals who are currently authorized to INITIATE wire transfer instructions to State Street:


	TITLE (Specify whether position
	is with Fund or Investment
NAME	Adviser)	SPECIMEN SIGNATURE

Authorized Verifiers

Please Type or Print

Please provide a listing of Fund officers or other individuals who will be CALLED BACK to verify the initiation of repetitive wires of $10 million or more and all non-repetitive wire instructions:


NAME	CALLBACK PHONE NUMBER	DOLLAR LIMITATION (IF ANY)

REMOTE ACCESS SERVICES ADDENDUM
to
MASTER CUSTODIAN AGREEMENT

ADDENDUM to that certain Master Custodian Agreement dated as of October 17, 2005 (the “Custodian Agreement”) by and among each management investment company identified on Appendix A thereto and made subject thereto pursuant to Section 18.5 thereof (each, a “Customer”) and State Street Bank and Trust Company, including its subsidiaries and affiliates (“State Street”).

State Street has developed and utilizes proprietary accounting and other systems in conjunction with the services which State Street provides to the Customer. In this regard, State Street maintains certain information in databases under its control and ownership which it makes available to its customers (the “Remote Access Services”).

The Services

State Street agrees to provide the Customer, and its designated investment advisors, consultants or other third parties authorized by State Street (“Authorized Designees”) with access to In~Sight ^SM as described in Exhibit A or such other systems as may be offered from time to time (the “System”) on a remote basis.

Security Procedures

The Customer agrees to comply, and to cause its Authorized Designees to comply, with remote access operating standards and procedures and with user identification or other password control requirements and other security procedures as may be issued from time to time by State Street for use of the System and access to the Remote Access Services. The Customer agrees to advise State Street immediately in the event that it learns or has reason to believe that any person to whom it has given access to the System or the Remote Access Services has violated or intends to violate the terms of this Addendum and the Customer will cooperate with State Street in seeking injunctive or other equitable relief. The Customer agrees to discontinue use of the System and Remote Access Services, if requested, for any security reasons cited by State Street.

Fees

Fees and charges for the use of the System and the Remote Access Services and related payment terms shall be as set forth in the fee schedule in effect from time to time between the parties. The Customer shall be responsible for any tariffs, duties or taxes imposed or levied by any government or governmental agency by reason of the transactions contemplated by this Addendum, including, without limitation, federal, state and local taxes, use, value added and personal property taxes (other than income, franchise or similar taxes which may be imposed or assessed against State Street). Any claimed exemption from such tariffs, duties or taxes shall be supported by proper documentary evidence delivered to State Street.

Proprietary Information/Injunctive Relief

The System and Remote Access Services described herein and the databases, computer programs, screen formats, report formats, interactive design techniques, formulae, processes, systems, software, know-how, algorithms, programs, training aids, printed materials, methods, books, records, files, documentation and other information made available to the Customer by State Street as part of the Remote Access Services and through the use of the System and all copyrights, patents, trade secrets and other proprietary rights of State Street related thereto are the exclusive, valuable and confidential property of State Street and its relevant licensors (the “Proprietary Information”). The Customer agrees on behalf of itself and its

Authorized Designees to keep the Proprietary Information confidential and to limit access to its employees and Authorized Designees (under a similar duty of confidentiality) who require access to the System for the purposes intended. The foregoing shall not apply to Proprietary Information in the public domain or required by law to be made public.

The Customer agrees to use the Remote Access Services only in connection with the proper purposes of this Addendum. The Customer will not, and will cause its employees and Authorized Designees not to, (i) permit any third party to use the System or the Remote Access Services, (ii) sell, rent, license or otherwise use the System or the Remote Access Services in the operation of a service bureau or for any purpose other than as expressly authorized under this Addendum, (iii) use the System or the Remote Access Services for any fund, trust or other investment vehicle without the prior written consent of State Street, or (iv) allow or cause any information transmitted from State Street’s databases, including data from third party sources, available through use of the System or the Remote Access Services, to be published, redistributed or retransmitted for other than use for or on behalf of the Customer, as State Street’s customer.

The Customer agrees that neither it nor its Authorized Designees will modify the System in any way; enhance or otherwise create derivative works based upon the System, nor will your or your Authorized Designees reverse engineer, decompile or otherwise attempt to secure the source code for all or any part of the System.

The Customer acknowledges that the disclosure of any Proprietary Information, or of any information which at law or equity ought to remain confidential, will immediately give rise to continuing irreparable injury to State Street inadequately compensable in damages at law and that State Street shall be entitled to obtain immediate injunctive relief against the breach or threatened breach of any of the foregoing undertakings, in addition to any other legal remedies which may be available.

Limited Warranties

State Street represents and warrants that it is the owner of and has the right to grant access to the System and to provide the Remote Access Services contemplated herein. Because of the nature of computer information technology including, but not limited to, the use of the Internet, and the necessity of relying upon third party sources, and data and pricing information obtained from third parties, the System and Remote Access Services are provided “AS IS”, and the Customer and its Authorized Designees shall be solely responsible for the investment decisions, results obtained, regulatory reports and statements produced using the Remote Access Services. Except with respect to its obligations with respect to infringement hereunder, State Street will not be liable to the Customer or its Authorized Designees for any direct damages arising out of or in any way connected with the System or the Remote Access Services. State Street and its relevant licensors will not be liable to the Customer or its Authorized Designees for any indirect, special, incidental, punitive or consequential damages arising out of or in any way connected with the System or the Remote Access Services. Neither party shall be responsible for delays or nonperformance under this Addendum arising out of any cause or event beyond such party’s control.

State Street will take reasonable steps to ensure that its products (and those of its third-party suppliers) reflect the available state of the art technology to offer products that are Year 2000 compliant, including, but not limited to, century recognition of dates, calculations that correctly compute same century and multi century formulas and date values, and interface values that reflect the date issues arising between now and December 31, 2099, and if any changes are required, State Street will make the changes to its products at no cost to you and in a commercially reasonable time frame and will require third-party suppliers to do likewise. The Customer will do likewise for its systems.

EXCEPT AS EXPRESSLY SET FORTH IN THIS ADDENDUM, STATE STREET, FOR ITSELF AND ITS RELEVANT LICENSORS, EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES CONCERNING THE SYSTEM AND THE SERVICES TO BE RENDERED HEREUNDER, WHETHER EXPRESS OR IMPLIED INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTIBILITY OR FITNESS FOR A PARTICULAR PURPOSE.

Infringement

State Street will defend the Customer or, at our option, settle any claim or action brought against the Customer to the extent that it is based upon an assertion that access to the System or use of the Remote Access Services by the Customer under this Addendum constitutes direct infringement of any patent or copyright or misappropriation of a trade secret, and will hold the Customer harmless from any direct damages incurred by the Customer and resulting from any such action relating to proprietary intellectual property of State Street, provided that, in any such event, the Customer notifies State Street promptly in writing of any such claim or proceeding and cooperates with State Street in the defense of such claim or proceeding. Should the System or the Remote Access Services or any part thereof become, or in State Street’s opinion be likely to become, the subject of a claim of infringement or the like under any applicable patent or copyright or trade secret laws, State Street shall have the right, at State Street’s sole option, to (i) procure for the Customer the right to continue using the System or the Remote Access Services, (ii) replace or modify the System or the Remote Access Services so that the System or the Remote Access Services becomes noninfringing, or (iii) terminate this Addendum without further obligation. The foregoing shall be the Customer’s sole remedy for any intellectual property infringement claim relating to the System or the Remote Access Services.

Termination

Either party to the Custodian Agreement may terminate this Addendum (i) for any reason by giving the other party at least one-hundred and eighty (180) days prior written notice in the case of notice of termination by State Street to the Customer or thirty (30) days notice in the case of notice from the Customer to State Street of termination, or (ii) immediately for failure of the other party to comply with any material term and condition of the Addendum by giving the other party written notice of termination. This Addendum shall in any event terminate within ninety (90) days after the termination of the Custodian Agreement. In the event of termination, the Customer will return to State Street all copies of documentation and other confidential information in its possession or in the possession of its Authorized Designees. The foregoing provisions with respect to confidentiality and infringement will survive termination for a period of three (3) years.

Miscellaneous

This Addendum and the exhibit hereto constitute the entire understanding of the parties to the Custodian Agreement with respect to access to the System and the Remote Access Services. This Addendum cannot be modified or altered except in a writing duly executed by each of State Street and the Customer and shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts.

By its execution of the Custodian Agreement, the Customer (a) confirms to State Street that it informs all Authorized Designees of the terms of this Addendum; (b) accepts responsibility for its and its Authorized Designees’ compliance with the terms of this Addendum; and (c) indemnifies and holds State Street harmless from and against any and all costs, expenses, losses, damages, charges, counsel fees, payments and liabilities arising from any failure of the Customer or any of its Authorized Designees to abide by the terms of this Addendum.

iii

EXHIBIT A
to
REMOTE ACCESS SERVICES ADDENDUM

IN~SIGHT ^SM
System Product Description

In~Sight ^SM provides bilateral information delivery, interoperability, and on-line access to State Street. In~Sight ^SM allows users a single point of entry into State Street’s diverse systems and applications. Reports and data from systems such as Investment Policy Monitor ^SM , Multicurrency Horizon ^SM ”, Securities Lending, Performance & Analytics and Electronic Trade Delivery can be accessed through In~Sight ^SM , This Internet-enabled application is designed to run from a Web browser and perform across low-speed data lines or corporate high-speed backbones. In~Sight ^SM also offers users a flexible toolset, including an ad-hoc query function, a custom graphics package, a report designer, and a scheduling capability. Data and reports offered through In~Sight ^SM will continue to increase in direct proportion with the customer roll out, as it is viewed as the information delivery system will grow with State Street’s customers.

Amendment to Amended and Restated Master Custodian Agreement

This Amendment to Amended and Restated Master Custodian Agreement is made as of September 22, 2009 (the “Amendment Effective Date”) by and among each management investment company identified on Appendix A hereto (each such investment company shall hereinafter be referred to as a “ Fund ”) and State Street Bank and Trust Company, a Massachusetts trust company (the “ Custodian ”). Capitalized terms used but not defined herein shall have the meaning ascribed to them in that certain Amended and Restated Master Custodian Agreement made as of October 17, 2005 (the “ Custodian Agreement ”).

Witnesseth:

Whereas , certain of the Funds and the Custodian entered into the Custodian Agreement pursuant to which the Custodian provides certain custodial services to such Funds;

Whereas , the Funds listed on Appendix B hereto (collectively, the “ Schwab ETFs ”), which are exchange traded funds, will issue and redeem shares of each Portfolio only in aggregations of Shares known as “ Creation Units ,” generally in exchange for a basket of certain equity or fixed income securities and a specified cash payment, as more fully described in the currently effective prospectus and statement of additional information of the Schwab ETF Fund related to the Portfolio (collectively, the “ Prospectus ”);

Whereas , each of the Schwab ETFs desires to become a party to the Custodian Agreement and the Custodian desires to provide the services set forth in the Custodian Agreement to each of the Schwab ETFs; and

Whereas , the nature of the Schwab ETFs requires that certain provisions of the Custodian Agreement be modified for the Schwab ETFs only.

Now Therefore , in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:

1. For purposes of the Schwab ETFs only, Section 2 of the Custodian Agreement is amended by adding the following Section 2.14:

Section 2.14 Determination of Fund Deposit, etc. Subject to and in accordance with directions from the investment adviser for the Portfolios, the Custodian will determine for each Portfolio after the end of each trading day on the New York Stock Exchange (the “ NYSE ”), in accordance with the respective Portfolio’s policies as adopted from time to time by the Board and in accordance with the procedures set forth in the Prospectus and Statement of Additional Information, (i) the identity and

weighting of the securities in the Deposit Securities and the Fund Securities, (ii) the cash component, and (iii) the amount of cash redemption proceeds (all as further described in the Statement of Additional Information) required for the issuance or redemption, as the case may be, of Shares in Creation Unit aggregations of the Portfolio on such date.

The Custodian will provide (or cause to be provided) this information to such persons as instructed according to the policies established by the Board, and will disseminate such information prior to the opening of trading on the NYSE on each day that the NYSE is open, including through the facilities of the National Securities Clearing Corporation (“ NSCC ”).

2. For purposes of the Schwab ETFs only, Section 2 of the Custodian Agreement is amended by adding the following Section 2.15:

Section 2.15. Allocation of Deposit Security Shortfalls . The Fund acknowledges that the Custodian maintains only one account on the books of the NSCC for the benefit of all exchange traded funds for which the Custodian serves as custodian, including the Fund (collectively, the “ ETF Custody Clients ”). In the event that (a) two or more ETF Custody Clients require delivery of the same Deposit Security in order to purchase a Creation Unit, and (b) the NSCC, pursuant to its Continuous Net Settlement system, delivers to the Custodian’s NSCC account less than the full amount of such Deposit Security necessary to satisfy in full each affected ETF Custody Client’s required amount (a “ Common Deposit Security Shortfall ”), then, until all Common Deposit Security Shortfalls for a given Deposit Security are satisfied in full, the Custodian will allocate to each affected ETF Custody Client, on a pro rata basis, securities and/or cash received in the Custodian’s NSCC account relating to such shortfall, first to satisfy any prior unsatisfied Common Deposit Security Shortfall, and then to satisfy the current Common Deposit Security Shortfall.

3. For purposes of the Schwab ETFs only, Section 6 of the Custodian Agreement is hereby amended in its entirety and the following Section 6 is inserted in lieu thereof:

Section 6 . Payments for Sales or Repurchases or Redemptions of Shares .

The Custodian shall receive from the Portfolio’s distributor of the Shares or from the Transfer Agent, as the case may be, and deposit into the account of the appropriate Portfolio such payments as are received for Shares (in Creation Unit aggregations) issued or sold from time to time by the applicable Fund. The Custodian will provide timely notification to

-2-

such Fund on behalf of each such Portfolio and the Transfer Agent of any receipt by it of payments for Shares of such Portfolio.

Subject to the directions of the investment adviser for the Portfolios and the procedures set forth in the Prospectus and Statement of Additional Information, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds and securities available (from such funds and securities as may be available for such purpose) for payment to, or in accordance with the instructions of, Authorized Participants (as defined in the Prospectus) who have delivered to the Transfer Agent proper instructions for the redemption or repurchase of their Shares, in Creation Unit aggregations, which shall have been accepted by the Transfer Agent, the applicable Fund Securities (as further described in the Statement of Additional Information) (or such securities in lieu thereof as may be designated by the investment adviser of the Fund in accordance with the Prospectus and Statement of Additional Information) for such Portfolio and the cash redemption amount (as further described in the Prospectus and Statement of Additional Information), if applicable, less any applicable redemption transaction fee (as further described in the Prospectus and Statement of Additional Information). The Custodian will transfer the applicable Fund Securities to or on the order of the Authorized Participant. Any cash redemption payment (less any applicable redemption transaction fee) due to the Authorized Participant on redemption shall be effected through the DTC (as defined in the Prospectus) system or through wire transfer in the case of redemptions effected outside of the DTC system.

4. For purposes of the Schwab ETFs only, Section 16 of the Custodian Agreement is hereby amended as follows:

(A) Section 16(a) of the Custodian Agreement is hereby amended in its entirety and the following Section 16(a) is inserted in lieu thereof:

SECTION 16. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT

a. This Agreement shall become effective as of August ___, 2009 and shall remain in full force and effect for a period of three (3) years from such effective date (the “Initial Term”), and thereafter shall automatically continue in full force and effect unless either party terminates this Agreement by written notice to the other party at least ninety (90) days prior to the date of termination.

(B) Section 16(c) of the Custodian Agreement is hereby amended by the insertion of the following new Section 16(c)(I):

-3-

(I) With respect to a Schwab ETF, in the event that such Schwab ETF ceases operating as and under the name of such Schwab ETF for any reason, which may (but need not) be in connection with a merger, reorganization, transfer or liquidation of assets, stock exchange delisting or other extraordinary event. For the avoidance of doubt, upon termination of this Agreement under this Section 16(c)(I), such Schwab ETF shall pay to the Custodian such compensation (including any applicable fees) and any reimbursable expenses as may be due and undisputed under the terms hereof to the date of such termination, including reasonable out-of-pocket expenses associated with such termination, and no other compensation, fees, charges or expenses will be assessed or will accrue with respect to said Schwab ETF after said termination. All out-of-pocket expenses for which the Custodian seeks reimbursement under this Section 16(c)(I) must be pre-approved by the Schwab ETF in writing, provided that such approval shall not be unreasonably withheld.

For the avoidance of doubt, the remainder of Section 16 of the Custodian Agreement, including Section 16(c)(H) thereof relating to terminations in connection with material breaches by the Custodian, shall remain in effect for all Funds and Schwab ETFs.

5. In the event that any exchange traded fund in addition to those listed on Appendix B hereto desires to have the Custodian render services as custodian under the terms of the Custodian Agreement and this Amendment, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such exchange traded fund shall become a Fund and a Schwab ETF under the Custodian Agreement and this Amendment and be bound by all terms and conditions and provisions of the Custodian Agreement and this Amendment including, without limitation, the representations and warranties set forth in Section 18.7 of the Custodian Agreement.

6. Except as modified hereby, all other terms and conditions of the Custodian Agreement shall remain in full force and effect.

7. This Amendment may be executed in multiple counterparts, which together shall constitute one instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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Signature Page

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 date first above-written.


Fund Signature Attested to By:				Each of the Entities Set Forth on Appendix A Hereto

By:				By:

Name: Shelley A. Harding				Name:
Title:				Title:


By:				By:

Name: Shelley A. Harding				Name:
Title:				Title:


Signature Attested to By:				State Street Bank and Trust Company

By:				By:

Name:				Name: Joseph C. Antonellis

Title:				Title: Vice Chairman

Amendment to Amended and Restated Master Custodian Agreement

APPENDIX A
TO
MASTER CUSTODIAN AGREEMENT

MANAGEMENT INVESTMENT COMPANIES REGISTERED WITH THE SEC
AND PORTFOLIOS THEREOF, IF ANY

THE CHARLES SCHWAB FAMILY OF FUNDS
Schwab Money Market Fund
Schwab Value Advantage Money Fund
Schwab Retirement Advantage Money Fund
Schwab Investor Money Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Municipal Money Fund
Schwab California Municipal Money Fund
Schwab New York AMT Tax-Free Money Fund (formerly NY Muni Money Fund)
Schwab AMT Tax-Free Money Fund (formerly Florida Muni Money Fund)
Schwab California AMT Tax-Free Money Fund
Schwab Massachusetts AMT Tax-Free Money Fund (formerly MA Muni Money Fund)
Schwab Pennsylvania Municipal Money Fund
Schwab New Jersey AMT Tax-Free Money Fund (formerly NJ Muni Money Fund)
Schwab Cash Reserves
Schwab Advisor Cash Reserves

SCHWAB INVESTMENTS
Schwab 1000 Index Fund
Schwab YieldPlus Fund
Schwab Short-Term Bond Market Fund
Schwab Total Bond Market Fund
Schwab GNMA Fund
Schwab Tax-Free YieldPlus Fund
Schwab Tax-Free Bond Fund
Schwab California Tax-Free YieldPlus Fund
Schwab California Tax-Free Bond Fund
Schwab Inflation Protected Fund
Schwab Premier Income Fund

SCHWAB CAPITAL TRUST
Schwab Core Equity Fund
Schwab Hedged Equity Fund
Schwab Premier Equity Fund
Laudus International MarketMasters Fund
Laudus Small-Cap MarketMasters Fund
Schwab Balanced Fund (formerly Schwab Viewpoints Fund)
Schwab Fundamental US Small-Mid Company Index Fund

A-1

Schwab Fundamental US Large Company Index Fund
Schwab Monthly Income Fund — Moderate Payout
Schwab Monthly Income Fund — Enhanced Payout
Schwab Monthly Income Fund — Maximum Payout
Schwab International Core Equity Fund

SCHWAB ANNUITY PORTFOLIOS
Schwab Money Market Portfolio

SCHWAB STRATEGIC TRUST
Schwab U.S. Broad Market ETF
Schwab U.S. Large-Cap ETF
Schwab U.S. Large-Cap Growth ETF
Schwab U.S. Large-Cap Value ETF

Schwab U.S. Small-Cap ETF
Schwab International Equity ETF
Schwab International Small-Cap Equity ETF
Schwab Emerging Markets Equity ETF

A-2

APPENDIX B

List of Schwab ETFs

SCHWAB STRATEGIC TRUST

Schwab U.S. Broad Market ETF
Schwab U.S. Large-Cap ETF
Schwab U.S. Large-Cap Growth ETF
Schwab U.S. Large-Cap Value ETF
Schwab U.S. Small-Cap ETF
Schwab International Equity ETF
Schwab International Small-Cap Equity ETF
Schwab Emerging Markets Equity ETF

ADMINISTRATION AGREEMENT

THIS ADMINISTRATION AGREEMENT (this “ Agreement ”) is made as of the ___day of October 2009 (the “ Effective Date ”), by and between Schwab Strategic Trust, a statutory trust formed under the laws of the State of Delaware (the “ Company ”), and Charles Schwab Investment Management, Inc., a Delaware corporation, (the “ Administrator ”).

WHEREAS, the Company is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “ 1940 Act ”), consisting of the series portfolios, including ETF Portfolios (as defined herein), set forth in Schedule I (“ Portfolios ”), attached hereto;

WHEREAS, the Company on behalf of each Portfolio has separately appointed the Administrator as its investment adviser; and

WHEREAS, the Company desires the Administrator to provide, and the Administrator is willing to provide, administrative and accounting services to the Company on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Company and the Administrator hereby agree as follows:

SECTION 1 DEFINITIONS

	1.01		“ 1940 Act ” shall have the meaning given to such term in the recitals of this Agreement.

	1.02		“ Adviser ” means Charles Schwab Investment Management, Inc., (“ CSIM ”) or any other Person acting as an “adviser” to the Company within the meaning of the 1940 Act.

	1.03		“ Authorized Participant ” means a Person that has entered into an Authorized Participant Agreement with the Company and the ETF Portfolio Distributor that is authorized to purchase and redeem Creation Units of the ETF Portfolio.

	1.04		“ Board ” means the board of trustees of the Company.

	1.05		“ Confidential Information ” shall have the meaning given to such term in Section 11.01 of this Agreement.

	1.06		“ Creation Unit ” means an aggregation of a specified number of ETF Portfolio Shares that is purchased and/or redeemed by an Authorized Participant as described in the ETF Portfolio’s Prospectus and Statement of Additional Information and in accordance with any terms and procedures set forth in the by the Distributor.

	1.07		“ Disclosing Party ” shall have the meaning given to such term in Section 11.01 of this Agreement.

	1.08		“ Distributor ” means a Person that has entered into an agreement with the distribution, marketing and sale of Shares of a Portfolio.

	1.09		“ ETF Portfolio ” shall mean an exchange traded fund issued and offered by the Company that is an investment company legally classified as an open-end company or unit investment trust.

	1.10		“ Initial Term ” shall have the meaning given to such term in Section 9.01 of this Agreement.

	1.11		“ Interested Party ” or “ Interested Parties ” means the Administrator, its subsidiaries and its affiliates and each of their respective officers, directors, employees, agents, delegates and associates.

	1.12		“ Investments ” shall mean such cash, securities and all other assets and property of whatsoever nature now owned or subsequently acquired by or for the account of the Company or a Portfolio.

	1.13		“ Organizational Documents ” means, as applicable, the articles of incorporation, declaration of trust, certificate of formation, memorandum of association, partnership agreement, bylaws or other similar documentation setting forth the respective rights and obligations of directors, trustees, officers, shareholders and Authorized Participants in the Company.

	1.14		“ PCF File ” means Portfolio Composition File.

	1.15		“ Person ” shall mean any natural person, partnership, estate, association, custodian, nominee, limited liability company, corporation, trust or other legal entity.

	1.16		“ Portfolio ” shall have the meaning given to such term in the recital to this Agreement.

	1.17		“ Pricing Sources ” shall have the meaning given to such term in Section 6.

	1.18		“ Receiving Party ” shall have the meaning given to such term in Section 11.01, of this Agreement.

	1.19		“ Renewal Term ” shall have the meaning given to such term in Section 9.01 of this Agreement.

	1.20		“ Services ” shall have the meaning given to such term in Section 2.01 of this Agreement.

	1.21		“ Shares ” means any unit of beneficial interest in a Portfolio.

	1.22		Unless the context otherwise requires and except as otherwise specified in this Agreement, the term the “ Company ” shall include, as applicable, a sponsor, general partner, trustee or other Person having similar status or performing similar functions, as the case may be, acting on behalf of the Company.

	1.23		“ Company Data ” shall have the meaning given to such term in Section 2.04 of this Agreement.

	1.24		“ Company Materials ” means any prospectus, registration statement, statement of additional information, proxy solicitation and tender offer materials, annual or other periodic report of the Company or any advertising, marketing, shareholder communication, or promotional material generated by the Company or its investment adviser from time to time, as appropriate, including all amendments or supplements thereto.

SECTION 2 APPOINTMENT AND CONTROL

	2.01		Services . The Company hereby appoints the Administrator to be, and the Administrator agrees to act as, the administrative agent of the Company for the term and subject to the provisions hereof. The Administrator shall perform (and may delegate or sub-contract, as provided below) the services set forth in this Agreement, including the services set forth on Schedule II, which may be amended from time to time in writing by the parties (collectively, the “ Services ”). In performing its duties under this Agreement, the Administrator will act in all material respects in accordance with the Organizational Documents and Company Materials as they may be amended (to the extent that copies of such documents are delivered to the Administrator). The Company will initially consist of the Portfolios set forth in Schedule I. In the event that the Company establishes one or more additional Portfolios with respect to which it wishes to retain the Administrator to act as administrator hereunder, the Company shall notify the Administrator in writing. Upon written acceptance by the Administrator, such Portfolio shall become subject to the provisions of this Agreement to the same extent as the existing Portfolios, except to the extent that such provisions (including those relating to the compensation and expenses payable by the Company and its Portfolios) may be modified with respect to each additional Portfolio in writing by the Company and the Administrator at the time of the addition of the Portfolio.

	2.02		Authority . Each of the activities engaged in under the provisions of this Agreement by the Administrator on behalf of the Company shall be subject to the overall direction and control of the Company or any Person authorized to act on the Company’s behalf (including, without limitation, the Company’s Board); provided, however, that the Administrator shall have the general authority to do all acts deemed in the Administrator’s good faith belief to be necessary and proper to perform its obligations under this Agreement. In performing its duties hereunder, the Administrator shall observe and generally comply with the Company Materials, all applicable resolutions and/or directives of the Board of which it has notice, and applicable laws which may from time to time apply to the Services rendered by the Administrator. The Administrator, in such capacity, (i) shall not have or be required to have any authority to supervise the investment or reinvestment of the Creation Units, underlying securities or other properties which comprise the assets of the Company and (ii) shall not provide any investment advisory services to the Company, and shall have no liability related to the foregoing; provided however, that nothing herein shall preclude CSIM from undertaking any or all such authority or responsibility to provide such services and accept such liability in a separate agreement with the Company.

	2.03		Third Parties; Affiliated Persons . The Administrator may delegate to, or sub-contract with, third parties or affiliated person(s) (as defined in Section 2(a)(3)(A)-(C) of the 1940 Act) administrative or other functions it deems necessary to perform its obligations under this Agreement; provided, however, all fees and expenses incurred in any delegation or sub-contract shall be paid by CSIM and the Administrator shall remain responsible to the Company for the acts and omissions of such other entities as if such acts or omissions were the acts or omissions of the Administrator. The Company acknowledges that during the term of this Agreement, the services to be performed by the Administrator may be completed by one or more of the Administrator’s affiliated person(s) or third parties located in or outside of the United States of America. Notwithstanding any other provision of this Agreement, the term “Administrator” as used in this Agreement shall exclude CSIM acting in any capacity with respect to the

			Company or any Portfolio other than that of Administrator hereunder and, in particular, shall exclude CSIM acting in its capacity as Adviser.

	2.04		Company Data . As between the Company and the Administrator, the Company shall be solely responsible for the accuracy, completeness, and timeliness of all data and other information provided to the Administrator by or on behalf of the Company pursuant to this Agreement (including, without limitation, (i) prices, (ii) sufficient transaction supporting documentation, (iii) detailed accounting methodologies with respect to the Company’s Investments as approved by the Company’s auditors, (iv) the terms of any agreement between the Company and an investor or Authorized Participant regarding any special fee or specific fee arrangement or access to portfolio information that may impact or affect the Services, and (v) trade and settlement information from prime brokers and custodians) (collectively, “ Company Data ”). All Company Data shall be provided to the Administrator on a timely basis and in a format and medium reasonably requested by the Administrator from time to time. The Company shall have an ongoing obligation to promptly update all Company Data so that such information remains complete and accurate. All Company Data shall be prepared and maintained, by or on behalf of the Company, in accordance with applicable law, Company Materials and generally acceptable accounting principles. The Administrator shall be entitled to rely on all the Company Data and shall have no liability for any loss, damage or expense incurred by the Company or any other Person to the extent that such loss, damage or expense arises out of or is related to the Company Data that is not timely, current, complete and accurate.

SECTION 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY

3.01

The Company represents and warrants to the Administrator that:

	3.01.01.		it issues and offers shares of an exchange traded fund that is registered under the 1940 Act as an open-end fund and that issues and redeems its shares at their net asset value;

	3.01.02.		shares of an ETF Portfolio in the Company are available for purchase and redeemable only by Authorized Participants and only in Creation Units;

	3.01.03.		it has full power, right and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby; the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by all requisite actions on its part, and no other proceedings on its part are necessary to approve this Agreement or to consummate the transactions contemplated hereby; this Agreement has been duly executed and delivered by it; this Agreement constitutes a legal, valid and binding obligation, enforceable against it in accordance with its terms;

	3.01.04.		as of the close of business on the Effective Date, each Portfolio that is in existence as of the Effective Date has authorized the issuance of an indefinite number of shares and has elected to register an indefinite number of shares in accordance with Rule 24f-2 under the 1940 Act;

	3.01.05.		it has obtained all consents and given all notices (regulatory or otherwise), made all required regulatory filings and is in compliance with all applicable laws and regulations;

	3.01.06.		it has a valid engagement with an independent auditor, custodian and distributor and will provide additional information regarding such service providers, including information regarding the terms of its agreement with such service providers, upon request;

	3.01.07.		it has notified the Administrator of any and all separate agreements between the Company and any third party that could impact the Administrator’s performance of its obligations pursuant to this Agreement; and

	3.01.08.		it has disclosed the terms of any agreement between the Company and an investor or Authorized Participant regarding any special fee or specific fee arrangement or access to portfolio information that may impact or affect the Services.

3.02

The Company covenants and agrees with the Administrator that:

3.02.01.

it will furnish the Administrator from time to time with complete copies, authenticated or certified, of each of the following:

(a)

Copies of the following documents:

	(1)		Copies of the Company’s current Organizational Documents and of any amendments thereto, certified by the proper official of the state in which such document has been filed; and

	(2)		Certified copies of resolutions of the Board covering the approval of this Agreement, authorization of a specified officer of the Company to execute and deliver this Agreement and authorization for specified officers of the Company to instruct the Administrator.

	(b)		A list of all the officers of the Company, together with specimen signatures of those officers who are authorized to instruct the Administrator in all matters.

	(c)		Copies of all Company Materials, including the current prospectus and statement of additional information for the Company.

	(d)		A list of all issuers the Company is restricted from purchasing.

	(e)		A list of all issuers and/or indices that any ETF Portfolio in the Company will invest in and/or track.

	(f)		A list of all affiliated persons (as such term is defined in the 1940 Act) of the Company that are broker-dealers.

	(g)		The identity of the Company’s auditors along with contact information.

	(h)		The expense budget for each Portfolio for the current fiscal year.

	(i)		A list of contact persons (primary, backup and secondary backup) of the Company’s investment adviser and, if applicable, sub-adviser, who can be reached until 6:30 p.m. ET with respect to valuation matters.

	(j)		Copies of all the Company Data reasonably requested by the Administrator or necessary for the Administrator to perform its obligations pursuant to this Agreement.

			The Company shall promptly provide the Administrator with written notice of any updates of or changes to any of the foregoing documents or information, including an updated written copy of such document or information. Until the Administrator receives such updated information or document, the Administrator shall have no obligation to implement or rely upon such updated information or document.

	3.02.02.		it shall timely perform or oversee the performance of all obligations identified in this Agreement as obligations of the Company, including, without limitation, providing the Administrator with all the Company Data and Organizational Documents reasonably requested by the Administrator;

	3.02.03.		it will promptly notify the Administrator of any matter which could materially affect the Administrator’s performance of its duties and obligations under this Agreement, including any amendment to the documents referenced in Section 3.02.01 above;

	3.02.04.		it will comply in all material respects with all applicable requirements of the Securities Act of 1933 (the “ 1933 Act ”), the Securities Exchange Act of 1934, the 1940 Act, and any laws, rules and regulations of governmental authorities having jurisdiction;

	3.02.05.		it shall be solely responsible for its compliance with applicable investment policies, Company Materials, and any laws and regulations governing the manner in which its assets may be invested, and shall be solely responsible for any losses attributable to non-compliance with Company Materials, and applicable policies, laws and regulations governing the Company, its activities or the duties, actions or omissions of its investment adviser (if other than CSIM); and

	3.02.06.		it will promptly notify the Administrator of acts, omissions, occurrences and contingencies that would have rendered its representations and

warranties hereunder inaccurate.


SECTION 4		REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ADMINISTRATOR

4.01

The Administrator represents and warrants that:

4.01.01.

it has full power, right and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby; the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by all requisite action on its part, and no other proceedings on its part are necessary to approve this Agreement or to consummate the transactions contemplated hereby; this Agreement has been duly executed and delivered by it; this Agreement constitutes a legal, valid and binding obligation, enforceable against it in accordance with its terms.

SECTION 5 LIMITATION OF LIABILITY AND INDEMNIFICATION

	5.01		THE DUTIES OF THE ADMINISTRATOR SHALL BE CONFINED TO THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT, AND NO IMPLIED DUTIES ARE ASSUMED BY OR MAY BE ASSERTED AGAINST THE ADMINISTRATOR. In the absence of willful misfeasance, gross negligence, bad faith or fraud in the performance of the Services, or reckless disregard of its duties under this Agreement, the Administrator shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission in carrying out its duties under this Agreement. For the avoidance of doubt, the Administrator shall not be responsible for any breach in the performance of its obligations under this Agreement due to (i) the failure or delay of the Company or its agents (other than CSIM itself) to perform its obligations under this Agreement or (ii) the Administrator’s reliance on the Company Data. Each party shall have the duty to mitigate its damages for which another party may become responsible. As used in this Section 5, the term “ Administrator ” shall include the officers, directors, employees, affiliates and agents of the Administrator as well as that entity itself. NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL THE ADMINISTRATOR BE LIABLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL, OR OTHER NON-DIRECT DAMAGES OF ANY KIND WHETHER SUCH LIABILITY IS PREDICATED ON CONTRACT, STRICT LIABILITY, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER THE TRUST IS ADVISED OF THE POSSIBILITY OF ANY SUCH DAMAGES.

	5.02		The Company shall indemnify and hold harmless the Administrator from and against, and the Administrator shall have no liability in connection with, any and all actions, suits and claims, whether groundless or otherwise, and from and against any and all losses, damages, costs, charges, payments, expenses and liabilities (including reasonable counsel fees and disbursements) arising directly or indirectly out of: (i) any act or omission of the Administrator in carrying out its duties hereunder or as a result of the Administrator’s reliance upon any instructions, notice or instrument that

			the Administrator believes is genuine and signed or presented by an authorized Person of the Company; provided that this clause(i) shall not apply if any such loss, damage, cost, charge or expense is caused by or arises from the Administrator’s willful misfeasance, gross negligence, bad faith or fraud in the performance of the Services, or the Administrator’s reckless disregard of its duties under this Agreement; (ii) any violation by the Company or any agent of the Company of any applicable investment policy, law or regulation, (iii) any misstatement or omission in Company Materials or any Company Data; (iv) any breach by the Company of any representation, warranty or agreement contained in this Agreement; (v) any act or omission of the Company, the Company’s other service providers (such as custodians, prime brokers, transfer agents, investment advisers and sub-adviser(s)); (vi) any pricing error caused by the failure of the Company’s investment adviser or sub-adviser to provide a trade ticket or for incorrect information included in any trade ticket; or (vii) any act or omission of the Administrator as a result of the Administrator’s compliance with the Regulations, as defined in Section 12.12, including, but not limited to, returning an investor or Authorized Participant’s investment or restricting the payment of redemption proceeds.

	5.03		The Administrator may apply to the Company, the Company’s sponsor or any Person acting on the Company’s behalf at any time for instructions and may consult counsel for the Company or the Company’s sponsor or with accountants, counsel and other experts with respect to any matter arising in connection with the Administrator’s duties hereunder, and the Administrator shall not be liable or accountable for any action taken or omitted by it in good faith in accordance with such instruction or upon the advice of counsel, accountants or other experts. Also, the Administrator shall not be liable for actions taken pursuant to any document which it reasonably believes to be genuine and to have been signed by the proper Person or Persons. The Administrator shall not be held to have notice of any change of authority of any officer, employee or agent of the Company until receipt of written notice thereof. To the extent that the Administrator consults with Company counsel pursuant to this provision, any such expense shall be borne by the Company.

