EXHIBIT (5)(a)
INVESTMENT ADVISORY AGREEMENT
BY AND BETWEEN
USAA LIFE INVESTMENT TRUST
AND
USAA INVESTMENT MANAGEMENT COMPANY
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 16th day of December, 1994 between USAA INVESTMENT
MANAGEMENT COMPANY, a corporation organized under the laws of the State of
Delaware and having a place of business in San Antonio, Texas (the "Adviser"),
and USAA LIFE INVESTMENT TRUST, a business trust organized under the laws of the
State of Delaware and having a place of business in San Antonio, Texas (the
"Trust").
WHEREAS, the Trust is organized and intends to engage in business as an
open-end management investment company and is so registered under the Investment
Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Adviser is engaged principally in the business of rendering
investment management services and is registered as an investment adviser under
the Investment Advisers Act of 1940; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust intends to initially offer shares in five series (the
"Initial Funds") to be designated as the USAA Life Variable Annuity Money Market
Fund, USAA Life Variable Annuity Income Fund, USAA Life Variable Annuity Growth
and Income Fund, USAA Life Variable Annuity World Growth Fund, and USAA Life
Variable Annuity Diversified Assets Fund (together with all other series
subsequently established by the Trust, the "Funds"), each of which pursues its
investment objectives through separate investment policies; and
WHEREAS, the Trust intends to offer shares of the Funds to the Separate
Account of USAA Life Insurance Company ("Account") to fund benefits under
variable annuity contracts ("Contracts") issued by USAA Life Insurance Company
("USAA Life"); and
WHEREAS, the Trust, the Adviser and the Adviser's affiliate, USAA Life,
have entered into an Underwriting and Administrative Services Agreement
regarding the allocation of certain duties and expenses, including investment
advisory expenses, among the parties; and
WHEREAS, the Trust has entered into a Custodian Agreement with State Street
Bank and Trust Company (the "Custodian") pursuant to which the Custodian will
calculate the net asset value of the shares of each Fund; and
WHEREAS, the Trust desires to retain the Adviser to render investment
advisory services hereunder, and the Adviser is willing to do so.
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF ADVISER.
(a) Initial Funds. The Trust hereby appoints the Adviser, and the Adviser
hereby accepts the appointment, to act as investment adviser to each of the
Initial Funds for the period and on the terms herein set forth, for the
compensation herein provided.
(b) Additional Funds. In the event that the Trust establishes one or more
series of shares other than the Initial Funds with respect to which it desires
to retain the Adviser to render investment advisory services hereunder, it shall
so notify the Adviser in writing. If the Adviser is
willing to render such services it shall notify the Trust in writing whereupon
such series of shares shall become a Fund hereunder.
(c) Independent Contractor. The Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Trust in
any way or be deemed an employee of the Trust.
2. DUTIES OF ADVISER.
The Adviser, at its own expense or pursuant to arrangements with others to
bear the expenses, shall furnish the following services and facilities to the
Trust, subject to the overall supervision and review of the Board of Trustees of
the Trust and in accordance with, as in effect from time to time, the provisions
of the Master Trust Agreement, Bylaws, Prospectus, statement of additional
information, and the 1940 Act, the Internal Revenue Code (including Subchapter
M, Section 817(h), and the regulations thereunder), and all other applicable
laws and regulations (including any applicable investment restrictions imposed
by state insurance regulation):
(a) Investment Program. The Adviser shall, as agent for the Trust, (i)
furnish continuously an investment program for each Fund, (ii) determine what
investments shall be purchased, held, sold or exchanged by each Fund and what
portion, if any, of the assets of each Fund shall be held uninvested, and (iii)
make changes on behalf of the Trust in the investments of each Fund, placing all
orders for the purchase and sale of investments for each Fund with brokers and
dealers selected by the Adviser.
(b) Valuation of Securities. The Adviser shall assist the Custodian (i)
in valuing the securities of each Fund in such manner and on such basis as
described in the then-current prospectus and statement of additional information
of the Trust and (ii) in calculating the net asset value per
share of each Fund, as described in the then-current prospectus and statement of
additional information of the Trust, at the close of the regular trading session
of the New York Stock Exchange (the "Exchange"), usually 4:00 p.m. Eastern time,
each Monday through Friday, except days on which the Exchange is closed. The
Trust shall provide, or arrange for others to provide, all necessary information
for the calculation of the net asset value per share of each Fund, including the
total number of Trust shares outstanding.
The Custodian shall provide the Adviser and Trust or its designee with the
net asset value per share of each Fund as soon as reasonably practical each day
after the net asset value per share has been calculated.
