Exhibit d(viii)
USAA CONTRACT NUMBER: 1015825-000
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of March, 2006 (the Effective Date)
between USAA INVESTMENT MANAGEMENT COMPANY, a corporation organized under the
laws of the State of Delaware and having its principal place of business in San
Antonio, Texas (IMCO) and BARROW, HANLEY, XXXXXXXXX & XXXXXXX, INC., a
corporation organized under the laws of the State of Nevada and having its
principal place of business in Dallas, Texas (BHMS).
WHEREAS, IMCO serves as the investment adviser to USAA Investment Trust, a
business trust organized under the laws of the Commonwealth of Massachusetts
(the Company) and registered as an open-end management investment company under
the Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, under its Investment Advisory Agreement with the Company
(Investment Advisory Agreement), IMCO is authorized to appoint subadvisers for
series of the Company (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain BHMS to render investment advisory services
to such series (or portions thereof) of the Company as now or hereafter may be
identified in Schedule A to this Agreement, as such Schedule A may be amended
from time to time (each such series or portion thereof referred to herein as a
Fund Account and collectively as Fund Accounts); and
WHEREAS, BHMS is willing to provide such services to the Fund Accounts and
IMCO upon the terms and conditions and for the compensation set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. APPOINTMENT OF BHMS. IMCO hereby appoints BHMS to act as an investment
adviser for each Fund Account in accordance with the terms and conditions of
this Agreement. BHMS will be an independent contractor and will have no
authority to act for or represent the Company or IMCO in any way or otherwise be
deemed an agent of the Company or IMCO except as expressly authorized in this
Agreement or another writing by the Company, IMCO and BHMS. BHMS accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. DUTIES OF BHMS.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO and
the Company's Board of Trustees (the Board), BHMS, at its own expense, shall
have full discretion to manage, supervise and direct the investment and
reinvestment of Fund Accounts allocated to it by IMCO from time to time. It is
understood that a Fund Account may consist of all, a portion of, or none of the
assets of the Fund, and that IMCO has the right to allocate and reallocate such
assets to a Fund Account at any time. BHMS shall perform its duties described
herein in a
CONFIDENTIAL Page 1 of 13
manner consistent with the investment objective, policies and restrictions set
forth in the then current Prospectus and Statement of Additional Information
(SAI) for each Fund. Should BHMS anticipate materially modifying its investment
process, it must provide written notice in advance to IMCO, and any affected
Prospectus and SAI should be amended accordingly.
For each Fund set forth on Schedule A to this Agreement, BHMS shall provide
investment advice only with respect to the discrete portion of the Fund's
portfolio allocated to it by IMCO from time to time and shall not consult with
any other subadviser of such Fund concerning transactions for the Fund in
securities or other assets.
With respect to the management of each Fund Account pursuant to this
Agreement, BHMS shall determine what investments shall be purchased, held, sold
or exchanged by each Fund Account and what portion, if any, of the assets of
each Fund Account shall be held in cash or cash equivalents, and purchase or
sell portfolio securities for each Fund Account; except that, to the extent BHMS
wishes to hold cash or cash equivalents in excess of 10% of a Fund Account's
assets, BHMS must request in writing and receive advance permission from IMCO.
In accordance with Subsection (b) of this Section 2, BHMS shall arrange for
the execution of all orders for the purchase and sale of securities and other
investments for each Fund Account and will exercise full discretion and act for
the Company in the same manner and with the same force and effect as the Company
might or could do with respect to such purchases, sales, or other transactions,
as well as with respect to all other things necessary or incidental to the
furtherance or conduct of such purchases, sales, or other transactions.
In the performance of its duties, BHMS will act in the best interests of
each Fund and will comply with (i) applicable laws and regulations, including,
but not limited to, the 1940 Act and the Investment Advisers Act of 1940, as
amended (Advisers Act), and the rules under each, (ii) the terms of this
Agreement, (iii) the stated investment objective, policies and restrictions of
each Fund, as stated in the then-current Registration Statement of each Fund,
(iv) the Company's compliance procedures and other policies, procedures or
guidelines as the Board or IMCO reasonably may establish from time to time, (v)
the provisions of the Internal Revenue Code of 1986, as amended (Code),
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), as from time to time in effect, and (vi) the written instructions of
IMCO. BHMS shall establish compliance procedures reasonably calculated to ensure
compliance with the foregoing. IMCO shall be responsible for providing BHMS with
the Company's Declaration of Trust, as amended and supplemented, the Company's
By-Laws and amendments thereto and current copies of the materials specified in
Subsections (a)(iii) and (iv) of this Section 2. IMCO shall provide BHMS with
prior written notice of any material change to the Company's Registration
Statement that would affect BHMS' management of a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, BHMS will select the
brokers or dealers that will execute purchase and sale transactions for the Fund
Accounts, subject to the conditions herein. In the selection of broker-dealers
and the placement of orders for the purchase and sale of portfolio investments
for the Fund Accounts, BHMS shall use its best efforts to obtain for the Fund
Accounts the most favorable price and execution available, except to the extent
it may be permitted to pay higher brokerage commissions for brokerage and
research services as described below. In using its
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best efforts to obtain the most favorable price and execution available, BHMS,
bearing in mind each Fund's best interests at all times, shall consider all
factors it deems relevant, including by way of illustration, price, the size of
the transaction, the nature of the market for the security, the amount of the
commission and dealer's spread or 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), BHMS shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused a Fund Account to pay a broker-dealer that provides brokerage and
research services to BHMS an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another
broker-dealer offering equally good execution capability in the portfolio
investment would have charged for effecting that transaction if BHMS determines
in good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker-dealer,
viewed in terms of either that particular transaction or BHMS' overall
responsibilities with respect to the Fund and to other clients of BHMS as to
which BHMS exercises investment discretion. The Board or IMCO may direct BHMS to
effect transactions in portfolio securities through broker-dealers in a manner
that will help generate resources to pay the cost of certain expenses that the
Company is required to pay or for which the Company is required to arrange
payment.
On occasions when BHMS deems the purchase or sale of a security to be in
the best interest of a Fund as well as other clients of BHMS, BHMS, to the
extent permitted by applicable laws and regulations, may aggregate the
securities to be purchased or sold to attempt to obtain a more favorable price
or lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by BHMS in the manner it considers to
be the most equitable and consistent with its fiduciary obligations to the Fund
and to its other clients over time.
BHMS may buy securities for a Fund Account at the same time it is selling
such securities for another client account and may sell securities for a Fund
Account at the time it is buying such securities for another client account. In
such cases, subject to applicable legal and regulatory requirements, and in
compliance with such procedures of the Company as may be in effect from time to
time, BHMS may effectuate cross transactions between a Fund Account and such
other account if it deems this to be advantageous.
BHMS will advise the Funds' custodian or such depository or agents as may
be designated by the custodian and IMCO promptly of each purchase and sale of a
portfolio security, specifying the name of the issuer, the description and
amount or number of shares of the security purchased, the market price, the
commission and gross or net price, the trade date and settlement date, the
identity of the effecting broker or dealer and any other pertinent data that the
Funds' custodian may need to settle a security's purchase or sale. BHMS shall
not have possession or custody of any Fund's investments. The Company shall be
responsible for all custodial agreements and the payment of all custodial
charges and fees and, upon BHMS giving proper instructions to the custodian,
BHMS shall have no responsibility or liability for the acts,
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omissions or other conduct of the custodian, depository, or other agent
designated by the custodian and IMCO.
Notwithstanding the foregoing, BHMS agrees that IMCO shall have the right
by written notice to identify securities that may not be purchased on behalf of
any Fund and/or brokers and dealers through which portfolio transaction on
behalf of the Fund may not be effected, including, without limitation, brokers
or dealers affiliated with IMCO. BHMS shall refrain from purchasing such
securities for a Fund Account or directing any portfolio transaction to any such
broker or dealer on behalf of a Fund Account, unless and until the written
approval of IMCO to do so is obtained. In addition, BHMS agrees that it shall
not direct portfolio transactions for the Fund Accounts through any broker or
dealer that is an "affiliated person" (as that term is defined in the 1940 Act
or interpreted under applicable rules and regulations of the Commission) of
BHMS, except as permitted under the 1940 Act. IMCO agrees that it will provide
BHMS with a list of brokers and dealers that are affiliated persons of the
Funds, or affiliated persons of such persons, and shall timely update that list
as the need arises. The Funds agree that any entity or person associated with
IMCO or BHMS that is a member of a national securities exchange is authorized to
effect any transaction on such exchange for the account of the Funds that is
permitted by Section 11(a) of the Exchange Act, and the Funds consent to the
retention of compensation for such transactions.
(C) EXPENSES. BHMS, at its expense, will furnish all necessary facilities
and personnel, including salaries, expenses and fees of any personnel required
for them to faithfully perform their duties under this Agreement and
administrative facilities, including bookkeeping, and all equipment and services
necessary for the efficient conduct of BHMS' duties under this Agreement.
However, BHMS shall not be obligated to pay any expenses of IMCO, the Company or
the Funds, including without limitation, interest and taxes, brokerage
commissions and other costs in connection with the purchase or sale of
securities or other investment instruments for the Funds and custodian fees and
expenses.
(D) VALUATION. Securities traded on a national securities exchange or the
NASDAQ market for which market quotes are readily available are valued on each
day the New York Stock Exchange is open for business. For those securities for
which market quotes are not readily available, BHMS, at its expense and in
accordance with procedures and methods established by the Board, which may be
amended from time to time, will provide assistance to IMCO in determining the
fair value of such securities, including providing market price information
relating to these assets of the Fund. BHMS also shall monitor for "significant
events" that occur after the closing of a market but before the Funds calculate
their net asset values and that may affect the valuation of any Fund Account's
portfolio securities and shall notify IMCO immediately of the occurrence of any
such events.
(E) REPORTS AND AVAILABILITY OF PERSONNEL. BHMS, at its expense, shall
render to the Board and IMCO such periodic and special reports as the Board and
IMCO may reasonably request with respect to matters relating to the duties of
BHMS set forth herein. BHMS, at its expense, will make available to the Board
and IMCO at reasonable times its portfolio managers and other appropriate
personnel in order to review investment policies of the Funds and to consult
with the Board and IMCO regarding the investment affairs of the Funds, including
economic, statistical and investment matters relevant to BHMS' duties hereunder.
