EHXIBIT D (ii)
MANAGEMENT AGREEMENT
AGREEMENT made as of the 1st day of August, 2006, between USAA INVESTMENT
MANAGEMENT COMPANY, a corporation organized under the laws of the state of
Delaware and having a place of business in San Antonio, Texas (the "Manager"),
and USAA MUTUAL FUNDS TRUST, a statutory trust organized under the laws of the
state of Delaware and having a place of business in San Antonio, Texas (the
"Trust").
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is so registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Manager is engaged principally in the business of rendering
investment management services and is registered under the Investment Advisers
Act of 1940, as amended; and
WHEREAS, the Trust is authorized to issue shares of capital stock (the
"Shares") in separate classes with each such class representing interests in a
separate portfolio of securities and other assets; and
WHEREAS, the Trust has established a new series of Shares, namely, the
Extended Market Index Fund (the "Fund"); and
WHEREAS, the Trust desires to retain the Manager to render certain
management and investment advisory services as described hereunder and the
Manager is willing to perform such services; and
WHEREAS, the Trust initially desires to invest all of its investable assets
in another mutual fund with a substantially similar investment objective (the
"Portfolio");
NOW, THEREFORE, WITNESSETH: That it is agreed between the parties hereto as
follows:
1. APPOINTMENT OF MANAGER.
The Trust hereby appoints the Manager to act as manager and investment
adviser to the Fund for the period and on the terms herein set forth. The
Manager accepts such appointment and agrees to render the services herein set
forth, for the compensation herein provided.
2. DUTIES OF MANAGER.
The Manager, at its own expense, shall furnish the following services to
the Fund:
(a) MONITORING. The Manager will monitor the services provided to the
Portfolio, subject always to the control of the Trust's Board of Trustees. Such
monitoring may include among other things, review of Portfolio reports showing
tracking with the Wilshire 4500 Index, review of Portfolio reports showing the
composition of securities in the Portfolio on a periodic basis and periodic
review of investment practices of the Portfolio. The Manager will report to the
Trust's Board of Trustees, at least annually, on the results of such monitoring
such that the Board may determine whether continued investment exclusively in
the Portfolio is in the best interests of the Fund's shareholders.
(b) INVESTMENT PROGRAM. Should the Trust's Board of Trustees determine it
is in the best interests of the Fund's shareholders to withdraw its investment
in the Portfolio, the Manager will directly manage the assets of the Fund. At
such time, the Manager will (i) furnish continuously an investment program
2
for the Fund, (ii) determine (subject to the overall supervision and review of
the Board of Trustees of the Trust) what investments shall be purchased, held,
sold or exchanged by the Fund and what portion, if any, of the assets of the
Fund shall be held uninvested, and (iii) make changes on behalf of the Trust in
the investments of the Fund. The Trust's Board of Trustees would then consider
whether to invest in a different master portfolio or take other action, such as
the selection of a different sub-adviser.
3. SUB-ADVISERS.
Should the Manager provide services pursuant to subparagraph (b) of
paragraph 2 above, then the Manager may employ one or more sub-advisers from
time to time to perform such of the acts and services of the Manager, including
the selection of brokers or dealers to execute the Fund's portfolio security
transactions, and upon such terms and conditions as may be agreed upon between
the Manager and such investment adviser and approved by the Trust's Board of
Trustees.
4. ALLOCATION OF EXPENSES.
Except for the services to be provided by the Manager set forth in
paragraph 2 above and the services and facilities provided by the Manager set
forth in an Administration Agreement between the Trust and the Manager, the
Fund assumes and shall pay all expenses for all other Fund operations and
activities and shall reimburse the Manager for any such expenses incurred by the
Manager. The expenses to be borne by the Fund shall include, without limitation:
(a) the charges and expenses of any registrar, share transfer or
dividend disbursing agent, custodian, or depository appointed by the
Trust for the safekeeping of the Fund's cash, portfolio securities and
other property;
(b) the charges and expenses of auditors;
(c) brokerage commissions, if any, for transactions in the portfolio
securities of the Fund;
(d) all taxes, including issuance and transfer taxes, and fees payable
by the Fund to federal, state or other governmental agencies;
(e) fees involved in registering and maintaining registrations of the
Trust and of its Shares with the Securities and Exchange Commission and
various states and other jurisdictions;
(f) all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing proxy statements, quarterly reports,
semiannual reports, annual reports and other communications (including
prospectuses) to existing shareholders;
(g) compensation and travel expenses of Trustees who are not
"interested persons" within the meaning of the 1940 Act;
(h) the expense of furnishing or causing to be furnished to each
shareholder a statement of his account, including the expense of mailing;
2
(i) charges and expenses of legal counsel in connection with matters
relating to the Fund, including, without limitation, legal services
rendered in connection with the Fund's legal and financial structure and
relations with its shareholders, issuance of Fund Shares, and registration
and qualification of securities under federal, state and other laws;
(j) membership or association dues for the Investment Company
Institute or similar organizations;
(k) interest payable on Fund borrowings; and
(l) postage.
5. MANAGEMENT FEE.
(a) For the services to be provided by the Manager as provided in
subparagraph (a) of paragraph 2 hereof, the Fund shall pay to the Manager no fee
for providing such services.
(b) For the services and facilities that may be provided by the Manager as
provided in subparagraph (b) of paragraph 2 hereof, the Fund shall pay to the
Manager a monthly fee computed as a percentage of aggregate average net assets
of the Fund, which on an annual basis is equal to thirty hundredths of one
percent (.30%) of the Monthly Average Net Assets (defined below) of the Fund for
such calendar month.
(c) The "Monthly Average Net Assets" of the Fund for any calendar month
shall be equal to the quotient produced by dividing (i) the sum of the net
assets of such Fund, determined in accordance with procedures established from
time to time by or under the direction of the Board of Trustees of the Fund in
accordance with the Master Trust Agreement of the Trust, for each calendar day
of such month, by (ii) the number of such days.
(d) The Manager may from time to time and for such periods as it deems
appropriate voluntarily waive fees or otherwise reduce its compensation
hereunder.
(e) From time to time, the Manager may voluntarily waive all or a portion
of the management fee payable with respect to the Fund or pay expenses of the
Fund. In addition to any amounts otherwise payable to the Manager as a
management fee for current services under the Management Agreement, the Trust
shall be obligated to pay the Manager all amounts previously waived or expenses
paid by the Manager with respect to the Fund, provided that such additional
payments are made not later than three years from the date first set forth above
and provided further that the amount of such additional payment in any year,
together with all other expenses of the Fund, in the aggregate, would not cause
the Fund's expense ratio in such year to exceed .50% of the average net assets
of the Fund.
3
6. EXPENSE LIMITATION.
In the event that the expenses of the Fund exceed any expense limitation
which the Manager may, by written notice to the Fund, voluntarily declare to be
effective subject to such terms and conditions as the Manager may prescribe in
such notice, the compensation due the Manager shall be reduced, and, if
necessary, the Manager shall assume expenses of the Fund, to the extent required
by such expense limitation.
In the event this Agreement is terminated as of a date other than the last
day of the fiscal year of the Trust, the Manager shall pay the Trust a pro rata
portion of the amount that the Manager would have been required to pay, if any,
had this Agreement remained in effect for the full fiscal year.
7. FUND TRANSACTIONS.
Should the Manager provide services pursuant to subparagraph (b) of
paragraph 2 above, the Manager, acting by its own officers, directors or
employees or by a duly authorized subcontractor, is authorized to select the
brokers or dealers that will execute purchase and sale transactions for the Fund
and is directed to use its best efforts to obtain the best available price and
most favorable execution with respect to all such purchases and sales of
portfolio securities for the Fund. Subject to this primary requirement, and
maintaining as its first consideration the benefits to the Fund and its
shareholders, the Manager shall have the right, subject to the control of the
Board of Trustees, to follow a policy of selecting brokers and dealers who
furnish statistical, research and other services to the Fund or to the Manager.
The Manager agrees that neither it nor any of its officers or directors
will take any long or short position in the capital stock of the Fund; provided,
however, that such prohibition:
(a) shall not prevent the Manager from purchasing shares of the
capital stock of the Fund if orders to purchase such shares are placed upon
the receipt by the Manager of purchase orders for such shares and are not
in excess of such purchase orders received by the Manager; and
(b) shall not prevent the purchase of shares of capital stock of the
Trust by any of the persons above described for their account and for
investment at the price at which such shares are available to the public at
the time of purchase or as part of the initial capital of the Fund.
