Exhibit (d)(i)
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
(THE SCHWAB MONEY FUNDS)
AGREEMENT made as of June 1, 2001 between THE XXXXXXX XXXXXX FAMILY OF
FUNDS, a Massachusetts business trust (herein called the "Trust"), and XXXXXXX
XXXXXX INVESTMENT MANAGEMENT, INC., a Delaware corporation (the "Investment
Adviser").
WHEREAS, the Trust is registered as an open-end diversified, management
investment company under the Investment Company Act of 1940, as amended ("1940
Act"); and
WHEREAS, the Trust desires to retain the Investment Adviser to furnish
investment advisory, administrative, and certain accounting and record-keeping
services to three investment portfolios of the Trust: the Schwab Money Market
Fund, the Schwab Government Money Fund and the Schwab Municipal Money Fund
(formerly, the Schwab Tax-Exempt Money Fund) (each a "Money Fund" and
collectively, the "Money Funds"), and the Investment Adviser is willing and
believes that it possesses the legal authority to so furnish such services,
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Investment Adviser to act as
investment adviser and administrator to the Money Funds for the period and on
the terms set forth in this Agreement. The Investment Adviser accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided.
2. Delivery of Documents. The Trust has furnished the Investment Adviser
with copies properly certified or authenticated of each of the following:
(a) the Trust's Agreement and Declaration of Trust, as filed with
the Secretary of State of The Commonwealth of Massachusetts on October 20,
1989, and all amendments thereto or restatements thereof (such Agreement
and Declaration, as presently in effect and as it shall from time to time
be amended or restated, is herein called the "Declaration of Trust");
(b) the Trust's By-Laws and amendments thereto;
(c) resolutions of the Trust's Board of Trustees authorizing the
appointment of the Investment Adviser and approving this Agreement;
(d) the Trust's Notification of Registration on Form N-8A under the
1940 Act, as filed with the Securities and Exchange Commission ("SEC") on
November 1, 1989 and all amendments thereto;
(e) the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act"), (File No. 33-31894) and
under the 1940 Act as filed with the SEC and all amendments thereto; and
(f) the Trust's most recent prospectus and Statement of Additional
Information for the Money Funds (such prospectuses and Statement of
Additional Information, as presently in effect, and all amendments and
supplements thereto are herein collectively called the "Prospectus").
The Trust will furnish the Investment Adviser from time to time with copies of
all amendments of or supplements to the foregoing.
3. Management. Subject to the direction and control of the Board of
Trustees of the Trust, the Investment Adviser will supervise or perform for the
Money Funds all aspects of the operations of the Money Funds except for those
performed by the custodian for the Money Funds under the Custody Agreement,
provide general economic and financial analysis and advice to the Money Funds,
and provide a continuous investment program for the Money Funds, including
investment research and management as to all securities and investments and cash
equivalents in the Money Funds. More particularly, the Investment Adviser will:
determine from time to time what securities and other investments will be
purchased, retained, or sold by the Money Funds; maintain office facilities
(which may be in the offices of the Investment Adviser or a corporate affiliate
but shall be in such location as the Trust reasonably determines); furnish
statistical and research data, clerical services and stationery and office
supplies; compile data for, prepare for execution by the Money Funds and file
all the Money Funds' federal and state tax returns and required tax filings
other than those required to be made by the Money Funds' custodian and transfer
agent;
prepare compliance filings pursuant to state securities laws with the advice of
the Trust's counsel; prepare the Trust's Annual and Semi-Annual Reports to
Shareholders and amendments to its Registration Statements (on Form N-1A or any
replacement therefor); compile data for, prepare and file timely Notices to the
SEC required pursuant to Rule 24f-2 under the 1940 Act; perform at the expense
of the Money Funds the daily pricing of portfolio securities and computation of
the net asset value and the net income of each Money Fund in accordance with the
Prospectus and resolutions of the Trust's Board of Trustees; keep and maintain
the financial accounts and records of the Money Funds and provide the Trust with
certain reports, all as more specifically set forth on Schedule A hereto; and
generally assist in all aspects of the operations of the Money Funds.
Subject to the provisions of the Agreement and Declaration of Trust and
the 1940 Act, the Investment Adviser, at its expense, may select and contract
with investment advisers (the "Sub-Advisers") for one or more of the Money
Funds. So long as any Sub-Adviser serves as Sub-Adviser to a Money Fund, it must
be a party to a Sub-Investment Advisory Agreement in substantially the form
attached hereto as Schedule B (the "Sub-Adviser Agreement") and will be
obligated to (i) furnish continuously an investment program as to those assets
of the Trust and the Money Funds involved allocated by the Investment Adviser,
(ii) in connection therewith, adhere to such guidelines as may be established by
the Investment Adviser from time to time to insure compliance with applicable
investment objectives, policies and restrictions of the Trust and the Money
Funds and (iii) place all orders for the purchase and sale of Investments. The
Investment Adviser may also delegate or subcontract some or all of the
Investment Adviser's other duties enumerated in this Agreement. The Investment
Adviser will be responsible for payment of all compensation to all Sub-Advisers
and other persons and entities to which Investment Adviser delegates any duties
hereunder.
