For the period ended 07/31/04 Series 1, 19
File Number 811-2429
Sub-Item 77Q1(e): Exhibits
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INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of July, 2004 (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 XXXXXX XXXXXX AND COMPANY, L.P., a Delaware Limited
Partnership having its principal place of business in Boston, Massachusetts
(Xxxxxx).
WHEREAS, IMCO serves as the investment adviser to USAA Mutual Fund,
Inc. a corporation organized under the laws of the state of Maryland (the
Company) 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 Company
(Investment Advisory Agreement), IMCO is authorized to appoint sub-advisers for
series of the Company (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain Xxxxxx to render investment advisory
services to such series (or portions thereof) of the Company 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, Xxxxxx 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 XXXXXX. IMCO hereby appoints Xxxxxx to act as an
investment adviser for each Fund Account in accordance with the terms and
conditions of this Agreement. Xxxxxx will be an independent contractor and will
have no authority to act for or represent the Company or IMCO in any way or
otherwise be deemed an agent of the Company or IMCO except as expressly
authorized in this Agreement or another writing by the Company, IMCO and Xxxxxx.
Xxxxxx accepts such appointment and agrees to render the services herein set
forth for the compensation herein provided.
2. DUTIES OF XXXXXX.
(a) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO
and the Company's Board of Directors (the Board), Xxxxxx, 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. Xxxxxx 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 Xxxxxx 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, Xxxxxx 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, Xxxxxx 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
Xxxxxx wishes to hold cash or cash equivalents in excess of 10% of a Fund
Account's assets, Xxxxxx must request in writing and receive advance permission
from IMCO.
In accordance with Subsection (b) of this Section 2, Xxxxxx 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 Company in the same manner and with the same force and effect as
the Company 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, Xxxxxx 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 Company'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. Xxxxxx shall establish compliance procedures reasonably calculated to
ensure compliance with the foregoing. IMCO shall be responsible for providing
Xxxxxx with the Company's Articles of Incorporation, as amended and
supplemented, the Company'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 Xxxxxx with prior written notice of any material change to the
Company's Registration Statement that would affect Xxxxxx' management of a Fund
Account.
(b) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, Xxxxxx 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, Xxxxxx 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, Xxxxxx, 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 mark-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), Xxxxxx 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 Xxxxxx 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 Xxxxxx
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 Xxxxxx'
overall responsibilities with respect to the Fund and to other clients of Xxxxxx
as to which Xxxxxx exercises investment discretion. The Board or IMCO may direct
Xxxxxx 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 Company is required to pay or for which the Company is required to
arrange payment.
On occasions when Xxxxxx deems the purchase or sale of a security to be
in the best interest of a Fund as well as other clients of Loomis, Loomis, 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 Xxxxxx 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.
Xxxxxx 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 Company as may be in effect from
time to time, Xxxxxx may effectuate cross transactions between a Fund Account
and such other account if it deems this to be advantageous.
Xxxxxx 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. Xxxxxx shall
not have possession or custody of any Fund's investments. The Company shall be
responsible for all custodial agreements and the payment of all custodial
charges and fees and, upon Xxxxxx giving proper instructions to the custodian,
Xxxxxx 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, Xxxxxx 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. Xxxxxx 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, Xxxxxx
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 Xxxxxx, except as permitted under the 1940 Act. IMCO agrees
that it will provide Xxxxxx 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 Xxxxxx 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. Xxxxxx, 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 Xxxxxx' duties under this Agreement.
However, Xxxxxx shall not be obligated to pay any expenses of IMCO, the Company
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, Xxxxxx, at its expense and in
accordance with procedures and methods established by the Board, which may be
amended from time to time, will provide assistance to IMCO in determining the
fair value of such securities, including providing market price information
relating to these assets of the Fund. Xxxxxx 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. Xxxxxx, 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 Xxxxxx set forth herein. Xxxxxx, 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 Xxxxxx'
duties hereunder.