	5.04		The Administrator shall have no liability for its reliance on the Company Data or the performance or omissions of unaffiliated third parties such as, by way of example and not limitation, transfer agents, sub-transfer agents, custodians, prime brokers, placement agents, third party marketers, asset data service providers, investment advisers (including, without limitation, the sponsor) or sub-advisers, current or former third party service providers, Pricing Sources, software providers, printers, postal or delivery services, prior administrators, telecommunications providers and processing and settlement services. The Administrator may rely on and shall have no duty to investigate or confirm the accuracy or adequacy of any information provided by any of the foregoing third parties.

	5.05		The Administrator shall have no obligation with respect to any laws relating to the distribution, purchase or sale of Shares or Creation Units. Further, the Company assumes full responsibility for the preparation, contents and distribution of its Company Materials and its compliance with all applicable laws, rules, and regulations.

	5.06		The indemnification rights hereunder shall include the right to reasonable advances of defense expenses in the event of any pending or threatened legal, administrative,

			arbitral or other proceedings, claims, actions or governmental or regulatory investigations or inquiries with respect to which indemnification hereunder may ultimately be merited. If in any case the Company is asked to indemnify or hold the Administrator harmless, the Administrator shall promptly advise the Company of the pertinent facts concerning the situation in question, and the Administrator will use all reasonable care to identify and notify the Company promptly concerning any situation which presents or appears likely to present the probability of such a claim for indemnification, but failure to do so shall not affect the rights hereunder.

	5.07		The Company shall be entitled to participate at its own expense or, if it so elects, to assume the defense of any suit brought involving any claims subject to this indemnity provision. If the Company elects to assume the defense of any such claim, the defense shall be conducted by counsel chosen by the Company and satisfactory to the Administrator, whose approval shall not be unreasonably withheld. In the event that the Company elects to assume the defense of any suit and retains counsel, the Administrator shall bear the fees and expenses of any additional counsel retained by it. If the Company does not elect to assume the defense of a suit, it will reimburse the Administrator for the fees and expenses of any counsel retained by the Administrator. None of the parties hereto shall settle or compromise any action, suit, proceeding or claim if such settlement or compromise provides for an admission of liability on the part of the indemnified party without such indemnified party’s written consent.

	5.08		The rights afforded to the Administrator under this Section 5 shall extend, upon the same terms and conditions, to all directors, officers, employees, representatives and other agents of the Administrator and to every Person who controls the Administrator within the meaning of Section 15 of the 1933 Act, all of whom are intended beneficiaries of this Section of the Agreement.

	5.09		The provisions of this Section 5 shall survive the termination of this Agreement.

SECTION 6 VALUATION

The Administrator is entitled to rely on the price and value information (hereinafter “ Valuation Information ”) provided by brokers and custodians, the Adviser, an underlying fund in which the Company invests, if applicable, and any third-party pricing services selected by the Administrator, the Adviser or the Company (collectively hereinafter referred to as the “ Pricing Sources ”) in order to calculate the Company’s aggregate NAV (and the value of Authorized Participants’ capital accounts based upon such valuation). The Administrator shall have no obligation to obtain Valuation Information from any sources other than the Pricing Sources. The Administrator shall have no liability or responsibility for the accuracy of the Valuation Information provided by a Pricing Source or the delegate of a Pricing Source and the Company shall indemnify and defend the Administrator against any loss, damages, costs, charges or reasonable counsel fees and expenses in connection with any inaccuracy of such Valuation Information. The Company shall not use Valuation Information for any purpose other than in connection with the Services and in accordance with the provisions of this Agreement.

SECTION 7 ALLOCATION OF CHARGES AND EXPENSES

	7.01		The Administrator . The Administrator shall furnish at its own expense the personnel necessary to perform its obligations under this Agreement.

	7.02		Portfolio Expenses . The Company or the Adviser assumes and shall pay or cause to be paid all expenses of the Company (including any Portfolio of the Company) not otherwise allocated in this Agreement, including, without limitation, organizational costs; taxes; expenses for legal and auditing services; the expenses of preparing (including typesetting), printing and mailing reports, Company Materials, proxy solicitation and tender offer materials and notices to existing shareholders; all expenses in connection with issuing and redeeming Creation Units; the costs of Pricing Sources; the costs of escrow and custodial services; the cost of document retention and archival services, the costs of responding to document production requests; the cost of initial and ongoing registration of the shares under Federal and state securities laws; fees and out-of-pocket expenses of Board members; the costs of Board meetings; insurance; interest; brokerage costs; litigation and other extraordinary or nonrecurring expenses; and all fees and charges of service providers to the Company. The Company or the Adviser shall reimburse the Administrator for its reasonable out-of-pocket expenses, including all reasonable charges for printing, financial reporting software/typesetting fees, copying, postage, telephone, and fax charges incurred by the Administrator in the performance of its duties.

SECTION 8 COMPENSATION

The Company shall pay to the Administrator compensation for the services performed and the facilities and personnel provided by the Administrator pursuant to this Agreement, the fees set forth in Schedule III to this Agreement.

SECTION 9 DURATION AND TERMINATION

	9.01		Term and Renewal . This Agreement shall become effective as of the Effective Date and shall remain in effect with respect to a Portfolio for so long as the investment management agreement between CSIM and such Portfolio remains in effect, unless terminated by any party giving ninety (90) days written notice of termination to the each other party hereto.

	9.02		Effect of Termination .

	9.02.01.		The termination of this Agreement shall be without prejudice to any rights that may have accrued hereunder to any party hereto prior to such termination.

	9.02.02.		After termination of this Agreement and upon payment of all accrued fees, reimbursable expenses and other moneys owed to the Administrator, the Administrator shall deliver to the Company, or as it shall direct, all books of account, records, registers, correspondence, documents and assets relating to the affairs of or belonging to the Company in the possession of or under the control of the Administrator or any of its agents or delegates.

	9.02.03.		In the event any and all accrued fees, reimbursable expenses and other moneys owed to the Administrator hereunder remain unpaid in whole or in part for more than thirty days past due, the Administrator, without further notice, may take any and all actions it deems necessary to collect such amounts due, and any and all of its collection expenses, costs and fees shall be paid by the Company, including, without limitation, administrative costs, attorneys fees, court costs, collection agencies or agents and interest.

	9.02.04.		Notwithstanding the foregoing, in the event this Agreement is terminated and for any reason the Administrator, with the written consent of the Company, in fact continues to perform any one or more of the Services contemplated by this Agreement, the pertinent provisions of this Agreement, including without limitation, the provisions dealing with payment of fees and indemnification shall continue in full force and effect. The Administrator shall be entitled to collect from the Company, in addition to the compensation described in Schedule III, the amount of all of the Administrator’s expenses in connection with the Administrator’s activities following such termination, including without limitation, the delivery to the Company and/or designees of the Company’s property, records, instruments and documents.

SECTION 10 CONFLICTS OF INTEREST

	10.01		Non-Exclusive . The services of the Administrator rendered to the Company are not deemed to be exclusive. The Administrator is free to render such services to others. The Administrator shall not be deemed to be affected by notice of, or to be under any duty to disclose to the Company or Person acting on the Company’s behalf, information which has come into its possession or the possession of an Interested Party in the course of or in connection with providing administrative or other services to any other person or in any manner whatsoever other than in the course of carrying out its duties pursuant to this Agreement.

	10.02		Rights of Interested Parties . Subject to applicable law, nothing herein contained shall prevent:

	10.02.01.		an Interested Party from buying, holding, disposing of or otherwise dealing in any shares or Creation Units for its own account or the account of any of its customers or from receiving remuneration in connection therewith, with the same rights which it would have had if the Administrator were not a party to this Agreement; provided, however, that the prices quoted by the Administrator are no more favorable to the Interested Party than to a similarly situated investor in or redeeming holder of shares or Creation Units;

	10.02.02.		an Interested Party from buying, holding, disposing of or otherwise dealing in any securities or other investments for its own account or for the account of any of its customers and receiving remuneration in connection therewith, notwithstanding that the same or similar securities or other investments may be held by or for the account of the Company;

	10.02.03.		an Interested Party from receiving any commission or other remuneration which it may negotiate in connection with any sale or purchase of shares or Creation Units or Investments effected by it for the account of the Company; provided, however, that the amount of such commission or other remuneration is negotiated at arm’s length; and

	10.02.04.		an Interested Party from contracting or entering into any financial, banking or other transaction with the Company or from being interested in any such contract or transaction; provided, however, that the terms of such transaction are negotiated at arm’s length.

SECTION 11 CONFIDENTIALITY

	11.01		Confidential Information . The Administrator and the Company (in such capacity, the “ Receiving Party ”) acknowledge and agree to maintain the confidentiality of Confidential Information (as hereinafter defined) provided by the Administrator and the Company (in such capacity, the “ Disclosing Party ”) in connection with this Agreement. The Receiving Party shall not disclose or disseminate the Disclosing Party’s Confidential Information to any Person other than those employees, agents, contractors, subcontractors and licensees of the Receiving Party, or with respect to the Administrator as a Receiving Party, to those employees, agents, contractors, subcontractors and licensees of any agent or affiliate, who have a need to know it in order to assist the Receiving Party in performing its obligations, or to permit the Receiving Party to exercise its rights under this Agreement. In addition, the Receiving Party (a) shall take all reasonable steps to prevent unauthorized access to the Disclosing Party’s Confidential Information, and (b) shall not use the Disclosing Party’s Confidential Information, or authorize other Persons to use the Disclosing Party’s Confidential Information, for any purposes other than in connection with performing its obligations or exercising its rights hereunder. As used herein, “reasonable steps” means steps that a party takes to protect its own, similarly confidential or proprietary information of a similar nature, which steps shall in no event be less than a reasonable standard of care.

			The term “ Confidential Information ,” as used herein, shall mean all business strategies, plans and procedures, proprietary information, methodologies, data and trade secrets, and other confidential information and materials (including, without limitation, any non-public personal information as defined in Regulation S-P) of the Disclosing Party, its affiliates, their respective clients or suppliers, or other Persons with whom they do business, that may be obtained by the Receiving Party from any source or that may be developed as a result of this Agreement.

	11.02		Exclusions . The provisions of this Section 11 respecting Confidential Information shall not apply to the extent, but only to the extent, that such Confidential Information: (a) is already known to the Receiving Party free of any restriction at the time it is obtained from the Disclosing Party, (b) is subsequently learned from an independent third party free of any restriction and without breach of this Agreement; (c) is or becomes publicly available through no wrongful act of the Receiving Party or any third party; (d) is independently developed by or for the Receiving Party without reference to or use of any Confidential Information of the Disclosing Party; or (e) is required to be disclosed pursuant to an applicable law, rule, regulation,

			government requirement or court order, or the rules of any stock exchange (provided, however, that the Receiving Party shall advise the Disclosing Party of such required disclosure promptly upon learning thereof in order to afford the Disclosing Party a reasonable opportunity to contest, limit and/or assist the Receiving Party in crafting such disclosure).

	11.03		Permitted Disclosure . The Receiving Party shall advise its employees, agents, contractors, subcontractors and licensees, and shall require its affiliates to advise their employees, agents, contractors, subcontractors and licensees, of the Receiving Party’s obligations of confidentiality and non-use under this Section 11 and shall be responsible for ensuring compliance by its and its affiliates’ employees, agents, contractors, subcontractors and licensees with such obligations. In addition, the Receiving Party shall require all Persons that are provided access to the Disclosing Party’s Confidential Information, other than the Receiving Party’s accountants and legal counsel, to execute confidentiality or non-disclosure agreements containing provisions substantially similar to those set forth in this Section 11. The Receiving Party shall promptly notify the Disclosing Party in writing upon learning of any unauthorized disclosure or use of the Disclosing Party’s Confidential Information by such Persons.

	11.04		Effect of Termination . Upon the Disclosing Party’s written request following the termination of this Agreement, the Receiving Party promptly shall return to the Disclosing Party, or destroy, all Confidential Information of the Disclosing Party provided under or in connection with this Agreement, including all copies, portions and summaries thereof. Notwithstanding the foregoing sentence, (a) the Receiving Party may retain one copy of each item of the Disclosing Party’s Confidential Information for purposes of identifying and establishing its rights and obligations under this Agreement, for archival or audit purposes and/or to the extent required by applicable law, and (b) the Administrator shall have no obligation to return or destroy Confidential Information of the Company that resides in saved tapes of Administrator; provided, however, that in either case all such Confidential Information retained by the Receiving Party shall remain subject to the provisions of Section 11 for so long as it is so retained. If requested by the Disclosing Party, the Receiving Party shall certify in writing its compliance with the provisions of this paragraph.

SECTION 12 MISCELLANEOUS PROVISIONS

12.01

Internet Access . Data and information may be made electronically accessible to the Company, its investment adviser and/or sub-adviser(s) and its investors or Authorized Participants through Internet access to one or more web sites provided by the Administrator (“ Web Access ”). As between the Company and Administrator, the Administrator shall own all right, title and interest to such Web Access, including, without limitation, all content, software, interfaces, documentation, data, trade secrets, design concepts, “look and feel” attributes, enhancements, improvements, ideas and inventions and all intellectual property rights inherent in any of the foregoing or appurtenant thereto including all patent rights, copyrights, trademarks, know-how and trade secrets (collectively, the “Proprietary Information”). The Company recognizes that the Proprietary Information is of substantial value to the Administrator and shall not use or disclose the Proprietary Information except as specifically authorized in writing by the Administrator. All

			Proprietary Information shall be deemed Confidential Information of the Administrator. Use of the Web Access by the Company or its agents or investors will be subject to any additional terms of use set forth on the web site. Unless provided otherwise in such additional terms, the Company shall have a non-exclusive, non-transferable, terminable at-will license to use the Web Access solely in connection with this Agreement. All Web Access and the information (including text, graphics and functionality) on the web sites related to such Web Access is presented “As Is” and “As Available” without express or implied warranties including, but not limited to, implied warranties of non-infringement, merchantability and fitness for a particular purpose. The Administrator neither warrants that the Web Access will be uninterrupted or error free, nor guarantees the accessibility, reliability, performance, timeliness, sequence, or completeness of information provided on the Web Access.

	12.02		Independent Contractor . In making, and performing under, this Agreement, the Administrator shall be deemed to be acting as an independent contractor of the Company and neither the Administrator nor its employees shall be deemed an agent, affiliate, legal representative, joint venturer or partner of the Company. No party is authorized to bind any other party to any obligation, affirmation or commitment with respect to any other Person.

	12.03		Assignment; Binding Effect . The Company may not assign, delegate or transfer, by operation of law or otherwise, this Agreement (in whole or in part), or any of the Company’s obligations hereunder, without the prior written consent of the Administrator, which consent shall not be unreasonably withheld or delayed. The Administrator may assign, delegate or transfer, by operation of law or otherwise, all or any portion of its rights under this Agreement to an affiliate of the Administrator or to any person or entity who purchases all or substantially all of the business or assets of the Administrator to which this Agreement relates, provided that such affiliate, person or entity agrees in advance and in writing to be bound by the terms, conditions and provisions of this Agreement. Subject to the foregoing, all of the terms, conditions and provisions of this Agreement shall be binding upon and shall inure to the benefit of each party’s successors and permitted assigns. Any assignment, delegation, or transfer in violation of this provision shall be void and without legal effect.

	12.04		Agreement for Sole Benefit of the Administrator and the Company . This Agreement is for the sole and exclusive benefit of the Company, the Administrator and the Persons identified in Section 5.09 (to the extent set forth therein) and will not be deemed to be for the direct or indirect benefit of either (i) the clients or customers of the Administrator or the Company, (ii) the sponsor, or (iii) any service provider to the Company unaffiliated with the Administrator. The clients or customers of the Administrator or the Company will not be deemed to be third party beneficiaries of this Agreement nor to have any other contractual relationship with the Administrator by reason of this Agreement and each party hereto agrees to indemnify and hold harmless the other party from any claims of its clients or customers against the other party including any attendant expenses and attorneys’ fees, based on this Agreement or the services provided hereunder.

	12.05		Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of California without giving effect to any conflict of laws

			or choice of laws rules or principles thereof. To the extent that the applicable laws of the State of California, or any of the provisions of this Agreement, conflict with the applicable provisions of the 1940 Act, the 1933 Act or the Securities Exchange Act of 1934, the latter shall control.

	12.06		Equitable Relief . Each party agrees that any other party’s violation of the provisions of Section 11 may cause immediate and irreparable harm to the other party for which money damages would not constitute an adequate remedy at law. Therefore, the parties agree that, in the event either party breaches or threatens to breach said provision or covenant, the other party shall have the right to seek an injunction to restrain said breach or threatened breach, without posting any bond or other security.

	12.07		Dispute Resolution . Whenever either party desires to institute legal proceedings against the other concerning this Agreement, it shall provide written notice to that effect to such other party. The party providing such notice shall refrain from instituting said legal proceedings for a period of thirty days following the date of provision of such notice. During such period, the parties shall attempt in good faith to amicably resolve their dispute by negotiation among their executive officers. This Section 12.07 shall not prohibit either party from seeking, at any time, equitable relief as permitted under Section 12.06.

	12.08		Notice . All notices provided for or permitted under this Agreement (except for correspondence between the parties related to operations in the ordinary course) shall be deemed effective upon receipt, and shall be in writing and (a) delivered personally, (b) sent by commercial overnight courier with written verification of receipt, or (c) sent by certified or registered U.S. mail, postage prepaid and return receipt requested, to the party to be notified, at the address for such party set forth below. Notices to the Administrator shall be sent to the attention of: President, Charles Schwab Investment Management, Inc., 211 Main St., San Francisco, CA 94105. Notices to the Company shall be sent to the attention of President, Schwab Strategic Trust, 211 Main St., San Francisco, CA 94105.

	12.09		Entire Agreement; Amendments . This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof. This Agreement supersedes all prior or contemporaneous representations, discussions, negotiations, letters, proposals, agreements and understandings between the parties hereto with respect to the subject matter hereof, whether written or oral. This Agreement may be amended, modified or supplemented only by a written instrument duly executed by an authorized representative of each of the parties.

	12.10		Severability . Any provision of this Agreement that is determined to be invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability in such jurisdiction, without rendering invalid or unenforceable the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. If a court of competent jurisdiction declares any provision of this Agreement to be invalid or unenforceable, the parties agree that the court making such determination shall have the power to reduce the scope, duration, or area of the provision, to delete specific words or phrases, or to replace the provision with a provision that is valid and enforceable and that comes closest to expressing the original intention of the parties, and this Agreement shall be enforceable as so modified.

	12.11		Waiver . Any term or provision of this Agreement may be waived at any time by the party entitled to the benefit thereof by written instrument executed by such party. No failure of either party hereto to exercise any power or right granted hereunder, or to insist upon strict compliance with any obligation hereunder, and no custom or practice of the parties with regard to the terms of performance hereof, will constitute a waiver of the rights of such party to demand full and exact compliance with the terms of this Agreement.

	12.12		Anti-Money Laundering Laws . In connection with performing the Services set forth herein, the Administrator may provide information that the Company may rely upon in connection with the Company’s compliance with applicable laws, policies and regulations aimed at the prevention and detection of money laundering and/or terrorism activities (hereinafter, the “ Regulations ”). The Company and the Administrator agree that the Company shall be responsible for its compliance with all such Regulations. It shall be a condition precedent to providing Services to the Company under this Agreement and the Administrator shall have no liability for non-performance of its obligations under this Agreement unless it is satisfied, in its absolute discretion, that it has sufficient and appropriate information and material to discharge its obligations under the Regulations, and that the performance of such obligations will not violate any Regulations applicable to it. Without in any way limiting the foregoing, the Company acknowledges that the Administrator is authorized to return an Authorized Participant’s Investment in any Portfolio and take any action necessary to restrict repayment of redemption proceeds to the extent necessary to comply with its obligations pursuant to the Regulations.

	12.13		Force Majeure . No breach of any obligation of a party to this Agreement (other than obligations to pay amounts owed) will constitute an event of default or breach to the extent it arises out of a cause, existing or future, that is beyond the control and without negligence of the party otherwise chargeable with breach or default, including without limitation: work action or strike; lockout or other labor dispute; failure of third party systems and software, telecommunication outages; flood; war; riot; theft; act of terrorism, earthquake or natural disaster. Either party desiring to rely upon any of the foregoing as an excuse for default or breach will, when the cause arises, give to the other party prompt notice of the facts which constitute such cause; and, when the cause ceases to exist, give prompt notice thereof to the other party.

	12.14		Equipment Failures . In the event of equipment failures beyond the Administrator’s control, the Administrator shall take reasonable and prompt steps to minimize service interruptions but shall have no liability with respect thereto. The Administrator shall develop and maintain a plan for recovery from equipment failures which may include contractual arrangements with appropriate parties making reasonable provision for emergency use of electronic data processing equipment to the extent appropriate equipment is available.

	12.15		Headings . All Article headings contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and will not affect in any way the meaning or interpretation of this Agreement.

	12.16		Counterparts . This Agreement may be executed in two or more counterparts, all of

which shall constitute one and the same instrument. Each such counterpart shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. This Agreement shall be deemed executed by both parties when any one or more counterparts hereof or thereof, individually or taken together, bears the original facsimile or scanned signatures of each of the parties.

[The remainder of this page has intentionally been left blank.]

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the Effective Date.


CHARLES SCHWAB INVESTMENT MANAGEMENT, INC.						SCHWAB STRATEGIC TRUST

By:						By:
Name:						Name:
Title:						Title:

SCHEDULE I

Portfolios

Schwab U.S. Broad Market ETF

Schwab U.S. Large-Cap ETF

Schwab U.S. Large-Cap Growth ETF

Schwab U.S. Large-Cap Value ETF

Schwab U.S. Small-Cap ETF

Schwab International Equity ETF

Schwab International Small-Cap Equity ETF

Schwab Emerging Markets Equity ETF

SCHEDULE II

Services

1)		Receive PCF Files from Adviser, or its designee, and, subject to final approval of such file by Adviser, send PCF Files to custodian in appropriate format;

2)		Compute yields, total returns, expense ratios, portfolio turnover rates and average dollar-weighted portfolio maturities, as appropriate;

3)		Track and validate income and expense accruals, analyze and modify expense accrual charges periodically, and process expense disbursements to vendors and service providers;

4)		Calculate required ordinary income and capital gains distributions, coordinate estimated cash payments, and perform necessary reconciliations with the transfer agent;

5)		Provide standardized performance reporting data to the Company;

6)		Provide performance, financial and expense information for registration statements and proxies;

7)		Communicate net asset values, yield, total returns or other financial data to appropriate third party reporting agencies, and assist in resolution of errors reported by such third party agencies;

8)		Prepare the Company’s financial statements for review by fund management and independent auditors, manage annual and semi-annual report preparation process, prepare Forms N-SAR, NQ, N-CSR and 24f-2, provide fund performance data for annual report, coordinate printing and delivery of annual and semi-annual reports to shareholders, and file Forms N-SAR, N-Q, N-CSR, 24f-2 and annual and semi-annual reports via EDGAR;

9)		Monitor each Portfolio’s compliance with the requirements of Subchapter M of the Internal Revenue Code with respect to status as a regulated investment company;

10)		Prepare and file federal and state tax returns for the Company other than those required to be prepared and filed by the Company’s transfer agent or custodian.

11)		Provide data for year-end 1099s and supplemental tax letters;

12)		Provide such reports in connection with quarterly meetings of the Board as the Board may reasonably request;

13)		Manage the Company’s proxy solicitation process, including evaluating proxy distribution channels, coordinating with outside service provider to distribute proxies, track shareholder responses and tabulate voting results, and managing the proxy solicitation vendor if necessary;

14)		Provide individuals to serve as officers of the Company, as requested;

15)		Coordinate with the Company’s counsel on filing of the Company’s registration statements and proxy statements, and coordinate printing and delivery of the Company’s prospectuses and proxy statements;

16)		Provide consultation to the Company on regulatory matters relating to the operation of the Company as requested and coordinate with the Company’s legal counsel regarding such matters;

17)		Develop policies and procedures relating to the operations of the Company in coordination with legal counsel and the Chief Compliance Officer;

18)		Act as liaison to legal counsel to the Company and, where applicable, to legal counsel to the Company’s independent trustees;

19)		Coordinate with the Company counsel in the preparation, review and execution of contracts between the Company and third parties, such as the Company’s investment adviser, transfer agent, and custodian, and record-keepers or shareholder service providers;

20)		Assist the Company in handling and responding to routine regulatory examinations with respect to records retained or services provided by the Administrator, and coordinate with the Company’s legal counsel in responding to any non-routine regulatory matters with respect to such matters;

21)		Coordinate as necessary the registration or qualification of Creation Units with appropriate state securities authorities;

22)		Manage the preparation for and conducting of Board meetings by (i) coordinating Board book production and distribution process, (ii) subject to review and approval by the Company and its counsel, preparing meeting agendas, (iii) preparing the relevant sections of the Board materials required to be prepared by the Administrator, (iv) assisting to gather and coordinate special materials related to annual contract renewals and approval of rule 12b-1 plans and related agreements for and as directed by the trustees or the Company counsel, (v) attending Board meetings, and (vi) performing such other Board meeting functions as shall be agreed by the parties in writing;

23)		Cooperate with, and take all reasonable actions in the performance of its duties under this Agreement to ensure that all necessary information is made available to the Company’s independent public accountants in connection with the preparation of any audit or report requested by the Company, including the provision of a conference room at the Administrator’s location if necessary (in this regard, the Company’s independent auditors shall provide the Administrator with reasonable notice of any such audit so that (i) the audit will be completed in a timely fashion and (ii) the Administrator will be able to promptly respond to such information requests without undue disruption of its business); and

24)		On a T+2 post-trade basis and based on the information available to the Administrator, periodically monitor the Portfolios for compliance with applicable limitations as set forth in the Company’s or any Portfolio’s then current Prospectus and Statement of Additional Information (this provision shall not relieve the Company’s investment adviser and sub-advisers, if any, of their primary day-to-day responsibility for assuring such compliance, including on a pre-trade basis).

25)		Coordinate the distribution of prospectuses, supplements, proxy materials and reports to shareholders, and coordinate the solicitation and tabulation of proxies in connection with any annual or special meetings of shareholders.

26)		Obtain and maintain fidelity bonds and directors and officers/errors and omissions insurance policies for the Company in accordance with Rules 17g-1 and 17-d-1 under the 1940 Act and file the fidelity bonds and any notices with the SEC as required under the 1940 Act, to the extent such

		bonds and policies are approved by the Company’s Board.

27)		Maintain corporate records on behalf of the Company, including, but not limited to, minute books, the Declaration of Trust and By-Laws.

28)		Additional Reports and Services. Upon reasonable notice and as mutually agreed upon, the Administrator may provide additional reports and/or services upon the request of the Company or its investment adviser .

***

SCHEDULE III

Fees

None

TRANSFER AGENCY AND SERVICE AGREEMENT

THIS AGREEMENT is made as of the ___day of , 2009, by and between STATE STREET BANK AND TRUST COMPANY, a trust company chartered under the laws of the Commonwealth of Massachusetts having its principal office and place of business at One Lincoln Center, Boston, Massachusetts 02111 (“State Street” or the “Transfer Agent”), and Charles Schwab Investment Management, Inc., a Delaware corporation having its principal office and place of business at 211 Main Street, San Francisco, CA 94105 (the “Administrator”) on behalf of Schwab Strategic Trust, a Delaware statutory trust (the “Trust”).

WHEREAS, the Trust is authorized to issue shares of beneficial interest (“Shares”) in separate series, with each such series representing interests in a separate portfolio of securities and other assets;

WHEREAS, the Trust intends to initially offer Shares in one or more series, each as named in the attached Schedule A , which may be amended by the parties to add or remove series from time to time (such series, including all series subsequently established by the Trust and made subject to this Agreement in accordance with Section 13 of this Agreement, being herein referred to as a “Portfolio,” and collectively as the “Portfolios”);

WHEREAS, the Trust will issue and redeem Shares of each Portfolio only in aggregations of Shares known as “Creation Units” as described in the currently effective prospectus and statement of additional information of the Trust and each Portfolio (collectively, the “Prospectus”);

WHEREAS, only those entities (“Authorized Participants”) that have entered into an Authorized Participant Agreement with a distributor of the Trust (a “Distributor”), currently SEI Investments Distribution Co., are eligible to place orders for Creation Units with a Distributor;

WHEREAS, the Depository Trust Company, a limited purpose trust company organized under the laws of the State of New York (“DTC”), or its nominee will be the record or registered owner of all outstanding Shares;

WHEREAS, Administrator administers the operations of the Trust and provides or procures the provision of certain services, including transfer agency services, for and on behalf of the Trust;

WHEREAS, Administrator desires to appoint State Street as transfer agent, dividend disbursing agent and agent in connection with certain other activities; and

WHEREAS, State Street is willing to accept such appointment.

NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties hereto, intending to be legally bound, mutually covenant and agree as follows:

TERMS OF APPOINTMENT

	1.1		Subject to the terms and conditions set forth in this Agreement, the Administrator, on behalf of the Trust and the Portfolios, hereby appoints the Transfer Agent to act as, and the Transfer Agent agrees to act as, transfer agent for the Creation Units and dividend disbursing agent of the Trust and the Portfolios.

	1.2		Transfer Agency Services . In accordance with procedures established from time to time by written agreement between the Administrator, on behalf of the Trust and each of the Portfolios, as applicable, and the Transfer Agent, the Transfer Agent shall:

	(i)		establish one or more omnibus accounts representing DTC’s position in each Portfolio on the Transfer Agent’s recordkeeping system and maintain each such account;

	(ii)		receive and process orders identified for the benefit of the appropriate Authorized Participant for the purchase of Creation Units from a Distributor or the Trust, and promptly deliver payment and appropriate documentation thereof to the custodian of a Portfolio as identified by the Trust (the “Custodian”);

	(iii)		receive and process redemption requests and redemption directions from the Distributor or the Trust and deliver the appropriate documentation thereof to the Custodian;

	(iv)		prepare and transmit by means of DTC’s book-entry system payments for any dividends and distributions declared by the Trust on behalf of the applicable Portfolio;

	(v)		record the issuance of Shares of the applicable Portfolio and maintain a record of the total number of Shares of each Portfolio which are issued and outstanding; and provide the Administrator on a regular basis with the total number of Shares of each Portfolio that are issued and outstanding; but Transfer Agent shall have no obligation, when recording the issuance of Shares, to monitor the issuance of such Shares to determine if there are authorized Shares available for issuance or to take cognizance of any laws relating to, or corporate actions required for, the issue or sale of such Shares, which functions shall be the sole responsibility of the Administrator on behalf of the Trust and each Portfolio; and, except for the accounts established and maintained as provided in this Section 1.2 and in Section 1.3, the Transfer Agent shall have no obligation or responsibility to account for, keep records of, or otherwise related to, ownership of the Shares;

	(vi)		maintain and manage, as agent for the Administrator on behalf of the Trust and the Portfolios, such bank accounts as the Transfer Agent shall deem

			necessary for the performance of its duties under this Agreement, including but not limited to, the processing of Creation Unit purchases and redemptions and the payment of Portfolio dividends and distributions; the Transfer Agent may maintain such accounts at the bank or banks deemed appropriate by the Transfer Agent in accordance with applicable law;

	(vii)		process changes to Authorized Participant identification records; and

	(viii)		except as otherwise instructed by the Administrator on behalf of the Trust, the Transfer Agent shall process all transactions in the Trust in accordance with the procedures agreed upon by the Administrator and the Transfer Agent with respect to the proper net asset value to be applied to purchases received in good order by the Transfer Agent or by the Administrator or any other person or firm on behalf of the Administrator or the Trust or from an Authorized Participant before the cut-off times established by the Trust; and the Transfer Agent shall report to the Administrator any known exceptions to the foregoing.

Notwithstanding anything to the contrary contained herein, Transfer Agent will not provide Transfer Agency Services to an Authorized Participant who is an individual, and Administrator will not knowingly provide any information subject to any Applicable Privacy Laws as to such individual, as hereinafter defined, unless and until the Administrator has requested that Transfer Agent provide such services to such individual Authorized Participant and Transfer Agent has consented to provide such services in writing, which consent shall not be unreasonably withheld. The terms of Schedule B shall apply only to Customer Information provided to Transfer Agent after Transfer Agent has given its written consent, which consent shall not be unreasonably withheld to provide Transfer Agency Services to such individual Authorized Participant pursuant to the terms of this Section. The foregoing, however, shall not relieve Transfer Agent of any obligations it may have under any Privacy Laws applicable to its possession of any Customer Information (as defined in Schedule B)” or be construed as to impose any obligation or liability on Administrator with regard to any failure by Transfer Agent to comply with those laws.

1.3

Additional Services . In addition to, and neither in lieu of nor in contravention of the services set forth in Section 1.2 above, the Transfer Agent shall perform the following services:

	(i)		Other Customary Services . Perform certain customary services of a transfer agent and dividend disbursing agent, including, but not limited to, maintaining all Authorized Participant identification records and maintaining Authorized Participant Share ownership positions;

	(ii)		State Transaction (“Blue Sky”) Reporting . The Trust shall be solely responsible for its “blue sky” compliance and state registration requirements;

	(iii)		Distributor, DTC and NSCC The Transfer Agent shall: (a) accept and effectuate the registration and maintenance of accounts, and the purchase and redemption of Creation Units in such accounts, in accordance with instructions transmitted to and received by the Transfer Agent by transmission from Distributor, DTC and NSCC relative to Authorized Participants; and (b) issue instructions to a Portfolio’s Custodian for the settlement of transactions of the Portfolio with Distributor, DTC and NSCC (acting on behalf of the applicable Authorized Participant);

	(iv)		Performance of Certain Services by the Administrator, the Trust or Affiliates or Agents . New procedures as to who shall provide certain of these services described in this Section 1 may be established in writing from time to time by agreement between the Administrator and the Transfer Agent. If agreed to in writing by the Administrator and the Transfer Agent, the Transfer Agent may at times perform only a portion of these services, and the Administrator, the Trust or its agent may perform these services on the Trust’s or a Portfolio’s behalf.

	1.4		Authorized Persons . The Administrator, on behalf of the Trust and each Portfolio, hereby agrees and acknowledges that the Transfer Agent may rely on the current list of authorized persons, including the Distributor, as provided or agreed to by the Trust in writing and as may be amended from time to time, in receiving instructions to issue or redeem Creation Units. The Administrator, on behalf of the Trust and each Portfolio, agrees and covenants for itself and each such authorized person that any order or sale of or transaction in Creation Units received by it after the order cut-off time or such earlier time as set forth in or in accordance with the Prospectus or as otherwise provided by the Administrator in accordance with procedures mutually agreed upon by the Administrator and the Transfer Agent (the “Order Cut-Off Time”), shall be effectuated at the net asset value determined on the next business day or as otherwise required pursuant to the applicable Portfolio’s then-effective Prospectus, and the Administrator or such authorized person shall so instruct the Transfer Agent of the proper effective date of the transaction.

	1.5		Anti-Money Laundering and Client Screening . With respect to the Trust’s or any Portfolio’s offering and sale of Creation Units at any time, and for all subsequent transfers of such interests, the Trust or its delegate shall, directly or indirectly and to the extent required by law: (i) conduct know your customer/client identity due diligence with respect to potential investors and transferees in the Shares and Creation Units and shall obtain and retain due diligence records for each investor and transferee; (ii) use its reasonable efforts to ensure that each investor’s and any transferee’s funds used to purchase Creation Units or Shares shall not be derived from, nor the product of, any criminal activity; (iii) if requested, provide periodic written verifications that such investors/transferees have been checked against the United States Department of the Treasury Office of Foreign Assets Control database for any non-compliance or exceptions; and (iv) perform its obligations under this Section in accordance with all applicable anti-money laundering laws

			and regulations. In the event that the Transfer Agent has received advice from counsel that access to underlying due diligence records pertaining to the investors/transferees is necessary to ensure compliance by the Transfer Agent with relevant anti-money laundering (or other applicable) laws or regulations, the Trust shall, upon receipt of written request from the Transfer Agent, provide the Transfer Agent copies of such due diligence records.

	1.6		Tax Law . The Transfer Agent shall have no responsibility or liability for any obligations now or hereafter imposed on the Trust, a Portfolio, any Creation Units, any Shares, a beneficial owner thereof, an Authorized Participant or the Transfer Agent in connection with the services provided by the Transfer Agent hereunder by the tax laws of any country or of any state or political subdivision thereof. It shall be the responsibility of the Administrator to notify the Transfer Agent of the obligations imposed on the Trust, a Portfolio, the Creation Units, the Shares, or the Transfer Agent in connection with the services provided by the Transfer Agent hereunder by the tax law of countries, states and political subdivisions thereof, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting.

FEES AND EXPENSES

	2.1		Fee Schedule . For the performance by the Transfer Agent pursuant to this Agreement, the Administrator agrees on behalf of the Trust and each of the Portfolios to pay the Transfer Agent the fees and expenses set forth in the fee schedule (the “Fee Schedule”). Such fees and any out of pocket expenses and advances identified under Section 2.2 below may be changed only by written agreement between the Administrator on behalf of the Trust and the Portfolios and the Transfer Agent. The parties agree that the fees set forth in the Fee Schedule shall apply with respect to each Portfolio set forth on Schedule A hereto as of the date hereof and to any newly created Portfolios added to this Agreement that have requirements consistent with services then being provided by the Transfer Agent under this Agreement. In the event that a Portfolio is to become a party to this Agreement as a result of an acquisition or merger, then the parties shall confer diligently and negotiate in good faith, and agree upon fees applicable to such Portfolio.

