Exhibit 4(k)
FORM OF INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the ____ day of _________, 2003 (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 NORTHERN TRUST INVESTMENTS, INC., a corporation
organized under the laws of the State of Illinois and having its principal place
of business in Chicago, Illinois (NTI).
WHEREAS, IMCO serves as the investment adviser to USAA Mutual Fund,
Inc., a corporation organized under the laws of the state of Maryland (the
Company) and registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, under its Investment Advisory Agreement with the Company
(Investment Advisory Agreement), IMCO is authorized to appoint subadvisers for
series of the Company (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain NTI to render investment advisory
services to such series (or portions thereof) of the Company as now or hereafter
may be identified in Schedule A to this Agreement, as such Schedule A may be
amended from time to time (each such series or portion thereof referred to
herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, NTI 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 NTI. IMCO hereby appoints NTI to act as an investment
subadviser for each Fund Account in accordance with the terms and conditions of
this Agreement. NTI will be an independent contractor and will have no authority
to act for or represent the Company or IMCO in any way or otherwise be deemed an
agent of the Company or IMCO except as expressly authorized in this Agreement or
another writing by the Company, IMCO and NTI. NTI accepts such appointment and
agrees to render the services herein set forth for the compensation herein
provided.
2. DUTIES OF NTI.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO
and the Company's Board of Directors (the Board), NTI, 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. NTI 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 NTI 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, NTI 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 NTI
wishes to hold cash or
cash equivalents in excess of 10% of a Fund Account's assets for longer than two
consecutive business days, NTI must request in writing and receive advance
permission from IMCO.
In accordance with Subsection (b) of this Section 2, NTI shall arrange
for the execution of all orders for the purchase and sale of securities and
other investments for each Fund Account and will exercise full discretion and
act for the Company in the same manner and with the same force and effect as the
Company might or could do with respect to such purchases, sales, or other
transactions, as well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases, sales, or other
transactions.
In the performance of its duties, NTI 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 Company's compliance procedures and other
policies, procedures or guidelines as the Board or IMCO reasonably may establish
from time to time, (v) the provisions of the Internal Revenue Code of 1986, as
amended (Code), applicable to "regulated investment companies" (as defined in
Section 851 of the Code), including Section 817(h), as from time to time in
effect, and (vi) the written instructions of IMCO. NTI shall establish
compliance procedures reasonably calculated to ensure compliance with the
foregoing. IMCO shall be responsible for providing NTI with the Company's
Articles of Incorporation, as amended and supplemented, the Company's Bylaws and
amendments thereto and current copies of the materials specified in Subsections
(a)(iii) and (iv) of this Section 2. IMCO shall provide NTI with prior written
notice of any material change to the Company's Registration Statement under the
Securities Act of 1933 and the 1940 Act that would affect NTI's management of a
Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, NTI 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, NTI shall use its best efforts to obtain for the Fund
Accounts the best overall terms 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 best terms
available, NTI, 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), NTI 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 NTI 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 NTI 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 NTI's overall
responsibilities with respect to the Fund and to other clients of NTI as to
which NTI exercises investment discretion. The Board or IMCO may direct NTI to
effect transactions in portfolio securities through broker-dealers in a
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manner that will help generate resources to pay the cost of certain expenses
that the Company is required to pay or for which the Company is required to
arrange payment.
On occasions when NTI deems the purchase or sale of a security to be in
the best interest of a Fund as well as other clients of NTI, NTI, 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 NTI 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.
NTI may buy securities for a Fund Account at the same time it is
selling such securities for another client account and may sell securities for a
Fund Account at the time it is buying such securities for another client
account. In such cases, subject to applicable legal and regulatory requirements,
and in compliance with such procedures of the Company as may be in effect from
time to time, NTI may effectuate cross transactions between a Fund Account and
such other account if it deems this to be advantageous.
NTI 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. NTI shall not
have possession or custody of any Fund's investments. The Company shall be
responsible for all custodial agreements and the payment of all custodial
charges and fees and, upon NTI giving proper instructions to the custodian, NTI
shall have no responsibility or liability for the acts, omissions or other
conduct of the custodian.
Notwithstanding the foregoing, NTI 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. NTI 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, NTI 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 NTI, except as permitted under the 1940 Act. IMCO agrees that it
will provide NTI 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 NTI 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. NTI, 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 NTI's duties under this Agreement. In
addition, NTI shall reimburse the S&P 500 Index Fund for all license fees paid
by the S&P 500 Index Fund to Standard & Poor's in amounts not exceeding the
annual rate of 0.001% of the average daily net assets of such Fund. However, NTI
shall not be obligated to pay any expenses of IMCO, the Company or the Funds,
including without limitation, interest and taxes, brokerage commissions and
other costs in connection with the
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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 will be valued
on each day the New York Stock Exchange is open for business. For those
securities held in Fund Accounts subadvised by NTI for which market quotes are
not readily available, NTI, at its expense and in accordance with procedures and
methods established by the Board, which may be amended from time to time, will
provide such assistance to IMCO in determining the fair value of such securities
as IMCO may reasonably request, including providing market price information
relating to these assets of the Fund. NTI shall also provide reasonable
assistance to IMCO in monitoring 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 promptly in the event NTI determines that a significant event
has occurred .
(E) REPORTS AND AVAILABILITY OF PERSONNEL. NTI, 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
NTI set forth herein. NTI, 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 NTI's duties hereunder.
(F) COMPLIANCE MATTERS. NTI, 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. NTI also shall cooperate with and
provide reasonable assistance to IMCO, the Company's administrator, the
Company's custodian and foreign custodians, the Company's transfer agent and
pricing agents and all other agents and representatives of the Company and IMCO,
keep all such persons fully informed as to such matters as they may reasonably
deem necessary to the performance of their obligations to the Company and IMCO,
provide prompt responses to reasonable requests made by such persons and
maintain any appropriate interfaces with each so as to promote the efficient
exchange of information.