8. RELATIONS WITH TRUST.
Subject to and in accordance with the Master Trust Agreement and Bylaws of
the Trust and the Articles of Incorporation and Bylaws of the Manager,
respectively, it is understood that Trustees, officers, agents and shareholders
of the Trust are or may be interested in the Manager (or any successor thereof)
as directors, officers, or otherwise, that directors, officers, agents and
shareholders of the Manager are or may be interested in the Trust as Trustees,
officers, shareholders or otherwise, that the Manager (or any such successor) is
or may be interested in the Trust as a shareholder or otherwise and that the
effect of any such interests shall be governed by said Master Trust Agreement,
Articles of Incorporation, and Bylaws.
9. LIABILITY OF MANAGER.
No provision of this Agreement shall be deemed to protect the Manager
against any liability to the Fund or its shareholders to which it might
otherwise be subject by reason of any willful misfeasance, bad faith or gross
negligence in the performance of its duties or the reckless disregard of its
obligations and duties under this Agreement. Nor shall any provision hereof be
deemed to protect any Trustee or officer of the Trust against
4
any such liability to which he might otherwise be subject by reason of any
willful misfeasance, bad faith or gross negligence in the performance of his
duties or the reckless disregard of his obligations and duties. If any provision
of this Agreement shall be held or made invalid by a court decision, statute,
rule or otherwise, the remainder of this Agreement shall not be affected
thereby.
10. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) DURATION. This Agreement shall become effective on the date upon
which the Agreement shall have been approved by a majority of the
outstanding voting securities (as that term is defined in the 0000 Xxx) of
the Fund. Unless terminated as herein provided, this Agreement shall remain
in full force and effect for two years after such date and shall continue
in full force and effect for periods of one year thereafter so long as such
continuance is approved at least annually (a) by either the Trustees of
the Trust or by vote of a majority of the outstanding voting shares (as
defined in the 0000 Xxx) of the Fund, and (b) in either event by the vote
of a majority of the Trustees of the Trust who are not parties to this
Agreement or "interested persons" (as defined in the 0000 Xxx) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval.
(b) TERMINATION. This Agreement may be terminated at any time, without
payment of any penalty, by vote of the Trustees of the Trust or by vote
of a majority of the outstanding shares (as defined in the 1940 Act), or by
the Manager on sixty (60) days' written notice to the other party.
(c) AUTOMATIC TERMINATION. This Agreement shall automatically
terminate in the event of its assignment.
11. NAME OF FUND.
It is understood that the name "USAA," and any logo associated with that
name, is the valuable property of the United Services Automobile Association,
and that the Fund has the right to include "USAA" as a part of its name only so
long as this Agreement shall continue and the Manager is a wholly owned
subsidiary of the United Services Automobile Association. Upon termination of
this Agreement the Fund shall forthwith cease to use the "USAA" name and logo
and shall take such action as necessary to change the Fund's name.
12. PRIOR AGREEMENT SUPERSEDED.
This Agreement supersedes any prior agreement relating to the subject
matter hereof between the parties.
13. SERVICES NOT EXCLUSIVE.
The services of the Manager to the Fund hereunder are not to be deemed
exclusive, and the Manager shall be free to render similar services to others so
long as its services hereunder are not impaired thereby.
5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
USAA MUTUAL FUNDS TRUST USAA INVESTMENT MANAGEMENT COMPANY
By: /S/ XXXXXXXXXXX X. XXXXX By: /S/ XXXXXXXX X. XXXXXXX
------------------------ ------------------------
Name: Xxxxxxxxxxx X. Xxxxx Name: Xxxxxxxx X. Xxxxxxx
Title: President Title: Senior Vice President
ATTEST: ATTEST:
By: /S/ XXXX X. XXXXXX By: /S/ XXXXXX X. XXXXXX
-------------------- ----------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxx X. Xxxxxx
Title: Secretary Title: Assistant Secretary
6
EXHIBIT D(iii)
ADVISORY AGREEMENT
AGREEMENT made as of the 1st day of August, 2006, between USAA INVESTMENT
MANAGEMENT COMPANY, a corporation organized under the laws of the state of
Delaware and having a place of business in San Antonio, Texas (the "Manager"),
and USAA MUTUAL FUNDS TRUST, a statutory trust organized under the laws of the
state of Delaware and having a place of business in San Antonio, Texas (the
"Trust").
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is so registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Manager is engaged principally in the business of rendering
investment management services and is registered under the Investment Advisers
Act of 1940, as amended; and
WHEREAS, the Trust is authorized to issue shares of capital stock (the
"Shares") in separate classes with each such class representing interests in a
separate portfolio of securities and other assets; and
WHEREAS, the Trust has established a series of Shares, namely, the
Nasdaq-100 Index Fund (herein referred to as the "Fund"); and
WHEREAS, the Trust desires to retain the Manager to render certain
management and investment advisory services as described hereunder and the
Manager is willing to perform such services;
NOW, THEREFORE, WITNESSETH: That it is agreed between the parties hereto as
follows:
1. APPOINTMENT OF MANAGER.
The Trust hereby appoints the Manager to act as manager and investment
adviser to the Fund for the period and on the terms herein set forth. The
Manager accepts such appointment and agrees to render the services herein set
forth, for the compensation herein provided.
2. DUTIES OF MANAGER.
The Manager, at its own expense, shall furnish the following services to
the Fund:
(a) INVESTMENT PROGRAM. The Manager will directly manage the assets of
the Fund. The Manager will (i) furnish continuously an investment program
for the Fund, (ii) determine (subject to the overall supervision and review
of the Board of Trustees of the Trust) what investments shall be purchased,
held, sold or exchanged by the Fund and what portion, if any, of the assets
of the Fund shall be held uninvested, and (iii) make changes on behalf of
the Trust in the investments of the Fund.
(b) MONITORING. Should the Trust's Board of Trustees determine it is in
the best interests of the Fund's shareholders to invest all of its
investable assets in another mutual fund with an identical investment
objective (the "Portfolio"), the Manager will monitor the services provided
to the Portfolio, subject always to the control of the Trust's Board of
Trustees. Such monitoring may include among other things, review of
Portfolio reports showing tracking with the Nasdaq-100
1
Index, review of Portfolio reports showing the composition of securities in
the Portfolio on a periodic basis and periodic review of investment
practices of the Portfolio. The Manager will report to the Trust's Board of
Trustees, at least annually, on the results of such monitoring such that
the Board may determine whether continued investment exclusively in the
Portfolio is in the best interests of the Fund's shareholders.
3. SUB-ADVISERS.
The Manager may employ one or more sub-advisers from time to time to
perform such of the acts and services of the Manager, including the selection of
brokers or dealers to execute the Fund's portfolio security transactions, and
upon such terms and conditions as may be agreed upon between the Manager and
such investment adviser and approved by the Trust's Board of Trustees.
4. ALLOCATION OF EXPENSES.
Except for the services to be provided by the Manager set forth in
paragraph 2 above and the services and facilities provided by the Manager set
forth in an Administration Agreement between the Trust and the Manager, the Fund
assumes and shall pay all expenses for all other Fund operations and activities
and shall reimburse the Manager for any such expenses incurred by the Manager.
The expenses to be borne by the Fund shall include, without limitation:
(a) the charges and expenses of any registrar, share transfer or
dividend disbursing agent, custodian, or depository appointed by the Trust
for the safekeeping of the Fund's cash, portfolio securities and other
property;
(b) the charges and expenses of auditors;
(c) brokerage commissions, if any, for transactions in the portfolio
securities of the Fund;
(d) all taxes, including issuance and transfer taxes, and fees payable
by the Fund to federal, state or other governmental agencies;
(e) fees involved in registering and maintaining registrations of the
Trust and of its Shares with the Securities and Exchange Commission and
various states and other jurisdictions;
(f) all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing proxy statements, quarterly reports,
semiannual reports, annual reports and other communications (including
prospectuses) to existing shareholders;
(g) compensation and travel expenses of Trustees who are not
"interested persons" within the meaning of the 1940 Act;
(h) the expense of furnishing or causing to be furnished to each
shareholder a statement of his account, including the expense of mailing;
(i) charges and expenses of legal counsel in connection with matters
relating to the Fund, including, without limitation, legal services
rendered in connection with the Fund's legal and financial structure and
relations with its shareholders, issuance of Shares, and registration and
qualification of securities under federal, state and other laws;
2
(j) membership or association dues for the Investment Company Institute
or similar organizations;
(k) interest payable on Fund borrowings; and
(l) postage.
5. ADVISORY FEE.
(a) For the services and facilities to be provided by the Manager as
provided in subparagraph (a) of paragraph 2 hereof, the Fund shall pay to
the Manager a monthly fee computed as a percentage of aggregate average net
assets of the Fund, which on an annual basis is equal to (i) twenty
hundredths of one percent (.20%) of the Monthly Average Net Assets (defined
below) of the Fund for such calendar month.
