Exhibit 4(b)
INTERIM INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 28 day of JUNE, 2002 between USAA INVESTMENT
MANAGEMENT COMPANY, a corporation organized under the laws of the state of
Delaware and having a place of business in San Antonio, Texas ("IMCO"), and USAA
INVESTMENT TRUST, a business trust organized under the laws of the state of
Massachusetts and having a place of business in San Antonio, Texas (the
"Company").
WHEREAS, the Company is engaged in business as an open-end management
investment company and is so registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, IMCO is engaged in the business of rendering investment management
and advisory services and is registered under the Investment Advisers Act of
1940, as amended; and
WHEREAS, the Company is authorized to issue shares of beneficial interest
(the "Shares") in separate series with each such series representing interests
in a separate portfolio of securities and other assets; and
WHEREAS, the Company presently offers Shares in each of the series
identified in Schedule A hereto (the "Existing Funds") (such series, together
with all other series subsequently established by the Company with respect to
which the Company desires to retain IMCO to render management and investment
advisory services hereunder and with respect to which IMCO is willing so to do,
being herein collectively referred to as the "Funds");
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF IMCO.
(a) EXISTING FUNDS. The Company hereby appoints IMCO to act as manager and
investment adviser for each of the Existing Funds for the period and on the
terms herein set forth. IMCO accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
(b) ADDITIONAL FUNDS. In the event that the Company establishes one or more
series of Shares other than the Existing Funds with respect to which it desires
to retain IMCO to render management and investment advisory services hereunder,
it shall so notify IMCO in writing. If IMCO is willing to render such services
it shall notify the Company in writing, whereupon the Company shall appoint IMCO
to act as manager and investment adviser for each of such series of Shares for
the period and on the terms herein set forth, IMCO shall accept such appointment
and agree to render the services herein set forth for the compensation herein
provided, and each of such series of Shares shall become a Fund hereunder.
2. DUTIES OF IMCO.
Subject to the delegation of any such duties to one or more investment
subadvisers ("Subadvisers") as provided in Paragraph 3 hereof, IMCO, at its own
expense, shall furnish the following services and facilities to the Company:
(a) INVESTMENT PROGRAM. IMCO will (i) furnish continuously an investment
program for each Fund, (ii) determine (subject to the overall supervision and
review of the Board of Trustees of the Company (the "Board")) what investments
shall be purchased, held, sold or exchanged for each Fund and what portion, if
any, of the assets of each Fund shall be held uninvested, and (iii) make changes
on behalf of the Company in the investments of each Fund.
(b) MONITORING. Should the Board determine it is in the best interests of a
Fund's shareholders to invest all of its investable assets in another mutual
fund with substantially the same investment objective (the "Portfolio"), IMCO
will monitor the services provided to the Portfolio, subject always to the
control of the Board. Such monitoring may include among other things, review of
Portfolio reports showing the composition of securities in the Portfolio on a
periodic basis and periodic review of investment practices of the Portfolio.
IMCO will report to the Board, at least annually, on the results of such
monitoring such that the Board may determine whether continued investment
exclusively in the Portfolio is in the best interests of the Fund's
shareholders.
3. SUBADVISERS.
(a) Subject to the general supervision and control of the Board and under
the terms and conditions set forth in this Agreement, IMCO, at its own expense,
may select and contract with one or more Subadvisers to manage the investment
operations and composition of each Fund and render investment advice for each
Fund, including the purchase, retention and disposition of the investments,
securities and cash contained in each Fund, in accordance with such Fund's
investment objectives, policies and restrictions as stated in the Company's
Declaration of Trust, By-Laws and such Fund's Prospectus and Statement of
Additional Information ("SAI"), as is from time to time in effect; provided
that, (i) IMCO will continue to have overall supervisory responsibility for the
general management and investment of each Fund's assets, and (ii) any contract
with a Subadviser (a "Subadvisory Agreement") shall be in compliance with and
approved in the manner required by the 1940 Act and rules thereunder or in
accordance with exemptive or other relief granted by the Securities and Exchange
Commission ("SEC") or its staff.
(b) Subject to the general supervision and control of the Board, IMCO will
have full discretion to (i) select new or additional Subadvisers for each Fund,
(ii) enter into and materially modify existing Subadvisory Agreements, and (iii)
terminate and replace any Subadviser. In connection with IMCO's responsibilities
herein, IMCO will assess each Fund's investment focus and will seek to implement
decisions with respect to the allocation and reallocation of each Fund's assets
among one or more current or additional Subadvisers from time to time, as IMCO
deems appropriate, to enable each Fund to achieve its investment goals. In
addition, IMCO will monitor compliance of each Subadviser with the investment
objectives, policies and restrictions of any Fund or Funds (or portions of any
Fund) under the management of such Subadviser, and
2
review and report to the Board on the performance of each Subadviser. IMCO will
furnish, or cause the appropriate Subadviser(s) to furnish, to the Company such
statistical information, with respect to the investments that a Fund (or
portions of any Fund) may hold or contemplate purchasing, as the Company may
reasonably request. On IMCO's own initiative, IMCO will apprise, or cause the
appropriate Subadviser(s) to apprise, the Company of important developments
materially affecting each Fund (or any portion of a Fund that they advise) and
will furnish the Company, from time to time, with such information as may be
appropriate for this purpose. Further, IMCO agrees to furnish, or cause the
appropriate Subadviser(s) to furnish, to the Board such periodic and special
reports as the Board may reasonably request. In addition, IMCO agrees to cause
the appropriate Subadviser(s) to furnish to third-party data reporting services
all currently available standardized performance information and other customary
data.
4. ALLOCATION OF EXPENSES.
Except for the services and facilities to be provided by IMCO set forth in
Paragraphs 2 and 3 above, the Company assumes and shall pay all expenses for all
other Company operations and activities and shall reimburse IMCO for any such
expenses incurred by IMCO. The expenses to be borne by the Company shall
include, without limitation:
(a) the charges and expenses of any registrar, share transfer or dividend
disbursing agent, custodian, or depository appointed by the Company for the
safekeeping of its cash, portfolio securities and other property;
(b) the charges and expenses of auditors;
(c) brokerage commissions for transactions in the portfolio securities of
the Company;
(d) all taxes, including issuance and transfer taxes, and fees payable by
the Company to federal, state or other governmental agencies;
(e) the cost of share certificates representing Shares of the Company;
(f) fees involved in registering and maintaining registrations of the
Company and of its Shares with the SEC and various states and other
jurisdictions;
(g) all expenses of shareholders' and Board meetings and of preparing,
printing and mailing proxy statements, quarterly reports, semiannual reports,
annual reports and other communications (including Prospectuses) to existing
shareholders;
(h) compensation and travel expenses of Board members who are not
"interested persons" within the meaning of the 1940 Act;
(i) the expense of furnishing or causing to be furnished to each
shareholder a statement of his account, including the expense of mailing;
(j) charges and expenses of legal counsel in connection with matters
relating to the Company, including, without limitation, legal services rendered
in connection with the Company's legal and financial structure and relations
with its shareholders, issuance of
3
Company Shares, and registration and qualification of securities under federal,
state and other laws;
(k) membership or association dues for the Investment Company Institute or
similar organizations;
(l) interest payable on Company borrowings; and
(m) postage.
5. ADVISORY FEE.
(a) For the services and facilities to be provided by IMCO as provided in
Paragraphs 2(a) and 3 hereof, the Company shall pay to IMCO a monthly fee with
respect to each Fund computed as set forth in Schedule B or Schedule C hereto.
For the services and facilities to be provided by IMCO as provided in Paragraph
2(b) hereof, the Company shall pay no fee.
(b) IMCO may from time to time and for such periods as it deems appropriate
voluntarily waive fees or otherwise reduce its compensation hereunder. With
respect to each Fund identified in Schedule D hereto, in addition to any amounts
otherwise payable to IMCO as an advisory fee for current services under this
Agreement, the Company shall be obligated to pay IMCO amounts previously waived
or expenses paid by IMCO with respect to such Fund, provided that such
additional payments are made not later than the date identified in Schedule D
hereto as the "Ending Date" and provided further that the amount of such
additional payment in any year, together with all other expenses of the Fund, in
the aggregate, would not cause the Fund's expense ratio in such year to exceed
the percentage of the Fund's average net assets identified in Schedule D.
