Exhibit d(xvi)
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 2nd day of October, 2006 (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 CREDIT SUISSE ASSET MANAGEMENT, LLC, a limited
liability company organized under the laws of the State of Delaware and having
its principal place of business in New York, New York (Credit Suisse).
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 Credit Suisse to render investment
advisory services to such Funds (or portions thereof) 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 Fund or portion thereof referred to herein as a
Fund Account and collectively as Fund Accounts); and
WHEREAS, Credit Suisse 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 CREDIT SUISSE. IMCO hereby appoints Credit Suisse to act as an
investment adviser for each Fund Account in accordance with the terms and
conditions of this Agreement. Credit Suisse 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 Credit
Suisse. Credit Suisse accepts such appointment and agrees to render the services
herein set forth for the compensation herein provided.
2. DUTIES OF CREDIT SUISSE.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO
and the Trust's Board of Trustees (the Board), Credit Suisse, at its own
expense, 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. Credit Suisse 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
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Fund. Should Credit Suisse 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, Credit Suisse
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, Credit Suisse 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 Credit Suisse wishes to hold cash or cash equivalents in excess of 10% of
a Fund Account's assets, Credit Suisse must request in writing and receive
advance permission from IMCO.
In accordance with Subsection (b) of this Section 2, Credit Suisse
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, Credit Suisse 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 defiPersonNamened in Section
851 of the Code), as from time to time in effect, and (vi) the written
instructions of IMCO. Credit Suisse shall establish compliance procedures
reasonably calculated to ensure compliance with the foregoing. IMCO shall be
responsible for providing Credit Suisse 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 Credit Suisse with prior written notice of
any material change to the Trust's Registration Statement that would affect
Credit Suisse's management of a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, Credit Suisse 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, Credit Suisse shall use its best
efforts to obtain for the Fund Accounts the best execution available, except to
the extent it may be permitted to pay higher
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brokerage commissions for brokerage and research services as described below. In
using its best efforts to obtain the best execution available, Credit Suisse,
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), Credit Suisse 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 Credit Suisse 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 Credit Suisse
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 Credit
Suisse's overall responsibilities with respect to the Fund and to other clients
of Credit Suisse as to which Credit Suisse exercises investment discretion. The
Board or IMCO may direct Credit Suisse 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 Credit Suisse deems the purchase or sale of a
security to be in the best interest of a Fund as well as other clients of Credit
Suisse, Credit Suisse, 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 Credit Suisse
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.
Credit Suisse 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, Credit Suisse may effectuate cross transactions between a Fund
Account and such other account if it deems this to be advantageous.
Credit Suisse 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.
Credit Suisse shall not have possession or custody of any Fund's investments.
The Trust shall be responsible for all custodial
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agreements and the payment of all custodial charges and fees and, upon Credit
Suisse giving proper instructions to the custodian, Credit Suisse 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, Credit Suisse 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. Credit Suisse 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,
Credit Suisse 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 Securities and Exchange Commission (the Commission)) of
Credit Suisse, except as permitted under the 1940 Act. IMCO agrees that it will
provide Credit Suisse 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 Credit Suisse 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. Credit Suisse, 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 Credit Suisse's duties under this
Agreement. However, Credit Suisse 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, Credit Suisse, at its
expense, will provide 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 Credit Suisse will take such steps as
necessary to assist IMCO in reaching such pricing determinations for Fund
Account securities. Credit Suisse 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. Credit Suisse, at its
expense, shall render to the Board and IMCO such periodic and special reports as
the Board and IMCO may
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reasonably request with respect to matters relating to the duties of Credit
Suisse set forth herein. Credit Suisse, 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 Credit
Suisse's duties hereunder.
(F) COMPLIANCE MATTERS. Credit Suisse, 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. Credit Suisse 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. Credit Suisse 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, Credit Suisse 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, Credit Suisse may maintain copies of such
records to comply with its recordkeeping obligations.
(H) PROXIES. Unless and until Credit Suisse 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 Credit Suisse as compensation for Credit
Suisse'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 Credit Suisse 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.