	2.2		Out of Pocket Expenses . In addition to the fees paid under Section 2.1 above, the Administrator agrees on behalf of each of the Trust and the Portfolios to reimburse the Transfer Agent for reasonable and customary out of pocket expenses, including but not limited to, confirmation production, postage, forms, telephone, microfilm, microfiche, tabulating proxies, records storage, or advances incurred by the Transfer Agent for the items set out in the fee schedule attached hereto. In addition, any other expenses incurred by the Transfer Agent at the request or with the consent of the Administrator will be reimbursed by the Administrator on behalf of the applicable Portfolio.

2.3

Invoices . The Administrator agrees on behalf of the Trust and each of the Portfolios to pay all fees and out of pocket expenses within thirty (30) days following the receipt of the respective invoice, except for any fee or expense that is subject to good faith dispute. In the event of such a dispute, the Administrator may withhold that portion of the fee or expense subject to the good faith dispute. The Administrator shall notify the Transfer Agent in writing within twenty-one (21) calendar days following the receipt of each invoice if the Administrator is disputing any amounts in good faith. The Administrator shall settle such disputed amounts within five (5) days of the day on which the parties agree on the amount to be paid.

3.		REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT

		The Transfer Agent represents and warrants to the Administrator that:

	3.1		It is a trust company duly organized and existing and in good standing under the laws of the Commonwealth of Massachusetts.

	3.2		It is duly registered as a transfer agent under Section 17A(c)(2) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), it will remain so registered for the duration of this Agreement, and it will promptly notify the Administrator in the event of any material change in its status as a registered transfer agent.

	3.3		It is duly qualified to carry on its business in the Commonwealth of Massachusetts.

	3.4		It is empowered under applicable laws and by its organizational documents to enter into and perform the services contemplated in this Agreement.

	3.5		All requisite proceedings have been taken to authorize it to enter into and perform this Agreement.

	3.6		It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement.

	3.7		It is and will remain for the duration of this Agreement in compliance with all federal and state laws, rules and regulations applicable to its transfer agency business and the performance of its duties, obligations and services under this Agreement.

REPRESENTATIONS AND WARRANTIES OF THE ADMINISTRATOR ON BEHALF OF THE TRUST AND THE PORTFOLIOS AND OF THE ADMINISTRATOR ON ITS OWN BEHALF

On behalf of the Trust and the Portfolios, the Administrator represents and warrants to the Transfer Agent that:

	4.1		The Trust is a statutory trust duly organized, existing and in good standing under the laws of the State of Delaware.

	4.2		The Trust is empowered under applicable laws and by its organizational documents to enter into and perform this Agreement.

	4.3		All requisite proceedings have been taken to authorize the Trust to enter into, perform and receive services pursuant to this Agreement.

	4.4		The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company.

	4.5		A registration statement under the Securities Act of 1933, as amended (the “Securities Act”), is currently effective and will remain effective, and all appropriate state securities law filings have been made and will continue to be made, with respect to all Shares of the Trust being offered for sale.

The Administrator further represents and warrants to the Transfer Agent that:

	4.6		It is a corporation organized and existing and in good standing under the laws of the State of Delaware.

	4.7		All proceedings required by its organizational documents have been taken to authorize the Administrator to enter into and perform this Agreement.

	4.8		It is authorized to act on behalf of the Trust in entering into and performing this Agreement.

DATA ACCESS AND PROPRIETARY INFORMATION

5.1

Neither the Administrator, the Trust nor the Portfolios shall be granted, or acquire as part of receipt of services provided by the Transfer Agent hereunder, any right, title or interest, express or implied, or any intellectual property right in the databases, computer programs, screen formats, report formats, interactive design techniques, and documentation manuals furnished to the Administrator and the Trust by the Transfer Agent as part of the Administrator’s and the Trust’s ability to access certain Trust-related data maintained by the Transfer Agent or another third party on databases under the control and ownership of the Transfer Agent (“Data Access Services”) (collectively, “Proprietary Information”). Notwithstanding the foregoing or any other provision of this Agreement, nothing contained herein shall be construed as granting Transfer Agent any right, title, or interest, express or implied, in or to any Portfolio Confidential Information (as defined below). The Proprietary Information shall constitute Confidential Information of Transfer Agent. Without limiting the foregoing, the Administrator agrees for itself and its officers and employees, on behalf of the Trust and applicable agents, to:

	(i)		use such programs and databases solely on the Administrator’s, Trust’s, or such agents’ computers, or solely from equipment at the location(s) agreed to between the Administrator and the Transfer Agent, and solely in accordance with the Transfer Agent’s applicable user documentation;

	(ii)		refrain from copying or duplicating in any way the Proprietary Information;

	(iii)		refrain from obtaining unauthorized access to any portion of the Proprietary Information, and if such access is inadvertently obtained, to inform the Transfer Agent in a timely manner of such fact and dispose of such information in accordance with the Transfer Agent’s instructions;

	(iv)		refrain from causing or allowing Proprietary Information transmitted from the Transfer Agent’s computers to the Administrator’s, the Trust’s, or such agents’ computer to be retransmitted to any other computer facility or other location;

	(v)		allow the Administrator and the Trust to have access only to those authorized transactions agreed upon by the Administrator and the Transfer Agent;

	(vi)		to honor all reasonable written requests made by the Transfer Agent to protect at the Transfer Agent’s expense the rights of the Transfer Agent in Proprietary Information at common law, under federal copyright law and under other federal or state law.

	5.2		Proprietary Information shall not include all or any portion of any of the foregoing items that are or become publicly available without breach of this Agreement; that are released for general disclosure by a written release by the Transfer Agent; or that are already in the possession of the receiving party at the time of receipt without obligation of confidentiality or breach of this Agreement.

	5.3		Notwithstanding any other provision to the contrary, the Administrator may disclose Proprietary Information in the event that it is required to be disclosed by law or in a judicial or administrative proceeding, or by an appropriate regulatory authority having jurisdiction over the Administrator or the Trust; provided that all reasonable legal remedies for maintaining such information in confidence have been exhausted including, but not limited to, giving the Transfer Agent as much advance notice of the possibility of such disclosure as practical so the Transfer Agent may attempt to stop such disclosure or obtain a protective order concerning such disclosure.

	5.4		If the Administrator notifies the Transfer Agent that any of the Data Access Services do not operate in material compliance with the most recently issued user documentation for such services, the Transfer Agent shall endeavor in a timely manner to correct such failure. Organizations from which the Transfer Agent may obtain certain data included in the Data Access Services are solely

			responsible for the contents of such data, and the Administrator agrees to make no claim against the Transfer Agent arising out of the contents of such third-party data, including, but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN “AS IS, AS AVAILABLE” BASIS. THE TRANSFER AGENT EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

	5.5		If the Administrator and the Trust have the ability to originate electronic instructions to the Transfer Agent in order to effect the transfer or movement of cash or Creation Units or transmit Authorized Participant information or other information, then in such event the Transfer Agent shall be entitled to rely on the validity and authenticity of such instruction without undertaking any further inquiry as long as such instruction is undertaken in conformity with security procedures established by the Transfer Agent from time to time.

	5.6		Each party shall take reasonable efforts to advise its employees of their obligations pursuant to this Section. The obligations of this Section shall survive the termination of this Agreement.

WIRE TRANSFER OPERATING GUIDELINES

	6.1		Obligation of Sender . The Transfer Agent is authorized to promptly debit the appropriate Portfolio account(s) upon the receipt of a payment order in compliance with the prescribed security procedure (the “Security Procedure”) chosen for funds transfer in the Funds Transfer Addendum to this Agreement (agreed to in conjunction with that certain Amended and Restated Master Custodian Agreement between the parties thereto dated as of October 17, 2005, as amended and restated from time to time) and in the amount of money that the Transfer Agent has been instructed to transfer. The Transfer Agent shall execute payment orders in compliance with the Security Procedure and with the Administrator’s instructions on the execution date, provided that such payment order is received by the customary deadline for processing such a request, unless the payment order specifies a later time. All payment orders and communications received after the customary deadline will be deemed to have been received the next business day.

	6.2		Security Procedure . The Administrator on behalf of the Trust and the Portfolios acknowledges that the Security Procedure it has designated on the Funds Transfer Addendum was selected by the Administrator from security procedures offered by the Transfer Agent. The Administrator shall restrict access to confidential information relating to the Security Procedure to authorized persons as communicated to the Transfer Agent in writing. The Administrator must notify the Transfer Agent immediately if it has reason to believe unauthorized persons

			may have obtained access to such information or of any change in the Administrator’s authorized personnel. The Transfer Agent shall verify the authenticity of all instructions received from the Administrator according to the Security Procedure.

	6.3		Account Numbers . The Transfer Agent shall process all payment orders on the basis of the account number contained in the payment order. In the event of a discrepancy between any name indicated on the payment order and the account number, the account number shall take precedence and govern.

	6.4		Rejection . The Transfer Agent reserves the right to decline to process or delay the processing of a payment order which (i) is in excess of the collected balance in the account to be charged at the time of the Transfer Agent’s receipt of such payment order; (ii) if initiating such payment order would cause the Transfer Agent, in the Transfer Agent’s sole judgment, to exceed any volume, aggregate dollar, network, time, credit or similar limits which are applicable to the Transfer Agent; or (iii) if the Transfer Agent, in good faith is unable to satisfy itself that the transaction has been properly authorized.

	6.5		Cancellation Amendment . The Transfer Agent shall use reasonable efforts to act on all authorized requests to cancel or amend payment orders received in compliance with the Security Procedure, provided that such requests are received in a timely manner affording the Transfer Agent reasonable opportunity to act. However, the Transfer Agent assumes no liability if the request for amendment or cancellation cannot be satisfied.

	6.6		Errors . The Transfer Agent shall assume no responsibility for failure to detect any erroneous payment order provided that the Transfer Agent complies with the payment order instructions as received and the Transfer Agent complies with the Security Procedure. The Security Procedure is established for the purpose of authenticating payment orders only and not for the detection of errors in payment orders.

	6.7		Interest . The Transfer Agent shall assume no responsibility for lost interest with respect to the refundable amount of any unauthorized payment order, unless the Transfer Agent is notified of the unauthorized payment order within thirty (30) days of notification by the Transfer Agent of the acceptance of such payment order.

	6.8		ACH Credit Entries/Provisional Payments . When a Portfolio initiates or receives Automated Clearing House credit and debit entries pursuant to these guidelines and the rules of the National Automated Clearing House Association and the New England Clearing House Association, the Transfer Agent will act as an Originating Depository Financial Institution and/or Receiving Depository Financial Institution, as the case may be, with respect to such entries. Credits given by the Transfer Agent with respect to an ACH credit entry are provisional until the Transfer Agent receives final settlement for such entry from the Federal

			Reserve Bank. If the Transfer Agent does not receive such final settlement, the Trust agrees that the Transfer Agent shall receive a refund of the amount credited to the applicable Portfolio in connection with such entry, and the party making payment to the Portfolio via such entry shall not be deemed to have paid the amount of the entry.

	6.9		Confirmation . Confirmation of the Transfer Agent’s execution of payment orders shall ordinarily be provided within twenty four (24) hours notice of which may be delivered through the Transfer Agent’s proprietary information systems, or by facsimile or call-back. The Trust must report any objections to the execution of an order within thirty (30) calendar days of receipt of such confirmation.

INDEMNIFICATION

7.1

The Transfer Agent shall not be responsible for, and the Administrator on behalf of itself and the Trust and each Portfolio shall indemnify and hold the Transfer Agent harmless from and against, any and all losses, damages, costs, charges, reasonable counsel fees (including the defense of any lawsuit in which the Transfer Agent or affiliate is a named party), payments, reasonable expenses and liability arising out of or attributable to:

	(i)		all actions of the Transfer Agent or its agents or subcontractors required to be taken pursuant to this Agreement, provided that such actions are taken in good faith and without negligence or willful misconduct;

	(ii)		the Administrator’s or the Trust’s breach of any representation, warranty or covenant of the Administrator or the Trust hereunder;

	(iii)		the Administrator’s or the Trust’s lack of good faith, negligence or willful misconduct;

	(iv)		the reliance upon, and any subsequent use of or action taken or omitted, by the Transfer Agent, or its agents or subcontractors on: (a) any information, records, documents, data, stock certificates or services, which are received by the Transfer Agent or its agents or subcontractors by machine readable input, facsimile, CRT data entry, electronic instructions or other similar means authorized by the Administrator or the Trust, and which have been prepared, maintained or performed by the Administrator or the Trust or any other person or firm on behalf of the Administrator or the Trust, including but not limited to any broker-dealer or previous transfer agent; (b) any instructions or requests of the Administrator or the Trust or any of their officers, employees, agents or subcontractors who have been deemed by the Administrator to be authorized personnel to provide instructions; (c) any instructions or opinions of legal counsel to the Administrator, the Trust or any Portfolio with respect to any matter arising in connection with the services to be performed by the Transfer Agent under this Agreement which are provided to the Transfer Agent after consultation with such

			legal counsel; or (d) any paper or document, reasonably believed to be genuine, authentic, or signed by the proper person or persons;

	(v)		the offer or sale of Creation Units in violation of federal or state securities laws or regulations requiring that such Creation Units be registered, or in violation of any stop order or other determination or ruling by any federal or state agency with respect to the offer or sale of such Creation Units;

	(vi)		the negotiation and processing of any checks, wires and ACH transmissions, including without limitation, for deposit into, or credit to, the Trust’s demand deposit accounts maintained by the Transfer Agent;

	(vii)		all actions relating to the transmission of Creation Unit or Authorized Participant data through the NSCC clearing systems, if applicable; and

	(viii)		any tax obligations under the tax laws of any country or of any state or political subdivision thereof, including taxes, withholding and reporting requirements, claims for exemption and refund, additions for late payment, interest, penalties and other expenses (including legal expenses) that may be assessed, imposed or charged against the Transfer Agent as transfer agent hereunder.

7.2

At any time the Transfer Agent may apply to any officer of the Administrator for instructions, and may consult with legal counsel with respect to any matter arising in connection with the services to be performed by the Transfer Agent under this Agreement, and the Transfer Agent and its agents or subcontractors shall not be liable and shall be indemnified by the Administrator on behalf of the Trust and the applicable Portfolio for any action taken or omitted by it in reliance upon such instructions or upon the opinion of such counsel. The Transfer Agent, its agents and subcontractors shall be protected and indemnified in acting upon any paper or document furnished by or on behalf of the Trust or the applicable Portfolio, reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents provided the Transfer Agent or its agents or subcontractors by machine readable input, telex, CRT data entry or other similar means authorized by the Administrator on behalf of the Trust and the Portfolios, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Administrator.

STANDARD OF CARE / LIMITATION OF LIABILITY

8.1

The Transfer Agent shall at all times act in good faith in its performance of all services performed under this Agreement, but assumes no responsibility and shall not be liable for loss or damage due to errors, including encoding and payment processing errors, unless said errors are caused by its negligence, bad faith, or willful misconduct or that of its employees or agents. The parties agree that any encoding or payment processing errors shall be governed by this standard of care,

and that Section 4-209 of the Uniform Commercial Code is superseded by this Section.

ADDITIONAL COVENANTS OF THE ADMINISTRATOR AND THE TRANSFER AGENT

9.1

The Administrator shall promptly furnish to the Transfer Agent the following:

	(i)		A certified copy of the resolution of the Board of Trustees of the Trust authorizing the appointment of the Transfer Agent and the execution and delivery of this Agreement.

	(ii)		A copy of the Declaration of Trust and By-Laws of the Trust and all amendments thereto.

	9.2		The Transfer Agent hereby agrees to establish and maintain facilities and procedures for safekeeping of stock certificates, check forms and facsimile signature imprinting devices, if any; and for the preparation or use, and for keeping account of, such certificates, forms and devices.

	9.3		Records . The Transfer Agent shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. To the extent required by Section 31 of the 1940 Act and the Rules thereunder, the Transfer Agent agrees that all such records prepared or maintained by the Transfer Agent relating to the services to be performed by the Transfer Agent hereunder are the property of the Trust and will be preserved, maintained and made available in accordance with such Section and Rules, and will be surrendered promptly to the Trust on and in accordance with its request.

10.

CONFIDENTIALITY

10.1

Portfolio Confidential Information . The term “Portfolio Confidential Information” means any information that Portfolio discloses, whether in writing, electronically or orally, to Transfer Agent whether in tangible or intangible form which by the circumstances of disclosure or nature of the information would be considered to be confidential. By way of example and not limitation, Portfolio Confidential Information includes: (i) any information concerning Portfolio’s, its agents’ or licensors’ technology, such as systems, source code, databases, hardware, software, programs, applications, engine protocols, routines, models, displays and manuals, including, without limitation, the selection, coordination, and arrangement of the contents thereof; and (ii) any information concerning Portfolio’s, its agents’ or licensors’ financial or business plans or operations, such as research activities and plans, marketing or sales plans, pricing or pricing strategies, operational techniques, internal controls, compliance policies, methods of operation, security procedures, strategic plans, customer information, and unpublished financial information, including information concerning revenues, profits and profit margins. Transfer Agent agrees that Portfolio will have no obligation to specifically identify by any notice or other action any information to

			which the protection of this Agreement extends. Without limiting the foregoing, to the extent disclosed to the Transfer Agent, portfolio holdings information of the Portfolio shall be deemed to be Confidential Information of the Portfolio until such time as such portfolio holdings information shall made in a public filing by the Portfolio. The Transfer Agent shall not purchase or sell securities or other investments on the basis of confidential portfolio holdings information of the Portfolio provided to the Transfer Agent and shall take reasonable steps to prevent any employee or agent of Transfer Agent from purchasing or selling securities or other investments on the same basis.

	10.2		Restrictions on Use . Without the prior written consent of Portfolio, Transfer Agent will not use any portion of Portfolio Confidential Information for any purpose other than for the services provided under this Agreement. Transfer Agent further agrees that:

	(i)		it will hold Portfolio Confidential Information of Portfolio in the strictest confidence;

	(ii)		it will exercise the same care with respect to Portfolio Confidential Information as it exercises with respect to its own proprietary and confidential information;

	(iii)		it will not, without Portfolio’s prior written consent, copy or disclose to any third party any portion thereof;

	(iv)		it will notify immediately Portfolio of any unauthorized disclosure or use unless in and ownership of Portfolio Confidential Information resulting from such unauthorized disclosure or use by or through Transfer Agent; and

	(v)		it will restrict dissemination of Portfolio Confidential Information to only those persons within or related to its organization who are involved in the delivery services provided under this Agreement, to Transfer Agent’s regulatory authorities as required to comply with such regulatory authorities’ request or order, and to Transfer Agent’s examiners, auditors, directors and legal counsel to the extent Transfer Agent believes the same is reasonably required provided that Transfer Agent makes reasonable effort to notify such parties as to the confidential nature of the Portfolio Confidential Information.

10.3

Exceptions . The foregoing shall not prohibit or limit Transfer Agent’s use, disclosure, reproduction or dissemination of Portfolio Confidential Information which:

(i)

is or becomes public domain information or material through no fault or breach on the part of Transfer Agent;

	(ii)		as demonstrated by the written records of Transfer Agent or otherwise, was already lawfully known (without restriction on disclosure) to Transfer Agent prior to the information being disclosed to Transfer Agent by Portfolio or any representative of Portfolio;

	(iii)		has been or is hereafter rightfully furnished to Transfer Agent without restriction on disclosure by the Portfolio or a third person lawfully in possession thereof;

	(iv)		has been independently developed, by or for Transfer Agent, without reference to Portfolio Confidential Information;

	(v)		is requested or required to be disclosed pursuant to any legal or regulatory proceeding, investigation, audit, examination, subpoena, civil investigative demand or other similar process, where required by law, regulation, rule or self-regulatory organization rule, provided that, unless prohibited from doing so in such circumstance, the Transfer Agent notifies Portfolio as promptly as possible so that Portfolio may to have a reasonable opportunity to obtain a protective order or other form of protection against disclosure. Notwithstanding any such disclosure by Transfer Agent, such disclosure will not otherwise affect Transfer Agent’s obligations hereunder with respect to Portfolio Confidential Information so disclosed which is retained by Transfer Agent; or

	(vi)		is disclosed by the Transfer Agent with the prior written consent of the applicable Portfolio to disclose, which consent shall not be unreasonably withheld.

			Any Portfolio Confidential Information in the possession of Transfer Agent that has been disclosed to it by Portfolio or any representative of Portfolio that is not within any of the exceptions above shall be considered confidential unless the Transfer Agent may demonstrate otherwise by records, documentation or other reasonable means.

10.4

Equitable Relief . Transfer Agent agrees and acknowledges that any breach of this Section 10 may cause a Portfolio irreparable harm for which monetary damages would be inadequate. Accordingly, the Portfolio will be entitled to seek injunctive or other equitable relief to remedy any threatened or actual breach of this Section 10 by Transfer Agent, as well as monetary damages.

10.5

No Publicity . No party hereto will announce or disclose the existence of this Agreement, or its contents to any third party without the prior written consent of the other or except as may be required by law, in which case the party required to make such a disclosure will give the other party the maximum feasible prior notice of such disclosure.

11.		RESERVED

12.		TERMINATION OF AGREEMENT

	12.1		Termination for Convenience . This Agreement may be terminated by either party, without cause, upon ninety (90) days written notice to the other.

	12.2		Bankruptcy . Either party hereto may terminate this Agreement by notice to the other party, immediately or effective at any time specified therein, in the event that (a) the other party ceases to carry on its business or (b) an action is commenced by or against the other party under Title 11 of the United States Code or a receiver, conservator or similar officer is appointed for the other party and such suit, conservatorship or receivership is not discharged within thirty (30) days.

	12.3		Cessation of Operations. The Trust may, in its discretion, terminate this Agreement as to one or more Portfolios by providing not less than 60 days prior written notice to Transfer Agent in the event that such Portfolio ceases, or such Portfolios cease, operating as and under the name or names, respectively, appearing (at the time of notice) on Schedule A to this Agreement for any reason, which may (but need not) be in connection with a merger, reorganization, transfer or liquidation of assets, stock exchange delisting or other extraordinary event. Notwithstanding any other provision of this Agreement: upon termination of this Agreement as to a Portfolio under this Section 12.3, the Administrator on behalf of such Portfolio shall pay to the Transfer Agent such compensation (including any applicable fees) and any reimbursable expenses as may be due and undisputed under the terms hereof to the date of such termination, including reasonable out-of-pocket expenses associated with such termination; and no other compensation, fees, charges or expenses will be assessed or will accrue with respect to said Portfolio after said termination.

	12.4		Out of Pocket Expenses . All out-of-pocket expenses associated with the movement of records and material will be borne by the Trust on behalf of the applicable Portfolio(s).

	12.5		Proprietary Information and Portfolio Confidential Information . Upon termination of this Agreement, each party shall return to the other party all copies of Proprietary Information or Portfolio Confidential Information received from

such other party hereunder, if any, other than materials or information required to be retained by such party under applicable laws or regulations.

13.

ADDITIONAL PORTFOLIOS

In the event that the Trust establishes one or more series of Shares in addition to the Portfolios listed on the attached Schedule A , with respect to which the Administrator on behalf of the Trust desires to have the Transfer Agent render services as transfer agent under the terms hereof, it shall so notify the Transfer Agent in writing; and, if the Transfer Agent agrees in writing to provide such services, then each such series of Shares shall become a Portfolio hereunder, and Schedule A shall thereupon be amended to add the name of each such new Portfolio.

14.

ASSIGNMENT

	14.1		Except as provided in Section 15 below, neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written consent of the other party. Any attempt to do so in violation of this Section shall be void. Unless specifically stated to the contrary in any written consent to an assignment, no assignment will release or discharge the assignor from any duty or responsibility under this Agreement. Notwithstanding the foregoing, either party may assign this Agreement to a successor entity in the event of a merger, acquisition, or sale of all or substantially all of its assets. In the event Transfer Agent makes such assignment, the Administrator on behalf of the Trust may terminate this Agreement on written notice to Transfer Agent.

	14.2		Except as explicitly stated elsewhere in this Agreement, nothing under this Agreement shall be construed to give any rights or benefits in this Agreement to anyone other than the Transfer Agent and the Administrator on behalf of the Trust and the Portfolios, and the duties and responsibilities undertaken pursuant to this Agreement shall be for the sole and exclusive benefit of the Transfer Agent and the Administrator on behalf of the Trust and the Portfolios. This Agreement shall inure to the benefit of, and be binding upon, the parties and their respective permitted successors and assigns.

	14.3		This Agreement does not constitute an agreement for a partnership or joint venture between the Transfer Agent and the Administrator or the Trust. Other than as provided in Section 15, neither party shall make any commitments with third parties that are binding on the other party without the other party’s prior written consent.

15.

SUBCONTRACTORS

The Transfer Agent may, without further consent on the part of the Administrator, subcontract for the performance hereof with (i) Boston Financial Data Services, Inc., a Massachusetts corporation (“BFDS”) which is duly registered as a transfer agent pursuant to Section 17A(c)(2) of the 1934 Act (“Section 17A(c)(2)”), (ii) a BFDS subsidiary duly registered as a transfer agent pursuant to Section 17A(c)(2), (iii) a BFDS affiliate duly registered as a

transfer agent or (iv) other affiliated or unaffiliated third party duly registered as a transfer agent pursuant to Section 17A(c)(2); provided, however, that the Transfer Agent shall remain liable to the Administrator for the acts and omissions of any subcontractor under this Section as it is for its own acts and omissions under this Agreement and shall ensure all such entities comply with all relevant terms of this Agreement.

16.

MISCELLANEOUS

	16.1		Amendment . This Agreement may be amended or modified by a written agreement executed by both parties.

	16.2		Massachusetts Law to Apply . This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of the Commonwealth of Massachusetts without regard to the conflict of laws provisions thereof.

	16.3		Force Majeure . In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, equipment or transmission failure or damage reasonably beyond its control, or other causes reasonably beyond its control, such party shall not be liable for damages to the other for any damages resulting from such failure to perform or otherwise from such causes.

	16.4		Consequential Damages . Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement or for any consequential damages arising out of any act or failure to act hereunder.

	16.5		Survival . All provisions regarding indemnification, warranty, liability, and limits thereon, and confidentiality and/or protections of proprietary rights and trade secrets shall survive the termination of this Agreement.

	16.6		Severability . If any provision or provisions of this Agreement shall be held invalid, unlawful, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired.

	16.7		Priorities Clause . In the event of any conflict, discrepancy or ambiguity between the terms and conditions contained in this Agreement and any schedules or attachments hereto, the terms and conditions contained in this Agreement shall take precedence.

	16.8		Waiver. No waiver by either party or any breach or default of any of the covenants or conditions herein contained and performed by the other party shall be construed as a waiver of any succeeding breach of the same or of any other covenant or condition.

	16.9		Merger of Agreement . This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written.

	16.10		Counterparts . This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

	16.11		Reproduction of Documents . This Agreement and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.

	16.12		Notices . All notices and other communications as required or permitted hereunder shall be in writing and sent by first class mail, postage prepaid, addressed as follows or to such other address or addresses of which the respective party shall have notified the other.

(a)

If to Transfer Agent, to:

State Street Bank and Trust Company
200 Clarendon Street, 16th Floor
Boston, Massachusetts 02116
Attention: Sheila McClorey, Transfer Agent Vice President
Telephone: (617) 937-6912
Facsimile: (617) 937-8139

With a copy to:
State Street Bank and Trust Company
2 Avenue de Lafayette, 2nd Floor (LCC/2)
Boston, MA 02206-5049
Attn: Mary Moran Zeven, Esq.
Telephone: (617) 662-1783
Facsimile: (617) 662-2702

(b)

If to the Trust, to:

Schwab Strategic Trust
101 Montgomery Street
San Francisco, California 94104
Attention: George M. Pereira
Telephone: (415) 636-3300
Telecopy: (415) 667-3800

With a copy to:
Koji E. Felton, Esq.

101 Montgomery Street
San Francisco, California 94104
Telephone: 415-636-3461
Telecopy: 415-667-3440

(c)

If to the Administrator, to:

Charles Schwab Investment Management, Inc.
211 Main Street
San Francisco, CA 94105
Attn: Legal Department
Telephone: (415) 667-7000
Facsimile: (415) 667-1962

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers, as of the day and year first above written.


STATE STREET BANK AND TRUST COMPANY
By:
	Name:	Francis Koudelka
	Title:	Senior Vice President, duly authorized

SCHWAB STRATEGIC TRUST
By:
	Name:	George M. Pereira
	Title:	Treasurer

CHARLES SCHWAB INVESTMENT MANAGEMENT, INC., in its capacity as the Administrator of Schwab Strategic Trust
By:
	Name:	George M. Pereira
	Title:	Senior Vice President and Chief Financial Officer

Schedule A

LIST OF PORTFOLIOS

SCHWAB STRATEGIC TRUST

Schedule B

Customer Information Security Requirements

1. Customer Information . “Customer Information” shall mean: (A) The following personal identifying information, however collected or received: (i) an individual’s name (first initial and last name or first name and last name), address or telephone number plus (a) social security number, (b) drivers license number, (c) state identification card number, (d) debit or credit card number, (e) financial account number or (f) personal identification number or password that would permit access to a person’s account or (ii) any combination of the foregoing that would allow a person to log onto or access an individual’s account; (B) any “nonpublic personal information” as defined under the Gramm-Leach-Bliley Act of 1999 (“GLBA”); and (C) any information identifiable to an individual subject to any privacy and security laws applicable Transfer Agent’s possession of Customer Information in connection with the “Agreement”, including GLBA (collectively, “Applicable Privacy Laws”). “Customer Information,” as used in the Agreement, shall only refer to information relating to a Portfolio or the Trust, provided by the Administrator, a Portfolio or the Trust to the Transfer Agent, in connection with the services provided under the Agreement.

2. In the course of providing services under the Agreement, the Administrator acknowledges and agrees, on behalf of the Trust and the Portfolios, that no Portfolio intends to provide Customer Information to the Transfer Agent. The Transfer Agent agrees to treat all information which a reasonable person could determine from the facts and circumstances to constitute Customer Information as such in accordance with the terms of this Schedule B. Transfer Agent acknowledges that any Customer Information that may be disclosed hereunder is disclosed for the specific purpose of performing the activities contemplated by the Agreement. Transfer Agent agrees that, with respect to Customer Information, it will comply with Applicable Privacy Laws. With respect to Customer Information, Transfer Agent will use the same degree of care as it exercises to protect information regarding its own individual customers, but no less than the level of care required by Applicable Privacy Laws.

3. Transfer Agent represents and warrants that at all times during and after the termination of the Agreement for so long as it retains possession of Customer Information it shall use, handle, collect, maintain, and safeguard Customer Information in accordance with (i) the requirements of the Agreement and (ii) Applicable Privacy Laws. Transfer Agent acknowledges that it alone is responsible for understanding and complying with its obligations under Applicable Privacy Laws. In the event any unauthorized disclosure of the Customer Information in the possession of the Transfer Agent or its agents requires notification to an individual under Applicable Privacy Laws, Transfer Agent shall notify Portfolio in order to discuss the content, timing, process and costs associated with such notification to the extent practicable unless prohibited by law. Transfer Agent may destroy or return to the Administrator all Customer Information in its possession as soon as possible following termination of the Agreement; prior to any destruction, Transfer Agent shall notify Administrator of its intent to destroy the information and reasonably cooperate with Administrator in providing any copies of the information as may be required by Administrator.

4. Transfer Agent shall comply with the provisions of this Schedule B or similar requirements in all material respects. In addition, Transfer Agent will maintain and enforce safety and physical security procedures with respect to its access and maintenance of Customer Information that are (a) at least equal to financial industry standards for such types of locations, and (b) which provide reasonably appropriate technical and organizational safeguards against accidental or unlawful destruction, loss, alteration or unauthorized disclosure or access of Customer Information and all other data owned by Portfolio and accessible by Transfer Agent under the Agreement. Without limiting the generality of the foregoing, Transfer Agent will take reasonable measures to secure and defend its location and equipment against “hackers” and others who may seek, without authorization, to modify or access Transfer Agent systems or the information found therein without the consent of Portfolio. Transfer Agent will periodically test its systems for potential areas where security could be breached. Transfer Agent will report to Portfolio any breaches of security or unauthorized access to Transfer Agent’s systems relating to Customer Information that Transfer Agent detects or has knowledge of unless such notification is prohibited by law which report will be made by Transfer Agent promptly following Transfer Agent’s confirmation as to the occurrence, scope and circumstances of an actual breach or unauthorized access. Transfer Agent will pursue such confirmation promptly following its becoming aware of such occurrence. Transfer Agent will use diligent efforts to remedy such breach of security or unauthorized access in a timely manner and deliver to Portfolio a root cause assessment and future incident mitigation plan with regard to any breach of security or unauthorized access affecting Customer Information.

5. Storage of Customer Information. All Customer Information must be stored in a physically and logically secure environment that is designed to protect it from unauthorized access, modification, theft, misuse and destruction. In addition to the general standards set forth above, Transfer Agent will maintain what Transfer Agent believes to be an adequate level of physical security controls over its facility including, but not limited to, appropriate alarm systems, fire suppression, access controls (including off-hour controls) which may include visitor access procedures, security guard force, video surveillance, and staff egress searches. Further, Transfer Agent will maintain what Transfer Agent believes to be an adequate level of data security controls, which may include, but is not limited to, logical access controls including user sign-on identification and authentication, data access controls (e.g., password protection of your applications, data files and libraries), accountability tracking, anti-virus software, secured printers, restricted download to disk capability and provision for system backup.

6. Information Security Procedures

These procedures are in addition to the requirements of the Agreement and present a minimum standard only. However, it is Transfer Agent’s sole obligation to (i) implement appropriate measures to secure its systems and data, including Portfolio Confidential Information, internal and external threats and risks; and (ii) continuously review and revise those measures to address ongoing threats and risks. Failure to comply with the minimum standards set forth in this Schedule will constitute a material, non-curable breach of the Agreement by Transfer Agent, entitling the Trust, in addition to and cumulative of all other remedies available to it at law, in equity, or under the Agreement, to immediately terminate the Agreement. Unless specifically defined in this Schedule, capitalized terms shall have the meanings set forth in the Agreement.

Security Policy . Transfer Agent shall establish and maintain a formal, documented, mandated, company-wide information security program, including security policies, standards and procedures (collectively “ Information Security Policy ”). The Information Security Policy will be communicated to all Transfer Agent personnel and contractors in a relevant, accessible, and understandable form and will be regularly reviewed and evaluated to ensure its operational effectiveness, compliance with all applicable laws and regulations, and to address new threats and risks.

Personnel and Transfer Agent Protections . Transfer Agent shall screen all personnel contacting Portfolio Confidential Information, including Customer Information for potential security risks and require all employees, contractors, and subcontractors to acknowledge an appropriate written confidentiality/non-disclosure agreement. All agreements with third parties involving access to Transfer Agent’s systems and data used to service the Portfolio, including all outsourcing arrangements and maintenance and support agreements (including facilities maintenance), shall address security risks, controls, and procedures for information systems. Transfer Agent shall supply each of its personnel and contractors with appropriate, ongoing training regarding information security procedures, risks, and threats. Transfer Agent shall have an established set of procedures to ensure personnel and contractors promptly report actual breaches of security.

Removable Media. Except in the context of Transfer Agent’s routine back-ups, appropriately encrypted data, or as otherwise specifically authorized by Portfolio in writing, Transfer Agent has instituted a policy against transfer of Customer Information to any form of Removable Media,. For purposes of this Schedule, “Removable Media” means portable or removable hard disks, floppy disks, USB memory drives, zip disks, optical disks, CDs, DVDs, digital film, memory cards (e.g., Secure Digital (SD), Memory Sticks (MS), CompactFlash (CF), SmartMedia (SM), MultiMediaCard (MMC), and xD-Picture Card (xD)), magnetic tape, and all other removable data storage media.

Data Control; Media Disposal and Servicing . Customer Information (i) may only be made available and accessible to those parties explicitly authorized under the Agreement or as otherwise agreed expressly by Portfolio in writing; (ii) if transferred across the Internet, any wireless network ( e.g., cellular, 802.11x, or similar technology), or other public or shared networks, must be protected using appropriate cryptography as designated or approved by Portfolio in writing; and (iii) if transferred using Removable Media (as defined herein) must be sent via a bonded courier or protected using cryptography. The foregoing requirements shall apply to back-up data, other than that stored on back-up tapes, stored by Transfer Agent at off-site facilities.

Hardware Return . [ SSBT comment: Hardware must be defined ] Upon termination or expiration of the Agreement or at any time upon Portfolio’s request, Transfer Agent will return all hardware, if any, provided by Portfolio containing Customer Information to Portfolio. The Customer Information shall not be removed or altered in any way. The hardware should be physically sealed and returned via a bonded courier or as otherwise directed by Portfolio.

Physical and Environmental Security . Transfer Agent facilities that process Portfolio Confidential Information will be housed in secure areas and protected by perimeter security such as barrier access controls (e.g., the use of guards and entry badges) that provide a physically secure environment from unauthorized access, damage, and interference.

