Exhibit d(xxi)
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 9th day of July, 2007 (the Effective Date)
between USAA INVESTMENT MANAGEMENT COMPANY, a corporation organized under the
laws of the State of Delaware and having its principal place of business in San
Antonio, Texas (IMCO) and QUANTITATIVE MANAGEMENT ASSOCIATES LLC, a limited
liability company organized under the laws of the State of New Jersey and having
its principal place of business in Newark, New Jersey (QMA).
WHEREAS, IMCO serves as the investment adviser to USAA Mutual Funds
Trust, a statutory trust organized under the laws of the State of Delaware (the
Trust) and registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, under its Investment Advisory Agreement with the Trust
(Investment Advisory Agreement), IMCO is authorized to appoint subadvisers for
series of the Trust (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain QMA to render investment advisory
services to such series (or portions thereof) of the Trust as now or hereafter
may be identified in Schedule A to this Agreement, as such Schedule A may be
amended from time to time (each such series or portion thereof referred to
herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, QMA is willing to provide such services to the Fund Accounts
and IMCO upon the terms and conditions and for the compensation set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. APPOINTMENT OF QMA. IMCO hereby appoints QMA to act as an investment
adviser for each Fund Account in accordance with the terms and conditions of
this Agreement. QMA will be an independent contractor and will have no authority
to act for or represent the Trust or IMCO in any way or otherwise be deemed an
agent of the Trust or IMCO except as expressly authorized in this Agreement or
another writing by the Trust, IMCO and QMA. QMA accepts such appointment and
agrees to render the services herein set forth for the compensation herein
provided.
2. DUTIES OF QMA.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO
and the Trust's Board of Trustees (the Board), QMA, at its own expense (except
as set forth in paragraph (c) of this Section 2), shall have full discretion to
manage, supervise and direct the investment and reinvestment of Fund Accounts
allocated to it by IMCO from time to time. It is understood
that a Fund Account may consist of all, a portion of, or none of the assets of
the Fund, and that IMCO has the right to allocate and reallocate such assets to
a Fund Account at any time. QMA shall perform its duties described herein in a
manner consistent with the investment objective, policies and restrictions set
forth in the then current Prospectus and Statement of Additional Information
(SAI) for each Fund. Should QMA anticipate materially modifying its investment
process, it must provide written notice in advance to IMCO. If IMCO shall
determine that any such modification would necessitate the amendment or
supplementation of any affected Prospectus or SAI, QMA shall cooperate with IMCO
to provide such information as IMCO shall reasonably require in connection with
its preparation of such amended or supplemented Prospectus or SAI in order to
fulfill IMCO's disclosure requirements in respect of QMA's investment process.
For each Fund set forth on Schedule A to this Agreement, QMA shall
provide investment advice only with respect to, and only be responsible for, the
discrete portion of the Fund's portfolio allocated to it by IMCO from time to
time and shall not consult with any other subadviser of such Fund concerning
transactions for the Fund in securities or other assets.
With respect to the management of each Fund Account pursuant to this
Agreement, QMA shall determine what investments shall be purchased, held, sold
or exchanged by each Fund Account and what portion, if any, of the assets of
each Fund Account shall be held in cash or cash equivalents, and purchase or
sell portfolio securities for each Fund Account; except that, to the extent QMA
wishes to hold cash or cash equivalents in excess of 10% of a Fund Account's
assets, QMA must request in writing and receive advance permission from IMCO.
In accordance with Subsection (b) of this Section 2, QMA shall arrange
for the execution of all orders for the purchase and sale of securities and
other investments for each Fund Account and will exercise full discretion and
act for the Trust with the same force and effect as the Trust might or could do
with respect to such purchases, sales, or other transactions, as well as with
respect to all other things necessary or incidental to the furtherance or
conduct of such purchases, sales, or other transactions.
In the performance of its duties, QMA will act in the best interests of
each Fund Account and will comply, in all material respects, with (i) laws and
regulations applicable with respect to it's investment management of each Fund
Account including, but not limited to, the 1940 Act and the Investment Advisers
Act of 1940, as amended (Advisers Act), and the rules under each, (ii) the terms
of this Agreement, (iii) the stated investment objective, policies and
restrictions of each Fund set forth on Schedule A, as stated in the then-current
Prospectus and SAI of each such Fund, (iv) the Trust's compliance procedures and
other policies, procedures or guidelines as the Board or IMCO reasonably may
establish from time to time and communicate in writing to QMA, (v) the
diversification requirements of the Internal Revenue Code of 1986, as amended
(Code), applicable to "regulated investment companies" (as defined in Section
851 of the Code) as set forth in the Prospectus for each Fund listed on Schedule
A, and (vi) the written instructions of IMCO. QMA shall establish compliance
procedures reasonably calculated to ensure compliance with the foregoing. IMCO
shall be responsible for providing QMA with the Trust's Master Trust Agreement,
as amended and supplemented, the Trust's By-Laws and amendments thereto and
current copies of the materials specified in Subsections (a)(iii) and (iv) of
this Section 2. IMCO shall provide QMA with prior written notice of any material
change to the
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Trust's Registration Statement (including, without limitation, each then-current
Prospectus and SAI) that could reasonably be expected to affect QMA's management
of a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, QMA will select the
brokers or dealers that will execute purchase and sale transactions for the Fund
Accounts, subject to the conditions herein. In the selection of broker-dealers
and the placement of orders for the purchase and sale of portfolio investments
for the Fund Accounts, QMA shall use its best efforts to obtain for the Fund
Accounts the most favorable price and execution available, except to the extent
it may be permitted to pay higher brokerage commissions for brokerage and
research services as described below. In using its best efforts to obtain the
most favorable price and execution available, QMA, bearing in mind each Fund's
best interests at all times, shall consider all factors it deems relevant,
including by way of illustration, price, the size of the transaction, the nature
of the market for the security, the amount of the commission and dealer's spread
or xxxx-up, the timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of the broker-dealer
involved, the general execution and operational facilities of the broker-dealer
and the quality of service rendered by the broker-dealer in other transactions.
Subject to such policies as the Board may determine and to the extent
authorized by Section 28(e) of the Securities Exchange Act of 1934 (Exchange
Act), QMA shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused a Fund Account to pay a broker-dealer that provides brokerage and
research services to QMA an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another
broker-dealer offering equally good execution capability in the portfolio
investment would have charged for effecting that transaction if QMA determines
in good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker-dealer,
viewed in terms of either that particular transaction or QMA's overall
responsibilities with respect to the Fund and to other clients of QMA as to
which QMA exercises investment discretion. The Board or IMCO may direct QMA to
effect transactions in portfolio securities through broker-dealers in a manner
that will help generate resources to pay the cost of certain expenses that the
Trust is required to pay or for which the Trust is required to arrange payment.
On occasions when QMA deems the purchase or sale of a security to be in
the best interest of a Fund as well as other clients of QMA, QMA, to the extent
permitted by applicable laws and regulations, may aggregate the securities to be
purchased or sold to attempt to obtain a more favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by QMA in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to its other clients
over time.
QMA may buy securities for a Fund Account at the same time it is
selling such securities for another client account and may sell securities for a
Fund Account at the time it is buying such securities for another client
account. In such cases, subject to applicable legal and regulatory requirements,
and in compliance with such procedures of the Trust as may be in effect from
time to time, QMA may effectuate cross transactions between a Fund Account and
such other account if it deems this to be advantageous.