(G) BOOKS AND RECORDS. NTI 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, NTI 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, NTI may maintain copies of such records to comply with its
recordkeeping obligations.
(H) PROXIES. NTI 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 NTI's proxy voting
guidelines, as amended from time to time, which shall be provided to IMCO.
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3. ADVISORY FEE. IMCO shall pay to NTI as compensation for NTI'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 C, 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 NTI 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) NTI. NTI represents and warrants to IMCO that (i) the retention of
NTI by IMCO as contemplated by this Agreement is authorized by NTI's governing
documents; (ii) the execution, delivery and performance of this Agreement does
not violate any obligation by which NTI 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 NTI and when executed and
delivered by NTI will be a legal, valid and binding obligation of NTI,
enforceable against NTI 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) NTI is
registered as an investment adviser under the Advisers Act; (v) NTI has adopted
a written code of ethics complying with the requirements of Rule 17j-1 under the
1940 Act and instituted implementation procedures and that NTI 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 shall cause its employees, officers,
and partners to furnish to IMCO all reports and information required to be
provided under Rule 17j-1(c)(2) with respect to persons who are "Access Persons"
(as defined in Rule 17j-1(a)(1)) with respect to a Fund Account; (vi) NTI 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) NTI will
promptly notify IMCO of the occurrence of any event that would disqualify NTI
from serving as investment manager of an investment company pursuant to Section
9(a) of the 1940 Act or otherwise; (viii) NTI 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) NTI will notify IMCO of any "assignment" (as
defined in the 0000 Xxx) of this Agreement or change of control of NTI, as
applicable, and any changes in the key personnel who are either the portfolio
manager(s) of any Fund Account or senior management of NTI, in each case prior
to or promptly after, such change; and (x) NTI has adequate disaster recovery
and interruption prevention measures reasonably designed to ensure business
resumption in accordance with applicable law and within industry standards.
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(B) IMCO. IMCO represents and warrants to NTI that (i) the retention of
NTI by IMCO as contemplated by this Agreement is authorized by the respective
governing documents of the Company and IMCO; (ii) the execution, delivery and
performance of each of this Agreement and the Investment Advisory Agreement does
not violate any obligation by which the Company or IMCO or their respective
property is bound, whether arising by contract, operation of law or otherwise;
(iii) each of this Agreement and the Investment Advisory Agreement has been duly
authorized by appropriate action of the Company and IMCO and when executed and
delivered by IMCO will be a legal, valid and binding obligation of the Company
and IMCO, enforceable against the Company and IMCO in accordance with its terms,
subject, as to enforcement, to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and to general equitable principles
(regardless of whether enforcement is sought in a proceeding in equity or law);
(iv) IMCO is registered as an investment adviser under the Advisers Act; (v)
IMCO has adopted a written code of ethics complying with the requirements of
Rule 17j-1 under the 1940 Act and instituted implementation procedures 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 NTI 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) NTI. NTI shall indemnify and hold harmless the Company, 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)(collectively, Losses) 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 negligence,
willful misconduct, bad faith or reckless disregard of NTI 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 NTI 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 Company by NTI Indemnities (as defined below) for use
therein.
(B) IMCO. IMCO shall indemnify and hold harmless NTI, 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, NTI
Indemnities) for any and all Losses to which the NTI Indemnities may become
subject under the 1933 Act, the 1940 Act, the Advisers Act, or under any other
statute, at common law or otherwise arising out of (i) any negligence, willful
misconduct, bad faith or reckless disregard by IMCO in the performance of any of
its duties or obligations hereunder or (ii) any untrue statement of a material
fact contained in the Prospectus and SAI, proxy materials, reports,
advertisements, sales literature, or other materials pertaining to the Funds or
the omission to state therein a material fact known to IMCO which was required
to be stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon information
furnished in writing by NTI Indemnities to IMCO or the Company.
(c) Notwithstanding anything herein to the contrary, the NTI
Indemnities shall not be liable to any IMCO Indemnities for any Losses resulting
from NTI's acts or omissions as subadviser to a Fund Account, except to the
extent such Losses result from a breach of contract or the negligence, willful
misconduct, bad faith or reckless disregard by the NTI Indemnities.
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6. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall become
effective with respect to a Fund upon its execution; provided, however, that
this Agreement shall not become effective with respect to a Fund unless it has
first been approved in the manner required by the 1940 Act and rules thereunder
or in accordance with exemptive or other relief granted by the SEC or its staff.
This Agreement shall remain in full force and effect continuously thereafter,
except as follows:
(a) By vote of a majority of (i) the Board members who are not
"interested persons" (as defined in the 0000 Xxx) of the Company, IMCO, or NTI
(Independent Board Members) or (ii) the outstanding voting shares of a Fund,
such Fund may at any time terminate this Agreement, without the payment of any
penalty, by providing not more than 60 days' nor less than 10 days' written
notice delivered or mailed by registered mail, postage prepaid, to IMCO and NTI.
(b) This Agreement will terminate automatically with respect to a Fund,
without the payment of any penalty, unless within two years after its initial
effectiveness and at least annually thereafter, the continuance of the Agreement
is specifically approved by (i) the Board or the shareholders of the Fund by the
affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a
majority of the Independent Board Members, by vote cast in person at a meeting
called for the purpose of voting on such approval. If the continuance of this
Agreement is submitted to the shareholders of the Fund for their approval and
such shareholders fail to approve such continuance as provided herein, NTI may
continue to serve hereunder in a manner consistent with the 1940 Act and the
rules thereunder.