(b) The "Monthly Average Net Assets" of the Fund for any calendar month
shall be equal to the quotient produced by dividing (i) the sum of the net
assets of such Fund, determined in accordance with procedures established
from time to time by or under the direction of the Board of Trustees of the
Fund in accordance with the Master Trust Agreement of the Trust, for each
calendar day of such month, by (ii) the number of such days.
(c) The Manager may from time to time and for such periods as it deems
appropriate voluntarily waive fees or otherwise reduce its compensation
hereunder.
(d) For the services that may be provided by the Manager as provided in
subparagraph (b) of paragraph 2 hereof, the Fund shall pay to the Manager
no fee for providing such services.
6. EXPENSE LIMITATION.
In the event that the expenses of the Fund exceed any expense limitation
which the Manager may, by written notice to the Fund, voluntarily declare to be
effective subject to such terms and conditions as the Manager may prescribe in
such notice, the compensation due the Manager shall be reduced, and, if
necessary, the Manager shall assume expenses of the Fund, to the extent required
by such expense limitation.
In the event this Agreement is terminated as of a date other than the last
day of the fiscal year of the Trust, the Manager shall pay the Trust a pro rata
portion of the amount that the Manager would have been required to pay, if any,
had this Agreement remained in effect for the full fiscal year.
7. FUND TRANSACTIONS.
The Manager, acting by its own officers, directors or employees or by a
duly authorized subcontractor, is authorized to select the brokers or dealers
that will execute purchase and sale transactions for the Fund and is directed to
use its best efforts to obtain the best available price and most favorable
execution with respect to all such purchases and sales of portfolio securities
for the Fund. Subject to this primary requirement, and maintaining as its first
consideration the benefits to the Fund and its shareholders, the Manager shall
have the right, subject to the control of the Board of Trustees, to
3
follow a policy of selecting brokers and dealers who furnish statistical,
research and other services to the Fund or to the Manager.
The Manager agrees that neither it nor any of its officers or directors
will take any long or short position in the capital stock of the Fund; provided,
however, that such prohibition:
(a) shall not prevent the Manager from purchasing shares of the
capital stock of the Fund if orders to purchase such shares are placed upon
the receipt by the Manager of purchase orders for such shares and are not
in excess of such purchase orders received by the Manager; and
(b) shall not prevent the purchase of shares of capital stock of the
Trust by any of the persons above described for their account and for
investment at the price at which such shares are available to the public at
the time of purchase or as part of the initial capital of the Fund.
8. RELATIONS WITH TRUST.
Subject to and in accordance with the Master Trust Agreement and Bylaws of
the Trust and the Articles of Incorporation and Bylaws of the Manager,
respectively, it is understood that Trustees, officers, agents and shareholders
of the Trust are or may be interested in the Manager (or any successor thereof)
as directors, officers, or otherwise, that directors, officers, agents and
shareholders of the Manager are or may be interested in the Trust as Trustees,
officers, shareholders or otherwise, that the Manager (or any such successor) is
or may be interested in the Trust as a shareholder or otherwise and that the
effect of any such interests shall be governed by said Master Trust Agreement,
Articles of Incorporation, and Bylaws.
9. LIABILITY OF MANAGER.
No provision of this Agreement shall be deemed to protect the Manager
against any liability to the Fund or its shareholders to which it might
otherwise be subject by reason of any willful misfeasance, bad faith or gross
negligence in the performance of its duties or the reckless disregard of its
obligations and duties under this Agreement. Nor shall any provision hereof be
deemed to protect any Trustee or officer of the Trust against any such liability
to which he might otherwise be subject by reason of any willful misfeasance, bad
faith or gross negligence in the performance of his duties or the reckless
disregard of his obligations and duties. If any provision of this Agreement
shall be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
10. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) DURATION. This Agreement shall become effective on the date upon
which the Agreement shall have been approved by a majority of the
outstanding voting securities (as that term is defined in the 0000 Xxx) of
the Fund. Unless terminated as herein provided, this Agreement shall remain
in full force and effect for two years after such date and shall continue
in full force and effect for periods of one year thereafter so long as such
continuance is approved at least annually (a) by either the Trustees of the
Trust or by vote of a majority of the outstanding voting shares (as
defined in the 0000 Xxx) of the Fund, and (b) in either event by the vote
of a majority of the Trustees of the Trust who are not parties to this
Agreement or "interested persons" (as defined in the 0000 Xxx) of any such
party, cast in person at a meeting called for the purpose of voting on
such approval.
4
(b) TERMINATION. This Agreement may be terminated at any time, without
payment of any penalty, by vote of the Trustees of the Trust or by vote
of a majority of the outstanding shares (as defined in the 1940 Act), or by
the Manager on sixty (60) days' written notice to the other party.
(c) AUTOMATIC TERMINATION. This Agreement shall automatically
terminate in the event of its assignment.
11. NAME OF FUND.
It is understood that the name "USAA," and any logo associated with that
name, is the valuable property of the United Services Automobile Association,
and that the Fund has the right to include "USAA" as a part of its name only so
long as this Agreement shall continue and the Manager is a wholly owned
subsidiary of the United Services Automobile Association. Upon termination of
this Agreement the Fund shall forthwith cease to use the "USAA" name and logo
and shall take such action as necessary to change the Fund's name.
12. PRIOR AGREEMENT SUPERSEDED.
This Agreement supersedes any prior agreement relating to the subject
matter hereof between the parties.
13. SERVICES NOT EXCLUSIVE.
The services of the Manager to the Fund hereunder are not to be deemed
exclusive, and the Manager shall be free to render similar services to others so
long as its services hereunder are not impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
USAA MUTUAL FUNDS TRUST USAA INVESTMENT MANAGEMENT COMPANY
By: /S/ XXXXXXXXXXX X. XXXXX By: /S/ XXXXXXXX X. XXXXXXX
------------------------- ----------------------------
Name: Xxxxxxxxxxx X. Xxxxx Name: Xxxxxxxx X. Xxxxxxx
Title: President Title: Senior Vice President
ATTEST: ATTEST:
By: /S/ XXXX X. XXXXXX By: /S/ XXXXXX X. XXXXXX
------------------------- ---------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxx X. Xxxxxx
Title: Secretary Title: Assistant Secretary
5
EXHIBIT D (iv)
MANAGEMENT AGREEMENT
AGREEMENT made as of the 1st day of August, 2006, between USAA INVESTMENT
MANAGEMENT COMPANY, a corporation organized under the laws of the state of
Delaware and having a place of business in San Antonio, Texas (the "Manager"),
and USAA MUTUAL FUNDS TRUST, a statutory trust organized under the laws of the
State of Delaware and having a place of business in San Antonio, Texas (the
"Trust").
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is so registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Manager is engaged principally in the business of rendering
investment management services and is registered under the Investment Advisers
Act of 1940, as amended; and
WHEREAS, the Trust is authorized to issue shares of capital stock (the
"Shares") in separate classes with each such class representing interests in a
separate portfolio of securities and other assets; and
WHEREAS, the Trust has established a series of Shares, namely, the S&P 500
Index Fund (the "Fund"); and
WHEREAS, the Trust desires to retain the Manager to render certain
management and investment advisory services as described hereunder and the
Manager is willing to perform such services;
NOW, THEREFORE, WITNESSETH: That it is agreed between the parties hereto as
follows:
1. APPOINTMENT OF MANAGER.
The Trust hereby appoints the Manager to act as manager and investment
adviser to the Fund for the period and on the terms herein set forth. The
Manager accepts such appointment and agrees to render the services herein set
forth, for the compensation herein provided.
2. DUTIES OF MANAGER.
The Manager, at its own expense, shall furnish the following services to
the Fund:
(a) INVESTMENT PROGRAM. The Manager will directly manage the assets of
the Fund. The Manager will (i) furnish continuously an investment program
for the Fund, (ii) determine (subject to the overall supervision and
review of the Board of Trustees of the Trust) what investments shall be
purchased, held, sold or exchanged by the Fund and what portion, if any,
of the assets of the Fund shall be held uninvested, and (iii) make
changes on behalf of the Trust in the investments of the Fund.
(b) MONITORING. Should the Trust's Board of Trustees determine it is in
the best interests of the Fund's shareholders to invest all of the Fund's
investable assets in another mutual fund with an identical investment
objective (a "Portfolio"), the Manager will monitor the services provided
to the Portfolio, subject always to the control of the Trust's Board of
Trustees. Such monitoring may include among other things, review of
Portfolio reports showing tracking with the Standard & Poor's 500
Composite Price Index, review of Portfolio reports showing the
1
composition of securities in the Portfolio on a periodic basis and
periodic review of investment practices of the Portfolio. The Manager
will report to the Trust's Board of Trustees, at least annually, on the
results of such monitoring such that the Board may determine whether
continued investment exclusively in the Portfolio would be in the best
interests of the Fund's shareholders.