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QMA will advise the Funds' custodian or such depository or agents as
may be designated by the custodian and IMCO promptly of each purchase and sale
of a portfolio security, specifying the name of the issuer, the description and
amount or number of shares of the security purchased, the market price, the
commission and gross or net price, the trade date and settlement date, the
identity of the effecting broker or dealer and any other pertinent data that the
Funds' custodian may need to settle a security's purchase or sale. QMA shall not
have possession or custody of any Fund's investments. The Trust shall be
responsible for all custodial agreements and the payment of all custodial
charges and fees and, upon QMA giving proper instructions to the custodian, QMA
shall have no responsibility or liability for the acts, omissions or other
conduct of the custodian, depository, or other agent designated by the custodian
and IMCO.
Notwithstanding the foregoing, QMA agrees that IMCO shall have the
right by written notice to identify securities that may not be purchased on
behalf of any Fund and/or brokers and dealers through which portfolio
transaction on behalf of the Fund may not be effected, including, without
limitation, brokers or dealers affiliated with IMCO. QMA shall refrain from
purchasing such securities for a Fund Account or directing any portfolio
transaction to any such broker or dealer on behalf of a Fund Account following
QMA's receipt of such notice, unless and until the written approval of IMCO to
do so is obtained. If, at the time QMA receives an instruction from IMCO not to
purchase specified securities on behalf of the Fund, a Fund Account holds such
securities by reason of a purchase made prior to QMA's receipt of such
instruction, IMCO shall direct QMA in writing as to whether QMA should sell or
continue to hold such securities, and QMA shall be entitled to rely on such
direction of IMCO in performing its duties hereunder. In addition, QMA agrees
that it shall not direct portfolio transactions for the Fund Accounts through
any broker or dealer that is an "affiliated person" (as that term is defined in
the 1940 Act or interpreted under applicable rules and regulations of the U.S.
Securities and Exchange Commission, hereinafter referenced as the Commission) of
QMA, except as permitted under the 1940 Act. IMCO agrees that it will provide
QMA with a list of brokers and dealers that are affiliated persons of the Funds,
or affiliated persons of such persons, and shall timely update that list as the
need arises. IMCO agrees on behalf of the Funds, and represents that the Funds
have agreed, that any entity or person associated with IMCO or QMA that is a
member of a national securities exchange is authorized to effect any transaction
on such exchange for the account of the Funds that is permitted by Section 11(a)
of the Exchange Act, and further represents that the Funds consent to the
retention of compensation for such transactions.
(C) EXPENSES. QMA, at its expense, will furnish all necessary
facilities and personnel, including salaries, expenses and fees of any personnel
required for them to faithfully perform their duties under this Agreement and
administrative facilities, including bookkeeping, and all equipment and services
necessary for the efficient conduct of QMA's duties under this Agreement.
However, QMA shall not be obligated to pay any expenses of IMCO, the Trust or
the Funds, including without limitation, interest and taxes, brokerage
commissions and other costs in connection with the purchase or sale of
securities or other investment instruments for the Funds and custodian fees and
expenses.
(D) VALUATION. Securities traded on a national securities exchange or
the NASDAQ market for which market quotes are readily available are valued on
each day the New York Stock Exchange is open for business. For those securities
for which market quotes are not readily available, QMA, at its expense, will
provide assistance to IMCO regarding the valuation of
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securities that are the subject of a significant event, not registered for
public sale, not traded on any securities markets, or otherwise deemed illiquid
for purposes of the 0000 Xxx. The parties acknowledge that IMCO is responsible
for final valuation determinations and calculations, and that QMA will take such
steps as are reasonably necessary to assist IMCO in reaching such valuation
determinations for Fund Account securities. QMA also shall monitor for
"significant events" that occur after the closing of a market but before the
Funds calculate their net asset values and that may affect the valuation of any
Fund Account's portfolio securities and shall notify IMCO immediately of the
occurrence of any such events.
(E) REPORTS AND AVAILABILITY OF PERSONNEL. QMA, at its expense, shall
render to the Board and IMCO such periodic and special reports as the Board and
IMCO may reasonably request with respect to matters relating to the duties of
QMA set forth herein. QMA, at its expense, will make available to the Board and
IMCO at reasonable times its portfolio managers and other appropriate personnel
in order to review investment policies of the Funds and to consult with the
Board and IMCO regarding the investment affairs of the Funds, including
economic, statistical and investment matters relevant to QMA's duties hereunder.
(F) COMPLIANCE MATTERS. QMA, at its expense, will provide IMCO with
such compliance reports relating to its duties under this Agreement as may be
agreed upon by such parties from time to time. QMA also shall cooperate with and
provide reasonable assistance to IMCO, the Trust's administrator, the Trust's
custodian and foreign custodians, the Trust's transfer agent and pricing agents
and all other agents and representatives of the Trust and IMCO identified by
IMCO to QMA, keep all such persons informed as to such matters as they may
reasonably deem necessary to the performance of their obligations to the Trust
and IMCO (provided the information so requested of QMA is in its possession or
readily available to it), provide prompt responses to reasonable requests made
by such persons and maintain any appropriate interfaces with each so as to
promote the efficient exchange of information.
(G) BOOKS AND RECORDS. QMA will maintain for the Funds all books and
records required to be maintained by the Funds pursuant to the 1940 Act and the
rules and regulations promulgated thereunder insofar as such records relate to
the investment affairs of the Fund Accounts. Pursuant to Rule 31a-3 under the
1940 Act, QMA agrees that: (i) all records it maintains for a Fund Account are
the property of the Fund; (ii) it will surrender promptly to a Fund or IMCO any
such records (or copies of such records) upon the Fund's or IMCO's request; and
(iii) it will preserve for the periods prescribed by Rule 31a-2 under the 1940
Act the records it maintains for any Fund Account. Notwithstanding subsection
(ii) above, QMA may maintain copies of such records to comply with its
recordkeeping obligations.
(H) PROXIES. Unless and until QMA is otherwise directed by IMCO or the
Board, IMCO will vote proxies with respect to a Fund Account's securities and
exercise rights in corporate actions or otherwise in accordance with IMCO's
proxy voting guidelines.
3. ADVISORY FEE. IMCO shall pay to QMA as compensation for QMA's services
rendered pursuant to this Agreement a fee based on the average daily net assets
of each Fund Account at the annual rates set forth in Schedule B, which schedule
can be modified from time to time, subject to any appropriate approvals required
by the 1940 Act. Such fees shall be calculated daily and payable monthly in
arrears within 15 business days after the end of such month. IMCO
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(and not the Funds) shall pay such fees. If QMA shall serve for less than the
whole of a month, the compensation as specified shall be prorated based upon the
number of calendar days during which this Agreement is in effect during such
month, and the fee shall be computed based upon the average daily net assets of
a Fund Account for such days.
QMA agrees that if (i) it enters into any arrangement whereby it
provides investment advisory services substantially similar to the services
provided to a Fund Account to any other registered, open-end management
investment company (or series thereof) with a substantially similar investment
mandate and with total assets under management in such strategy for the
investment company and its affiliates (measured at account inception) equal to
or less than the assets of the Fund Account under management by QMA (the
Substantially Similar Services) and (ii) QMA charges a lower fee for providing
the Substantially Similar Services than it charges with respect to the Fund
Account, then QMA shall reduce its fee with respect to the Fund Account so that
it is equal to or less than the fee charged for providing the Substantially
Similar Services on a going forward basis starting immediately.