(c) IMCO may at any time terminate this Agreement with respect to a
Fund, without the payment of any penalty, by written notice delivered in person
or by facsimile, or mailed by registered mail, postage prepaid, to NTI. NTI may
at any time, without the payment of any penalty, terminate this Agreement with
respect to a Fund by not less than 60 days' written notice delivered or mailed
by registered mail, postage prepaid, to IMCO.
(d) This Agreement automatically and immediately shall terminate with
respect to the Funds, without the payment of any penalty, in the event of its
assignment (as that term is defined in the 1940 Act or interpreted under
applicable rules and regulations of the Commission) or if the Investment
Advisory Agreement shall terminate for any reason.
(e) Any notice of termination served on NTI by IMCO shall be without
prejudice to the obligation of NTI to complete transactions already initiated or
acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to NTI
under this Agreement automatically shall revert to IMCO. Notwithstanding any
termination of this Agreement with respect to a Fund, Sections 5, 10(a), 10(e),
11(a), and 11(c) of this Agreement shall remain in effect after any such
termination.
7. AMENDMENT OF AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. No material amendment of this Agreement shall be
effective until approved in the manner required by the 1940 Act, any rules
thereunder or any exemptive or other relief granted by the SEC or its staff
(Applicable Law).
8. APPROVAL, AMENDMENT, OR TERMINATION BY INDIVIDUAL FUND. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 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
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action has not been approved by the vote of a majority of the outstanding voting
securities of the Company, unless such action shall be required by any
applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of NTI to IMCO in connection with the
Funds hereunder are not to be deemed exclusive, and NTI 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 NTI 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 NTI 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 NTI, or IMCO itself, to perform
investment advisory services to any portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. NTI shall, upon reasonable notice, afford
IMCO at all reasonable times access to NTI'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 NTI to provide IMCO with
access to the books and records of NTI relating to any other accounts other than
the Funds or where such access is prohibited by law.
(B) CONFIDENTIALITY. NTI, and its officers, employees and authorized
representatives, shall treat confidentially and as proprietary information of
the Company all records and information relative to the Company and prior,
present or potential shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Company, which approval shall not be unreasonably withheld and may not be
withheld where NTI may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company.
(C) PRIVACY POLICY. NTI 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 NTI 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, share-holders of the Company or the public, which refer to NTI
or its clients in any way, prior to use thereof and not to use such material if
NTI 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 NTI with respect to 1) sales literature in which NTI is only
referenced in a listing of subadvisers to USAA funds; and 2) other materials as
agreed upon mutually by
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IMCO and NTI. Sales literature may be furnished to NTI hereunder by first-class
or overnight mail, electronic or facsimile transmission, or hand delivery.
(E) NOTIFICATIONS. NTI agrees that it will promptly notify IMCO in the
event that NTI 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. NTI 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 NTI's business activities.
(G) SHAREHOLDER MEETING EXPENSES. In the event that the Company shall
be required to call a meeting of shareholders solely due to a change of control
of NTI, NTI shall bear all reasonable expenses associated with such shareholder
meeting and attributable to such change in control.
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
NTI: Northern Trust Investments, Inc.
00 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, Vice President
(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.
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.
IN WITNESS WHEREOF, IMCO and NTI have caused this Agreement to be
executed as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT
COMPANY
By: _______________________________ By: _________________________________
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
Attest: NORTHERN TRUST INVESTMENTS, INC.
By: ________________________________ By: _________________________________
Name: Name:
Title: Title:
10
SCHEDULE A
S&P 500 Index Fund
11
SCHEDULE B
FEES
Rate per annum of the average daily net
Fund Account assets of the Fund Account
S&P 500 Index Fund 0.02% on the first $1.5 billion of assets
0.01% on assets over $1.5 billion and
up to $3 billion
0.005% on assets over $3 billion
12
Exhibit 4(l)
FORM OF INVESTMENT ACCOUNTING AGREEMENT
THIS AGREEMENT made and effective as of this___________, 2003, by and
between USAA Mutual Fund, Inc. (the "Company"), a Maryland corporation on behalf
of USAA S&P 500 Index Fund (the "Fund"), a series of the Company, and The
Northern Trust Company ("Northern Trust").
WHEREAS, the Company is registered as an "investment company" under the
Investment Company Act of 1940 (the "1940 Act") and the Fund is a duly
authorized series of the Company; and
WHEREAS, NORTHERN TRUST performs certain investment accounting and
compliance services in connection with maintaining certain accounting records of
one or more investment companies; and
WHEREAS, NORTHERN TRUST may perform certain investment accounting and
compliance services on a computerized accounting system (the "Portfolio
Accounting System"); and
WHEREAS, the Company desires to appoint NORTHERN TRUST as investment
accounting agent for the Fund, and NORTHERN TRUST is willing to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties hereto, intending to be legally bound, mutually covenant and agree
as follows:
1. APPOINTMENT OF INVESTMENT ACCOUNTING AGENT. The Company hereby
constitutes and appoints NORTHERN TRUST as investment accounting agent
for the Fund to perform accounting and limited compliance functions
related to portfolio transactions required of the Fund under Rule
31a-1 of the 1940 Act and to calculate the net asset value of the
Fund. Notwithstanding Section 11.I, NORTHERN TRUST may assign all or a
portion of its duties and responsibilities hereunder to one or more of
NORTHERN TRUST's affiliates upon advance written notice of such
assignment to the Company. Nevertheless, any assignment by NORTHERN
TRUST to a person or entity which is not an affiliate of NORTHERN
TRUST of all or a portion of NORTHERN TRUST's duties and
responsibilities hereunder shall comply with Section 11.I.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents, warrants and acknowledges to NORTHERN TRUST:
A. That it is a corporation duly organized and existing and in good
standing under the laws of Maryland, and that it is registered
under the 1940 Act; and
B. That it has the requisite power and authority under applicable law,
its charter or articles of incorporation and its bylaws to enter
into this Agreement; that it has taken all requisite action
necessary to appoint NORTHERN TRUST as investment accounting agent
for the Fund; that this Agreement has been duly executed and
delivered by the Company on behalf of the Fund; and that this
Agreement constitutes a legal, valid and binding obligation of the
Company, enforceable in accordance with its terms.