3. ALLOCATION OF EXPENSES.
Except for the services to be provided by the Manager set forth in
paragraph 2 above and the services and facilities provided by the Manager set
forth in an Administration Agreement between the Trust and the Manager, the
Fund assumes and shall pay all expenses for all other Fund operations and
activities and shall reimburse the Manager for any such expenses incurred by the
Manager. The expenses to be borne by the Fund shall include, without limitation:
(a) the charges and expenses of any registrar, share transfer or
dividend disbursing agent, custodian, or depository appointed by the
Trust for the safekeeping of the Fund's cash, portfolio securities
and other property;
(b) the charges and expenses of auditors;
(c) brokerage commissions, if any, for transactions in the portfolio
securities of the Fund;
(d) all taxes, including issuance and transfer taxes, and fees
payable by the Fund to federal, state or other governmental agencies;
(e) fees involved in registering and maintaining registrations of the
Trust and of its Shares with the Securities and Exchange Commission
and various states and other jurisdictions;
(f) all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing proxy statements, quarterly reports,
semiannual reports, annual reports and other communications (including
prospectuses) to existing shareholders;
(g) compensation and travel expenses of Trustees who are not
"interested persons" within the meaning of the 1940 Act;
(h) the expense of furnishing or causing to be furnished to each
shareholder a statement of his account, including the expense of
mailing;
(i) charges and expenses of legal counsel in connection with matters
relating to the Fund, including, without limitation, legal services
rendered in connection with the Fund's legal and financial structure
and relations with its shareholders, issuance of Fund Shares, and
registration and qualification of securities under federal, state and
other laws;
(j) membership or association dues for the Investment Company
Institute or similar organizations;
(k) interest payable on Fund borrowings; and
(l) postage.
4. MANAGEMENT FEE.
2
(a) For the services and facilities to be provided by the Manager as
provided in subparagraph (a) of paragraph 2 hereof, the Fund shall pay to
the Manager a monthly fee computed as a percentage of aggregate average
net assets of the Fund, which on an annual basis is equal to one-tenth of
one percent (.10%) of the Monthly Average Net Assets (defined below) of
the Fund for such calendar month.
(b) For the services that would be provided by the Manager as
provided in subparagraph (b) of paragraph 2 hereof, the Fund shall pay to
the Manager no fee for providing such services.
(c) The "Monthly Average Net Assets" of the Fund for any calendar
month shall be equal to the quotient produced by dividing (i) the sum of
the net assets of such Fund, determined in accordance with procedures
established from time to time by or under the direction of the Board of
Trustees of the Fund in accordance with the Articles of Incorporation of
the Trust, as of the close of business on each day during such month
that Fund was open for business, by (ii) the number of such days.
(d) The Manager may from time to time and for such periods as it
deems appropriate voluntarily waive fees or otherwise reduce its
compensation hereunder.
5. EXPENSE LIMITATION.
In the event that expenses of the Fund for any fiscal year should exceed
the expense limitation on investment company expenses imposed by any statute or
regulatory authority of any jurisdiction in which shares of the Trust are
qualified for offer and sale, the compensation due the Manager for such fiscal
year with respect to the Fund shall be reduced by the amount of such excess by a
reduction or refund thereof. In the event that the expenses of the Fund exceed
any expense limitation which the Manager may, by written notice to the Fund,
voluntarily declare to be effective subject to such terms and conditions as the
Manager may prescribe in such notice, the compensation due the Manager shall be
reduced, and, if necessary, the Manager shall assume expenses of the Fund, to
the extent required by such expense limitation.
In the event this Agreement is terminated as of a date other than the last
day of the fiscal year of the Trust, the Manager shall pay the Trust a pro rata
portion of the amount that the Manager would have been required to pay, if any,
had this Agreement remained in effect for the full fiscal year.
6. FUND TRANSACTIONS.
Should the Manager provide services pursuant to subparagraph (a) of
paragraph 2 above, the Manager, acting by its own officers, directors or
employees or by a duly authorized subcontractor, is authorized to select the
brokers or dealers that will execute purchase and sale transactions for the Fund
and is directed to use its best efforts to obtain the best available price and
most favorable execution with respect to all such purchases and sales of
portfolio securities for the Fund. Subject to this primary requirement, and
maintaining as its first consideration the benefits to the Fund and its
shareholders, the Manager shall have the right, subject to the control of the
Board of Trustees, to follow a policy of selecting brokers and dealers who
furnish statistical, research and other services to the Fund or to the Manager.
The Manager agrees that neither it nor any of its officers or directors
will take any long or short position in the capital stock of the Fund; provided,
however, that such prohibition:
3
(a) shall not prevent the Manager from purchasing shares of the
capital stock of the Fund if orders to purchase such shares are placed
upon the receipt by the Manager of purchase orders for such shares and
are not in excess of such purchase orders received by the Manager; and
(b) shall not prevent the purchase of shares of capital stock of the
Trust by any of the persons above described for their account and for
investment at the price at which such shares are available to the public
at the time of purchase or as part of the initial capital of the Fund.
7. RELATIONS WITH TRUST.
Subject to and in accordance with the Master Trust Agreement and Bylaws of
the Trust and the Articles of Incorporation and Bylaws of the Manager,
respectively, it is understood that Trustees, officers, agents and shareholders
of the Trust are or may be interested in the Manager (or any successor thereof)
as directors, officers, or otherwise, that directors, officers, agents and
shareholders of the Manager are or may be interested in the Trust as Trustees,
officers, shareholders or otherwise, that the Manager (or any such successor) is
or may be interested in the Trust as a shareholder or otherwise and that the
effect of any such interests shall be governed by said Master Trust Agreement,
Articles of Incorporation, and Bylaws.
8. LIABILITY OF MANAGER.
No provision of this Agreement shall be deemed to protect the Manager
against any liability to the Fund or its shareholders to which it might
otherwise be subject by reason of any willful misfeasance, bad faith or gross
negligence in the performance of its duties or the reckless disregard of its
obligations and duties under this Agreement. Nor shall any provision hereof be
deemed to protect any Trustee or officer of the Trust against any such liability
to which he might otherwise be subject by reason of any willful misfeasance, bad
faith or gross negligence in the performance of his duties or the reckless
disregard of his obligations and duties. If any provision of this Agreement
shall be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
9. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective on the date upon
which the Agreement shall have been approved by a majority of the
outstanding voting securities (as that term is defined in the 0000 Xxx)
of the Fund. Unless terminated as herein provided, this Agreement shall
remain in full force and effect for two years after such date and shall
continue in full force and effect for periods of one year thereafter so
long as such continuance is approved at least annually (a) by either the
Trustees of the Trustee or by vote of a majority of the outstanding
voting shares (as defined in the 0000 Xxx) of the Fund, and (b) in either
event by the vote of a majority of the Trustees of the Trust who are
not parties to this Agreement or "interested persons" (as defined in the
0000 Xxx) of any such party, cast in person at a meeting called for the
purpose of voting on such approval.
(b) Termination. This Agreement may be terminated at any time, without
payment of any penalty, by vote of the Trustees of the Trust or by vote
of a majority of the outstanding shares (as defined in the 1940 Act), or
by the Manager on sixty (60) days' written notice to the other party.
(c) Automatic Termination. This Agreement shall automatically terminate
in the event of its assignment.
4
10. NAME OF FUND.
It is understood that the name "USAA," and any logo associated with that
name, is the valuable property of the United Services Automobile Association,
and that the Fund has the right to include "USAA" as a part of its name only so
long as this Agreement shall continue and the Manager is a wholly owned
subsidiary of the United Services Automobile Association. Upon termination of
this Agreement the Fund shall forthwith cease to use the "USAA" name and logo
and shall submit to its shareholders an amendment to its Master Trust Agreement
to change the Fund's name.
11. PRIOR AGREEMENT SUPERSEDED.
This Agreement supersedes any prior agreement relating to the subject
matter hereof between the parties.
