EXHIBIT (d)(xii)
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made this ___ day of February 2002, by and between, Xxxxxxx
Xxxxxx Investment Management, Inc. ("CSIM"), and Royce & Associates, Inc.
("Sub-Adviser").
WHEREAS, Schwab Capital Trust, a Massachusetts business trust ("Company"),
is an open-end, management investment company registered under the Investment
Company Act of 1940 ("1940 Act"), consisting of several series, each having its
own investment objective and policies; and
WHEREAS, Company has entered into an Investment Advisory and
Administration Agreement with CSIM pursuant to which CSIM acts as investment
manager to Company ("Management Agreement"); and
WHEREAS, CSIM, acting with the approval of Company, wishes to retain
Sub-Adviser to provide discretionary investment advisory services ("Services")
with respect to a portion of each series identified on Schedule A hereto, as may
be amended from time to time, (each a "Fund") that may be allocated by CSIM for
management by the Sub-Adviser from time to time, together with all income earned
on those assets and all realized and unrealized capital appreciation related to
those assets (for each Fund, the "Managed Assets"), and Sub-Adviser is willing
to render the Services.
NOW, THEREFORE, in consideration of mutual covenants herein contained, the
parties agree as follows:
1. APPOINTMENT. CSIM appoints Sub-Adviser to provide the Services for the period
and term set forth in this Investment Sub-Advisory Agreement ("Agreement").
Sub-Adviser accepts such appointment and agrees to render the Services as
provided herein.
2. DUTIES OF SUB-ADVISER.
(a) Subject to supervision by the Company, its Board of Trustees
("Trustees") and CSIM (collectively "Fund Parties"), Sub-Adviser will manage the
investment and reinvestment of the Managed Assets and determine in its
discretion, the securities and other property to be purchased or sold and the
portion of the Managed Assets to be retained in cash. Sub-Adviser will use the
same skill and care in providing the Services to each Fund as it utilizes in
providing investment advisory services to other fiduciary accounts for which it
has investment responsibilities. Sub-Adviser will provide Fund Parties with
records concerning Sub-Adviser's activities that Fund Parties are required to
maintain, and regular reports concerning Sub-Adviser's performance of the
Services, as Fund Parties may reasonably request.
(b) Unless CSIM provides written instructions to the contrary,
Sub-Adviser will review all proxy solicitation materials and will exercise any
voting rights associated with securities comprising the Managed Assets in the
best interests of each Fund and its shareholders.
(c) Sub-Adviser will use it best efforts to provide assistance to
Company, Xxxxxxx Xxxxxx & Co, Inc. ("Distributor") and CSIM (collectively
"Schwab Parties"), as may be reasonably requested by such parties, in connection
with the offering, sale and marketing of Fund shares. Such assistance may
include, without limitation: (i) review of offering, marketing and sales
materials; (ii) attendance and participation at internal and external
conferences (including in-person, telephonic and video), conventions, road shows
and other sales or educational meetings; provided that the amount of time
required to be spent on such efforts by Sub-Adviser's portfolio manager will be
limited to not more than one such event, in San Francisco, annually; and (iii)
provision of discussion, analysis and commentary and market and performance data
for filings with the Securities and Exchange Commission ("SEC") and web and
other
medium based marketing and advertising. Schwab parties may use the names, trade
names, trademarks, service marks, artwork, designs, or other copyrighted
materials of Sub-Adviser in connection with the offering, sale and marketing of
Fund shares, subject to the written approval of Sub-Adviser, which will not be
unreasonably withheld.
(d) Unless CSIM provides written instructions to the contrary,
Sub-Adviser will be responsible for determining, in good faith, the fair value
of any securities of the Managed Assets for which market quotations are not
readily available in accordance with guidelines and procedures adopted by the
Trustees, a copy of which will be delivered to Sub-Adviser. In addition,
Sub-Adviser will arrange for the provision of market values from at least two
parties independent of Sub-Adviser with respect to any securities of the Managed
Assets for which the Company's pricing agent does not obtain prices in the
ordinary course of business from an automated pricing service.