(c) Regulatory Reports. To the extent appropriate as a result of the
Adviser's responsibilities hereunder, the Adviser shall furnish to the Trust
necessary assistance, cooperation and information in the following matters,
although the Trust or its designee shall have primary responsibility for such
matters:
(i) The preparation of all reports as required by Federal or state law
or regulations.
(ii) The furnishing of any information or reports in connection with
the services provided hereunder as may be requested by any state insurance
commissioner, which request is made to ascertain whether the operations of
the Trust are being conducted in a manner consistent with applicable state
insurance law or regulations.
(iii) The preparation of prospectuses, statements of additional
information, registration statements, and amendments thereto that may be
required by Federal or other laws by the rules or regulations of any duly
authorized commission or administrative body.
(d) Office Space, Facilities, and Personnel. The Adviser shall furnish
qualified personnel as required for the performance of its responsibilities
hereunder, and, for their use, the Adviser shall
furnish office space in the offices of the Adviser or in such other place or
places as may be agreed upon from time to time, and all necessary office
facilities, simple business equipment, supplies, utilities, telephone service
and, to the extent incidental to such responsibilities, secretarial, clerical,
administrative, legal, record keeping and accounting services (in addition to
those provided by the custodian and transfer agent and by independent
accountants and attorneys retained by the Trust).
(e) Information, Records, and Confidentiality. The Trust or its designees
shall provide timely information to the Adviser regarding such matters as
purchases and redemptions of shares in each Fund, the cash requirements, and
cash available for investment in each Fund, and all other information as may be
reasonably necessary or appropriate in order for the Adviser to perform its
responsibilities hereunder.
The Trust shall own and control all records maintained hereunder by the
Adviser on the Trust's behalf and, upon request of the Trust or in the event of
termination of this Agreement with respect to any Fund for any reason, all
records relating to that Fund shall promptly be returned to the Trust, free from
any claim or retention of rights by the Adviser and without charge by the
Adviser except for the Adviser's direct expense.
The Adviser shall not disclose or use any records or information obtained
pursuant hereto except as expressly authorized herein, and will keep
confidential any information obtained pursuant hereto, and disclose such
information only if the Trust has authorized such disclosure, or if such
disclosure is expressly required by applicable Federal or state regulatory
authorities.
The Adviser shall supply the Board of Trustees and officers of the Trust
with all statistical information regarding investments which is reasonably
required by them and reasonably available to the Adviser.
(f) The Adviser and the Trust or its designee shall cooperate to adopt such
written compliance procedures as they deem necessary to assure compliance with
all federal and state securities law.
3. ALLOCATION OF EXPENSES.
The Trust assumes and shall pay, or shall provide for others to assume and
pay, all expenses for all Trust operations and activities and shall cause the
Adviser to be reimbursed, by the Trust or by others, for any such expense
incurred by the Adviser. The expenses to be so assumed shall include, without
limitation:
(a) the charges and expenses of any registrar, stock transfer or dividend
disbursing agent, custodian, or depository appointed by the Trust for the
safekeeping of its cash, portfolio securities and other property;
(b) the charges and expenses of independent auditors and independent legal
counsel retained by the Trust;
(c) brokerage commissions for transactions in the portfolio investments of
the Trust and similar fees and charges for the acquisition, disposition, lending
or borrowing of such portfolio investments;
(d) all taxes, including issuance and transfer taxes, and corporate fees
payable by the Trust to Federal, state or other governmental agencies;
(e) the fees and expenses involved in the preparation of all reports as
required by Federal or state law or regulations;
(f) the expense of furnishing any information or reports in connection with
the services provided hereunder as may be requested by any state insurance
commissioner, which request is
made to ascertain whether the operations of the Trust are being conducted in a
manner consistent with applicable state insurance law or regulations;
(g) fees and expenses involved in registering and maintaining registrations
of the Trust and of its shares with the Securities and Exchange Commission and
various states and other jurisdictions;
(h) any activity that may be attributable to the Trust as primarily
intended to result in the sale of Trust shares to other than then-current
shareholders ("Shareholders"), and, as conceptualized by the Securities and
Exchange Commission ("SEC"), the owners of Contracts ("Contractowners"),
including the preparation, setting in type, printing in quantity and
distribution of such materials as prospectuses, statements of additional
information, supplements to prospectuses and statements of additional
information, sales literature (including the Trust's periodic reports to
