Exhibit (d)(ix)
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made this ___ day of ________, 2004, by and between, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ Investment Management, Inc. ("CSIM"), and TAMRO Capital Partners LLC
("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.
(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 provide assistance to Company,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & 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 will 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; 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. 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: (i) such policies as Fund Parties may from time to time
establish; (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 or other relief granted by the SEC; (vii) the Internal Revenue Code of
1986 ("Code"); (viii) the Commodities and 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 orders to
brokers for the Managed Assets by 9:00 am EST on the day following the trade
date and will affirm the trade to the Custodian and Fund Accountant before the
close of business one business day after the trade date.
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 direct
from time to time, and in conformity with the federal securities laws.
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(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 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 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 execute any
transactions with brokers or dealers that are Related Parties without the prior
written approval of CSIM.
(e) Consistent with any 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, 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.
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.
7. REPORTS.
(a) Sub-Adviser will provide written quarterly reports to
Fund Parties regarding the Managed Assets. CSIM will specify the information to
be included in such quarterly reports. Sub-Adviser will make available to Fund
Parties any economic, statistical and investment services that Sub-Adviser makes
available to its other institutional clients.
(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 or senior management, as far in advance of such
change as possible.
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(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, 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 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 periodic and special reports,
balance sheets, profitability analyses, financial information, and such other
information with regard to Sub-Adviser's affairs, as Fund Parties may reasonably
request, including any information requested by Fund Parties to assist the
Trustees in evaluating the terms of this Agreement and any renewal thereof under
Section 15(c) of the ▇▇▇▇ ▇▇▇.
(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 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 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, and
will transfer said records to any successor sub-adviser upon the termination of
this Agreement (or, if there is no successor sub-adviser, to CSIM).
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
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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 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 terms or existence
of this Agreement, 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, client lists, 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 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 ▇▇▇▇ ▇▇▇. 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)
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any federal or state regulatory violation by Sub-Adviser; 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) This Agreement may not be terminated by the
Sub-Adviser prior to February 1, 2004. 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.
(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.
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: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Investment Management, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Treasurer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Sub-Adviser: TAMRO Capital Partners LLC
Street Address:
City and Zip Code:
Attention:
Telephone:
Facsimile:
17. NONCOMPETE PROVISIONS. Except as set forth in Schedule D,
Sub-Adviser is not and will not become a party to any noncompete agreement or
other agreement or arrangement that would restrict, limit or otherwise interfere
with the ability of Schwab Parties and their affiliates to employ or engage any
person or entity, now or in the future, to provide investment advisory or other
services.
18. 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.
19. 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. Any legal action or proceeding arising out of
this Agreement will be brought only in the courts of the State of California
located in the City and County of San Francisco or in the United States District
Court for the Northern District of California. Each party will submit to the
jurisdiction of such courts and venue in such courts and will waive any claims
that such courts lack jurisdiction or are inconvenient forums.
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20. 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 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 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.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Investment Management, Inc.
By: -------------------------------------
Name:
Title:
TAMRO Capital Partners LLC
By: -------------------------------------
Name:
Title:
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SCHEDULE A
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ INVESTMENT MANAGEMENT, INC.
AND
TAMRO CAPITAL PARTNERS LLC
FUND(S)
Schwab Small-Cap MarketMasters Fund(TM)
Effective Date of this Schedule A: ____________, 2004
8
SCHEDULE B
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ INVESTMENT MANAGEMENT, INC.
AND
TAMRO CAPITAL PARTNERS LLC
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").
Sub-Adviser represents and warrants that the Company Percentage now is and in
the future will be equal to or less than the applicable fee percentage payable
to Sub-Adviser under any other advisory or sub-advisory agreement for comparable
investment advisory services (each a "Third Party Percentage"). If at any times,
the Company Percentage is greater than any Third Party Percentage, the Company
Percentage will be reduced to the lowest Third Party Percentage, including with
respect to any advisory or sub-advisory agreement amended or entered into by
Sub-Adviser after the effective date of this Schedule. Fees will be paid within
30 days following the end of each calendar quarter.
COMPANY PERCENTAGE
If the assets are equal to or less than $80 million, the Company Percentage will
be 70 Basis Points.
If the assets are greater than $80 million, the Company Percentage will be 60
Basis Points on all assets managed.
Effective Date of this Schedule B: ___________, 2004
9
SCHEDULE C
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ INVESTMENT MANAGEMENT, INC.
AND
TAMRO CAPITAL PARTNERS LLC
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: _______________, 2004
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SCHEDULE D
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ INVESTMENT MANAGEMENT, INC.
AND
TAMRO CAPITAL PARTNERS LLC
NONCOMPETE PROVISIONS:
Effective Date of this Schedule D: ______________, 2004
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