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(F) COMPLIANCE MATTERS. BHMS, at its expense, will provide IMCO with such
compliance reports relating to its duties under this Agreement as may be agreed
upon by such parties from time to time. BHMS also shall cooperate with and
provide reasonable assistance to IMCO, the Company's administrator, the
Company's custodian and foreign custodians, the Company's transfer agent and
pricing agents and all other agents and representatives of the Company and IMCO,
keep all such persons fully informed as to such matters as they may reasonably
deem necessary to the performance of their obligations to the Company and IMCO,
provide prompt responses to reasonable requests made by such persons and
maintain any appropriate interfaces with each so as to promote the efficient
exchange of information.
(G) BOOKS AND RECORDS. BHMS will maintain for the Funds all books and
records required to be maintained by the Funds pursuant to the 1940 Act and the
rules and regulations promulgated thereunder insofar as such records relate to
the investment affairs of the Fund Accounts. Pursuant to Rule 31a-3 under the
1940 Act, BHMS agrees that: (i) all records it maintains for a Fund Account are
the property of the Fund; (ii) it will surrender promptly to a Fund or IMCO any
such records (or copies of such records) upon the Fund's or IMCO's request; and
(iii) it will preserve for the periods prescribed by Rule 31a-2 under the 1940
Act the records it maintains for any Fund Account. Notwithstanding subsection
(ii) above, BHMS may maintain copies of such records to comply with its
recordkeeping obligations.
(H) PROXIES. Unless and until BHMS is otherwise directed by IMCO or the
Board, IMCO vote proxies with respect to a Fund Account's securities and
exercise rights in corporate actions or otherwise in accordance with IMCO's
proxy voting guidelines.
3. ADVISORY FEE. IMCO shall pay to BHMS as compensation for BHMS' services
rendered pursuant to this Agreement a fee based on the average daily net assets
of each Fund Account at the annual rates set forth in Schedule B, which schedule
can be modified from time to time, subject to any appropriate approvals required
by the 1940 Act. Such fees shall be calculated daily and payable monthly in
arrears within 15 business days after the end of such month. IMCO (and not the
Funds) shall pay such fees. If BHMS shall serve for less than the whole of a
month, the compensation as specified shall be prorated based upon the number of
calendar days during which this Agreement is in effect during such month, and
the fee shall be computed based upon the average daily net assets of a Fund
Account for such days.
4. REPRESENTATIONS AND WARRANTIES.
(A) BHMS. BHMS represents and warrants to IMCO that (i) the retention of
BHMS by IMCO as contemplated by this Agreement is authorized by BHMS' governing
documents; (ii) the execution, delivery and performance of this Agreement does
not violate any obligation by which BHMS or its property is bound, whether
arising by contract, operation of law or otherwise; (iii) this Agreement has
been duly authorized by appropriate action of BHMS and when executed and
delivered by BHMS will be a legal, valid and binding obligation of BHMS,
enforceable against BHMS in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general equitable principles (regardless of
whether enforcement is sought in a proceeding in equity or law); (iv) BHMS is
registered as an investment adviser under the Advisers Act; (v) BHMS has adopted
a written code of ethics complying with the requirements of Rule 17j-1 under the
1940
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Act and that BHMS and certain of its employees, officers, partners and directors
are subject to reporting requirements thereunder and, accordingly, agrees that
it shall, on a timely basis, furnish a copy of such code of ethics to IMCO, and,
with respect to such persons, BHMS shall furnish to IMCO all reports and
information provided under Rule 17j-1(c)(2); (vi) BHMS is not prohibited by the
1940 Act, the Advisers Act or other law, regulation or order from performing the
services contemplated by this Agreement; (vii) BHMS will promptly notify IMCO of
the occurrence of any event that would disqualify BHMS from serving as
investment manager of an investment company pursuant to Section 9(a) of the 1940
Act or otherwise; (viii) BHMS has provided IMCO with a copy of its Form ADV,
which as of the date of this Agreement is its Form ADV as most recently filed
with the SEC, and promptly will furnish a copy of all amendments to IMCO at
least annually; (ix) BHMS will notify IMCO of any "assignment" (as defined in
the 0000 Xxx) of this Agreement or change of control of BHMS, as applicable, and
any changes in the key personnel who are either the portfolio manager(s) of any
Fund Account or senior management of BHMS, in each case prior to or promptly
after, such change; and (x) BHMS has adequate disaster recovery and interruption
prevention measures to ensure business resumption in accordance with applicable
law and within industry standards.
(B) IMCO. IMCO represents and warrants to BHMS that (i) the retention of
BHMS by IMCO as contemplated by this Agreement is authorized by the respective
governing documents of the Company and IMCO; (ii) the execution, delivery and
performance of each of this Agreement and the Investment Advisory Agreement does
not violate any obligation by which the Company or IMCO or their respective
property is bound, whether arising by contract, operation of law or otherwise;
(iii) each of this Agreement and the Investment Advisory Agreement has been duly
authorized by appropriate action of the Company and IMCO and when executed and
delivered by IMCO will be a legal, valid and binding obligation of the Company
and IMCO, enforceable against the Company and IMCO in accordance with its terms,
subject, as to enforcement, to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and to general equitable principles
(regardless of whether enforcement is sought in a proceeding in equity or law);
(iv) IMCO is registered as an investment adviser under the Advisers Act; (v)
IMCO has adopted a written code of ethics complying with the requirements of
Rule 17j-1 under the 1940 Act and that IMCO and certain of its employees,
officers and directors are subject to reporting requirements thereunder; (vi)
IMCO is not prohibited by the 1940 Act, the Advisers Act or other law,
regulation or order from performing the services contemplated by this Agreement;
and (vii) IMCO will promptly notify BHMS of the occurrence of any event that
would disqualify IMCO from serving as investment manager of an investment
company pursuant to Section 9(a) of the 1940 Act or otherwise.
5. LIABILITY AND INDEMNIFICATION.
(A) BHMS. BHMS shall be liable for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which the Company, a Fund, IMCO, any affiliated persons thereof (within the
meaning of the 0000 Xxx) and any controlling persons thereof (as described in
Section 15 of the Securities Act of 1933, as amended (the 1933 Act))
(collectively, IMCO Indemnities) may become subject under the 1933 Act, the 1940
Act, the Advisers Act, or under any other statute, at common law or otherwise
arising out of (i) any negligence, willful misconduct, bad faith or reckless
disregard of BHMS in the performance of any of its duties or obligations
hereunder or (ii) any untrue statement of a material fact contained
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in the Prospectus and SAI, proxy materials, reports, advertisements, sales
literature, or other materials pertaining to the Funds or the omission to state
therein a material fact known to BHMS which was required to be stated therein or
necessary to make the statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to IMCO or the Company
by BHMS Indemnities (as defined below) for use therein. BHMS shall indemnify and
hold harmless the IMCO Indemnities for any and all such losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses).
(B) IMCO. IMCO shall be liable for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which BHMS, any affiliated persons thereof (within the meaning of the 0000 Xxx)
and any controlling persons thereof (as described in Section 15 of the 1933 Act)
(collectively, BHMS Indemnities) may become subject under the 1933 Act, the 1940
Act, the Advisers Act, or under any other statute, at common law or otherwise
arising out of (i) any negligence, willful misconduct, bad faith or reckless
disregard by IMCO in the performance of any of its duties or obligations
hereunder or (ii) any untrue statement of a material fact contained in the
Prospectus and SAI, proxy materials, reports, advertisements, sales literature,
or other materials pertaining to the Funds or the omission to state therein a
material fact known to IMCO which was required to be stated therein or necessary
to make the statements therein not misleading, unless such statement or omission
was made in reliance upon information furnished to IMCO or the Company. IMCO
shall indemnify and hold harmless BHMS Indemnities for any and all such losses,
claims, damages, liabilities or litigation (including reasonable legal and other
expenses).
6. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall become
effective with respect to a Fund upon its execution; provided, however, that
this Agreement shall not become effective with respect to a Fund unless it has
first been approved in the manner required by the 1940 Act and rules thereunder
or in accordance with exemptive or other relief granted by the SEC or its staff.
This Agreement shall remain in full force and effect continuously thereafter,
except as follows:
(A) By vote of a majority of (i) the Board members who are not "interested
persons" (as defined in the 0000 Xxx) of the Funds, IMCO, or BHMS (Independent
Board Members) or (ii) the outstanding voting shares of a Fund, such Fund may at
any time terminate this Agreement, without the payment of any penalty, by
providing not more than 60 days' written notice delivered or mailed by
registered mail, postage prepaid, to IMCO and BHMS.
(B) This Agreement will terminate automatically with respect to a Fund,
without the payment of any penalty, unless within two years after its initial
effectiveness and at least annually thereafter, the continuance of the Agreement
is specifically approved by (i) the Board or the shareholders of the Fund by the
affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a
majority of the Independent Board Members, by vote cast in person at a meeting
called for the purpose of voting on such approval. If the continuance of this
Agreement is submitted to the shareholders of the Fund for their approval and
such shareholders fail to approve such continuance as provided herein, BHMS may
continue to serve hereunder in a manner consistent with the 1940 Act and the
rules thereunder.
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(C) IMCO may at any time terminate this Agreement with respect to a Fund,
without the payment of any penalty, by written notice delivered in person or by
facsimile, or mailed by registered mail, postage prepaid, to BHMS. BHMS may at
any time, without the payment of any penalty, terminate this Agreement with
respect to a Fund by not less than 90 days' written notice delivered or mailed
by registered mail, postage prepaid, to IMCO.
(D) This Agreement automatically and immediately shall terminate with
respect to the Funds, without the payment of any penalty, in the event of its
assignment (as that term is defined in the 1940 Act or interpreted under
applicable rules and regulations of the Commission) or if the Investment
Advisory Agreement shall terminate for any reason.
(E) Any notice of termination served on BHMS by IMCO shall be without
prejudice to the obligation of BHMS to complete transactions already initiated
or acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to BHMS
under this Agreement automatically shall revert to IMCO. Notwithstanding any
termination of this Agreement with respect to a Fund, Sections 5, 10(a), 10(e),
11(a), and 11(c) of this Agreement shall remain in effect after any such
termination.
7. AMENDMENT OF AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. No material amendment of this Agreement shall be
effective until approved in the manner required by the 1940 Act, any rules
thereunder or any exemptive or other relief granted by the SEC or its staff
(Applicable Law).