4. REPRESENTATIONS AND WARRANTIES.
(A) QMA. QMA represents and warrants to IMCO that (i) the retention of
QMA by IMCO as contemplated by this Agreement is authorized by QMA's governing
documents; (ii) the execution, delivery and performance of this Agreement does
not violate any obligation by which QMA or its property is bound, whether
arising by contract, operation of law or otherwise; (iii) this Agreement has
been duly authorized by appropriate action of QMA and when executed and
delivered by QMA will be a legal, valid and binding obligation of QMA,
enforceable against QMA in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general equitable principles (regardless of
whether enforcement is sought in a proceeding in equity or law); (iv) QMA is
registered as an investment adviser under the Advisers Act; (v) QMA has adopted
a written code of ethics complying with the requirements of Rule 17j-1 under the
1940 Act and that QMA and certain of its employees, officers, partners and
directors are subject to reporting requirements thereunder and, accordingly,
agrees that it shall, on a timely basis, furnish a copy of such code of ethics
to IMCO, and, with respect to such persons, QMA shall furnish to IMCO all
reports and information provided under Rule 17j-1(c)(2); (vi) QMA is not
prohibited by the 1940 Act, the Advisers Act or other law, regulation or order
from performing the services contemplated by this Agreement; (vii) QMA will
promptly notify IMCO of the occurrence of any event that would disqualify QMA
from serving as investment manager of an investment company pursuant to Section
9(a) of the 1940 Act or otherwise; (viii) QMA has provided IMCO with a copy of
its Form ADV, which as of the date of this Agreement is its Form ADV as most
recently filed with the SEC, and promptly will furnish a copy of all amendments
to IMCO at least annually; (ix) QMA will notify IMCO of any "assignment" (as
defined in the 0000 Xxx) of this Agreement or change of control of QMA, as
applicable, and any changes in the key personnel who are either the portfolio
manager(s) of any Fund Account or senior management of QMA, in each case prior
to or promptly after, such change; and (x) QMA has taken disaster recovery and
interruption prevention measures that it believes are adequate to ensure
business resumption in accordance with applicable law and within industry
standards. QMA makes no representation or warranty, express or implied, that any
level of performance or investment
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results will be achieved by the Fund or any Fund Account, whether on a relative
or absolute basis.
(B) IMCO. IMCO represents and warrants to QMA that (i) the
retention of QMA by IMCO as contemplated by this Agreement is authorized by the
respective governing documents of the Trust and IMCO; (ii) the execution,
delivery and performance of each of this Agreement and the Investment Advisory
Agreement does not violate any obligation by which the Trust or IMCO or their
respective property is bound, whether arising by contract, operation of law or
otherwise; (iii) each of this Agreement and the Investment Advisory Agreement
has been duly authorized by appropriate action of the Trust and IMCO and when
executed and delivered by IMCO will be a legal, valid and binding obligation of
the Trust and IMCO, enforceable against the Trust and IMCO in accordance with
its terms, subject, as to enforcement, to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and to general equitable
principles (regardless of whether enforcement is sought in a proceeding in
equity or law); (iv) IMCO is registered as an investment adviser under the
Advisers Act; (v) IMCO has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and that IMCO and certain of its
employees, officers and directors are subject to reporting requirements
thereunder; (vi) IMCO is not prohibited by the 1940 Act, the Advisers Act or
other law, regulation or order from performing the services contemplated by this
Agreement; (vii) IMCO will promptly notify QMA of the occurrence of any event
that would disqualify IMCO from serving as investment manager of an investment
company pursuant to Section 9(a) of the 1940 Act or otherwise; and (viii) IMCO
and/or its affiliates have adopted and use their best efforts to enforce their
policies to identify and prevent investors in the Fund from market timing the
purchase and sale of the Fund's shares or engaging in arbitrage activity to the
detriment of long-term investors in the Fund.
5. LIABILITY AND INDEMNIFICATION.
(A) QMA. QMA shall be liable for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which the Trust, a Fund, IMCO, any affiliated persons thereof (within the
meaning of the 0000 Xxx) and any controlling persons thereof (as described in
Section 15 of the Securities Act of 1933, as amended (the 1933 Act))
(collectively, IMCO Indemnities) may become subject under the 1933 Act, the 1940
Act, the Advisers Act, or under any other statute, at common law or otherwise
arising out of (i) any gross negligence, willful misconduct, bad faith or
reckless disregard of QMA in the performance of any of its duties or obligations
hereunder or (ii) any untrue statement of a material fact contained in the
Prospectus and SAI, proxy materials, reports, advertisements, sales literature,
or other materials pertaining to the Funds or the omission to state therein a
material fact known to QMA which was required to be stated therein or necessary
to make the statements therein not misleading, if such statement or omission was
made in reliance upon information furnished in writing to IMCO or the Trust by
QMA Indemnities (as defined below) expressly for use therein. QMA shall
indemnify and hold harmless the IMCO Indemnities for any and all such losses,
claims, damages, liabilities or litigation (including reasonable legal and other
expenses); PROVIDED, HOWEVER, that in no case is QMA's indemnity hereunder
deemed to protect a person against any liability to which any such person would
otherwise be subject by reason of such person's willful misconduct, bad faith or
gross negligence in performance of its duties under this Agreement or the
Investment Advisory Agreement with the Trust.
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(B) IMCO. IMCO shall be liable for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which QMA, any affiliated persons thereof (within the meaning of the 0000 Xxx)
and any controlling persons thereof (as described in Section 15 of the 1933 Act)
(collectively, QMA Indemnities) may become subject under the 1933 Act, the 1940
Act, the Advisers Act, or under any other statute, at common law or otherwise
arising out of (i) any gross negligence, willful misconduct, bad faith or
reckless disregard by IMCO in the performance of any of its duties or
obligations hereunder or (ii) any untrue statement of a material fact contained
in the Prospectus and SAI, proxy materials, reports, advertisements, sales
literature, or other materials pertaining to the Funds or the omission to state
therein a material fact known to IMCO which was required to be stated therein or
necessary to make the statements therein not misleading, unless such statement
or omission was made in reliance upon information furnished in writing to IMCO
or the Trust by QMA expressly for use therein. IMCO shall indemnify and hold
harmless QMA Indemnities for any and all such losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses);
PROVIDED, HOWEVER, that in no case shall IMCO's indemnity hereunder be deemed to
protect a person against any liability to which any such person would otherwise
be subject by reason of such person's willful misconduct, bad faith or gross
negligence in the performance of its duties under this Agreement.
6. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall become
effective as of the Effective Date, and with respect to any Fund Account not
identified on Schedule A on the Effective Date, on the date of the amendment of
Schedule A to reflect such Fund's addition thereto as contemplated in the
Recitals to this Agreement; provided, however, that this Agreement shall not
become effective with respect to a Fund unless it has first been approved in the
manner required by the 1940 Act and rules thereunder or in accordance with
exemptive or other relief granted by the SEC or its staff. IMCO shall advise QMA
prior to QMA's taking any action under this Agreement with respect to a Fund if
any such approval has not been obtained at or prior to the date this Agreement
would otherwise become effective with respect to such Fund. This Agreement shall
remain in full force and effect continuously after it has become effective,
except as follows:
(a) By vote of a majority of (i) the Board members who are not
"interested persons" (as defined in the 0000 Xxx) of the Funds, IMCO, or QMA
(Independent Board Members) or (ii) the outstanding voting shares of a Fund,
such Fund may at any time terminate this Agreement, without the payment of any
penalty, by providing not more than 60 days' written notice delivered or mailed
by registered mail, postage prepaid, to IMCO and QMA.