The Investment Adviser further agrees that it:
(a) will use the same skill and care in providing such services as
it would use in providing services to fiduciary accounts if it had
investment responsibilities for such accounts;
(b) will conform with all applicable Rules and Regulations of the
SEC and will in addition conduct its activities under this Agreement in
accordance with any applicable regulations of any governmental authority
pertaining to the investment advisory activities of the Investment
Adviser;
(c) will not make loans to any person to purchase or carry units of
beneficial interest in the Trust or make loans to the Trust;
(d) will place orders pursuant to its investment determinations for
the Money Funds either directly with the issuer or with an underwriter,
market maker, or broker or dealer. In placing orders with brokers and
dealers the Investment Adviser will attempt to obtain prompt execution of
orders in an effective manner at the most favorable price. Consistent with
this obligation, when the execution and price offered by two or more
brokers or dealers are comparable, the Investment Adviser may, in its
discretion, purchase or sell portfolio securities to and from brokers and
dealers who provide the Investment Adviser or any Sub-Adviser with
research advice and other services. In no instance will portfolio
securities be purchased from or sold to the Investment Adviser or any
Sub-Adviser, or any affiliated person of either the Trust, the Investment
Adviser, or any Sub-Adviser, except as may be permitted under the 1940
Act;
(e) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust, and will
not use such records and information for any purpose other than
performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Trust, which approval
shall not be unreasonably withheld and may not be withheld where the
Investment Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the
Trust; and
(f) will direct its personnel when making investment recommendations
for the Trust, not to inquire or take into consideration whether the
issuers of securities proposed for purchase or sale for the Trust's
accounts are customers of the Investment Adviser or of its parent or its
subsidiaries or affiliates. In dealing with such customers, the Investment
Adviser and its parent, subsidiaries, and affiliates will not inquire or
take into consideration whether securities of those customers are held by
the Trust.
4. Services to Others. The Trust understands that
the Investment Adviser may in the future act as an investment adviser to
fiduciary and other managed accounts, and as investment adviser, sub-investment
adviser, and/or administrator to other investment companies. The Trust has no
objection to the Investment Adviser's acts in such capacities, provided that
whenever one of the Money Funds and one or more other investment companies
advised by the Investment Adviser have available funds for investment,
investments suitable and appropriate for each will be allocated in accordance
with a formula believed by the Investment Adviser to be equitable to each
company. The Trust recognizes that in some cases this procedure may adversely
affect the size of the position that a Money Fund may obtain in a particular
security. In addition, the Trust understands that the persons employed by the
Investment Adviser to assist in the Investment Adviser's duties under this
Agreement will not devote their full time to such service and nothing contained
in this Agreement will be deemed to limit or restrict the right of the
Investment Adviser or any of its affiliates to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Adviser hereby agrees that all records it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's request and
will require the same type of agreement from each Sub-Adviser. The Investment
Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act.
6. Expenses. During the term of this Agreement, the Investment Adviser
will pay all expenses incurred by it in providing general economic and financial
analysis and advice to the Money Funds and providing a continuous investment
program for the Money Funds pursuant to Section 3 above and in providing its
activities under this Agreement other than the cost of securities (including
brokerage commissions, if any) purchased for the Trust. The Investment Adviser
will also pay all compensation of any person or person employed by or associated
with the Investment Adviser to assist in the performance of the Investment
Adviser's obligations under this Agreement, whether or not such person is also a
officer or employee of the Trust, and the Investment Adviser will not cause any
obligation to be incurred on behalf of the Trust in respect of any such
compensation. Other expenses to be incurred in the operation of the Money Funds
-- including without limitation taxes, interest, brokerage fees and commissions,
if any, fees of Trustees who are not officers, directors,
shareholders, or employees of the Investment Adviser or any Sub-Adviser, SEC
fees and state "blue sky" qualification fees, advisory and administration fees,
costs of performing the pricing of portfolio securities, transfer and dividend
disbursing agents' fees, certain insurance premiums, outside auditing and legal
expenses, costs of maintaining the Trust's existence as a Massachusetts business
trust, typesetting and printing prospectuses for regulatory purposes and for
distribution to current shareholders of the Money Funds, costs of shareholders'
and Trustees' reports and meetings and any extraordinary expenses -- will be
borne by the Money Funds; provided however, that the Money Funds will not bear,
directly or indirectly, the cost of any activity that is primarily intended to
result in the distribution of shares of the Money Funds.
7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement for each Money Fund, the Trust will pay the
Investment Adviser out of the assets of such Money Fund and the Investment
Adviser will accept as full compensation therefor an annual fee, computed daily
and paid monthly in arrears, equal to the percentages of such Money Fund's
average daily net assets set forth below.