8. APPROVAL, AMENDMENT, OR TERMINATION BY INDIVIDUAL FUND. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 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 BHMS to IMCO in connection with the
Funds hereunder are not to be deemed exclusive, and BHMS shall be free to render
investment advisory services to others so long as its services hereunder are not
impaired thereby. It is understood that the persons employed by BHMS to assist
in the performance of its duties hereunder will not devote their full time to
such services and nothing contained herein shall be deemed to limit or restrict
in any manner whatsoever the right of BHMS to engage in or devote time and
attention to other businesses or to render services of whatever kind or nature.
It is understood that IMCO may appoint at any time in accordance with Applicable
Law one or more subadvisers, in addition to BHMS, or IMCO itself, to perform
investment advisory services to any portion of the Funds.
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10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. BHMS shall, upon reasonable notice, afford IMCO
at all reasonable times access to BHMS' officers, employees, agents and offices
and to all its relevant books and records and shall furnish IMCO with all
relevant financial and other data and information as requested; provided,
however, that nothing contained herein shall obligate BHMS to provide IMCO with
access to the books and records of BHMS relating to any other accounts other
than the Funds.
(B) CONFIDENTIALITY. BHMS, and its officers, employees and authorized
representatives, shall treat confidentially and as proprietary information of
the Company all records and information relative to the Company and prior,
present or potential shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Company, which approval shall not be unreasonably withheld and may not be
withheld where BHMS may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company.
(C) PRIVACY POLICY. BHMS acknowledges that nonpublic customer information
(as defined in Regulation S-P, including any amendments thereto) of customers of
the Funds received from IMCO is subject to the limitations on redisclosure and
reuse set forth in Section 248.11 of such Regulation, and agrees such
information (i) shall not be disclosed to any third party for any purpose
without the written consent of IMCO unless permitted by exceptions set forth in
Sections 248.14 or 248.15 of such Regulation and (ii) shall be safeguarded
pursuant to procedures adopted under Section 248.30 of such Regulation if so
required.
(D) PUBLIC ANNOUNCEMENTS. No party shall issue any press release or
otherwise make any public statements with respect to the matters covered by this
Agreement without the prior written consent of the other parties hereto, which
consent shall not be unreasonably withheld; provided, however, that consent
shall not be required if, in the opinion of counsel, such disclosure is required
by law; provided further, however, that the party making such disclosure shall
provide the other parties hereto with as much prior written notice of such
disclosure as is practical under the circumstances.
(E) NOTIFICATIONS. BHMS agrees that it will promptly notify IMCO in the
event that BHMS or any of its affiliates is or expects to become the subject of
an administrative proceeding or enforcement action by the Commission or other
regulatory body with applicable jurisdiction.
(F) INSURANCE. BHMS agrees to maintain errors and omissions or professional
liability insurance coverage in an amount that is reasonable in light of the
nature and scope of BHMS' business activities.
(G) SHAREHOLDER MEETING AND OTHER EXPENSES. In the event that the Company
shall be required to call a meeting of shareholders or send an information
statement or prospectus supplement to shareholders solely due to actions
involving BHMS, including, without limitation, a change of control of BHMS or a
portfolio manager change, BHMS shall bear all reasonable
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expenses associated with such shareholder meeting, information statement, or
prospectus supplement.
11. MISCELLANEOUS.
(A) NOTICES. All notices or other communications given under this Agreement
shall be made by guaranteed overnight delivery, telecopy or certified mail;
notice is effective when received. Notice shall be given to the parties at the
following addresses:
IMCO: USAA Investment Management Company
0000 Xxxxxxxxxxxxxx Xxxx, X-X0-X
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Securities Counsel
BHMS: Barrow, Hanley, Xxxxxxxxx & Xxxxxxx, Inc.
0000 XxXxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx Xxxxx
(B) SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors.
(C) GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the State of Texas, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act. To the extent that the
applicable laws of the State of Texas conflict with the applicable provisions of
the 1940 Act, the latter shall control.
(D) COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(E) HEADINGS. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
(F) ENTIRE AGREEMENT. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act.
(G) LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any obligation of the Funds
under this Agreement are not binding upon the Trustees or the shareholders
individually but are binding only upon the assets and property of the Funds.
10
IN WITNESS WHEREOF, IMCO and BHMS have caused this Agreement to be executed
as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT
COMPANY
/S/Xxxx X. Xxxxxx /S/Xxxxxxxxxxx X. Xxxxx
By: ____________________________ By: ___________________________
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
/S/Xxxxx X. Xxxxxxxx
By: ___________________________
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
Attest: BARROW, HANLEY, XXXXXXXXX &
XXXXXXX, INC.
/S/Xxxxx X. Xxxxxx
By: ____________________________ By: ___________________________
Name: Name: Xxxxx X. Xxxxxx
Title: Title: President
11
SCHEDULE A
USAA BALANCED STRATEGY FUND
12
SCHEDULE B
FEES
FUND ACCOUNT Rate per annum of the average daily
------------ net assets of the Fund Account plus the
average daily net assets managed by
BHMS in the USAA Value Fund and
the USAA Growth & Income Fund
----------------------
USAA Balanced Strategy Fund 0.75% on the first $15 million of assets
0.55% on assets over $15 million and
up to $25 million
0.45% on assets over $25 million and
up to $100 million
0.35% on assets over $100 million and
up to $200 million
0.25% on assets over $200 million and
up to $1 billion
0.15% on assets over $1 billion
13
Exhibit d(ix)
THIS NUMBER SHOULD APPEAR ON ALL INVOICES
USAA Contract Number: 1014700-000
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of December, 2005 (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 BATTERYMARCH FINANCIAL MANAGEMENT, INC., a corporation
organized under the laws of the State of Maryland and having its principal place
of business in Boston, MA (Batterymarch).
WHEREAS, IMCO serves as the investment adviser to USAA Investment Trust, a
business trust organized under the laws of the Commonwealth of Massachusetts
(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 Batterymarch 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, Batterymarch 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 BATTERYMARCH. IMCO hereby appoints Batterymarch to act as
subadviser for each Fund Account in accordance with the terms and conditions of
this Agreement. Batterymarch 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 Batterymarch. Batterymarch
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.
2. DUTIES OF BATTERYMARCH.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO and
the Company's Board of Trustees (the Board), Batterymarch, 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. Batterymarch shall perform its duties
described herein in a manner consistent with the investment objective, policies
and restrictions
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USAA Contract Number: 1014700-000
set forth in the then current Prospectus and Statement of Additional Information
(SAI) for each Fund. Should Batterymarch anticipate materially modifying its
investment process, it must provide written notice in advance to IMCO, and any
affected Prospectus and SAI should be amended accordingly.
For each Fund set forth on Schedule A to this Agreement, Batterymarch shall
provide investment advice only with respect to the discrete portion of the
Fund's portfolio allocated to it by IMCO from time to time and shall not consult
with any other subadviser of such Fund concerning transactions for the Fund in
securities or other assets.
With respect to the management of each Fund Account pursuant to this
Agreement, Batterymarch 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 Batterymarch wishes to hold cash or cash equivalents in excess of 10% of
a Fund Account's assets, Batterymarch must request in writing and receive
advance permission from IMCO.
In accordance with Subsection (b) of this Section 2, Batterymarch 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, Batterymarch will act in the best
interests of each Fund and will comply with (i) applicable laws and regulations,
including, but not limited to, the 1940 Act and the Investment Advisers Act of
1940, as amended (Advisers Act), and the rules under each, (ii) the terms of
this Agreement, (iii) the stated investment objective, policies and restrictions
of each Fund, as stated in the then-current Registration Statement of each Fund,
(iv) the Company's compliance procedures and other policies, procedures or
guidelines as the Board or IMCO reasonably may establish from time to time, (v)
the provisions of the Internal Revenue Code of 1986, as amended (Code),
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), as from time to time in effect, and (vi) the written instructions of
IMCO. Batterymarch shall establish compliance procedures reasonably calculated
to ensure compliance with the foregoing. IMCO shall be responsible for providing
Batterymarch 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 Batterymarch with prior written notice of any material change to
the Company's Registration Statement that would affect Batterymarch's management
of a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, Batterymarch 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, Batterymarch shall use its best
efforts to obtain for the
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USAA Contract Number: 0000000-000
Fund Accounts the most favorable price and execution available, except to the
extent it may be permitted to pay higher brokerage commissions for brokerage and
research services as described below. In using its best efforts to obtain the
most favorable price and execution available, Batterymarch, 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.
Batterymarch shall not be responsible for any acts or omissions by any such
broker or brokers, or any third party not owned by Batterymarch, provided that
Batterymarch is not negligent in the selection of such broker or brokers, or
third parties.
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), Batterymarch 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 Batterymarch 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 Batterymarch
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
Batterymarch's overall responsibilities with respect to the Fund and to other
clients of Batterymarch as to which Batterymarch exercises investment
discretion. The Board or IMCO may direct Batterymarch 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 Batterymarch deems the purchase or sale of a security to
be in the best interest of a Fund as well as other clients of Batterymarch,
Batterymarch, 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 Batterymarch 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.
Batterymarch 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, Batterymarch may effectuate cross transactions between a Fund
Account and such other account if it deems this to be advantageous.
Batterymarch 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
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USAA Contract Number: 1014700-000
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. Batterymarch 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 Batterymarch giving proper instructions to the
custodian, Batterymarch shall have no responsibility or liability for the acts,
omissions or other conduct of the custodian, depository, or other agent
designated by the custodian and IMCO.
Notwithstanding the foregoing, Batterymarch agrees that IMCO shall have the
right by written notice to identify securities that may not be purchased on
behalf of any Fund and/or brokers and dealers through which portfolio
transaction on behalf of the Fund may not be effected, including, without
limitation, brokers or dealers affiliated with IMCO. Batterymarch 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, Batterymarch 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 Batterymarch, except as permitted
under the 1940 Act. IMCO agrees that it will provide Batterymarch 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 Batterymarch
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. Batterymarch, 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 Batterymarch's duties under this
Agreement. However, Batterymarch shall not be obligated to pay any expenses of
IMCO, the Company or the Funds, including without limitation, interest and
taxes, brokerage commissions and other costs in connection with the purchase or
sale of securities or other investment instruments for the Funds and custodian
fees and expenses.
(D) VALUATION. Securities traded on a national securities exchange or the
NASDAQ market for which market quotes are readily available are valued on each
day the New York Stock Exchange is open for business. For those securities for
which market quotes are not readily available, Batterymarch, 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. Batterymarch 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
USAA CONFIDENTIAL Page 4
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USAA Contract Number: 1014700-000
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. Batterymarch, 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 Batterymarch set forth herein. Batterymarch, 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
Batterymarch's duties hereunder.