Shareholders and any Account periodic report to Contractowners), advertising and
other promotional material relating to either the Trust or the Account and
compensation paid to sales personnel;
(i) the preparation, setting in type, printing in quantity and distribution
of materials distributed to then-current Shareholders, and as conceptualized by
the SEC, Contractowners of such materials as prospectuses, statements of
additional information, supplements to prospectuses and statements of additional
information, periodic reports to Shareholders, and as conceptualized by the SEC,
Contractowners, communications, and proxy materials (including proxy statements,
proxy cards and voting instruction forms) relating to either the Trust or the
Account and the processing, including tabulation, of the results of voting
instruction and proxy solicitations;
(j) all expenses of Shareholders and Trustees' meetings (exclusive of
compensation and travel expenses of those Trustees and employees of the Trust
who are "interested persons" of the Trust within the meaning of the 1940 Act);
(k) compensation and travel expenses of those Trustees of the Trust who are
not "interested persons" of the Trust within the meaning of the 1940 Act;
(l) the expense of furnishing, or causing to be furnished to each
Shareholder statements of account, including the expense of mailing;
(m) membership or association dues for the Investment Company Institute or
similar organizations;
(n) interest payable on the Trust's borrowings;
(o) postage;
(p) extraordinary or non-recurring expenses, such as legal claims and
liabilities and litigation costs and indemnification payments by the Trust in
connection therewith; and
(q) the cost of the fidelity bond required by 1940 Act Rule 17g-1 and any
errors and omissions insurance or other liability insurance covering the Trust
and/or its officers, directors and employees.
4. ADVISORY FEE.
For the services and facilities to be provided by the Adviser as provided in
Paragraph 2 hereof, the Trust shall pay to the Adviser a monthly fee with
respect to each Fund as soon as practical after the last day of each calendar
month at a rate equal to one-fifth of one percent (1/5%) on an annual basis of
the Monthly Average Net Assets (defined below) of each such Fund of the Trust
for such calendar month.
In the case of termination of this Agreement with respect to any Fund during
any calendar month, the fee with respect to such Fund for that month shall be
reduced proportionately based upon
the number of calendar days during which it is in effect and the fee shall be
computed upon the average net assets of such Fund for the business days during
which it is so in effect.
The "Monthly Average Net Assets" of any Fund of the Trust for any calendar
month shall be equal to the quotient produced by dividing (i) the sum of the net
assets of such Fund determined in accordance with procedures established from
time to time by or under the direction of the Board of Trustees of the Trust in
accordance with the Master Trust Agreement of the Trust, for each calendar day
of such month, by (ii) the number of such calendar days.
5. TRUST TRANSACTIONS.
In connection with the management of the investment and reinvestment of the
assets of the Trust, the Adviser, acting by its own officers, directors or
employees, is authorized to select the brokers or dealers that will execute
purchase and sale transactions for the Trust and is directed to use its best
efforts to obtain the best available price and most favorable execution with
respect to all such purchases and sales of portfolio securities for the Trust.
Subject to this primary requirement, and maintaining as its first consideration
the benefits to the Trust and its shareholder, the Adviser shall have the right,
subject to the control of the Board of Trustees of the Trust ("Board of
Trustees") to follow a policy of selecting brokers and dealers who furnish
statistical, research and other services to the Trust or to the Adviser, at a
higher cost to the Trust than may result when allocating brokerage solely on the
basis of seeking the most favorable price and execution. The Adviser shall
determine in good faith that such higher cost was reasonable in relation to the
value of the brokerage and research services provided. Notwithstanding the
foregoing, the Adviser shall not itself execute purchase and sale transactions
for the Trust, except pursuant to such explicit authorization and procedures
that the Board of Trustees shall subsequently adopt.
The fees payable to the Adviser by the Trust hereunder shall be reduced by
any tender solicitation fees or similar payments received by the Adviser, or any
affiliated person of the Adviser, in connection with the tender of investments
of any Fund (less any direct expenses incurred by the Adviser, or any affiliated
person of the Adviser, in connection with such fees or payments). The Adviser
shall use its best efforts to recapture all available tender offer solicitation
fees and similar payments in connection with tenders of the securities of any
Fund, provided, however, that neither the Adviser, nor any affiliate of the
Adviser shall be required to register as a broker-dealer for this purpose. The
Adviser shall advise the Board of Trustees of any fees or payments of whatever
type which it may be possible for the Adviser or an affiliate of the Adviser to
receive in connection with the purchase or sale of investment securities for any
Fund.