(b) This Agreement will terminate automatically with respect to a Fund,
without the payment of any penalty, unless within two years after its initial
effectiveness and at least annually thereafter, the continuance of the Agreement
is specifically approved by (i) the Board or the shareholders of the Fund by the
affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a
majority of the Independent Board Members, by vote cast in person at a meeting
called for the purpose of voting on such approval. If the continuance of this
Agreement is submitted to the shareholders of the Fund for their approval and
such shareholders fail to approve such continuance as provided herein, QMA may
continue to serve hereunder in a manner consistent with the 1940 Act and the
rules thereunder.
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(c) IMCO may at any time terminate this Agreement with respect to a
Fund, without the payment of any penalty, by reasonable written notice delivered
in person or by facsimile, or mailed by registered mail, postage prepaid, to
QMA. QMA may at any time, without the payment of any penalty, terminate this
Agreement with respect to a Fund by not less than 90 days' written notice
delivered or mailed by registered mail, postage prepaid, to IMCO.
(d) This Agreement automatically and immediately shall terminate with
respect to the Funds, without the payment of any penalty, in the event of its
assignment (as that term is defined in the 1940 Act or interpreted under
applicable rules and regulations of the Commission) or if the Investment
Advisory Agreement shall terminate for any reason.
(e) Any notice of termination served on QMA by IMCO shall be without
prejudice to the obligation of QMA to complete transactions already initiated or
acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to QMA
under this Agreement automatically shall revert to IMCO. Notwithstanding any
termination of this Agreement with respect to a Fund, Sections 5, 10(a), 11(a),
and 11(c) of this Agreement shall remain in effect after any such termination.
7. AMENDMENT OF 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 whom enforcement of the change, waiver, discharge or
termination is sought. No material amendment of this Agreement shall be
effective until approved in the manner required by the 1940 Act, any rules
thereunder or any exemptive or other relief granted by the SEC or its staff
(Applicable Law).
8. APPROVAL, AMENDMENT, OR TERMINATION BY INDIVIDUAL FUND. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 0000 Xxx) of any Fund shall be
effective to continue, amend or terminate this Agreement with respect to any
such Fund notwithstanding (i) that such action has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund
affected thereby, and/or (ii) that such action has not been approved by the vote
of a majority of the outstanding voting securities of the Trust, unless such
action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of QMA to IMCO in connection with
the Funds hereunder are not to be deemed exclusive, and QMA shall be free to
render investment advisory services to others so long as its services hereunder
are not impaired thereby. It is understood that the persons employed by QMA to
assist in the performance of its duties hereunder will not devote their full
time to such services and nothing contained herein shall be deemed to limit or
restrict in any manner whatsoever the right of QMA to engage in or devote time
and attention to other businesses or to render services of whatever kind or
nature. It is understood that IMCO may appoint at any time in accordance with
Applicable Law one or more subadvisers, in addition to QMA, or IMCO itself, to
perform investment advisory services to any portion of the Funds.
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10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. QMA shall, upon reasonable notice, afford
IMCO at all reasonable times access to QMA's officers, employees, agents and
offices and to all its relevant books and records and shall furnish IMCO with
all relevant financial and other data and information as requested; provided,
however, that nothing contained herein shall obligate QMA to provide IMCO with
access to the books, records and facilities of QMA relating to any other
accounts other than the Funds, or to provide IMCO with access to personnel of
QMA who are not directly involved in performing services under this Agreement.
(B) CONFIDENTIALITY. All information and advice furnished by one party
to the other party (including their respective officers, employees and
authorized representatives) shall be treated confidentially and as proprietary
information. Each party 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 other party,
which approval shall not be unreasonably withheld; provided that, each party may
disclose information as required by law, court order or other regulating
authority or as requested by regulatory or governmental authorities.
Notwithstanding the foregoing, QMA may disclose such information (i) to
affiliates that provide services to QMA related to its responsibilities and
duties hereunder, but only to the extent necessary for such affiliates to
provide their respective services; (ii) to the custodian or custodians with
respect to the Funds solely for the purpose of performing its responsibilities
and duties hereunder; (iii) to brokers and dealers that are counterparties for
trades for any Fund solely for the purpose of performing its responsibilities
and duties hereunder; and (iv) to third party service providers subject to
agreements to keep such information confidential and not misuse it, but only to
the extent necessary for such providers to perform their respective services.
(C) PRIVACY POLICY. IMCO agrees that it will not provide QMA with
nonpublic customer information (as defined in Regulation S-P, including any
amendments thereto) of customers of the Funds.
(D) PUBLIC ANNOUNCEMENTS. No party shall issue any press release or
otherwise make any public statements with respect to the matters covered by this
Agreement without the prior written consent of the other parties hereto, which
consent shall not be unreasonably withheld; provided, however, that consent
shall not be required if, in the opinion of counsel, such disclosure is required
by law; provided further, however, that the party making such disclosure shall
provide the other parties hereto with as much prior written notice of such
disclosure as is practical under the circumstances.
(E) NOTIFICATIONS. QMA agrees that it will promptly notify IMCO in
the event that: (i) QMA or any of its investment professionals becomes or
receives written notice that it will become the subject of an administrative
proceeding or enforcement action related to QMA's investment management
activities by the Commission or other regulatory body with applicable
jurisdiction or (ii) to the best of QMA's knowledge, any affiliate of QMA
becomes the subject of an administrative proceeding or enforcement action by the
Commission or other regulatory body with applicable jurisdiction that could
reasonably be expected to have a material adverse effect upon the ability of QMA
to perform its duties under this Agreement.
10
(F) INSURANCE. QMA agrees to maintain errors and omissions or
professional liability insurance coverage in an amount that is reasonable in
light of the nature and scope of QMA's business activities.
(G) SHAREHOLDER MEETING AND OTHER EXPENSES. In the event that the Trust
shall be required to call a meeting of shareholders or send an information
statement or prospectus supplement to shareholders solely due to actions
involving QMA, including, without limitation, a change of control of QMA or a
portfolio manager change, QMA shall bear all reasonable expenses associated with
such shareholder meeting, information statement, or prospectus supplement.
11. MISCELLANEOUS.
(A) NOTICES. All notices or other communications given under this
Agreement shall be made by guaranteed overnight delivery, telecopy or certified
mail; notice is effective when received. Notice shall be given to the parties at
the following addresses:
IMCO: USAA Investment Management Company
0000 Xxxxxxxxxxxxxx Xxxx, X-X0-X
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Securities Counsel
QMA: Quantitative Management Associates LLC
Xxx Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxx
With a copy to:
The Prudential Insurance Company of America
Xxx Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxx Fialcowitz
(B) SEVERABILITY. 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.
(C) GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Texas, without giving effect to the conflicts of laws
principles thereof, and in
11
accordance with (i) the 1940 Act, and (ii) other applicable federal securities
laws (including, without limitation, the Advisers Act) to the extent that such
laws preempt or supersede state law. To the extent that the applicable laws of
the State of Texas conflict with the applicable provisions of the 1940 Act or
such other applicable federal securities laws, the latter shall control.
(D) COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(E) HEADINGS. 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.
(F) ENTIRE AGREEMENT. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act.
(G) ACKNOWLEDGEMENT OF IMCO. IMCO hereby acknowledges that it has
received from QMA a copy of Part II of the Form ADV of QMA.