4. REPRESENTATIONS AND WARRANTIES.
(A) CREDIT SUISSE. Credit Suisse represents and warrants to IMCO that
(i) the retention of Credit Suisse by IMCO as contemplated by this Agreement is
authorized by Credit Suisse's governing documents; (ii) the execution, delivery
and performance of this Agreement does not violate any obligation by which
Credit Suisse or its property is bound, whether arising by contract, operation
of law or otherwise; (iii) this Agreement has been duly authorized by
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appropriate action of Credit Suisse and when executed and delivered by Credit
Suisse will be a legal, valid and binding obligation of Credit Suisse,
enforceable against Credit Suisse 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) Credit
Suisse is registered as an investment adviser under the Advisers Act; (v) Credit
Suisse has adopted a written code of ethics complying with the requirements of
Rule 17j-1 under the 1940 Act and that Credit Suisse 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, Credit Suisse shall furnish to IMCO all reports and information
provided under Rule 17j-1(c)(2); (vi) Credit Suisse 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) Credit Suisse will promptly
notify IMCO of the occurrence of any event that would disqualify Credit Suisse
from serving as investment manager of an investment company pursuant to Section
9(a) of the 1940 Act or otherwise; (viii) Credit Suisse 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) Credit Suisse will notify IMCO of any
"assignment" (as defiPersonNamened in the 0000 Xxx) of this Agreement or change
of control of Credit Suisse, as applicable, and any changes in the key personnel
who are either the portfolio manager(s) of any Fund Account or senior management
of Credit Suisse, in each case prior to or promptly after, such change; and (x)
Credit Suisse has adequate disaster recovery and interruption prevention
measures to ensure business resumption in accordance with applicable law and
within industry standards. Credit Suisse 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 Credit Suisse that (i) the
retention of Credit Suisse 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 Credit Suisse 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
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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) CREDIT SUISSE. Credit Suisse 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 by Credit Suisse in the performance of any of its duties or
obligations hereunder or (ii) any untrue statement of a material fact
contaiPersonNamened 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 Credit Suisse 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 Credit Suisse Indemnities (as
defiPersonNamened below) for use therein. Credit Suisse 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 Credit Suisse'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 Credit Suisse, 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, Credit Suisse 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
contaiPersonNamened 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 Credit Suisse 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.
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
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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 Credit
Suisse (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 Credit Suisse.
(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, Credit
Suisse 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 Credit
Suisse. Credit Suisse 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 Credit Suisse by IMCO shall be
without prejudice to the obligation of Credit Suisse to complete transactions
already initiated or acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to
Credit Suisse 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
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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 Credit Suisse to IMCO in connection
with the Funds hereunder are not to be deemed exclusive, and Credit Suisse 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 Credit Suisse 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 Credit Suisse
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 Credit Suisse, or IMCO itself, to perform investment advisory services to any
portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. Credit Suisse shall, upon reasonable notice,
afford IMCO at all reasonable times access to Credit Suisse'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
Credit Suisse to provide IMCO with access to the books and records of Credit
Suisse 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, or when so requested by the other party.
(C) PRIVACY POLICY. Credit Suisse 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
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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. Credit Suisse agrees that it will promptly notify
IMCO in the event that: (i) Credit Suisse 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 Credit Suisse's knowledge, any affiliate of Credit Suisse 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 Credit Suisse to perform its duties under this Agreement.
(F) INSURANCE. Credit Suisse 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 Credit Suisse'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 Credit Suisse, including, without limitation, a change of control of
Credit Suisse or a portfolio manager change, Credit Suisse 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
Credit Suisse: Credit Suisse Asset Management, LLC
addressStreet466 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: General Counsel
Page 10 of 13
(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 StateplaceTexas, 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 StateplaceTexas 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.
IN WITNESS WHEREOF, IMCO and Credit Suisse have caused this Agreement
to be executed as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT COMPANY
/S/XXXX X. XXXXXX /S/XXXXXXXXXXX X. XXXXX
By: ----------------------- By: ------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
/S/XXXXX X. XXXXXXXX
By: ------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
Attest: CREDIT SUISSE ASSET MANAGEMENT, LLC
/S/XXXXXX XXXXXXX /S/X. XXXXXXXXX
By: ----------------------- By: -------------------------
Name: Xxxxxx Xxxxxxx Name: X. Xxxxxxxxx
Title: Managing Director Title: Managing Director
Page 11 of 13
SCHEDULE A
CORNERSTONE STRATEGY FUND
FIRST START GROWTH FUND
Page 12 of 13
SCHEDULE B
FEES
FUND ACCOUNT RATE PER ANNUM OF THE AVERAGE DAILY
NET ASSET OF THE FUND ACCOUNT
Cornerstone Strategy Fund 0.15%*
First Start Growth Fund 0.15%*
------------------------
* Credit Suisse agrees that it will not seek to increase these fee rates during
the period ending October 1, 2010 (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").