Communications and Operational Management . Transfer Agent shall (i) monitor and manage all of its information processing facilities, including, without limitation, implementing operational procedures, change management and incident response procedures; and (ii) deploy adequate anti-viral software and adequate back-up facilities designed to ensure essential business information can be promptly recovered in the event of a disaster or media failure; and (iii) ensure its operating procedures will be adequately documented and designed to protect information, computer media, and data from theft and unauthorized access.

Access Control . Transfer Agent shall implement formal procedures to control access to its systems, services, and data, including, but not limited to, user account management procedures and the following controls:

	•		Network access to both internal and external networked services shall be controlled, including, but not limited to, the use of properly configured firewalls;

	•		Systems tools will be used to enforce access controls to computer resources including, but not limited to, authentication, authorization, and event logging where technically feasible;

	•		Applications will include access control to limit user access to information and application system functions; and

	•		Systems will be monitored for suspicious activity. Transfer Agent shall record, review and act upon all events deemed appropriate by the Transfer Agent.

FORM OF

AUTHORIZED PARTICIPANT AGREEMENT

THIS AUTHORIZED PARTICIPANT AGREEMENT (this “Agreement”) is entered into by and between SEI Investments Distribution Co. (“Distributor”) and (the “Participant”) and is subject to acceptance by State Street Bank and Trust Company, as transfer agent (the “Transfer Agent”) for Schwab Strategic Trust (the “Trust”).

WHEREAS, Distributor serves as the principal underwriter of the Trust in connection with the sale and distribution of shares of beneficial interest (“Shares”) of each portfolio or series of the Trust (each, a “Fund” and collectively, the “Funds”); and

WHEREAS, Transfer Agent serves as the transfer agent for each Fund of the Trust, and is an Index Receipt Agent as that term is defined in the rules of the National Securities Clearing Corporation (“NSCC”); and

WHEREAS, the Shares of any Fund (excepting any Fund listed on Exhibit A to this Agreement) may be purchased or redeemed only by or through an authorized participant, such as Participant, who has entered into an authorized participant agreement substantially in the form hereof.

NOW, THEREFORE, the parties hereto, in consideration of the premises and of the mutual agreements contained herein, and intending to be legally bound hereby, agree as follows:

ARTICLE 1 DEFINED TERMS

The capitalized terms used in this Agreement are defined as set forth herein. Any capitalized terms used herein that are not defined shall have the meaning set forth in the Prospectus.

1.01 “ 1933 Act ” means the Securities Act of 1933, as amended.

1.02 “ 1934 Act ” means the Securities Exchange Act of 1934, as amended.

1.03 “ 1940 Act ” means the Investment Company Act of 1940, as amended.

1.04 “ Affiliated Person ” shall have the meaning given to it by Section 2(a) of the 1940 Act, subject to such exemptions as may be granted by the SEC by any rule, regulation or order.

1.05 “ AML Program ” shall have the meaning set forth in Section 3.01(v) .

1.06 “ Authorized Person ” shall have the meaning set forth in ARTICLE 5 .

1.07 “ Balancing Amount ” will be an amount equal to the differential, if any, between the total aggregate market value of the Deposit Securities and the NAV per Creation Unit next determined.

1.08 “ Beneficial Owner ” shall have the meaning given to it by Rule 16a-1(a)(2) of the 1934 Act.

1.09 “ Business Day ” shall mean each day the New York Stock Exchange is open for regular trading and the Trust and the Custodian are open for business.

1.10 “ Cash ” shall mean same day funds in United States dollars.

1.11 “ Cash Amount ” means the Balancing Amount plus the applicable transaction fee.

1.12 “ CEA ” means the Commodity Exchange Act, as amended.



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1.13 “ CNS Process ” means the Continuous Net Settlement clearing processes of NSCC, as such processes have been enhanced to effect purchases and redemptions of Creation Units.

1.14 “ CNS System ” means the Continuous Net Settlement clearing processes of NSCC.

1.15 “ Code ” means the Internal Revenue Code of 1986, as amended.

1.16 “ Contractual Settlement Date ” means the date as specified in the Prospectus and the Procedures Handbook upon which delivery of Deposit Securities must be made to the Fund.

1.17 “ Creation Unit ” shall have the meaning set forth in Section 2.01 .

1.18 “ Custodian ” means the Trust’s custodian, State Street Bank and Trust Company.

1.19 “ Deposit Securities ” means an in-kind deposit of a designated portfolio of securities selected by or on behalf of the Fund.

1.20 “ DTC Participant ” shall have the meaning set forth in Section 3.01 .

1.21 “ DTC Process ” means the process for effecting purchases orders or redemption requests of Creation Units through DTC other than through the use of the CNS System.

1.22 “ DTC ” means The Depository Trust Company.

1.23 “ FinCEN ” shall have the meaning set forth in Section 3.01(iv).

1.24 “ FINRA ” means the Financial Industry Regulatory Authority.

1.25 “ Fund Deposit” means the Deposit Securities plus or minus the “Balancing Amount ”.

1.26 “ Fund Securities ” means in-kind redemption proceeds of a designated portfolio of securities selected by the Adviser.

1.27 “ Indemnified Party ” shall have the meaning set forth in Section 6.01 .

1.28 “ Intraday Indicative Value ” means the value of a Fund, as calculated and published by the New York Stock Exchange or any similar exchange or widely recognized industry organization, throughout the trading day based on the last sale prices of the securities specified for creation and redemption plus any estimated cash amounts associated with the creation unit, on a per share basis.

1.29 “ Listing Exchange ” shall have the meaning set forth in Section 8.01 .

1.30 “ NAV ” shall have the meaning set forth in Section 6.02 .

1.31 “ OFAC ” shall have the meaning set forth in Section 3.01(iv) .

1.32 “ Orders ” shall have the meaning set forth in Section 2.02 .

1.33 “ Participant Client ” means any party on whose behalf the Participant acts in connection with an Order (whether a customer or otherwise).

1.34 “ Participating Party ” shall have the meaning set forth in Section 3.01 .

1.35 “ PIN Number ” shall have the meaning set forth in ARTICLE 5 .



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1.36 “ Procedures Handbook ” shall have the meaning set forth in Section 2.02 .

1.37 “ Prospectus ” means a Fund’s then current prospectus and statement of additional information included in its effective registration statement, as supplemented or amended from time to time.

1.38 “ Purchase Order ” shall have the meaning set forth in Section 2.02 .

1.39 “ Redemption Request ” shall have the meaning set forth in Section 2.02 .

ARTICLE 2 ORDERS FOR PURCHASE AND REDEMPTION

2.01 Creation Units . The Shares of any Fund may be purchased or redeemed only in aggregations of a specified number of Shares, as stated in the Prospectus, referred to herein as a “ Creation Unit ”. The Participant is hereby authorized to purchase and redeem Creation Units of any Fund listed in the Prospectus, which may be revised by the Fund from time to time.

2.02 Procedures for Orders . The Participant may purchase and/or redeem Creation Units of Shares through (i) the CNS Process or (ii) the DTC Process. The procedures for placing and processing an order to purchase Shares (each a “ Purchase Order ”) and a request to redeem Shares (each a “ Redemption Request ”) (as used herein, Purchase Orders and Redemption Requests are collectively referred to as “ Orders ”) are described in the Fund’s Prospectus and in the then current procedures handbook as prepared by the Distributor and made available to the Participant (“ Procedures Handbook ”). All Orders shall be made in accordance with the terms and procedures set forth in this Agreement, the Prospectus and Procedures Handbook; provided that in the event of a conflict, the terms and procedures of the Prospectus shall control. Each party hereto agrees to comply with the provisions of such documents to the extent applicable to it. Each of the Trust and the Distributor reserves the right to issue additional or other procedures relating to the manner of purchasing or redeeming Creation Units, and the Participant agrees to comply with such procedures as may be issued from time to time, upon reasonable notice thereon. To the extent that a provision of the Procedures Handbook, as revised, conflicts with any provision of this Agreement, as amended, the terms of the Procedures Handbook shall control.

2.03 NSCC Authorization . Solely with respect to Orders through the CNS Process, the Participant, hereby authorizes the Fund or its designee to transmit to the NSCC on behalf of the Participant such instructions, including amounts of the Deposit Securities and the Cash Amount consistent with such Orders. The Participant agrees to be bound by the terms of such instructions issued by the Fund or its designee and reported to NSCC as though such instructions were issued by the Participant directly to NSCC.

2.04 Consent to Recording . It is contemplated that the phone lines used by the Distributor, the Transfer Agent, the Trust or their Affiliated Persons will be recorded, and the Participant hereby consents to the recording of all calls with any of those parties.

2.05 Irrevocability . The Participant acknowledges and agrees on behalf of itself and any party for which it is acting (whether as a customer or otherwise) that delivery of a Order shall be irrevocable; provided that the Trust and its agents reserve the absolute right to reject any Order.

2.06 Prospectus and Trade Confirmation Delivery . The Participant consents to the delivery of Fund Prospectuses and trade confirmations electronically, and understands that unless this consent is revoked, the Participant can only obtain access to Prospectuses and delivery of trade confirmations from the Distributor electronically. The Participant understands that current Prospectuses and all required reports for each applicable Fund are available at the Trust’s website at . The Participant can revoke this consent to delivering a Prospectus electronically at any time by calling [1-800-xxx-xxxx]. The Participant agrees to



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maintain a valid e-mail address, and further agrees to promptly notify the Distributor if its e-mail address changes. The Participant understands that it must have regular and continuous Internet access to access all documents relating to a Prospectus.

2.07 Sub-Custodian Account . The Participant understands and agrees that in the case of each international Fund, the Trust has caused the Custodian, acting in its capacity as the Trust’s custodian, to maintain with the applicable sub-custodian (“Sub-Custodian”) for such Fund an account in the relevant foreign jurisdiction to which the Participant shall deliver or cause to be delivered in connection with the purchase of a Creation Unit the securities and any other cash amount (or the cash value of all or a part of such securities, in the case of a permitted or required cash purchase or “cash in lieu” amount) on behalf of itself or any party for which it is acting (whether or not a customer), with any appropriate adjustments as advised by such Fund, in accordance with the terms and conditions applicable to such account in such jurisdiction.

ARTICLE 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARTICIPANT

3.01 Representations, Warranties and Covenants of Participant . The Participant hereby represents, warrants and covenants the following:

(i) The Participant (i) is and will continue to be a member in good standing of the NSCC so long as this Agreement is in full force and effect and (ii) with respect to (x) all orders of Creation Units of Shares of any Fund, it is a “ DTC Participant ,” and (y) any order of Creation Units of Shares of any Fund initiated through the CNS Process, it is a member of NSCC and a participant in the CNS System of NSCC (a “ Participating Party ”). If any change in the foregoing status of the Participant occurs the Participant shall give prompt written notice to the Distributor and the Trust of such change. Upon such notice, the Distributor, in consultation with the Trust, may terminate this Agreement.

(ii) Unless Section 3.01(iii) applies, the Participant either (i) is registered as a broker-dealer under the 1934 Act and is a member in good standing of FINRA, or (ii) is qualified to act as a broker or dealer in the states or other jurisdictions where the nature of its business so requires. In connection with the purchase or redemption of Creation Units and any related offers or sales of Shares, the Participant will maintain any such registrations, qualifications and membership in good standing and in full force and effect throughout the term of this Agreement. The Participant will comply with all applicable federal laws, the laws of the states or other jurisdictions concerned, and the rules and regulations promulgated thereunder, and with the FINRA By-Laws and NASD Conduct Rules (or of comparable FINRA Conduct Rules, if such NASD Conduct Rules are subsequently renamed, repealed, rescinded, or are otherwise replaced by FINRA Conduct Rules) if it is a FINRA member, in each case, to the extent applicable to its role acting as Participant hereunder and will not offer or sell Shares in any state or jurisdiction where they may not lawfully be offered and/or sold.

(iii) If the Participant is offering or selling Shares in jurisdictions outside the several states, territories and possessions of the United States and is not otherwise required to be registered, qualified or a member of FINRA as set forth in Section 3.01(ii) above, the Participant will, in connection with such offers and sales, (i) observe the applicable laws of the jurisdiction in which such offer and/or sale is made, (ii) comply with the prospectus delivery and other requirements of the 1933 Act, and the regulations promulgated thereunder, and (iii) conduct its business in accordance with the NASD Conduct Rules (or with comparable FINRA Conduct Rules, if such NASD Conduct Rules are subsequently renamed, repealed, rescinded, or are otherwise replaced by FINRA Conduct Rules), to the extent the foregoing relates to the Participant’s transactions in, and activities with respect to, Shares.

(iv) The Participant is and will continue to be in compliance with all applicable laws and regulations aimed at the prevention and detection of money laundering and/or the financing of terrorism activities, including the Bank Secrecy Act, as amended by USA



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PATRIOT Act; rules and regulations issued by the U.S. Treasury Department, including the Office of Foreign Asset Control (“ OFAC ”), the Financial Crimes and Enforcement Network (“ FinCEN ”), the SEC and FINRA.

(v) The Participant has and will continue to have an anti-money laundering program (“ AML Program ”), that at minimum includes, i) an AML compliance officer designated to administer and oversee the AML Program, ii) ongoing training for appropriate personnel, iii) internal controls and procedures reasonably designed to prevent and detect suspicious activity monitoring and terrorist financing activities; iv) procedures to comply with know your customer requirements and to verify the identity of all customers; and v) appropriate record keeping procedures. In addition, Participant agrees to fully cooperate with requests from the government regulators and Distributor and Transfer Agent for information relating to customers and/or transactions involving the Shares, as permitted by law, in order for Distributor and/or Transfer Agent to comply with its regulatory requirements. Without in any way limiting the foregoing, Participant acknowledges that Distributor is authorized to take any action necessary to restrict distribution activities to the extent necessary to comply with regulatory obligations applicable to it.

(vi) The Participant acknowledges that in addition to satisfying the prospectus delivery and disclosure requirements of the 1933 Act, it and any other participant in the distribution of the Shares purchased by the Participant may have an obligation to comply with all applicable provisions and rules and regulations promulgated pursuant to the CEA, including applicable disclosure delivery requirements thereunder.

(vii) The Participant will not make, or permit any of its representatives to make, any representations concerning the Shares or any Indemnified Party other than representations contained (A) in the then-current Prospectus of the Fund, (B) in printed information approved by the Fund as information supplemental to such Prospectus or (C) in any promotional materials or sales literature furnished to the Participant by the Fund.

(viii) The Participant will not furnish or cause to be furnished to any person or display or publish any information or material relating to the Shares, any Indemnified Party or a Fund that have not been approved by the Fund.

(ix) The Participant agrees to abide by the terms of the then current click-through agreement set forth on the applicable website, which terms are hereby incorporated herein.

(x) The Participant agrees to maintain records of all sales of Shares made by or through it in accordance with and to the extent required by applicable law and to furnish copies of such records to the Trust, Distributor and/or Transfer Agent upon request of the Trust, Distributor or Transfer Agent, subject to applicable privacy laws, including, without limitation SEC Regulation S-P.

ARTICLE 4 STATUS OF PARTICIPANT

4.01 General . The Participant acknowledges and agrees that for all purposes of this Agreement, the Participant will be deemed to be an independent contractor, and (a) the Participant shall have no authority to act as agent for the Trust, the Distributor or the Transfer Agent in any matter or in any respect; (b) the Participant will make itself and its employees available, upon reasonable request, during normal business hours to consult with the Distributor, Transfer Agent or their designees concerning the performance of the Participant’s responsibilities under this Agreement; (c) the Participant, as a DTC Participant, agrees that it shall be bound by all of the obligations of a DTC Participant in addition to any obligations that it undertakes hereunder or in accordance with the Prospectus or the Procedures Handbook and (d) the Participant agrees, subject to any privacy, confidentiality or other obligations it may have to its customers arising under federal or state securities laws or the applicable rules of any self-



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regulatory organization, to assist the Distributor in ascertaining certain information regarding sales of Shares made by or through the Participant upon request of the Trust or the Distributor that is necessary for the Trust to comply with its obligations to distribute information to its shareholders under applicable state or federal securities laws; provided that consistent with market practice, the Participant may undertake to deliver prospectuses, proxy material, annual and other reports of the Trust or other similar information that the Trust is obligated to deliver to its shareholders to the Participant’s customers that custody Shares with the Participant, after receipt from the Trust of sufficient quantities to allow mailing thereof to such customers.

4.02 Treatment as Underwriter . The Participant understands and acknowledges that the method by which Creation Units will be created and traded may raise certain issues under applicable securities laws. For example, because new Creation Units of Shares may be issued and sold by the Trust on an ongoing basis, at any point a “distribution”, as such term is used in the 1933 Act, may occur. The Participant understands and acknowledges that some activities on its part, depending on the circumstances, may result in its being deemed a participant in a distribution in a manner which could render it a statutory underwriter and subject it to the prospectus delivery and liability provisions of the 1933 Act. The Participant also understands and acknowledges that dealers who are not “underwriters” but are effecting transactions in Shares, whether or not participating in the distribution of Shares, are generally required to deliver a prospectus.

4.03 Creditworthiness . The Participant understands that it will be required from time to time to satisfy certain creditworthiness criteria established and approved by the Trust.

4.04 Qualified Institutional Buyer Status. The Participant represents, covenants and warrants that it currently is, and will continue to be throughout the term of this Agreement, a “qualified institutional buyer” as such term is defined in Rule 144A of the 1933 Act. Any change in the foregoing status of Participant shall terminate this Agreement and Participant shall give prompt notice to the Distributor, Transfer Agent and the Trust of such change.

4.05 No Affiliation. The Participant represents, covenants and warrants that, during the term of this Agreement, it will not be an affiliated person of a Fund, a promoter or a principal underwriter of a Fund or an affiliated person of such persons, except to the extent that the Participant may be deemed to be an affiliated person under 2(a)(3)(A) or 2(a)(3)(C) of the 1940 Act, due to ownership of Shares. The Participant shall give prompt notice to the Distributor, Transfer Agent and the Trust of any change to the foregoing status.

4.06 Privacy. The Participant represents that it has procedures in place that are reasonably designed to protect the privacy of non-public personal consumer/customer financial information to the extent required by applicable U.S. federal and state laws, rules and regulations and will continue to do so throughout the term of this Agreement.

ARTICLE 5 AUTHORIZED PERSONS

Concurrently with the execution of this Agreement and upon request from the Distributor from time to time thereafter, the Participant shall deliver to the Distributor, with a copy to the Transfer Agent, notarized, and duly certified as appropriate by its secretary or other duly authorized official, a certificate in the form of Exhibit B setting forth the names and signatures of all persons authorized to give instructions relating to activity contemplated hereby or by any other notice, request or instruction given on behalf of the Participant (each, an “Authorized Person”). The Distributor and Transfer Agent may accept and rely upon such certificate as conclusive evidence of the facts set forth therein and shall consider such certificate to be in full force and effect until the Distributor and Transfer Agent, as applicable, receives a superseding certificate bearing a subsequent date. Upon the termination or revocation of authority of any formerly Authorized Person by the Participant, the Participant shall give immediate written notice of such fact to the Distributor, with a copy to the Transfer Agent, and such notice shall be effective upon receipt by



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the Distributor. The Distributor shall issue to each Authorized Person a unique personal identification number (the “PIN Number”) by which such Authorized Person shall be identified and by which instructions issued by the Participant hereunder shall be authenticated. The PIN Number shall be kept confidential by the Participant and shall only be provided to the Authorized Person. If, after issuance, the Authorized Person’s PIN Number is changed, the new PIN Number shall become effective on a date mutually agreed upon by the Participant and the Distributor. Notwithstanding the foregoing, delivery, maintenance and use of the PIN Number shall be governed by the terms and conditions set forth in the Procedures Handbook.

ARTICLE 6 INDEMNIFICATION AND LIMITATION OF LIABILITY

6.01 Indemnification . The Participant hereby agrees to indemnify, defend and hold harmless the Distributor, the Trust, the Transfer Agent, the Custodian and each of their respective subsidiaries, Affiliated Persons, directors, officers, employees and agents, and each person, if any, who is under common control, controls or is controlled by such persons within the meaning of Section 15 of the 1933 Act (each an “ Indemnified Party ”) from and against any loss, liability, cost and expense (including attorneys’ fees) incurred by such Indemnified Party resulting from, in connection with or arising out of (i) any breach by the Participant (or an affiliate of the Participant) of any provision of this Agreement; (ii) any failure on the part of the Participant to perform any of its obligations set forth in the Agreement; (iii) any failure by the Participant to comply with applicable laws, including rules and regulations of self-regulatory organizations; (iv) actions of such Indemnified Party in reliance upon any instructions issued by Participant reasonably believed by such Indemnified Party to be genuine and to have been given by the Participant, or (v) (A) any representation by the Participant, its employees or its agents or other representatives about the Shares, any Indemnified Party or a Fund that is not consistent with the Fund’s Prospectus made in connection with the offer or the solicitation of an offer to buy or sell Shares and (B) any untrue statement or alleged untrue statement of a material fact contained in any research reports, marketing material and sales literature related to a Fund or any alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading to the extent that such statement or omission relates to the Shares, any Indemnified Party or a Fund, made by the Participant or an Affiliate of the Participant unless, in either case, such representation, statement or omission was made or included by the Participant or an Affiliate of the Participant at the written direction of the Distributor or is based upon any omission or alleged omission by the Distributor to state a material fact in connection with such representation, statement or omission necessary to make such representation, statement or omission not misleading.

6.02 Limitation of Liability (Distributor) . The Distributor shall not be liable to the Participant for any damages arising out of (i) mistakes or errors in data provided in connection with Orders except to the extent arising out of data provided by the Distributor; (ii) mistakes or errors arising out of interruptions or delays of communications (iii) mistakes or errors of the Transfer Agent, or (iv) differences in performance between the Fund’s Net Asset Value (“ NAV ”), the Intraday Indicative Value, the Deposit Securities, or the underlying index benchmark of any Fund. In no event and under no circumstances will either party to this Agreement be liable to anyone, including, without limitation, the other party, for consequential damages for any act or failure to act under any provision of this Agreement.

ARTICLE 7 CONFIDENTIAL INFORMATION

7.01 General . Distributor and the Trust (in such capacity, the “ Receiving Party ”) acknowledge and agree to maintain the confidentiality of Confidential Information (as hereinafter defined) provided by Participant (in such capacity, the “ Disclosing Party ”) in connection with this Agreement. The Receiving Party shall not disclose or disseminate the Disclosing Party’s Confidential Information to any Person other than (a) those employees, agents, contractors, subcontractors and licensees of the Receiving Party, or (b) with respect to Distributor as a Receiving Party, to those employees, agents, contractors, subcontractors and licensees of any



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agent or affiliate, who have a need to know it in order to assist the Receiving Party in performing its obligations, or to permit the Receiving Party to exercise its rights under this Agreement. In addition, the Receiving Party (a) shall take all reasonable steps to prevent unauthorized access to the Disclosing Party’s Confidential Information, and (b) shall not use the Disclosing Party’s Confidential Information, or authorize other Persons to use the Disclosing Party’s Confidential Information, for any purposes other than in connection with performing its obligations or exercising its rights hereunder. As used herein, “reasonable steps” means steps that a party takes to protect its own, similarly confidential or proprietary information of a similar nature, which steps shall in no event be less than a reasonable standard of care.

7.02 Definition of Confidential Information . The term “ Confidential Information ,” as used herein, shall mean all business strategies, plans and procedures, proprietary information, methodologies, data and trade secrets, and other confidential information and materials (including, without limitation, any non-public personal information as defined in Regulation S-P) of the Disclosing Party, its affiliates, their respective clients or suppliers, or other Persons with whom they do business, that may be obtained by the Receiving Party from any source or that may be developed as a result of this Agreement.

7.03 Exclusions . The provisions of this ARTICLE 7 respecting Confidential Information shall not apply to the extent, but only to the extent, that such Confidential Information: (a) is already known to the Receiving Party free of any restriction at the time it is obtained from the Disclosing Party, (b) is subsequently learned from an independent third party free of any restriction and without breach of this Agreement; (c) is or becomes publicly available through no wrongful act of the Receiving Party or any third party; (d) is independently developed by or for the Receiving Party without reference to or use of any Confidential Information of the Disclosing Party; or (e) is required to be disclosed pursuant to an applicable law, rule, regulation, government requirement or court order, or the rules of any stock exchange (provided, however, that the Receiving Party shall advise the Disclosing Party of such required disclosure promptly upon learning thereof in order to afford the Disclosing Party a reasonable opportunity to contest, limit and/or assist the Receiving Party in crafting such disclosure).

7.04 Disclosure of Confidential Information . The Receiving Party shall advise its employees, agents, contractors, subcontractors and licensees, and shall require its agents and affiliates to advise their employees, agents, contractors, subcontractors and licensees, of the Receiving Party’s obligations of confidentiality and non-use under this ARTICLE 7 , and shall be responsible for ensuring compliance by its and its affiliates’ employees, agents, contractors, subcontractors and licensees with such obligations. In addition, the Receiving Party shall require all persons that are provided access to the Disclosing Party’s Confidential Information, other than the Receiving Party’s accountants and legal counsel, to execute confidentiality or non-disclosure agreements containing provisions substantially similar to those set forth in this ARTICLE 7 . The Receiving Party shall promptly notify the Disclosing Party in writing upon learning of any unauthorized disclosure or use of the Disclosing Party’s Confidential Information by such persons.

7.05 Obligations Upon Termination . Upon the Disclosing Party’s written request following the termination of this Agreement, the Receiving Party promptly shall return to the Disclosing Party, or destroy, all Confidential Information of the Disclosing Party provided under or in connection with this Agreement, including all copies, portions and summaries thereof. Notwithstanding the foregoing sentence, (a) the Receiving Party may retain one copy of each item of the Disclosing Party’s Confidential Information for purposes of identifying and establishing its rights and obligations under this Agreement, for archival or audit purposes and/or to the extent required by applicable law, and (b) Distributor shall have no obligation to return or destroy Confidential Information of the Trust that resides in save tapes of Distributor; provided, however, that in either case all such Confidential Information retained by the Receiving Party shall remain subject to the provisions of this ARTICLE 7 for so long as it is so retained. If requested by the Disclosing Party, the Receiving Party shall certify in writing its compliance with the provisions of this paragraph.



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ARTICLE 8 ORDERS

8.01 Listing Exchange . The Participant understands and agrees that an Order may be submitted only on days that the national securities exchange which is the primary exchange or other market on which with Shares are traded (the “ Listing Exchange ”) is open for trading or business.

8.02 Purchase Orders . The Participant agrees that all Purchase Orders will be made in accordance with the terms and procedures set forth in this Agreement, the Prospectus and Procedures Handbook; provided that in the event of a conflict, the terms and procedures of the Prospectus shall control. To affect a purchase of a Creation Unit of a particular Fund, the Participant agrees on behalf of itself, and any Participant Client, to deliver to the Fund a Fund Deposit plus a purchase transaction fee as described in the Prospectus and/or the Procedures Handbook. The amount of such purchase transaction fee shall be determined by the Fund, or the investment adviser to the Fund (the “ Adviser ”), in its sole discretion and may be changed from time to time. The Fund Deposit shall consist of the requisite Deposit Securities plus or minus a Balancing Amount. The Balancing Amount will be payable to or receivable from the Fund depending on the net asset value of Shares of the Fund next determined after the Order has been placed. The Fund may permit or require the substitution of an amount of cash to be added to the Balancing Amount to replace any Deposit Securities (i.e., the cash value of all or a part of such securities, in the case of a permitted or required cash purchase or “cash in lieu” amount). The Participant understands that a Creation Unit will not be issued until the requisite cash and/or Deposit Securities, as applicable, transaction fees and taxes are transferred to the Trust on or before the settlement date in accordance with the Prospectus and the Procedures Handbook and in accordance with any instructions provided by the Trust, the Custodian and/or Sub-Custodian with respect to cash payments, delivery and settlement.

(i) Title to Securities; Restricted Securities . The Participant shall deliver the Deposit Securities to the Custodian free and clear of all liens, restrictions, charges, duties, encumbrances and not subject to any adverse claims, including, without limitation, any restriction upon sale or transfer arising out of (i) any agreement or arrangement entered into by the Participant or any Participant Client (ii) any provision of the 1933 Act, and any regulations there under (except that portfolio securities of issuers other than U.S. issuers shall not be required to have been registered under the 1933 Act if exempt from such registration), or the applicable laws or regulations of any other applicable jurisdiction or (iii) such securities being designated “restricted securities” as such term is used in Rule 144(a)(3)(i) promulgated under the 1933 Act.

(ii) Corporate Actions . The Participant acknowledges that with respect to a Purchase Order of a particular Fund, the Fund acknowledges and agrees to return to the Participant any dividend, distribution or other corporate action paid to the Fund in respect of any Deposit Security transferred to the Fund that, based on the valuation of such Deposit Security at the time of transfer, should have been paid to the Participant.

8.03 Redemption Request . The Participant understands and agrees that Redemption Requests may be submitted only on days that the Fund is open for business, as required by Section 22(e) of the 1940 Act. and that Participant will not attempt to place an Order for purchasing or redeeming any Creation Unit, except as set forth in this Agreement, the Prospectus and Procedures Handbook of the Fund.

(i) Title to Securities; Restricted Securities . In connection with each Redemption Request, the Participant agrees to ascertain that the Shares to be redeemed have not been loaned or pledged to another party and are not the subject of a repurchase agreement, securities lending agreement or any other arrangement that would preclude the delivery of such Shares to the Fund in accordance with the Prospectus or as otherwise required by the Fund. In addition, the Participant agrees that the Fund will acquire good and unencumbered title to Shares, free and clear of all liens, restrictions, charges and encumbrances and not subject to any



Authorized Participant Agreement		9

adverse claims, including without limitation, any restriction upon the sale or transfer of such Shares. The Participant understands and agrees that in the event collateral or Shares are not transferred to the Fund as set forth in the Procedures Handbook, the Redemption Request trade may be broken by the Fund and the Participant will be solely responsible for all costs incurred by the Fund or the Distributor related to breaking the trade. The Distributor will only process Redemption Requests upon verification from the Fund or its designee of the Fund’s receipt of such collateral or shares. The Participant understands that shares may be redeemed only when one or more Creation Units of Shares of a Beneficial Owner are held in the account of a single Participant.

(ii) Corporate Actions . With respect to any Redemption Request, the Participant on behalf of itself and any Participant Client acknowledges and agrees to return to the applicable Fund any dividend, interest, distribution or other corporate action paid to it or a Participant Client in respect of any Fund Security that is transferred to the Participant or any Participant Client that, based on the valuation of such Fund Security at the time of transfer, should have been paid to the Fund. A Fund is entitled to reduce the amount of proceeds due to the Participant or any Participant Client by an amount equal to any dividend, interest, distribution or other corporate action paid to the Participant or the Participant Client in respect of any Fund Security that is transferred to the Participant or any Participant Client that, based on the valuation of such Fund Security at the time of transfer, should have been paid to the Fund.

8.04 Beneficial Ownership Limitation . The Participant represents and warrants to the Distributor and the Trust that, any portfolio securities deposited with a Fund will have an adjusted tax basis equal to the fair market value of such securities at the time of the contributions. The Participant agrees and represents that with regard to any Order for one or more Creation Units of Shares of a Fund that, after giving effect to the purchase of Shares, it will not hold more than eighty percent (80%) or more of the outstanding Shares of the relevant Fund and that it will not treat such purchase as eligible for tax-free treatment under section 351 of the Code. Such representation and warranty shall be deemed repeated with respect to each creation order and accuracy of the representation is a condition to validity of the creation order. The Trust and its Transfer Agent and Distributor shall have the right to require, as a condition to the acceptance of a deposit of Deposit Securities, supporting information from the Participant regarding Share ownership of each Fund, and shall be entitled to rely thereon to the extent necessary to make a determination regarding ownership of eighty percent (80%) or more of the currently outstanding Shares of any Fund by a Beneficial Owner.

ARTICLE 9 IRREVOCABLE PROXY

9.01 Appointment of Irrevocable Proxy. The Participant, from time to time, may be a Beneficial Owner or an owner of record of a Fund. To the extent that it is a Beneficial Owner of a Fund, the Participant does hereby irrevocably appoint the Distributor as its attorney and proxy with full authorization and power to vote (or abstain from voting) the Participant’s beneficially owned shares of a Fund which the Participant is or may be entitled to vote at any meeting of a Fund held after the date this Agreement is executed, whether annual or special and whether or not an adjourned meeting, or, if applicable, to give written consent with respect thereto. The Distributor shall mirror vote (or abstain from voting) the Participant’s beneficially owned shares in the same proportion as the votes (or abstentions) of other holders of the corresponding Fund on any matter, question or resolution submitted to the vote of shareholders of such Fund and with complete independence from and without any regard to any views, statements or interests of the Participant, its affiliates or any other person.

9.02 Powers of Attorney and Proxy. The Distributor, as attorney and proxy for the Participant under this paragraph: (i) is hereby given full power of substitution and revocation; (ii) may act through such agents, nominees or substitute attorneys as it may from time to time appoint; (iii) may provide voting instructions to such agents, nominees or substitute attorneys in any lawful manner deemed appropriate by it, including in writing, by telephone, telex, facsimile, electronically



Authorized Participant Agreement		10

(including through the Internet) or otherwise. The powers of the Distributor as attorney and proxy under this paragraph shall include (without limiting its general powers hereunder) the power to receive and waive any notice of any meeting on behalf of the Participant.

9.03 Term of Attorney and Proxy. The Distributor shall serve as an irrevocable attorney and proxy for the Participant under this paragraph for so long (and only so long) as this Agreement remains in effect. This irrevocable proxy automatically shall terminate with respect to any Fund or the Trust as a whole, if the Distributor ceases to act as Distributor to any Fund or the Trust, as applicable. The Distributor may terminate this irrevocable proxy with sixty (60) days written notice to the Participant.

ARTICLE 10 MISCELLANEOUS

10.01 Termination, and Amendment . This Agreement may be terminated (i) at any time by any party upon unanimous agreement of the parties; (ii) upon thirty days prior written notice by any party to the other parties (iii) upon written notice of the Distributor in the event of a breach by the Participant of any provision of this Agreement, the Prospectus or the Procedures Handbook; (iv) automatically upon assignment (as defined under the 1940 Act) or termination of the Distribution Agreement currently in place between the Trust and Distributor. This Agreement supersedes any prior such agreement between or among the parties. This Agreement may be amended by the Trust or the Distributor from time to time without the consent of the Participant or any Beneficial Owner by mailing a copy of such amendment to the Participant and the Transfer Agent. For purposes of this Agreement, mail will be deemed received by the Participant on the fifth Business Day following the deposit of such mail into the U.S. Postal system. If the Participant fails to object in writing to the amendment within five days after its receipt, the amendment will become part of this Agreement in accordance with its terms.

10.02 Third Party Beneficiary . The Participant and the Distributor understand and agree that the Trust and each Fund, each as a third party beneficiary to this Agreement, is entitled and intends to proceed directly against the Participant in the event that the Participant fails to honor any of its obligations pursuant to this Agreement that benefit the Trust or such Fund.

10.03 Incorporation by Reference . The Participant acknowledges receipt of the Prospectus and Procedures Handbook, represents that it has reviewed such documents and understands the terms thereof, and further acknowledges that the procedures contained therein pertaining to the creation and redemption of Shares are incorporated herein by reference.

10.04 Notices . All notices provided for or permitted under this Agreement shall be deemed effective upon receipt, and shall be in writing and (a) delivered personally, (b) sent by commercial overnight courier with written verification of receipt, or (c) sent by certified or registered U.S. mail, postage prepaid and return receipt requested, to the party to be notified, at the address for such party set forth below. Notices to Distributor shall be sent to the attention of: General Counsel, SEI Investments Distribution Co., 1 Freedom Valley Drive, Oaks, Pennsylvania 19456. Notices to the Participant shall be sent to . Notices to the Trust shall be sent to Schwab Strategic Trust, Attn: Legal Department, 211 Main Street, San Francisco, California 94105, with copies sent to: State Street Bank and Trust Company, 200 Clarendon Street, 16th Floor, Boston, Massachusetts 02116, Attention: Sheila McClorey, Transfer Agent Vice President; and: State Street Bank and Trust Company, 2 Avenue de Lafayette, 2nd Floor (LCC/2), Boston, MA 02206-5049, Attn: Mary Moran Zeven, Esq.

10.05 Commencement of Trading . The Participant may not submit an Order pursuant to this Agreement until five Business Days after effectiveness of this Agreement (which shall not take effect until this Agreement is accepted by the Transfer Agent) or such earlier date agreed upon between the Distributor and the Participant after such time as this Agreement is accepted by the Transfer Agent.



Authorized Participant Agreement		11

10.06 Dispute Resolution . Whenever either party desires to institute legal proceedings against the other concerning this Agreement, it shall first provide written notice to that effect to such other parties. The party providing such notice shall refrain from instituting said legal proceedings for a period of thirty days following the date of provision of such notice. During such period, the parties shall attempt in good faith to amicably resolve their dispute by negotiation among their executive officers.

10.07 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without giving effect to any conflict of laws or choice of laws rules or principles thereof. To the extent that the applicable laws of the Commonwealth of Pennsylvania, or any of the provisions of this Agreement, conflict with the applicable provisions of the 1933 Act, 1934 Act, or 1940 Act, the relevant Act shall control.