(F) COMPLIANCE MATTERS. Batterymarch, 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. Batterymarch 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. Batterymarch 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, Batterymarch 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, Batterymarch may maintain copies of such
records to comply with its recordkeeping obligations.
(H) PROXIES. Unless and until Batterymarch is otherwise directed by IMCO or
the Board, IMCO will vote proxies with respect to a Fund Account's securities
and exercise rights in corporate actions or otherwise in accordance with IMCO's
proxy voting guidelines.
Batterymarch will not be responsible for taking any action or rendering any
advice with respect to any legal proceedings or bankruptcies involving the
issuers of securities held in the Fund Account. To the extent, however,
Batterymarch receives materials requiring action relating to any legal
proceedings or bankruptcies involving the issuers of securities held in the Fund
Account, Batterymarch shall promptly forward such materials to IMCO.
3. ADVISORY FEE. IMCO shall pay to Batterymarch as compensation for
Batterymarch'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 Batterymarch shall
serve for less than
USAA CONFIDENTIAL Page 5
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USAA Contract Number: 1014700-000
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.
Batterymarch agrees that if (i) it provides investment advisory services
substantially similar to the services provided to a Fund Account to any other
registered, open-end management investment company (or series thereof) with a
substantially similar investment mandate and with assets under management equal
to or less than the assets of the Fund Account under management by Batterymarch
(the Substantially Similar Services) and (ii) Batterymarch charges a lower fee
for providing the Substantially Similar Services than it charges with respect to
the Fund Account, then Batterymarch shall reduce its fee with respect to the
Fund Account so that it is equal to or less than the fee charged for providing
the Substantially Similar Services on a going forward basis starting
immediately.
4. REPRESENTATIONS AND WARRANTIES.
(A) BATTERYMARCH. Batterymarch represents and warrants to IMCO that (i) the
retention of Batterymarch by IMCO as contemplated by this Agreement is
authorized by Batterymarch's governing documents; (ii) the execution, delivery
and performance of this Agreement does not violate any obligation by which
Batterymarch 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 Batterymarch and when executed and delivered by Batterymarch will be a
legal, valid and binding obligation of Batterymarch, enforceable against
Batterymarch 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) Batterymarch is registered as
an investment adviser under the Advisers Act; (v) Batterymarch has adopted a
written code of ethics complying with the requirements of Rule 17j-1 under the
1940 Act and that Batterymarch and certain of its employees, officers, partners
and directors are subject to reporting requirements thereunder and, accordingly,
agrees that it shall, on a timely basis, furnish a copy of such code of ethics
to IMCO, and with respect to such persons, Batterymarch shall furnish to IMCO
all reports and information provided under Rule 17j-1(c)(2); (vi) Batterymarch
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)
Batterymarch will promptly notify IMCO of the occurrence of any event that would
disqualify Batterymarch from serving as investment manager of an investment
company pursuant to Section 9(a) of the 1940 Act or otherwise; (viii)
Batterymarch 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)
Batterymarch will notify IMCO of any "assignment" (as defined in the 0000 Xxx)
of this Agreement or change of control of Batterymarch, as applicable, and any
changes in the key personnel who are either the portfolio manager(s) of any Fund
Account or senior management of Batterymarch, in each case prior to or promptly
after, such change; and (x) Batterymarch has adequate disaster recovery and
interruption prevention measures to ensure business resumption in accordance
with applicable law and within industry standards.
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(B) IMCO. IMCO represents and warrants to Batterymarch that (i) the
retention of Batterymarch by IMCO as contemplated by this Agreement is
authorized by the respective governing documents of the Company and IMCO; (ii)
the execution, delivery and performance of each of this Agreement and the
Investment Advisory Agreement does not violate any obligation by which the
Company or IMCO or their respective property is bound, whether arising by
contract, operation of law or otherwise; (iii) each of this Agreement and the
Investment Advisory Agreement has been duly authorized by appropriate action of
the Company and IMCO and when executed and delivered by IMCO will be a legal,
valid and binding obligation of the Company and IMCO, enforceable against the
Company and IMCO in accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and to general equitable principles (regardless of whether enforcement
is sought in a proceeding in equity or law); (iv) IMCO is registered as an
investment adviser under the Advisers Act; (v) IMCO has adopted a written code
of ethics complying with the requirements of Rule 17j-1 under the 1940 Act and
that IMCO and certain of its employees, officers and directors are subject to
reporting requirements thereunder; (vi) IMCO is not prohibited by the 1940 Act,
the Advisers Act or other law, regulation or order from performing the services
contemplated by this Agreement; and (vii) IMCO will promptly notify Batterymarch
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) BATTERYMARCH. Batterymarch shall be liable for any and all losses,
claims, damages, liabilities or litigation (including reasonable legal and other
expenses) to which the Company, a Fund, IMCO, any affiliated persons thereof
(within the meaning of the 0000 Xxx) and any controlling persons thereof (as
described in Section 15 of the Securities Act of 1933, as amended (the 1933
Act)) (collectively, IMCO Indemnities) may become subject under the 1933 Act,
the 1940 Act, the Advisers Act, or under any other statute, at common law or
otherwise arising out of (i) any negligence, willful misconduct, bad faith or
reckless disregard of Batterymarch 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 Batterymarch which was required to be stated
therein or necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished to IMCO or
the Company by Batterymarch Indemnities (as defined below) for use therein.
Batterymarch shall indemnify and hold harmless the IMCO Indemnities for any and
all such losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses). Such IMCO Indemnities must obtain
Batterymarch's prior written consent to any settlement or compromise relating to
a claim that would otherwise fall under this provision.
(B) IMCO. IMCO shall be liable for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which Batterymarch, 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, Batterymarch Indemnities) may become subject under the
1933 Act, the 1940 Act, the Advisers Act, or under any other
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statute, at common law or otherwise arising out of (i) any negligence, willful
misconduct, bad faith or reckless disregard by IMCO in the performance of any of
its duties or obligations hereunder or (ii) any untrue statement of a material
fact contained in the Prospectus and SAI, proxy materials, reports,
advertisements, sales literature, or other materials pertaining to the Funds or
the omission to state therein a material fact known to IMCO which was required
to be stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon information
furnished to IMCO or the Company. IMCO shall indemnify and hold harmless
Batterymarch Indemnities for any and all such losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses). Such
Batterymarch Indemnities must obtain IMCO's prior written consent to any
settlement or compromise relating to a claim that would otherwise fall under
this provision.
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 Funds, IMCO, or Batterymarch
(Independent Board Members) or (ii) the outstanding voting shares of a Fund,
such Fund may at any time terminate this Agreement, without the payment of any
penalty, by providing not more than 60 days' written notice delivered or mailed
by registered mail, postage prepaid, to IMCO and Batterymarch.
(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,
Batterymarch 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 Batterymarch.
Batterymarch 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.
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(e) Any notice of termination served on Batterymarch by IMCO shall be
without prejudice to the obligation of Batterymarch to complete transactions
already initiated or acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to
Batterymarch 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 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 Batterymarch to IMCO in connection
with the Funds hereunder are not to be deemed exclusive, and Batterymarch 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 Batterymarch 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 Batterymarch
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 Batterymarch, or IMCO itself, to perform investment advisory services to any
portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. Batterymarch shall, upon reasonable notice,
afford IMCO at all reasonable times access to Batterymarch'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
Batterymarch to provide IMCO with access to the books and records of
Batterymarch relating to any other accounts other than the Funds.
(B) CONFIDENTIALITY. Batterymarch, and its officers, employees and
authorized representatives, shall treat confidentially and as proprietary
information of the Company all
USAA CONFIDENTIAL Page 9
THIS NUMBER SHOULD APPEAR ON ALL INVOICES
USAA Contract Number: 1014700-000
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
Batterymarch 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. Batterymarch acknowledges that nonpublic customer
information (as defined in Regulation S-P, including any amendments thereto) of
customers of the Funds received from IMCO is subject to the limitations on
redisclosure and reuse set forth in Section 248.11 of such Regulation, and
agrees such information (i) shall not be disclosed to any third party for any
purpose without the written consent of IMCO unless permitted by exceptions set
forth in Sections 248.14 or 248.15 of such Regulation and (ii) shall be
safeguarded pursuant to procedures adopted under Section 248.30 of such
Regulation if so required.
(D) PUBLIC ANNOUNCEMENTS. No party shall issue any press release or
otherwise make any public statements with respect to the matters covered by this
Agreement without the prior written consent of the other parties hereto, which
consent shall not be unreasonably withheld; provided, however, that consent
shall not be required if, in the opinion of counsel, such disclosure is required
by law; provided further, however, that the party making such disclosure shall
provide the other parties hereto with as much prior written notice of such
disclosure as is practical under the circumstances.
(E) NOTIFICATIONS. Batterymarch agrees that it will promptly notify IMCO in
the event that Batterymarch 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. Notwithstanding the
above, Batterymarch is not obligated to notify the Company or IMCO of any
routine regulatory inspection of Batterymarch except to the extent a Fund
Account is involved.
(F) INSURANCE. Batterymarch 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 Batterymarch's business activities.
(G) SHAREHOLDER MEETING EXPENSES. In the event that the Company shall be
required to call a meeting of shareholders or send an information supplement or
prospectus supplement to shareholders solely due to actions involving
Batterymarch, including, without limitation, a change of control of Batterymarch
or a portfolio manager change. Batterymarch shall bear all reasonable expenses
associated with such shareholder meeting information statement, or prospectus
supplement.
11. MISCELLANEOUS.
(A) NOTICES. All notices or other communications given under this Agreement
shall be made by guaranteed overnight delivery, telecopy or certified mail;
notice is effective when received. Notice shall be given to the parties at the
following addresses:
USAA CONFIDENTIAL Page 10
THIS NUMBER SHOULD APPEAR ON ALL INVOICES
USAA Contract Number: 1014700-000
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.
Batterymarch: Batterymarch Financial Management, Inc.
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attn: Chief Financial Officer
(B) SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors.
(C) GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the State of Texas, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act. To the extent that the
applicable laws of the State of Texas conflict with the applicable provisions of
the 1940 Act, the latter shall control.
(D) COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(E) HEADINGS. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
(F) ENTIRE AGREEMENT. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act.
(G) LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any obligation of the Funds
under this Agreement are not binding upon the Trustees or the shareholders
individually but are binding only upon the assets and property of the Funds.