1
3. REPRESENTATIONS AND WARRANTIES OF NORTHERN TRUST. NORTHERN TRUST
hereby represents, warrants and acknowledges to the Company:
A. That it is a corporation duly organized and existing and in good
standing under the laws of the State of Illinois;
B. That it has the requisite power and authority under applicable law,
its charter or articles of incorporation and its bylaws to enter
into and perform this Agreement; that this Agreement has been duly
executed and delivered by NORTHERN TRUST; and that this Agreement
constitutes a legal, valid and binding obligation of NORTHERN
TRUST, enforceable in accordance with its terms; and
C. That the accounts maintained and preserved by NORTHERN TRUST shall
be the property of the Company and/or the Fund and that it will not
use any information made available to it under the terms hereof for
any purpose other than complying with its duties and
responsibilities hereunder or as specifically authorized in writing
by the Company for itself and on behalf of the Fund.
4. DUTIES AND RESPONSIBILITIES OF THE COMPANY.
A. The Company shall turn over to NORTHERN TRUST all of the Fund's
accounts previously maintained, if any.
B. The Company shall provide to NORTHERN TRUST the information
necessary to perform NORTHERN TRUST's duties and responsibilities
hereunder in writing or its electronic or digital equivalent prior
to the close of the New York Stock Exchange on each day on which
NORTHERN TRUST prices the Funds' securities and foreign currency
holdings.
C. The Company shall furnish NORTHERN TRUST with the declaration,
record and payment dates and amounts of any dividends or income and
any other special actions required concerning the securities in the
portfolio when such information is not readily available from
generally accepted securities industry services or publications.
D. The Company shall pay to NORTHERN TRUST such compensation at such
time as may from time to time be agreed upon in writing by NORTHERN
TRUST and the Company. The initial compensation schedule is
attached as Exhibit A.
E. The Company shall provide to NORTHERN TRUST, as conclusive proof of
any fact or matter required to be ascertained from the Company as
reasonably determined by NORTHERN TRUST, a certificate signed by
the Company's president or other officer of the Company, or other
authorized individual, as reasonably requested by NORTHERN TRUST.
The Company shall also provide to NORTHERN TRUST instructions with
respect to any matter concerning this Agreement requested by
NORTHERN TRUST. NORTHERN TRUST may rely upon any instruction or
information furnished by any person reasonably believed by it to be
an officer or agent of the Company, and shall not be held to have
notice of any change of authority of any such person until receipt
of written notice thereof from the Company.
F. The Company shall preserve the confidentiality of the Portfolio
Accounting System and the tapes, books, reference manuals,
instructions, records, programs, documentation and information of,
and other materials relevant to, the Portfolio Accounting System
and the business of NORTHERN TRUST ("Confidential Information").
The Company shall not voluntarily disclose such Confidential
Information to any other person other than its own employees or
agents who reasonably have a need to know such information pursuant
to this Agreement. The Company shall return all such Confidential
Information to NORTHERN TRUST upon termination or expiration of
this Agreement. The Company acknowledges that NORTHERN TRUST may
contract with third parties for its Portfolio Accounting System and
may change Portfolio Accounting Systems at any time if such change
will not materially affect the services provided under this
Agreement. The Company further acknowledges that the
2
confidentiality provisions of this Agreement as they relate to the
Portfolio Accounting System are intended to provide protection to
NORTHERN TRUST, third party system providers and any of their
respective agents.
G. If NORTHERN TRUST shall provide the Company direct access to the
computerized accounting and reporting system used hereunder or if
NORTHERN TRUST and the Company shall agree to utilize any
electronic system of communication, the Company shall be fully
responsible for any and all consequences of the use or misuse of
the terminal device, passwords, access instructions and other means
of access to such system(s) which are utilized by, assigned to or
otherwise made available to the Company. The Company agrees to
implement and enforce appropriate security policies and procedures
to prevent unauthorized or improper access to or use of such
system(s). NORTHERN TRUST shall be fully protected in acting
hereunder upon any instructions, communications, data or other
information received by NORTHERN TRUST by such means as fully and
to the same extent as if delivered to NORTHERN TRUST by written
instrument signed by the requisite authorized representative(s) of
the Company.
5. DUTIES AND RESPONSIBILITIES OF NORTHERN TRUST.
A. NORTHERN TRUST shall calculate the Fund's net asset
value, in accordance with the Fund's prospectus.
NORTHERN TRUST will price the securities of the Fund
for which market quotations are available by the use
of outside services designated by the Company which
are normally used and contracted with for this
purpose; all other securities will be priced in
accordance with the Company's instructions.
B. NORTHERN TRUST shall prepare and maintain, with the
direction and as interpreted by the Company or the
Fund's accountants and/or other advisors, in
complete, accurate, and current form, all accounts
and records needed to be maintained as a basis for
calculation of the Fund's net asset value, and as
further agreed upon by the parties in writing, and
shall preserve such records in the manner and for the
periods required by law or for such longer period as
the parties may agree upon in writing.
C. NORTHERN TRUST shall make available to the Company
for inspection or reproduction within a reasonable
time, upon demand, all accounts and records of the
Fund maintained and preserved by NORTHERN TRUST. In
addition, NORTHERN TRUST shall periodically provide
certain records to various parties, all as
specifically set forth in Exhibit B.
D. NORTHERN TRUST shall be entitled to rely conclusively
on the completeness and correctness of any and all
accounts and records turned over to it by the
Company.