12. SERVICES NOT EXCLUSIVE.
The services of the Manager to the Fund hereunder are not to be deemed
exclusive, and the Manager shall be free to render similar services to others so
long as its services hereunder are not impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
USAA MUTUAL FUNDS TRUST USAA INVESTMENT MANAGEMENT COMPANY
BY: /S/ XXXXXXXXXXX X. XXXXX BY: /S/ XXXXXXXX X. XXXXXXX
-------------------------- -------------------------
Xxxxxxxxxxx X. Xxxxx Xxxxxxxx X. Xxxxxxx
President Senior Vice President
ATTEST: /S/ XXXX X. XXXXXX ATTEST: /S/ XXXXXX X. XXXXXX
------------------ ----------------------
Xxxx X. Xxxxxx Xxxxxx X. Xxxxxx
Secretary Assistant Secretary
5
EXHIBIT D(v)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 1st day of August, 2006 between USAA INVESTMENT
MANAGEMENT COMPANY, a corporation organized under the laws of the state of
Delaware and having a place of business in San Antonio, Texas ("IMCO"), and USAA
MUTUAL FUNDS TRUST, a statutory trust organized under the laws of the State of
Delaware and having a place of business in San Antonio, Texas (the "Trust").
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is so registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, IMCO is engaged in the business of rendering investment management
and advisory services and is registered under the Investment Advisers Act of
1940, as amended; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest
(the "Shares") in separate series with each such series representing interests
in a separate portfolio of securities and other assets; and
WHEREAS, the Trust presently offers Shares in each of the series identified
in Schedule A hereto (the "Existing Funds") (such series, together with all
other series subsequently established by the Trust with respect to which the
Trust desires to retain IMCO to render management and investment advisory
services hereunder and with respect to which IMCO is willing so to do, being
herein collectively referred to as the "Funds");
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF IMCO.
(a) EXISTING FUNDS. The Trust hereby appoints IMCO to act as manager and
investment adviser for each of the Existing Funds for the period and on the
terms herein set forth. IMCO accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
(b) ADDITIONAL FUNDS. In the event that the Trust establishes one or more
series of Shares other than the Existing Funds with respect to which it desires
to retain IMCO to render management and investment advisory services hereunder,
it shall so notify IMCO in writing. If IMCO is willing to render such services
it shall notify the Trust in writing, whereupon the Trust shall appoint IMCO to
act as manager and investment adviser for each of such series of Shares for the
period and on the terms herein set forth, IMCO shall accept such appointment and
agree to render the services herein set forth for the compensation herein
provided, and each of such series of Shares shall become a Fund hereunder.
2. DUTIES OF IMCO.
Subject to the delegation of any such duties to one or more investment
subadvisers ("Subadvisers") as provided in Paragraph 3 hereof, IMCO, at its own
expense, shall furnish the following services and facilities to the Trust:
(a) INVESTMENT PROGRAM. IMCO will (i) furnish continuously an investment
program for each Fund, (ii) determine (subject to the overall supervision and
review of the Board of Trustees of the Trust (the "Board")) what investments
shall be purchased, held, sold or exchanged for each Fund and what portion, if
any, of the assets of each Fund shall be held uninvested, and (iii) make changes
on behalf of the Trust in the investments of each Fund.
(b) MONITORING. Should the Board determine it is in the best interests of a
Fund's shareholders to invest all of its investable assets in another mutual
fund with substantially the same investment objective (the "Portfolio"), IMCO
will monitor the services provided to the Portfolio, subject always to the
control of the Board. Such monitoring may include among other things, review of
Portfolio reports showing the composition of securities in the Portfolio on a
periodic basis and periodic review of investment practices of the Portfolio.
IMCO will report to the Board, at least annually, on the results of such
monitoring such that the Board may determine whether continued investment
exclusively in the Portfolio is in the best interests of the Fund's
shareholders.
3. SUBADVISERS.
(a) Subject to the general supervision and control of the Board and under
the terms and conditions set forth in this Agreement, IMCO, at its own expense,
may select and contract with one or more Subadvisers to manage the investment
operations and composition of each Fund and render investment advice for each
Fund, including the purchase, retention and disposition of the investments,
securities and cash contained in each Fund, in accordance with such Fund's
investment objectives, policies and restrictions as stated in the Trust's Master
Trust Agreement, By-Laws and such Fund's Prospectus and Statement of Additional
Information ("SAI"), as is from time to time in effect; provided that, (i) IMCO
will continue to have overall supervisory responsibility for the general
management and investment of each Fund's assets, and (ii) any contract with a
Subadviser (a "Subadvisory Agreement") shall be in compliance with and approved
in the manner required by the 1940 Act and rules thereunder or in accordance
with exemptive or other relief granted by the Securities and Exchange Commission
("SEC") or its staff.
(b) Subject to the general supervision and control of the Board, IMCO will
have full discretion to (i) select new or additional Subadvisers for each Fund,
(ii) enter into and materially modify existing Subadvisory Agreements, and (iii)
terminate and replace any Subadviser. In connection with IMCO's responsibilities
herein, IMCO will assess each Fund's investment focus and will seek to implement
decisions with respect to the allocation and reallocation of each Fund's assets
among one or more current or additional Subadvisers from time to time, as IMCO
deems appropriate, to enable each Fund to achieve its investment goals. In
addition, IMCO will monitor compliance of each Subadviser with the investment
objectives, policies and restrictions of any Fund or Funds (or portions of any
Fund) under the management of such Subadviser, and
2
review and report to the Board on the performance of each Subadviser. IMCO will
furnish, or cause the appropriate Subadviser(s) to furnish, to the Trust such
statistical information, with respect to the investments that a Fund (or
portions of any Fund) may hold or contemplate purchasing, as the Trust may
reasonably request. On IMCO's own initiative, IMCO will apprise, or cause the
appropriate Subadviser(s) to apprise, the Trust of important developments
materially affecting each Fund (or any portion of a Fund that they advise) and
will furnish the Trust, from time to time, with such information as may be
appropriate for this purpose. Further, IMCO agrees to furnish, or cause the
appropriate Subadviser(s) to furnish, to the Board such periodic and special
reports as the Board may reasonably request. In addition, IMCO agrees to cause
the appropriate Subadviser(s) to furnish to third-party data reporting services
all currently available standardized performance information and other customary
data.
4. ALLOCATION OF EXPENSES.
Except for the services and facilities to be provided by IMCO set forth in
Paragraphs 2 and 3 above, the Trust assumes and shall pay all expenses for all
other Trust operations and activities and shall reimburse IMCO for any such
expenses incurred by IMCO. The expenses to be borne by the Trust shall include,
without limitation:
(a) the charges and expenses of any registrar, share transfer or dividend
disbursing agent, custodian, or depository appointed by the Trust for the
safekeeping of its cash, portfolio securities and other property;
(b) the charges and expenses of auditors;
(c) brokerage commissions for transactions in the portfolio securities of
the Trust;
(d) all taxes, including issuance and transfer taxes, and fees payable by
the Trust to federal, state or other governmental agencies;
(e) fees involved in registering and maintaining registrations of the Trust
and of its Shares with the SEC and various states and other jurisdictions;
(f) all expenses of shareholders' and Board meetings and of preparing,
printing and mailing proxy statements, quarterly reports, semiannual reports,
annual reports and other communications (including Prospectuses) to existing
shareholders;
(g) compensation and travel expenses of Board members who are not
"interested persons" within the meaning of the 1940 Act;
(h) the expense of furnishing or causing to be furnished to each
shareholder a statement of his account, including the expense of mailing;
(i) charges and expenses of legal counsel in connection with matters
relating to the Trust, including, without limitation, legal services rendered in
connection with the Trust's legal and financial structure and relations with its
shareholders, issuance of Trust Shares, and registration and qualification of
securities under federal, state and other laws;
3
(j) membership or association dues for the Investment Company Institute or
similar organizations;
(k) interest payable on Trust borrowings; and
(l) postage.
5. ADVISORY FEE.
(a) For the services and facilities to be provided by IMCO as provided in
Paragraphs 2(a) and 3 hereof, the Trust shall pay to IMCO a monthly fee with
respect to each Fund computed as set forth in Schedule B or Schedule C hereto.
For the services and facilities to be provided by IMCO as provided in Paragraph
2(b) hereof, the Trust shall pay no fee.
(b) IMCO may from time to time and for such periods as it deems appropriate
voluntarily waive fees or otherwise reduce its compensation hereunder. With
respect to each Fund identified in Schedule D hereto, in addition to any amounts
otherwise payable to IMCO as an advisory fee for current services under this
Agreement, the Trust shall be obligated to pay IMCO amounts previously waived or
expenses paid by IMCO with respect to such Fund, provided that such additional
payments are made not later than the date identified in Schedule D hereto as the
"Ending Date" and provided further that the amount of such additional payment in
any year, together with all other expenses of the Fund, in the aggregate, would
not cause the Fund's expense ratio in such year to exceed the percentage of the
Fund's average net assets identified in Schedule D.
(c) In the event this Agreement is terminated with respect to any one or
more Funds as of a date other than the last day of any month, the Trust shall
pay IMCO a pro rata portion of the amount that the Trust would have been
required to pay, if any, had this Agreement remained in effect for the full
month, subject to such other adjustments as may be provided in Schedule B
hereto.