(e) Sub-Adviser will discharge the foregoing responsibilities
subject to the supervision of Fund Parties, and in compliance with the
following, as may be applicable to the Services: (i) such policies as Fund
Parties may from time to time establish which are provided in writing to
Sub-Adviser; (ii) Company's Prospectus and Statement of Additional Information
("Prospectus and SAI"); (iii) Company's Declaration of Trust and By-Laws; (iv)
1940 Act; (v) the Investment Advisers Act of 1940 ("Advisers Act"); (vi) any
exemptive relief granted to the Company which is provided in writing to
Sub-Adviser or other applicable relief granted by the SEC; (vii) the Internal
Revenue Code of 1986 ("Code"); (viii) the Commodities Exchange Act ("CEA"); and
(ix) any other applicable laws. If a conflict in policies referenced herein
occurs, the Prospectus and SAI will control.
(f) Sub-Adviser agrees to perform such duties at its own expense and
to provide the office space, furnishings and equipment and the personnel
required by it to perform the Services on the terms and for the compensation
provided herein. Sub-Adviser will not, however, pay for the cost of securities,
commodities, and other investments (including brokerage commissions and other
transaction charges, if any) purchased or sold for a Fund.
3. DUTIES OF CSIM. CSIM will continue to have responsibility for all services to
be provided to a Fund pursuant to the Management Agreement and will oversee and
review Sub-Adviser's performance of the Services. CSIM will furnish to
Sub-Adviser current and complete copies of the Declaration of Trust and By-laws
of Company, and the current Prospectus and SAI as those documents may be amended
from time to time.
4. CUSTODY. Company will designate one or more custodians to hold the Managed
Assets ("Custodian") in the name of each Fund. Each custodian will be
responsible for the custody, receipt and delivery of securities and other assets
of a Fund including the Managed Assets, and Sub-Adviser will have no authority,
responsibility or obligation with respect to the custody, receipt or delivery of
securities or other assets of a Fund. In the event that any cash or securities
of a Fund are delivered to Sub-Adviser, Sub-Adviser will promptly deliver the
same to the Custodian for the benefit of and in the name of Fund. Sub-Adviser
will provide to the Custodian and Fund Accountant on each business day,
information relating to all transactions in the Managed Assets and will provide
such information to Fund Parties upon request. Sub-Adviser will make all
reasonable efforts to notify Custodian and Fund Accountant of all transactions
with brokers for the Managed Assets by 9:00 am EST on the business day following
the trade date and to affirm the trade to the Custodian and Fund Accountant
before the close of business one business day after the trade date.
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5. PORTFOLIO TRANSACTIONS.
(a) Sub-Adviser is authorized to select brokers or dealers that will
execute the purchases and sales of portfolio securities and other property for a
Fund in a manner that implements the policy with respect to brokerage set forth
in the Prospectus and SAI, or as Fund Parties may reasonably direct in writing
from time to time, and in conformity with the federal securities laws.
(b) In effecting transactions for a Fund and selecting brokers or
dealers, Sub-Adviser will use its best efforts to seek on behalf of the Fund the
best overall terms generally available. In assessing the best overall terms for
any transaction, Sub-Adviser will consider any factors that it deems relevant,
including price paid for the security, commission paid for the transaction,
clearance, settlement, reputation, financial strength and stability, efficiency
of execution and error resolution, block trading and block positioning
capabilities, willingness to execute related or unrelated difficult transactions
and order of call.
(c) Consistent with any written policies established by Fund Parties
and in compliance with the Prospectus and SAI and 1940 Act, Sub-Adviser is
authorized, in its discretion, to utilize the services of a broker or dealer
that provides brokerage or research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934).