E. NORTHERN TRUST shall assist the Fund's independent
accountants, or upon approval of the Company or upon
demand, any regulatory body, in any requested review
of the Fund's accounts and records maintained by
NORTHERN TRUST but shall be reimbursed by the Company
for all expenses and employee time invested in any
such review outside of routine and normal periodic
reviews. Inspections conducted by the Securities and
Exchange Commission shall be considered routine.
F. Upon receipt from the Company of any necessary
information or instructions, NORTHERN TRUST shall
provide information from the books and records it
maintains for the Company with respect to the Fund
that the Company needs for Fund tax returns,
questionnaires, or periodic reports to shareholders
and such other reports and information requests as
the Company and NORTHERN TRUST shall agree upon from
time to time.
G. NORTHERN TRUST shall not have any responsibility
hereunder to the Company, the Fund, the Fund's
shareowners or any other person or entity for moneys
or securities of the Fund, whether held by the Fund
or custodians of the Fund.
3
H. NORTHERN TRUST agrees that it shall hold in strict
confidence all data and information obtained from the
Fund or any related party (unless such information is
or becomes readily ascertainable from public or
published information or trade sources) and shall
ensure that its officers, employees and authorized
representatives do not disclose such information to
others without the prior written consent of the Fund,
except if disclosure is required by the Securities
and Exchange Commission or other regulator body or
the Fund's auditors or in the opinion of counsel such
disclosure is required by law, and then only with as
much prior written notice to the Fund as is practical
under the circumstances.
6. INDEMNIFICATION.
A. The Company shall indemnify and hold NORTHERN TRUST harmless from
and against any and all costs, expenses, losses, damages, charges,
reasonable counsel fees, payments and liabilities which may be
asserted against or incurred by NORTHERN TRUST, or for which it
may be liable, arising out of or attributable to:
1. NORTHERN TRUST's action or omission to act pursuant hereto
except for any loss or damage arising from any negligent act
or willful misconduct of NORTHERN TRUST.
2. NORTHERN TRUST's payment of money as requested by the Company,
or the taking of any action which might make NORTHERN TRUST
liable for payment of money; provided, however, that NORTHERN
TRUST shall not be obligated to expend its own moneys or to
take any such action except in NORTHERN TRUST's sole
discretion.
3. NORTHERN TRUST's action or omission to act hereunder upon any
instructions, advice, notice, request, consent, certificate or
other instrument or paper reasonably believed by it to be
genuine and to have been properly executed and/or authorized.
4. NORTHERN TRUST's action or omission to act in good faith
reliance on the opinion of outside counsel acceptable to both
the Company and NORTHERN TRUST.
5. NORTHERN TRUST's action or omission to act in good faith
reliance on statements of counsel to the Company, the
Company's or the Fund's independent accountants, and the
Company's officers or other authorized individuals provided by
Company resolution.
6. The legality of the issue, sale or purchase of any shares of
the Fund, the sufficiency of the purchase or sale price, or
the declaration of any dividend by the Fund, whether paid in
cash or stock.
7. Any error, omission, inaccuracy or other deficiency in the
Fund's accounts and records or other information provided by
the Company or on behalf of the Company to NORTHERN TRUST, of
the failure of the Company to provide, or provide in a timely
manner, the information needed by NORTHERN TRUST to perform
its functions as specified in Section 4.C. hereunder.
8. The Company's refusal or failure to comply with the terms of
this Agreement, the Company's negligence or willful misconduct
in connection with the performance of its duties hereunder, or
the failure of any representation of the Company hereunder to
be and remain true and correct in all respects at all times.
9. The use or misuse, whether authorized or unauthorized, of the
Portfolio Accounting System or other computerized
recordkeeping and reporting system to which NORTHERN TRUST
provides the Company direct access hereunder or of any other
electronic system of communication used hereunder by the
Company or by any person who acquires access to such system(s)
through a terminal device, passwords, access instruction or
other means of access to such system(s) which are utilized by,
assigned to or otherwise made available to the Company, except
to the extent attributable to any negligence or willful
misconduct by NORTHERN TRUST.
4
B. NORTHERN TRUST shall indemnify and hold the Company harmless from
and against any and all costs, expenses, losses, damages, charges,
reasonable counsel fees, payments and liabilities which may be
asserted against or incurred by the Company, or for which it may
be liable, arising out of or attributable to:
1. NORTHERN TRUST's refusal or failure to comply with the terms
of this Agreement or the failure of any representation or
warranty of NORTHERN TRUST hereunder to be and remain true and
correct in all respects at all times.
2. Any negligent or willful misconduct of NORTHERN TRUST,
including direct losses occasioned by the negligent error of
NORTHERN TRUST in calculating the Fund's net asset value;
provided, however, that NORTHERN TRUST may take reasonable
steps at its own expense to mitigate any monetary damages
occurring as a result of NORTHERN TRUST's actions.
3. The failure of NORTHERN TRUST to materially comply with
applicable law in connection with the performance of its
duties hereunder.
In no event shall NORTHERN TRUST or the Company be liable for
consequential, special or punitive damages.
7. FORCE MAJEURE. NORTHERN TRUST shall not be responsible or liable for
its failure or delay in performance of its obligations under this
Agreement arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control, including, without
limitation: any interruption, loss or malfunction of any utility,
transportation, computer (hardware or software) or communication
service; inability to obtain labor, material, equipment or
transportation, or a delay in mails; government or exchange action,
statute, ordinance, rulings, regulations or direction; war, strike,
riot, emergency, civil disturbance, terrorism, vandalism, explosions,
labor disputes, freezes, floods, fires, tornadoes, acts of God or
public enemy, revolutions, or insurrection.