(c) In the event this Agreement is terminated with respect to any one or
more Funds as of a date other than the last day of any month, the Company shall
pay IMCO a pro rata portion of the amount that the Company would have been
required to pay, if any, had this Agreement remained in effect for the full
month, subject to such other adjustments as may be provided in Schedule B
hereto.
6. COMPANY TRANSACTIONS.
In connection with the management of the investment and reinvestment of the
assets of the Company, IMCO, acting by its own officers, directors or employees
or by a duly authorized subcontractor, is authorized to select the brokers or
dealers that will execute purchase and sale transactions for the Company and is
directed to use its best efforts to seek on behalf of a Fund the best overall
terms available. In assessing the best overall terms available for any
transaction, IMCO shall consider all factors it deems relevant, including the
breadth of the market in and the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of the
commission, if any, with respect to the specific transaction and on a continuing
basis.
IMCO may, to the extent permitted under Section 28(e) of the Securities
Exchange Act of 1934, as amended ("1934 Act"), cause a Fund to pay a broker or
dealer that provides brokerage
4
or research services to IMCO, a Subadviser, the Company or a Fund an amount of
commission for effecting a Fund transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if IMCO determines, in good faith, that such amount of commission is
reasonable in relation to the value of such brokerage or research services
provided in terms of that particular transaction or IMCO's overall
responsibilities to the Fund, the Company or its other investment advisory
clients. To the extent permitted by said Section 28(e), neither IMCO nor any
Subadviser shall be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of such action. In
addition, subject to seeking "best execution" and in compliance with the Conduct
Rules of the National Association of Securities Dealers, Inc., IMCO also may
consider sales of shares of the Company as a factor in the selection of brokers
and dealers. In this regard, the Company reserves the right to direct IMCO to
cause Subadvisers to effect transactions in Fund securities through
broker-dealers in a manner that will help generate resources to: (i) pay the
cost of certain expenses which the Company is required to pay or for which the
Company is required to arrange payment pursuant to this Agreement; or (ii)
recognize broker-dealers for the sale of shares of the Company. In addition, the
Company hereby agrees that any entity or person associated with IMCO or any
Subadviser that is a member of a national securities exchange is authorized to
effect any transaction on such exchange for the account of a Fund to the extent
and as permitted by Section 11(a)(1)(H) of the 1934 Act.
7. RELATIONS WITH COMPANY.
Subject to and in accordance with the Declaration of Trust and Bylaws of
the Company and of IMCO, respectively, it is understood that Board members,
officers, agents and shareholders of the Company are or may be interested in
IMCO (or any successor thereof) as directors, officers, or otherwise, that
directors, officers, agents and shareholders of IMCO are or may be interested in
the Company as Board members, officers, shareholders or otherwise, that IMCO (or
any such successor) is or may be interested in the Company as a shareholder or
otherwise and that the effect of any such interests shall be governed by said
Declaration of Trust and Bylaws.
8. LIABILITY OF IMCO.
Neither IMCO nor its officers, directors, employees, agents or controlling
persons or assigns shall be liable for any error of judgment or mistake of law
or for any loss suffered by the Company or its shareholders in connection with
the matters to which this Agreement relates; provided that no provision of this
Agreement shall be deemed to protect IMCO against any liability to the Company
or its shareholders to which it might otherwise be subject by reason of any
willful misfeasance, bad faith or gross negligence in the performance of its
duties or the reckless disregard of its obligations and duties under this
Agreement. Nor shall any provision hereof be deemed to protect any Board member
or officer of the Company against any such liability to which he might otherwise
be subject by reason of any willful misfeasance, bad faith or gross negligence
in the performance of his duties or the reckless disregard of his obligations
and duties. 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.
5
9. DURATION AND TERMINATION.
Unless sooner terminated as provided herein, this Agreement shall continue
in effect until the sooner of (a) 150 days from the date this Agreement is
entered into or (b) the date upon which Fund shareholders and the Board,
including a majority of the Board members who are not parties to this Agreement
or "interested persons" (as defined in the 0000 Xxx) of any such party, approve
the retention of IMCO in accordance with Section 15(a) of the 1940 Act and IMCO
executes an Investment Advisory Agreement with the Company; provided, however,
that this Agreement may continue for a period in excess of 150 days upon the
written agreement of the parties and consistent with SEC or SEC staff action or
interpretation of applicable law. This Agreement may be terminated at any time,
without payment of any penalty, by vote of the Board or by vote of a majority of
the outstanding shares (as defined in the 1940 Act), or by IMCO on sixty days'
written notice to the other party. This Agreement shall terminate automatically
in the event of its assignment (as defined in the 1940 Act).
10. NAME OF COMPANY.
It is understood that the name "USAA," and any logo associated with that
name is the valuable property of the United Services Automobile Association, and
that the Company has the right to include "USAA" as a part of its name only so
long as this Agreement shall continue and IMCO is a wholly owned subsidiary of
the United Services Automobile Association. Upon termination of this Agreement,
the Company shall forthwith cease to use the "USAA" name and logo and shall take
appropriate action to change the Company's name.
11. PRIOR AGREEMENT SUPERSEDED.
This Agreement supersedes any prior agreement relating to the subject
matter hereof between the parties.
12. SERVICES NOT EXCLUSIVE.
The services of IMCO to the Company hereunder are not to be deemed
exclusive, and IMCO shall be free to render similar services to others so long
as its services hereunder are not impaired thereby.
13. MISCELLANEOUS.
(a) 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 and rules
thereunder or in accordance with exemptive or other relief granted by the SEC or
its staff.
(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
6
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.
(g) LIABILITY OF BOARD MEMBERS AND SHAREHOLDERS. Any obligations of the
Funds under this Agreement are not binding upon the Board members or the
shareholders individually but are binding only upon the assets and property of
the Funds.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
USAA INVESTMENT TRUST USAA INVESTMENT MANAGEMENT
COMPANY
By: /S/ XXXXXX X. XXXXXX By: /S/ XXXXXXXXXXX X. XXXXX
------------------------------- ------------------------
Name: Xxxxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Vice President Title: President
7
SCHEDULE A TO ADVISORY AGREEMENT
LISTING OF FUNDS
NAME OF FUND
Balanced Strategy Fund
Cornerstone Strategy Fund
Growth and Tax Strategy Fund
Emerging Markets Fund
International Fund
World Growth Fund
A-1
Dated as of June 28, 2002
SCHEDULE B TO ADVISORY AGREEMENT - FOR
FUNDS WITH PERFORMANCE ADJUSTMENTS
This Schedule B shall apply to each of the Funds identified on Schedule B-1
hereto (each, a "Fund").
(a) GENERAL. The Company shall pay to IMCO, as compensation for IMCO's
services and expenses assumed hereunder, a fee determined with respect to each
Fund, which shall be composed of the Basic Fee (defined below) and a Performance
Adjustment (defined below) to the Basic Fee based upon the investment
performance of a class of shares of the Fund in relation to the investment
record of a securities index determined by the Board to be appropriate over the
same period.
(b) INDEX, CLASS AND CHANGES THERETO. The Board has designated for each
Fund the index and class of shares of the Fund identified on Schedule B-1 as the
index and class to be used for purposes of determining the Performance
Adjustment (referred to herein as the "Index" and the "Class," respectively).
From time to time, the Board may, by a vote of the Board voting in person,
including a majority of the Board members who are not parties to this Agreement
or "interested persons" (as defined in the 0000 Xxx) of any such parties,
determine (i) that another securities index is a more appropriate benchmark than
the Index for purposes of evaluating the performance of the Company; and/or (ii)
that a different class or classes of shares of the Company representing
interests in a Fund other than the Class is most appropriate for use in
calculating the Performance Adjustment. After ten days' written notice to IMCO,
a different index (the "Successor Index") may be substituted for the Index in
prospectively calculating the Performance Adjustment, and/or a different class
or classes of shares (the "Successor Class") may be substituted in calculating
the Performance Adjustment. However, the calculation of that portion of the
Performance Adjustment attributable to any portion of the performance period
prior to the adoption of the Successor Index will still be based upon the Fund's
performance compared to the Index. The use of a Successor Class of shares for
purposes of calculating the Performance Adjustment shall apply to the entire
performance period so long as such Successor Class was outstanding at the
beginning of such period. In the event that such Successor Class of shares was
not outstanding for all or a portion of the Performance Period, it may only be
used in calculating that portion of the Performance Adjustment attributable to
the period during which such Successor Class was outstanding and any prior
portion of the Performance Period shall be calculated using the Successor Class
of shares previously designated.