Page 13 of 13
Exhibit d(xviii)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT (this "Agreement") made as of the 2nd day of
October, 2006 (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 DEUTSCHE
INVESTMENT MANAGEMENT AMERICAS INC., a registered investment adviser organized
under the laws of the State of Delaware ("Deutsche").
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 (the
"Investment Advisory Agreement"), IMCO is authorized to appoint subadvisers for
series of the Trust; and
WHEREAS, IMCO wishes to retain Deutsche 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 referred to herein as a "Fund" and,
collectively, as the "Funds"); and
WHEREAS, Deutsche is willing to provide such services to the Funds 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 DEUTSCHE. IMCO hereby appoints Deutsche to act as sub-adviser
for each Fund in accordance with the terms and conditions of this Agreement.
Deutsche 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 Deutsche. Deutsche accepts such appointment and
agrees to render the services herein set forth for the compensation herein
provided.
2. DUTIES OF DEUTSCHE.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO
and the Trust's Board of Trustees (the "Board"), Deutsche, at its own expense,
shall have full discretion to manage, supervise and direct the investment and
reinvestment of each Fund Account's assets allocated to it by IMCO from time to
time. Deutsche 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
(the "Investment Guidelines") (collectively such documents, the "Registration
Statement"). Should Deutsche anticipate materially modifying management of a
Fund Account's assets, it must
Page 1 of 15
provide 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, Deutsche 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 (such portion of such
Fund referred to herein as a "Fund Account" and collectively, as the "Fund
Accounts") and shall not consult with any other subadviser of such Fund
concerning transactions for the Fund in securities or other assets. It is
understood that IMCO has the right to allocate and reallocate such assets to a
Fund Account at any time upon written notice to Deutsche.
With respect to the management of each Fund Account pursuant to this
Agreement, Deutsche 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
Deutsche wishes to hold cash or cash equivalents in excess of 10% of a Fund
Account's assets, Deutsche must request in writing and receive advance
permission from IMCO. If Deutsche receives a redemption notice from IMCO or its
agents that requires Deutsche to hold cash or cash equivalents in excess of 10%,
IMCO will be deemed to have given such permission to Deutsche via the redemption
notice. For clarification, positions in futures will not be deemed cash or cash
equivalents for purposes of this section.
In accordance with Subsection (b) of this Section 2, Deutsche 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.
Deutsche will manage the Fund Accounts in conformity with
(i) applicable laws and regulations, including, but not limited to, the 1940 Act
and the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and
the rules under each, (ii) the terms of this Agreement, (iii) the Investment
Guidelines of each Fund, as stated in the then-current Registration Statement of
each Fund, (iv) the Fund's compliance procedures and other policies, procedures
or guidelines as the Board or IMCO reasonably may establish from time to time
and provide to Deutsche, (v) the provisions of the Internal Revenue Code of
1986, as amended (the "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. Deutsche shall establish compliance
procedures reasonably calculated to ensure compliance with the foregoing. For
clarification purposes, Deutsche is responsible for compliance with the
foregoing with respect to Fund Accounts and not with respect to the Trust and/or
any Fund portfolios in the aggregate. IMCO shall be responsible for promptly
providing Deutsche 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 Deutsche with prior written notice of any material change to the
Registration Statement that would affect Deutsche's management of any Fund
Account.