USAA CONFIDENTIAL Page 11
THIS NUMBER SHOULD APPEAR ON ALL INVOICES
USAA Contract Number: 1014700-000
IN WITNESS WHEREOF, IMCO and Batterymarch have caused this Agreement to be
executed as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT
COMPANY
/S/Xxxx X. Xxxxxx /S/Xxxxxxxxxxx X. Xxxxx
By: ________________________ By: _________________________
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
/S/Xxxxx X. Xxxxxxxx
By: _________________________
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
Attest: BATTERYMARCH FINANCIAL
MANAGEMENT, INC.
/S/Xxxxxx X. Xxxxxxx /S/Xxxxxxx X. Xxxxx
By: ________________________ By: _________________________
Name: Xxxxxx X. Xxxxxxx Name: Xxxxxxx X. Xxxxx
Title: Assistant Secretary Title: President
USAA CONFIDENTIAL PAGE 12
THIS NUMBER SHOULD APPEAR ON ALL INVOICES
USAA Contract Number: 1014700-000
SCHEDULE A
FUND EFFECTIVE DATE
---- --------------
USAA CORNERSTONE STRATEGY FUND DECEMBER 1, 2005
USAA CONFIDENTIAL Page 13
THIS NUMBER SHOULD APPEAR ON ALL INVOICES
USAA Contract Number: 1014700-000
SCHEDULE B
FEES
FUND ACCOUNT Rate per annum of the average daily
------------ net assets of the Fund Account
----------------------------------
USAA Cornerstone Strategy Fund* 0.25% on the first $250 million of
assets
0.21% on assets over $250 million
and up to $500 million
0.17% on assets over $500 million
__________________________
* Batterymarch agrees that it will not seek to increase this fee rate during the
four-year period ending November 30, 2009 (the Four-Year Lock). This Four-Year
Lock does not limit the rights of a Fund's shareholders, a Fund's Board, or IMCO
as set forth in Section 6 of the Agreement ("Duration and Termination of this
Agreement").
USAA CONFIDENTIAL PAGE 14
Exhibit d(x)
AMENDMENT NO. 1
TO INVESTMENT SUBADVISORY AGREEMENT
AMENDMENT NO. 1 made as of the 1st day of March 2006, to the Investment
Subadvisory Agreement made as of the 1st day of December 2005, between USAA
INVESTMENT MANAGEMENT COMPANY, a corporation organized under the laws of the
State of Delaware and having its principal place of business in San Antonio,
Texas (IMCO) and BATTERYMARCH FINANCIAL MANAGEMENT, INC., a corporation
organized under the laws of the State of Maryland and having its principal place
of business in Boston, Massachusetts (Batterymarch), with respect to services
provided to series of USAA Investment Trust.
IMCO and Batterymarch agree to modify and amend the Investment Subadvisory
Agreement described above (Agreement) as follows:
1. SCHEDULE B. Schedule B to the Agreement, setting forth the fees payable
to Batterymarch with respect to each Fund, is hereby replaced in its entirety by
Schedule B attached hereto.
2. RATIFICATION. Except as modified and amended hereby, the Agreement is
hereby ratified and confirmed in full force and effect in accordance with its
terms.
IN WITNESS WHEREOF, IMCO and Batterymarch have caused this Amendment No. 1
to be executed as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT
COMPANY
/S/Xxxx X. Xxxxxx /S/Xxxxxxxxxxx X. Xxxxx
By: _______________________ By: ___________________________
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
/S/Xxxxx X. Xxxxxxxx
By: ___________________________
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
Attest: BATTERYMARCH FINANCIAL MANAGEMENT, INC.
/S/Xxxxxx X. Xxxxxxx /S/Xxxxxxx Xxxxx
By: _______________________ By: ___________________________
Name: Xxxxxx X. Xxxxxxx Name: Xxxxxxx Xxxxx
Title: Assistant Secretary Title: President & CFO
SCHEDULE B
FEES
FUND ACCOUNT Rate per annum of the average daily
------------ net assets of the Fund Account plus
the average daily net assets managed
by Batterymarch in the USAA Capital
Growth Fund
-------------------------------------
USAA Cornerstone Strategy Fund* 0.25% on the first $250 million of
assets
0.21% on assets over $250 million
and up to $500 million
0.17% on assets over $500 million
________________________
* Batterymarch agrees that it will not seek to increase this fee rate during the
four-year period ending November 30, 2009 (the Four-Year Lock). This Four-Year
Lock does not limit the rights of a Fund's shareholders, a Fund's Board, or IMCO
as set forth in Section 6 of the Agreement ("Duration and Termination of this
Agreement").
Revised March 1, 2006
Exhibit d(xi)
USAA Contract Number: 1016125-000
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of March, 2006 (the Effective Date)
between USAA INVESTMENT MANAGEMENT COMPANY, a corporation organized under the
laws of the State of Delaware and having its principal place of business in San
Antonio, Texas (IMCO) and XXXXXX XXXXXX AND COMPANY, L.P., a Delaware Limited
Partnership having its principal place of business in Boston, Massachusetts
(Xxxxxx).
WHEREAS, IMCO serves as the investment adviser to USAA Investment Trust, a
business trust organized under the laws of the Commonwealth of Massachusetts
(the Trust) and registered as an open-end management investment company under
the Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, under its Investment Advisory Agreement with the Trust (Investment
Advisory Agreement), IMCO is authorized to appoint subadvisers for series of the
Trust (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain Xxxxxx to render investment advisory
services to such series (or portions thereof) of the Trust as now or hereafter
may be identified in Schedule A to this Agreement, as such Schedule A may be
amended from time to time (each such series or portion thereof referred to
herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, Xxxxxx is willing to provide such services to the Fund Accounts
and IMCO upon the terms and conditions and for the compensation set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. APPOINTMENT OF XXXXXX. IMCO hereby appoints Xxxxxx to act as an investment
adviser for each Fund Account in accordance with the terms and conditions of
this Agreement. Xxxxxx will be an independent contractor and will have no
authority to act for or represent the Trust or IMCO in any way or otherwise be
deemed an agent of the Trust or IMCO except as expressly authorized in this
Agreement or another writing by the Trust, IMCO and Xxxxxx. Xxxxxx accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. DUTIES OF XXXXXX.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO and
the Trust's Board of Directors (the Board), Xxxxxx, at its own expense, shall
have full discretion to manage, supervise and direct the investment and
reinvestment of Fund Accounts allocated to it by IMCO from time to time. It is
understood that a Fund Account may consist of all, a portion of, or none of the
assets of the Fund, and that IMCO has the right to allocate and reallocate such
assets to a Fund Account at any time. Xxxxxx shall perform its duties described
herein in a manner consistent with the investment objective, policies and
restrictions set forth in the then current Prospectus and Statement of
Additional Information (SAI) for each Fund. Should
CONFIDENTIAL Page 1 of 13
Xxxxxx anticipate materially modifying its investment process, it must provide
written notice in advance to IMCO, and any affected Prospectus and SAI should be
amended accordingly.
For each Fund set forth on Schedule A to this Agreement, Xxxxxx shall
provide investment advice only with respect to the discrete portion of the
Fund's portfolio allocated to it by IMCO from time to time and shall not consult
with any other subadviser of such Fund concerning transactions for the Fund in
securities or other assets.
With respect to the management of each Fund Account pursuant to this
Agreement, Xxxxxx shall determine what investments shall be purchased, held,
sold or exchanged by each Fund Account and what portion, if any, of the assets
of each Fund Account shall be held in cash or cash equivalents, and purchase or
sell portfolio securities for each Fund Account; except that, to the extent
Xxxxxx wishes to hold cash or cash equivalents in excess of 10% of a Fund
Account's assets, Xxxxxx must request in writing and receive advance permission
from IMCO.
In accordance with Subsection (b) of this Section 2, Xxxxxx shall arrange
for the execution of all orders for the purchase and sale of securities and
other investments for each Fund Account and will exercise full discretion and
act for the Trust in the same manner and with the same force and effect as the
Trust might or could do with respect to such purchases, sales, or other
transactions, as well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases, sales, or other
transactions.
In the performance of its duties, Xxxxxx will act in the best interests of
each Fund and will comply with (i) applicable laws and regulations, including,
but not limited to, the 1940 Act and the Investment Advisers Act of 1940, as
amended (Advisers Act), and the rules under each, (ii) the terms of this
Agreement, (iii) the stated investment objective, policies and restrictions of
each Fund, as stated in the then-current Registration Statement of each Fund,
(iv) the Trust's compliance procedures and other policies, procedures or
guidelines as the Board or IMCO reasonably may establish from time to time, (v)
the provisions of the Internal Revenue Code of 1986, as amended (Code),
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), as from time to time in effect, and (vi) the written instructions of
IMCO. Xxxxxx shall establish compliance procedures reasonably calculated to
ensure compliance with the foregoing. IMCO shall be responsible for providing
Xxxxxx with the Trust's Declaration of Trust, as amended and supplemented, the
Trust's By-Laws and amendments thereto and current copies of the materials
specified in Subsections (a)(iii) and (iv) of this Section 2. IMCO shall provide
Xxxxxx with prior written notice of any material change to the Trust's
Registration Statement that would affect Xxxxxx' management of a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, Xxxxxx will select the
brokers or dealers that will execute purchase and sale transactions for the Fund
Accounts, subject to the conditions herein. In the selection of broker-dealers
and the placement of orders for the purchase and sale of portfolio investments
for the Fund Accounts, Xxxxxx shall use its best efforts to obtain for the Fund
Accounts the most favorable price and execution available, except to the extent
it may be permitted to pay higher brokerage commissions for brokerage and
research services as described below. In using its best efforts to obtain the
most favorable price and execution available, Xxxxxx, bearing in mind each
Fund's best interests at all times, shall consider all factors it deems
relevant, including by way
CONFIDENTIAL 2
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), Xxxxxx shall not be deemed to have acted unlawfully or to have breached
any duty created by this Agreement or otherwise solely by reason of its having
caused a Fund Account to pay a broker-dealer that provides brokerage and
research services to Xxxxxx an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another
broker-dealer offering equally good execution capability in the portfolio
investment would have charged for effecting that transaction if Xxxxxx
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular transaction or Xxxxxx'
overall responsibilities with respect to the Fund and to other clients of Xxxxxx
as to which Xxxxxx exercises investment discretion. The Board or IMCO may direct
Xxxxxx to effect transactions in portfolio securities through broker-dealers in
a manner that will help generate resources to pay the cost of certain expenses
that the Trust is required to pay or for which the Trust is required to arrange
payment.