(c) BASIC FEE. The basic fee for a Fund (the "Basic Fee") for any period
shall equal: (i) the Fund's average net assets during such period, multiplied by
(ii) the annual rate identified for such Fund on Schedule B-1 hereto, multiplied
by (iii) a fraction, the numerator of which is the number of calendar days in
the payment period and the denominator of which is 365 (366 in leap years).
(d) PERFORMANCE ADJUSTMENT. The amount of the performance adjustment (the
"Performance Adjustment") shall equal: (i) the average net assets of the Fund
over the Performance Period (as defined below), multiplied by (ii) the
Adjustment Rate (as defined below), multiplied by (iii) a fraction, the
numerator of which shall be the number of days in the last month of the
Performance Period and the denominator of which shall be 365. The resulting
B-1
Dated as of June 28, 2002
dollar figure will be added to or subtracted from the Basic Fee depending on
whether the Fund experienced better or worse performance than the Index.
(e) ADJUSTMENT RATE. The adjustment rate (the "Adjustment Rate") shall be
as set forth in Schedule B-2 for each Fund, provided, however, that the
Performance Adjustment may be further adjusted to the extent necessary to ensure
that the total adjustment to the Basic Fee on an annualized basis does not
exceed the maximum Performance Adjustment identified for such Fund in Schedule
B-2.
(f) PERFORMANCE PERIOD. The performance period (the "Performance Period")
for the Funds listed in Schedule B-1 on the effective date of this Agreement
shall be measured from August 1, 2001 (the "Commencement Date"). The
Commencement Date for any Fund added to Schedule B-1 after the effective date of
this Agreement shall be the effective date of the amendment adding such Fund to
Schedule B-1. The Performance Period shall consist of the current month plus the
preceding months through the Commencement Date until a period of 36 months is
included in the Performance Period, provided, however, that no Performance
Adjustment shall be made with respect to any period that is less than 12 months,
and provided further, that any Performance Adjustment for a period prior to the
effective date of this Agreement shall be based on the Fund's performance
relative to the designated index in effect during that period under any prior
agreement with respect to the Fund. In months subsequent to a 36-month
Performance Period having been reached, the Performance Period will be a rolling
36-month period consisting of the most recently completed month and the previous
35 months.
(g) MEASUREMENT CALCULATION. The Fund's investment performance will be
measured by comparing the (i) opening net asset value of one share of the Class
of the Fund on the first business day of the Performance Period with (ii) the
closing net asset value of one share of the Class of the Fund as of the last
business day of such period. In computing the investment performance of the Fund
and the investment record of the Index, distributions of realized capital gains,
the value of capital gains taxes per share paid or payable undistributed
realized long-term capital gains accumulated to the end of such period and
dividends paid out of investment income on the part of the Fund, and all cash
distributions of the companies whose securities comprise the Index, will be
treated as reinvested in accordance with Rule 205-1 or any other applicable rule
under the Investment Advisers Act of 1940, as the same from time to time may be
amended.
(h) PAYMENT OF FEES. The Management Fee payable hereunder shall be computed
daily and paid monthly in arrears.
(i) AVERAGE NET ASSETS. The term "average net assets" of a Fund as used
herein for any period shall mean the quotient produced by dividing (i) the sum
of the net assets of the Fund, as determined in accordance with procedures
established from time to time under the direction of the Board, for each
calendar day of such period, by (ii) the number of such days.
(j) TERMINATION. In the event this Agreement with respect to any Fund is
terminated as of a date other than the last day of any month, the Basic Fee
shall be computed on the basis of the period ending on the last day on which
this Agreement is in effect for such Fund, subject to a pro rata adjustment
based on the number of days elapsed in the current month as a percentage of the
total number of days in such month. The amount of any Performance Adjustment to
the Basic
B-2
Dated as of June 28, 2002
Fee will be computed on the basis of and applied to the average net assets over
the Performance Period ending on the last day on which this Agreement is in
effect for such Fund.
B-3
Dated as of June 28, 2002
SCHEDULE B-1 TO ADVISORY AGREEMENT - LISTING OF FUNDS
WITH PERFORMANCE ADJUSTMENT
ANNUAL BASIC
NAME OF FUND1 PERFORMANCE INDEX FEE RATE
Balanced Strategy Fund Lipper Balanced Funds Index .75%
Cornerstone Strategy Fund Lipper Global Flexible Funds Index .75%
Growth and Tax Strategy Fund Lipper Balanced Funds Index .50%
Emerging Markets Fund Lipper Emerging Markets Funds Index 1.00%
International Fund Lipper International Funds Index .75%
World Growth Fund Lipper Global Funds Index .75%
1 The Performance Adjustment initially will be determined by reference to the
sole outstanding class of shares of each Fund. If, in the future, a Fund offers
more than one class of shares, the Performance Adjustment for that Fund will
continue to be determined by reference to the initial class of shares, unless
the Board determines otherwise.
B-4
Dated as of June 28, 2002
SCHEDULE B-2 TO ADVISORY AGREEMENT - PERFORMANCE ADJUSTMENT RATE
Balanced Strategy Fund
Cornerstone Strategy Fund
Emerging Markets Fund
International Fund
World Growth Fund
Over/Under Performance Relative Performance Adjustment Rate
to Index (in basis points) (in basis points as a percentage
of average net assets)
+/- 100 to 400 +/- 4
+/- 401 to 700 x/- 0
x/- 000 xxx xxxxxxx x/- 0
Growth and Tax Strategy Fund
Over/Under Performance Relative Performance Adjustment Rate
to Index (in basis points) (in basis points as a percentage
of average net assets)
+/- 20 to 50 +/- 4
+/- 51 to 100 x/- 0
x/- 000 xxx xxxxxxx x/- 0
X-0
Dated as of June 28, 2002
SCHEDULE C TO ADVISORY AGREEMENT - FOR FUNDS
WITH NO PERFORMANCE ADJUSTMENT
This Schedule C shall apply to each of the Funds identified on Schedule C-1
hereto (each, a "Fund").
(a) The Company shall pay to IMCO a fee for each Fund calculated daily and
payable monthly in arrears, computed as a percentage of the average net assets
of the Fund for such month at the rate set forth in Schedule C-1 thereto.
(b) The "average net assets" of the Fund for any month shall be equal to
the quotient produced by dividing (i) the sum of the net assets of such Fund,
determined in accordance with procedures established from time to time by or
under the direction of the Board, for each calendar day of such month, by (ii)
the number of such days.
C-1
Dated as of June 28, 2002
SCHEDULE C-1 TO ADVISORY AGREEMENT - LISTING OF FUNDS
AND FEE RATES
NAME OF FUND FEE RATE
C-2
Dated as of June 28, 2002
SCHEDULE D TO ADVISORY AGREEMENT- FOR FUNDS WITH FEE
WAIVER AND EXPENSE REIMBURSEMENT RECOVERY PLANS
PERCENTAGE OF
NAME OF FUND ENDING DATE AVERAGE NET ASSETS
D-1
Dated as of June 28, 2002
Exhibit 4(d)
INTERIM INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 28th day of June, 2002 (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 DRESDNER RCM GLOBAL INVESTORS LLC, a limited liability
company organized under the laws of the State of Delaware and having its
principal place of business in San Francisco, California (Dresdner).
WHEREAS, IMCO serves as the investment adviser to USAA Investment
Trust, a Trust organized under the laws of the Commonwealth of Massachusetts
(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 Dresdner to render investment advisory
services to such series (or portions thereof) of the Trust as now or hereafter
may be identified in Schedule A to this Agreement, as such Schedule A may be
amended from time to time (each such series or portion thereof referred to
herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, Dresdner 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 DRESDNER. IMCO hereby appoints Dresdner to act as an
investment adviser for each Fund Account in accordance with the terms and
conditions of this Agreement. Dresdner 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 Dresdner. Dresdner
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.
2. DUTIES OF DRESDNER.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO
and the Trust's Board of Trustees (the Board), Dresdner, 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. Dresdner 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
881298
Dresdner 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.
With respect to the management of each Fund Account pursuant to this
Agreement, Dresdner 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
Dresdner wishes to hold cash or cash equivalents in excess of 10% of a Fund
Account's assets, Dresdner must request in writing and receive advance
permission from IMCO.