8. PROCEDURES. NORTHERN TRUST and the Company may from time to time adopt
procedures as they agree upon, and NORTHERN TRUST may conclusively
assume that any procedure approved in writing or directed by the
Company or its accountants or other advisors does not conflict with or
violate any requirements of the Fund's prospectus or the Company's,
charter or articles of incorporation, bylaws, any applicable law, rule
or regulation, or any order, decree or agreement by which the Company
may be bound.
9. TERM AND TERMINATION. The initial term of this Agreement shall be a
period of one year commencing on the effective date hereof. This
Agreement shall continue thereafter until terminated by either party
by notice in writing received by the other party not less than sixty
(60) days prior to the date upon which such termination shall take
effect. Upon termination of this Agreement:
A. The Company shall pay to NORTHERN TRUST its fees and compensation
due hereunder.
B. The Company shall designate a successor (which may be the Company)
by notice in writing to NORTHERN TRUST on or before the
termination date.
C. NORTHERN TRUST shall deliver to the successor, or if none has been
designated, to the Company, in a format designated by the Company
or the successor, all records, funds and other properties of the
Company or the Fund deposited with or held by NORTHERN TRUST
hereunder. In the event that neither a successor nor the Company
takes delivery of all records, funds and other properties of the
Company or the Fund by the termination date, NORTHERN TRUST's sole
obligation with respect thereto from the termination date until
delivery to a successor or the Company shall be to exercise
reasonable care to hold the same in custody in its form and
condition as of the termination date, and NORTHERN TRUST shall be
entitled to reasonable compensation therefor, including but not
limited to all of its out-of-pocket costs and expenses incurred in
connection therewith.
5
10. NOTICES. Notices, requests, instructions and other writings addressed
to the Company at USAA Mutual Fund, Inc., 0000 Xxxxxxxxxxxxxx Xxxx,
XX0X, Xxx Xxxxxxx, Xxxxx 00000, Attention: Xxxxxxx Xxxxxxx, or at such
address as that the Company may have designated to NORTHERN TRUST in
writing, shall be deemed to have been properly given to the Company
hereunder; and notices, requests, instructions and other writings
addressed to NORTHERN TRUST at its offices at 00 Xxxxx XxXxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxx 00000; Attention:_________________, or to such other
address as it may have designated to the Fund in writing, shall be
deemed to have been properly given to NORTHERN TRUST hereunder.
11. MISCELLANEOUS.
A. This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws
of the State of New York, without reference to the choice of laws
principles thereof.
B. All terms and provisions of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto
and their respective successors and permitted assigns.
C. The representations, warranties, and indemnifications extended
hereunder, and the provisions of Section 4.G. are intended to and
shall continue after and survive the expiration, termination or
cancellation of this Agreement.
D. No provisions of the Agreement may be amended or modified in any
manner except by a written agreement properly authorized and
executed by each party hereto.
E. The failure of either party to insist upon the performance of any
terms or conditions of this Agreement or to enforce any rights
resulting from any breach of any of the terms or conditions of
this Agreement, including the payment of damages, shall not be
construed as a continuing or permanent waiver of any such terms,
conditions, rights or privileges, but the same shall continue and
remain in full force and effect as if no such forbearance or
waiver had occurred.
F. The captions in this Agreement are included for convenience of
reference only, and in no way define or limit any of the
provisions hereof or otherwise affect their construction or
effect.
G. This Agreement may be executed in two or more separate
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
H. If any provision of this Agreement shall be determined to be
invalid or unenforceable, the remaining provisions of this
Agreement shall not be affected thereby, and every provision of
this Agreement shall remain in full force and effect and shall
remain enforceable to the fullest extent permitted by applicable
law.
I. This Agreement may not be assigned by either party hereto without
the prior written consent of the other.
J. Neither the execution nor performance of this Agreement shall be
deemed to create a partnership or joint venture by and between the
Company and NORTHERN TRUST.
K. Except as specifically provided herein, this Agreement does not in
any way affect any other agreements entered into among the parties
hereto and any actions taken or omitted by any party.
L. Notice is hereby given that a copy of the Company's articles of
incorporation and all amendments thereto is on file with the
Secretary of State of the state of its organization; that this
Agreement has been executed on behalf of the Company by the
undersigned duly authorized representative of the
6
Company in his/her capacity as such and not individually. The
Company is authorized to issue shares of capital stock in separate
series, with each such series representing interests in a separate
portfolio of securities and other assets. Under no circumstances
shall the rights, obligations or liabilities under this Agreement
with respect to the Fund constitute a right, obligation or
liability with respect to any other series of the Company, and
NORTHERN TRUST shall look solely to the assets of the Fund with
respect to any such liability.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective and duly authorized officers, to be effective as of
the day and year first above written.
The Northern Trust Company
By:__________________________________
Name:________________________________
Title:_______________________________
USAA Mutual Fund, Inc., on behalf of
its series USAA S&P 500 Index Fund
By:__________________________________
Name: Xxxxxxxxxxx X. Xxxxx
Title: President
7
EXHIBIT A
There will not be any separate payment of any Investment Accounting fee under
this Agreement. All fees in connection with the management of the Fund and the
Accounting and compliance services provided to the Fund will be paid under and
in conjunction with the investment sub-advisory agreement between the Company
and Northern Trust Investments Inc. ("NTI"), an affiliate of NORTHERN TRUST.
NORTHERN TRUST shall look solely to NTI for payment for services provided under
this Agreement.
USAA Mutual Fund, Inc. , on behalf of The Northern Trust Company
its series USAA S&P 500 Index Fund
By: ____________________ By: ____________________
Name: Xxxxxxxxxxx X. Xxxxx Name: ____________________
Title: President Title: ____________________
Exhibit A is hereby Agreed to By
Northern Trust Investments, Inc.