Schwab Money Market Fund
$1 billion or less 0.38%
Over $1 billion through $10 billion 0.35%
Over $10 billion through $20 billion 0.32%
Over $20 billion through $40 billion 0.30%
Over $40 billion 0.27%
Schwab Government Money Fund and the Schwab Municipal Money Fund
$1 billion or less 0.38%
Over $1 billion through $10 billion 0.35%
Over $10 billion through $20 billion 0.32%
Over $20 billion through $40 billion 0.30%
Over $40 billion 0.27%
If in any fiscal year the aggregate expenses (as defined under the
securities regulations of any state having jurisdiction over the Trust) of a
Money Fund exceed the expense limitations of any such state, the Investment
Adviser will reimburse such Money Fund for a portion of such excess expenses
equal to such excess times the ratio of the fees otherwise payable by such Money
Fund to the Investment Adviser hereunder to the aggregate fees otherwise payable
by such Money Fund to the Investment Adviser hereunder, and to Xxxxxxx Xxxxxx &
Co., Inc. under the Transfer Agency and Shareholder Servicing Agreement between
it and the Trust. The obligation of the Investment
Adviser to reimburse a Money Fund hereunder is limited in any fiscal year to the
amount of its fee hereunder from such Money Fund for such fiscal year, provided,
however, that notwithstanding the foregoing, the Investment Adviser will
reimburse each Money Fund for such proportion of such excess expenses regardless
of the amount of fees paid to it during such fiscal year to the extent that the
securities regulations of any state having jurisdiction over the Trust so
require. Such expense reimbursement, if any, will be estimated daily and
reconciled and paid on a monthly basis.
8. Limitation of Liability. The Investment Adviser will not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the performance of this Agreement, except a loss resulting from
a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Investment Adviser in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement.
9. Duration and Termination. This Agreement will become effective as to
each Money Fund as of the date first written above, provided that it has been
approved by a vote of a majority of the outstanding voting securities of such
Money Fund, in accordance with the requirements under the 1940 Act.
Thereafter, if not terminated as to a Money Fund, this Agreement
will continue in effect as to such Money Fund for successive periods each ending
on May 30 of each year, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Trust's
Board of Trustees who are not parties to this Agreement or interested persons of
the Trust, the Investment Adviser, or any Sub-Adviser, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the
Trust's Board of Trustees or by vote of a majority of the outstanding voting
securities of such Money Fund. Notwithstanding the foregoing, this Agreement may
be terminated at any time on sixty days' written notice, without the payment of
any penalty, by the Trust (by vote of the Trust's Board of Trustees or by vote
of a majority of the outstanding voting securities of such Money Fund) or by the
Investment Adviser. This Agreement will immediately terminate in the event of
its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested persons" and "assignment" shall have
the same meaning of such terms in the 1940 Act.)
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the laws of the State of California.
The names "The Xxxxxxx Xxxxxx Family of Funds" and "Trustees of The
Xxxxxxx Xxxxxx Family of Funds" refer respectively to the Trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under the Declaration of Trust, to which reference is hereby made and a
copy of which is on file at the office of the Secretary of The Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "The Xxxxxxx Xxxxxx
Family of Funds" 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, interest holders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of units of interest 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.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE XXXXXXX XXXXXX FAMILY OF FUNDS
By: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: President and Trustee
XXXXXXX XXXXXX INVESTMENT
MANAGEMENT, INC.
By: /s/ Xxxxxxxx X. Xxxxxxx
Name: Xxxxxxxx X. Xxxxxxx
Title: President and Chief
Operating Officer
SCHEDULE A
The Investment Adviser will keep and maintain the following books and
records of each Money Fund pursuant to Rule 31a-1 under the Investment Company
Act of 1940 (the "Rule"):
a. Journals containing an itemized daily record in detail of all purchases
and sales of securities, all receipts and disbursements of cash, and all other
debits and credits, as required by subsection (b)(1) of the Rule;
b. General and auxiliary ledgers reflecting all asset, liability, reserve,
capital, income and expense accounts, including interest accrued and interest
received, as required by subsection (b)(2)(i) of the Rule;
c. Separate ledger accounts required by subsection (b)(2)(ii) and (iii) of
the Rule; and
d. A monthly trial balance of all ledger accounts (except shareholder
accounts) as required by subsection (b)(8) of the Rule.
In addition to the maintenance of the books and records specified above,
the Investment Adviser will perform the following accounting services daily for
each Money Fund:
a. Calculate the yield;
b. Provide the following reports:
(i) a current security position report;
(ii) a summary report of transactions and pending maturities
(including the principal, cost, and accrued interest on each
portfolio security in maturity date order); and
(iii) a current cash position report (including cash available from
portfolio sales and maturities and sales of a Portfolio's
Shares less cash needed for redemptions and settlement of
portfolio purchases);
c. Such other similar services with respect to a Money Fund as may be
reasonably requested by Trust.
SCHEDULE B
NOT APPLICABLE