In accordance with Subsection (b) of this Section 2, Dresdner 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, Dresdner will act in the best
interests of each Fund and will comply with (i) applicable laws and regulations,
including, but not limited to, the 1940 Act and the Investment Advisers Act of
1940, as amended (Advisers Act), and the rules under each, (ii) the terms of
this Agreement, (iii) the stated investment objective, policies and restrictions
of each Fund, as stated in the then-current Registration Statement of each Fund,
(iv) the Trust's compliance procedures and other policies, procedures or
guidelines as the Board or IMCO reasonably may establish from time to time, (v)
the provisions of the Internal Revenue Code of 1986, as amended (Code),
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), as from time to time in effect, and (vi) the written instructions of
IMCO. Dresdner shall establish compliance procedures reasonably calculated to
ensure compliance with the foregoing. IMCO shall be responsible for providing
Dresdner with the Trust's Articles of Incorporation, 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 Dresdner with prior written notice of any material change to the
Trust's Registration Statement that would affect Dresdner's management of a Fund
Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, Dresdner 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, Dresdner 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,
Dresdner, 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.
874731 v1 2
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), Dresdner 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 Dresdner 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 Dresdner
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
Dresdner's overall responsibilities with respect to the Fund and to other
clients of Dresdner as to which Dresdner exercises investment discretion. The
Board or IMCO may direct Dresdner to effect up to 25% of 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 Dresdner deems the purchase or sale of a security to
be in the best interest of a Fund as well as other clients of Dresdner,
Dresdner, 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 Dresdner 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.
Dresdner 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, Dresdner may effectuate cross transactions between a Fund Account
and such other account if it deems this to be advantageous.
Dresdner 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. Dresdner
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 Dresdner giving proper instructions to the custodian,
Dresdner shall have no responsibility or liability for the acts, omissions or
other conduct of the custodian.
Notwithstanding the foregoing, Dresdner 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. Dresdner 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
874731 v1 3
of IMCO to do so is obtained. In addition, Dresdner 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
Dresdner, except as permitted under the 1940 Act. IMCO agrees that it will
provide Dresdner 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 Dresdner 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. Dresdner, 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 Dresdner's duties under this Agreement.
However, Dresdner 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, Dresdner, 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. Dresdner 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. Dresdner, 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 Dresdner set forth herein. Dresdner, 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
Dresdner's duties hereunder.
(F) COMPLIANCE MATTERS. Dresdner, 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. Dresdner 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
874731 v1 4
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. Dresdner 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, Dresdner 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, Dresdner may maintain copies of such records to comply
with its recordkeeping obligations.
(H) PROXIES. Dresdner 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 Dresdner's
proxy voting guidelines, as amended from time to time, which shall be provided
to IMCO.
3. ADVISORY FEE. IMCO shall pay to Dresdner as compensation for
Dresdner'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 Dresdner 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) DRESDNER. Dresdner represents and warrants to IMCO that (i) the
retention of Dresdner by IMCO as contemplated by this Agreement is authorized by
Dresdner's governing documents; (ii) the execution, delivery and performance of
this Agreement does not violate any obligation by which Dresdner 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 Dresdner and when
executed and delivered by Dresdner will be a legal, valid and binding obligation
of Dresdner, enforceable against Dresdner 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) Dresdner is registered as an investment adviser under the Advisers Act; (v)
Dresdner has adopted a written code of ethics complying with the requirements of
Rule 17j-1 under the 1940 Act and that Dresdner 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 shall cause its employees, officers,
partners and directors to furnish to IMCO all reports and information required
to be provided under such code of ethics with respect to such persons; (vi)
Dresdner is not prohibited by the 1940 Act, the Advisers Act or other law,
regulation or order from
874731 v1 5
performing the services contemplated by this Agreement; (vii) Dresdner will
promptly notify IMCO of the occurrence of any event that would disqualify
Dresdner from serving as investment manager of an investment company pursuant to
Section 9(a) of the 1940 Act or otherwise; (viii) Dresdner has provided IMCO
with a copy of its current Form ADV-Part II, and promptly will furnish a copy of
all amendments to IMCO at least annually; (ix) Dresdner will notify IMCO of any
"assignment" (as defined in the 0000 Xxx) of this Agreement or change of control
of Dresdner, as applicable, and any changes in the key personnel who are either
the portfolio manager(s) of any Fund Account or senior management of Dresdner,
in each case prior to or promptly after, such change; and (x) Dresdner 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 Dresdner that (i) the
retention of Dresdner 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; and (vii) IMCO will promptly notify Dresdner 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) DRESDNER. Dresdner shall be liable for any and all losses, claims,
damages, liabilities or litigation (including reasonable legal and other
expenses) to which the Trust, a Fund, IMCO, any affiliated persons thereof
(within the meaning of the 0000 Xxx) and any controlling persons thereof (as
described in Section 15 of the Securities Act of 1933, as amended (the 1933
Act)) (collectively, IMCO Indemnities) may become subject under the 1933 Act,
the 1940 Act, the Advisers Act, or under any other statute, at common law or
otherwise arising out of (i) any negligence, willful misconduct, bad faith or
reckless disregard of Dresdner 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 Dresdner 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 Trust by Dresdner Indemnities (as defined below) for use therein. Dresdner
shall
874731 v1 6
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 Dresdner, 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, Dresdner 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
Trust. IMCO shall indemnify and hold harmless Dresdner 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. Unless sooner terminated as
provided herein, this Agreement shall continue in effect until the sooner of (a)
150 days from the date this Agreement is entered into or (b) the date upon which
Fund shareholders and the Board, including a majority of the Board members who
are not "interested persons" of the Funds, IMCO or Dresdner (Independent Board
Members), approve the retention of Dresdner in accordance twith Section 15(a) of
the 1940 Act and IMCO executes a Subadvisory Agreement with Dresdner; provided,
however, that this Agreement may continue for a period in excess of 150 days
upon the written agreement of the parties and consistent with SEC or SEC staff
action or interpretation of applicable law. This Agreement may be terminated at
any time, without payment of any penalty, by vote of the Board, by vote of a
majority of the outstanding shares (as defined in the 1940 Act), or by IMCO. In
addition, this Agreement may be terminated by Dresdner on sixty days' written
notice to the other party. Any notice of termination served on Dresdner by the
Company or IMCO shall be without prejudice to the obligation of Dresdner to
complete transactions already initiated or acted upon with respect to the Fund.
This Agreement shall terminate automatically in the event of its assignment (as
defined in the 1940 Act).
7. AMENDMENT OF AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. No material amendment of this Agreement shall be
effective until approved in the manner required by the 1940 Act, any rules
thereunder or any exemptive or other relief granted by the SEC or its staff
(Applicable Law).
8. APPROVAL, AMENDMENT, OR TERMINATION BY INDIVIDUAL FUND. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 0000 Xxx) of any Fund shall be
effective to continue, amend or terminate this Agreement with respect to any
such Fund notwithstanding (i) that such action has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund
affected thereby, and/or (ii) that such action has not been approved by the vote
of a
874731 v1 7
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 Dresdner to IMCO in connection
with the Funds hereunder are not to be deemed exclusive, and Dresdner 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 Dresdner 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 Dresdner 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 Dresdner, or IMCO
itself, to perform investment advisory services to any portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. Dresdner shall, upon reasonable notice,
afford IMCO at all reasonable times access to Dresdner'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 Dresdner to
provide IMCO with access to the books and records of Dresdner relating to any
other accounts other than the Funds.
(B) CONFIDENTIALITY. Dresdner, and its officers, employees and
authorized representatives, shall treat confidentially and as proprietary
information of the Trust all records and information relative to the Trust 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 Trust, which approval shall not be unreasonably withheld and may not be
withheld where Dresdner may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust. IMCO agrees to
maintain in strict confidence and for use only with respect to the Fund all
investment advice given by Dresdner.
(C) PRIVACY POLICY. Dresdner 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
874731 v1 8
shall provide the other parties hereto with as much prior written notice of such
disclosure as is practical under the circumstances.
(E) NOTIFICATIONS. Dresdner agrees that it will promptly notify IMCO in
the event that Dresdner 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. Dresdner 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 Dresdner's business activities.