Page 2 of 15
(B) PORTFOLIO TRANSACTIONS. In connection with the management
of the investment and reinvestment of the Fund Accounts' assets, Deutsche 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, Deutsche shall use its reasonable
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 reasonable best efforts to obtain the most favorable price and
execution available, Deutsche, 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 from time to time
(which policies, if any, and any amendments thereto shall be provided promptly
to Deutsche) and to the extent authorized by Section 28(e) of the Securities
Exchange Act of 1934 (the "Exchange Act"), Deutsche 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 Deutsche 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 Deutsche 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 Deutsche's overall responsibilities with respect to
the Fund and to other clients of Deutsche as to which Deutsche exercises
investment discretion. The Board or IMCO may (subject to Deutsche's internal
policies regarding directed brokerage) direct Deutsche 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. Deutsche may use for the
benefit of its other clients, or make available to companies affiliated with
Deutsche or to its directors for the benefit of its clients, any such brokerage
and research services that Deutsche obtains from brokers or dealers with respect
to the Fund Accounts.
On occasions when Deutsche deems the purchase or sale of a security to
be in the best interest of a Fund as well as other clients of Deutsche,
Deutsche, 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 Deutsche in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Funds and to its other clients over time.
Deutsche 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
Page 3 of 15
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, Deutsche may
effectuate cross transactions between a Fund Account and such other account if
it deems this to be advantageous.
Deutsche 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. Deutsche
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 Deutsche giving proper instructions to the custodian,
Deutsche 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, Deutsche 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. Deutsche 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, Deutsche
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 Deutsche, except as permitted under the 1940 Act. IMCO agrees
that it will provide Deutsche 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 represents and warrants
that the Funds agree that any entity or person associated with IMCO or Deutsche
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 Rule 11a2-2(T) thereunder, and the Funds
consent to the retention of compensation for such transactions.
(C) EXPENSES. Deutsche, 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 Deutsche's duties under this Agreement
(excluding determination of net asset value and shareholder accounting
services). However, Deutsche 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, sale or
ownership of securities or other investment instruments for the Funds and
custodian fees and expenses.
Page 4 of 15
(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, Deutsche, at its expense,
will provide 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 Deutsche will take such reasonable
steps as necessary to assist IMCO in reaching such pricing determinations for
Fund Account securities. Deutsche also shall monitor for "significant events"
that: (i) occur after the close of the primary markets on which any Fund
Account's portfolio securities trade but before the pricing of a Fund and (ii)
may affect the valuation of any Fund Account's portfolio securities. Deutsche
shall notify IMCO immediately in the event Deutsche determines that a
significant event has occurred.
(E) REPORTS AND AVAILABILITY OF PERSONNEL. Deutsche, 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 Deutsche set forth herein. Deutsche, 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
Deutsche's duties hereunder.
(F) COMPLIANCE MATTERS. Deutsche, 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. Deutsche 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. Deutsche 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, Deutsche 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, Deutsche may maintain copies of such records to comply
with its recordkeeping obligations.
(H) PROXIES. Unless and until Deutsche 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.
Page 5 of 15
3. ADVISORY FEE. IMCO shall pay to Deutsche as compensation for Deutsche'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 Deutsche 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.
4. REPRESENTATIONS AND WARRANTIES.
(A) REPRESENTATIONS AND WARRANTIES OF DEUTSCHE. Deutsche hereby
represents and warrants to IMCO that (i) the retention of Deutsche by IMCO as
contemplated by this Agreement is authorized by Deutsche's governing documents;
(ii) the execution, delivery and performance of this Agreement does not violate
any obligation by which Deutsche 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 Deutsche and when executed and delivered by
Deutsche will be a legal, valid and binding obligation of Deutsche, enforceable
against Deutsche 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) Deutsche is registered as an
investment adviser under the Advisers Act; (v) Deutsche has adopted a written
code of ethics complying with the requirements of Rule 17j-1 under the 1940 Act
and that Deutsche 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, Deutsche shall furnish to IMCO all reports and
information provided under Rule 17j-1(c)(2); (vi) Deutsche 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) Deutsche will promptly notify
IMCO of the occurrence of any event that would disqualify Deutsche from serving
as investment manager of an investment company pursuant to Section 9(a) of the
1940 Act or otherwise; (viii) Deutsche 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 will furnish a copy of all amendments thereto to IMCO
annually; (ix) Deutsche will notify IMCO of any "assignment" (as defined in the
0000 Xxx) of this Agreement or change of control of Deutsche, as applicable, and
any changes in the key personnel who are either the portfolio manager(s) of any
Fund Account or senior management of Deutsche, in each case prior to or promptly
after, such change; and (x) Deutsche has adequate disaster recovery and
interruption prevention measures to ensure business resumption in accordance
with applicable law and within industry standards. Deutsche 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) REPRESENTATIONS AND WARRANTIES OF IMCO. IMCO hereby represents and
warrants to Deutsche that (i) the retention of Deutsche by IMCO as contemplated
by this
Page 6 of 15
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 Deutsche 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; and (ix)
except as Deutsche has been informed in writing to the contrary and except as
otherwise provided in the Funds' respective Registration Statement and the
Funds' respective Investment Guidelines that have been provided to Deutsche on
or prior to the date hereof, there are no restrictions which would prevent or
limit investment of assets of the Funds in any manner whatsoever and that if any
such restriction should be effected, Deutsche shall be promptly informed in
writing as to the nature and extent of any such restriction.