10.08 Counterparts . This Agreement may be executed in two or more counterparts, all of which shall constitute one and the same instrument. Each such counterpart shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. This Agreement shall be deemed executed by all parties when any one or more counterparts hereof or thereof, individually or taken together, bears the original or facsimile signatures of each of the parties.

10.09 Force Majeure . No breach of any obligation of a party to this Agreement (other than obligations to pay amounts owed) will constitute an event of default or breach to the extent it arises out of a cause, existing or future, that is beyond the control and without negligence of the party otherwise chargeable with breach or default, including without limitation: work action or strike; lockout or other labor dispute; flood; war; riot; theft; act of terrorism, earthquake or natural disaster. Either party desiring to rely upon any of the foregoing as an excuse for default or breach will, when the cause arises, give to the other party prompt notice of the facts which constitute such cause; and, when the cause ceases to exist, give prompt notice thereof to the other party. This provision shall also apply to the Transfer Agent to the extent the Transfer Agent shall have been deemed to have obligations hereunder.

10.10 Severability. Any provision of this Agreement that is determined to be invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability in such jurisdiction, without rendering invalid or unenforceable the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. If a court of competent jurisdiction declares any provision of this Agreement to be invalid or unenforceable, the parties agree that the court making such determination shall have the power to reduce the scope, duration, or area of the provision, to delete specific words or phrases, or to replace the provision with a provision that is valid and enforceable and that comes closest to expressing the original intention of the parties, and this Agreement shall be enforceable as so modified.

10.11 Assignment. No party may assign its rights or obligations under this Agreement (in whole or in part) without the prior written consent of the parties, which shall not be unreasonably withheld.

10.12 The Participant and Distributor each understand and agree that the Transfer Agent, by accepting this Agreement, has not agreed to undertake any obligations nor made any representations or warranties under this Agreement.



Authorized Participant Agreement		12

IN WITNESS WHEREOF, the Participant and Distributor have each duly executed this Agreement, as of the day and year above written.

ACCEPTED BY:

[TRANSFER AGENT]

By:

Name:

Title:



Authorized Participant Agreement		13

EXHIBIT A

FUNDS

EXHIBIT B

CERTIFIED AUTHORIZED PERSONS OF AUTHORIZED PARTICIPANT

The following are the names, titles and signatures of all persons (each, an “ Authorized Person ”) authorized to give instructions relating to any activity contemplated by the Authorized Participant Agreement (the “ Agreement ”), dated between and among SEI Investments Distribution Co. (“ Distributor ”), (the “ Participant ”), (the “ Transfer Agent ”) and (the “ Trust ”) or any other notice, request or instruction on behalf of the Participant pursuant to the Agreement. In addition, Distributor is requesting that one authorized trader is designated as the primary contact; this will enable Distributor to relay information efficiently to the authorized participants. Please complete and return to Distributor.


AP Firm Name:

Desk Name:

Authorized Persons:


Name (Primary Contact)				Phone


Signature				Email Address


Name				Phone


Signature				Email Address


Name				Phone


Signature				Email Address

The undersigned, [name], [title] of [company], does hereby certify that the persons listed above have been duly elected to the offices set forth beneath their names, that they presently hold such offices, that they have been duly authorized to act as Authorized Persons pursuant to the Participant Agreement by and between [Participant], [Trust] and , as Transfer Agent, [dated], and that their signatures set forth above are their own true and genuine signatures.

In Witness Whereof, the undersigned has hereby set his/her hand and the seal of [company] on the date set forth below.


Subscribed and sworn to before me this day of , 20		By:

		Name:

		Title:

		Date:
Notary Public

EXECUTED

Master Fund Accounting and Services Agreement

This AGREEMENT is made as of October 1, 2005 by and among each regulated management investment company identified on Appendix A hereto (each such management investment company and each regulated management investment company made subject to this Agreement in accordance with Section 11.5 below shall hereinafter be referred to as a “Fund” and are sometimes collectively hereinafter referred to as the “Funds”), and State Street Bank and Trust Company, a Massachusetts trust company, having its principal place of business at One Lincoln Place, Boston, Massachusetts 02111 (the “Accounting Agent” ).

Whereas, each Fund desires to retain the Accounting Agent to perform certain fund accounting and recordkeeping services;

Whereas, each Fund may or may not be authorized to issue common stock or shares of beneficial interest ( “Shares” ) in separate series, with each such series representing interests in a separate portfolio of securities and other assets;

Whereas, each Fund so authorized intends that this Agreement be applicable to its series of Shares (as identified on Appendix A hereto (such series together with all other series subsequently established by such Fund and made subject to this Agreement in accordance with Section 11.6 below, shall hereinafter be referred to as the “Portfolio(s)” ));

Whereas, each Fund not so authorized intends that this Agreement be applicable to it and that all references hereinafter to one or more “Portfolio(s)” shall be deemed to refer to such Fund(s); and

Whereas, the Accounting Agent is willing to perform such services upon the terms and conditions hereinafter set forth.

Now, Therefore, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:

Section 1. Appointment of Accounting Agent .

Each Fund hereby appoints Accounting Agent for purposes of providing certain fund accounting, recordkeeping and related services for the period and on the terms set forth in this Agreement. Accounting Agent accepts such appointment and agrees to render the services stated herein upon the terms and conditions hereinafter set forth.

Section 2. Duties of the Accounting Agent .

Section 2.1 Books of Account .

The Accounting Agent shall maintain the books of account of each Fund and shall perform such other duties set forth on Schedule A hereto (collectively, the “Services” ) in the manner prescribed by such Fund’s currently effective prospectus, statement of additional information or other governing document, certified copies of which have been supplied to the Accounting Agent (a “governing document”).

Each Fund shall provide timely prior notice to the Accounting Agent of any modification in the manner in which such duties/calculations are to be performed as prescribed in any revision to such Fund’s governing document and shall supply the Accounting Agent with certified copies of all amendments and/or supplements to the governing documents in a timely manner. For purposes of calculating the net asset value of a Fund, the Accounting Agent shall value each Fund’s portfolio securities utilizing prices obtained from sources designated by such Fund (collectively, the “Authorized Price Sources” ) on a Price Source Authorization substantially in the form attached hereto as Exhibit A, as the same may be amended from time to time, or otherwise designated by means of Proper Instructions (as such term is defined in Section 3.3 below) (the “Price Source Authorization” ). The Accounting Agent shall not be responsible for any revisions to calculation methods made by the Fund unless such revisions are communicated in writing to the Accounting Agent.

Section 2.2 Records .

The Accounting Agent shall create and maintain all records relating to its activities and obligations under this Agreement in such a manner as will meet the obligations of each Fund under the Investment Company Act of 1940, as amended, specifically Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the applicable Fund and shall at all times during the regular business hours of the Accounting Agent be open for inspection by duly authorized officers, employees or agents of the applicable Fund and employees and agents of the Securities and Exchange Commission. Subject to Section 5 below, the Accounting Agent shall preserve for the period required by law the records required to be maintained thereunder.

Each Fund acknowledges that, in keeping the books of account of such Fund and/or making the calculations described herein with respect to Fund property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7) of such Fund’s custodial services agreement with State Street Bank and Trust Company or otherwise with regard to free deliveries or payments of Fund assets or monies effected by a Fund’s custodian, the Accounting Agent is authorized and instructed to rely upon information provided to it by such Fund, such Fund’s counterparty(ies) (as identified by free delivery or free payment instructions issued pursuant to the relevant custody agreement), or the authorized agents of either of them.

Section 2.3 Appointment of Agents and Others .

The Accounting Agent is authorized to and may employ or associate with such person or persons, entity or entities as the Accounting Agent may deem desirable to assist it in performing its duties under this Agreement ( “Delegate(s)” ); provided, however; (a) Accounting Agent may not delegate more fifty percent of any service to such Delegate without the prior written approval of the

Fund which shall not be unreasonably withheld; (b) Accounting Agent shall pay all compensation and expenses of such Delegates; (c) Accounting Agent shall be fully responsible for the acts and omissions of such Delegates as Accounting Agent is for its own acts and omissions; and (d) Accounting Agent agrees that as used in this paragraph, the references to Delegates apply only to the provision of services by temporary workers or sub-contractors for the purpose of handling short-term increases in Fund activity or short-term shortage of Accounting Agent personnel.

Section 3. Duties of each Fund .

Section 3.1 Delivery of information .

Each Fund shall provide, or shall cause a third party to provide, timely notice to the Accounting Agent of certain data as a condition to the Accounting Agent’s performance described in Sections 1 and 2 above. The data required to be provided pursuant to this section is set forth on Schedule B hereto, which schedule may be separately amended or supplemented by the parties from time to time.

The Accounting Agent is authorized and instructed to rely upon the information it receives from the Fund or any of its Authorized Price Sources, Authorized Persons or Third Party Agents (as such terms are defined in Section 3.3 below and pursuant to instructions as defined in Section 3.3 below). Except as otherwise required by the Price Source Authorization with respect to data obtained from Authorized Price Sources, the Accounting Agent shall have no responsibility to review, confirm or otherwise assume any duty with respect to the accuracy or completeness of any data supplied to it by or on behalf of any Fund.

Section 3.2 Delivery of Documents .

Each Fund will promptly deliver to the Accounting Agent copies of each of the following documents and all future amendments and supplements, if any:

a. The Fund’s Declaration and by-laws;

b. The Fund’s currently effective registration statement under the Securities Act of 1933, as amended (the “ 1933 Act” ), and the 1940 Act and the Fund’s Prospectus(es) and Statement(s) of Additional Information relating to all Portfolios and all amendments and supplements thereto as in effect from time to time;

c. Certified copies of the resolutions of the Board of Directors or Board of Trustees of the Fund (the “ Board ”) authorizing (1) the Fund to enter into this Agreement and (2) certain individuals or entities on behalf of the Fund to (a) give instructions to the Accounting Agent pursuant to this Agreement and (b) sign checks and pay expenses;

d. A copy of the investment advisory agreement between the Fund and its investment adviser; and

e. Such other certificates, documents or opinions which the Accounting Agent reasonably believes to be necessary or appropriate in the proper performance of its duties, subject to the consent of the Fund, which consent shall not be unreasonably withheld.

Section 3.3 Proper Instructions .

Each Fund and any person/entity duly authorized by such Fund for such communication ( “Authorized Person(s)” ) shall communicate to the Accounting Agent by means of Proper Instructions. Proper Instructions shall mean (i) a writing signed or initialed by one or more Authorized Persons as the Board of a Fund shall have from time to time authorized or (ii) communication effected directly between a Fund or its duly authorized third-party agents (each, a “Third Party Agent” ) and the Accounting Agent by electro-mechanical or electronic devices, provided that such Fund and the Accounting Agent have approved such security procedures. Upon the effectiveness of this Agreement, each Fund shall provide to the Accounting Agent a list of all Authorized Persons (with signature specimens and such other information as the Accounting Agent may reasonably require) in form and substance satisfactory to the Accounting Agent. The Accounting Agent may rely upon any Proper Instruction reasonably believed by it to be genuine and to have been properly issued by an Authorized Person or on behalf of the applicable Fund and the Accounting Agent shall not be held to have notice of any change of authority of an Authorized Person (or any other person or entity) until receipt of written notice from the applicable Fund. Oral instructions shall be considered Proper Instructions if the Accounting Agent reasonably believes them to have been given by an Authorized Person. The Fund shall cause all oral instructions to be confirmed in accordance with clauses (i) or (ii) above, as appropriate. The Fund shall give timely Proper Instructions to the Accounting Agent in regard to matters affecting accounting practices and the Accounting Agent’s performance pursuant to this Agreement.

Section 4. Representations and Warranties

a. The Accounting Agent represents and warrants to, and covenants with, the Funds that:

	(i)		It is a Massachusetts trust company, duly organized and existing under the laws of The Commonwealth of Massachusetts;

	(ii)		It has the corporate power and authority to carry on its business in The Commonwealth of Massachusetts;

	(iii)		All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement;

	(iv)		No legal or administrative proceedings have been instituted or threatened which would impair the Accounting Agent’s ability to perform its duties and obligations under this Agreement;

	(v)		Its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Accounting Agent or any law or regulation applicable to it; and

	(vi)		It will comply with all applicable securities, banking, tax, commodities and other laws, rules and regulations applicable to it in connection with and as applicable to its provision of services hereunder.

b. Each Fund represents and warrants to, and covenants with, the Accounting Agent that:

	(i)		It is a business trust, duly organized, existing and in good standing under the laws of Massachusetts;

	(ii)		It has the corporate power and authority under applicable laws and by its charter and by-laws to enter into and perform this Agreement;

	(iii)		All requisite proceedings have been taken to authorize it to enter into and perform this Agreement;

	(iv)		It is an investment company duly registered under the 1940 Act;

	(v)		A registration statement under the 1933 Act and the 1940 Act has been filed and will be effective and remain effective during the term of this Agreement. The Fund also warrants to the Accounting Agent that as of the effective date of this Agreement, all necessary filings under the securities laws of the states in which the Fund offers or sells its shares have been made;

	(vi)		No legal or administrative proceedings have been instituted or threatened which would impair the Fund’s ability to perform its duties and obligations under this Agreement;

	(vii)		Its entrance into this Agreement will not cause a material breach or be in material conflict with any other agreement or obligation of the Fund or any law or regulation applicable to it; and

	(viii)		It will comply with all securities, banking, tax, commodities and other laws, rules and regulations applicable to it.

Section 5. Standard of Care; Limitation of Liabiliiy .

The Accounting Agent shall, at all times, act in good faith and exercise reasonable care in performing the Services. The Accounting Agent shall be responsible for the performance of only the Services and, except as otherwise provided under Section 2.3 above, shall have no

responsibility for the actions or activities of any other party, including other service providers, except as described in Section 2.3 above. The Accounting Agent shall be entitled to obtain, rely on and act upon the advice of counsel for the Fund on all matters. The Accounting Agent shall be without liability for any action reasonably taken or omitted in good faith in accordance with the advice of counsel for the Fund. For the avoidance of doubt, it is hereby specifically understood and agreed that nothing in this Section shall be construed as imposing upon the Accounting Agent any obligation to seek such advice of counsel for the Fund. Without in any way limiting the generality of the foregoing, the Accounting Agent shall in no event be liable for any loss or damage arising from causes beyond its control or, on an industry standard basis, its anticipation.

Each Fund, any Third Party Agent or Authorized Price Sources from which the Accounting Agent shall receive or obtain certain records, reports and other data utilized or included in the services provided hereunder are responsible for the contents of such information including, without limitation, the accuracy thereof and each Fund agrees to make no claim against the Accounting Agent arising out of the contents of such third-party data including, but not limited to, the accuracy thereof. The Accounting Agent shall have no responsibility to review, confirm or otherwise assume any duty with respect to the accuracy or completeness of any such information and shall be without liability for any loss or damage suffered as a result of the Accounting Agent’s reasonable reliance on and utilization of such information, except as otherwise required by the Price Source Authorization with respect to the use of data obtained from Authorized Price Sources. The Accounting Agent shall have no responsibility and shall be without liability for any loss or damage caused by the failure of any Fund, Authorized Person or Third Party Agent to provide it with the information required by Section 3.1, Section 3.2 or Section 3.3 above. Further, and without in any way limiting the generality of the foregoing, the Accounting Agent shall have no liability in respect of any loss, damage or expense suffered by the Fund or any third party, insofar as such loss, damage or expense arises from the performance of the Accounting Agent’s duties hereunder by reason of the Accounting Agent’s good faith reliance upon records that were maintained for any Fund by any entity other than the Accounting Agent prior to such Fund’s appointment of the Accounting Agent pursuant to this Agreement.

The Accounting Agent shall have no liability for any error of judgment or mistake of law or for any loss or damage resulting from the performance or nonperformance of its duties hereunder except to the extent caused by or resulting from the negligence, bad faith or willful misconduct of the Accounting Agent, its directors, officers, employees or Delegates. No party hereto shall be liable for any special, indirect, incidental, punitive or consequential damages, including lost profits, of any kind whatsoever (including, without limitation, attorneys’ fees) under any provision of this Agreement or for any such damages arising out of any act or failure to act hereunder, each of which is hereby excluded by agreement of the parties regardless of whether such damages were foreseeable or whether either party or any entity had been advised of the possibility of such damages. For the avoidance of doubt, it is hereby acknowledged that the damage limitations set forth in the immediately preceding sentence are not intended to relieve the Accounting Agent from any responsibility that it may otherwise have to a Fund under this Agreement for foreseeable loss incurred by such Fund as a direct result of the Accounting Agent’s negligent calculation of such Fund’s net asset value.

In any event, for any liability or loss suffered by the Fund including, but not limited to, any liability relating to qualification of the Fund as a regulated investment company under the Internal Revenue Code of 1986, as amended, or any liability relating to the Fund’s compliance with any federal or state tax or securities statute, regulation or ruling, the Accounting Agent’s liability under this Agreement with respect to the Services “n” through “aa” as set forth on Schedule A hereto only shall be limited to such amount as may be agreed upon from time to time by the parties hereto. This limitation on liability shall not be applicable to any other services listed on said Schedule A.

Each Fund agrees to indemnify and hold the Accounting Agent and its directors, officers, employees and Delegates free and harmless from any expense, loss, cost, damage or claim, including reasonable attorney’s fees and expenses (collectively, “ Losses ”), suffered by the Accounting Agent and caused by or resulting any claim, demand, action or suit (collectively, “ Claims ”) in connection with any action or omission by the Accounting Agent in the performance of its duties hereunder, or as a result of acting upon any instructions reasonably believed by it to have been communicated by Authorized Persons, or from the acts or omissions of such Fund or any authorized third-party whose services the Accounting Agent must rely upon in performing services hereunder, provided, however, that this indemnification shall not apply to actions or omissions of the Accounting Agent, its directors, officers, employees or Delegates in cases of its or their own negligence, bad faith or willful misconduct.

The indemnifications contained herein shall survive the termination of this Agreement.

Each Fund acknowledges and agrees that, with respect to investments it maintains with an entity which may from time to time act as a transfer agent for uncertificated shares of regulated investment companies (the “Underlying Transfer Agent ”), such Underlying Transfer Agent is the sole source of information on the number of shares held by it on behalf of a Fund and that the Accounting Agent has the right to rely on holdings information furnished by the Underlying Transfer Agent to the Accounting Agent in performing its duties under this Agreement.

Section 6. Disaster Recovery and Business Continuity .

The Accounting Agent shall implement and maintain reasonable disaster recovery and business continuity procedures that are reasonably designed to recover data processing systems, data communications facilities, information, data and other business related functions of the Accounting Agent in a manner and time frame consistent with legal, regulatory and business requirements applicable to the Accounting Agent in its provision of Services hereunder. In the event of any disaster which causes a business interruption, the Accounting Agent shall act in good faith and take reasonable steps to minimize service interruptions.

Section 7. Service Level Documents .

The Fund and the Accounting Agent may from time to time, in good faith, agree on certain performance measures by which the Accounting Agent is expected to provide the services contemplated by this Agreement ( “Service Level Documents” ). The Service Level Documents are designed to provide metrics and other information which may be utilized by the parties to help measure performance. The parties agree Service Level Documents reflect performance measures as opposed to specific contractual obligations. Notwithstanding, the parties agree that (a) the Accounting Agent’s inability to achieve such performance measures may give rise to grounds for termination pursuant to Section 9 below; and (b) the Accounting Agent’s performance and/or non-performance of the services, separate and apart from the performance measures in the Service Level Documents, may give rise to any remedies in tort or contract that the Fund may assert against Accounting Agent under the terms of this Agreement.

Section 8. Compensation of Accounting Agent; Expense Reimbursement .

The Accounting Agent shall be entitled to reasonable compensation for its services and reasonable expenses as Accounting Agent, as agreed upon from time to time between the Fund and the Accounting Agent. All expenses in excess of $500 must be pre-approved by the Fund in writing and such approval shall not be unreasonably withheld.

At no additional charge to the Fund, the Accounting Agent shall provide the office facilities, equipment, supplies, the personnel and other items determined by it to perform the services contemplated herein. Each Fund agrees promptly to reimburse the Accounting Agent for any equipment and supplies specially ordered in writing by or for such Fund through the Accounting Agent and for any other reasonable expenses not contemplated by this Agreement that the Accounting Agent may incur on a Fund’s behalf at a Fund’s request or with the Fund’s consent. All such equipment, supplies and expenses must be pre-approved by the Fund in writing and such approval shall not be unreasonably withheld.

Each Fund will bear all expenses that are incurred in its operation and not assumed by the Accounting Agent. Expenses to be borne by the Funds, include, but are not limited to: the Fund’s organizational expenses; cost of services of independent accountants and the Fund’s outside legal and tax counsel (including such counsel’s review of the Fund’s registration statement, proxy materials, federal and state tax qualification as a regulated investment company and other reports and materials prepared by the Accounting Agent under this Agreement); cost of any services contracted for by the Fund directly from parties other than the Accounting Agent; cost of trading operations and brokerage fees, commissions and transfer taxes in connection with the purchase and sale of securities for the Fund; investment advisory fees; taxes, insurance premiums applicable to the Fund’s operation; costs incidental to any meetings of shareholders (excluding costs specifically assumed by the Accounting Agent) including, but not limited to, the Fund’s legal and accounting fees, proxy filing fees and the costs of printing and mailing of any proxy materials; costs incidental to Board meetings (excluding costs specifically assumed by the Accounting Agent), including fees and expenses of Board members; the salary and expenses of any officer, director\trustee or

employee of the Fund; costs of printing and distribution of the Fund’s registration statements and any amendments thereto and shareholder reports; cost of typesetting and printing of prospectuses; cost of filing of the Fund’s tax returns, Form N-1A or N-2, Form N-CSR, Form N-Q, Form N-PX and Form N-SAR, and all notices, registrations and amendments associated with applicable federal and state tax, and securities laws; all applicable registration fees and filing fees required under federal and state securities laws; the Fund’s fidelity bond and directors’ and officers’ liability insurance; and cost of independent pricing services that have been approved by the Fund used in computing the Portfolios’ net asset values.

Section 9. Term of Agreement; Amendment .

a. This Agreement shall become effective on the date of its execution and shall remain in full force and effect for a period of three (3) years from the effective date (the “Initial Term” ), and thereafter shall automatically continue in full force and effect unless either party terminates this Agreement by written notice to the other party at least ninety (90) days prior to the date of termination.

b. During the Initial Term and thereafter, the Accounting Agent may, at its discretion, terminate the Agreement for cause with respect to (1) one or more Portfolios; and/or (2) the Fund in its entirety by providing not less than 60 days prior written notice to the Fund upon occurrence of any of the following termination events:

	(A)		Fund has been convicted, pled guilty or pled no contest to criminal conduct in a criminal proceeding;

	(B)		Fund has been found to have violated federal or state law in an administrative or regulatory proceeding; provided such violation (1) involves unethical conduct; and (2) Accounting Agent reasonably believes that such violation would have a material adverse impact on Accounting Agent’s ability to perform services under this Agreement:

	(C)		Fund has encountered financial difficulties which are evidenced by the authorization or commencement of, or involvement by way of pleading, answer, consent or acquiescence in, a voluntary or involuntary case under Title 11 of the United States Code, as from time to time is in effect, or any applicable law, other that said Title 11, of any jurisdiction relation to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors;

	(D)		Fund has been terminated for cause by the Accounting Agent pursuant to the terms of (1) any fund accounting or custody agreement between Accounting Agent or Fund, or (2) any fund accounting, custody or administrative agreement between Accounting Agent and Charles Schwab Investment Management, Inc. ( “CSIM” )or any other investment company other than the Fund advised by CSIM;

	(E)		CSIM has been terminated for cause by the Accounting Agent pursuant to the terms of any agreement between Accounting Agent and CSIM;

	(F)		Fund attempts to assign this Agreement in violation of Section 11.3 of this Agreement; and

	(G)		Fund has committed a material breach of this Agreement, and such breach has not been remedied by the Fund within sixty days written notice of such breach by Accounting Agent.

c. During the Initial Term and thereafter, Fund, at its discretion, may terminate this agreement for cause with respect to (1) one or more Portfolios, and/or (2) the Fund in its entirety by providing at least 60 days written notice to Accounting Agent upon the occurrence of any of the following termination events;

	(A)		Accounting Agent has been convicted, pled guilty or pled no contest to criminal conduct in any criminal proceeding in connection with the provision of fund administration, fund accounting and/or custody services to any client;

	(B)		Accounting Agent has been found to have violated federal or state law in any administrative or regulatory proceeding; provided such violation (1) involves unethical behavior and (2) relates to the provision of administrative services, fund accounting services and/or custody services to any client;

	(C)		Accounting Agent has encountered financial difficulties which are evidenced by the authorization or commencement of, or involvement by way of pleading, answer, consent or acquiescence in, a voluntary or involuntary case under Title 11 of the United States Code, as from time to time is in effect, pr any applicable law, other than said Title 11, of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors;

	(D)		Accounting Agent has been terminated by the Fund for cause pursuant to the terms of (1) any administration or custody agreement between Accounting Agent and Fund, or (2) any administration, custody or fund accounting agreement between Accounting Agent and CSIM or any investment company (other than Fund) advised by CSIM;

	(E)		Accounting Agent has been terminated by CSIM for cause pursuant to the terms of any sub-administrative agreement between Accounting Agent and or its affiliates and CSIM;

	(F)		Accounting Agent transfers fifty percent (50%) or more of any class of its voting securities; (2) transfers all, or substantially all, of its assets to a non-affiliate; or (3) attempts to assign this Agreement in violation of Section 11.3 of this Agreement; and

	(G)		In Fund’s reasonable opinion, Accounting Agent has not achieved one or more of the performance measures set forth in any Service Level Document established pursuant to

			pursuant to Section 7 of this Agreement, and a plan or revised plan has not been put into place in accordance with the following procedures: In the event that Fund reasonably believes that the Accounting Agent has not met one or more of the performance measures set forth in any Service Level Document during any calendar quarter or other period of measurement as may be set forth in any Service Level Document, the Fund may, in its discretion, submit a written deficiency notice to Accounting Agent outlining the performance deficiencies *(“Deficiency Notice”)* . Such Deficiency Notice must be provided to Accounting Agent within 20 days of the end of such quarter. After receipt of such notice, Accounting Agent shall present the Fund with a written plan to address the deficiencies set forth in the Deficiency Notice (the *“Plan”* ). Such Plan must be provided to Fund within 30 days after receipt of the Deficiency Notice. If Accounting Agent fails to submit a Plan within such 30 day period, Fund may terminate the Agreement upon 60 days written notice to the Accounting Agent. The Fund, in its discretion, may accept the Plan or reject the Plan ( *“Rejection Notice”* ). Such Rejection Notice must be submitted to the Accounting Agent within 15 days after submission of the Plan. If Fund fails to provide a Rejection Notice within such 15 days period, it shall be presumed that Fund accepted the Plan. In the event, Fund submits a Rejection Notice, Accounting Agent shall submit a revised plan *(“Revised Plan”)* to the Fund. Such Revised Plan must be provided to Fund within 30 days after provision of the Rejection Notice. If Accounting Agent fails to submit a Revised Plan within such 30 day period, Fund may terminate the Agreement upon 60 days written notice to Accounting Agent. The Fund, in its sole discretion, may accept the Revised Plan or reject the Revised Plan *(“Denial Notice”)* . Any Denial Notice must be submitted to Accounting Agent within 15 days after provision of the Revised Plan. If Fund fails to provide a Denial Notice within such 15 day period, it shall be presumed that Fund accepted the Revised Plan. If Fund provides a Denial Notice to Accounting Agent, Fund may, in its sole discretion, terminate this Agreement upon 60 days written notice to Accounting Agent. Such termination notice must be submitted to Accounting Agent within 60 days after provision of the Denial Notice.

	(H)		Accounting Agent has committed a material breach of this Agreement and such breach has not been remedied by the Accounting Agent within sixty days written notice of such breach by Fund.

d. Termination of this Agreement with respect to any given Portfolio or Fund shall in no way affect the continued validity of this Agreement with respect to any other Portfolio or Fund.

e. Upon termination of this Agreement, the Fund shall pay to the Accounting Agent such compensation and any reimbursable expenses as may be due and undisputed under the terms hereof as of the date of such termination, including reasonable out-of-pocket expenses associated with such termination. All out-of-pocket expenses associated under the sub-paragraph for which the Accounting Agent seeks reimbursement must be pre-approved by this Fund in writing, such approval shall not be unreasonable withheld.

f. This Agreement may be modified or amended from time to time by mutual written agreement of the parties hereto.

Section 10. Successor Accounting Agent .

If a successor accounting agent for any Fund shall be appointed by a Fund, the Accounting Agent shall upon termination deliver to such successor agent at the office of the Accounting Agent all properties of such Fund held by it hereunder. If no such successor agent shall be appointed, the Accounting Agent shall at its office upon receipt of Proper Instructions deliver such properties in accordance with such instructions.

Section 11. General .

Section 11.1 Massachusetts Law to Apply . This Agreement shall be governed by, construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts excluding that body of law applicable to conflicts of law.

Section 11.2 Prior Agreements . This Agreement supersedes and terminates, as of the date hereof, all prior agreements between any Fund and the Accounting Agent relating to fund accounting and recordkeeping services regarding such Fund.

Section 11.3 Assignment . No part or whole of this Agreement may be assigned by any party hereto without the prior consent in writing of (a) the Funds in the event of assignment by the Accounting Agent or (b) by the Accounting Agent in the event of assignment by any Fund, except that any party may, without such prior consent, assign to an entity controlling, controlled by or under common control with such party or to a successor of all of or a substantial portion of its business.

Section 11.4 Interpretive and Additional Provisions . In connection with the operation of this Agreement, the Accounting Agent and the Funds may from time to time agree on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions shall be in a writing signed by all 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 a Fund’s governing documents. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement.

Section 11.5 Additional Funds . In the event that any management investment company in addition to those listed on Appendix A hereto desires to have the Accounting Agent render services as accounting agent under the terms hereof, it shall so notify the Accounting Agent in writing, and if the Accounting Agent agrees in writing to provide such services, such

management investment company shall become a Fund hereunder and be bound by all terms and conditions and provisions hereof with respect to such Fund.

Section 11.6 Additional Portfolios . In the event that any Fund establishes one or more series of Shares in addition to those set forth on Appendix A hereto with respect to which it desires to have the Accounting Agent render services as accounting agent under the terms hereof, it shall so notify the Accounting Agent in writing, and if the Accounting Agent agrees in writing to provide such services, such series of Shares shall become a Portfolio hereunder.

Section 11.7 Remote Access Services Addendum . Each Fund and the Accounting Agent hereby agree to the terms of the Remote Access Services Addendum hereto.

Section 11.8 Confidentiality .

a. Definition of term “Fund Confidential Information” . The term “Fund Confidential Information” means any information that Fund discloses, whether in writing, electronically or orally, to Accounting Agent whether in tangible or intangible form which is identified as confidential at the time of disclosure or which by the circumstances of disclosure or nature of the information would be considered to be confidential. By way of example and not limitation, Fund Confidential Information includes: (i) any information concerning Fund’s, its agents or licensors’ technology, such as systems, source code, databases, hardware, software, programs, applications, engine protocols, routines, models, displays and manuals, including, without limitation, the selection, coordination, and arrangement of the contents thereof; and (ii) any information concerning Fund’s, its agents or licensors’ financial or business plans or operations, such as research activities and plans, marketing or sales plans, pricing or pricing strategies, operational techniques, internal controls, compliance policies, methods of operation, security procedures, strategic plans, customer information, and unpublished financial information, including information concerning revenues, profits and profit margins. Accounting Agent agrees that Fund will have no obligation to specifically identify by any notice or other action any information to which the protection of this Agreement extends. Without limiting the foregoing, to the extent disclosed to the Accounting Agent, portfolio holdings information of the Fund shall be deemed to be Confidential Information of the Fund until such time as such portfolio holdings information shall made in a public filing by the Fund. The Accounting Agent shall not purchase or sell securities or other investments on the basis of confidential portfolio holdings information of the Fund provided to the Accounting Agent and shall take reasonable steps to prevent any employee or agent of Accounting Agent from purchasing or selling securities or other investments on the same basis.

b. Restrictions on Use . Without the prior written consent of Fund, Accounting Agent will not use any portion of Fund Confidential Information for any purpose other than for the services provided under this Agreement. Accounting Agent further agrees that:

(i)

it will hold Fund Confidential Information of Fund in the strictest confidence;

	(ii)		it will exercise the same care with respect to Fund Confidential Information as it exercises with respect to its own proprietary and confidential information;

	(iii)		it will not, without Fund’s prior written consent, copy or disclose to any third party any portion thereof;

	(iv)		it will notify immediately Fund of any unauthorized disclosure or use unless in and ownership of Fund Confidential Information resulting from such unauthorized disclosure or use by or through Accounting Agent; and

	(v)		it will restrict dissemination of Fund Confidential Information to only those persons within or related to its organization who are involved in the delivery services provided under this Agreement, to Accounting Agent’s regulatory authorities as required to comply with such regulatory authorities’ request or order, and to Accounting Agent’s examiners, auditors, directors and legal counsel to the extent Accounting Agent believes the same is reasonably required provided that Accounting Agent makes reasonable effort to notify such parties as to the confidential nature of the Fund Confidential Information.

c. Exceptions . The foregoing shall not prohibit or limit Accounting Agent’s use, disclosure, reproduction or dissemination of Fund Confidential Information which:

	(i)		is or becomes public domain information or material through no fault or breach on the part of Accounting Agent;

	(ii)		as demonstrated by the written records of Accounting Agent or otherwise, was already lawfully known (without restriction on disclosure) to Accounting Agent prior to the information being disclosed to Accounting Agent by Fund or any representative of Fund;

	(iii)		has been or is hereafter rightfully furnished to Accounting Agent without restriction on disclosure by the Fund or a third person lawfully in possession thereof;

	(iv)		has been independently developed, by or for Accounting Agent, without reference to Fund Confidential Information;

	(v)		is requested or required to be disclosed pursuant to any legal or regulatory proceeding, investigation, audit, examination, subpoena, civil investigative demand or other similar process, where required by law, regulation, rule or self-regulatory organization rule, provided that, unless prohibited from doing so in such circumstance, the Accounting Agent notifies Fund as promptly as possible so that Fund may to have a reasonable opportunity to obtain a protective order or other form of protection against disclosure. Notwithstanding any such disclosure by Accounting Agent, such disclosure will not otherwise affect Accounting

			Agent’s obligations hereunder with respect to Fund Confidential Information so disclosed which is retained by Accounting Agent; or

	(vi)		is disclosed by the Accounting Agent with the prior written consent of the applicable Fund to disclose, which consent shall not be unreasonably withheld.

Any Fund Confidential Information in the possession of Accounting Agent that has been disclosed to it by Fund or any representative of Fund that is not within any of the exceptions above shall be considered confidential unless the Accounting Agent may demonstrate otherwise by records, documentation or other reasonable means.

d. Equitable Relief . Accounting Agent agrees and acknowledges that any breach of this Section 11.8 may cause Fund irreparable harm for which monetary damages would be inadequate. Accordingly, Fund will be entitled to seek injunctive or other equitable relief to remedy any threatened or actual breach of this Section 11.8 by Accounting Agent, as well as monetary damages.

Section 11.9 Notices . Any notice, instruction or other instrument required to be given hereunder may be delivered in person to the offices of the parties as set forth herein during normal business hours or delivered prepaid registered mail or by telex, cable or telecopy to the parties at the following addresses or such other addresses as may be notified by any party from time to time.


To any Fund:		[Name of Fund]
		101 Montgomery Street
		San Francisco, California 94104
		Attention: George M. Pereira, Treasurer and Principal
		Financial Officer
		Telephone: 415-636-3300
		Telecopy: 415-667-3800

With a copy to:		Koji E. Felton, Secretary
		101 Montgomery Street
		San Francisco, California 94104
		Telephone: 415-636-3461
		Telecopy:415-667-3440


To the Accounting Agent:		State Street Bank and Trust Company
		1776 Heritage Drive
		North Quincy, Massachusetts 02171
		Attention: James M. Keenan, Vice President
		Telephone: 617-985-9422
		Telecopy: 617-985-7575

S ection 11.10 Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all such counterparts taken together shall constitute one and the same agreement.

S ection 11.11 Severability . If any provision or provisions of this Agreement shall be held to be invalid, unlawful or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired.

S ection 11.12 Reproduction of Documents . This Agreement and all schedules, addenda, exhibits, appendices, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.

S ection 11.13 Massachusetts Business Trust . With respect to any Fund which is a party to this Agreement and which is organized as a Massachusetts business trust (in each case a “Trust”), the term “Fund” (as used throughout this Agreement) means and refers to the trustees from time to time serving under the applicable trust agreement of such Trust, as the same may be amended from time to time (the “Declaration of Trust”). It is expressly agreed that the obligations of any such Trust hereunder shall not be binding upon any of the trustees, shareholders, nominees, officers, agents or employees of such Trust personally, but bind only the trust property of the Trust as set forth in the applicable Declaration of Trust. In the case of each Trust, the execution and delivery of this Agreement on behalf of the Trust has been authorized by the trustees, and signed by an authorized officer of the Trust, in each case acting in such capacity and not individually, and neither such authorization by the trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually, but shall only bind the trust property of the Trust as provided in its Declaration of Trust.