(d) In no instance will Sub-Adviser cause Managed Assets to be
purchased from or sold to Distributor, CSIM, Sub-Adviser or any affiliated
person of either Company, Distributor, CSIM, or Sub-Adviser (collectively
"Related Parties"), except to the extent permitted by the 1940 Act or any
exemptive or other relief granted by the SEC. Sub-Adviser will not knowingly
execute any transactions with brokers or dealers that are Related Parties
without the prior written approval of CSIM. CSIM will furnish to Sub-Adviser a
current list of brokers and dealers that are Related Parties of Company,
Distributor or CSIM as such list may be amended by CSIM from time to time.
(e) Consistent with any written policies established by Fund
Parties, Sub-Adviser may aggregate orders for purchase or sale of Managed Assets
with similar orders being made concurrently for other accounts managed by
Sub-Adviser, if, in Sub-Adviser's reasonable judgment, such aggregation will
result in an overall economic benefit to Fund, as well as other accounts managed
by Sub-Adviser, taking into consideration the transaction price, brokerage
commission and other expenses. In any single transaction in which purchases or
sales of securities of any issuer for the account of a Fund are aggregated with
other accounts managed by Sub-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.
(f) CSIM acknowledges that Sub-Adviser has not had an opportunity to
review any of the following: Company's Registration Statement; Prospectus and
Statement of Additional Information; Declaration of Trust and By-Laws; or any of
Company's or CSIM's policies referred to herein. Sub-Adviser and CSIM agree to
work together in good faith to resolve any issues that may arise out of such
documents or documents pertaining to Sub-Adviser's performance of the Services.
In the event such issues cannot be resolved in good faith, Sub-Adviser may
terminate this Agreement without commencing to perform the Services,
notwithstanding the limitation set forth in the first sentence of Section 15(c).
6. COMPENSATION OF SUB-ADVISER. For the Services provided and expenses assumed
by Sub-Adviser under this Agreement, CSIM will pay to Sub-Adviser compensation
at the rate specified in Schedule B, as may be amended from time to time. Such
compensation will be paid at the times and on the terms set forth in Schedule B.
All rights of compensation under this Agreement for Services performed as of the
termination date will survive the termination of this Agreement. Except as
otherwise prohibited by law or regulation, Sub-Adviser may, in its discretion,
from time to time, waive a portion of its compensation.
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7. REPORTS.
(a) Sub-Adviser will provide written quarterly reports to Fund
Parties regarding the Managed Assets, as Fund Parties may reasonably request.
CSIM will specify the information to be included in such quarterly reports.
(b) Sub-Adviser will promptly communicate to Fund Parties any
information relating to transactions in the Managed Assets, as Fund Parties may
reasonably request.
(c) Sub-Adviser will promptly notify Fund Parties of any financial
or regulatory condition that is likely to impair the ability of Sub-Adviser to
perform the Services. In addition, Sub-Adviser will promptly notify Fund Parties
of any intended change in control of Sub-Adviser and of any intended change in
portfolio management applicable to the Managed Assets or senior management, as
far in advance of such change as possible.
(d) Sub-Adviser will make its officers and employees available to
meet with Fund Parties at such times and places, as Fund Parties may reasonably
request with reasonable advance written notice, including at quarterly and
special meetings of the Trustees in San Francisco, California.
8. STATUS OF SUB-ADVISER. Sub-Adviser is and will continue to be registered
under the Advisers Act. The Services of Sub-Adviser to Company for each Fund are
not to be deemed exclusive, and Sub-Adviser is free to render similar services
to others so long as its Services to the Fund are not impaired thereby.
Sub-Adviser is and will continue to be an independent contractor and, unless
otherwise expressly provided or authorized, has no authority to act for or
represent Company in any way or otherwise act as agent of Company.
9. CODE OF ETHICS. Sub-Adviser will furnish to Fund Parties a current copy of
its code of ethics that complies with the requirements of Rule 17j-1 under the
1940 Act. Upon written request of CSIM, Sub-Adviser will permit Fund Parties to
examine the reports made by Sub-Adviser pursuant to Rule 17j-1 and other records
relevant to Sub-Adviser's code of ethics. Sub-Adviser will provide an annual
certification to Fund Parties certifying that to Sub-Adviser's knowledge, there
have been no material violations of Sub-Adviser's code of ethics or, if such
violations have occurred, that appropriate actions have been taken in response
to such violations.