(C) COVENANTS AND AGREEMENTS OF IMCO. IMCO hereby covenants and agrees
that:
(i) as a condition of the provision of services by Deutsche
hereunder, IMCO shall provide to Deutsche such documents as Deutsche may require
as evidence of IMCO's authority to enter into this Agreement, and will forthwith
advise Deutsche of any variation of or supplements to such documents relevant to
the authority of IMCO to enter into this Agreement;
(ii) IMCO shall promptly notify Deutsche if there is any
change to the Investment Guidelines of any Fund and will provide such other
relevant information as Deutsche may from time to time reasonably require in
order to fulfill its legal, regulatory and contractual obligations under or in
connection with this Agreement. IMCO acknowledges that a failure to provide such
information may adversely affect the quality of the services that Deutsche may
provide; and
(iii) IMCO has delivered to Deutsche a true and complete copy
of each Fund's Registration Statement as well as all applicable procedures
adopted by the Board and will promptly provide Deutsche with any and all
amendments to these documents.
5. LIABILITY AND INDEMNIFICATION.
Page 7 of 15
Neither Deutsche nor any of its affiliates or their respective
officers, directors, employees, agents, or legal representatives (collectively,
"Related Persons") of Deutsche shall be liable for any error of judgment or
mistake of law, or for any losses, damages, costs, charges, liabilities or
expenses (including, but not limited to, reasonable counsel fees and expenses)
(collectively, "Damages") suffered or incurred by any Fund or 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)) in connection with the matters to which this Agreement relates;
PROVIDED that, except as set forth in the succeeding paragraph, no provision of
this Agreement shall be deemed to protect Deutsche or any of its Related Persons
against any liability to which it might otherwise be subject by reason of any
willful misfeasance, bad faith or negligence of Deutsche or its Related Persons
or the reckless disregard by Deutsche of its obligations and duties (each of the
foregoing acts is hereby referred to as a "Culpable Act") under this Agreement.
Neither Deutsche nor any of its Related Persons shall be liable for any
error of judgment or mistake of law, or for any Damages suffered by IMCO or any
affiliated persons thereof (within the meaning of the 0000 Xxx) and any
controlling persons thereof (as described in Section 15 of the 0000 Xxx) in
connection with the matters to which this Agreement relates; provided that this
provision shall not be deemed to protect Deutsche or its Related Persons against
any liability to which it might otherwise be subject by reason of any Culpable
Act by Deutsche or its Related Persons.
IMCO shall indemnify Deutsche and its Related Persons and hold them
harmless from and against any and all actions, suits or claims whether
groundless or meritorious, and from and against any and all Damages arising
directly or indirectly out of or in connection with the performance of services
by Deutsche or its Related Persons hereunder unless such Damages result from any
Culpable Act of Deutsche or any of its Related Persons.
Deutsche shall indemnify IMCO and its Related Persons from and against
any Damages arising directly or indirectly out of or in connection with the
performance of services by IMCO or its Related Persons in respect of the Funds
to the extent such Damages result from any Culpable Act of Deutsche or any of
its Related Persons.
6. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall
become effective with respect to a Fund upon its execution by all parties
hereto; 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 Deutsche
("Independent Board Members") or (ii) the outstanding voting shares of a Fund,
such Fund may at any time terminate this
Page 8 of 15
Agreement, without the payment of any penalty, by providing not less than 60
days' written notice delivered or mailed by registered mail, postage prepaid, to
IMCO and Deutsche.