IN WITNESS WHEREOF, IMCO and QMA have caused this Agreement to be
executed as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT
COMPANY
By: /s/ Xxxxxxxx Xxxxxxx By: /s/ Xxxxxx X. Xxxxx
--------------------------- -------------------------------
Name: Xxxxx Xxxxxxx Name: Xxxxxx X. Xxxxx
Title: Senior Vice President Title: Vice President
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Authorized Signatory
Attest: QUANTITATIVE MANAGEMENT
ASSOCIATES LLC
By: /s/ Xxxxxx Xxxxxxx By: /s/ Xxxxx Xxxxxxx
---------------------------- -------------------------------
Name: Xxxxxx Xxxxxxx Name: Xxxxx Xxxxxxx
Title: Assistant Secretary Title: Chief Executive Officer
12
SCHEDULE A
CORNERSTONE STRATEGY FUND
13
SCHEDULE B
FEES
FUND ACCOUNT RATE PER ANNUM OF THE AVERAGE
DAILY NET ASSETS OF THE FUND
ACCOUNT
Cornerstone Strategy Fund 0.25%*
* QMA agrees that it will not seek to increase this fee rate during the
period ending July 8, 2011 (the Lock). This Lock does not limit the rights of
the Fund's shareholders, the Fund's Board, or IMCO as set forth in Section 6 of
the Agreement ("Duration and Termination of this Agreement").
14
Exhibit d(xxii)
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 9th day of July, 2007 (the Effective Date)
between USAA INVESTMENT MANAGEMENT COMPANY, a corporation organized under the
laws of the State of Delaware and having its principal place of business in San
Antonio, Texas (IMCO) and UBS Global Asset Management (Americas) Inc.,
corporation organized under the laws of the State of Delaware and having its
principal place of business in Chicago, Illinois (UBS).
WHEREAS, IMCO serves as the investment adviser to USAA Mutual Funds
Trust, a statutory trust organized under the laws of the State of Delaware (the
Trust) and registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, under its Investment Advisory Agreement with the Trust
(Investment Advisory Agreement), IMCO is authorized to appoint subadvisers for
series of the Trust (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain UBS to render investment advisory
services to such series (or portions thereof) of the Trust as now or hereafter
may be identified in Schedule A to this Agreement, as such Schedule A may be
amended from time to time (each such series or portion thereof referred to
herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, UBS is willing to provide such services to the Fund Accounts
and IMCO upon the terms and conditions and for the compensation set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. APPOINTMENT OF UBS. IMCO hereby appoints UBS to act as an investment adviser
for each Fund Account in accordance with the terms and conditions of this
Agreement. UBS will be an independent contractor and will have no authority to
act for or represent the Trust or IMCO in any way or otherwise be deemed an
agent of the Trust or IMCO except as expressly authorized in this Agreement or
another writing by the Trust, IMCO and UBS. UBS accepts such appointment and
agrees to render the services herein set forth for the compensation herein
provided.
2. DUTIES OF UBS.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO
and the Trust's Board of Trustees (the Board), UBS shall have full discretion to
manage, supervise and direct the investment and reinvestment of Fund Accounts
allocated to it by IMCO from time to time. It is understood that a Fund Account
may consist of all, a portion of, or none of the assets of the Fund, and that
IMCO has the right to allocate and reallocate such assets to a Fund Account at
any time. UBS shall perform its duties described herein in a manner consistent
with the investment objective, policies and restrictions set forth in the then
current Prospectus and Statement of Additional Information (SAI) for each Fund,
as provided to UBS by IMCO from time to time. Should UBS anticipate materially
modifying its investment process, it must
provide written notice in advance to IMCO, and any affected Prospectus and SAI
should be amended accordingly.
For each Fund set forth on Schedule A to this Agreement, UBS shall
provide investment advice only with respect to the discrete portion of the
Fund's portfolio allocated to it by IMCO from time to time and shall not consult
with any other subadviser of such Fund concerning transactions for the Fund in
securities or other assets.
With respect to the management of each Fund Account pursuant to this
Agreement, UBS shall determine what investments shall be purchased, held, sold
or exchanged by each Fund Account and what portion, if any, of the assets of
each Fund Account shall be held in cash or cash equivalents, and purchase or
sell portfolio securities and other investments for each Fund Account; except
that, to the extent UBS wishes to hold cash or cash equivalents in excess of 10%
of a Fund Account's assets, UBS must request in writing and receive advance
permission from IMCO.
In accordance with Subsection (b) of this Section 2, UBS shall arrange
for the execution of all orders for the purchase and sale of securities and
other investments for each Fund Account and will exercise full discretion and
act for the Trust in the same manner and with the same force and effect as the
Trust might or could do with respect to such purchases, sales, or other
transactions, as well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases, sales, or other
transactions.
In the performance of its duties, UBS will act in the best interests of
each Fund and will comply with (i) applicable laws and regulations, including,
but not limited to, the 1940 Act and the Investment Advisers Act of 1940, as
amended (Advisers Act), and the rules under each, (ii) the terms of this
Agreement, (iii) the stated investment objective, policies and restrictions of
each Fund, as stated in the then-current Registration Statement of each Fund,
(iv) the Trust's compliance procedures and other policies, procedures or
guidelines as the Board or IMCO reasonably may establish from time to time, (v)
the provisions of the Internal Revenue Code of 1986, as amended (Code),
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), as from time to time in effect, and (vi) the written instructions of
IMCO. UBS shall establish compliance procedures reasonably calculated to ensure
compliance with the foregoing. IMCO shall be responsible for providing UBS with
the Trust's Master Trust Agreement, as amended and supplemented, the Trust's
By-Laws and amendments thereto and current copies of the materials specified in
Subsections (a)(iii) and (iv) of this Section 2. IMCO shall provide UBS with
prior written notice of any material change to the Trust's Registration
Statement that would affect UBS's management of a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, UBS will select the
brokers or dealers that will execute purchase and sale transactions for the Fund
Accounts, subject to the conditions herein. In the selection of broker-dealers
and the placement of orders for the purchase and sale of portfolio investments
for the Fund Accounts, UBS shall use its best efforts to seek to obtain for the
Fund Accounts the most favorable price and execution available, except to the
extent it may be permitted to pay higher brokerage commissions for brokerage and
research services as described below. In using its best efforts to seek to
obtain the most favorable price and execution available, UBS,
2
bearing in mind each Fund's best interests at all times, shall consider all
factors it deems relevant, including by way of illustration, price, the size of
the transaction, the nature of the market for the security, the amount of the
commission and dealer's spread or xxxx-up, the timing of the transaction taking
into account market prices and trends, the reputation, experience and financial
stability of the broker-dealer involved, the general execution and operational
facilities of the broker-dealer and the quality of service rendered by the
broker-dealer in other transactions.
Subject to such policies as the Board may determine and to the extent
authorized by Section 28(e) of the Securities Exchange Act of 1934 (Exchange
Act), UBS shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused a Fund Account to pay a broker-dealer that provides brokerage and
research services to UBS an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another
broker-dealer offering equally good execution capability in the portfolio
investment would have charged for effecting that transaction if UBS determines
in good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker-dealer,
viewed in terms of either that particular transaction or UBS's overall
responsibilities with respect to the Fund and to other clients of UBS as to
which UBS exercises investment discretion. The Board or IMCO may direct UBS to
effect transactions in portfolio securities through broker-dealers in a manner
that will help generate resources to pay the cost of certain expenses that the
Trust is required to pay or for which the Trust is required to arrange payment.