(f) COMPLIANCE MATTERS. Xxxxxx, 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. Xxxxxx also shall cooperate with
and provide reasonable assistance to IMCO, the Company's administrator, the
Company's custodian and foreign custodians, the Company's transfer agent and
pricing agents and all other agents and representatives of the Company 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 Company 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. Xxxxxx 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, Xxxxxx 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, Xxxxxx may maintain copies of such records to comply with
its recordkeeping obligations.
(h) PROXIES. Xxxxxx will, unless and until otherwise directed by IMCO
or the Board, vote proxies with respect to a Fund Account's securities and
exercise rights in corporate actions or otherwise in accordance with Xxxxxx'
proxy voting guidelines, as amended from time to time, which shall be provided
to IMCO.
3. ADVISORY FEE. IMCO shall pay to Xxxxxx as compensation for Xxxxxx'
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 Xxxxxx 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) XXXXXX. Xxxxxx represents and warrants to IMCO that (i) the
retention of Xxxxxx by IMCO as contemplated by this Agreement is authorized by
Xxxxxx' governing documents; (ii) the execution, delivery and performance of
this Agreement does not violate any obligation by which Xxxxxx 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 Xxxxxx and when
executed and delivered by Xxxxxx will be a legal, valid and binding obligation
of Xxxxxx, enforceable against Xxxxxx 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) Xxxxxx is
registered as an investment adviser under the Advisers Act; (v) Xxxxxx has
adopted a written code of ethics complying with the requirements of Rule 17j-1
under the 1940 Act and that Xxxxxx 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, Xxxxxx shall furnish
to IMCO all reports and information provided under Rule 17j-1(c)(2); (vi) Xxxxxx
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) Xxxxxx
will promptly notify IMCO of the occurrence of any event that would disqualify
Xxxxxx from serving as investment manager of an investment company pursuant to
Section 9(a) of the 1940 Act or otherwise; (viii) Xxxxxx 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) Xxxxxx will notify IMCO of any
"assignment" (as defined in the 1940 Act) of this Agreement or change of control
of Xxxxxx, as applicable, and any changes in the key personnel who are either
the portfolio manager(s) of any Fund Account or senior management of Xxxxxx, in
each case prior to or promptly after, such change; and (x) Xxxxxx has adequate
disaster recovery and interruption prevention measures to ensure business
resumption in accordance with applicable law and within industry standards.
(b) IMCO. IMCO represents and warrants to Xxxxxx that (i) the retention
of Xxxxxx by IMCO as contemplated by this Agreement is authorized by the
respective governing documents of the Company 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 Company 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 Company and IMCO and when
executed and delivered by IMCO will be a legal, valid and binding obligation of
the Company and IMCO, enforceable against the Company 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; and (vii) IMCO will promptly notify Xxxxxx 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.
5. Liability and Indemnification.
(a) XXXXXX. Xxxxxx shall be liable for any and all losses, claims,
damages, liabilities or litigation (including reasonable legal and other
expenses) to which the Company, a Fund, IMCO, any affiliated persons thereof
(within the meaning of the 1940 Act) 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 Xxxxxx 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 Xxxxxx 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 to IMCO or the Company
by Xxxxxx Indemnities (as defined below) for use therein. Xxxxxx 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).
(b) IMCO. IMCO shall be liable for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which Xxxxxx, any affiliated persons thereof (within the meaning of the 1940
Act) and any controlling persons thereof (as described in Section 15 of the 1933
Act) (collectively, Xxxxxx 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 to IMCO or the
Company. IMCO shall indemnify and hold harmless Loomis Indemnities for any and
all such losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses).
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 1940 Act) of the Funds, IMCO, or Loomis
(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 Loomis.
(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, Loomis
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 Xxxxxx.
Xxxxxx 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 Loomis by IMCO shall be without
prejudice to the obligation of Loomis to complete transactions already initiated
or acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to
Loomis 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 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 1940 Act) 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 Company, unless such
action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of Loomis to IMCO in connection
with the Funds hereunder are not to be deemed exclusive, and Loomis 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 Loomis 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 Loomis 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 Loomis,
or IMCO itself, to perform investment advisory services to any portion of the
Funds.