Signature Page


Signature Attested to By:	Each Regulated Management Investment Company Set Forth on Appendix A Hereto

/s/ Michael Clinton	By:	/s/ George M. Pereira

Name: Michael Clinton		George M. Pereira, Treasurer and Principal
Title: Assistant Treasurer		Financial Officer

Signature Attested to By:	State Street Bank and Trust Company

/s/ Stephanie L. Poster	By:	/s/ Joseph L. Hooley

Stephanie L. Poster, Vice President		Joseph L. Hooley, Executive Vice President

Appendix A
to
Master Fund Accounting and Services Agreement
May 21, 2008

MANAGEMENT INVESTMENT COMPANIES AND PORTFOLIOS THEREOF, IF ANY

Schwab Capital Trust
Schwab International Index Fund
Schwab Small-Cap Index Fund
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Schwab MarketTrack All Equity Portfolio
Schwab S&P 500 Index Fund
Schwab Dividend Equity Fund
Schwab Small-Cap Equity Fund
Schwab Institutional Select S&P 500 Fund
Schwab Large-Cap Growth Fund
Schwab Total Stock Market Index Fund
Schwab Financial Services Fund
Schwab Health Care Fund
Schwab Target 2040 Fund
Schwab Target 2030 Fund
Schwab Target 2020 Fund
Schwab Target 2010 Fund
Schwab Retirement Income Fund
Schwab Premier Equity Fund
Schwab Core Equity Fund
Schwab Hedged Equity Fund
Laudus International MarketMasters Fund
Laudus U.S. MarketMasters Fund
Laudus Small-Cap MarketMasters Fund
Schwab Balanced Fund (formerly known as Schwab Viewpoints Fund)
Schwab Fundamental US Large Company Index Fund
Schwab Fundamental US Small-Mid Company Index Fund
Schwab Fundamental International Large Company Index Fund
Schwab Fundamental Emerging Markets Index Fund
Schwab Fundamental International Small-Mid Company Index Fund
Schwab Target 2015 Fund
Schwab Target 2025 Fund
Schwab Target 2035 Fund
Schwab Monthly Income Fund — Moderate Payout
Schwab Monthly Income Fund — Enhanced Payout
Schwab Monthly Income Fund — Maximum Payout
Schwab International Core Equity Fund

Schwab Annuity Portfolios
Schwab MarketTrack Growth Portfolio II
Schwab S&P500 Index Portfolio
Schwab Money Market Portfolio

Charles Schwab Family of Funds
Schwab Money Market Fund
Schwab Value Advantage Money Fund
Schwab Retirement Advantage Money Fund
Schwab Investor Money Fund (formerly Schwab Retirement Money Fund)
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Municipal Money Fund
Schwab California Municipal Money Fund
Schwab New York AMT Tax-Free Money Fund (formerly known as Schwab New York Municipal Money Fund)
Schwab AMT Tax-Free Money Fund (formerly known as Schwab Florida Municipal Money Fund)
Schwab Massachusetts AMT Tax-Free Money Fund (formerly known as Schwab Massachusetts Municipal Money Fund)
Schwab Pennsylvania Municipal Money Fund
Schwab New Jersey AMT Tax-Free Money Fund (formerly known as Schwab New Jersey Municipal Money Fund)
Schwab Cash Reserves
Schwab Advisor Cash Reserves
Schwab California AMT Tax-Free Money Fund

Schwab Investments
Schwab Inflation Protected Fund
Schwab 1000 Index Fund
Schwab Short-Term Bond Market Fund
Schwab Total Bond Market Fund
Schwab California Tax Free Bond Fund (formerly known as Schwab California Long-Term Tax-Free Bond Fund)
Schwab Tax-Free Bond Fund (formerly known as Schwab Long-Term Tax-Free Bond Fund)
Schwab YieldPlus Fund
Schwab GNMA Fund
Schwab California Tax-Free YieldPlus Fund
Schwab Tax-Free YieldPlus Fund
Schwab Global Real Estate Fund
Schwab Premier Income Fund

Amendment to Master Fund Accounting and Services Agreement

This Amendment to Master Fund Accounting and Services Agreement is made as of September 22, 2009 by and among each regulated management investment company identified on Appendix A hereto (each such management investment company shall hereinafter be referred to as a “ Fund ”) and State Street Bank and Trust Company, a Massachusetts trust company (the “ Accounting Agent ”). Capitalized terms used but not defined herein shall have the meaning ascribed to them in that certain Master Fund Accounting and Services Agreement made as of October 1, 2005 (the “ Fund Accounting Agreement ”).

Witnesseth:

Whereas , certain of the Funds and the Accounting Agent entered into the Fund Accounting Agreement pursuant to which the Accounting Agent provides certain fund accounting and recordkeeping services to such Funds;

Whereas , the Funds listed on Appendix B hereto (collectively, the “ Schwab ETFs ”), which are exchange traded funds, will issue and redeem shares of each Portfolio only in aggregations of Shares known as “ Creation Units ,” generally in exchange for a basket of certain equity or fixed income securities and a specified cash payment, as more fully described in the currently effective prospectus and statement of additional information of the Schwab ETF related to the Portfolio (collectively, the “ Prospectus ”);

Whereas , each of the Schwab ETFs desires to become a party to the Fund Accounting Agreement and the Accounting Agent desires to provide the services set forth in the Fund Accounting Agreement to each of the Schwab ETFs; and

Whereas , the nature of the Schwab ETFs requires that certain provisions of the Fund Accounting Agreement be modified for the Schwab ETFs only.

Now Therefore , in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:

1. For purposes of the Schwab ETFs only, Section 9 of the Fund Accounting Agreement is hereby amended as follows:

(A) Section 9(a) of the Fund Accounting Agreement is hereby amended in its entirety and the following Section 9(a) is inserted in lieu thereof:

SECTION 9. TERM OF AGREEMENT; AMENDMENT.

automatically continue in full force and effect unless either party terminates this Agreement by written notice to the other party at least ninety (90) days prior to the date of termination.

(B) Section 9(c) of the Fund Accounting Agreement is hereby amended by the insertion of the following new Section 9(c)(I):

(I) With respect to a Schwab ETF, in the event that such Schwab ETF ceases operating as and under the name of such Schwab ETF for any reason, which may (but need not) be in connection with a merger, reorganization, transfer or liquidation of assets, stock exchange delisting or other extraordinary event. For the avoidance of doubt, upon termination of this Fund Accounting Agreement under this Section 9(b)(I), such Schwab ETF shall pay to the Accounting Agent such compensation (including any applicable fees) and any reimbursable expenses as may be due and undisputed under the terms hereof to the date of such termination, including reasonable out-of-pocket expenses associated with such termination, and no other compensation, fees, charges or expenses will be assessed or will accrue with respect to said Schwab ETF after said termination. All out-of-pocket expenses for which the Accounting Agent seeks reimbursement under this Section 9(b)(I) must be pre-approved by the Schwab ETF in writing, provided that such approval shall not be unreasonably withheld.

For the avoidance of doubt, the remainder of Section 9 of the Fund Accounting Agreement, including Section 9(c)(H) thereof relating to terminations in connection with material breaches by the Accounting Agent, shall remain in effect for all Funds and Schwab ETFs.

2. For purposes of the Schwab ETFs only, Schedule A to the Fund Accounting Agreement is hereby amended by adding the following services:

bb. The Accounting Agent shall transmit the net asset value per share of each Portfolio to the Fund’s transfer agent, the Fund’s distributor, the New York Stock Exchange (the “ NYSE ”) and such other entities as directed in writing by the Fund.

cc. The Accounting Agent shall on each day a Portfolio is open for the purchase or redemption of Shares of such Portfolio compute the number of shares of each Deposit Security (as further described in the Statement of Additional Information) to be included in the current Fund Deposit (as further described in the Statement of Additional Information) and shall transmit such information to the National Securities Clearing Corporation.

-2-

3. In the event that any exchange traded fund in addition to those listed on Appendix B hereto desires to have the Accounting Agent render services as accounting agent under the terms of the Fund Accounting Agreement and this Amendment, it shall so notify the Accounting Agent in writing, and if the Accounting Agent agrees in writing to provide such services, such exchange traded fund shall become a Fund and a Schwab ETF under the Fund Accounting Agreement and this Amendment and be bound by all terms and conditions and provisions of the Fund Accounting Agreement and this Amendment with respect to such Fund.

4. Except as modified hereby, all other terms and conditions of the Fund Accounting Agreement shall remain in full force and effect.

5. This Amendment may be executed in multiple counterparts, which together shall constitute one instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

-3-

Signature Page


Fund Signature Attested to By:		Each Regulated Management
		Investment Company Set Forth on
		Appendix A Hereto

By:		By:
Name:	Shelley A. Harding	Name:
Title:		Title:


By:		By:
Name:	Shelley A. Harding	Name:
Title:		Title:


Signature Attested to By:		State Street Bank and Trust Company

By:		By:
Name:		Name:	Joseph C. Antonellis

Title:		Title:	Vice Chairman

Amendment to Master Fund Accounting and Services Agreement

APPENDIX A

MASTER ACCOUNTING SERVICES AGREEMENT

MANAGEMENT INVESTMENT COMPANIES AND PORTFOLIOS THEREOF, IF ANY

[Missing Funds]

SCHWAB INVESTMENTS
Schwab 1000 Index Fund
Schwab YieldPlus Fund
Schwab Short-Term Bond Market Fund
Schwab Total Bond Market Fund
Schwab GNMA Fund
Schwab Tax-Free YieldPlus Fund
Schwab Tax-Free Bond Fund
Schwab California Tax-Free YieldPlus Fund
Schwab California Tax-Free Bond Fund
Schwab Inflation Protected Fund
Schwab Premier Income Fund

SCHWAB CAPITAL TRUST
Schwab Core Equity Fund
Schwab Hedged Equity Fund
Schwab Premier Equity Fund
Laudus International MarketMasters Fund
Laudus Small-Cap MarketMasters Fund
Schwab Balanced Fund (formerly Schwab Viewpoints Fund)

A-1

Schwab Fundamental US Small-Mid Company Index Fund
Schwab Fundamental US Large Company Index Fund
Schwab Monthly Income Fund — Moderate Payout
Schwab Monthly Income Fund — Enhanced Payout
Schwab Monthly Income Fund — Maximum Payout
Schwab International Core Equity Fund

SCHWAB ANNUITY PORTFOLIOS
Schwab Money Market Portfolio

SCHWAB STRATEGIC TRUST

Schwab U.S. Broad Market ETF
Schwab U.S. Large-Cap ETF
Schwab U.S. Large-Cap Growth ETF
Schwab U.S. Large-Cap Value ETF

Schwab U.S. Small-Cap ETF
Schwab International Equity ETF
Schwab International Small-Cap Equity ETF
Schwab Emerging Markets Equity ETF

A-2

APPENDIX B

List of Schwab ETFs

SCHWAB STRATEGIC TRUST

EXECUTED

SUB-ADMINISTRATION AGREEMENT

Agreement dated as of October 1, 2005 by and between State Street Bank and Trust Company, a Massachusetts trust company (the “Sub-Administrator”), and Charles Schwab Investment Management, Inc., a California corporation (the “Administrator”).

WHEREAS, each of the investment companies, or series thereof (each, an “Investment Fund” and together, the “Investment Funds”), listed in Schedule A to this Agreement is registered as an open-end, management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”); and

WHEREAS, each Investment Fund has retained the Administrator to furnish administrative services to it; and

WHEREAS, the Administrator desires to retain the Sub-Administrator to furnish certain administrative services to the Investment Funds, and the Sub-Administrator is willing to furnish such services, on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows:

1. Appointment of Sub-Administrator

The Administrator hereby appoints the Sub-Administrator to act as sub-administrator with respect to each Investment Fund for purposes of providing certain sub-administrative services for the period and on the terms set forth in this Agreement. The Sub-Administrator accepts such appointment and agrees to render the services stated herein.

The Investment Funds will initially consist of the portfolio(s) and/or class(es) of shares listed in Schedule A to this Agreement. In the event that the Administrator furnishes administrative services to one or more additional Investment Funds with respect to which it wishes to retain the Sub-Administrator to act as sub-administrator hereunder, the Administrator shall notify the Sub-Administrator in writing. Upon written acceptance by the Sub-Administrator, such Investment Fund shall become subject to the provisions of this Agreement to the same extent as the existing Investment Funds, except to the extent that such provisions (including those relating to the compensation and expenses payable by the Administrator) may be modified with respect to each additional Investment Fund in writing by the Administrator and the Sub-Administrator at the time of the addition of the Investment Fund.

2. Delivery of Documents

The Administrator will promptly deliver to the Sub-Administrator copies of each of the following documents and all future amendments and supplements, if any:

	a.		Each Investment Fund’s Declaration of Trust and by-laws;

	b.		Each Investment Fund’s currently effective registration statement under the Securities Act of 1933, as amended (the “1933 Act”), and the 1940 Act and each Investment Fund’s Prospectus(es) and Statement(s) of Additional Information and all amendments and supplements thereto as in effect from time to time;

	c.		Certified copies of the resolutions of the Board of Trustees of each Investment Fund (the “Board”) authorizing (1) the Administrator to enter into this Agreement and (2) certain individuals or entities on behalf of the Administrator to (a) give instructions to the Sub-Administrator pursuant to this Agreement and (b) sign checks and pay expenses (“Authorized Persons”);

	d.		A copy of each investment advisory agreement and each administration agreement between an Investment Fund and its investment adviser and Administrator, respectively; and

	e.		Such other certificates, documents or opinions which the Sub- Administrator reasonably believes to be necessary or appropriate in the proper performance of its duties, subject to the consent of Administrator which shall not be unreasonably withheld.

3. Representations and Warranties of the Sub-Administrator

The Sub-Administrator represents and warrants to the Administrator that:

	a.		It is a Massachusetts trust company, duly organized and existing under the laws of The Commonwealth of Massachusetts;

	b.		It has the corporate power and authority to carry on its business in The Commonwealth of Massachusetts;

	c.		All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement;

	d.		No legal or administrative proceedings have been instituted or threatened which would impair the Sub-Administrator’s ability to perform its duties and obligations under this Agreement; and

	e.		Its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Sub-Administrator or any law or regulation applicable to it.

4. Representations and Warranties of the Administrator

The Administrator represents and warrants to the Sub-Administrator that:

	a.		It is a corporation, duly organized, existing and in good standing under the laws of California;

	b.		It has the corporate power and authority under applicable laws and by its charter and by-laws to enter into and perform this Agreement;

	c.		All requisite proceedings have been taken to authorize it to enter into and perform this Agreement;

	d.		No legal or administrative proceedings have been instituted or threatened which would impair the Administrator’s ability to perform its duties and obligations under this Agreement;

	e.		Its entrance into this Agreement will not cause a material breach or be in material conflict with any other agreement or obligation of the Administrator or any law or regulation applicable to it; and

	f.		With respect to each Investment Fund:

	(1)		Each Investment Fund is an investment company duly registered under the 1940 Act;

	(2)		A registration statement under the 1933 Act and the 1940 Act has been filed and will be effective and remain effective during the term of this Agreement. The Administrator also warrants to the Sub-Administrator that as of the effective date of this Agreement, all necessary filings under the securities laws of the states in which each Investment Fund offers or sells its shares have been made; and

	(3)		As of the close of business on the date of this Agreement, each Investment Fund is authorized to issue shares of beneficial interest,

and each Investment Fund will initially offer shares, in the authorized amounts as set forth in Schedule A to this Agreement.

5. Sub-Administration Services

The Sub-Administrator shall provide the services set forth on Schedule C hereto (collectively, “Services”), subject to the control, supervision, authorization and direction of the Administrator and, in each case where appropriate, the review and comment by an Investment Fund’s auditors and legal counsel and in accordance with procedures which may be established from time to time between the Administrator and the Sub-Administrator.

The Sub-Administrator shall perform such other services for the Administrator that are mutually agreed to by the parties from time to time in writing, for which the Administrator will pay such fees as may be mutually agreed upon in writing, including the Sub-Administrator’s reasonable out-of-pocket expenses which are required to perform such other services. All such expenses in excess of $500 must be pre-approved by the Administrator in writing and such approval shall not be unreasonably withheld. The provision of such services shall be subject to the terms and conditions of this Agreement.

6. Fees; Expenses; Expense Reimbursement; Delegates

The Sub-Administrator shall receive from the Administrator such compensation for the Sub-Administrator’s services provided pursuant to this Agreement as may be agreed to from time to time in a written fee schedule approved by the parties and initially set forth in the Fee Schedule to this Agreement. The fees are accrued daily and billed monthly and shall be due and payable within thirty (30) days of the Administrator’s receipt of the invoice. Upon the termination of this Agreement before the end of any month, the fee for the part of the month before such termination shall be prorated according to the proportion which such part bears to the full monthly period and shall be payable within thirty (30) days of termination of this Agreement. In addition, the Administrator shall reimburse the Sub-Administrator for its reasonable out-of-pocket costs which are required to perform the services under this Agreement. All expenses in excess of $500 must be pre-approved by the Administrator in writing and such approval shall not be unreasonably withheld. All rights of compensation and expense reimbursement under this Agreement for services performed as of the termination date shall survive the termination of this Agreement.

At no additional charge to the Administrator, the Sub-Administrator shall provide the office facilities, equipment, supplies, the personnel and other items determined by it to perform the services contemplated herein. The Administrator agrees promptly to reimburse the Sub-Administrator for any equipment and supplies specially ordered in writing by or for the Administrator through the Sub-Administrator and for any other reasonable expenses not contemplated by this Agreement that the Sub-Administrator may incur on the Administrator’s behalf at the Administrator’s request or with the Administrator’s consent. All such equipment,

supplies and expenses must be pre-approved by the Administrator in writing and such approval shall not be unreasonably withheld.

The Administrator or each Investment Fund will bear all expenses that are incurred in its operation and not assumed by the Sub-Administrator.

The Sub-Administrator is authorized to and may employ or associate with such person, persons, entity or entities as the Sub-Administrator may deem desirable to assist it in performing its duties under this Agreement (collectively, “Delegates”); provided, however; (1) Sub-Administrator may not delegate more fifty percent of any Service to such Delegates without the prior written approval of the Administrator which shall not be unreasonably withheld; (2) Sub-Administrator shall pay all compensation and expenses of such Delegates; and; (3) Sub-Administrator agrees that as used in this paragraph, the references to Delegates applies only to the provision of services by temporary workers or sub-contractors for the purpose of handling short-term increases in Administrator or Investment Fund activity or short-term shortage of Sub-Administrator personnel.

7. Instructions

At any time, the Sub-Administrator may apply to any officer of the Administrator or to independent accountants for an Investment Fund for written instructions with respect to any matter arising in connection with the services to be performed by the Sub-Administrator under this Agreement. Nothing in this paragraph shall be construed as imposing upon the Sub-Administrator any obligation to seek instructions, except to the extent, Sub-Administrator is required by law or the other terms of this Agreement to obtain such instructions. Sub-Administrator shall act in accordance with all such instructions, unless Sub-Administrator reasonable believes that to do so would violate applicable law or the other terms of this Agreement. Sub-Administrator shall provide written notice to the Administrator of its intention to not act on any instructions.

8. Standard of Care / Limitation of Liability and Indemnification

The Sub-Administrator shall, at all times, act in good faith and exercise reasonable care in performing the Services. The Sub-Administrator shall be responsible for the performance of only the Services and shall have no responsibility for the actions or activities of any other party, including other service providers. Notwithstanding the foregoing sentence, the Sub-Administrator shall be fully responsible for the acts and omissions of such Delegates as Sub-Administrator is for its own acts and omissions. The Sub-Administrator shall be entitled to obtain, receive, rely on and act upon the advice of counsel for an Investment Fund on all matters. The Sub-Administrator shall be without liability for any action reasonably taken or omitted in good faith in accordance with the advice of counsel for an Investment Fund. For the avoidance of doubt, it is hereby specifically understood and agreed that nothing in this section shall be construed as imposing upon the Sub-Administrator any obligation to seek such advice of counsel for each Investment Fund.

The Sub-Administrator shall have no liability in respect of any loss, damage or expense suffered by the Administrator or an Investment Fund insofar as such loss, damage or expense arises from the performance of the Sub-Administrator’s duties hereunder in good faith reliance upon records that were maintained for the Investment Fund by entities other than the Sub-Administrator prior to the Sub-Administrator’s appointment as Sub-Administrator for the Investment Fund. The Sub-Administrator shall have no liability for any error of judgment or mistake of law or for any loss or damage resulting from the performance or nonperformance of its duties hereunder except to the extent caused by or resulting from the negligence, bad faith or willful misconduct of the Sub-Administrator, its directors, officers, employees or Delegates (the “Responsible Parties”). Neither party shall be liable to the other party for any special, indirect, incidental, punitive or consequential damages, including lost profits, of any kind whatsoever (including, without limitation, attorneys’ fees) under any provision of this Agreement or for any such damages arising out of any act or failure to act hereunder, each of which is hereby excluded by agreement of the parties regardless of whether such damages were foreseeable or whether either party or any entity had been advised of the possibility of such damages. In any event, for any liability or loss suffered by an Investment Fund including, but not limited to, any liability relating to qualification of an Investment Fund as a regulated investment company under the Internal Revenue Code of 1986, as amended, or any liability relating to an Investment Fund’s compliance with any federal or state tax or securities statute, regulation or ruling, the Sub-Administrator’s liability under this Agreement shall be limited to such amount as may be agreed upon from time to time between the parties hereto.

The Sub-Administrator shall not be responsible or liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its control or, on an industry standard basis, its anticipation.

The Administrator shall indemnify and hold the Sub-Administrator and its directors, officers, employees and Delegates harmless from all loss, cost, damage and expense, including reasonable fees and expenses for counsel (collectively “Losses”), incurred by the Sub-Administrator resulting from any claim, demand, action or suit (collectively “Claims”) in connection with any action or omission by the Sub-Administrator in the performance of its duties hereunder, or as a result of acting upon any instructions reasonably believed by it to have been communicated by Authorized Persons or upon reasonable reliance on information or records given or made by the Administrator or an Investment Fund or an Investment Fund’s investment adviser(s), provided that this indemnification shall not apply to actions or omissions of the Responsible Parties in cases of its or their own negligence, bad faith or willful misconduct.

The indemnification contained herein shall survive the termination of this Agreement.

9. Disaster Recovery and Business Continuity

The Sub-Administrator shall implement and maintain reasonable disaster recovery and business continuity procedures that are reasonably designed to recover data processing systems, data communications facilities, information, data and other business related functions of the Sub-Administrator in a manner and time frame consistent with legal, regulatory and business requirements applicable to the Sub-Administrator in its provision of services hereunder. In the event of any disaster which causes a business interruption, the Sub-Administrator shall act in good faith and take reasonable steps to minimize service interruptions.

10. Service Level Documents

The Administrator and the Sub-Administrator may from time to time, in good faith, agree on certain performance measures by which the Sub-Administrator is expected to provide the services contemplated by this Agreement (“Service Level Documents”). The Service Level Documents are designed to provide metrics and other information that can be utilized by the parties to help measure the Sub-Administrator’s performance. The parties agree the Service Level Documents reflect performance measures as opposed to specific contractual obligations. Notwithstanding, the parties agree that (1) Sub-Administrator’s inability to achieve such performance measures may give rise to grounds for termination pursuant to Section 14; and (2) Sub-Administrator’s performance and/or nonperformance of the services, separate and apart from the performance measures in the Service Level Documents, may give rise to any remedies tort or contract that the Administrator may assert against Sub-Administrator under the terms of this Agreement.

11. Confidentiality

Definition of “Investment Fund Confidential Information”. The term “Investment Fund Confidential Information” means any information that an Investment Fund or the Administrator discloses, whether in writing, electronically or orally, to Sub-Administrator whether in tangible or intangible form which is identified as confidential at the time of disclosure or which by the circumstances of disclosure or nature of the information would be considered to be confidential. By way of example and not limitation, Investment Fund Confidential Information includes: (i) any information concerning an Investment Fund’s, its agents or licensors’ technology, such as systems, source code, databases, hardware, software, programs, applications, engine protocols, routines, models, displays and manuals, including, without limitation, the selection, coordination, and arrangement of the contents thereof; and (ii) any information concerning an Investment Fund’s, its agents or licensors’ financial or business plans or operations, such as research activities and plans, marketing or sales plans, pricing or pricing strategies, operational techniques, internal controls, compliance policies, methods of operation, security procedures, strategic plans, customer information, and unpublished financial information, including information concerning revenues, profits and profit margins. Sub-Administrator agrees that an Investment Fund will have no obligation to specifically identify by any notice or other action any information to which the protection of this Agreement extends.

Without limiting the foregoing, to the extent disclosed to the Sub-Administrator, portfolio holdings information of an Investment Fund shall be deemed to be Confidential Information of the Investment Fund until such time as such portfolio holdings information shall made in a public filing by an Investment Fund. The Sub-Administrator shall not purchase or sell securities or other investments on the basis of confidential portfolio holdings information of an Investment Fund provided to the Sub-Administrator and shall take reasonable steps to prevent any employee or agent of Sub-Administrator from purchasing or selling securities or other investments on the same basis.

Restrictions on Use. Without the prior written consent of Administrator or an Investment Fund, Sub-Administrator will not use any portion of Investment Fund Confidential Information for any purpose other than for the services provided under this Agreement. Sub-Administrator further agrees that:

	(a)		it will hold Investment Fund Confidential Information of each Investment Fund in the strictest confidence;

	(b)		it will exercise the same care with respect to Investment Fund Confidential Information as it exercises with respect to its own proprietary and confidential information;

	(c)		it will not, without Administrator’s or an Investment Fund’s prior written consent, copy or disclose to any third party any portion thereof;

	(d)		it will notify immediately Administrator or an Investment Fund of any unauthorized disclosure or use unless in and ownership of Investment Fund Confidential Information resulting from such unauthorized disclosure or use by or through Sub-Administrator; and

	(e)		it will restrict dissemination of Investment Fund Confidential Information to only those persons within or related to its organization who are involved in the delivery of services provided under this Agreement to Sub-Administrator’s regulatory authorities as required to comply with such regulatory authorities’ request or order and to Sub-Administrator’s examiners, auditors, directors and legal counsel to the extent Sub-Administrator believes the same is reasonably required provided that Sub-Administrator makes reasonable efforts to notify such parties as to the confidential nature of the Investment Fund Confidential Information.

Exceptions. The foregoing shall not prohibit or limit Sub-Administrator’s use, disclosure, reproduction or dissemination of Investment Fund Confidential Information which:

	(a)		is or becomes public domain information or material through no fault or breach on the part of Sub-Administrator;

	(b)		as demonstrated by the written records of Sub-Administrator or otherwise, was already lawfully known (without restriction on disclosure) to Sub-Administrator prior

			to the information being disclosed to Sub-Administrator by Administrator or an Investment Fund or any representative of the Administrator or an Investment Fund;

	(c)		has been or is hereafter rightfully furnished to Sub-Administrator without restriction on disclosure by the Administrator or an Investment Fund or a third person lawfully in possession thereof;

	(d)		has been independently developed, by or for Sub-Administrator, without reference to Investment Fund Confidential Information;

	(e)		is requested or required to be disclosed pursuant to any legal or regulatory proceeding, investigation, audit, examination, subpoena, civil investigative demand or other similar process where required by law, regulation, rule or self-regulatory organization rule, or where the Sub-Administrator has determined that disclosure is necessary for the protection of its interests, provided that, unless prohibited from doing so in such circumstance, the Sub-Administrator notifies the Administrator or an Investment Fund as promptly as possible so that Administrator or an Investment Fund may to have a reasonable opportunity to obtain a protective order or other form of protection against disclosure. Notwithstanding any such disclosure by Sub-Administrator, such disclosure will not otherwise affect Sub-Administrator’s obligations hereunder with respect to Investment Fund Confidential Information so disclosed which is retained by Sub-Administrator; or

	(f)		is disclosed by the Sub-Administrator with the prior written consent of the Administrator or an Investment Fund, which consent shall not be unreasonably withheld.

Any Investment Fund Confidential Information in the possession of Sub-Administrator that has been disclosed to it by Administrator or an Investment Fund or any representative of Administrator or an Investment Fund that is not within any of the exceptions above shall be considered confidential unless the Sub-Administrator may demonstrate otherwise by records and documentation or other reasonable means.

Equitable Relief. Sub-Administrator agrees and acknowledges that any breach of Section 11 may cause Administrator or an Investment Fund irreparable harm for which monetary damages would be inadequate. Accordingly, Administrator or an Investment Fund will be entitled to seek injunctive or other equitable relief to remedy any threatened or actual breach of Section 11 by Sub-Administrator, as well as monetary damages.

No Publicity. Neither party will announce or disclose the existence of this Agreement, or its contents to any third party without the prior written consent of the other or except as may be required by law, in which case the party required to make such a disclosure will give the other party the maximum feasible prior notice of such disclosure.

12. Compliance with Governmental Rules and Regulations; Records

Each Investment Fund assumes full responsibility for complying with all securities, banking, tax, commodities and other laws, rules and regulations applicable to it.

The Sub-Administrator assumes full responsibility for complying with all applicable securities, banking, tax, commodities and other laws, rules and regulations applicable to it in connection with and as applicable to its provision of services hereunder.

In compliance with the requirements of Rule 31a-1 under the 1940 Act, the Sub-Administrator agrees that all records which it maintains for an Investment Fund shall at all times remain the property of that Investment Fund, shall be readily accessible during normal business hours, and shall be promptly surrendered upon the termination of the Agreement or otherwise on written request. The Sub-Administrator further agrees that all records which it maintains for an Investment Fund pursuant to Rule 31a-l under the 1940 Act will be preserved for the periods prescribed by Rule 31a-2 under the 1940 Act unless any such records are earlier surrendered as provided above. Records may be surrendered in either written or machine-readable form.

13. Services Not Exclusive

The services of the Sub-Administrator to the Administrator are not to be deemed exclusive, and the Sub-Administrator shall be free to render similar services to others. The Sub-Administrator shall be deemed to be an independent contractor and shall, unless otherwise expressly provided herein or authorized by the Administrator from time to time, have no authority to act or represent the Administrator or an Investment Fund in any way or otherwise be deemed an agent of the Administrator or an Investment Fund.

14. Term, Termination and Amendment

	(a)		This Agreement shall become effective on the date of its execution and shall remain in full force and effect for a period of three (3) years from the effective date (the “Initial Term”), and thereafter shall automatically continue in full force and effect unless either party terminates this Agreement by written notice to the other party at least ninety (90) days prior to the date of termination.

	(b)		During the Initial Term and thereafter, the Sub-Administrator may, at its discretion, terminate this Agreement for cause with respect to (1) one or more Investment Funds; and/or (2) the Administrator by providing not less than 60 days prior written notice to an Investment Fund or the Administrator, as applicable, upon occurrence of any of the following termination events:

	(A)		Administrator has been convicted, pled guilty or pled no contest to criminal conduct in a criminal proceeding;

	(B)		Administrator has been found to have violated federal or state law in an administrative or regulatory proceeding; provided such violation (1) involves unethical conduct; and (2) Sub-Administrator reasonably believes that such violation would have a material adverse impact on Sub-Administrator’s ability to the perform services under this Agreement;

	(C)		Administrator has encountered financial difficulties which are evidenced by the authorization or commencement of, or involvement by way of pleading, answer, consent or acquiescence in, a voluntary or involuntary case under Title 11 of the United States Code, as from time to time is in effect, or any applicable law, other than said Title 11, of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors;

	(D)		Administrator has been terminated for cause by the Sub-Administrator pursuant to the terms of (1) any fund accounting or custody agreement between Sub-Administrator and an Investment Fund, or (2) any fund accounting, custody or administrative agreement between Sub-Administrator and any other investment company advised by the Administrator;

	(E)		Administrator has been terminated for cause by the Sub-Administrator pursuant to the terms of any sub-administrative agreement between Sub-Administrator and Administrator;

	(F)		Administrator attempts to assign this Agreement in violation of Section 16 of this Agreement; and

	(G)		Administrator has committed a material breach of this Agreement, and such breach has not been remedied by the Administrator within sixty days written notice of such breach by Sub-Administrator.

(c)

During the Initial Term and thereafter, the Administrator, at its discretion, may terminate this Agreement for cause with respect to (1) one or more Investment Funds; and/or (2) the Sub-Administrator by providing at least 60 days prior written notice to an Investment Fund or the

Sub-Administrator, as applicable, upon occurrence of any of the following termination events:

(A) Sub-Administrator has been convicted, pled guilty or pled no contest to criminal conduct in any criminal proceeding in connection with the provision of administration services, fund accounting services and/or custody services to any client;

(B) Sub-Administrator has been found to have violated federal or state law in any administrative or regulatory proceeding; provided such violation (1) involves unethical behavior and (2) relates to the provision of administration services, fund accounting services and/or custody services to any client;

(C) Sub-Administrator has encountered financial difficulties which are evidenced by the authorization or commencement of, or involvement by way of pleading, answer, consent or acquiescence in, a voluntary or involuntary case under Title 11 of the United States Code, as from time to time is in effect, or any applicable law, other than said Title 11, of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors;

(D) Sub-Administrator has been terminated by the Administrator or an Investment Fund, as applicable, for cause pursuant to the terms of (1) any fund accounting or custody agreement between Sub-Administrator or its affiliates and the Administrator or an Investment Fund, as applicable, or (2) any fund Accounting, custody or administrative agreement between
Sub-Administrator or its affiliates and any investment company (other than the Investment Funds) advised by the Administrator;

(E) Sub-Administrator has been terminated by the Administrator for cause pursuant to the terms of any sub-administrative agreement between Sub-Administrator and or its affiliates and the Administrator;

(F) Sub-Administrator transfers fifty percent (50%) or more of any class of its voting securities; (2) transfers all, or substantially all, of its assets to a non-affiliate; or (3) attempts to assign this Agreement in violation of Section 16 of this Agreement; and

(G) In Administrator’s reasonable opinion, Sub-Administrator has not achieved one or more of the performance measures set forth in any Service Level Document established pursuant to pursuant to Section 10 of this Agreement, and a plan or revised plan has not been put into place in accordance with the following procedures: In the event that Administrator reasonably believes that the Sub-Administrator has not met one or more of the performance measures set forth in any Service Level Document during any calendar quarter or other period of measurement as may be set forth in any Service Level Document, the Administrator may, in its discretion, submit a written deficiency notice to Sub-Administrator outlining the performance deficiencies (“Deficiency Notice”). Such Deficiency Notice must be provided to Sub-Administrator within 20 days of the end of such quarter. After receipt of such notice, Sub-Administrator shall present the Administrator with a written plan to address the deficiencies set forth in the Deficiency Notice (the “Plan”). Such Plan must be provided to Administrator within 30 days after receipt of the Deficiency Notice. If Sub-Administrator fails to submit a Plan within such 30 day period, Administrator may terminate the Agreement upon 60 days written notice to Sub-Administrator. The Administrator, in its discretion, may accept the Plan or reject the Plan (“Rejection Notice”). Such Rejection Notice must be submitted to Sub-Administrator within 15 days after submission of the Plan. If Administrator fails to provide a Rejection Notice within such 15 day period, it shall be presumed that Administrator accepted the Plan. In the event, Administrator submits a Rejection Notice, Sub-Administrator shall submit a revised plan (“Revised Plan”) to the Administrator. Such Revised Plan must be provided to Administrator within 30 after provision of the Rejection Notice. If Sub-Administrator fails to submit a Revised Plan within such 30 day period, Administrator may terminate the Agreement upon 60 days written notice to Sub-Administrator. The Administrator, in its sole discretion, may accept the Revised Plan or reject the Revised Plan (“Denial Notice”). Any Denial Notice must be submitted to Sub-Administrator within 15 days after provision of the Revised Plan. If Administrator fails to provide a Denial Notice within such 15 day period, it shall be presumed that Administrator accepted the Revised Plan. If Administrator provides a Denial Notice to Sub-Administrator, Administrator may, in its sole discretion, terminate this Agreement upon 60 days written notice to Sub-Administrator. Such termination notice must be submitted to

Sub-Administrator within 60 days after provision of the Denial Notice; and

(H) Sub-Administrator has committed a material breach of this Agreement and such breach has not been remedied by the
Sub-Administrator within sixty days written notice of such breach by Administrator.

	(d)		Termination of this Agreement with respect to any given Investment Fund shall in no way affect the continued validity of this Agreement with respect to any other Investment Fund.

	(e)		Upon termination of this Agreement, the Administrator shall pay to the Sub-Administrator such compensation and any reimbursable expenses as may be due and undisputed under the terms hereof as of the date of such termination, including reasonable out-of-pocket expenses associated with such termination. All out-of pocket-expenses associated under this sub-paragraph for which the Sub-Administrator seeks reimbursement must be pre-approved by the Administrator in writing, such approval shall not be unreasonable withheld.

	(f)		This Agreement may be modified or amended from time to time by mutual written agreement of the parties hereto.

15. Notices

Any notice or other communication authorized or required by this Agreement to be given to either party shall be in writing and deemed to have been given when delivered in person or by confirmed facsimile, or posted by certified mail, return receipt requested, to the following address (or such other address as a party may specify by written notice to the other): if to the Administrator: 101 Montgomery Street, San Francisco, CA 94104, Attn: George M. Pereira, facsimile: 415-667-3800 with a copy to Koji E. Felton, facsimile: 415-667-3440; if to the
Sub-Administrator: State Street Bank and Trust Company, P.O. Box 5049, Boston, MA 02206-5049, Attn: Fund Administration Legal Department, fax: 617-662-3805.