10. CERTAIN RECORDS.
(a) Sub-Adviser will maintain all books and records with respect to
transactions involving the Managed Assets required by subparagraphs (b)(5), (6),
(7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act.
Sub-Adviser will provide to Fund Parties such information with regard to
Sub-Adviser and the profitability of the Fund to Sub-Adviser, as Fund Parties
may reasonably request, to assist the Trustees in evaluating the terms of this
Agreement and any renewal thereof under Section 15(c) of the 0000 Xxx.
(b) Sub-Adviser will keep the books and records relating to the
Managed Assets required to be maintained by Sub-Adviser under this Agreement and
will timely furnish to Fund Parties all information relating to Sub-Adviser's
Services under this Agreement needed by Fund Parties to keep the other books and
records of the Company required by Rule 31a-1 under the 1940 Act. Sub-Adviser
will also furnish to Fund Parties, upon Fund Parties' request, any other
information relating to the Managed Assets that must be filed by Company with
the SEC or sent to shareholders under the 1940 Act, and any exemptive or other
relief granted by the SEC. Sub-Adviser agrees that all records that it maintains
on behalf of Company are property of Company and Sub-Adviser will surrender
promptly to Company any of such
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records upon Fund Parties' request; provided, however, Sub-Adviser may retain a
copy of such records. In addition, Sub-Adviser will preserve for the periods
prescribed by Rule 31a-2 under 1940 Act any such records as are required to be
maintained by it pursuant to this Agreement.
11. LIMITATION OF LIABILITY OF SUB-ADVISER. Sub-Adviser will not be liable for
any claims, liabilities, damages, costs or losses ("collectively" claims)
arising out of this Agreement, except to the extent such claims arise out of:
(a) Sub-Adviser's negligence, bad faith or willful misfeasance; or (b)
Sub-Adviser's breach of this Agreement. Nothing in this Section 11 will be
deemed a waiver or limitation of any obligation or duty that may not by law be
waived or limited.
12. INDEMNIFICATION.
(a) Sub-Adviser will indemnify and hold harmless Fund Parties, their affiliates
and their respective employees, officers and directors from and against all
claims arising out of this Agreement to the extent such claims arise out of: (i)
Sub-Adviser's negligence, bad faith or willful misfeasance; or (ii)
Sub-Adviser's breach of this Agreement.
(b) CSIM will indemnify and hold harmless Sub-Adviser, its affiliates, and their
respective employees, officers and directors from and against all claims arising
out of this Agreement, except to the extent such claims arise out of: (i)
Sub-Adviser's negligence, bad faith or willful misfeasance; or (ii)
Sub-Adviser's breach of this Agreement.
13. CONFIDENTIALITY. The Mutual Confidentiality and Non-Disclosure Agreement
("Confidentiality Agreement") previously entered into between the parties is
attached hereto as Schedule C and incorporated herein by reference. The
Confidentiality Agreement will remain in effect throughout the term of this
Agreement, and each party will abide by all of the provisions set forth therein.
Upon termination of this Agreement, each party will continue to hold any
Confidential Information (as that term is defined in the Confidentiality
Agreement) in strict confidence for ten years from the date of termination,
except as otherwise set forth in the Confidentiality Agreement and except with
regard to: (a) trade secrets of either party which will be held in confidence
for as long as such information remains a trade secret; and (b) Schwab Customer
Information (as that term is defined in the Confidentiality Agreement) which
will be held by Sub-Adviser in strict confidence in perpetuity and which will be
used by Sub-Adviser only to perform the Services and for no other purpose. In
the event any of the provisions of the Confidentiality Agreement conflict with
any of the provisions of this Agreement, the latter will control.