6. TRUST TRANSACTIONS.
In connection with the management of the investment and reinvestment of the
assets of the Trust, IMCO, acting by its own officers, directors or employees or
by a duly authorized subcontractor, is authorized to select the brokers or
dealers that will execute purchase and sale transactions for the Trust and is
directed to use its best efforts to seek on behalf of a Fund the best overall
terms available. In assessing the best overall terms available for any
transaction, IMCO shall consider all factors it deems relevant, including the
breadth of the market in and the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of the
commission, if any, with respect to the specific transaction and on a continuing
basis.
IMCO may, to the extent permitted under Section 28(e) of the Securities
Exchange Act of 1934, as amended ("1934 Act"), cause a Fund to pay a broker or
dealer that provides brokerage or research services to IMCO, a Subadviser, the
Trust or a Fund an amount of commission for effecting a Fund transaction in
excess of the amount of
4
commission another broker or dealer would have charged for effecting that
transaction if IMCO determines, in good faith, that such amount of commission is
reasonable in relation to the value of such brokerage or research services
provided in terms of that particular transaction or IMCO's overall
responsibilities to the Fund, the Trust or its other investment advisory
clients. To the extent permitted by said Section 28(e), neither IMCO nor any
Subadviser shall be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of such action. In
addition, subject to seeking "best execution" and in compliance with the Conduct
Rules of the National Association of Securities Dealers, Inc., IMCO also may
consider sales of shares of the Trust as a factor in the selection of brokers
and dealers. In this regard, the Trust reserves the right to direct IMCO to
cause Subadvisers to effect transactions in Fund securities through
broker-dealers in a manner that will help generate resources to: (i) pay the
cost of certain expenses which the Trust is required to pay or for which the
Trust is required to arrange payment pursuant to this Agreement; or (ii)
recognize broker-dealers for the sale of shares of the Trust. In addition, the
Trust hereby agrees that any entity or person associated with IMCO or any
Subadviser that is a member of a national securities exchange is authorized to
effect any transaction on such exchange for the account of a Fund to the extent
and as permitted by Section 11(a)(1)(H) of the 1934 Act.
7. RELATIONS WITH TRUST.
Subject to and in accordance with the Master Trust Agreement and Bylaws of
the Trust and the Articles of Incorporation and Bylaws of IMCO, it is understood
that Board members, officers, agents and shareholders of the Trust are or may be
interested in IMCO (or any successor thereof) as directors, officers, or
otherwise, that directors, officers, agents and shareholders of IMCO are or may
be interested in the Trust as Board members, officers, shareholders or
otherwise, that IMCO (or any such successor) is or may be interested in the
Trust as a shareholder or otherwise and that the effect of any such interests
shall be governed by said Master Trust Agreement, Articles of Incorporation, and
Bylaws.
8. LIABILITY OF IMCO.
Neither IMCO nor its officers, directors, employees, agents or controlling
persons or assigns shall be liable for any error of judgment or mistake of law
or for any loss suffered by the Trust or its shareholders in connection with the
matters to which this Agreement relates; provided that no provision of this
Agreement shall be deemed to protect IMCO against any liability to the Trust or
its shareholders to which it might otherwise be subject by reason of any willful
misfeasance, bad faith or gross negligence in the performance of its duties or
the reckless disregard of its obligations and duties under this Agreement. Nor
shall any provision hereof be deemed to protect any Board member or officer of
the Trust against any such liability to which he might otherwise be subject by
reason of any willful misfeasance, bad faith or gross negligence in the
performance of his duties or the reckless disregard of his obligations and
duties. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
5
9. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) DURATION. This Agreement shall be executed and become effective with
respect to any Existing Fund on the first date upon which the Agreement shall
have been approved by a majority of the outstanding voting securities (as that
term is defined in the 0000 Xxx) of such Existing Fund, and with respect to any
additional Fund on the date set forth in the notice from IMCO in accordance with
Paragraph 1(b) hereof that IMCO is willing to serve as the manager and
investment adviser with respect to such Fund. Unless terminated as herein
provided, this Agreement shall remain in full force and effect with respect to
each Existing Fund through July 31, 2008, and, with respect to each additional
Fund, through the first July 31 occurring more than twelve months after the date
on which such Fund becomes a Fund hereunder, and shall continue in full force
and effect for periods of one year thereafter with respect to each Fund so long
as such continuance with respect to any such Fund is approved at least annually
(a) by either the Board or by vote of a majority of the outstanding voting
shares (as defined in the 0000 Xxx) of such Fund, and (b) in either event by the
vote of a majority of the Board members who are not parties to this Agreement or
"interested persons" (as defined in the 0000 Xxx) of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
Any approval of this Agreement by the holders of a majority of the
outstanding shares (as defined in the 0000 Xxx) of any Fund shall be effective
to continue this Agreement with respect to any such Fund notwithstanding (a)
that this Agreement has not been approved by the holders of a majority of the
outstanding shares of any other Fund affected thereby, and (b) that this
Agreement has not been approved by the vote of a majority of the outstanding
shares of the Trust, unless such approval shall be required by any other
applicable law or otherwise.
(b) TERMINATION. This Agreement may be terminated at any time, without
payment of any penalty, by vote of the Board or by vote of a majority of the
outstanding shares (as defined in the 0000 Xxx) of a Fund, or by IMCO on sixty
days' written notice to the other party.
(c) AUTOMATIC TERMINATION. This Agreement shall automatically terminate in
the event of its assignment.
10. NAME OF TRUST.
It is understood that the name "USAA," and any logo associated with that
name is the valuable property of the United Services Automobile Association, and
that the Trust has the right to include "USAA" as a part of its name only so
long as this Agreement shall continue and IMCO is a wholly owned subsidiary of
the United Services Automobile Association. Upon termination of this Agreement,
the Trust shall forthwith cease to use the "USAA" name and logo and shall take
appropriate action to change the Trust's name.
11. PRIOR AGREEMENT SUPERSEDED.
This Agreement supersedes any prior agreement relating to the subject
matter hereof between the parties.
6
12. SERVICES NOT EXCLUSIVE.
The services of IMCO to the Trust hereunder are not to be deemed exclusive,
and IMCO shall be free to render similar services to others so long as its
services hereunder are not impaired thereby.
13. MISCELLANEOUS.
(a) AMENDMENT OF AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. No material amendment of this Agreement shall be
effective until approved in the manner required by the 1940 Act and rules
thereunder or in accordance with exemptive or other relief granted by the SEC or
its staff.
(b) SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected 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.
7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
USAA MUTUAL FUNDS TRUST USAA INVESTMENT MANAGEMENT COMPANY
By: /S/ XXXXXXXXXXX X. XXXXX By: /S/ XXXXXXXX X. XXXXXXX
------------------------ --------------------------
Name: Xxxxxxxxxxx X. Xxxxx Name: Xxxxxxxx X. Xxxxxxx
Title: President Title: Senior Vice President
Attest: Attest:
By: /S/ XXXX X. XXXXXX By: /S/ XXXXXX X. XXXXXX
---------------------- --------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxx X. Xxxxxx
Title: Secretary Title: Assistant Secretary
8
SCHEDULE A TO ADVISORY AGREEMENT
LISTING OF FUNDS
NAME OF FUND
Aggressive Growth Fund
Balanced Strategy Fund
Capital Growth Fund
California Bond Fund
California Money Market Fund
Cornerstone Strategy Fund
Emerging Markets Fund
First Start Growth Fund
GNMA Trust
Growth & Income Fund
Growth and Tax Strategy Fund
Growth Fund
High-Yield Opportunities Fund
Income Stock Fund
Income Fund
Intermediate-Term Bond Fund
Intermediate-Term Fund
International Fund
Long-Term Fund
Money Market Fund
New York Bond Fund
New York Money Market Fund
Precious Metals and Minerals Fund
Science & Technology Fund
Short-Term Bond Fund
Short-Term Fund
Small Cap Stock Fund
Tax Exempt Money Market Fund
Treasury Money Market Trust
Total Return Strategy Fund
Value Fund
Xxxxxxxx Xxxx Fund
Virginia Money Market Fund
World Growth Fund
A-1
SCHEDULE B TO ADVISORY AGREEMENT - FOR
FUNDS WITH PERFORMANCE ADJUSTMENTS
This Schedule B shall apply to each of the Funds identified on Schedule B-1
hereto (each, a "Fund").
(a) GENERAL. The Trust shall pay to IMCO, as compensation for IMCO's
services and expenses assumed hereunder, a fee determined with respect to each
Fund, which shall be composed of the Basic Fee (defined below) and a Performance
Adjustment (defined below) to the Basic Fee based upon the investment
performance of a class of shares of the Fund in relation to the investment
record of a securities index determined by the Board to be appropriate over the
same period.