16. Non-Assignability

This Agreement, nor any part thereof, shall be assigned by either party hereto without the prior consent in writing of the other party, except that either party may assign this Agreement to a successor of all or a substantial portion of its business, or to a party controlling, controlled by or under common control with such party.

17. Successors

This Agreement shall be binding on and shall inure to the benefit of the Administrator and the Sub-Administrator and their respective successors and permitted assigns.

18. E ntire Agreement

This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes all previous representations, warranties or commitments regarding the services to be performed hereunder whether oral or in writing.

19. Waiver

The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver nor shall it deprive such party of the right thereafter to insist upon strict adherence to that term or any term of this Agreement. Any waiver must be in writing signed by the waiving party.

20. Severability

If any provision of this Agreement is invalid or unenforceable, the balance of the Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance it shall nevertheless remain applicable to all other persons and circumstances.

21. Governing Law

This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of the Commonwealth of Massachusetts.

22. Reproduction of Documents

This Agreement and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, xerographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.

23. Counterparts

This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the date first written above.


		CHARLES SCHWAB INVESTMENT MANAGEMENT, INC.

		By:		/s/ George M. Pereira
		Name:		George M. Pereira
		Title:		Senior Vice President and Chief Financial Officer

		STATE STREET BANK AND TRUST COMPANY

		By:		/s/ Gary L. French
		Name:		Gary L. French
		Title:		Senior Vice President

Amendment to Sub-Administration Agreement

This Amendment to Sub-Administration Agreement is made as of September 22, 2009 by and between State Street Bank and Trust Company, a Massachusetts trust company (the “Sub-Administrator”), and Charles Schwab Investment Management, Inc., a California corporation (the “Administrator”), with respect each management investment company identified on Appendix A hereto (each such investment company shall hereinafter be referred to as an “Investment Fund” and collectively, the “Investment Funds”). Capitalized terms used but not defined herein shall have the meaning ascribed to them in that certain Sub-Administration Agreement made as of October 1, 2005 (the “Sub-Administration Agreement”).

Witnesseth:

Whereas , the Administrator and the Sub-Administrator entered into the Sub-Administration Agreement pursuant to which the Sub-Administrator furnishes certain administrative services to certain of the Investment Funds;

Whereas , the Funds listed on Appendix B hereto (collectively, the “Schwab ETFs”), which are exchange traded funds, will issue and redeem shares (“Shares”) only in aggregations of Shares known as “Creation Units,” generally in exchange for a basket of certain equity or fixed income securities and a specified cash payment, as more fully described in the currently effective prospectus and statement of additional information of such Schwab ETFs; and

Whereas , the Administrator desires for the Sub-Administrator to provide services to each of the Schwab ETFs and the Sub-Administrator desires to provide the services set forth in the Sub-Administration Agreement to each of the Schwab ETFs; and

Whereas , the parties desire to amend a certain provision of the Sub-Administration Agreement to reflect the term of the Sub-Administration Agreement with respect to the Schwab ETFs.

Now Therefore , in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:

1. For purposes of the Schwab ETFs only, Section 14 of the Sub-Administration Agreement is hereby amended as follows:

(A) Section 14(a) of the Sub-Administration Agreement is hereby amended in its entirety and the following Section 14(a) is inserted in lieu thereof:

SECTION 14. TERM, TERMINATION AND AMENDMENT

(a). This Agreement shall become effective as of August ___, 2009 and shall remain in full force and effect for a period of three (3) years from such effective date (the “Initial Term”), and thereafter shall automatically continue in full force and effect unless either party terminates this Agreement by written notice to the other party at least ninety (90) days prior to the date of termination.

(B) Section 14(c) of the Fund Accounting Agreement is hereby amended by the insertion of the following new Section 14(c)(I):

(I) With respect to a Schwab ETF, in the event that such Schwab ETF ceases operating as and under the name of such Schwab ETF for any reason, which may (but need not) be in connection with a merger, reorganization, transfer or liquidation of assets, stock exchange delisting or other extraordinary event. For the avoidance of doubt, upon termination of this Agreement under this Section 14(c)(I), such Schwab ETF shall pay to Sub-Administrator such compensation (including any applicable fees) and any reimbursable expenses as may be due and undisputed under the terms hereof to the date of such termination, including reasonable out-of-pocket expenses associated with such termination, and no other compensation, fees, charges or expenses will be assessed or will accrue with respect to said Schwab ETF after said termination. All out-of-pocket expenses for which the Sub-Administrator seeks reimbursement under this Section 14(c)(I) must be pre-approved by the Schwab ETF in writing, provided that such approval shall not be unreasonably withheld.

For the avoidance of doubt, the remainder of Section 14 of the Sub-Administration Agreement, including Section 14(c)(H) thereof relating to terminations in connection with material breaches by the Sub-Administrator, shall remain in effect for all Investment Funds and Schwab ETFs.

2. In the event that the Administrator desires to have the Sub-Administrator render services to any exchange traded fund in addition to those listed on Appendix B hereto under the terms of the Sub-Administration Agreement and this Amendment, it shall so notify the Sub-Administrator in writing, and if the Sub-Administrator agrees in writing to provide such services, such exchange traded fund shall become an Investment Fund and a Schwab ETF under the Sub-Administration Agreement and this Amendment and be bound by all terms and conditions and provisions of the Sub-Administration Agreement and this Amendment including, without limitation, the representations and warranties set forth in Section 4 of the Sub-Administration Agreement.

3. Except as modified hereby, all other terms and conditions of the Sub-Administration Agreement shall remain in full force and effect.

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4. This Amendment may be executed in multiple counterparts, which together shall constitute one instrument.

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Signature Page


Signature Attested to By:	Charles Schwab Investment Management, Inc.

By:	By:


Name: Shelley A. Harding	Name:

Title:	Title:



By:	By:


Name: Shelley A. Harding	Name:

Title:	Title:



Signature Attested to By:	State Street Bank and Trust Company

By:	By:


Name:	Name:	Gary L. French


Title:	Title:	Senior Vice President

Amendment to Amended and Restated Master Sub-Administration Agreement

APPENDIX A

THE CHARLES SCHWAB FAMILY OF FUNDS

Schwab Money Market Fund
Schwab Value Advantage Money Fund
Schwab Retirement Advantage Money Fund
Schwab Investor Money Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Municipal Money Fund
Schwab California Municipal Money Fund
Schwab New York AMT Tax-Free Money Fund (formerly NY Muni Money Fund)
Schwab AMT Tax-Free Money Fund (formerly Florida Muni Money Fund)
Schwab California AMT Tax-Free Money Fund
Schwab Massachusetts AMT Tax-Free Money Fund (formerly MA Muni Money Fund)
Schwab Pennsylvania Municipal Money Fund
Schwab New Jersey AMT Tax-Free Money Fund (formerly NJ Muni Money Fund)
Schwab Cash Reserves
Schwab Advisor Cash Reserves

SCHWAB INVESTMENTS

Schwab 1000 Index Fund
Schwab YieldPlus Fund
Schwab Short-Term Bond Market Fund
Schwab Total Bond Market Fund
Schwab GNMA Fund
Schwab Tax-Free YieldPlus Fund
Schwab Tax-Free Bond Fund
Schwab California Tax-Free YieldPlus Fund
Schwab California Tax-Free Bond Fund
Schwab Inflation Protected Fund
Schwab Premier Income Fund

SCHWAB CAPITAL TRUST

Schwab Core Equity Fund
Schwab Hedged Equity Fund
Schwab Premier Equity Fund
Laudus International MarketMasters Fund
Laudus Small-Cap MarketMasters Fund
Schwab Balanced Fund (formerly Schwab Viewpoints Fund)
Schwab Fundamental US Small-Mid Company Index Fund
Schwab Fundamental US Large Company Index Fund
Schwab Monthly Income Fund-Moderate Payout
Schwab Monthly Income Fund-Enhanced Payout
Schwab Monthly Income Fund-Maximum Payout
Schwab International Core Equity Fund

SCHWAB ANNUITY PORTFOLIOS

Schwab Money Market Portfolio

A-1

SCHWAB STRATEGIC TRUST

Schwab U.S. Broad Market ETF
Schwab U.S. Large-Cap ETF
Schwab U.S. Large-Cap Growth ETF
Schwab U.S. Large-Cap Value ETF

Schwab U.S. Small-Cap ETF
Schwab International Equity ETF
Schwab International Small-Cap Equity ETF
Schwab Emerging Markets Equity ETF

A-2

APPENDIX B

SCHWAB STRATEGIC TRUST

DISTRIBUTION AND SHAREHOLDER SERVICES PLAN

WHEREAS, Schwab Strategic Trust (the “Trust”) is engaged in business as an open-end investment company registered under the Investment Company Act of 1940 (the “1940 Act”), and the Trust offers for sale units of beneficial interest of the Trust (“Shares”) that are designated and classified into one or more distinct series of the Trust, and Shares of such series may be further divided into one or more classes;

WHEREAS, the Trust desires to compensate SEI Investments Distribution Co., the Trust’s principal underwriter (the “Distributor”), for (a) offering Shares of each of the classes of the series of the Trust listed on Exhibit A attached hereto (each, a “Class” and, collectively, the “Classes,” and each, a “Fund” and, collectively, the “Funds”); (b) acting as distributor with respect to the creation and distribution of Creation Unit size aggregations of Shares as described in the Funds’ registration statement (“Creation Units”) of each Fund that is sold as an exchange-traded fund; and (c) providing the services described herein to persons (the “Shareholders”) who from time to time beneficially own Shares and/or Creation Units of such Classes;

WHEREAS, the Board of Trustees of the Trust has determined that there is a reasonable likelihood that this Distribution and Shareholder Services Plan (the “Plan”) will benefit the Trust and the Shareholders of each of the Classes and Funds;

WHEREAS, pursuant to Rule 12b-1 under the 1940 Act, the Board of Trustees of the Trust must adopt a plan under which the Distributor will provide the distribution services stated in Section 2; and

WHEREAS, the Board of Trustees of the Trust wishes to adopt a plan under which the Distributor will provide or cause to be provided to Shareholders some or all of the service activities stated in Section 3.

NOW, THEREFORE, the Board of Trustees of the Trust hereby adopts the following Plan.

Section 1. The Trust has adopted this Plan to enable the Trust to directly or indirectly bear expenses primarily intended to result in the sale of Shares (including Creation Units) of each Class of the Funds, including payments relating to the distribution of the Shares of each Class of the Funds and for the provision of service activities to the Shareholders of each Class of the Funds.

Section 2. With respect to each Class of the Funds, the Trust will pay the Distributor a fee up to the amount set forth in Exhibit A per annum of each Class’ average daily net assets for distribution services and service activities. With respect to distribution services, the Distributor may use this fee on any activities or expenses primarily intended to result in the sale of Shares (including Creation Units) of each Class of the Funds, including, but not limited to, (i) as compensation for the Distributor’s services in connection with distribution assistance; or (ii) as a source of payments to financial institutions and intermediaries such as banks, savings and loan associations, insurance companies and investment counselors, broker-dealers, mutual fund supermarkets and the Distributor’s affiliates and subsidiaries as compensation for services or reimbursement of expenses incurred in connection with distribution assistance.

With respect to service activities, the Distributor may use payments under this aspect of the Plan to provide or enter into agreements with organizations, including affiliates of the Distributor (referred to herein as “Service Organizations”), who will provide one or more of the following service activities: (i) maintaining accounts relating to Shareholders that invest in Shares (including Creation Units) of the

Classes of the Funds; (ii) arranging for bank wires; (iii) responding to Shareholder inquiries relating to the services performed by Distributor and/or Service Organizations; (iv) responding to inquiries from Shareholders concerning their investment in Shares (including Creation Units) of the Classes of the Funds; (v) assisting Shareholders in changing dividend options, account designations and addresses; (vi) providing information periodically to Shareholders showing their position in Shares (including Creation Units) of the Classes of the Funds; (vii) forwarding shareholder communications from the Funds such as proxies, shareholder reports, annual reports, and dividend distribution and tax notices to Shareholders; (viii) processing purchase, exchange and redemption requests from Shareholders and placing orders with the Funds or its service providers; and (ix) processing dividend payments from the Funds on behalf of Shareholders. The Distributor may also use this fee for payments to financial institutions and intermediaries such as banks, savings and loan associations, insurance companies and investment counselors, broker-dealers, mutual fund supermarkets and the Distributor and/or Service Organizations’ affiliates and subsidiaries as compensation for such services. For purposes of this Plan, “service activities” shall mean activities covered by the definition of “service fee” contained in FINRA Conduct Rule 2830 or any subsequent amendments to such definition.

The Distributor may use all or any portion of the amount received pursuant to this Plan to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services, pursuant to agreements with the Distributor, or to pay any of the expenses associated with other activities authorized under this Section.

Section 3. This Plan shall not take effect with respect to any Class of Shares of a Fund until it has been approved (a) together with any related agreements, by votes of the majority of both (i) the Trustees of the Trust and (ii) the Qualified Trustees, cast in person at a Board of Trustees meeting called for the purpose of voting on this Plan or such agreement, and (b) by a vote of at least a majority of the outstanding voting securities of such Class if adopted after the public offering of Shares of such Class.

Section 4. With respect to each Class of a Fund, this Plan shall continue in effect for a term of one year. Thereafter, this Plan shall continue in effect for each Class of a Fund for so long as its continuance is specifically approved at least annually in the manner provided in Part (a) of Section 3 for the approval of this Plan.

Section 5. With respect to each Class of a Fund, this Plan may be terminated at any time by the vote of a majority of the Qualified Trustees or by vote of a majority of the outstanding voting securities of such Class.

Section 6. All agreements with any person relating to implementation of this Plan shall be in writing, and any agreement related to this Plan shall provide (i) that such agreement may be terminated at any time, without payment of any penalty, by the vote of a majority of the Qualified Trustees or by the vote of a majority of the outstanding voting securities of the relevant Class(es), on not more than 60 days written notice to any other party to the agreement; and (ii) that such agreement shall terminate automatically in the event of its assignment. The Plan will not be terminated by an assignment.

Section 7. The Plan may be amended at any time by the Board of Trustees, provided that (i) with respect to each Class of a Fund, this Plan may not be amended to increase materially the amount of distribution expenses permitted pursuant to Section 2 hereof without the approval of Shareholders holding a majority of the outstanding voting securities of such Class, and (ii) all material amendments to this Plan shall be approved in the manner provided in Part (a) of Section 3 for the approval of this Plan.

Section 8. The Distributor shall provide to the Trustees of the Trust, at least quarterly, a written report of the amounts expended pursuant to the Plan and the purposes for which such expenditures were made.

Section 9. As used in this Plan, (i) the term “Qualified Trustee” shall mean those Trustees of the Trust who are not interested persons of the Trust, and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it, and (ii) the terms “assignment,” “interested person” and “majority of the outstanding voting securities” shall have their respective meanings specified in the 1940 Act and the rules and regulations thereunder, subject to such exemptions as may be granted by the Securities and Exchange Commission.

Section 10. While this Plan is in effect, the selection and nomination of those Trustees who are not interested persons of the Trust shall be committed to the discretion of the Trustees then in office who are not interested persons of the Trust.

Section 11. The Trust shall preserve copies of this Plan (including any amendments thereto) and any related agreements and all reports made pursuant to Section 8 hereof for a period of not less than six years from the date of this Plan, the first two years in an easily accessible place.

Section 12. This Plan shall not obligate the Trust or any other party to enter into an agreement with any particular person.

Section 13. If any provision of the Plan shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Plan shall not be affected thereby.

EXHIBIT A

Fee Schedule

Subject to any limitations imposed by Rule 2830 of the FINRA’s Conduct Rules, and any successors, the current level of fees payable to the Distributor pursuant to Section 2 of the Plan are set forth below.


	Maximum Fees for Distribution Services
Funds and Class	and Service Activities
Schwab U.S. Broad Market ETF		0.25	%
Schwab U.S. Large-Cap ETF		0.25	%
Schwab U.S. Large-Cap Growth ETF		0.25	%
Schwab U.S. Large-Cap Value ETF		0.25	%
Schwab U.S. Small-Cap ETF		0.25	%
Schwab International Equity ETF		0.25	%
Schwab International Small-Cap Equity ETF		0.25	%
Schwab Emerging Markets Equity ETF		0.25	%

THE CHARLES SCHWAB FAMILY OF FUNDS
SCHWAB INVESTMENTS
SCHWAB CAPITAL TRUST
SCHWAB ANNUITY PORTFOLIOS
SCHWAB STRATEGIC TRUST
LAUDUS TRUST
LAUDUS INSTITUTIONAL TRUST
CHARLES SCHWAB INVESTMENT MANAGEMENT, INC (Investment Adviser)
CHARLES SCHWAB & CO., INC. (Principal Underwriter)

Joint Code of Ethics adopted pursuant to Rule 17j-1
under the Investment Company Act of 1940
and
Rule 204A-1 under the Investment Advisers Act of 1940

Effective October 1, 2009

Rule 17j-1 of the Investment Company Act of 1940 (the “1940 Act”) requires that every registered investment company, and each investment adviser to and principal underwriter for such investment company, adopt a written code of ethics containing provisions reasonably necessary to prevent its Access Persons (as defined in Section II below) from engaging in any act, practice or course of business prohibited by Section 17(j) of the 1940 Act and Rule 17j-1 adopted thereunder. Rule 17j-1 further requires that each investment company and its adviser(s) and underwriter(s) use reasonable diligence, and institute procedures reasonably necessary, to prevent violations of such code.

Rule 204A-1 of the Investment Advisers Act of 1940 (the “Advisers Act”) requires each investment adviser registered with the Securities and Exchange Commission to establish, maintain and enforce a written code of ethics with respect to its Access Persons, which shall include, among other things: (i) standards of business conduct for its Access Persons; (ii) provisions requiring its Access Persons to comply with applicable federal securities laws; and (iii) provisions requiring its Access Persons to report, and the adviser to review, their personal securities transactions and holdings periodically.

The Insider Trading and Securities Fraud Enforcement Act of 1988 (“ITSFEA”) and Section 204A of the Advisers Act for registered investment advisers, requires every investment adviser and registered broker-dealer to develop, implement and enforce policies and procedures to prevent the misuse of material non-public information.

The following policies constitute the joint Code of Ethics (the “Code”) for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust, Laudus Trust, Laudus Institutional Trust (each a “Trust,” and, collectively, the “Trusts”), Charles Schwab Investment Management, Inc. (“CSIM”), a registered investment adviser and the investment adviser to the Trusts, and Charles Schwab & Co., Inc. (“Schwab”), a registered broker-dealer and the principal

underwriter of certain Trusts. The principal underwriter function for the Schwab Strategic Trust, Laudus Trust and Laudus Institutional Trust is currently performed by a broker-dealer who is not affiliated with the Trusts, CSIM or Schwab. Access Persons of unaffiliated broker-dealers and other entities that serve as investment sub-advisers to the various series of the Trusts (each, a “Fund”) shall comply with their own codes of ethics which may be approved by the applicable Trust’s Board of Trustees in accordance with Rule 17j-1, and report to such Board of Trustees in accordance with Section VI hereunder as required by Rule 17j-1.

The Code is applicable to all Access Persons of the Trusts, CSIM and Schwab, which generally include all directors, trustees, officers and employees of the Trusts and CSIM, and any director, officer or employee of Schwab (acting in the capacity of principal underwriter) who makes, participates in or obtains information regarding the purchase or sale of “Covered Securities” (as defined below) by the Trusts or any other client of CSIM (collectively referred to as the “Client Accounts”). This Code in no way limits your duties or responsibilities with respect to The Charles Schwab Corporation Code of Business Conduct and Ethics (the “Corporate Code”). CSIM Compliance monitors Access Persons’ compliance with the specific provisions herein related to personal securities transactions of Access Persons, and Schwab’s Compliance Department is responsible for monitoring Access Persons’ adherence to the Corporate Code and provisions of the Schwab Compliance Manual. Schwab’s Compliance Department reports any identified infractions of the Corporate Code and provisions of the Schwab Compliance Manual, with respect to Access Persons, to CSIM Compliance for further evaluation under this Code.

All Access Persons shall initially be provided with a copy of this Code and all subsequent amendments. All Access Persons shall provide CSIM’s Chief Compliance Officer or his or her designee (the “Review Officer”) a written acknowledgment, which may be made electronically, of their receipt of the Code and all subsequent amendments.

I. POLICY STATEMENT

Rule 17j-1 under the 1940 Act makes it unlawful for any Affiliated Person (as defined in Section II below) of, or principal underwriter for, the Trusts or Affiliated Persons of the Trusts’ investment adviser(s) and principal underwriters, in connection with the direct or indirect purchase or sale by such person of any Covered Security that is “held or to be acquired” by any Client Account:

•		To employ any device, scheme or artifice to defraud the Client Account;

•		To make to the Client Account any untrue statement of a material fact or omit to state to the Client Account a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading;

•		To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the Client Account; and

•

To engage in any manipulative practice with respect to the Client Account.

It is the policy of the Trusts, CSIM and Schwab that no Access Person will make, participate in, or engage in any act, practice or course of conduct that would violate the Policy Statement provisions set forth above or any applicable Federal Securities Laws or which would, in any way, conflict with the interests of the Trusts (or their shareholders) or any Client Account. This obligation encompasses:

•		The duty at all times to place the interests of shareholders/clients first;

•		The duty to ensure that all personal securities transactions be conducted consistent with the Code and in such a manner as to avoid any actual or potential conflict of interest or any abuse of an individual’s position of trust and responsibility; and

•		The fundamental standard that Access Persons not take inappropriate advantage of their positions.

•		The duty that every Access Person shall promptly report any violation of this Code to CSIM’s Chief Compliance Officer.

II. DEFINITIONS

The definitions used in this Code include the following:

Access Person

	•		*An Access Person of the Trusts or CSIM* is any director, Trustee or officer of the Trusts or CSIM.

	•		*An Access Person of CSIM* is any employee of CSIM who, in the ordinary course of business:

	o		has access to non-public information regarding the purchase or sale of Covered Securities for any Client Account; or

	o		has functions or duties that relate to the making of any recommendation to any Client Account regarding the purchase or sale of securities; or

	o		has access to such recommendations (excluding those who only have access to client non-current, non-contemporaneous recommendations).

•

An Access Person of Schwab is any director or officer of Schwab who, in the ordinary course of business:

	o		makes, participates in or obtains information regarding the purchase or sale of Covered Securities for any Client Account; or

	o		has functions or duties that are related to the making of any recommendation to any Client Account regarding the purchase or sale of Covered Securities; or

	o		has access to such recommendations (excluding those who only have access to client non-current, non-contemporaneous recommendations).

•

An Access Person is also any natural person in a control relationship to a Trust, to a Fund or CSIM who obtains information concerning recommendations made to

any Client Account with regard to the purchase or sale of Covered Securities by any Client Account (excluding those who only have access to client non-current, non-contemporaneous recommendations).

Affiliated Person An “Affiliated Person” of the Trusts, CSIM or Schwab is defined in Section 2(a)(3) of the 1940 Act, which states:

“[An] Affiliated Person of another person means (A) any person directly or indirectly owning, controlling, or holding with power to vote, 5 per centum or more of the outstanding voting securities of such other person; (B) any person 5 per centum or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other person; (C) any person directly or indirectly controlling, controlled by, or under common control with, such other person; (D) any officer, director, partner, copartner, or employee of such other person; (E) if such other person is an investment company, any investment adviser thereof or any member of an advisory board thereof; and (F) if such other person is an unincorporated investment company not having a board of directors, the depositor thereof.”

Automatic Investment Plan is a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation. An “Automatic Investment Plan” includes a dividend reinvestment plan.

Beneficial Ownership A person should consider himself or herself a “beneficial owner” of any security in which he or she has a direct or indirect pecuniary interest. Pecuniary interest in any class of securities includes the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in securities. For example, he or she has “beneficial ownership” of securities held by his or her spouse, minor children, a relative who shares his or her home, or other persons if by reason of any contract, understanding, relationship, agreement or other arrangement, he or she obtains from such securities benefits substantially equivalent to those of ownership. He or she should also consider himself or herself the beneficial owner of securities if he or she can vest or revest title in himself or herself now or in the future.

Client Account The accounts of the Funds or any other investment advisory client of CSIM.

Control “Control” has the same meaning as in Section (2)(a)(9) of the 1940 Act. Section 2(a)(9) provides that “control” means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company.

Ownership of more than 25% of a company’s outstanding voting securities is presumed to give the holder of such securities control over the company. The SEC may determine, however, that the facts and circumstances of a given situation that may counter this presumption.

Covered Security A “Covered Security” is any security as defined in Section 2(a)(36) of the 1940 Act, including:

•

Fixed Income -

	o		Note

	o		Bond

	o		Evidence of Indebtedness

	o		Debenture

•

Equity

	o		Stock

	o		Treasury Stock

	o		Certificate of interest or participation in any profit-sharing agreement

	o		Collateral-trust certificate

	o		Pre organization certificate or subscription

	o		Transferable share

	o		Investment contract

	o		Voting trust certificate

	o		Certificate of deposit for a security

•

Derivatives / Others -

	o		Shares of any affiliated Mutual Fund / Investment Company (excluding money market funds)

	o		Shares of Exchange-Traded Funds (ETFs) regardless of whether such ETF (a) is classified as an open-end investment company or unit investment trust or (b) is registered as an investment company under the 1940 Act.

	o		Security future

	o		Any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof)

	o		Any put, call, straddle, option or privilege entered into on a national securities exchange relating to foreign currency

	o		Fractional undivided interest in oil, gas, or other mineral rights

	o		In general, any interest or instrument commonly known as a “security,” or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase any of the foregoing

Provided, that Covered Securities do not include:

	•		Direct obligations of the United States Government

	•		Bankers’ acceptances; bank certificates of deposit

	•		Commercial paper

	•		Repurchase agreements

	•		Other High Quality Short-Term Debt Instruments

	•		Shares of any money market fund, including affiliated money market funds

	•		Units of a unit investment trust invested exclusively in unaffiliated registered open-end investment companies

	•		Shares of any unaffiliated registered open-end investment companies, except for shares of ETFs (which are Covered Securities, as indicated above).

Please refer to “Appendix A” for additional detail on your Preclearance and Reporting requirements under the Code with respect to transactions and holdings in the Covered Securities noted above.

Federal Securities Laws means the Securities Act of 1933 (the “1933 Act”), the Securities Exchange Act of 1934 (the “1934 Act”), the Sarbanes-Oxley Act of 2002, the Investment Company Act of 1940, the Investment Advisers Act of 1940, Title V of the Gramm-Leach-Bliley Act, any rules adopted by the Securities and Exchange Commission (“SEC”) under any of these statutes, the Bank Secrecy Act as it applies to investment companies and investment advisers, and any rules adopted thereunder by the SEC or the Department of the Treasury.

Held or to be acquired A Covered Security is “held or to be acquired” if within the most recent 15 days it is or has been held by a Client Account, or is being or has been considered by a Client Account or CSIM for purchase by a Client Account. A purchase or sale includes the writing of an option to purchase or sell a Covered Security described above.

High Quality Short-Term Debt Instrument A “High Quality Short-Term Debt Instrument” is any instrument having a maturity at issuance of less than 366 days and which is rated in one of the highest two rating categories by a nationally recognized statistical rating organization, or which is unrated but is of comparable quality.

Initial Public Offering “Initial Public Offering” is an offering of securities registered under the 1933 Act, the issuer of which, immediately before the registration, was not subject to the reporting requirements of Sections 13 or 15(d) of the 1934 Act.

Investment Personnel “Investment Personnel” are Access Persons who, in connection with their regular functions or duties, make or participate in making recommendations regarding the purchase or sale of securities by a Client Account. The term also includes all natural persons who control a Trust or an employee of CSIM or Schwab who has access to information concerning recommendations made to the Client Account regarding the purchase or sale of securities by Client Account.

Material Non-Public Information is information that is both “material” and “non-public”. For this purpose, information is generally considered “material” if there is a substantial likelihood that a reasonable investor would consider it important in formulating an investment decision. If the information has influenced a person’s investment decision, it would be very likely to be considered material. In addition, information that, when disclosed, is reasonably likely to affect the stock’s price should be treated as material. Examples include, but are not limited to, information concerning impending mergers, sales of subsidiaries, significant revenue or earnings swings, dividend changes, impending securities offerings, awards of patents, technological developments, impending product announcements, impending financial news and other major corporate events. Information is “non-public” when it has not been disseminated

in a manner making it available to the general public. Information is public once it has been widely disseminated, such as when it is reported in widely disseminated news services and/or publications, and investors have had a reasonable time to react to the information, generally two days.

Non-Interested Trustee and Interested Trustee A “Non-Interested Trustee” is any Trustee of a Trust who is not an interested person of such Trust as defined in section 2(a)(19) of the 1940 Act. An “Interested Trustee” is any Trustee of a Trust who is an interested person of such Trust as defined in section 2(a)(19) of the 1940 Act.

Private Placement A “Private Placement” is an offering that is exempt from registration under the 1933 Act pursuant to Section 4(2) or Section 4(6) or pursuant to Rule 504, Rule 505 or Rule 506 adopted thereunder.

Stock Option Program A “Stock Option Program” allows an employee to buy a set number of shares of a company’s stock at a future date at a set price.

III. COMMUNICATIONS

Access Persons may not tip or otherwise disclose to others (except to others who have a need to know such information in the ordinary course of their business) any information regarding the investment activities of the Client Accounts, including any transaction or recommendation made by or to CSIM or a Client Account. All communications that violate the terms of this Section III must be reported immediately to CSIM Compliance.

IV. LIMITS ON ACCEPTING OR RECEIVING GIFTS

Access Persons may not accept or receive any gift of more than de minimis value (as defined in the Schwab Compliance Manual) from any person or entity in connection with a Client Account entry into a contract, development of an economic relationship, or other course of dealing by or on behalf of a Client Account. Details regarding CSIM’s guidelines as it relates to its policy on CSIM employees’ receipts of gifts can be found by referring to the “CSIM Operational Guidelines for Gifts and Business Entertainment”.

V. TRADING RESTRICTIONS

The policies and procedures regarding trading restrictions are as follows:

Prohibition on Trading Based on Material Non-public Information. Any officer, director, Trustee or employee of the Trusts, CSIM or Schwab with material non-public information regarding any security, including a Covered Security, is prohibited from all personal trading in such security including derivatives of such securities.

Prior Approval of Trades Access Persons, except a person who is an Access Person solely by reason of serving as an Officer or Trustee of a Trust, must receive prior approval by the Review Officer before purchasing or selling any Covered Security, unless such purchase or sale was effected in any account over which the Access Person

has no direct or indirect influence or control or such purchase or sale was non-volitional. Please note that submitting a preclearance request should be indicative of the intent to execute a trade, not to secure an Access Person’s right to execute a transaction on the basis of favorable intraday price movements. Prior approval of a personal transaction may only be relied upon through the end of the following business day from the date approval is received, unless the approval is received after the close of the New York Stock Exchange (NYSE) (typically, 1pm PST), in which case it will be valid through the following two business days (excluding NYSE holidays).

The prior approval requirement does not apply to transactions in SCHW stock and options on SCHW stock in light of the specific policies in place to monitor and control employee trading of SCHW stock. Access Persons seeking to trade SCHW stock or options thereon should refer to Section D of the “Employee Securities Accounts and Investments & Inside Information Policy” in the Schwab Compliance Manual for a complete description. All other trading restrictions in this Code applicable to Covered Securities apply to SCHW stock and options on SCHW stock. Access Persons of any sub-adviser for the Trusts are subject only to the trading restrictions under their own respective codes of ethics.

Except as set forth above, prior approval is required for all transactions in Covered Securities in accounts or transactions over which Access Persons of CSIM exercise control. This requirement includes rebalancing activity in an Access Person’s 401(k) Schwabplan Brokerage Account (when an affiliated mutual fund is involved), trading activity in accounts for their family members or accounts in which they have a beneficial interest, but is not required for:

	•		Automatic Investment Plans;

	•		Direct Stock Purchase Plans;

	•		Investment decisions made by an unrelated third party who does not have access to the information in possession of such Access Person; or

	•		Any trade that does not result from such Access Person’s specific investment decision, including, without limitation, a trade generated by an automated model, even if the Access Person participates in the design or maintenance of the model.

All trading activity by Access Persons is subject to reporting and surveillance as set forth in Sections VI. and VII. of these procedures.

De Minimis Amounts Access Persons requesting prior approval for trades in Covered Securities may be granted approval, regardless of Client Account trading activity, if any of the following criteria are met: (1) the transaction requested is for an affiliated open-end investment company, (2) the transaction requested is an equity trade in an amount equal to or less than 100 shares, (3) the transaction requested is an equity trade in the stock of a company with a market capitalization greater than $5 billion and has a 10-day average daily trading volume exceeding 5 million shares (each measured at the time of the requested trade), or (4) the transaction requested is a fixed income trade in an amount up to $100,000 per calendar month per issuer and the original issue size was greater than $100 million.

Excessive Requests /Trading This practice is discouraged regardless of whether (a) the securities are Covered Securities or (b) the account is covered under the Code. In general, anyone requesting approval to trade Covered Securities (other than shares of the Trusts) more than 60 times in a calendar quarter across all of his or her brokerage accounts should expect additional scrutiny of his or her trades. CSIM Compliance monitors trading activity, and may limit the number of trades for which it allows pre-clearance for the Access Person during the calendar quarter.

Prohibition on Short-Term Trading Profits Investment Personnel are prohibited from profiting in the purchase and sale, or sale and purchase, of the same (or related) securities, except for affiliated ultra-short bond funds, within 60 calendar days. This restriction applies without regard to tax lot considerations. Generally speaking, profit determinations will be made on the basis of a “Last-In-First-Out” (LIFO) accounting methodology, unless the fundamentals of the trade warrant a different consideration as determined by the Review Officer.

In the event that Investment Personnel realize profits on such prohibited short-term trades, the Investment Personnel must relinquish such profits to CSIM to be donated to a charitable organization selected by CSIM. The Review Officer may pre-approve exceptions to the 60 day holding period in cases of hardship. This exception is not automatic and requires advance written approval.

Profits received from a sale of securities which were acquired as a result of exercising options received through a Stock Option Program are excluded from the short-term trading profits prohibition discussed above. Investment Personnel receiving options may be subject to other restrictions with respect to their transactions in securities.

Blackout Periods Investment Personnel who are designated by CSIM as Portfolio Managers and Traders are restricted from executing a personal transaction in a Covered Security (except SCHW stock and options) within seven (7) calendar days before or after any Client Account that he/she manages trades in that security. Investment Personnel who are designated by CSIM as Credit Analysts are restricted from executing a personal transaction in a fixed income security within seven (7) calendar days before or after any Client Account trades in that security. All Access Persons, including all Investment Personnel, are restricted from executing a personal transaction in a Covered Security on a day during which any Client Account has a pending “buy” or “sell” order in the same security. Notwithstanding the fact that the transaction may not be restricted, no Access Person is permitted to effect a trade in any Covered Security in which they know or reasonably should have known a Client Account was effecting the trade.

This section will not be deemed to restrict personal securities transactions by Access Persons, including Investment Personnel, which would otherwise be prohibited solely because the transactions coincide with trades initiated as a result of cash flow by any Schwab Index Funds (other than trades in connection with a scheduled index rebalancing or adds and deletes).

This section will also not be deemed to restrict personal securities transactions by all Access Persons, including Investment Personnel, which would otherwise be prohibited solely because the transactions coincide with trades by any sub-adviser for a Fund for which the Access Person does not have prior access to daily trading information.

Prohibition of Initial Public Offerings (“IPOs”) All Access Persons, except persons who are Access Persons solely by reason of serving as an officer or Trustee of a Trust, are prohibited from directly or indirectly acquiring beneficial ownership in an IPO.

Prior Approval of Private Placements Each transaction where Access Persons, except persons who are Access Persons solely by reason of serving as an officer or Trustee of a Trust, directly or indirectly acquire beneficial ownership in a private placement requires prior approval by the Review Officer.

Prohibition On Service As Director Or Public Official All Access Persons are prohibited from serving on the board of directors of any publicly traded company or in an official capacity for any federal, state, or local government (or governmental agency or instrumentality) without prior approval from the Review Officer or Schwab’s applicable Review Officer.

Non-Interested Trustees A Non-Interested Trustee of the Trusts may trade in securities in which a Client Account has invested or is considering for investment, provided that the Trustee has no actual knowledge of the Trust’s contemporaneous activities with respect to the subject security, and has no material, non-public information about the issuer of the subject security.

VI. REPORTING

The policies and procedures regarding reporting requirements that are applicable to Access Persons include the following:

Reports to the Board of Trustees The President of CSIM and Executive Vice President of Schwab (or their designees) must (i) furnish annually to each Trust’s Board of Trustees a written report of any issues arising under this Code, including any material violations and any sanctions imposed in response to these violations and (ii) certify annually to the Board of Trustees that each has adopted procedures reasonably designed to prevent its Access Persons from violating the provisions of this Code. The President of the Trusts (or his or her designee) will report to the Board of Trustees on an annual basis in accordance with subparts (i) and (ii) above.