(G) SHAREHOLDER MEETING EXPENSES. In the event that the Trust shall be
required to call a meeting of shareholders solely due to actions involving
Dresdner, including, without limitation, a change of control of Dresdner,
Dresdner shall bear all reasonable expenses associated with such shareholder
meeting.
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 & Compliance Dept.
Dresdner: Dresdner RCM Global Investors LLC
Xxxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile No: (000) 000-0000
Attention: Legal Services Dept.
(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.
874731 v1 9
(E) HEADINGS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(F) ENTIRE AGREEMENT. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act.
(G) LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any obligations of the
Funds under this Agreement are not binding upon the Trustees or the shareholders
individually but are binding only upon the assets and property of the Funds.
IN WITNESS WHEREOF, IMCO and Dresdner 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: Assistant Secretary Title: President
Attest: DRESDNER RCM GLOBAL INVESTORS LLC
By: /S/XXX X XXXXXXXXXX By: /S/XXXX X. XXXXXXX
-------------------------------- ---------------------------
Name: Xxx X. Xxxxxxxxxx Name: Xxxx X. Xxxxxxx
Title: Senior Client Services Officer Title: Managing Director of Client
Relations
874731 v1 10
SCHEDULE A
USAA GROWTH AND TAX STRATEGY FUND
874731 v1 11
SCHEDULE B
FEES
Rate per annum of the average daily net
Fund Account assets of the Fund Account
------------ ---------------------------------------
USAA Growth & Tax Strategy Fund 0.20%
874731 v1 12
Exhibit 4 (e)
INTERIM INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 28th day of June, 2002 (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 THE BOSTON COMPANY ASSET MANAGEMENT, LLC, a limited
liability company organized under the laws of the Commonwealth of Massachusetts
and having its principal place of business in Boston, Massachusetts (Boston
Company).
WHEREAS, IMCO serves as the investment adviser to USAA Investment
Trust, a business trust organized under the laws of the Commonwealth of
Massachusetts (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 Boston Company to render investment
advisory services to such series (or portions thereof) of the Trust as now or
hereafter may be identified in Schedule A to this Agreement, as such Schedule A
may be amended from time to time (each such series or portion thereof referred
to herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, Boston Company 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 BOSTON COMPANY. IMCO hereby appoints Boston Company
to act as an investment adviser for each Fund Account in accordance with the
terms and conditions of this Agreement. Boston Company 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
Boston Company. Boston Company accepts such appointment and agrees to render the
services herein set forth for the compensation herein provided.
2. DUTIES OF BOSTON COMPANY.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO
and the Trust's Board of Trustees (the Board), Boston Company, 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. Boston Company shall
perform its duties described herein in a manner consistent with the investment
objective, policies and restrictions
#880637
set forth in the then current Prospectus and Statement of Additional Information
(SAI) for each Fund. Should Boston Company 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.
With respect to the management of each Fund Account pursuant to this
Agreement, Boston Company 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 Boston Company wishes to hold cash or cash equivalents in excess of 10%
of a Fund Account's assets, Boston Company must request in writing and receive
advance permission from IMCO.
In accordance with Subsection (b) of this Section 2, Boston Company
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, Boston Company will act in the best
interests of each Fund and will comply with (i) applicable laws and regulations,
including, but not limited to, the 1940 Act and the Investment Advisers Act of
1940, as amended (Advisers Act), and the rules under each, (ii) the terms of
this Agreement, (iii) the stated investment objective, policies and restrictions
of each Fund, as stated in the then-current Registration Statement of each Fund,
(iv) the Trust's compliance procedures and other policies, procedures or
guidelines as the Board or IMCO reasonably may establish from time to time, (v)
the provisions of the Internal Revenue Code of 1986, as amended (Code),
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), as from time to time in effect, and (vi) the written instructions of
IMCO. Boston Company shall establish compliance procedures reasonably calculated
to ensure compliance with the foregoing. IMCO shall be responsible for providing
Boston Company with the Trust's Declaration of Trust, 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 Boston Company with prior written notice of any change to the
Trust's Registration Statement that would affect Boston Company's management of
a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, Boston Company 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, Boston Company 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, Boston
Company, 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
2
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), Boston Company 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 Boston Company 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 Boston Company
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 Boston
Company's overall responsibilities with respect to the Fund and to other clients
of Boston Company as to which Boston Company exercises investment discretion.
The Board or IMCO may direct Boston Company 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 Boston Company deems the purchase or sale of a
security to be in the best interest of a Fund as well as other clients of Boston
Company, Boston Company, 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 Boston Company
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.
Boston Company 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, Boston Company may effectuate cross transactions between a Fund
Account and such other account if it deems this to be advantageous.
Boston Company 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.
Boston Company 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 Boston Company giving proper
instructions to the custodian, Boston Company shall have no responsibility or
liability for the acts, omissions or other conduct of the custodian.
3
Notwithstanding the foregoing, Boston Company 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. Boston Company
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, Boston Company 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 Boston Company, except as permitted
under the 1940 Act. IMCO agrees that it will provide Boston Company 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 Boston Company
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. Boston Company, 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 Boston Company's
duties under this Agreement. However, Boston Company 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, Boston Company, 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. Boston Company 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. Boston Company, 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 Boston Company set forth herein. Boston Company, 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 Boston Company's duties hereunder.
4
(F) COMPLIANCE MATTERS. Boston Company, 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. Boston Company 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. Boston Company 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, Boston Company 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, Boston Company may maintain copies of
such records to comply with its recordkeeping obligations.
(H) PROXIES. Boston Company 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 Boston
Company's proxy voting guidelines, as amended from time to time, which shall be
provided to IMCO.
3. ADVISORY FEE. IMCO shall pay to Boston Company as compensation for
Boston Company'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 Boston Company
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) BOSTON COMPANY. Boston Company represents and warrants to IMCO that
(i) the retention of Boston Company by IMCO as contemplated by this Agreement is
authorized by Boston Company's governing documents; (ii) the execution, delivery
and performance of this Agreement does not violate any obligation by which
Boston Company 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 Boston Company and when executed and delivered by Boston
Company will be a legal, valid and binding obligation of Boston Company,
enforceable against Boston Company in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general
5
equitable principles (regardless of whether enforcement is sought in a
proceeding in equity or law); (iv) Boston Company is registered as an investment
adviser under the Advisers Act; (v) Boston Company has adopted a written code of
ethics complying with the requirements of Rule 17j-1 under the 1940 Act and that
Boston Company 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, Boston Company shall furnish to IMCO all reports
and information provided under Rule 17j-1(c)(2); (vi) Boston Company 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) Boston
Company will promptly notify IMCO of the occurrence of any event that would
disqualify Boston Company from serving as investment manager of an investment
company pursuant to Section 9(a) of the 1940 Act or otherwise; (viii) Boston
Company 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) Boston
Company will notify IMCO of any "assignment" (as defined in the 0000 Xxx) of
this Agreement or change of control of Boston Company, as applicable, and any
changes in the key personnel who are either the portfolio manager(s) of any Fund
Account or senior management of Boston Company, in each case prior to or
promptly after, such change; and (x) Boston Company 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 Boston Company that (i) the
retention of Boston Company 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; and (vii) IMCO will promptly notify Boston Company 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) BOSTON COMPANY. Boston Company 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
6
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 Boston Company 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 Boston Company 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 Trust by Boston Company Indemnities (as defined below)
for use therein. Boston Company 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 Boston Company, 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, Boston Company 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 Trust by Boston Company. IMCO shall indemnify and hold harmless Boston
Company 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. Unless sooner terminated
as provided herein, this Agreement shall continue in effect until the sooner of
(a) 150 days from the date this Agreement is entered into or (b) the date upon
which Fund shareholders and the Board, including a majority of the Board members
who are not "interested persons" of the Funds, IMCO or Boston Company
(Independent Board Members), approve the retention of Boston Company in
accordance with Section 15(a) of the 1940 Act and IMCO executes a Subadvisory
Agreement with Boston Company; provided, however, that this Agreement may
continue for a period in excess of 150 days upon the written agreement of the
parties and consistent with SEC or SEC staff action or interpretation of
applicable law. This Agreement may be terminated at any time, without payment of
any penalty, by vote of the Board, by vote of a majority of the outstanding
shares (as defined in the 1940 Act), or by IMCO. In addition, this Agreement may
be terminated by Boston Company on sixty days' written notice to the other
party. Any notice of termination served on Boston Company by the Company or IMCO
shall be without prejudice to the obligation of Boston Company to complete
transactions already initiated or acted upon with respect to the Fund. This
Agreement shall terminate automatically in the event of its assignment (as
defined in the 1940 Act).