(b) INDEX, CLASS AND CHANGES THERETO. The Board has designated for each
Fund the index and class of shares of the Fund identified on Schedule B-1 as the
index and class to be used for purposes of determining the Performance
Adjustment (referred to herein as the "Index" and the "Class," respectively).
From time to time, the Board may, by a vote of the Board voting in person,
including a majority of the Board members who are not parties to this Agreement
or "interested persons" (as defined in the 0000 Xxx) of any such parties,
determine (i) that another securities index is a more appropriate benchmark than
the Index for purposes of evaluating the performance of the Trust; and/or (ii)
that a different class or classes of shares of the Trust representing
interests in a Fund other than the Class is most appropriate for use in
calculating the Performance Adjustment. After ten days' written notice to IMCO,
a different index (the "Successor Index") may be substituted for the Index in
prospectively calculating the Performance Adjustment, and/or a different class
or classes of shares (the "Successor Class") may be substituted in calculating
the Performance Adjustment. However, the calculation of that portion of the
Performance Adjustment attributable to any portion of the performance period
prior to the adoption of the Successor Index will still be based upon the Fund's
performance compared to the Index. The use of a Successor Class of shares for
purposes of calculating the Performance Adjustment shall apply to the entire
performance period so long as such Successor Class was outstanding at the
beginning of such period. In the event that such Successor Class of shares was
not outstanding for all or a portion of the Performance Period, it may only be
used in calculating that portion of the Performance Adjustment attributable to
the period during which such Successor Class was outstanding and any prior
portion of the Performance Period shall be calculated using the Successor Class
of shares previously designated.
(c) BASIC FEE. The basic fee for a Fund (the "Basic Fee") for any period
shall equal: (i) the Fund's average net assets during such period, multiplied by
(ii) the annual rate identified for such Fund on Schedule B-1 hereto, multiplied
by (iii) a fraction, the numerator of which is the number of calendar days in
the payment period and the denominator of which is 365 (366 in leap years).
(d) PERFORMANCE ADJUSTMENT. The amount of the performance adjustment (the
"Performance Adjustment") shall equal: (i) the average net assets of the Fund
over the Performance Period (as defined below), multiplied by (ii) the
Adjustment Rate (as defined below), multiplied by (iii) a fraction, the
numerator of which shall be the number of days in the last month of the
Performance Period and the denominator of which shall be 365. The resulting
B-1
dollar figure will be added to or subtracted from the Basic Fee depending on
whether the Fund experienced better or worse performance than the Index.
(e) ADJUSTMENT RATE. The adjustment rate (the "Adjustment Rate") shall be
as set forth in Schedule B-2 for each Fund, provided, however, that the
Performance Adjustment may be further adjusted to the extent necessary to ensure
that the total adjustment to the Basic Fee on an annualized basis does not
exceed the maximum Performance Adjustment identified for such Fund in Schedule
B-2.
(f) PERFORMANCE PERIOD. The performance period (the "Performance Period")
for the Funds listed in Schedule B-1 on the effective date of this Agreement
shall be measured from August 1, 2003 or, for any Fund created after August 1,
2003, the Fund's inception date (the "Commencement Date"). The Commencement Date
for any Fund added to Schedule B-1 after the effective date of this Agreement
shall be the effective date of the amendment adding such Fund to Schedule B-1.
The Performance Period shall consist of the current month plus the preceding
months through the Commencement Date until a period of 36 months is included in
the Performance Period, provided, however, that no Performance Adjustment shall
be made with respect to any period that is less than 12 months, and provided
further, that any Performance Adjustment for a period prior to the effective
date of this Agreement shall be based on the Fund's performance relative to the
designated index in effect during that period under any prior agreement with
respect to the Fund. In months subsequent to a 36-month Performance Period
having been reached, the Performance Period will be a rolling 36-month period
consisting of the most recently completed month and the previous 35 months.
(g) MEASUREMENT CALCULATION. The Fund's investment performance will be
measured by comparing the (i) opening net asset value of one share of the Class
of the Fund on the first business day of the Performance Period with (ii) the
closing net asset value of one share of the Class of the Fund as of the last
business day of such period. In computing the investment performance of the Fund
and the investment record of the Index, distributions of realized capital gains,
the value of capital gains taxes per share paid or payable undistributed
realized long-term capital gains accumulated to the end of such period and
dividends paid out of investment income on the part of the Fund, and all cash
distributions of the companies whose securities comprise the Index, will be
treated as reinvested in accordance with Rule 205-1 or any other applicable rule
under the Investment Advisers Act of 1940, as the same from time to time may be
amended.
(h) PAYMENT OF FEES. The Management Fee payable hereunder shall be computed
daily and paid monthly in arrears.
(i) AVERAGE NET ASSETS. The term "average net assets" of a Fund as used
herein for any period shall mean the quotient produced by dividing (i) the sum
of the net assets of the Fund, as determined in accordance with procedures
established from time to time under the direction of the Board, for each
calendar day of such period, by (ii) the number of such days.
(j) TERMINATION. In the event this Agreement with respect to any Fund is
terminated as of a date other than the last day of any month, the Basic Fee
shall be computed on the basis of the period ending on the last day on which
this Agreement is in effect for such Fund, subject to a pro rata adjustment
based on the number of days elapsed in the current month as a percentage of the
B-2
total number of days in such month. The amount of any Performance Adjustment to
the Basic Fee will be computed on the basis of and applied to the average net
assets over the Performance Period ending on the last day on which this
Agreement is in effect for such Fund.
B-3
SCHEDULE B-1 TO ADVISORY AGREEMENT - LISTING OF FUNDS
WITH PERFORMANCE ADJUSTMENT
ANNUAL
NAME OF FUND(1) PERFORMANCE INDEX BASIC
--------------- ----------------- FEE
RATE
-----
Aggressive Growth Fund Lipper Large-Cap Growth Funds Index *
Balanced Strategy Fund Lipper Balanced Funds Index .75%
California Bond Fund Lipper California Municipal Debt **
Funds Index
Capital Growth Fund Lipper Global Funds Index .85%
Cornerstone Strategy Fund Lipper Global Flexible Funds Index .75%
Emerging Markets Fund Lipper Emerging Markets Funds Index 1.00%
First Start Growth Fund Lipper Flexible Portfolio Funds Index .75%
GNMA Trust Lipper GNMA Funds Index .125%
Growth & Income Fund Lipper Multi-Cap Core Funds Index .60%
Growth and Tax Strategy Fund Composite Consisting of 51% of the .50%
Lipper General Municipal Bond Funds
Index and 49% of the Lipper Large Cap
Core Funds Index
Growth Fund Lipper Large-Cap Growth Funds Index .75%
High-Yield Opportunities Fund Lipper High Current Yield Index .50%
Income Stock Fund Lipper Equity Income Funds Index .50%
Income Fund Lipper Corporate Debt Funds A .24%
Rated Index
Intermediate-Term Bond Fund Lipper Intermediate Investment Grade Debt ***
Funds Index
Tax Exempt Intermediate-Term
Fund Lipper Municipal Debt Funds Index .28%
----------------------
(1) The Performance Adjustment initially will be determined by reference to the
sole outstanding class of shares of each Fund. If, in the future, a Fund offers
more than one class of shares, the Performance Adjustment for that Fund will
continue to be determined by reference to the initial class of shares, unless
the Board determines otherwise.
B-4
Fund
International Fund Lipper International Funds Index .75%
Tax Exempt Long-Term Fund Lipper General Municipal Debt .28%
Funds Index
New York Bond Fund Lipper New York Municipal Debt **
Funds Index
Precious Metals and
Minerals Fund Lipper Gold Funds Index .75%
Science & Technology Fund Lipper Science & Technology .75%
Funds Index
Short-Term Bond Fund Lipper Short Investment Grade Debt .24%
Funds Index
Short-Term Fund Lipper Short Municipal Debt .28%
Funds Index
Small Cap Stock Fund Lipper Small-Cap Core Funds Index .75%
Total Return Strategy Fund Lipper Flexible Portfolio Funds Index .65%
Value Fund Lipper Multi-Cap Value Funds Index .75%
Xxxxxxxx Xxxx Fund Lipper Virginia Municipal Debt **
Funds Index
World Growth Fund Lipper Global Funds Index .75%
* The fee is computed at one-half of one percent (.50%) of the first $750
million of average net assets, two-fifths of one percent (.40%) of the
portion of average net assets over $750 million but not over $1.5 billion,
and one-third of one percent (.33%) of the portion of average net assets
over $1.5 billion.