On occasions when Xxxxxx deems the purchase or sale of a security to be in
the best interest of a Fund as well as other clients of Loomis, Loomis, to the
extent permitted by applicable laws and regulations, may aggregate the
securities to be purchased or sold to attempt to obtain a more favorable price
or lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by Xxxxxx in the manner it considers
to be the most equitable and consistent with its fiduciary obligations to the
Fund and to its other clients over time.
Xxxxxx may buy securities for a Fund Account at the same time it is selling
such securities for another client account and may sell securities for a Fund
Account at the time it is buying such securities for another client account. In
such cases, subject to applicable legal and regulatory requirements, and in
compliance with such procedures of the Trust as may be in effect from time to
time, Xxxxxx may effectuate cross transactions between a Fund Account and such
other account if it deems this to be advantageous.
Xxxxxx will advise the Funds' custodian or such depository or agents as may
be designated by the custodian and IMCO promptly of each purchase and sale of a
portfolio security, specifying the name of the issuer, the description and
amount or number of shares of the security purchased, the market price, the
commission and gross or net price, the trade date and settlement date, the
identity of the effecting broker or dealer and any other pertinent data that the
Funds' custodian may need to settle a security's purchase or sale. Xxxxxx shall
not have possession or custody of any Fund's investments. The Trust shall be
responsible for all custodial agreements and the payment of all custodial
charges and fees and, upon Xxxxxx giving proper instructions to the custodian,
Xxxxxx shall have no responsibility or liability for the acts, omissions or
other conduct of the custodian, depository, or other agent designated by the
custodian and IMCO.
CONFIDENTIAL 3
Notwithstanding the foregoing, Xxxxxx agrees that IMCO shall have the right
by written notice to identify securities that may not be purchased on behalf of
any Fund and/or brokers and dealers through which portfolio transaction on
behalf of the Fund may not be effected, including, without limitation, brokers
or dealers affiliated with IMCO. Xxxxxx shall refrain from purchasing such
securities for a Fund Account or directing any portfolio transaction to any such
broker or dealer on behalf of a Fund Account, unless and until the written
approval of IMCO to do so is obtained. In addition, Xxxxxx agrees that it shall
not direct portfolio transactions for the Fund Accounts through any broker or
dealer that is an "affiliated person" (as that term is defined in the 1940 Act
or interpreted under applicable rules and regulations of the Commission) of
Xxxxxx, except as permitted under the 1940 Act. IMCO agrees that it will provide
Xxxxxx with a list of brokers and dealers that are affiliated persons of the
Funds, or affiliated persons of such persons, and shall timely update that list
as the need arises. The Funds agree that any entity or person associated with
IMCO or Xxxxxx that is a member of a national securities exchange is authorized
to effect any transaction on such exchange for the account of the Funds that is
permitted by Section 11(a) of the Exchange Act, and the Funds consent to the
retention of compensation for such transactions.
(C) EXPENSES. Xxxxxx, at its expense, will furnish all necessary facilities
and personnel, including salaries, expenses and fees of any personnel required
for them to faithfully perform their duties under this Agreement and
administrative facilities, including bookkeeping, and all equipment and services
necessary for the efficient conduct of Xxxxxx' duties under this Agreement.
However, Xxxxxx shall not be obligated to pay any expenses of IMCO, the Trust or
the Funds, including without limitation, interest and taxes, brokerage
commissions and other costs in connection with the purchase or sale of
securities or other investment instruments for the Funds and custodian fees and
expenses.
(D) VALUATION. Securities traded on a national securities exchange or the
NASDAQ market for which market quotes are readily available are valued on each
day the New York Stock Exchange is open for business. For those securities for
which market quotes are not readily available, Xxxxxx, at its expense and in
accordance with procedures and methods established by the Board, which may be
amended from time to time, will provide assistance to IMCO in determining the
fair value of such securities, including providing market price information
relating to these assets of the Fund. Xxxxxx also shall monitor for "significant
events" that occur after the closing of a market but before the Funds calculate
their net asset values and that may affect the valuation of any Fund Account's
portfolio securities and shall notify IMCO immediately of the occurrence of any
such events.
(E) REPORTS AND AVAILABILITY OF PERSONNEL. Xxxxxx, at its expense, shall
render to the Board and IMCO such periodic and special reports as the Board and
IMCO may reasonably request with respect to matters relating to the duties of
Xxxxxx set forth herein. Xxxxxx, at its expense, will make available to the
Board and IMCO at reasonable times its portfolio managers and other appropriate
personnel in order to review investment policies of the Funds and to consult
with the Board and IMCO regarding the investment affairs of the Funds, including
economic, statistical and investment matters relevant to Xxxxxx' duties
hereunder.
(F) COMPLIANCE MATTERS. Xxxxxx, at its expense, will provide IMCO with such
compliance reports relating to its duties under this Agreement as may be agreed
upon by such
CONFIDENTIAL 4
parties from time to time. Xxxxxx also shall cooperate with and provide
reasonable assistance to IMCO, the Trust's administrator, the Trust's custodian
and foreign custodians, the Trust's transfer agent and pricing agents and all
other agents and representatives of the Trust and IMCO, keep all such persons
fully informed as to such matters as they may reasonably deem necessary to the
performance of their obligations to the Trust and IMCO, provide prompt responses
to reasonable requests made by such persons and maintain any appropriate
interfaces with each so as to promote the efficient exchange of information.
(G) BOOKS AND RECORDS. Xxxxxx will maintain for the Funds all books and
records required to be maintained by the Funds pursuant to the 1940 Act and the
rules and regulations promulgated thereunder insofar as such records relate to
the investment affairs of the Fund Accounts. Pursuant to Rule 31a-3 under the
1940 Act, Xxxxxx agrees that: (i) all records it maintains for a Fund Account
are the property of the Fund; (ii) it will surrender promptly to a Fund or IMCO
any such records (or copies of such records) upon the Fund's or IMCO's request;
and (iii) it will preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records it maintains for any Fund Account. Notwithstanding
subsection (ii) above, Xxxxxx may maintain copies of such records to comply with
its recordkeeping obligations.
(H) PROXIES. Xxxxxx will, unless and until otherwise directed by IMCO or
the Board, vote proxies with respect to a Fund Account's securities and exercise
rights in corporate actions or otherwise in accordance with Xxxxxx' proxy voting
guidelines, as amended from time to time, which shall be provided to IMCO.
3. ADVISORY FEE. IMCO shall pay to Xxxxxx as compensation for Xxxxxx' services
rendered pursuant to this Agreement a fee based on the average daily net assets
of each Fund Account at the annual rates set forth in Schedule B, which schedule
can be modified from time to time, subject to any appropriate approvals required
by the 1940 Act. Such fees shall be calculated daily and payable monthly in
arrears within 15 business days after the end of such month. IMCO (and not the
Funds) shall pay such fees. If Xxxxxx shall serve for less than the whole of a
month, the compensation as specified shall be prorated based upon the number of
calendar days during which this Agreement is in effect during such month, and
the fee shall be computed based upon the average daily net assets of a Fund
Account for such days.
4. REPRESENTATIONS AND WARRANTIES.
(A) XXXXXX. Xxxxxx represents and warrants to IMCO that (i) the retention
of Xxxxxx by IMCO as contemplated by this Agreement is authorized by Xxxxxx'
governing documents; (ii) the execution, delivery and performance of this
Agreement does not violate any obligation by which Xxxxxx or its property is
bound, whether arising by contract, operation of law or otherwise; (iii) this
Agreement has been duly authorized by appropriate action of Xxxxxx and when
executed and delivered by Xxxxxx will be a legal, valid and binding obligation
of Xxxxxx, enforceable against Xxxxxx in accordance with its terms, subject, as
to enforcement, to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general equitable principles (regardless of
whether enforcement is sought in a proceeding in equity or law); (iv) Xxxxxx is
registered as an investment adviser under the Advisers Act; (v) Xxxxxx has
adopted a written code of ethics complying with the requirements of Rule 17j-1
under the 1940 Act and that Xxxxxx and certain of its employees, officers,
partners and directors
CONFIDENTIAL 5
are subject to reporting requirements thereunder and, accordingly, agrees that
it shall, on a timely basis, furnish a copy of such code of ethics to IMCO, and,
with respect to such persons, Xxxxxx shall furnish to IMCO all reports and
information provided under Rule 17j-1(c)(2); (vi) Xxxxxx is not prohibited by
the 1940 Act, the Advisers Act or other law, regulation or order from performing
the services contemplated by this Agreement; (vii) Xxxxxx will promptly notify
IMCO of the occurrence of any event that would disqualify Xxxxxx from serving as
investment manager of an investment company pursuant to Section 9(a) of the 1940
Act or otherwise; (viii) Xxxxxx has provided IMCO with a copy of its Form ADV,
which as of the date of this Agreement is its Form ADV as most recently filed
with the SEC, and promptly will furnish a copy of all amendments to IMCO at
least annually; (ix) Xxxxxx will notify IMCO of any "assignment" (as defined in
the 0000 Xxx) of this Agreement or change of control of Xxxxxx, as applicable,
and any changes in the key personnel who are either the portfolio manager(s) of
any Fund Account or senior management of Xxxxxx, in each case prior to or
promptly after, such change; and (x) Xxxxxx has adequate disaster recovery and
interruption prevention measures to ensure business resumption in accordance
with applicable law and within industry standards.
(B) IMCO. IMCO represents and warrants to Xxxxxx that (i) the retention of
Xxxxxx by IMCO as contemplated by this Agreement is authorized by the respective
governing documents of the Trust and IMCO; (ii) the execution, delivery and
performance of each of this Agreement and the Investment Advisory Agreement does
not violate any obligation by which the Trust or IMCO or their respective
property is bound, whether arising by contract, operation of law or otherwise;
(iii) each of this Agreement and the Investment Advisory Agreement has been duly
authorized by appropriate action of the Trust and IMCO and when executed and
delivered by IMCO will be a legal, valid and binding obligation of the Trust and
IMCO, enforceable against the Trust and IMCO in accordance with its terms,
subject, as to enforcement, to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and to general equitable principles
(regardless of whether enforcement is sought in a proceeding in equity or law);
(iv) IMCO is registered as an investment adviser under the Advisers Act; (v)
IMCO has adopted a written code of ethics complying with the requirements of
Rule 17j-1 under the 1940 Act and that IMCO and certain of its employees,
officers and directors are subject to reporting requirements thereunder; (vi)
IMCO is not prohibited by the 1940 Act, the Advisers Act or other law,
regulation or order from performing the services contemplated by this Agreement;
and (vii) IMCO will promptly notify Xxxxxx of the occurrence of any event that
would disqualify IMCO from serving as investment manager of an investment
company pursuant to Section 9(a) of the 1940 Act or otherwise.