7
7. AMENDMENT OF AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. No material amendment of this Agreement shall be
effective until approved in the manner required by the 1940 Act, any rules
thereunder or any exemptive or other relief granted by the SEC or its staff
(Applicable Law).
8. APPROVAL, AMENDMENT, OR TERMINATION BY INDIVIDUAL FUND. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 0000 Xxx) of any Fund shall be
effective to continue, amend or terminate this Agreement with respect to any
such Fund notwithstanding (i) that such action has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund
affected thereby, and/or (ii) that such action has not been approved by the vote
of a majority of the outstanding voting securities of the Trust, unless such
action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of Boston Company to IMCO in
connection with the Funds hereunder are not to be deemed exclusive, and Boston
Company 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 Boston Company 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 Boston Company 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 Boston Company, or IMCO itself, to perform investment advisory
services to any portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. Boston Company shall, upon reasonable
notice, afford IMCO at all reasonable times access to Boston Company'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
Boston Company to provide IMCO with access to the books and records of Boston
Company relating to any other accounts other than the Funds.
(B) CONFIDENTIALITY. Boston Company, and its officers, employees and
authorized representatives, shall treat confidentially and as proprietary
information of the Trust all records and information relative to the Trust 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 Trust, which approval shall not be unreasonably withheld and may not be
withheld where Boston Company may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust.
(C) PRIVACY POLICY. Boston Company acknowledges that nonpublic customer
information (as defined in Regulation S-P, including any amendments thereto) of
customers of
8
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. Boston Company agrees that it will promptly notify
IMCO in the event that Boston Company expects to become the subject of an
administrative proceeding or enforcement action by the Commission or other
regulatory body with applicable jurisdiction.
(F) INSURANCE. Boston Company 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 Boston Company's business activities.
(G) SHAREHOLDER MEETING EXPENSES. In the event that the Trust shall be
required to call a meeting of shareholders solely due to actions involving
Boston Company, including, without limitation, a change of control of Boston
Company, Boston Company shall bear all reasonable expenses associated with such
shareholder meeting.
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 & Compliance Dept.
Boston Company: The Boston Company Asset Management, LLC
Xxx Xxxxxx Xxxxx, 000-0000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Risk Management and Compliance Department
(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
9
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.
(G) LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any obligations of the
Funds under this Agreement are not binding upon the Trustees or the shareholders
individually but are binding only upon the assets and property of the Funds.
IN WITNESS WHEREOF, IMCO and Boston Company 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: Assistant Secretary Title: President
Attest: THE BOSTON COMPANY ASSET
MANAGEMENT, LLC
By: By: /S/XXXXX X. XXXXXXX
------------------------------- ---------------------------
Name: Name: Xxxxx X. Xxxxxxx
Title: Title: Chief Executive Officer
10
SCHEDULE A
USAA EMERGING MARKETS FUND
11
SCHEDULE B
FEES
Rate per annum of the average daily net
Fund Account assets of the Fund Account
------------ ---------------------------------------
USAA Emerging Markets Fund 0.69%
12
Exhibit 4(f)
INTERIM INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 28th day of June, 2002 (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 MFS INSTITUTIONAL ADVISORS, INC., a corporation
organized under the laws of the Commonwealth of Massachusetts and having its
principal place of business in Boston, Massachusetts (MFS).
WHEREAS, IMCO serves as the investment adviser to USAA Investment
Trust, a business trust organized under the laws of the Commonwealth of
Massachusetts (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 MFS to render investment advisory
services to such series (or portions thereof) of the Trust as now or hereafter
may be identified in Schedule A to this Agreement, as such Schedule A may be
amended from time to time (each such series or portion thereof referred to
herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, MFS 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 MFS. IMCO hereby appoints MFS to act as an investment
adviser for each Fund Account in accordance with the terms and conditions of
this Agreement. MFS 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 MFS. MFS accepts such appointment and
agrees to render the services herein set forth for the compensation herein
provided.
2. DUTIES OF MFS.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO
and the Trust's Board of Trustees (the Board), MFS, 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. MFS 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 MFS
880684 v1
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.
With respect to the management of each Fund Account pursuant to this
Agreement, MFS 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 MFS
wishes to hold cash or cash equivalents in excess of 10% of a Fund Account's
assets, MFS must request in writing and receive advance permission from IMCO.
In accordance with Subsection (b) of this Section 2, MFS 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, MFS will act in the best interests of
each Fund and will comply with (i) applicable laws and regulations, including,
but not limited to, the 1940 Act and the Investment Advisers Act of 1940, as
amended (Advisers Act), and the rules under each, (ii) the terms of this
Agreement, (iii) the stated investment objective, policies and restrictions of
each Fund, as stated in the then-current Registration Statement of each Fund,
(iv) the Trust's compliance procedures and other policies, procedures or
guidelines as the Board or IMCO reasonably may establish from time to time, (v)
the provisions of the Internal Revenue Code of 1986, as amended (Code),
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), as from time to time in effect, and (vi) the written instructions of
IMCO. MFS shall establish compliance procedures reasonably calculated to ensure
compliance with the foregoing. IMCO shall be responsible for providing MFS with
the Trust's Declaration of Trust, 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 MFS with
prior written notice of any material change to the Trust's Registration
Statement that would affect MFS 's management of a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, MFS 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, MFS 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, MFS, 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.
2
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), MFS 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 MFS 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 MFS 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 MFS 's overall
responsibilities with respect to the Fund and to other clients of MFS as to
which MFS exercises investment discretion. The Board or IMCO may direct MFS 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 MFS deems the purchase or sale of a security to be in
the best interest of a Fund as well as other clients of MFS, MFS, 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 MFS 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.
MFS 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, MFS may effectuate cross transactions between a Fund Account and
such other account if it deems this to be advantageous.
MFS 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. MFS 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 MFS giving proper instructions to the custodian, MFS
shall have no responsibility or liability for the acts, omissions or other
conduct of the custodian.
Notwithstanding the foregoing, MFS 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. MFS 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
3
obtained. In addition, MFS 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 MFS, except as
permitted under the 1940 Act. IMCO agrees that it will provide MFS 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 MFS 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. MFS, 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 MFS 's duties under this Agreement.
However, MFS 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, MFS, 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. MFS 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. MFS, 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
MFS set forth herein. MFS, 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 MFS 's duties
hereunder.
(F) COMPLIANCE MATTERS. MFS, 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. MFS 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
4
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. MFS 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, MFS 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, MFS may maintain copies of such records to comply with its
recordkeeping obligations.
(H) PROXIES. MFS 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 MFS 's proxy voting
guidelines, as amended from time to time, which shall be provided to IMCO.
3. ADVISORY FEE. IMCO shall pay to MFS as compensation for MFS '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 MFS 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) MFS. MFS represents and warrants to IMCO that (i) the retention of
MFS by IMCO as contemplated by this Agreement is authorized by MFS 's governing
documents; (ii) the execution, delivery and performance of this Agreement does
not violate any obligation by which MFS 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 MFS and when executed and
delivered by MFS will be a legal, valid and binding obligation of MFS,
enforceable against MFS 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) MFS is
registered as an investment adviser under the Advisers Act; (v) MFS has adopted
a written code of ethics complying with the requirements of Rule 17j-1 under the
1940 Act and that MFS 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, MFS shall furnish to IMCO all
reports and information provided under Rule 17j-1(c)(2); (vi) MFS 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) MFS will
promptly notify IMCO of the occurrence of any event that would
5
disqualify MFS from serving as investment manager of an investment company
pursuant to Section 9(a) of the 1940 Act or otherwise; (viii) MFS 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) MFS will notify IMCO of any
"assignment" (as defined in the 0000 Xxx) of this Agreement or change of control
of MFS, as applicable, and any changes in the key personnel who are either the
portfolio manager(s) of any Fund Account or senior management of MFS, in each
case prior to or promptly after, such change; and (x) MFS has adequate disaster
recovery and interruption prevention measures for business resumption in
accordance with relevant provisions of the 1940 Act and within industry
standards.