(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, Deutsche
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 Deutsche.
Deutsche 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. The parties
agree that if Deutsche terminates this Agreement in accordance with this
provision, Deutsche shall not be liable for any expenses, including expenses
related to updating disclosure or shareholder vote.
(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 Deutsche by IMCO shall be
without prejudice to the obligation of Deutsche to complete transactions already
initiated or acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to
Deutsche under this Agreement automatically shall revert to IMCO.
Notwithstanding any termination of this Agreement with respect to a Fund,
Sections 2(c), 3, 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 each party hereto. 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 solely with respect to
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
Page 9 of 15
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. IMCO understands, and has advised the Board, that the
services of Deutsche to IMCO in connection with the Funds hereunder are not
exclusive, and Deutsche shall be free to render investment advisory services to
other clients and it is agreed that Deutsche may give advice and take action
with respect to such other clients or for its own account or for the account of
any of its affiliates or for the accounts of any of their clients (collectively,
"Other Accounts") which may differ from the advice or the timing or nature of
action taken with respect to the Fund Accounts. Furthermore, Deutsche shall have
no obligation to purchase or sell, or to recommend for purchase or sale for the
Fund Accounts any security or instrument which Deutsche or any of its affiliates
may purchase or sell for Other Accounts. IMCO understands, and has advised the
Board, that the persons employed by Deutsche 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 Deutsche 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 Deutsche, or IMCO itself, to perform investment
advisory services to any portion of the Funds.
10. CONFLICTS OF INTEREST. It is understood that trustees, officers, agents and
beneficial owners of the Trust are or may be interested in Deutsche as trustees,
officers, partners or otherwise; that employees, agents and partners of Deutsche
are or may be interested in the Trust as trustees, officers, beneficial owners
or otherwise; that Deutsche may be interested in the Trust; and that the
existence of any such dual interest shall not affect the validity hereof or of
any transactions hereunder except as otherwise provided in this Agreement or
Declaration of Trust of the Trust or by specific provision of applicable law.
11. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. Deutsche shall, upon reasonable notice,
afford IMCO at all reasonable times access to Deutsche'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 Deutsche to
provide IMCO with access to the books and records of Deutsche 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, or when so requested by the other party.
(C) PRIVACY POLICY. Deutsche acknowledges that nonpublic customer
information (as defined in Regulation S-P, including any amendments thereto) of
customers of the Funds
Page 10 of 15
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 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. Deutsche agrees that it will promptly notify IMCO in
the event that: (i) Deutsche 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 Deutsche's
knowledge, any affiliate of Deutsche 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 Deutsche to
perform its duties under this Agreement..
(F) INSURANCE. Deutsche 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 Deutsche'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 Deutsche, including, without limitation, a change of control of
Deutsche or a portfolio manager change, Deutsche shall bear all reasonable
expenses associated with such shareholder meeting, information statement, or
prospectus supplement.
12. 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
Deutsche: Deutsche Asset Management
000 Xxxx Xxxxxx
Page 00 xx 00
00xx Xxxxx
Xxx Xxxx, XX 00000;
Attention: Xxxx XxXxxxxxx
Mailstop NYC20-2636
with a copy to:
Legal Department
Deutsche Asset Management
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000,
Attention: Documentation Specialist,
Mailstop NYC20-1651
(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 StateplaceTexas, 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 StateplaceTexas 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.
Page 12 of 15
IN WITNESS WHEREOF, IMCO and Deutsche have caused this Agreement to be
executed as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT
COMPANY
By: /s/ Xxxx X. Xxxxxx By: /s/ Xxxxxxxxxxx X. Xxxxx
----------------------------------- ----------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
By: /s/ Xxxxx X. Xxxxxxxx
---------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
Attest: DEUTSCHE INVESTMENT MANAGEMENT
AMERICAS INC.
By: By: /s/ Xxxxxxxxx Xxxxxxxxxx
--------------------------------- -----------------------------
Name: Name: Xxxxxxxxx Xxxxxxxxxx
Title: Title: Manangin Director
By: /s/ Xxxxxxx Xxxxxx
-----------------------------
Name: Xxxxxxx Xxxxxx
Title: Managing Director
Page 13 of 15
SCHEDULE A
BALANCED STRATEGY FUND
Page 14 of 15
SCHEDULE B
FEES
FUND ACCOUNT Rate per annum of the average daily
net assets of the Fund Account
------------------------------------
Balanced Strategy Fund 0.15%*
-------------------------
* Deutsche agrees that it will not seek to increase this fee rate during
the period ending October 1, 2010 (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").