5. LIABILITY AND INDEMNIFICATION.
(A) XXXXXX. Xxxxxx shall be liable for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which the Trust, a Fund, IMCO, any affiliated persons thereof (within the
meaning of the 0000 Xxx) and any controlling persons thereof (as described in
Section 15 of the Securities Act of 1933, as amended (the 1933 Act))
(collectively, IMCO Indemnities) may become subject under the 1933 Act, the 1940
Act, the Advisers Act, or under any other statute, at common law or otherwise
arising out of (i) any negligence, willful misconduct, bad faith or reckless
disregard of Xxxxxx in the performance of any of its duties or obligations
hereunder or (ii) any untrue statement of a material fact contained in the
Prospectus and SAI, proxy materials, reports, advertisements, sales literature,
or other
CONFIDENTIAL 6
materials pertaining to the Funds or the omission to state therein a material
fact known to Xxxxxx which was required to be stated therein or necessary to
make the statements therein not misleading, if such statement or omission was
made in reliance upon information furnished to IMCO or the Trust by Xxxxxx
Indemnities (as defined below) for use therein. Xxxxxx shall indemnify and hold
harmless the IMCO Indemnities for any and all such losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses).
(B) IMCO. IMCO shall be liable for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which Xxxxxx, any affiliated persons thereof (within the meaning of the 0000
Xxx) and any controlling persons thereof (as described in Section 15 of the 1933
Act) (collectively, Xxxxxx Indemnities) may become subject under the 1933 Act,
the 1940 Act, the Advisers Act, or under any other statute, at common law or
otherwise arising out of (i) any negligence, willful misconduct, bad faith or
reckless disregard by IMCO in the performance of any of its duties or
obligations hereunder or (ii) any untrue statement of a material fact contained
in the Prospectus and SAI, proxy materials, reports, advertisements, sales
literature, or other materials pertaining to the Funds or the omission to state
therein a material fact known to IMCO which was required to be stated therein or
necessary to make the statements therein not misleading, unless such statement
or omission was made in reliance upon information furnished to IMCO or the
Trust. IMCO shall indemnify and hold harmless Xxxxxx Indemnities for any and all
such losses, claims, damages, liabilities or litigation (including reasonable
legal and other expenses).
6. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall become
effective with respect to a Fund upon its execution; provided, however, that
this Agreement shall not become effective with respect to a Fund unless it has
first been approved in the manner required by the 1940 Act and rules thereunder
or in accordance with exemptive or other relief granted by the SEC or its staff.
This Agreement shall remain in full force and effect continuously thereafter,
except as follows:
(a) By vote of a majority of (i) the Board members who are not "interested
persons" (as defined in the 0000 Xxx) of the Funds, IMCO, or Xxxxxx (Independent
Board Members) or (ii) the outstanding voting shares of a Fund, such Fund may at
any time terminate this Agreement, without the payment of any penalty, by
providing not more than 60 days' written notice delivered or mailed by
registered mail, postage prepaid, to IMCO and Xxxxxx.
(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, Xxxxxx
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
CONFIDENTIAL 7
registered mail, postage prepaid, to Xxxxxx. Xxxxxx may at any time, without the
payment of any penalty, terminate this Agreement with respect to a Fund by not
less than 90 days' written notice delivered or mailed by registered mail,
postage prepaid, to IMCO.
(d) This Agreement automatically and immediately shall terminate with
respect to the Funds, without the payment of any penalty, in the event of its
assignment (as that term is defined in the 1940 Act or interpreted under
applicable rules and regulations of the Commission) or if the Investment
Advisory Agreement shall terminate for any reason.
(e) Any notice of termination served on Xxxxxx by IMCO shall be without
prejudice to the obligation of Xxxxxx to complete transactions already initiated
or acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to Xxxxxx
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 action has not been approved by the vote
of a majority of the outstanding voting securities of the Trust, unless such
action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of Xxxxxx to IMCO in connection with the
Funds hereunder are not to be deemed exclusive, and Xxxxxx 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 Xxxxxx
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 Xxxxxx 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 Xxxxxx, or IMCO itself,
to perform investment advisory services to any portion of the Funds.
CONFIDENTIAL 8
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. Xxxxxx shall, upon reasonable notice, afford
IMCO at all reasonable times access to Xxxxxx' 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 Xxxxxx to provide IMCO
with access to the books and records of Xxxxxx relating to any other accounts
other than the Funds.
(B) CONFIDENTIALITY. Xxxxxx, and its officers, employees and authorized
representatives, shall treat confidentially and as proprietary information of
the Trust all records and information relative to the Trust and prior, present
or potential shareholders, and will not use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld where Xxxxxx
may be exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities, or
when so requested by the Trust.
(C) PRIVACY POLICY. Xxxxxx acknowledges that nonpublic customer information
(as defined in Regulation S-P, including any amendments thereto) of customers of
the Funds received from IMCO is subject to the limitations on redisclosure and
reuse set forth in Section 248.11 of such Regulation, and agrees such
information (i) shall not be disclosed to any third party for any purpose
without the written consent of IMCO unless permitted by exceptions set forth in
Sections 248.14 or 248.15 of such Regulation and (ii) shall be safeguarded
pursuant to procedures adopted under Section 248.30 of such Regulation if so
required.
(D) PUBLIC ANNOUNCEMENTS. No party shall issue any press release or
otherwise make any public statements with respect to the matters covered by this
Agreement without the prior written consent of the other parties hereto, which
consent shall not be unreasonably withheld; provided, however, that consent
shall not be required if, in the opinion of counsel, such disclosure is required
by law; provided further, however, that the party making such disclosure shall
provide the other parties hereto with as much prior written notice of such
disclosure as is practical under the circumstances.
(E) NOTIFICATIONS. Xxxxxx agrees that it will promptly notify IMCO in the
event that Xxxxxx 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. Xxxxxx 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 Xxxxxx' business activities.
(G) SHAREHOLDER MEETING AND OTHER EXPENSES. In the event that the Trust
shall be required to call a meeting of shareholders or send an information
statement or prospectus supplement to shareholders solely due to actions
involving Xxxxxx, including, without limitation, a change of control of Xxxxxx
or a portfolio manager change, Xxxxxx shall bear all reasonable
CONFIDENTIAL 9
expenses associated with such shareholder meeting, information statement, or
prospectus supplement.
11. MISCELLANEOUS.
(A) NOTICES. All notices or other communications given under this Agreement
shall be made by guaranteed overnight delivery, telecopy or certified mail;
notice is effective when received. Notice shall be given to the parties at the
following addresses:
IMCO: USAA Investment Management Company
0000 Xxxxxxxxxxxxxx Xxxx, X-X0-X
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Securities Counsel
Xxxxxx: Xxxxxx Xxxxxx & Company, L.P.
Xxx Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
(B) SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors.
(C) GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the State of Texas, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act. To the extent that the
applicable laws of the State of Texas conflict with the applicable provisions of
the 1940 Act, the latter shall control.
(D) COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(E) HEADINGS. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
(F) ENTIRE AGREEMENT. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act.
(G) LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any obligation of the Funds
under this Agreement are not binding upon the Trustees or the shareholders
individually but are binding only upon the assets and property of the Funds.
CONFIDENTIAL 10
IN WITNESS WHEREOF, IMCO and Xxxxxx have caused this Agreement to be
executed as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT COMPANY
/S/Xxxx X. Xxxxxx /S/Xxxxxxxxxxx X. Xxxxx
By: __________________________ By: ____________________________
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
/S/Xxxxxxx X. Xxxxxxxx
By: ____________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: Authorized Signatory
Attest: XXXXXX XXXXXX AND COMPANY, L.P.
/S/Xxxxxx X. Xxxxxxx /S/Xxxxxx Xxxxxxxx
By: __________________________ By: ____________________________
Name: Xxxxxx X. Xxxxxxx Name: Xxxxxx Xxxxxxxx
Title: Vice President Title: Chairman & CEO
CONFIDENTIAL 11
SCHEDULE A
FUND EFFECTIVE DATE
---- --------------
BALANCED STRATEGY FUND MARCH 1, 2006
CONFIDENTIAL 12
SCHEDULE B
FEES
FUND ACCOUNT RATE PER ANNUM OF THE AVERAGE DAILY
------------ NET ASSETS OF THE FUND ACCOUNT
----------------------------------
Balanced Strategy Fund 0.20%
Xxxxxx agrees that it will not seek to increase this fee rate during the
five-year period ending February 28, 2011 (the Five-Year Lock). This Five-Year
Lock does not limit the rights of a Fund's shareholders, a Fund's Board, or IMCO
as set forth in Section 6 of the Agreement ("Duration and Termination of this
Agreement").
CONFIDENTIAL 13
Exhibit d(xii)
USAA Contract Number: 1004100-000
USAA Amendment Number: 1004100-003
FORM OF AMENDMENT NO. 2
AMENDED AND RESTATED
INVESTMENT SUBADVISORY AGREEMENT
AMENDMENT NO. 2 made as of the 1st day of January 2006 to the Amended and
Restated Investment Subadvisory Agreement made as of the 18th day of October,
2002, and amended and restated as of the 1st day of May 2003, 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 MASSACHUSETTS FINANCIAL SERVICES COMPANY, a corporation
organized under the laws of the Sate of Delaware and having its principal place
of business in Boston, Massachusetts (MFS), with respect to services provided to
series of USAA Investment Trust.
IMCO and MFS agree to modify and amend the Amended and Restated Investment
Subadvisory Agreement described above (Agreement) as follows:
1. SCHEDULE B. Schedule B to the Agreement, setting forth the fees payable
to MFS with respect to each Fund, is hereby replaced in its entirety by Schedule
B attached hereto.
2. RATIFICATION. Except as modified and amended hereby, the Agreement is
hereby ratified and confirmed in full force and effect in accordance with its
terms.
