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Exhibit 5(a)
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
AGREEMENT made as of June 15, 1994 between SCHWAB ANNUITY PORTFOLIOS, 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, 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 and administrative services to the investment portfolios of
the Trust listed on Schedule A hereto (each a "Fund" and collectively, the
"Funds"),
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 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 January 21,
1994 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
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Exhibit 5(a)
Exchange Commission ("SEC") on January 27, 1994 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. 33-74534) and
under the 1940 Act (File No. 811-08314) as filed with the SEC and all
amendments thereto; and
(f) the Trust's most recent prospectus and Statement of
Additional Information for the 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
Funds all aspects of the operations of the Funds except for those performed by
the custodian, shareholder service agent and transfer agent for the Funds,
provide general economic and financial analysis and advice to the Funds, and
provide a continuous investment program for the Funds, including investment
research and management as to all securities and investments and cash
equivalents in the 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 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 Funds and file all the Funds' federal and
state tax returns and required tax filings other than those required to be made
by the Funds' custodian, shareholder service agent and transfer agent; 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; and generally assist in all aspects of the operations of the
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
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Exhibit 5(a)
(the "Sub-Advisers") for one or more of the Funds. So long as any Sub-Adviser
serves as Sub-Adviser to a Fund, it must be a party to a sub-investment advisory
agreement and will be obligated to: (i) furnish continuously an investment
program as to those assets of the Trust and the 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 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;
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Exhibit 5(a)
(d) will place orders pursuant to its investment determinations
for the 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 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
Funds and one or more other investment
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Exhibit 5(a)
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 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 Funds and providing a continuous investment program
for the 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 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, 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
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Exhibit 5(a)
and printing prospectuses for regulatory purposes and for distribution to
current shareholders of the Funds, costs of shareholders' and Trustees' reports
and meetings and any extraordinary expenses -- will be borne by the Funds;
provided, however, that the 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 Funds.
7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Trust will pay the Investment Adviser and the
Investment Adviser will accept as full compensation therefor, an advisory fee,
accrued daily and payable monthly, in accordance with Schedule B hereto.
If in any fiscal year the aggregate expenses (as defined under
the securities regulations of any state having jurisdiction over the Trust) of a
Fund exceed the expense limitations of any such state, the Investment Adviser
will reimburse such Fund for a portion of such excess expenses equal to such
excess times the ratio of the fees otherwise payable by such Fund to the
Investment Adviser hereunder to the aggregate fees otherwise payable by such
Fund to the Investment Adviser hereunder, and to Xxxxxxx Xxxxxx & Co., Inc.
under the Transfer Agency and Shareholder Service Agreements between it and the
Trust. The obligation of the Investment Adviser to reimburse a Fund hereunder is
limited in any fiscal year to the amount of its fee hereunder from such Fund for
such fiscal year, provided, however, that notwithstanding the foregoing, the
Investment Adviser will reimburse each 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 Trust 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 Fund as of the date set forth opposite each Fund's name on Schedule A,
provided that it has been approved by
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Exhibit 5(a)
a vote of a majority of the outstanding voting securities of such Fund in
accordance with the requirements under the 1940 Act.
Thereafter, if not terminated as to a Fund, this Agreement will
continue in effect as to such 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 Fund. Notwithstanding the foregoing, this Agreement may be terminated as to
a Fund at any time, without the payment of any penalty, on sixty days' written
notice 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 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 "Schwab Annuity Portfolios" and "Trustees of Schwab
Annuity Portfolios" 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
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Exhibit 5(a)
obligations of the "Schwab Annuity Portfolios" 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.
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Exhibit 5(a)
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.
SCHWAB ANNUITY PORTFOLIOS
By: /s/ Xxxxxxxxx X. Xxxx
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Name: Xxxxxxxxx X. Xxxx
Title: President
XXXXXXX XXXXXX INVESTMENT
MANAGEMENT, INC.
By: /s/ Xxxxxxx X. Xxxxx
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Name: Xxxxxxx X. Xxxxx
Title: Senior Vice President and
Chief Operating Officer
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