By: ____________________
Name: ____________________
Title: ____________________
8
EXHIBIT B
On a daily basis, NORTHERN TRUST shall provide the following accounting
functions with respect to the Fund:
A. Journalize the Fund's investment, capital share and income and expense
activities;
B. Verify investment buy/sell trade tickets when received from the Fund's
investment adviser.
C. Maintain ledgers for investment securities;
D. Maintain historical tax lots in accordance with the specific identification
method for each security;
E. Reconcile cash and investment balances with the custodian, and provide the
Fund's investment sub-adviser with the beginning cash balance available for
investment purposes;
F. Update the cash availability throughout the day as required by the Fund's
investment sub-adviser;
G. Calculate various contractual expenses (e.g., adviser and custody fees);
H. Determine the Fund's net investment income;
I. Obtain security market prices from independent pricing services approved by
the Fund's Board or if such prices are unavailable, then follow fair value
procedures approved by the Fund's Board in order to calculate the market value
of the Fund's investments;
J. Transmit or mail a copy of the portfolio valuations to the Fund's investment
adviser/sub-adviser when requested;
K. Compute the net assets and net asset value of the Fund and transmit via email
(fax for backup purposes) to the Fund's transfer agent and the Fund's investment
adviser no later than 5:30 p.m. CST same day unless circumstances prevent such.
If the Fund's net assets and net asset value cannot be computed or transmitted
to the Fund's transfer agent and the Fund's investment adviser by 5:30 p.m. CST
same day, NORTHERN TRUST will telephone the Fund's transfer agent pricing pager
and the Fund's investment adviser (or other person designated by the Fund from
time to time); and NORTHERN TRUST will electronically deliver to the Fund's
transfer agent a daily pricing file (via FTP) by 5:30 p.m. CST. If the pricing
file cannot be transmitted to the Fund's transfer agent by 5:30 p.m. CST same
day, NORTHERN TRUST will call the Fund's transfer agent pricing pager; and
L. Post to and prepare the Fund's general ledger and transmit electronically or
via fax to the Fund's transfer agent and the Fund's investment adviser no later
than 8:00 a.m. CST next day unless circumstances so prevent. If the Fund's
general ledger cannot be transmitted to the Fund's transfer agent and the Fund's
investment adviser by 8:00 a.m. CST next day, NORTHERN TRUST will contact the
Fund's transfer agent pricing pager and the Fund's investment adviser (or other
person designated by the Fund from time to time).
9
In addition NORTHERN TRUST will:
A. Supply readily available Fund statistical data to the Company as reasonably
requested on an ongoing basis;
B. Provide information necessary for the Fund to prepare federal and state tax
returns, annual and semi-annual reports, Form N-SARs and proxy statements;
C. Provide all Fund records supporting and necessary for the Fund to monitor the
Fund's status as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code") from time to time;
D. Provide information necessary for the Fund to determine the amount of
dividends and other distributions payable to shareholders as necessary to, among
other things, maintain the qualification as a regulated investment company of
the Fund under the Code;
E. Provide all Fund records supporting and necessary for the Fund to prepare
annual and semi-annual trial balances for financial statement preparation that
includes all adjustments for last day trades, last day cap stock, and any other
adjusting journal entries set forth by the Fund or the Fund's auditors;
F. Provide all Fund records supporting and necessary for the Fund to prepare
annual and semi-annual portfolio of investments schedules for financial
statement preparation with all relevant footnotes (non-income producing,
restricted securities, etc.) as well as a schedule of the futures;
G. Provide the following information for the periods as required by the Fund's
investment adviser: wash sale reports; dividends eligible for the corporate
received deduction; income earned from U.S. government and agency securities;
reports identifying the gain or loss on individual security transactions; and
reports to calculate the shareholder state tax information for our South
Carolina and Massachusetts shareholders;
H. Provide all Fund records supporting and necessary for the Fund to prepare the
Fund's Statement of Net Assets and Liabilities, the Statement of Operations and
the Statement of Changes in Net Assets; and
I. Provide SAS 70 upon request.
10
EXHIBIT 4(s)
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 18th day of October, 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 Mutual Fund,
Inc., a corporation organized under the laws of the state of Maryland (the
Company) and registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, under its Investment Advisory Agreement with the Company
(Investment Advisory Agreement), IMCO is authorized to appoint subadvisers for
series of the Company (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain Wellington Management to render
investment advisory services to such series (or portions thereof) of the Company
as now or hereafter may be identified in Schedule A to this Agreement, as such
Schedule A may be amended from time to time (each such series or portion thereof
referred to herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, 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 Company or IMCO in any way or otherwise be deemed an agent
of the Company or IMCO except as expressly authorized in this Agreement or
another writing by the Company, IMCO and 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 Company's Board of Directors (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
939020
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 Company in the same manner and with the same
force and effect as the Company might or could do with respect to such
purchases, sales, or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct of such purchases,
sales, or other transactions.
In the performance of its duties, 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 Company's compliance
procedures and other policies, procedures or guidelines as the Board or IMCO
reasonably may establish from time to time, (v) the provisions of the Internal
Revenue Code of 1986, as amended (Code), applicable to "regulated investment
companies" (as defined in Section 851 of the Code), as from time to time in
effect, and (vi) the written instructions of IMCO. Wellington Management shall
establish compliance procedures reasonably calculated to ensure compliance with
the foregoing. IMCO shall be responsible for providing Wellington Management
with the Company's Articles of Incorporation, as amended and supplemented, the
Company's By-Laws and amendments thereto and current copies of the materials
specified in Subsections (a)(iii) and (iv) of this Section 2. IMCO shall provide
Wellington Management with prior written notice of any material change to the
Company'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
2
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, 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 Company is required to pay or for which the Company 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 Company
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
3
Funds' custodian may need to settle a security's purchase or sale. Wellington
Management shall not have possession or custody of any Fund's investments. The
Company shall be responsible for all custodial agreements and the payment of all
custodial charges and fees and, upon 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 Company or the Funds,
including without limitation, interest and taxes, brokerage commissions and
other costs in connection with the purchase or sale of securities or other
investment instruments for the Funds and custodian fees and expenses.