IN WITNESS WHEREOF, IMCO AND MFS have caused this Amendment No.2 to be
executed as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT COMPANY
/S/Xxxx X. Xxxxxx /S/Xxxxxxxxxxx X. Xxxxx
By: ___________________________ By: __________________________
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
USAA INVESTMENT MANAGEMENT COMPANY
/S/Xxxxxxx X. Xxxxxxxx
By: __________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: Authorized Signatory
Attest: MASSACHUSETTS FINANCIAL SERVICES
COMPANY
/S/Xxxxx X. Xxxxxxx /S/Xxxxxx X. Xxxxxxx
By: __________________________ By: __________________________
Name: Xxxxx X. Xxxxxxx Name: Xxxxxx X. Xxxxxxx
Title: Counsel Title: President and Chief
Executive Officer
USAA Confidential
USAA Contract Number: 1004100-000
USAA Amendment Number: 1004100-003
SCHEDULE B
FEES
Rate per annum of the aggregate average
daily net assets of the Fund Accounts
plus the average daily net assets
managed by MFS in the USAA Life World
Growth Fund
_______________________________________
USAA Cornerstone Strategy Fund 0.29%*
(International Stocks)
USAA International Fund 0.29%*
USAA World Growth Fund 0.29%*
______________________________
* MFS agrees that it will not seek to increase this fee rate during the
four-year period ending December 31, 2009 (the Four-Year Lock). This Four-Year
Lock does not limit the rights of a Fund's shareholders, a Fund's Board, or IMCO
as set forth in Section 6 of the Agreement ("Duration and Termination of this
Agreement").
USAA Confidential
Exhibit d(xiii)
THIS NUMBER SHOULD APPEAR ON ALL INVOICES
USAA Contract Number: 1014699-000
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of December, 2005 (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, N.A., a national
association organized under the laws of the United States and having its
principal place of business in Chicago, Illinois (NTI).
WHEREAS, IMCO serves as the investment adviser to USAA Investment Trust, a
business trust organized under the laws of the Commonwealth of Massachusetts
(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 Trustees (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.
For each Fund set forth on Schedule A to this Agreement, NTI shall provide
investment advice only with respect to the discrete portion of the Fund's
portfolio allocated to it by IMCO from time to time and shall not consult with
any other subadviser of such Fund concerning transactions for the Fund in
securities or other assets.
USAA CONFIDENTIAL Page 1
THIS NUMBER SHOULD APPEAR ON ALL INVOICES
USAA Contract Number: 1014699-000
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 manner
that will
USAA CONFIDENTIAL Page 2
THIS NUMBER SHOULD APPEAR ON ALL INVOICES
USAA Contract Number: 1014699-000
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.
Subject to applicable legal and regulatory requirements, including the
terms of any applicable exemptive relief granted by the Securities and Exchange
Commission, NTI may, unless instructed otherwise by the Board or IMCO, (i)
invest cash balances in shares of money market funds advised by NTI and (ii)
purchase securities issued by an "affiliated person" (as that term is defined in
the 1940 Act or interpreted under applicable rules and regulations of the
Commission) of NTI if such securities are included in the index that a Fund's
performance seeks to match.
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.
However, NTI shall not be obligated to pay any expenses of IMCO, the Company or
the Funds, including without limitation, interest
USAA CONFIDENTIAL Page 3
THIS NUMBER SHOULD APPEAR ON ALL INVOICES
USAA Contract Number: 1014699-000
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 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. Unless and until NTI is otherwise directed by IMCO or the
Board, IMCO will vote proxies with respect to a Fund Account's securities and
exercise rights in corporate actions or otherwise in accordance with IMCO's
proxy voting guidelines.
3. ADVISORY FEE. IMCO shall pay to 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 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 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.
USAA CONFIDENTIAL Page 4
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USAA Contract Number: 1014699-000
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, partners, and directors are subject to reporting
requirements thereunder and, accordingly, agrees that it shall, on a timely
basis, furnish a copy of such code of ethics to IMCO, and shall cause its
employees, officers, partners, and directors to furnish to IMCO all reports and
information required to be provided under 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.
(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 Indemnitees) for any and all
losses, claims, damages, liabilities or litigation (including reasonable legal
and other expenses)
USAA CONFIDENTIAL Page 5
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USAA Contract Number: 1014699-000
(collectively, Losses) to which the IMCO Indemnitees 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 Indemnitees (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
Indemnitees) for any and all Losses to which the NTI Indemnitees 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 Indemnitees to IMCO or the Company.
(C) Notwithstanding anything contained herein to the contrary, the NTI
Indemnitees shall not be liable to any IMCO Indemnitees 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 Indemnitees.
6. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall become
effective with respect to a Fund upon its initial execution with respect to a
Fund; 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 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 giving not less than 60 days' written notice 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
USAA CONFIDENTIAL Page 6
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USAA Contract Number: 1014699-000
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 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
USAA CONFIDENTIAL Page 7
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USAA Contract Number: 1014699-000
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 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 AND OTHER EXPENSES. In the event that the Company
shall be required to call a meeting of shareholders, send an information
statement to shareholders, or send a prospectus supplement to shareholders
solely due to actions involving NTI, including, without limitation, a change of
control of NTI or a portfolio manager change, NTI shall bear all reasonable
expenses associated with such shareholder meeting, information statement, or
prospectus supplement attributable to such matters.
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, XX0X
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Securities Counsel
NTI: Northern Trust Investments, N.A.
00 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, Vice President
USAA CONFIDENTIAL Page 8
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USAA Contract Number: 1014699-000
(B) SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors.
(C) GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the State of Texas, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act. To the extent that the
applicable laws of the State of Texas conflict with the applicable provisions of
the 1940 Act, the latter shall control.
(D) COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(E) HEADINGS. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
(F) ENTIRE AGREEMENT. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act.
(G) LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any obligation of the Funds
under this Agreement are not binding upon the Trustees or the shareholders
individually but are binding only upon the assets and property of the Funds.
IN WITNESS WHEREOF, IMCO and NTI have caused this Agreement to be executed
as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT
COMPANY
/S/Xxxx X. Xxxxxx /S/Xxxxxxxxxxx X. Xxxxx
By: ________________________ By: _____________________________
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
/S/Xxxxxxx X. Xxxxxxxx
By: _____________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: Authorized Signatory
Attest: NORTHERN TRUST INVESTMENTS, N.A.
/S/Xxxxxxx X. Xxxx /S/Xxxxx X. Xxxxxxxxx
By: _________________________ By: _____________________________
Name: Xxxxxxx X. Xxxx Name: Xxxxx X. Xxxxxxxxx
Title: Senior Vice President Title: Senior Vice President
USAA CONFIDENTIAL Page 9
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USAA Contract Number: 1014699-000
SCHEDULE A
USAA Growth & Tax Strategy Fund
USAA CONFIDENTIAL Page 10
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USAA Contract Number: 1014699-000
SCHEDULE B
FEES
Rate per annum of the average daily net
Fund Account assets of the Fund Account
USAA Growth & Tax Strategy Fund* 0.25% on the first $40 million of assets
0.10% on assets over $40 million
_______________________
* The annual fee paid to NTI for managing the Growth & Tax Strategy Fund shall
be the greater of $100,000 (the Minimum Annual Fee) or the fee computed at the
rates listed above (the Asset-Based Fee). If on the last day of an annual period
(November 30 of each year), the Asset-Based Fee is less than the Minimum Annual
Fee, IMCO shall pay, within 15 days after the end of such annual period, NTI the
difference between the Minimum Annual Fee and the Asset-Based Fee.
NTI agrees that it will not seek to increase these fee rates during the
four-year period ending November 30, 2009 (the Four-Year Lock). This Four-Year
Lock does not limit the rights of a Fund's shareholders, a Fund's Board, or IMCO
as set forth in Section 6 of the Agreement ("Duration and Termination of this
Agreement").
USAA CONFIDENTIAL Page 11
Exhibit d(xiv)
USAA CONTRACT NUMBER: 1004103-003
AMENDMENT NO. 1
TO AMENDED AND RESTATED
INVESTMENT SUBADVISORY AGREEMENT
AMENDMENT NO. 1 made as of the 1st day of March 2006 to the Amended and
Restated Investment Subadvisory Agreement made as of the 18th day of October,
2002, and amended and restated as of the 1st day of May, 2003, 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), with respect to services provided to certain series of USAA
Investment Trust.
IMCO and Wellington Management agree to modify and amend the Amended and
Restated Investment Subadvisory Agreement described above (Agreement) as
follows:
1. REMOVAL AS SUBADVISER. IMCO hereby terminates Wellington Management as
an investment subadviser of the Real Estate Securities category of the USAA
Cornerstone Strategy Fund.
2. SCHEDULE A. Schedule A to the Agreement, setting forth the Funds of the
Company for which Wellington Management is appointed as an investment
subadviser, is hereby replaced in its entirety by Schedule A attached hereto.
3. SCHEDULE B. Schedule B to the Agreement, setting forth the fees payable
to Wellington Management with respect to each Fund, is hereby replaced in its
entirety by Schedule B attached hereto.
4. RATIFICATION. Except as modified and amended hereby, the Agreement is
hereby ratified and confirmed in full force and effect in accordance with its
terms.
Revised March 1, 2006 CONFIDENTIAL Page 1 of 4
USAA CONTRACT NUMBER: 1004103-003
IN WITNESS WHEREOF, IMCO and Wellington Management have caused this
Amendment No. 1 to be executed as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT COMPANY
/S/Xxxx X. Xxxxxx /S/Xxxxxxxxxxx X. Xxxxx
By: _______________________ By: ___________________________
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
/S/Xxxxx X. Xxxxxxxx
By: ___________________________
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
Attest: WELLINGTON MANAGEMENT COMPANY, LLP
/S/Xxxxxx X. Xxxxx /S/Xxxxxxxx X. Xxxxxx
By: _______________________ By: ___________________________
Name: Xxxxxx X. Xxxxx Name: Xxxxxxxx X. Xxxxxx
Title: Vice President and Counsel Title: Senior Vice President
Revised March 1, 2006 CONFIDENTIAL Page 2 of 4
USAA CONTRACT NUMBER 1004103-003
SCHEDULE A
USAA Balanced Strategy Fund
USAA Cornerstone Strategy Fund - U. S. Stocks
Revised March 1, 2006 CONFIDENTIAL Page 3 of 4
USAA CONTRACT NUMBER 1004103-003
SCHEDULE B
FEES
Rate per annum of the average daily
Fund Account net assets of the Fund Account
------------ ----------------------------------
USAA Balanced Strategy Fund 0.20%
USAA Cornerstone Strategy Fund
(U.S. Stocks category) 0.20%
Revised March 1, 2006 CONFIDENTIAL Page 4 of 4