An officer of any sub-adviser of the Trusts shall submit a copy of its code of ethics to the Board for initial approval and, thereafter, the reports required by subparts (i) and (ii) above. Such sub-adviser shall submit any material amendments to its code of ethics within 6 months of adoption.

Access Person Reporting Each Trust, CSIM and Schwab are responsible for promptly identifying and reporting to CSIM Compliance all persons considered to be Access

Persons. Each Trust, CSIM and Schwab will compile a written list of such persons, and promptly notify CSIM Compliance of all changes in the persons designated as Access Persons. CSIM Compliance will notify Access Persons of their obligation to report holdings and trading activity, and provide them with a copy of this Code.

Each Access Person (with the exception of Non-Interested Trustees) must make an initial holdings report, no later than ten days after he or she becomes an Access Person, and an annual holdings report, within forty-five days after the end of the calendar year, which shall disclose:

•

The title, and type of security, as applicable, the exchange ticker symbol or CUSIP number, number of shares and principal amount of each Covered Security in which such Access Person had any direct or indirect beneficial ownership;

•

The name of any broker, dealer or bank with whom the Access Person maintained an account in which securities were held for the direct or indirect beneficial interest of the Access Person; and

•

The date that the report is submitted by the Access Person.

The information included in the initial holdings report must be current as of a date no more than 45 days prior to the date a person becomes an Access Person. The information included in the annual holdings report must be as of each calendar year end.

CSIM Compliance utilizes an on-line system to prepare the quarterly transaction report for each Access Person and present such reports to Access Persons for review and certification. Access Persons are responsible for reviewing and certifying the quarterly transaction report, unless they are subject to an applicable exemption to such reporting (see “Exemptions to Reporting Requirements” below). Access Persons of any sub-adviser of the Trusts shall file reports only under their own code of ethics.

Access Persons (other than Non-Interested Trustees) shall report on a quarterly calendar basis all transactions in which they acquire any direct or indirect beneficial ownership in Covered Securities. These transaction reports must be made no later than thirty days after the end of each calendar quarter and include trading activity at Schwab and any other broker-dealer.

The quarterly transaction reports shall disclose the following:

With respect to any transaction during the quarter in a Covered Security in which the Access Person had any direct or indirect beneficial ownership:

	•		The date of the transaction, the title, as applicable, the exchange ticker symbol or CUSIP number, the interest rate and maturity date (if applicable), the number of shares and principal amount of each Covered Security;

	•		The nature of the transaction (i.e. purchase, sale, or any other type of acquisition or disposition);

	•		The price of the Covered Security at which the transaction was effected;

	•		The name of the broker, dealer or bank with or through which the transaction was effected; and

	•		The date that the report is submitted by the Access Person.

With respect to any account established during the quarter by an Access Person in which any securities were held for the direct or indirect benefit of the Access Person:

	•		The name of the broker, dealer or bank with whom the Access Person established the account;

	•		The date the account was established; and

	•		The date that the report is submitted by the Access Person.

In addition, Access Persons responsible for the implementation of portfolio management instructions in the Schwab Managed Portfolios and who hold a non-Schwab mutual fund account directly with the issuer, are required to provide duplicate trade confirmations and monthly statements for such accounts.

Non-Interested Trustee Reporting CSIM Compliance shall notify each Non-Interested Trustee that such person is subject to the reporting requirements of this Code and shall deliver a copy of this Code to each such person. Non-Interested Trustees are not required to submit the initial and annual holdings report as set forth under “Access Person Reporting.”

Each Non-Interested Trustee shall submit a quarterly transaction report in the form set forth under “Access Person Reporting” to Non-Interested Trustee Counsel, or in the case of Schwab Strategic Trust, to Fund Counsel, denoting any transactions in which the Non-Interested Trustee knew at the time of his or her transaction or, in the ordinary course of fulfilling his or her official duties as a Trustee, should have known that during the fifteen (15) day period immediately preceding or after the date of the Trustee’s transaction in a Covered Security, such Covered Security is or was purchased or sold, or considered for purchase or sale, by a Client Account.

Exceptions to Reporting Requirements

Every Access Person must file the preceding reports except :

•

An Access Person need not make a report with respect to transactions effected for, and Covered Securities held in, any account over which the person has no direct or indirect influence or control (i.e. investment discretion) regarding specific security selection.

•

An Access Person need not make a quarterly transaction report with respect to a transaction effected pursuant to an Automatic Investment Plan.

•

The Review Officer may elect to accept broker trade confirmations or account statements in lieu of a quarterly transactions report if the transactions report would duplicate information contained in the broker trade confirmations or account statements received by the Trust, CSIM or Schwab with respect to the Access Person in the time period required, and all of the information required to be contained in a quarterly transaction report is contained in the broker trade confirmations or account statements, or in the records of the Trust, CSIM or Schwab.

VII. SURVEILLANCE

The policies and procedures regarding surveillance that are applicable to Access Persons include the following:

Employee Surveillance and Review The Review Officer will, on a quarterly basis, compare reported personal transactions in Covered Securities with the Client Accounts’ executed transactions in Covered Securities (purchased or sold) to determine whether an exception may have occurred. The Review Officer will employ procedures similar to those attached in Appendix B hereto. Before determining that an Access Person has engaged in activity that is considered an exception to the Code, the Review Officer must give the person an opportunity to supply explanatory material.

If the Review Officer determines that an exception has or may have occurred, the Review Officer must submit the determination, together with the confidential quarterly report and any explanatory material provided by the Access Person to the Trusts’ Chief Compliance Officer (Funds’ CCO) or his or her designee, who will determine whether the person has had a material or non-material exception to the Code.

No Access Person is required to participate in a determination of whether he or she has committed a violation or discuss the imposition of any sanction against himself or herself.

Depending on the underlying facts and circumstances of the incident, if the Funds’ CCO finds that the person violated the Code, after consulting with the Review Officer, the Funds’ CCO, or the Review Officer, will impose sanctions upon the Access Person that he or she deems appropriate including, among other things, a letter of censure, suspension of trading privileges, disgorgement of profits, and/or termination of employment. The Funds’ CCO, or his or her designee, will report the exception and the sanction imposed to the Trusts’ Board of Trustees at the next regularly scheduled board meeting, unless, in the sole discretion of the Funds’ CCO or his or her designee, circumstances warrant an earlier report.

The Review Officer will report his or her own transactions to an Alternate Review Officer on a quarterly basis. The Alternative Review Officer, on a quarterly basis, shall fulfill the duties of the other Review Officer with respect to the latter’s transactions in Covered Securities.

Employees of CSIM and Schwab are also subject to the requirements of Schwab’s Corporate Code.

VIII. RECORDS

All records associated with this Code, including but not limited to; (i) lists of persons who are, or within the past five years have been designated as Access Persons; (ii) quarterly transaction and initial and annual holdings reports by Access Persons; (iii) surveillance documentation, including any Code violation and any sanctions resulting from the violation; and (iv) communications and all versions of the Code, shall be

maintained by CSIM Compliance in an easily accessible place for at least five years. In addition, any record of any decision, and the reasons supporting the decision, to approve a hardship exemption or the acquisition by Investment Personnel of securities acquired in a Private Placement, shall be maintained by CSIM Compliance for at least five years after the end of the fiscal year in which the approval is granted.

The Code, a copy of each quarterly transaction and initial and annual holding report by each Access Person of the Trusts or information provided in lieu of such reports, any written report made to the Board of Trustees concerning the Code and lists of all persons required to make reports shall be preserved with the Trusts’ records for the period required by Rule 17j-1.

IX. DISCLOSURE

The Trusts will disclose in their Statement of Additional Information that (i) the Trusts, CSIM and Schwab have adopted a code of ethics; (ii) the personnel of the Trusts, CSIM and Schwab are permitted to invest in securities for their own account, subject to the limitations of Rule 17j-1 under the 1940 Act and this Code; and (iii) the Code can be obtained from the SEC. The Code will be filed as an exhibit to the Trusts’ registration statements.

Appendix A: Pre-clearance & Reporting Requirements

The table below indicates pre-clearance and reporting requirements for Access Persons.


		Quarterly	Annual
		Transaction	Holdings
Security Type	Pre-clearance	Reporting	Reporting
EQUITY (including options & warrants)	YES	YES	YES

FIXED INCOME (Excluding us govt obligations	YES	YES	YES

AFFILIATED MUTUAL FUNDS (excluding money market funds)	YES	YES	YES

CLOSED-END MUTUAL FUNDS	YES	YES	YES

INDIVIDUAL SECURITIES HELD IN 401k OR ESPP ACCOUNTS	YES (except automatic purchase programs where timing is not controlled by access person)	YES (except automatic purchase programs where timing is not controlled by access person)	YES

EMPLOYER STOCK UNIT PLANS (i.e. Schwab 401k), ETFs/HLDRs, AUTOMATIC INVESTMENT PLANS, DIRECT STOCK PURCHASE PLANS, OR DRIPs *Jumpword: Schwabplan*	NO (Except rebalancing activity)	YES (except automatic purchase programs where timing is not controlled by access person)	YES

SCHWAB STOCK	NO	YES	YES

SCHWAB STOCK OPTIONS • granted and vested • purchased *Jumpword: Employer Stock Option*	NO	YES (except at time of grant)	YES

ALL EXCHANGE TRADED FUNDS (etfs)	YES	YES	YES

UNAFFILIATED OPEN-END MUTUAL FUNDS	NO	NO	NO

US TREASURIES/AGENCIES	NO	NO	NO

SHORT-TERM/CASH EQUIVALENTS	NO	NO	NO

SEI INVESTMENTS DISTRIBUTION CO.

RULE 17j-1 CODE OF ETHICS

A copy of this Code may be accessed on the SEI intranet site under the Corporate Governance section.

This is an important document. You should take the time to read it thoroughly before you submit the required annual certification.

Any questions regarding this Code of Ethics should be referred to a member of the SIDCO Compliance Department

TABLE OF CONTENTS


I. General Policy
II. Code of Ethics

A. Purpose of Code
B. Employee Categories
C. Prohibitions and Restrictions
D. Pre-clearance of Personal Securities Transactions
E. Reporting Requirements
F. Detection and Reporting of Code Violations
G. Violations of the Code of Ethics
H. Confidential Treatment
I. Recordkeeping
J. Definitions Applicable to the Code of Ethics

III. Exhibits — Code of Ethics Reporting Forms

I. GENERAL POLICY

SEl Investments Distribution Co. (“SIDCO”) serves as principal underwriter for investment companies that are registered under the Investment Company Act of 1940 (“Investment Vehicles”). In addition, certain employees of SIDCO may serve as directors and/or officers of certain Investment Vehicles. This Code of Ethics (“Code”) sets forth the procedures and restrictions governing personal securities transactions for certain SIDCO personnel.

SIDCO has a highly ethical business culture and expects that its personnel will conduct any personal securities transactions consistent with this Code and in such a manner as to avoid any actual or potential conflict of interest or abuse of a position of trust and responsibility. Thus, SIDCO personnel must conduct themselves and their personal securities transactions in a manner that does not create conflicts of interest with the firm’s clients.

Pursuant to this Code, SIDCO personnel, their family members, and other persons associated with SIMC may be subject to various pre-clearance and reporting standards for their personal securities transactions based on their status as defined by this Code. Therefore, it is important that every person pay special attention to the categories set forth to determine which provisions of this Code applies to him or her, as well as to the sections on restrictions, pre-clearance, and reporting of personal securities transactions.

Each person subject to this Code must read and retain a copy of this Code and agree to abide by its terms. Failure to comply with the provisions of this Code may result in the imposition of serious sanctions, including, but not limited to, disgorgement of profits, penalties, dismissal, substantial personal liability and/or referral to regulatory or law enforcement agencies.

Please note that employees and registered representatives of SIDCO are subject to the supervisory procedures and other policies and procedures of SIDCO, and are also subject to the Code of Conduct of SEI Investments Company, which is the parent company of SIDCO. The requirements and limitations of this Code of Ethics are in addition to any requirements or limitations contained in these other policies and procedures. All employees are required to comply with federal securities laws and any regulations set forth by self-regulatory organizations (NASD, MSRB, etc.) of which SIDCO is a member.

Any questions regarding this Code of Ethics should be directed to a member of the SIDCO Compliance Department.

II. CODE OF ETHICS

Purpose of Code

This Code is intended to conform to the provisions of Section 17(j) of the Investment Company Act of 1940 (“the 1940 Act”), as amended, and Rule 17j-1 thereunder, as amended, to the extent applicable to SIDCO’s role as principal underwriter to Investment Vehicles. Those provisions of the U.S. securities laws are designed to prevent persons who are actively engaged in the management, portfolio selection or underwriting of registered investment companies from participating in fraudulent, deceptive or manipulative acts, practices or courses of conduct in connection with the purchase or sale of securities held or to be acquired by such companies. Certain SIDCO personnel will be subject to various requirements based on their responsibilities within SIDCO and accessibility to certain information. Those functions are set forth in the categories below.

Access Persons

(1) any director, officer or employee of SIDCO who serves as a director or officer of an Investment Vehicle for which SIDCO serves as principal underwriter;

(2) any director or officer of SIDCO who, in the ordinary course of business, makes, participates in or obtains information regarding, the purchase or sale of Covered Securities by an Investment Vehicle for which SIDCO serves as principal underwriter, or whose functions or duties in the ordinary course of business relate to the making of any recommendation to the Investment Vehicle regarding the purchase or sale of a Covered Security.

Prohibitions and Restrictions

Prohibition Against Fraud, Deceit and Manipulation

Access Persons may not, directly or indirectly, in connection with the purchase or sale of a security held or to be acquired by an Investment Vehicle for which SIDCO serves as principal underwriter:

(a) employ any device, scheme or artifice to defraud the Investment Vehicle;

(b) make to the Investment Vehicle any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;

(c) engage in any act, practice or course of business that operates or would operate as a fraud or deceit upon the Investment Vehicle; or

(d) engage in any manipulative practice with respect to the Investment Vehicle.

Excessive Trading of Mutual Fund Shares

Access Persons may not, directly or indirectly, engage in excessive short-term trading of shares of Investment Vehicles for which SIDCO serves as principal underwriter. Exhibit 6 hereto provides a list of the Investment Vehicles for which SIDCO provided such services. For purposes of this section, a person’s trades shall be considered “excessive” if made in violation of any stated policy in the mutual fund’s prospectus or if the trading involves multiple short-term round trip trades in a Fund for the purpose of taking advantage of short-term market movements.

Note that the SEI Funds are Covered Securities. ¹ Trades in the SEI Funds do not have to be pre-cleared but do have to be reported in accordance with this Code. Trades in SEI Funds done through the SEI Capital Accumulation (401(k)) Plan and trades done through an employee account established at SEI Private Trust Company will be deemed to satisfy the reporting requirements of the Code. Any trades in SEI Funds done in a different channel must be reported to the SIDCO Compliance Officer or the designated representative of the SIDCO Compliance Department.

	3.		Personal Securities Restrictions

			Access Persons:

	•		may not purchase or sell, directly or indirectly, any Covered Security within 24 hours before or after the time that the same Covered Security (including any equity related security of the same issuer such as preferred stock, options, warrants and convertible bonds) is being purchased or sold by any Investment Vehicle for which SIDCO serves as principal underwriter.

	•		may not acquire securities as part of an Initial Public Offering (“IPO”) without obtaining the written approval of the SIDCO Compliance Officer or the designated representative of the SIDCO Compliance Department before directly or indirectly acquiring a beneficial ownership in such securities.

	•		may not acquire a Beneficial Ownership interest in securities issued in a private placement transaction without obtaining prior written approval from the SIDCO Compliance Officer or the designated representative of the SIDCO Compliance Department.

	•		may not profit from the purchase and sale or sale and purchase of a Covered Security within 60 days of acquiring or disposing of Beneficial Ownership of that Covered Security. This prohibition does not apply to transactions resulting in a loss, or to futures or options on futures on broad-based securities indexes or U.S. Government securities. This prohibition also does not apply to transactions in the


¹		The SEI Family of Funds includes the following Trusts: SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust and SEI Tax Exempt Trust.

			SEI Funds, which are separately covered under the “Excessive Trading of Mutual Fund Shares” discussed in Section II.C.2 above.

	•		may not serve on the board of directors of any publicly traded company.

Pre-Clearance of Personal Securities Transactions

Transactions Required to be Pre-Cleared:

	•		Access Persons must pre-clear with the SIDCO Compliance Officer or the designated representative of the SIDCO Compliance Department a proposed transaction in a Covered Security if he or she has actual knowledge at the time of the transaction that, during the 24 hour period immediately preceding or following the transaction, the Covered Security was purchased or sold or was being considered for purchase or sale by any Investment Vehicle. The pre-clearance obligation applies to all Accounts held in the person’s name or in the name of others in which they hold a Beneficial Ownership interest. Note that, among other things, this means that these persons must pre-clear such proposed securities transactions by their spouse or domestic partner, minor children, and relatives who reside in the person’s household.

	•		The SIDCO Compliance Officer or designated representative of the SIDCO Compliance Department may authorize a Pre-clearing Person to conduct the requested trade upon determining that the transaction for which pre-clearance is requested would not result in a conflict of interest or violate any other policy embodied in this Code. Factors to be considered may include: the discussion with the requesting person as to the background for the exemption request, the requesting person’s work role, the size and holding period of the requesting person’s position in the security, the market capitalization of the issuer, the liquidity of the security, the reason for the requesting person’s requested transaction, the amount and timing of client trading in the same or a related security, and other relevant factors. The person granting the authorization must document the basis for the authorization.

Transactions that do no have to be pre-cleared:

	•		purchases or sales over which the person pre-clearing the transactions (the “Pre-clearing Person”) has no direct or indirect influence or control;

	•		purchases, sales or other acquisitions of Covered Securities which are non-volitional on the part of the Pre-clearing Person or any Investment Vehicle, such as purchases or sales upon exercise or puts or calls written by Pre-clearing Person, sales from a margin account pursuant to a bonafide margin call, stock dividends, stock splits, mergers consolidations, spin-offs, or other similar corporate reorganizations or distributions;

	•		purchases or withdrawals made pursuant to an Automatic Investment Program; however, any transaction that overrides the preset schedule or allocations of the automatic investment plan must be reported in a quarterly transaction report;

	•		purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired for such issuer; and

	•		acquisitions of Covered Securities through gifts or bequests.

Pre-clearance Procedures:

	•		All requests for pre-clearance of securities transactions must be submitted to the SIDCO Compliance Officer or designated representative of the SIDCO Compliance Department by using the SEI Automated Pre-Clearance Trading system.

	•		The following information must be provided for each request:

a. Name, date, phone extension and job title

b. Transaction detail, i.e. whether the transaction is a buy or sell; the security name and security type; number of shares; price; date acquired if a sale; and whether the security is traded in a portfolio or Investment Vehicle, part of an initial public offering, or part of a private placement transaction; and

c. Signature and date; if electronically submitted, initial and date.

	•		The SIDCO Compliance Officer or designated representative of the SIDCO Compliance Department will notify the requesting person whether the trading request is approved or denied through the SEI Automated Pre-Clearance Trading system.

	•		A Pre-clearance Request should not be submitted for a transaction that the requesting person does not intend to execute.

	•		Pre-clearance trading authorization is valid from the time when approval is granted through the next business day. If the transaction is not executed within this period, an explanation of why the previous pre-cleared transaction was not completed must be submitted to the SIDCO Compliance department or entered into the SEI Automated Pre-clearance Trading system. Also, Open and Limit Orders must be resubmitted for pre-clearance approval if not executed within the permitted time period.

	•		With respect to any transaction requiring pre-clearance, the person subject to pre-clearance must submit to the SIDCO Compliance Officer or designated representative of the SIDCO Compliance Department transaction reports showing the transactions for all the Investment

			Vehicles with respect to which such person has knowledge regarding purchases and sales that triggered the requirement to pre-clear under Section D.1. The transaction information must be provided for the 24 hour period before and after the date on which their securities transactions were effected. These reports may be submitted in hard copy or viewed through the SEI Pre-clearance Trading system. Transaction reports need only cover the Investment Vehicles that hold or are eligible to purchase and sell the types of securities proposed to be bought or sold by person subject to pre-clearance requirements. For example, if a person seeks approval for a proposed equity trade, only the transactions reports for the Investment Vehicles effecting or eligible to effect transactions in equity securities are required.

	•		The SIDCO Compliance Department will maintain pre-clearance records and records of exemptions granted for 5 years.

Reporting Requirements

Duplicate Brokerage Statements

	•		Access Persons are required to instruct their broker/dealer to file duplicate statements with the SIDCO Compliance Department at SEI Oaks. Statements must be filed for all Accounts (including those in which the person has a Beneficial Ownership interest), except those that trade exclusively in open-end funds other than Reportable Funds, government securities or Automatic Investment Plans. Failure of a broker/dealer to send duplicate statements will not excuse a violation of this Section.

	•		Sample letters instructing the broker/dealer firms to send the statements to SIDCO are attached in Exhibit 1 of this Code. If the broker/dealer requires a letter authorizing a SIDCO employee to open an account, the permission letter may also be found in Exhibit 1. Please complete the necessary brokerage information and forward a signature ready copy to the SIDCO Compliance Officer.

	•		If no such duplicate statement can be supplied, the employee should contact the SIDCO Compliance Department.

Initial Holdings Report

	•		Access Persons must submit an Initial Holdings Report to the SIDCO Compliance Officer or designated representative of the SIDCO Compliance Department disclosing every Covered Security, including mutual fund accounts, beneficially owned directly or indirectly by such person within 10 days of becoming an Access Person. Any person who returns the report late may be subject to the penalties in Section G regarding Code of Ethics violations.

	•		The following information must be provided on the report:

a. the title of the security;

b. the number of shares held;

c. the principal amount of the security;

d. the name of the broker, dealer, transfer agent; bank or other location where the security is held; and

e. the date the report is submitted.

The information disclosed in the report should be current as of a date no more than 45 days prior to the date the person becomes an Access Person. If the above information is contained on the Access Person’s brokerage statement, he or she may attach the statement and sign the Initial Holdings Report.

•

The Initial Holdings Report is attached as Exhibit 2 to this Code.

Quarterly Report of Securities Transactions

	•		Access Persons must submit quarterly transaction reports of the purchases and/or sales of Covered Securities in which such persons have a direct or indirect Beneficial Ownership interest. The report will be provided to all of the above defined persons before the end of each quarter by the SIDCO Compliance Officer or designated representative of the SIDCO Compliance Department and must be completed and returned no later than 30 days after the end of each calendar quarter. Quarterly Transaction Reports that are not returned by the date they are due will be considered late and will be noted as violations of the Code of Ethics. Any person who repeatedly returns the reports late may be subject to the penalties in Section G regarding Code of Ethics violations.

	•		The following information must be provided on the report:

a. the date of the transaction, the description and number of shares, and the principal amount of each security involved;

b. whether the transaction is a purchase, sale or other acquisition or disposition;

c. the transaction price;

d. the name of the broker, dealer or bank through whom the transaction was effected;

e. a list of securities accounts opened during the quarterly including the name of the broker, dealer or bank and account number; and

f. the date the report is submitted.

•

The Quarterly Report of Securities Transaction is attached as Exhibit 3 to this Code.

Annual Report of Securities Holdings

	•		On an annual basis, Access Persons must submit to the SIDCO Compliance Officer or designated representative of the SIDCO Compliance Department an Annual Report of Securities Holdings that contains a list of all Covered Securities, including mutual fund accounts, in which they have any direct or indirect Beneficial Ownership interest.

	•		The following information must be provided on the report:

a. the title of the security;

b. the number of shares held;

c. the principal amount of the security;

d. the name of the broker, dealer, transfer agent, bank or other location where the security is held; and

e. the date the report is submitted.

The information disclosed in the report should be current as of a date no more than 45 days before the report is submitted. If the above information is contained on the Access Person’s brokerage statement, he or she may attach the statement and sign the annual holdings report.

	•		Annual Reports must be completed and returned to the SIDCO Compliance Officer or designated representative of the SIDCO Compliance Department within 30 days after the end of the calendar year-end. Annual Reports that are not returned by the date they are due will be considered late and will be noted as violations of the Code of Ethics. Any person who repeatedly returns the reports late may be subject to the penalties in Section G regarding Code of Ethics violations.

	•		The Annual Report of Securities Holdings is attached as Exhibit 4 to this Code.

Annual Certification of Compliance

•

Access Persons will be required to certify annually that they:

-have read the Code of Ethics;

-understand the Code of Ethics; and

-have complied with the provisions of the Code of Ethics.

•

The SIDCO Compliance Officer or designated representative from the SIDCO Compliance Department will send out annual forms to all Access Persons that must be completed and returned no later than 30 days after the end of the calendar year. Any person who repeatedly returns the forms late may be subject to the penalties in Section G regarding Code of Ethics violations.

•

The Annual Certification of Compliance is attached as Exhibit 5 to this Code.

Exception to Reporting Requirements

•

An Access Person who is subject to the Code of Ethics of an affiliate of SIDCO (“Affiliate Code”), and who pursuant to the Affiliate Code submits reports consistent with the reporting requirements of paragraphs 1 through 4 above, will not be required to submit such reports under this Code.

Detection and Reporting of Code Violations

The SIDCO Compliance Officer or designated representative of the SIDCO Compliance Department will:

	•		review the personal securities transaction reports or duplicate statements filed by Access Persons and compare the reports or statements of the Investment Vehicles’ completed portfolio transactions. The review will be performed on a quarterly basis. If the SIDCO Compliance Officer or the designated representative of the SIDCO Compliance Department determines that a compliance violation may have occurred, the Officer will give the person an opportunity to supply explanatory material;

	•		prepare an Annual Issues and Certification Report to the Board of Trustees or Directors of any Investment Vehicle that (1) describes the issues that arose during the year under this Code, including, but not limited to, material violations of and sanctions under the Code, and (2) certifies that SIDCO has adopted procedures reasonably necessary to prevent its Access Persons from violating this Code;

	•		prepare a written report to SIDCO management outlining any violations of the Code together with recommendations for the appropriate penalties; and

	•		prepare a written report detailing any approval(s) granted for the purchase of securities offered in connection with an IPO or a private placement. The report must include the rationale supporting any decision to approve such a purchase.

An employee who in good faith reports illegal or unethical behavior will not be subject to reprisal or retaliation for making the report. Retaliation is a serious violation of this policy and any concern about retaliation should be reported immediately. Any person found to have retaliated against an employee for reporting violations will be subject to appropriate disciplinary action.

Violations of the Code of Ethics

Penalties:

•

Persons who violate the Code of Ethics may be subject to serious penalties, which may include:

	§		written warning;

	§		reversal of securities transactions;

	§		restriction of trading privileges;

	§		disgorgement of trading profits;

	§		fines;

	§		suspension or termination of employment; and/or

	§		referral to regulatory or law enforcement agencies.

Penalty Factors:

•

Factors which may be considered in determining an appropriate penalty include, but are not limited to:

	§		the harm to clients;

	§		the frequency of occurrence;

	§		the degree of personal benefit to the employee;

	§		the degree of conflict of interest;

	§		the extent of unjust enrichment;

	§		evidence of fraud, violation of law, or reckless disregard of a regulatory requirement; and/or

	§		the level of accurate, honest and timely cooperation from the employee.

Confidential Treatment

•

The SIDCO Compliance Officer or designated representative from the SIDCO Compliance Department will use their best efforts to assure that all requests for pre-clearance, all personal securities reports and all reports for securities holding are treated as personal and confidential. However, such documents will be available for inspection by appropriate regulatory agencies and other parties, such as counsel, within and outside SIDCO as necessary to evaluate compliance with or sanctions under this Code.

Recordkeeping

	•		SIDCO will maintain records relating to this Code of Ethics in accordance with Rule 31a-2 under the 1940 Act. They will be available for examination by representatives of the Securities and Exchange Commission and other regulatory agencies.

	•		A copy of this Code that is, or at any time within the past five years has been, in effect will be preserved in an easily accessible place for a period of five years.

	•		A record of any Code violation and of any sanctions taken will be preserved in an easily accessible place for a period of at least five years following the end of the fiscal year in which the violation occurred.

	•		A copy of each Quarterly Transaction Report, Initial Holdings Report, and Annual Holdings Report submitted under this Code, including any information provided in lieu of any such reports made under the Code, will be preserved for a period of at least five years from the end of the fiscal year in which it is made, for the first two years in an easily accessible place.

	•		A record of all persons, currently or within the past five years, who are or were required to submit reports under this Code, or who are or were responsible for reviewing these reports, will be maintained in an easily accessible place for a period of at least five years from the end of the calendar year in which it is made.

J. Definitions Applicable to the Code of Ethics

	•		Account — a securities trading account held by a person and by any such person’s spouse, minor children and adults residing in his or her household (each such person, an “immediate family member”); any trust for which the person is a trustee or from which the person benefits directly or indirectly; any partnership (general, limited or otherwise) of which the person is a general partner or a principal of the general partner; and any other account over which the person exercises investment discretion.

	•		Automatic Investment Plan — a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation. An Automatic Investment Plan includes a dividend reinvestment plan.

	•		Beneficial Ownership — Covered Security ownership in which a person has a direct or indirect financial interest. Generally, a person will be regarded as a beneficial owner of Covered Securities that are held in the name of:

	a.		a spouse or domestic partner;

	c.		a relative who resides in the person’s household; or

	d.		any other person IF : (a) the person obtains from the securities benefits substantially similar to those of ownership (for example, income from securities that are held by a spouse); or (b) the person can obtain title to the securities now or in the future.

•

Covered Security — except as noted below, includes any interest or instrument commonly known as a “security”, including notes, bonds, stocks (including closed-end funds), debentures, convertibles, preferred stock, security future, warrants, rights, and any put, call, straddle, option,

			or privilege on any security (including a certificate of deposit) or on any group or index of securities. The term “Covered Securities” specifically includes the SEI Funds. See the definition of Reportable Funds below.

			A “Covered Security” does not include (i) direct obligations of the U.S. Government, (ii) bankers’ acceptances, (iii) bank certificates of deposit, (iv) commercial paper and other high quality short-term debt instruments, including repurchase agreements, (v) shares issued by money market funds and (vi) shares issued by open-end investment companies other than a Reportable Fund.

	•		Initial Public Offering — an offering of securities for which a registration statement has not been previously filed with the U.S. SEC and for which there is no active public market in the shares.

	•		Purchase or sale of a Covered Security — includes the writing of an option to purchase or sell a security.

	•		Reportable Fund — Any non-money market fund for which SIDCO serves as principal underwriter.

SEI INVESTMENTS DISTRIBUTION CO.
CODE OF ETHICS EXHIBITS


Exhibit 1		Account Opening Letters to Brokers/Dealers

Exhibit 2		Initial Holdings Report

Exhibit 3		Quarterly Transaction Report

Exhibit 4		Annual Securities Holdings Report

Exhibit 5		Annual Compliance Certification

Exhibit 6		SIDCO Client List

EXHIBIT 1

Date:

Your Broker
street address
city, state zip code


Re:		Your Name your S.S. number or account number

Dear Sir or Madam:

Please be advised that I am an employee of SEl Investments Distribution Co. Please send duplicate statements only of this brokerage account to the attention of:

SEl Investments Distribution Co.
Attn: The Compliance Department
One Freedom Valley Drive
Oaks, PA 19456

This request is made pursuant to SEI’s Code of Ethics.

Thank you for your cooperation.

Sincerely,

Your name

Date:

[Address]

Re:

Employee Name
Account #
SS#

Dear Sir or Madam:

Please be advised that the above referenced person is an employee of SEI Investments Distribution Co. We grant permission for him/her to open a brokerage account with your firm, provided that you agree to send duplicate statements only of this employee’s brokerage account to:

SEI Investments Distribution Co.
Attn: The Compliance Department
One Freedom Valley Drive
Oaks, PA 19456

This request is made pursuant to SEI’s Code of Ethics.

Thank you for your cooperation.

Sincerely,

SEI Compliance Officer

EXHIBIT 2

SEI INVESTMENTS DISTRIBUTION CO.
INITIAL HOLDINGS REPORT


Name of Reporting Person:

Date Person Became Subject to the Code’s Reporting


Requirements:


Information in Report Dated as of:


Date Report Due:


Date Report Submitted:

Securities Holdings


		Principal Amount, Maturity
Name of Issuer and Title	No. of Shares (if	Date and Interest Rate (if	Name of Broker, Dealer or Bank
of Security	applicable)	applicable)	Where Security Held

If you have no securities holdings to report, please check here. o

Securities Accounts


Name of Broker, Dealer or
Bank	Account Number	Names on Account	Type of Account

If you have no securities accounts to report, please check here. o

I certify that I have included on this report all securities holdings and accounts in which I have a direct or indirect beneficial interest and required to be reported pursuant to the Code of Ethics and that I will comply with the Code of Ethics.


Signature:						Date:


Received by:

EXHIBIT 3

SEI INVESTMENTS DISTRIBUTION CO.
QUARTERLY TRANSACTION REPORT
Transaction Record of Securities Directly or Indirectly Beneficially Owned
For the Quarter Ended


Name:


Submission Date:

Securities Transactions

Name of

Principal Amount,

Broker, Dealer

Name of Issuer

Maturity Date and

or Bank

Date of

and Title of

No. of Shares (if

Interest Rate (if

Type of

Effecting

Transaction

Security

applicable)

Transaction

Price

Transaction

If you had no reportable transactions during the quarter, please check here. o

NOTE: Trades in SEI Funds done through the SEI Capital Accumulation (401(k)) Plan and trades done through an employee account established at SEI Private Trust Company will be deemed to satisfy the reporting requirements of the Code and do not have to be reported here. Any trades in SEI Funds done in a different channel must be reported.

This report is required of all officers, directors and certain other persons under Rule 17j-1 of the Investment Company Act of 1940 and is subject to examination. Transactions in direct obligations of the U.S. Government need not be reported. In addition, persons need not report transactions in bankers’ acceptances, certificates of deposit, commercial paper or open-end investment companies other than Reportable Funds. The report must be returned within 30 days of the applicable calendar quarter end. The reporting of

transactions on this record shall not be construed as an admission that the reporting person has any direct or indirect beneficial ownership in the security listed.

Securities Accounts

If you established an account within the quarter, please provide the following information:


Name of Broker, Dealer			Date Account was
or Bank	Account Number	Names on Account	Established	Type of Account

If you did not establish a securities account during the quarter, please check here. o

By signing this document, I represent that all reported transactions were pre-cleared through the Compliance Department or the designated Compliance Officer in compliance with the SIDCO Code of Ethics. In addition, I certify that I have included on this report all securities transactions and accounts required to be reported pursuant to the Policy.


Signature:


Received by:

EXHIBIT 4

SEI INVESTMENTS DISTRIBUTION CO.
ANNUAL SECURITIES HOLDINGS REPORT
As of December 31,

Name of Reporting Person:

Securities Holdings


		Principal Amount,
		Maturity Date and
	No. of Shares (if	Interest Rate (if	Name of Broker, Dealer or Bank
Name of Issuer and Title of Security	applicable)	applicable)	Where Security Held

If you had no securities holding to report this year, please check here. o

Securities Accounts

If you established an account during the year, please provide the following information:


	Date Account was	Account
Name of Broker, Dealer or Bank	Established	Number	Names on Account	Type of Account

If you have no securities accounts to report this year, please check here. o

I certify that the above list is an accurate and complete listing of all securities in which I have a direct or indirect beneficial interest.



Signature		Received by

Date

Note: Do not report holdings of U.S. Government securities, bankers’ acceptances, certificates of deposit, commercial paper and mutual funds other than Reportable Funds.

EXHIBIT 5

SEI INVESTMENTS DISTRIBUTION CO.
RULE 17J-1 CODE OF ETHICS
ANNUAL COMPLIANCE CERTIFICATION

Please return the signed form via email or
interoffice the form to SEI Compliance Department — Meadowlands Two

1.		I hereby acknowledge receipt of a copy of the Code of Ethics.

2.		I have read and understand the Code of Ethics and recognize that I am subject thereto. In addition, I have raised any questions I may have on the Code of Ethics with the SIDCO Compliance Officer and have received a satisfactory response[s].

3.		For all securities/accounts beneficially owned by me, I hereby declare that I have complied with the terms of the Code of Ethics during the prior year.


Print Name:


Signature:


Date:


Received by SIDCO:

EXHIBIT 6

As of January 12, 2009, SIDCO acts as distributor for the following:

SEI Daily Income Trust
SEI Liquid Asset Trust
SEI Tax Exempt Trust
SEI Institutional Managed Trust
SEI Institutional International Trust
The Advisors’ Inner Circle Fund
The Advisors’ Inner Circle Fund II
Bishop Street Funds
SEI Asset Allocation Trust
SEI Institutional Investments Trust
Oak Associates Funds
CNI Charter Funds
iShares Inc.
iShares Trust
Optique Funds Inc (formerly Johnson Family Funds, Inc.)
Causeway Capital Management Trust
Barclays Global Investors Funds
SEI Opportunity Fund, LP
The Arbitrage Funds
The Turner Funds
ProShares Trust
Community Reinvestment Act Qualified Investment Fund
SEI Alpha Strategy Portfolios, LP
TD Asset Management USA Funds
SEI Structured Credit Fund LP
Wilshire Mutual Funds, Inc.
Wilshire Variable Insurance Trust
Forward Funds
Global X Funds