(D) VALUATION. Securities traded on a national securities exchange or
the NASDAQ market for which market quotes are readily available are valued on
each day the New York Stock Exchange is open for business. For those securities
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
4
such periodic and special reports as the Board and IMCO may reasonably request
with respect to matters relating to the duties of Wellington Management 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 Company's administrator, the Company's custodian and foreign custodians, the
Company's transfer agent and pricing agents and all other agents and
representatives of the Company and IMCO, keep all such persons fully informed as
to such matters as they may reasonably deem necessary to the performance of
their obligations to the Company and IMCO, provide prompt responses to
reasonable requests made by such persons and maintain any appropriate interfaces
with each so as to promote the efficient exchange of information.
(G) BOOKS AND RECORDS. 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.
5
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 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(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 Company and
IMCO; (ii) the execution, delivery and performance of each of this Agreement and
the Investment Advisory Agreement does not violate any obligation by which the
Company or IMCO or their respective property is bound, whether arising by
contract, operation of law or otherwise; (iii) each of this Agreement and the
Investment Advisory Agreement has been duly authorized by appropriate action of
the Company and IMCO and when executed and delivered by IMCO will be a legal,
valid and binding obligation of the Company and IMCO, enforceable against the
Company and IMCO in accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and to general equitable principles (regardless of whether enforcement
is sought in a proceeding in equity or law); (iv) IMCO is registered as an
investment adviser under the Advisers Act; (v) IMCO has adopted a written code
of ethics
6
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 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 Company by Wellington Management Indemnities (as defined
below) for use therein.
(B) IMCO. IMCO shall indemnify and hold harmless the Wellington
Management, 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) (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. This Agreement shall become
effective with respect to a Fund upon its execution; provided, however, that
this Agreement shall not become effective with respect to a Fund unless it has
first been approved in the manner required by the 1940 Act and rules thereunder
or in accordance with exemptive or other relief granted by the SEC or its staff.
This Agreement shall remain in full force and effect continuously thereafter,
except as follows:
7
(a) By vote of a majority of (i) the Board members who are not
"interested persons" (as defined in the 0000 Xxx) of the Company, IMCO, or
Wellington Management (Independent Board Members) or (ii) the outstanding voting
shares of a Fund, such Fund may at any time terminate this Agreement, without
the payment of any penalty, by providing not more than 60 days' nor less than 10
days' written notice delivered or mailed by registered mail, postage prepaid, to
IMCO and Wellington Management.
(b) This Agreement will terminate automatically with respect to a Fund,
without the payment of any penalty, unless within two years after its initial
effectiveness and at least annually thereafter, the continuance of the Agreement
is specifically approved by (i) the Board or the shareholders of the Fund by the
affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a
majority of the Independent Board Members, by vote cast in person at a meeting
called for the purpose of voting on such approval. If the continuance of this
Agreement is submitted to the shareholders of the Fund for their approval and
such shareholders fail to approve such continuance as provided herein,
Wellington Management may continue to serve hereunder in a manner consistent
with the 1940 Act and the rules thereunder.
(c) IMCO may at any time terminate this Agreement with respect to a
Fund, without the payment of any penalty, by written notice delivered in person
or by facsimile, or mailed by registered mail, postage prepaid, to Wellington
Management. Wellington Management may at any time, without the payment of any
penalty, terminate this Agreement with respect to a Fund by not less than 90
days' written notice delivered or mailed by registered mail, postage prepaid, to
IMCO.
(d) This Agreement automatically and immediately shall terminate with
respect to the Funds, without the payment of any penalty, in the event of its
assignment (as that term is defined in the 1940 Act or interpreted under
applicable rules and regulations of the Commission) or if the Investment
Advisory Agreement shall terminate for any reason.
(e) Any notice of termination served on Wellington Management by IMCO
shall be without prejudice to the obligation of Wellington Management to
complete transactions already initiated or acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to
Wellington Management under this Agreement automatically shall revert to IMCO.
Notwithstanding any termination of this Agreement with respect to a Fund,
Sections 5, 10(a), 10(e), 11(a) and 11(c) of this Agreement shall remain in
effect after any such termination.
7. AMENDMENT OF AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. No material amendment of this Agreement shall be
effective until approved in the manner required by the 1940 Act, any rules
thereunder or any exemptive or other relief granted by the SEC or its staff
(Applicable Law).
8. APPROVAL, AMENDMENT, OR TERMINATION BY INDIVIDUAL FUND. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the
outstanding
8
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 Company, 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 Company all records and information relative to the Company
and prior, present or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably withheld and may not be
withheld where 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
Company.
(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.
9
(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 Company 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.
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.
10
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.
11
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: Secretary Title: President
By: /S/XXXXX X. XXXXXXXX
-----------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
Attest: WELLINGTON MANAGEMENT COMPANY, LLP
By: /S/ XXXX X. XXXXX By: /S/ XXXX X. XXXXX
------------------------- ------------------------------
Name: Xxxx X. Xxxxx Name: Xxxx X. Xxxxx
Title: Vice President and Counsel Title: Senior Vice President
12
SCHEDULE A
USAA GROWTH & INCOME FUND
USAA SCIENCE & TECHNOLOGY FUND
13
SCHEDULE B
FEES
RATE PER ANNUM OF THE AVERAGE DAILY NET
FUND ACCOUNT ASSETS OF THE FUND ACCOUNT
USAA Growth & Income Fund 0.20%
USAA Science & Technology Fund 0.45% - First $100 million
0.35% - Amounts above $100 million
14
