INVESTMENT SUB-ADVISORY AGREEMENT
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made this 12th day of July, 2011, by and between, Xxxxxxx Xxxxxx Investment Management, Inc. (“CSIM”), and Mondrian Investment Partners Limited (“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
NOW, THEREFORE, in consideration of mutual covenants herein contained, the parties agree as follows:
(a) Subject to supervision of the Company, the Board of Trustees (“Trustees”) and CSIM (collectively “Fund Parties”), Sub-Adviser shall be responsible for managing 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, and shall not be responsible for providing investment advice to any other portion of a Fund. In performance of its duties and obligations under this Agreement, Sub-Adviser shall not consult with any other sub-adviser to a Fund concerning the Managed Assets, except to the extent permitted under the 1940 Act, or any rule, regulation or order thereunder. Sub-Adviser will use 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, CSIM will review all proxy solicitation materials and will exercise any voting rights associated with securities comprising the Managed Assets pursuant to its proxy voting policy and guidelines.
(c) Sub-Adviser will 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 general offering, sale and marketing of Fund shares. Such assistance will include, without limitation: (i) periodic review of general offering, marketing and sales materials; and (ii) quarterly conference calls by Sub-Advisor portfolio management staff with CSIM fund management professionals;
(iii) annual participation by Sub-Advisor portfolio management staff in educational activities regarding Sub-Advisor’s investment style, market views and performance results including, but not limited to, web casts or other technology-based communication media; and (iv) periodic provision of discussion, analysis and commentary and market and performance data for filings with the Securities and Exchange Commission (“SEC”). Except as described in the prior sentence, Sub-Adviser shall have no obligation to assist the Schwab Parties in connection with the offering, sale or marketing of Fund shares to any specific party or to participate in internal or external conferences, conventions, road shows or other sales or educational meetings. 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 provide assistance in 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 assist the Company’s pricing agent with arranging 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.
2
(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.
(b) In effecting transactions for a Fund and selecting brokers or dealers, Sub-Adviser will use its best efforts to seek best execution on behalf of the Fund. In assessing best execution 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. CSIM shall periodically provide Sub-Adviser with a list of all Related Parties in writing (other than parties that are affiliates of Sub-Adviser). Sub-Adviser shall have no obligation to independently determine whether a party may be a Related Party (other than parties that are Related Parties by being an affiliate of Sub-Adviser). Sub-Adviser shall have no liability whatsoever in the event that it engages in a transaction with a party that is actually a Related Party (other than a Related Party that is an affiliate of Sub-Adviser) but did not appear on the list of Related Parties most recently provided by CSIM to Sub-Adviser.
(e) Provided that Fund Parties have not prohibited the aggregation of orders for purchase or sale of Managed Assets with similar orders being made concurrently for other accounts managed by Sub-Adviser and notified Sub-Adviser in writing of such prohibition, consistent with any policies established by Sub-Adviser, Sub-Adviser may aggregate such orders, 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.
(a) Sub-Adviser will provide written quarterly reports to Fund Parties regarding the Managed Assets. CSIM will reasonably specify the information to be included in such quarterly reports. Although Sub-Adviser does not currently provide any economic, statistical or investment services to clients
3
other than asset management services, in the event that Sub-Adviser does provide such services to its other institutional clients, it shall make such services available to the Fund Parties.
(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.
(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.
(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 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 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. Fund Parties shall obtain the prior written consent of Sub-Adviser before including information regarding the Sub-Adviser in any document that is required to be filed with the SEC or required to be sent to shareholders, which approval will not be unreasonably withheld. 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
4
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).
(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 material 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.
(a) This Agreement will become effective for each Fund 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
5
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 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 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 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.
| CSIM: | Xxxxxxx Xxxxxx Investment Management, Inc. | |
| 000 Xxxx Xxxxxx | ||
| Xxx Xxxxxxxxx, XX 00000 | ||
| Attention: Treasurer and Principal Financial Officer | ||
| Telephone: (000) 000-0000 | ||
| Facsimile: (000) 000-0000 | ||
| Sub-Adviser: | Mondrian Investment Partners Limited | |
| Street Address: 00 Xxxxxxx Xx, 0xx Xxxxx | ||
| Xxxx and Zip Code: Xxxxxx, XX0X 0XX Xxxxxx Xxxxxxx | ||
| Attention: Managing Director | ||
| Telephone: x00-00-0000-0000 | ||
| Facsimile: x00-00-0000-0000 | ||
6
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.
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.
(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.
7
Xxxxxxx Xxxxxx Investment Management, Inc.
| By: | /s/ Xxxxxx Xxxxxxx | |
| Name: | Xxxxxx Xxxxxxx | |
| Title: | Chief Operating Officer & CFO, SVP |
MONDRIAN INVESTMENT PARTNERS LIMITED
| By: | /s/ Xxxxx Xxxxxx | |
| Name: | Xxxxx Xxxxxx | |
| Title: | Chairman |
List of Schedules
Schedule A – Funds
Schedule B – Fees
Schedule C – Mutual Confidentiality and Non-Disclosure Agreement
Schedule D – Intentionally Deleted
8
SCHEDULE A
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
XXXXXXX XXXXXX INVESTMENT MANAGEMENT, INC.
AND
MONDRIAN INVESTMENT PARTNERS LIMITED
FUND(S)
Laudus International MarketMasters Fund
Effective Date of this Schedule A: July 12, 2011
9
SCHEDULE B
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
XXXXXXX XXXXXX INVESTMENT MANAGEMENT, INC.
AND
MONDRIAN INVESTMENT PARTNERS LIMITED
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 time, 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
| First $850 million: | 57.5 Basis Points annually | |||
| Thereafter: | 55.0 Basis Points annually |
The above fee scale is subject to a minimum funding of $100 million, or fees equivalent thereto.
The maximum amount of Managed Assets that may be held in the account is $500 million. Sub-Adviser agrees to review its capacity positions once the account reaches $400 million to determine if the $500 million account size cap may be adjusted.
Effective Date of this Schedule B: July 12, 2011
10
SCHEDULE C
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
XXXXXXX XXXXXX INVESTMENT MANAGEMENT, INC.
AND
MONDRIAN INVESTMENT PARTNERS LIMITED
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: July 12, 2011
11