10. ADDITIONAL AGREEMENTS.
(a) ACCESS TO INFORMATION. Loomis shall, upon reasonable notice, afford
IMCO at all reasonable times access to Loomis' 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 Loomis to provide IMCO
with access to the books and records of Loomis relating to any other accounts
other than the Funds.
(b) CONFIDENTIALITY. Loomis, and its officers, employees and authorized
representatives, shall treat confidentially and as proprietary information of
the Company all records and information relative to the Company and prior,
present or potential shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Company, which approval shall not be unreasonably withheld and may not be
withheld where Loomis 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 Company.
(c) PRIVACY POLICY. Loomis 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
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. Loomis agrees that it will promptly notify IMCO in
the event that Loomis or any of its affiliates is or expects to become the
subject of an administrative proceeding or enforcement action by the Commission
or other regulatory body with applicable jurisdiction.
(f) INSURANCE. Loomis 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 Loomis' business activities.
(g) SHAREHOLDER MEETING AND OTHER EXPENSES. In the event that the
Company shall be required to call a meeting of shareholders or send an
information statement or prospectus supplement to shareholders solely due to
actions involving Loomis, including, without limitation, a change of control of
Loomis or a portfolio manager change, Loomis 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
Xxxxxx: Xxxxxx Xxxxxx & Company, L.P.
One Financial Center, 27th Floor
Boston, MA 02111
Attention: Xxxxxx Xxxxxxx
(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.
IN WITNESS WHEREOF, IMCO and Loomis 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/ Xxxx X. Xxxxxx
-----------------------------
Name: Xxxx X. Xxxxxx
Title: Authorized Signatory
Attest: XXXXXX XXXXXX AND COMPANY, L.P.
By: /s/ Xxxx XxXxxxx By: /s/ Xxxxxx Xxxxxxxx
----------------------------- ----------------------------------
Name: Xxxx XxXxxxx Name: Xxxxxx Xxxxxxxx
Title: Vice President Title: Chairman and CEO
SCHEDULE A
GROWTH FUND
SCHEDULE B
FEES
FUND ACCOUNT Rate per annum of the average daily net assets
------------ of the Fund Account
Growth Fund 0.20%
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of July, 2004 (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 BARROW, HANLEY, XXXXXXXXX & XXXXXXX, INC., a
corporation organized under the laws of the State of Nevada and having its
principal place of business in Dallas, Texas (BHMS).
WHEREAS, IMCO serves as the investment adviser to USAA Mutual Fund,
Inc. a corporation organized under the laws of the state of Maryland (the
Company) 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 Company
(Investment Advisory Agreement), IMCO is authorized to appoint subadvisers for
series of the Company (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain BHMS to render investment advisory
services to such series (or portions thereof) of the Company 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, BHMS 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 BHMS. IMCO hereby appoints BHMS to act as an investment
adviser for each Fund Account in accordance with the terms and conditions of
this Agreement. BHMS will be an independent contractor and will have no
authority to act for or represent the Company or IMCO in any way or otherwise be
deemed an agent of the Company or IMCO except as expressly authorized in this
Agreement or another writing by the Company, IMCO and BHMS. XXXX accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. DUTIES OF BHMS.
(a) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO
and the Company's Board of Directors (the Board), BHMS, 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. BHMS 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 BHMS 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, BHMS 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, BHMS 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 BHMS
wishes to hold cash or cash equivalents in excess of 10% of a Fund Account's
assets, BHMS must request in writing and receive advance permission from IMCO.
In accordance with Subsection (b) of this Section 2, BHMS 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 Company in the same manner and with the same force and effect as the
Company 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, BHMS 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 Company'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. BHMS shall establish compliance procedures reasonably calculated to ensure
compliance with the foregoing. IMCO shall be responsible for providing BHMS with
the Company's Articles of Incorporation, as amended and supplemented, the
Company'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
BHMS with prior written notice of any material change to the Company's
Registration Statement that would affect BHMS' management of a Fund Account.