On occasions when UBS deems the purchase or sale of a security to be in
the best interest of a Fund as well as other clients of UBS, UBS, to the extent
permitted by applicable laws and regulations, may aggregate the securities to be
purchased or sold to attempt to obtain a more favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by UBS in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to its other clients
over time.
UBS may buy securities for a Fund Account at the same time it is
selling such securities for another client account and may sell securities for a
Fund Account at the time it is buying such securities for another client
account. In such cases, subject to applicable legal and regulatory requirements,
and in compliance with such procedures of the Trust as may be in effect from
time to time, UBS may effectuate cross transactions between a Fund Account and
such other account if it deems this to be advantageous.
UBS will advise the Funds' custodian or such depository or agents as
may be designated by the custodian and IMCO promptly of each purchase and sale
of a portfolio security, specifying the name of the issuer, the description and
amount or number of shares of the security purchased, the market price, the
commission and gross or net price, the trade date and settlement date, the
identity of the effecting broker or dealer and any other pertinent data that the
Funds' custodian may need to settle a security's purchase or sale. UBS shall not
have possession or custody of any Fund's investments. The Trust shall be
responsible for all custodial agreements and the payment of all custodial
charges and fees and, upon UBS giving proper instructions to the custodian, UBS
shall have no responsibility or liability for the acts, omissions or other
conduct of the custodian, depository, or other agent designated by the custodian
and IMCO.
3
Notwithstanding the foregoing, UBS agrees that IMCO shall have the
right by written notice to identify securities that may not be purchased on
behalf of any Fund and/or brokers and dealers through which portfolio
transaction on behalf of the Fund may not be effected, including, without
limitation, brokers or dealers affiliated with IMCO. UBS shall refrain from
purchasing such securities for a Fund Account or directing any portfolio
transaction to any such broker or dealer on behalf of a Fund Account, unless and
until the written approval of IMCO to do so is obtained. In addition, UBS agrees
that it shall not direct portfolio transactions for the Fund Accounts through
any broker or dealer that is an "affiliated person" (as that term is defined in
the 1940 Act or interpreted under applicable rules and regulations of the
Commission) of UBS, except as permitted under the 1940 Act. IMCO agrees that it
will provide UBS with a list of brokers and dealers that are affiliated persons
of the Funds, or affiliated persons of such persons, and shall timely update
that list as the need arises. The Funds agree that any entity or person
associated with IMCO or UBS that is a member of a national securities exchange
is authorized to effect any transaction on such exchange for the account of the
Funds that is permitted by Section 11(a) of the Exchange Act, and the Funds
consent to the retention of compensation for such transactions.
(C) EXPENSES. UBS, at its expense, will furnish all necessary
facilities and personnel, including salaries, expenses and fees of any personnel
required for UBS to faithfully perform its duties under this Agreement and
administrative facilities, including bookkeeping, and all equipment and services
necessary for the efficient conduct of UBS's duties under this Agreement.
However, UBS shall not be obligated to pay any expenses of IMCO, the Trust or
the Funds, including without limitation, interest and taxes, brokerage
commissions and other costs in connection with the purchase or sale of
securities or other investment instruments for the Funds and custodian fees and
expenses.
(D) VALUATION. Securities traded on a national securities exchange or
the NASDAQ market for which market quotes are readily available are valued on
each day the New York Stock Exchange is open for business. For those securities
for which market quotes are not readily available, UBS, at its expense, will
provide reasonable assistance to IMCO regarding the valuation of securities that
are the subject of a significant event, not registered for public sale, not
traded on any securities markets, or otherwise deemed illiquid for purposes of
the 0000 Xxx. The parties acknowledge that IMCO is responsible for final pricing
determinations and calculations, and that UBS will take such steps as necessary
to assist IMCO in reaching such pricing determinations for Fund Account
securities. UBS also shall monitor for "significant events" that occur after the
closing of a market but before the Funds calculate their net asset values and
that may affect the valuation of any Fund Account's portfolio securities and
shall notify IMCO immediately of the occurrence of any such events.
(E) REPORTS AND AVAILABILITY OF PERSONNEL. UBS, at its expense, shall
render to the Board and IMCO such periodic and special reports as the Board and
IMCO may reasonably request with respect to matters relating to the duties of
UBS set forth herein. UBS, at its expense, will make available to the Board and
IMCO at reasonable times its portfolio managers and other appropriate personnel
in order to review investment policies of the Funds and to consult with the
Board and IMCO regarding the investment affairs of the Funds, including
economic, statistical and investment matters relevant to UBS's duties hereunder.
4
(F) COMPLIANCE MATTERS. UBS, at its expense, will provide IMCO with
such compliance reports relating to its duties under this Agreement as may be
agreed upon by such parties from time to time. UBS also shall cooperate with and
provide reasonable assistance to IMCO, the Trust's administrator, the Trust's
custodian and foreign custodians, the Trust's transfer agent and pricing agents
and all other agents and representatives of the Trust and IMCO, keep all such
persons fully informed as to such matters as they may reasonably deem necessary
to the performance of their obligations to the Trust and IMCO, provide prompt
responses to reasonable requests made by such persons and maintain any
appropriate interfaces with each so as to promote the efficient exchange of
information.
(G) BOOKS AND RECORDS. UBS will maintain for the Funds all books and
records required to be maintained by the Funds pursuant to the 1940 Act and the
rules and regulations promulgated thereunder insofar as such records relate to
the investment affairs of the Fund Accounts. Pursuant to Rule 31a-3 under the
1940 Act, UBS agrees that: (i) all records it maintains for a Fund Account are
the property of the Fund; (ii) it will surrender promptly to a Fund or IMCO any
such records (or copies of such records) upon the Fund's or IMCO's request; and
(iii) it will preserve for the periods prescribed by Rule 31a-2 under the 1940
Act the records it maintains for any Fund Account. Notwithstanding subsection
(ii) above, UBS may maintain copies of such records to comply with its
recordkeeping obligations.
(H) PROXIES. Unless and until UBS is otherwise directed by IMCO or the
Board, IMCO will vote proxies with respect to a Fund Account's securities and
exercise rights in corporate actions or otherwise in accordance with IMCO's
proxy voting guidelines.
3. ADVISORY FEE. IMCO shall pay to UBS as compensation for UBS's services
rendered pursuant to this Agreement a fee based on the average daily net assets
of each Fund Account at the annual rates set forth in Schedule B, which schedule
can be modified from time to time, subject to any appropriate approvals required
by the 1940 Act. Such fees shall be calculated daily and payable monthly in
arrears within 15 business days after the end of such month. IMCO (and not the
Funds) shall pay such fees. If UBS shall serve for less than the whole of a
month, the compensation as specified shall be prorated based upon the number of
calendar days during which this Agreement is in effect during such month, and
the fee shall be computed based upon the average daily net assets of a Fund
Account for such days.
UBS agrees that if (i) it provides investment advisory services
substantially similar to the services provided to a Fund Account to any other
registered, open-end management investment company (or series thereof), which is
sponsored by an investment manager other than UBS or its affiliates, with a
substantially similar investment mandate and with assets under management equal
to or less than the assets of the Fund Account under management by UBS (the
Substantially Similar Services) and (ii) UBS charges a lower fee for providing
the Substantially Similar Services than it charges with respect to the Fund
Account, then UBS shall reduce its fee with respect to the Fund Account so that
it is equal to or less than the fee charged for providing the Substantially
Similar Services on a going forward basis starting immediately.