Page 15 of 15
EXHIBIT d(xix)
AMENDMENT NO. 2
TO INVESTMENT SUBADVISORY AGREEMENT
AMENDMENT NO. 2 made as of the 2nd day of October 2006, to the
Investment Subadvisory Agreement made as of the 1st day of August 2006, as
amended, 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 BATTERYMARCH FINANCIAL MANAGEMENT,
INC., a corporation organized under the laws of the State of Maryland and having
its principal place of business in Boston, Massachusetts (Batterymarch), with
respect to services provided to series of USAA Mutual Funds Trust (the Trust).
IMCO and Batterymarch agree to modify and amend the Investment
Subadvisory Agreement described above (Agreement) as follows:
1. APPLICABLE FUNDS. IMCO hereby appoints Batterymarch as an
investment subadviser of the USAA World Growth and USAA Emerging Markets Funds
on the terms and conditions set forth in the Agreement and terminates
Batterymarch as an investment subadviser of the USAA First Start Growth Fund.
2. SCHEDULE A. Schedule A to the Agreement, setting forth the Funds
of the Trust for which Batterymarch is appointed as an investment subadviser, is
hereby replaced in its entirety by Schedule A attached hereto.
3. SCHEDULE B. Schedule B to the Agreement, setting forth the fees
payable to Batterymarch with respect to each Fund, is hereby replaced in its
entirety by Schedule B attached hereto.
4. RATIFICATION. Except as modified and amended hereby, the
Agreement is hereby ratified and confirmed in full force and effect in
accordance with its terms.
Page 1 of 2
IN WITNESS WHEREOF, IMCO and Batterymarch have caused this Amendment
No. 2 to be executed as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT COMPANY
By: /s/ Xxxx X. Xxxxxx By: /s/ Xxxxxxxxxxx X. Xxxxx
---------------------------- -------------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
By /s/ Xxxxx X. Xxxxxxxx
-------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
Attest: BATTERYMARCH FINANCIAL MANAGEMENT, INC.
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxxxx Xxxxx
--------------------------------- ---------------------------------
Name: Xxxxxx X. Xxxxxxx Name: Xxxxxxx Xxxxx
Title: Assistant Secretary Title: President & CFO
Page 2 of 2
SCHEDULE A
FUND EFFECTIVE DATE
CAPITAL GROWTH FUND AUGUST 1, 2006
CORNERSTONE STRATEGY FUND AUGUST 1, 2006
SMALL CAP STOCK FUND AUGUST 1, 2006
WORLD GROWTH FUND OCTOBER 2, 2006
EMERGING MARKETS FUND OCTOBER 2, 2006
SCHEDULE B
FEES
FUND ACCOUNT RATE PER ANNUM OF THE AVERAGE DAILY NET
ASSETS OF THE FUND ACCOUNTS
Capital Growth Fund, Cornerstone 0.25% on the first $250 million of assets
Strategy Fund, and World Growth
Fund* 0.21% on assets over $250 million and up
to $500 million
0.17% on assets over $500 million
Small Cap Stock Fund 0.50%
Emerging Markets Fund** 0.80% on the first $100 million of assets
0.75% on assets over $100 million and
up to $600 million
0.60% on assets over $600 million
----------------------------
* Batterymarch agrees that it will not seek to increase this fee rate during the
period ending November 30, 2009 (the Lock). This Lock does not limit the rights
of a Fund's shareholders, a Fund's Board, or IMCO as set forth in Section 6 of
the Agreement ("Duration and Termination of this Agreement").
** Batterymarch agrees that it will not seek to increase this fee rate during
the period ending October 1, 2010 (the Emerging Markets Lock). This Emerging
Markets Lock does not limit the rights of a Fund's shareholders, a Fund's Board,
or IMCO as set forth in Section 6 of the Agreement ("Duration and Termination of
this Agreement").
Page 1 of 1