(b) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, BHMS 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, BHMS 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, BHMS, 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 mark-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), BHMS 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 BHMS 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 BHMS 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 BHMS' overall
responsibilities with respect to the Fund and to other clients of BHMS as to
which BHMS exercises investment discretion. The Board or IMCO may direct BHMS 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
Company is required to pay or for which the Company is required to arrange
payment.
On occasions when BHMS deems the purchase or sale of a security to be
in the best interest of a Fund as well as other clients of BHMS, BHMS, 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 BHMS 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.
BHMS 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 Company as may be in effect from
time to time, BHMS may effectuate cross transactions between a Fund Account and
such other account if it deems this to be advantageous.
BHMS 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. BHMS shall
not have possession or custody of any Fund's investments. The Company shall be
responsible for all custodial agreements and the payment of all custodial
charges and fees and, upon BHMS giving proper instructions to the custodian,
BHMS 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, BHMS 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. BHMS 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, XXXX
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 BHMS, except as permitted under the 1940 Act. IMCO agrees
that it will provide BHMS 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 BHMS 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. BHMS, 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 BHMS' duties under this Agreement.
However, BHMS shall not be obligated to pay any expenses of IMCO, the Company 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, BHMS, at its expense and in
accordance with procedures and methods established by the Board, which may be
amended from time to time, will provide assistance to IMCO in determining the
fair value of such securities, including providing market price information
relating to these assets of the Fund. BHMS 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. BHMS, 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
BHMS set forth herein. BHMS, 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 BHMS' duties hereunder.
(f) COMPLIANCE MATTERS. BHMS, 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. BHMS also shall cooperate with
and provide reasonable assistance to IMCO, the Company's administrator, the
Company's custodian and foreign custodians, the Company's transfer agent and
pricing agents and all other agents and representatives of the Company 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 Company 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. BHMS 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, BHMS 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, BHMS may maintain copies of such records to comply with its
recordkeeping obligations.
(h) PROXIES. BHMS will, unless and until otherwise directed by IMCO or
the Board, vote proxies with respect to a Fund Account's securities and exercise
rights in corporate actions or otherwise in accordance with BHMS' proxy voting
guidelines, as amended from time to time, which shall be provided to IMCO.
3. ADVISORY FEE. IMCO shall pay to BHMS as compensation for BHMS' 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 BHMS 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) BHMS. BHMS represents and warrants to IMCO that (i) the retention
of BHMS by IMCO as contemplated by this Agreement is authorized by BHMS'
governing documents; (ii) the execution, delivery and performance of this
Agreement does not violate any obligation by which BHMS 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 BHMS and when
executed and delivered by BHMS will be a legal, valid and binding obligation of
BHMS, enforceable against BHMS 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) BHMS is
registered as an investment adviser under the Advisers Act; (v) BHMS has adopted
a written code of ethics complying with the requirements of Rule 17j-1 under the
1940 Act and that BHMS 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, BHMS shall furnish to IMCO all
reports and information provided under Rule 17j-1(c)(2); (vi) BHMS 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) BHMS will
promptly notify IMCO of the occurrence of any event that would disqualify BHMS
from serving as investment manager of an investment company pursuant to Section
9(a) of the 1940 Act or otherwise; (viii) BHMS 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) BHMS will notify IMCO of any "assignment" (as
defined in the 1940 Act) of this Agreement or change of control of BHMS, as
applicable, and any changes in the key personnel who are either the portfolio
manager(s) of any Fund Account or senior management of BHMS, in each case prior
to or promptly after, such change; and (x) BHMS has adequate disaster recovery
and interruption prevention measures to ensure business resumption in accordance
with applicable law and within industry standards.
(b) IMCO. IMCO represents and warrants to BHMS that (i) the retention
of BHMS by IMCO as contemplated by this Agreement is authorized by the
respective governing documents of the Company 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 Company 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 Company and IMCO and when
executed and delivered by IMCO will be a legal, valid and binding obligation of
the Company and IMCO, enforceable against the Company 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; and (vii) IMCO will promptly notify BHMS 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.