4. REPRESENTATIONS AND WARRANTIES.
5
(A) UBS. UBS represents and warrants to IMCO that (i) the retention of
UBS by IMCO as contemplated by this Agreement is authorized by UBS's governing
documents; (ii) the execution, delivery and performance of this Agreement does
not violate any obligation by which UBS or its property is bound, whether
arising by contract, operation of law or otherwise; (iii) this Agreement has
been duly authorized by appropriate action of UBS and when executed and
delivered by UBS will be a legal, valid and binding obligation of UBS,
enforceable against UBS in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general equitable principles (regardless of
whether enforcement is sought in a proceeding in equity or law); (iv) UBS is
registered as an investment adviser under the Advisers Act; (v) UBS has adopted
a written code of ethics complying with the requirements of Rule 17j-1 under the
1940 Act and that UBS and certain of its employees, officers, partners and
directors are subject to reporting requirements thereunder and, accordingly,
agrees that it shall, on a timely basis, furnish a copy of such code of ethics
to IMCO, and, with respect to such persons, UBS shall furnish to IMCO all
reports and information provided under Rule 17j-1(c)(2); (vi) UBS is not
prohibited by the 1940 Act, the Advisers Act or other law, regulation or order
from performing the services contemplated by this Agreement; (vii) UBS will
promptly notify IMCO of the occurrence of any event that would disqualify UBS
from serving as investment manager of an investment company pursuant to Section
9(a) of the 1940 Act or otherwise; (viii) UBS has provided IMCO with a copy of
its Form ADV, which as of the date of this Agreement is its Form ADV as most
recently filed with the SEC, and promptly will furnish a copy of all amendments
to IMCO at least annually; (ix) UBS will notify IMCO of any "assignment" (as
defined in the 0000 Xxx) of this Agreement or change of control of UBS, as
applicable, and any changes in the key personnel who are either the portfolio
manager(s) of any Fund Account or senior management of UBS, in each case prior
to or promptly after, such change; and (x) UBS has adequate disaster recovery
and interruption prevention measures to ensure business resumption in accordance
with applicable law and within industry standards. UBS makes no representation
or warranty, express or implied, that any level of performance or investment
results will be achieved by the Fund, whether on a relative or absolute basis.
(B) IMCO. IMCO represents and warrants to UBS that (i) the
retention of UBS by IMCO as contemplated by this Agreement is authorized by the
respective governing documents of the Trust and IMCO; (ii) the execution,
delivery and performance of each of this Agreement and the Investment Advisory
Agreement does not violate any obligation by which the Trust or IMCO or their
respective property is bound, whether arising by contract, operation of law or
otherwise; (iii) each of this Agreement and the Investment Advisory Agreement
has been duly authorized by appropriate action of the Trust and IMCO and when
executed and delivered by IMCO will be a legal, valid and binding obligation of
the Trust and IMCO, enforceable against the Trust and IMCO in accordance with
its terms, subject, as to enforcement, to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and to general equitable
principles (regardless of whether enforcement is sought in a proceeding in
equity or law); (iv) IMCO is registered as an investment adviser under the
Advisers Act; (v) IMCO has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and that IMCO and certain of its
employees, officers and directors are subject to reporting requirements
thereunder; (vi) IMCO is not prohibited by the 1940 Act, the Advisers Act or
other law, regulation or order from performing the services contemplated by this
Agreement; (vii) IMCO will promptly notify UBS of the occurrence of any event
that would
6
disqualify IMCO from serving as investment manager of an investment company
pursuant to Section 9(a) of the 1940 Act or otherwise; and (viii) IMCO and/or
its affiliates have adopted and use their best efforts to enforce their policies
to identify and prevent investors in the Fund from market timing the purchase
and sale of the Fund's shares or engaging in arbitrage activity to the detriment
of long-term investors in the Fund.
5. LIABILITY AND INDEMNIFICATION.
(A) UBS. UBS shall be liable for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which the Trust, a Fund, IMCO, any affiliated persons thereof (within the
meaning of the 0000 Xxx) and any controlling persons thereof (as described in
Section 15 of the Securities Act of 1933, as amended (the 1933 Act))
(collectively, IMCO Indemnities) may become subject under the 1933 Act, the 1940
Act, the Advisers Act, or under any other statute, at common law or otherwise
arising out of (i) any negligence, willful misconduct, bad faith or reckless
disregard of UBS in the performance of any of its duties or obligations
hereunder or (ii) any untrue statement of a material fact contained in the
Prospectus and SAI, proxy materials, reports, advertisements, sales literature,
or other materials pertaining to the Funds or the omission to state therein a
material fact known to UBS which was required to be stated therein or necessary
to make the statements therein not misleading, if such statement or omission was
made in reliance upon information furnished in writing to IMCO or the Trust by
UBS Indemnities (as defined below) for use therein. UBS shall indemnify and hold
harmless the IMCO Indemnities for any and all such losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses);
PROVIDED, HOWEVER, that in no case is UBS's indemnity hereunder deemed to
protect a person against any liability to which any such person would otherwise
be subject by reason of willful misconduct, bad faith or gross negligence in
performance of its duties under this Agreement or the Investment Advisory
Agreement with the Trust.
(B) IMCO. IMCO shall be liable for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which UBS, any affiliated persons thereof (within the meaning of the 0000 Xxx)
and any controlling persons thereof (as described in Section 15 of the 1933 Act)
(collectively, UBS Indemnities) may become subject under the 1933 Act, the 1940
Act, the Advisers Act, or under any other statute, at common law or otherwise
arising out of (i) any negligence, willful misconduct, bad faith or reckless
disregard by IMCO in the performance of any of its duties or obligations
hereunder or (ii) any untrue statement of a material fact contained in the
Prospectus and SAI, proxy materials, reports, advertisements, sales literature,
or other materials pertaining to the Funds or the omission to state therein a
material fact known to IMCO which was required to be stated therein or necessary
to make the statements therein not misleading, unless such statement or omission
was made in reliance upon information furnished in writing to IMCO or the Trust.
IMCO shall indemnify and hold harmless UBS Indemnities for any and all such
losses, claims, damages, liabilities or litigation (including reasonable legal
and other expenses); PROVIDED, HOWEVER, that in no case shall IMCO's indemnity
hereunder be deemed to protect a person against any liability to which any such
person would otherwise be subject by reason of willful misconduct, bad faith or
gross negligence in the performance of its duties under this Agreement.
7
6. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall become
effective with respect to a Fund upon its execution; provided, however, that
this Agreement shall not become effective with respect to a Fund unless it has
first been approved in the manner required by the 1940 Act and rules thereunder
or in accordance with exemptive or other relief granted by the SEC or its staff.
This Agreement shall remain in full force and effect continuously thereafter,
except as follows:
(a) By vote of a majority of (i) the Board members who are not
"interested persons" (as defined in the 0000 Xxx) of the Funds, IMCO, or UBS
(Independent Board Members) or (ii) the outstanding voting shares of a Fund,
such Fund may at any time terminate this Agreement, without the payment of any
penalty, by providing not more than 60 days' written notice delivered or mailed
by registered mail, postage prepaid, to IMCO and UBS.
(b) This Agreement will terminate automatically with respect to a Fund,
without the payment of any penalty, unless within two years after its initial
effectiveness and at least annually thereafter, the continuance of the Agreement
is specifically approved by (i) the Board or the shareholders of the Fund by the
affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a
majority of the Independent Board Members, by vote cast in person at a meeting
called for the purpose of voting on such approval. If the continuance of this
Agreement is submitted to the shareholders of the Fund for their approval and
such shareholders fail to approve such continuance as provided herein, UBS may
continue to serve hereunder in a manner consistent with the 1940 Act and the
rules thereunder.