14. PUBLICITY. During and after the term of this Agreement, Sub-Adviser will not
make any media release or other public announcement relating to this Agreement
without Schwab Parties' prior written consent. Sub-Adviser will acquire no right
to use, and will not use, without Schwab Parties' prior written consent, with
respect to each use, the names, trade names, trademarks, service marks, artwork,
designs, or copyrighted materials of Schwab Parties or their affiliates in any
sales or advertising materials, press releases, presentations, promotions or
other publicity related materials or media.
15. DURATION AND TERMINATION.
(a) This Agreement will become effective for each Fund upon its
approval by the Trustees and by a vote of the majority of the outstanding voting
securities of each Fund; provided, however, if CSIM obtains exemptive relief
from the SEC permitting it to engage a Sub-Adviser without first obtaining
approval of the Agreement from a majority of the outstanding voting securities
of the Fund involved, the Agreement will become effective upon its approval by
the Trustees, without approval by the shareholders. This Agreement will remain
in effect until two years from date of each effectiveness, and thereafter, for
periods of one year so long as such continuance thereafter is specifically
approved at least annually (i) by the
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vote of a majority of those Trustees who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval, and (ii) by the Trustees, or by the vote of
a majority of the outstanding voting securities of the Fund; provided, however,
that if the shareholders of a Fund fail to approve the Agreement as provided
herein, Sub-Adviser may continue to serve hereunder in the manner and to the
extent permitted by the 0000 Xxx. The foregoing requirement that continuance of
this Agreement be "specifically approved at least annually" will be construed in
a manner consistent with the 1940 Act.
(b) This Agreement may be terminated at any time, without cause and
without payment of any penalty by Fund Parties, by vote of a majority of the
Trustees or by vote of a majority of the outstanding voting securities of a Fund
on not more than 60 days' written notice to the Sub-Adviser, or by CSIM upon 90
days' written notice to Sub-Adviser. In addition, this Agreement may be
terminated, with cause, by CSIM at any time, without payment of any penalty by
Fund Parties, upon written notice to Sub-Adviser. As used herein, "with cause"
means: (i) any material breach of the Agreement by Sub-Adviser; (ii) any
material federal or state regulatory violation by Sub-Adviser that in the
reasonable judgment of CSIM impairs Sub-Adviser's ability to perform the
Services; and (iii) any material financial or other impairment that in the
reasonable judgment of CSIM impairs Sub-Adviser's ability to perform the
Services.
(c) Without cause, this Agreement may not be terminated by the
Sub-Adviser prior to January 1, 2003. Thereafter, this Agreement may be
terminated by the Sub-Adviser at any time, without cause and without payment of
any penalty, upon 90 days' written notice to CSIM. In addition, this Agreement
may be terminated, with cause, by Sub-Adviser, at any time, without payment of
any penalty by Sub-Adviser, upon written notice to CSIM. As used herein, "with
cause" means: (i) any material breach of the Agreement by CSIM; (ii) any
material federal or state regulatory violation by CSIM that in the reasonable
judgment of Sub-Adviser impairs CSIM's ability to perform its obligations under
this Agreement; and (iii) any material financial or other impairment that in the
reasonable judgment of Sub-Adviser impairs CSIM's ability to perform its
obligations under this Agreement.
(d) This Agreement will automatically and immediately terminate in
the event of its assignment or in the event of the termination of the Management
Agreement.
(e) Any termination of this Agreement in accordance with the terms
hereof will not affect the obligations or liabilities accrued prior to
termination. As used in this Section 15, the terms "assignment", "interested
persons," and a "vote of a majority of the outstanding voting securities" will
have the respective meanings set forth in the 1940 Act; subject to such
exceptions and other relief as may be granted by the SEC.
//
//
//
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16. NOTICE. All notices required or permitted hereunder will be deemed
sufficient upon receipt if sent by: (a) hand; (b) registered or certified mail,
postage prepaid; (c) overnight courier; or (d) facsimile transmission to the
last address furnished by the other party to the party giving notice. At the
outset, such notices will be delivered to the following addresses:
CSIM: Xxxxxxx Xxxxxx Investment Management, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Treasurer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Sub-Adviser: Royce & Associates, Inc.