5. LIABILITY AND INDEMNIFICATION.
(a) BHMS. BHMS shall be liable for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which the Company, a Fund, IMCO, any affiliated persons thereof (within the
meaning of the 1940 Act) 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 BHMS 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 BHMS 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 to IMCO or the Company by BHMS
Indemnities (as defined below) for use therein. BHMS 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).
(b) IMCO. IMCO shall be liable for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which BHMS, any affiliated persons thereof (within the meaning of the 1940 Act)
and any controlling persons thereof (as described in Section 15 of the 1933 Act)
(collectively, BHMS 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 to IMCO or the Company. IMCO
shall indemnify and hold harmless BHMS Indemnities for any and all such losses,
claims, damages, liabilities or litigation (including reasonable legal and other
expenses).
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 1940 Act) of the Funds, IMCO, or BHMS
(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 BHMS.
(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, BHMS 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 BHMS. BHMS
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 BHMS by IMCO shall be without
prejudice to the obligation of BHMS to complete transactions already initiated
or acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to
BHMS 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 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 1940 Act) 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 Company, unless such
action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of BHMS to IMCO in connection with
the Funds hereunder are not to be deemed exclusive, and BHMS 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 BHMS 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 BHMS 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 BHMS, or IMCO itself, to
perform investment advisory services to any portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(a) ACCESS TO INFORMATION. BHMS shall, upon reasonable notice, afford
IMCO at all reasonable times access to BHMS' 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 BHMS to provide IMCO with
access to the books and records of BHMS relating to any other accounts other
than the Funds.
(b) CONFIDENTIALITY. BHMS, and its officers, employees and authorized
representatives, shall treat confidentially and as proprietary information of
the Company all records and information relative to the Company and prior,
present or potential shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Company, which approval shall not be unreasonably withheld and may not be
withheld where BHMS 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 Company.
(c) PRIVACY POLICY. BHMS 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
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. XXXX agrees that it will promptly notify IMCO in the
event that BHMS or any of its affiliates is or expects to become the subject of
an administrative proceeding or enforcement action by the Commission or other
regulatory body with applicable jurisdiction.
(f) INSURANCE. BHMS 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 BHMS' business activities.
(g) SHAREHOLDER MEETING AND OTHER EXPENSES. In the event that the
Company shall be required to call a meeting of shareholders or send an
information statement or prospectus supplement to shareholders solely due to
actions involving BHMS, including, without limitation, a change of control of
BHMS or a portfolio manager change, BHMS 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
BHMS: Barrow, Xxxxxx, Xxxxxxxxx & Xxxxxxx, Inc.
0000 XxXxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx Xxxxx
(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.
IN WITNESS WHEREOF, IMCO and BHMS 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/ Xxxx X. Xxxxxx
----------------------------
Name: Xxxx X. Xxxxxx
Title: Authorized Signatory
Attest: XXXXXX, XXXXXX, XXXXXXXXX & XXXXXXX, INC.
By: /s/ Xxxxx Xxxxxx By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx Xxxxxx Name: Xxxxx X. Xxxxxx
Title: Principal Title: President, Secretary & Treasurer
SCHEDULE A
USAA Value Fund
Schedule B
FEE SCHEDULE
USAA VALUE FUND
MARKET VALUE ANNUAL PERCENTAGE
------------ -----------------
First $ 20,000,000 0.65 of 1%
Next $ 30,000,000 0.50 of 1%
Next $ 50,000,000 0.35 of 1%
Next $ 900,000,000 0.25 of 1%
Over $1,000,000,000 0.20 of 1%
The advisory fees paid to BHMS for managing the Fund Account, for the first two
years following the inception date of the Fund Account, shall be calculated by
applying the fee schedule, stated above, on an asset level of $170,000,000.00.
Each year after the "two-year anniversary date" from the inception date of the
Fund Account, fees will be calculated on the actual level of assets in the Fund
Account using the fee schedule shown above.