(c) IMCO may at any time terminate this Agreement with respect to a
Fund, without the payment of any penalty, by written notice delivered in person
or by facsimile, or mailed by registered mail, postage prepaid, to UBS. UBS may
at any time, without the payment of any penalty, terminate this Agreement with
respect to a Fund by not less than 90 days' written notice delivered or mailed
by registered mail, postage prepaid, to IMCO.
(d) This Agreement automatically and immediately shall terminate with
respect to the Funds, without the payment of any penalty, in the event of its
assignment (as that term is defined in the 1940 Act or interpreted under
applicable rules and regulations of the Commission) or if the Investment
Advisory Agreement shall terminate for any reason.
(e) Any notice of termination served on UBS by IMCO shall be without
prejudice to the obligation of UBS to complete transactions already initiated or
acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to UBS
under this Agreement automatically shall revert to IMCO. Notwithstanding any
termination of this Agreement with respect to a Fund, Sections 5, 10(a), 10(e),
11(a), and 11(c) of this Agreement shall remain in effect after any such
termination.
7. AMENDMENT OF 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 whom enforcement of the change, waiver, discharge or
termination is sought. No material amendment of this Agreement shall be
effective until approved in the manner required by the
8
1940 Act, any rules thereunder or any exemptive or other relief granted by the
SEC or its staff (Applicable Law).
8. APPROVAL, AMENDMENT, OR TERMINATION BY INDIVIDUAL FUND. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 0000 Xxx) of any Fund shall be
effective to continue, amend or terminate this Agreement with respect to any
such Fund notwithstanding (i) that such action has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund
affected thereby, and/or (ii) that such action has not been approved by the vote
of a majority of the outstanding voting securities of the Trust, unless such
action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of UBS to IMCO in connection with
the Funds hereunder are not to be deemed exclusive, and UBS shall be free to
render investment advisory services to others so long as its services hereunder
are not impaired thereby. It is understood that the persons employed by UBS to
assist in the performance of its duties hereunder will not devote their full
time to such services and nothing contained herein shall be deemed to limit or
restrict in any manner whatsoever the right of UBS to engage in or devote time
and attention to other businesses or to render services of whatever kind or
nature. It is understood that IMCO may appoint at any time in accordance with
Applicable Law one or more subadvisers, in addition to UBS, or IMCO itself, to
perform investment advisory services to any portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. UBS shall, upon reasonable notice, afford
IMCO at all reasonable times access to UBS's officers, employees, agents and
offices and to all its relevant books and records and shall furnish IMCO with
all relevant financial and other data and information as requested; provided,
however, that nothing contained herein shall obligate UBS to provide IMCO with
access to the books and records of UBS relating to any other accounts other than
the Funds.
(B) CONFIDENTIALITY. All information and advice furnished by one party
to the other party (including their respective officers, employees and
authorized representatives) shall be treated confidentially and as proprietary
information. Each party 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 other party,
which approval shall not be unreasonably withheld and may not be withheld where
a party may be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities, when so requested by the other party, or as otherwise required by
applicable law or regulation.
(C) PRIVACY POLICY. UBS acknowledges that nonpublic customer
information (as defined in Regulation S-P, including any amendments thereto) of
customers of the Funds received from IMCO is subject to the limitations on
redisclosure and reuse set forth in Section 248.11 of such Regulation, and
agrees such information (i) shall not be disclosed to any third party for any
purpose without the written consent of IMCO unless permitted by exceptions set
9
forth in Sections 248.14 or 248.15 of such Regulation and (ii) shall be
safeguarded pursuant to procedures adopted under Section 248.30 of such
Regulation if so required.
(D) PUBLIC ANNOUNCEMENTS. No party shall issue any press release or
otherwise make any public statements with respect to the matters covered by this
Agreement without the prior written consent of the other parties hereto, which
consent shall not be unreasonably withheld; provided, however, that consent
shall not be required if, in the opinion of counsel, such disclosure is required
by law; provided further, however, that the party making such disclosure shall
provide the other parties hereto with as much prior written notice of such
disclosure as is practical under the circumstances.
(E) NOTIFICATIONS. UBS agrees that it will promptly notify IMCO in the
event that: (i) UBS becomes or reasonably expects to become the subject of an
administrative proceeding or enforcement action by the Commission or other
regulatory body with applicable jurisdiction or (ii) to the best of UBS's
knowledge, any affiliate of UBS becomes or reasonably expects to become the
subject of an administrative proceeding or enforcement action by the Commission
or other regulatory body with applicable jurisdiction that could reasonably be
expected to have a material adverse effect upon the ability of UBS to perform
its duties under this Agreement..
(F) INSURANCE. UBS agrees to maintain errors and omissions or
professional liability insurance coverage in an amount that is reasonable in
light of the nature and scope of UBS's business activities.
(G) SHAREHOLDER MEETING AND OTHER EXPENSES. In the event that the Trust
shall be required to call a meeting of shareholders or send an information
statement or prospectus supplement to shareholders solely due to actions
involving UBS, including, without limitation, a change of control of UBS or a
portfolio manager change, UBS shall bear all reasonable expenses associated with
such shareholder meeting, information statement, or prospectus supplement.
11. MISCELLANEOUS.
(A) NOTICES. All notices or other communications given under this
Agreement shall be made by guaranteed overnight delivery, telecopy or certified
mail; notice is effective when received. Notice shall be given to the parties at
the following addresses:
IMCO: USAA Investment Management Company
0000 Xxxxxxxxxxxxxx Xxxx, X-X0-X
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Securities Counsel
UBS: UBS Global Asset Management (Americas) Inc.
Xxx Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Facsimile No. 000-000-0000
Attention: Legal Department
10
(B) SEVERABILITY. 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.
(C) GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Texas, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act. To the extent that the
applicable laws of the State of Texas conflict with the applicable provisions of
the 1940 Act, the latter shall control.
(D) COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(E) HEADINGS. 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.
(F) ENTIRE AGREEMENT. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act.
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IN WITNESS WHEREOF, IMCO and UBS have caused this Agreement to be
executed as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT
COMPANY
By: /s/ Xxxxxxxx Xxxxxxx By: /s/ Xxxxxx X. Xxxxx
--------------------------- -------------------------------
Name: Xxxxx Xxxxxxx Name: Xxxxxx X. Xxxxx
Title: Senior Vice President Title: Vice President
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Authorized Signatory
Attest: UBS GLOBAL ASSET MANAGEMENT
(AMERICAS) INC.
By: /s/ Xxxx Xxxxxxx By: /s/ Xxxx Xxxxxxx
----------------------------------- ------------------------------
Name: Xxxx Xxxxxxx Name: Xxxx Xxxxxxx
Title: Assistant Secretary Title: Managing Director
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Authorized Signatory
12
SCHEDULE A
GROWTH & INCOME FUND
13
SCHEDULE B
FEES
FUND ACCOUNT RATE PER ANNUM OF THE AVERAGE
DAILY NET ASSETS OF THE FUND
ACCOUNT
Growth & Income Fund 0.20%*
* UBS agrees that it will not seek to increase this fee rate during the period
ending July 8, 2011 (the Lock). This Lock does not limit the rights of the
Fund's shareholders, the Fund's Board, or IMCO as set forth in Section 6 of the
Agreement ("Duration and Termination of this Agreement").
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