(B) IMCO. IMCO represents and warrants to MFS that (i) the retention of
MFS 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;
and (vii) IMCO will promptly notify MFS 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) MFS. MFS 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 applicable statute, at common law or
otherwise directly arising out of (i) any gross negligence, willful misconduct,
bad faith or reckless disregard of MFS 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 MFS 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 written information furnished by
MFS to IMCO or the Trust by MFS Indemnities (as defined below) for
6
use therein. MFS 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 MFS, 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, MFS 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 by MFS to IMCO or the Trust.
IMCO shall indemnify and hold harmless MFS 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. Unless sooner terminated as
provided herein, this Agreement shall continue in effect until the sooner of (a)
150 days from the date this Agreement is entered into or (b) the date upon which
Fund shareholders and the Board, including a majority of the Board members who
are not "interested persons" of the Funds, IMCO or the Subadviser (Independent
Board Members), approve the retention of the Subadviser in accordance with
Section 15(a) of the 1940 Act and IMCO executes a Subadvisory Agreement with the
Subadviser; provided, however, that this Agreement may continue for a period in
excess of 150 days upon the written agreement of the parties and consistent with
SEC or SEC staff action or interpretation of applicable law. This Agreement may
be terminated at any time, without payment of any penalty, by vote of the Board,
by vote of a majority of the outstanding shares (as defined in the 1940 Act), or
by IMCO. In addition, this Agreement may be terminated by the Subadviser on
sixty days' written notice to the other party. Any notice of termination served
on the Subadviser by the Company or IMCO shall be without prejudice to the
obligation of the Subadviser to complete transactions already initiated or acted
upon with respect to the Fund. This Agreement shall terminate automatically in
the event of its assignment (as defined in the 1940 Act).
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 (if previously agreed to by the parties to this Agreement), 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
7
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 MFS to IMCO in connection with
the Funds hereunder are not to be deemed exclusive, and MFS 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 MFS 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 MFS 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 MFS, or IMCO itself, to
perform investment advisory services to any portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. MFS shall, upon reasonable notice, afford
IMCO at all reasonable times access to MFS '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 MFS to provide IMCO with
access to the books and records of MFS relating to any other accounts other than
the Funds.
(B) CONFIDENTIALITY. MFS, and its officers, employees and authorized
representatives, shall treat confidentially and as proprietary information of
the Trust all records and information relative to the Trust 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 Trust, which
approval shall not be unreasonably withheld and may not be withheld where MFS
may be exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities, or
when so requested by the Trust.
(C) PRIVACY POLICY. MFS 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
8
shall provide the other parties hereto with as much prior written notice of such
disclosure as is practical under the circumstances.
(E) NOTIFICATIONS. MFS agrees that it will promptly notify IMCO in the
event that MFS or any of its affiliates becomes the subject of an administrative
proceeding or enforcement action, with respect to the subadvisory services it
performs to the Trust pursuant to this Agreement, by the Commission or other
regulatory body with applicable jurisdiction.
(F) INSURANCE. MFS 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 MFS 's business activities.
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 & Compliance Dept.
MFS : [TO BE COMPLETED BY MFS ]
(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.
9
(F) ENTIRE AGREEMENT. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act.
(G) LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any obligations of the
Funds under this Agreement are not binding upon the Trustees or the shareholders
individually but are binding only upon the assets and property of the Funds.
IN WITNESS WHEREOF, IMCO and MFS 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: Assistant Secretary Title: President
Attest: MFS INSTITUTIONAL ADVISORS, INC.
By: By:
-------------------------------- -----------------------------
Name: Name:
Title: Title:
10
SCHEDULE A
USAA CORNERSTONE STRATEGY FUND - INTERNATIONAL STOCKS
USAA INTERNATIONAL FUND
USAA WORLD GROWTH FUND
11
SCHEDULE B
FEES
RATE PER ANNUM OF THE AGGREGATE
AVERAGE DAILY NET ASSETS OF THE
FUND ACCOUNTS FUND ACCOUNTS
------------- -------------------------------
USAA Cornerstone Strategy Fund 0.335% - on the first $350 million
(International Stocks)
0.225% - on amounts over $350 million
USAA International Fund
USAA World Growth Fund
12
Exhibit 4 (g)
INTERIM INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 28th day of June, 2002 (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 WELLINGTON MANAGEMENT COMPANY, LLP, a limited
liability partnership organized under the laws of the Commonwealth of
Massachusetts and having its principal place of business in Boston,
Massachusetts (Wellington Management).
WHEREAS, IMCO serves as the investment adviser to USAA Investment
Trust, a business trust organized under the laws of the Commonwealth of
Massachusetts (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 Wellington Management to render
investment advisory services to such series (or portions thereof) of the Trust
as now or hereafter may be identified in Schedule A to this Agreement, as such
Schedule A may be amended from time to time (each such series or portion thereof
referred to herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, Wellington Management 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 WELLINGTON MANAGEMENT. IMCO hereby appoints
Wellington Management to act as an investment subadviser for each Fund Account
in accordance with the terms and conditions of this Agreement. Wellington
Management 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 Wellington Management. Wellington Management
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.
2. DUTIES OF WELLINGTON MANAGEMENT.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO
and the Trust's Board of Trustees (the Board), Wellington Management, 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. Wellington Management
shall
881588 v1
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 Wellington
Management 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.
With respect to the management of each Fund Account pursuant to this
Agreement, Wellington Management 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 Wellington Management wishes to hold cash or cash
equivalents in excess of 10% of a Fund Account's assets for longer than two
consecutive business days, Wellington Management must request in writing and
receive advance permission from IMCO.
In accordance with Subsection (b) of this Section 2, Wellington
Management 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, Wellington Management 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 Prospectus and
Statement of Additional Information of each Fund, (iv) the Trust's compliance
procedures and other policies, procedures or guidelines as the Board or IMCO
reasonably may establish from time to time, (v) the provisions of the Internal
Revenue Code of 1986, as amended (Code), applicable to "regulated investment
companies" (as defined in Section 851 of the Code), as from time to time in
effect, and (vi) the written instructions of IMCO. Wellington Management shall
establish compliance procedures reasonably calculated to ensure compliance with
the foregoing. IMCO shall be responsible for providing Wellington Management
with the Trust's Declaration of Trust, 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 Wellington
Management with prior written notice of any material change to the Trust's
Registration Statement that would affect Wellington Management's management of a
Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, Wellington Management
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, Wellington Management 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
2
services as described below. In using its best efforts to obtain the most
favorable price and execution available, Wellington Management, 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), Wellington Management 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 Wellington Management 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
Wellington Management 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 Wellington Management's overall responsibilities with respect to
the Fund and to other clients of Wellington Management as to which Wellington
Management exercises investment discretion. The Board or IMCO may direct
Wellington Management 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 Wellington Management deems the purchase or sale of a
security to be in the best interest of a Fund as well as other clients of
Wellington Management, Wellington Management, 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 Wellington Management 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.
Wellington Management 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, Wellington Management may effectuate cross
transactions between a Fund Account and such other account if it deems this to
be advantageous.
Wellington Management 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. Wellington Management shall
3
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 Wellington Management giving proper instructions to
the custodian, Wellington Management shall have no responsibility or liability
for the acts, omissions or other conduct of the custodian.
Notwithstanding the foregoing, Wellington Management 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 transactions on behalf of the Fund may not be effected, including,
without limitation, brokers or dealers affiliated with IMCO. Wellington
Management 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, Wellington Management 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
Wellington Management, except as permitted under the 1940 Act. IMCO agrees that
it will provide Wellington Management 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 Wellington Management 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. Wellington Management, 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 Wellington
Management's duties under this Agreement. However, Wellington Management 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
held in Fund Accounts subadvised by Wellington Management for which market
quotes are not readily available, Wellington Management, 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. Wellington Management 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. Wellington Management, 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 Wellington Management
4
set forth herein. Wellington Management, 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 Wellington
Management's duties hereunder.
(F) COMPLIANCE MATTERS. Wellington Management, 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. Wellington
Management 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. Wellington Management 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, Wellington Management 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, Wellington Management
may maintain copies of such records to comply with its recordkeeping
obligations.
(H) PROXIES. Wellington Management 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 Wellington Management's proxy voting guidelines, as amended from time to
time, which shall be provided to IMCO.