6. RELATIONS WITH TRUST.
Subject to and in accordance with the Master Trust Agreement and Bylaws of
the Trust or the Articles of Incorporation and Bylaws of the Adviser, it is
understood that (i) Trustees, officers and designees of the Trust are or may be
interested in the Adviser (or any successor thereof) as directors, officers or
otherwise, (ii) directors, officers, agents, and shareholders of the Adviser are
or may be interested in the Trust as Trustees, officers, shareholders or
otherwise, and (iii) the effect of any such interests shall be governed by the
Master Trust Agreement and Bylaws.
7. LIABILITY OF ADVISER.
No provision of this Agreement shall be deemed to protect the Adviser
against any liability to the Trust or its Shareholders or, as conceptualized by
the SEC, Contractowners to which it might
otherwise be subject by reason of any willful misfeasance, bad faith or
negligence in the performance of its duties or the reckless disregard of its
obligations and duties under this Agreement. Nor shall any provision hereof be
deemed to protect any Trustee or officer of the Trust against any such liability
to which he might otherwise be subject by reason of any willful misfeasance, bad
faith or negligence in the performance of his duties or the reckless disregard
of his obligations and duties in the conduct of such person's office.
8. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to each
Initial Fund on January 3, 1995 and, with respect to any additional Fund, on the
date of receipt by the Trust of notice from the Adviser in accordance with
Paragraph 1(b) hereof that the Adviser is willing to serve as Adviser with
respect to such Fund. Unless terminated as herein provided, this Agreement
shall remain in full force and effect until January 3, 1997 with respect to the
Initial Funds and, with respect to each additional Fund, until two years
following the date on which such Fund becomes a Fund hereunder, and shall
continue in full force and effect thereafter with respect to each Fund so long
as such continuance with respect to any such Fund is approved at least annually
(a) by either the Trustees of the Trust or by vote of a majority of the
outstanding voting shares (as defined in the 1940 Act and rules thereunder) of
such Fund, and (b) in either event by the vote of a majority of the Trustees of
the Trust who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act and rules thereunder) of any such party, cast in person
at a meeting called for the purpose of voting on such approval. Notwithstanding
the foregoing, the Board of Trustees may, from time to time, establish a new
effective date for the continuance of this Agreement with respect to any
Initial Fund and/or additional Fund; provided, that such new effective date
precedes the then current termination date of the Agreement.
Any approval of this Agreement by the holders of a majority of the
outstanding shares (as defined in the 1940 Act and rules thereunder) of any Fund
shall be effective to continue this Agreement with respect to that Fund
notwithstanding (A) that this Agreement has not been approved by the vote of a
majority of the outstanding voting shares of any other Fund affected thereby,
and (B) that this Agreement has not been approved by the vote of a majority of
the outstanding voting shares of the Trust, unless such approval shall be
required by any other applicable law or otherwise.
(b) Termination. This Agreement may be terminated with respect to any Fund
at any time, without payment of any penalty, by vote of the Trustees of the
Trust, by vote of a majority of the outstanding voting shares (as defined in the
1940 Act and rules thereunder) of such Fund, or by the Adviser on at least sixty
(60) days written notice to the other party.
(c) Automatic Termination. This Agreement shall automatically and
immediately terminate in the event of its assignment (as defined in the 1940 Act
and rules thereunder).
9. NAME OF COMPANY.
It is understood that the name "USAA," and any logo associated with that
name, is the valuable property of the United Services Automobile Association,
and that the Trust has the right to include "USAA" as a part of its name only so
long as this Agreement shall continue and the Adviser is a wholly owned indirect
subsidiary of the United Services Automobile Association. Upon termination of
this Agreement the Trust shall forthwith cease to use the USAA name and any logo
associated with that name and shall submit to its Shareholders an amendment to
its Master Trust Agreement to change the Trust's name.
10. SERVICES NOT EXCLUSIVE.
The services of the Adviser to the Trust hereunder are not to be deemed
exclusive, and the Adviser shall be free to render similar services to others so
long as its services hereunder are not impaired thereby.
11. 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.
12. GOVERNING LAW.
This Agreement shall be construed in accordance with the laws of the State
of Texas and the applicable provisions of the 1940 Act. To the extent the
applicable law of the State of Texas, or any of the provisions herein conflict
with the applicable provisions of the 1940 Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
USAA LIFE INVESTMENT TRUST
BY: /s/________________________________
XXXXX X. XXXXXX
ATTEST: President
/s/____________________________
X.X. XXXXXXXX, XX.
Assistant Secretary
USAA INVESTMENT MANAGEMENT COMPANY
BY: /s/________________________________
XXXXXXX X.X. XXXX
ATTEST: President
/s/____________________________
XXXXXXX X. XXXXXX
Secretary