0000 Xxxxxx xx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxxxxx, General Counsel
Royce & Associates, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimiles: (000) 000-0000
17. SEVERABILITY. If any provision of this Agreement will be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement will not be affected thereby.
18. GOVERNING LAW. This Agreement will be construed in accordance with the laws
of the State of California and the applicable provisions of the 1940 Act. To the
extent that the applicable laws of the State of California, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act, the
latter will control.
19. MISCELLANEOUS.
(a) This Agreement constitutes the entire agreement and
understanding between the parties relating to the Services. Any prior
agreements, promises or representations not expressly set forth in this
Agreement are of no force and effect. No waiver or modification of this
Agreement will be effective unless reduced to writing and signed by the party to
be charged. No failure to exercise and no delay in exercising on the part of any
party hereto of any right, remedy, power or privilege hereunder will operate as
a waiver thereof.
(b) This Agreement is entered into on behalf of each Fund severally,
and not jointly, with the express intention that the provisions contained herein
will apply separately with respect to each Fund, as if contained in separate
agreements.
(c) Except as set forth in Section 15, this Agreement binds and
inures to the benefit of parties, their successors and assigns. This Agreement
may be executed in more than one counterpart each of
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which will be deemed an original and both of which, taken together, will be
deemed to constitute one and the same instrument.
(d) Company refers to Schwab Capital Trust and its Trustees, as
Trustees but not individually or personally, acting under a Declaration of Trust
dated May 7, 1993. A copy of the Certificate of Trust of Company is on file with
the Secretary of State of the State of Massachusetts. Notice is hereby given
that the obligations of Company entered into in the name of or on behalf of
Company by any of its Trustees, representatives or agents are made not
individually, but in such Company capacities. Such obligations are not binding
upon any of the Trustees, shareholders or representatives of Company personally,
but bind only the assets of Company belonging to such Fund for the enforcement
of any claims against Company.
(e) As used in this Agreement, any references to any laws
(including, without limitation, the 1940 Act, Advisers Act, Code and CEA)
incorporate the effects of: (i) any amendments to such laws; (ii) any rules or
regulations promulgated under such laws; and (iii) any valid interpretations of
such laws, rules or regulations by the applicable regulatory authorities.
NOW THEREFORE, the parties hereto have caused this Agreement to be executed as
of the day and year first written above.
Xxxxxxx Xxxxxx Investment Management, Inc.
By: __________________________
Name:
Title:
Royce & Associates, Inc.
By: __________________________
Name:
Title:
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SCHEDULE A
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
XXXXXXX XXXXXX INVESTMENT MANAGEMENT, INC.
AND
ROYCE & ASSOCIATES, INC.
FUND
Schwab Multi-Manager Small-Cap Fund
Effective Date of this Schedule A: February __, 2002
9
SCHEDULE B
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
XXXXXXX XXXXXX INVESTMENT MANAGEMENT, INC.
AND
ROYCE & ASSOCIATES, INC.
FEES
Fees will be accrued each day by applying to the Net Asset Value of the Managed
Assets at the end of that day, the daily rate, using a 365-day year, equivalent
to the applicable fee percentage set forth below ("Company Percentage"). Fees
will be paid within 30 days following the end of each calendar quarter.
COMPANY PERCENTAGE
80 Basis Points on the first $50 million
75 Basis points on the next $50 million
70 Basis Points on the next $50 million
65 Basis Points on the next $50 million
60 Basis Points on the amounts over $200 million
Effective Date of this Schedule B: February __, 2002
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SCHEDULE C
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
XXXXXXX XXXXXX INVESTMENT MANAGEMENT, INC.
AND
ROYCE & ASSOCIATES, INC.
MUTUAL CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT
A true and correct copy of the MUTUAL CONFIDENTIALITY AND NON-DISCLOSURE
AGREEMENT is attached hereto.
Effective Date of this Schedule C: February __, 2002
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