3. ADVISORY FEE. IMCO shall pay to Wellington Management as
compensation for Wellington Management'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 Wellington Management 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) WELLINGTON MANAGEMENT. Wellington Management represents and
warrants to IMCO that (i) the retention of Wellington Management by IMCO as
contemplated by this
5
Agreement is authorized by Wellington Management's governing documents; (ii) the
execution, delivery and performance of this Agreement does not violate any
obligation by which Wellington Management 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 Wellington Management and when
executed and delivered by Wellington Management will be a legal, valid and
binding obligation of Wellington Management, enforceable against Wellington
Management 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) Wellington Management is
registered as an investment adviser under the Advisers Act; (v) Wellington
Management has adopted a written code of ethics complying with the requirements
of Rule 17j-1 under the 1940 Act and that Wellington Management and certain of
its employees, officers and partners 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,
Wellington Management shall furnish to IMCO all reports and information provided
under Rule 17j-1(c)(2); (vi) Wellington Management 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) Wellington Management will
promptly notify IMCO of the occurrence of any event that would disqualify
Wellington Management from serving as investment manager of an investment
company pursuant to Section 9(a) of the 1940 Act or otherwise; (viii) Wellington
Management 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)
Wellington Management will notify IMCO of any "assignment" (as defined in the
0000 Xxx) of this Agreement or change of control of Wellington Management, as
applicable, and any changes in the key personnel who are either the portfolio
manager(s) of any Fund Account or senior management of Wellington Management, in
each case prior to or promptly after, such change; and (x) Wellington Management
has adequate disaster recovery and interruption prevention measures reasonably
designed to ensure business resumption in accordance with applicable law and
within industry standards.
(B) IMCO. IMCO represents and warrants to Wellington Management that
(i) the retention of Wellington Management 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; and (vii) IMCO will promptly notify Wellington
Management of the occurrence
6
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) WELLINGTON MANAGEMENT. Wellington Management shall indemnify and
hold harmless 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) for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which the IMCO Indemnities may become subject under the 1933 Act, the 1940 Act,
the Advisers Act, or under any other statute, at common law or otherwise arising
out of (i) any gross negligence, willful misconduct, bad faith or reckless
disregard of Wellington Management 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 Wellington Management 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 Wellington Management Indemnities (as defined
below) for use therein.
(B) IMCO. IMCO shall indemnify and hold harmless Wellington Management,
any affiliated persons thereof (within the meaning of the 1940 Act)
(collectively, Wellington Management Indemnities) for any and all losses,
claims, damages, liabilities or litigation (including reasonable legal and other
expenses) to which the Wellington Indemnities may become subject under the 1933
Act, the 1940 Act, the Advisers Act, or under any other statute, at common law
or otherwise arising out of (i) any gross negligence, willful misconduct, bad
faith or reckless disregard by IMCO in the performance of any of its duties or
obligations hereunder or (ii) any untrue statement of a material fact contained
in the Prospectus and SAI, proxy materials, reports, advertisements, sales
literature, or other materials pertaining to the Funds or the omission to state
therein a material fact known to IMCO which was required to be stated therein or
necessary to make the statements therein not misleading, unless such statement
or omission was made in reliance upon information furnished in writing by
Wellington Indemnities to IMCO or the Trust.
6. DURATION AND TERMINATION OF THIS AGREEMENT. Unless sooner terminated
as provided herein, this Agreement shall continue in effect until the sooner of
(a) 150 days from the date this Agreement is entered into or (b) the date upon
which Fund shareholders and the Board, including a majority of the Board members
who are not "interested persons" of the Funds, IMCO or Wellington Management
(Independent Board Members), approve the retention of Wellington Management in
accordance with Section 15(a) of the 1940 Act and IMCO executes a Subadvisory
Agreement with Wellington Management; provided, however, that this Agreement may
continue for a period in excess of 150 days upon the written agreement of the
parties and consistent with SEC or SEC staff action or interpretation of
applicable law. This Agreement may be terminated at any time, without payment of
any penalty, by vote of the Board, by vote of a majority of the outstanding
shares (as defined in the 1940 Act), or by IMCO. In addition, this Agreement may
be terminated by Wellington Management on sixty days' written notice to the
7
other party. Any notice of termination served on Wellington Management by the
Company or IMCO shall be without prejudice to the obligation of Wellington
Management to complete transactions already initiated or acted upon with respect
to the Fund. This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act).
7. AMENDMENT OF AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought. No material amendment of this Agreement
shall be effective until approved in the manner required by the 1940 Act, any
rules thereunder or any exemptive or other relief granted by the SEC or its
staff (Applicable Law).
8. APPROVAL, AMENDMENT, OR TERMINATION BY INDIVIDUAL FUND. Any
approval, amendment, or termination of this Agreement by the holders of a
majority of the outstanding voting securities (as defined in the 0000 Xxx) of
any Fund shall be effective to continue, amend or terminate this Agreement with
respect to any such Fund notwithstanding (i) that such action has not been
approved by the holders of a majority of the outstanding voting securities of
any other Fund affected thereby, and/or (ii) that such action has not been
approved by the vote of a majority of the outstanding voting securities of the
Trust, unless such action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of Wellington Management to
IMCO in connection with the Funds hereunder are not to be deemed exclusive, and
Wellington Management 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 Wellington Management 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 Wellington Management 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 Wellington Management, or
IMCO itself, to perform investment advisory services to any portion of the
Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. Wellington Management shall, upon reasonable
notice, afford IMCO at all reasonable times access to Wellington Management'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 Wellington Management to provide IMCO with access to the books and
records of Wellington Management relating to any other accounts other than the
Funds or where such access is prohibited by law.
(B) CONFIDENTIALITY. Wellington Management, and its officers, employees
and authorized representatives, shall treat confidentially and as proprietary
information of the Trust all records and information relative to the Trust and
prior, present or potential shareholders, and will not use such records and
information for any purpose other than performance of its
8
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where Wellington Management may be exposed to
civil or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Trust.
(C) PRIVACY POLICY. Wellington Management 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. During the term of this
Agreement, IMCO agrees to furnish to Wellington Management at its principal
office all Prospectuses, Statements of Additional Information, proxy statements,
reports to shareholders, sales literature, or other material prepared for
distribution to sales personnel, shareholders of the Trust or the public, which
refer to Wellington Management or its clients in any way, prior to use thereof
and not to use such material if Wellington Management reasonably objects in
writing two business days (or such other time as may be mutually agreed upon)
after receipt thereof. Advance review shall not be required from Wellington
Management with respect to 1) sales literature in which Wellington Management is
only referenced in a listing of subadvisers to USAA funds; and 2) other
materials as agreed upon mutually by IMCO and Wellington Management. Sales
literature may be furnished to Wellington Management hereunder by first-class or
overnight mail, electronic or facsimile transmission, or hand delivery.
(E) NOTIFICATIONS. Wellington Management agrees that it will promptly
notify IMCO in the event that Wellington Management 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. Wellington Management 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 Wellington Management's business
activities.
(G) SHAREHOLDER MEETING EXPENSES. In the event that the Trust shall be
required to call a meeting of shareholders solely due to actions involving
Wellington Management, including, without limitation, a change of control of
Wellington Management, Wellington Management shall bear all reasonable expenses
associated with such shareholder meeting.
9
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 & Compliance Dept.
Wellington Management: Wellington Management Company, LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Legal Department
(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.
(G) LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any obligations of the
Funds under this Agreement are not binding upon the Trustees or the shareholders
individually but are binding only upon the assets and property of the Funds.
10
IN WITNESS WHEREOF, IMCO and Wellington Management 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: Assistant Secretary Title: President
Attest: WELLINGTON MANAGEMENT COMPANY, LLP
By: By:
------------------------------ -----------------------------
Name: Name:
Title: Title:
11
SCHEDULE A
USAA BALANCED STRATEGY FUND
USAA CORNERSTONE STRATEGY FUND - U. S. STOCKS
USAA CORNERSTONE STRATEGY FUND - REAL ESTATE SECURITIES
12
SCHEDULE B
FEES
RATE PER ANNUM OF THE AVERAGE
DAILY NET ASSETS OF THE FUND
FUND ACCOUNT ACCOUNT
------------ -----------------------------
USAA Balanced Strategy Fund 0.20%
USAA Cornerstone Strategy Fund
(U.S. Stocks category) 0.20%
(Real Estate Securities category) 0.40% - First $50 million
0.35% - Amounts above $50 million
13