** The fee is computed at one-half of one percent (.50%) of the first $50
million of average net assets, two-fifths of one percent (.40%) of the
portion of average net assets over $50 million but not over $100 million,
and three-tenths of one percent (.30%) of the portion of average net assets
over $100 million. In calculating the fee for the Fund, the average net
assets of the California Bond Fund, the New York Bond Fund, and the
Xxxxxxxx Xxxx Fund are combined with the average net assets of the
California Money Market Fund, the Ney York Money Market Fund, and the
Virginia Money Market Fund, respectively, and the fee is allocated pro rata
based upon the average net assets of the two Funds.
*** The fee is computed at one-half of one percent (.50%) of the first $50
million of average net assets, two-fifths of one percent (.40%) of the
portion of average net assets over $50 million but not over $100 million,
and three-tenths of one percent (.30%) of the portion of average net assets
over $100 million.
B-5
SCHEDULE B-2 TO ADVISORY AGREEMENT - PERFORMANCE ADJUSTMENT RATE
EQUITY FUNDS
Aggressive Growth Fund Income Stock Fund
Balanced Strategy Fund International Fund
Capital Growth Fund Science & Technology Fund
Cornerstone Strategy Fund Small Cap Stock Fund
Emerging Markets Fund Total Return Strategy Fund
First Start Growth Fund Value Fund
Growth & Income Fund World Growth Fund
Growth Fund
Over/Under Performance Relative Performance Adjustment Rate
to Index (in basis points) (in basis points as a percentage
of average net assets)
+/- 100 to 400 +/- 4
+/- 401 to 700 x/- 0
x/- 000 xxx xxxxxxx x/- 0
FIXED INCOME FUNDS
California Bond Fund Tax Exempt Intermediate-Term Fund
GNMA Trust Tax Exempt Long-Term Fund
Growth and Tax Strategy Fund New York Bond Fund
High-Yield Opportunities Fund Tax Exempt Short-Term Bond Fund
Income Fund Short-Term Fund
Intermediate-Term Bond Fund Xxxxxxxx Xxxx Fund
Over/Under Performance Relative Performance Adjustment Rate
to Index (in basis points) (in basis points as a percentage
of average net assets)
+/- 20 to 50 +/- 4
+/- 51 to 100 x/- 0
x/- 000 xxx xxxxxxx x/- 0
X-0
SCHEDULE C TO ADVISORY AGREEMENT - FOR FUNDS
WITH NO PERFORMANCE ADJUSTMENT
This Schedule C shall apply to each of the Funds identified on Schedule C-1
hereto (each, a "Fund").
(a) The Trust shall pay to IMCO a fee for each Fund calculated daily and
payable monthly in arrears, computed as a percentage of the average net assets
of the Fund for such month at the rate set forth in Schedule C-1 thereto.
(b) The "average net assets" of the Fund for any month shall be equal to
the quotient produced by dividing (i) the sum of the net assets of such Fund,
determined in accordance with procedures established from time to time by or
under the direction of the Board, for each calendar day of such month, by (ii)
the number of such days.
C-1
SCHEDULE D TO ADVISORY AGREEMENT- FOR FUNDS WITH FEE
WAIVER AND EXPENSE REIMBURSEMENT RECOVERY PLANS
PERCENTAGE OF
NAME OF FUND ENDING DATE AVERAGE NET ASSETS
Total Return Strategy Fund January 7, 2008 1.00%
D-1
EXHIBIT D (vi)
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of August, 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 Mutual Funds Trust,
a statutory trust organized under the laws of the State of Delaware (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 BHMS 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, 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 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 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 Trust'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
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 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, 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 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. BHMS shall establish compliance procedures reasonably calculated to ensure
compliance with the foregoing. IMCO shall be responsible for providing BHMS with
the Trust's Master Trust Agreement, 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 BHMS with
prior written notice of any material change to the Trust's Registration
Statement that would affect BHMS' management of a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, BHMS will select the
brokers or dealers that will execute purchase and sale transactions for the Fund
Accounts, subject to the conditions herein. In the selection of broker-dealers
and the placement of orders for the purchase and sale of portfolio investments
for the Fund Accounts, BHMS shall use its best efforts to obtain for the Fund
Accounts the most favorable price and execution available, except to the extent
it may be permitted to pay higher brokerage commissions for brokerage and
research services as described below. In using its best efforts to obtain the
most favorable price and execution available, BHMS, bearing in mind each
2
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
Trust is required to pay or for which the Trust 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 Trust 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 Trust 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,
3
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 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, 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.
4
(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 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. 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
5
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 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 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 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 BHMS in the performance of any of its duties or obligations
hereunder or (ii) any untrue statement of a material fact contained
6
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 Trust
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 Trust. 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.
7
(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 Trust, 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.
8
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 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 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 Trust.
(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 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 BHMS, including, without limitation, a change of control of BHMS or a
portfolio manager change, BHMS shall bear all reasonable
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
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.
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
By: /S/ XXXX X. XXXXXX By: /S/ XXXXXXXXXXX X. XXXXX
--------------------------------- --------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
By: /S/ XXXXX X. XXXXXXXX
-------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
EVP Corp Services
Attest: BARROW, HANLEY, XXXXXXXXX & XXXXXXX,
INC.
By: /S/ XXXX X. XXXX By: /S/ XXXXX X. XXXXXX
---------------------------------- ------------------------
Name: Xxxx X. Xxxx Name: Xxxxx X. Xxxxxx
Title: Client Service Administrator Title: President, Secretary &
Treasurer
11
SCHEDULE A
BALANCED STRATEGY FUND
GROWTH & INCOME FUND
VALUE FUND
12
SCHEDULE B
FEES
FUND ACCOUNT RATE PER ANNUM OF THE AVERAGE DAILY
NET ASSETS OF THE FUND ACCOUNTS
Balanced Strategy Fund, Growth &
Income Fund, and Value 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(vii)
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of August, 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 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 Mutual Funds Trust,
a statutory trust organized under the laws of the State of Delaware (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 Batterymarch 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, 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 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 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 Trust'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 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 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, 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 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. Batterymarch shall establish compliance procedures reasonably calculated
to ensure compliance with the foregoing. IMCO shall be responsible for providing
Batterymarch with the Trust's Master Trust Agreement, 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 Batterymarch with prior written notice of any material change to
the Trust'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 Fund Accounts the most favorable price and execution
available, except to the extent it may be
2
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 Trust is required to pay
or for which the Trust 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 Trust 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 security, specifying the name of the issuer, the description
and amount or number of shares of the
3
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 Trust 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 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, 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 valuation of any
Fund Account's portfolio securities and shall notify IMCO immediately of the
occurrence of any such events.
4
(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 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. 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 the whole of a month, the compensation as specified shall be
prorated based upon the number of calendar days during which this Agreement is
in effect during such month, and the fee shall be computed based upon the
average daily net assets of a Fund Account for such days.
5
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.
(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 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,
6
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 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 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 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 Trust 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 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
7
or omission was made in reliance upon information furnished to IMCO or the
Trust. 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.
(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
8
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 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 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 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 Trust.
9
(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 Trust 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 Trust 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:
IMCO: USAA Investment Management Company
0000 Xxxxxxxxxxxxxx Xxxx, X-X0-X
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Securities Counsel
10
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.
11
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
By: /S/ XXXX X. XXXXXX By: /S/ XXXXXXXXXXX X. XXXXX
--------------------------- ---------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
By: /S/ XXXXX X. XXXXXXXX
-------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
EVP Corp Services
Attest: BATTERYMARCH FINANCIAL MANAGEMENT, INC.
By: /S/ XXXXXX X. XXXXXXX By: /S/ XXXXXXX X. XXXXX
----------------------------- ------------------------
Name: Xxxxxx X. Xxxxxxx Name: Xxxxxxx X. Xxxxx
Title: Assistant Secretary Title: President
12
SCHEDULE A
CAPITAL GROWTH FUND
CORNERSTONE STRATEGY FUND
SMALL CAP STOCK FUND
13
SCHEDULE B
FEES
FUND ACCOUNT RATE PER ANNUM OF THE AVERAGE DAILY NET
ASSETS OF THE FUND ACCOUNTS
Capital Growth Fund and Cornerstone 0.25% on the first $250 million of assets
Strategy Fund*
0.21% on assets over $250 million and up
to $500 million
0.17% on assets over $500 million
FUND ACCOUNT RATE PER ANNUM OF THE AVERAGE DAILY NET
ASSETS OF THE FUND ACCOUNT
Small Cap Stock Fund 0.50%
------------------
* Batterymarch agrees that it will not seek to increase this fee rate during the
period ending November 30, 2009 (the Lock). This 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").
14
EXHIBIT D (viii)
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of August, 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 THE BOSTON COMPANY ASSET MANAGEMENT, LLC, a limited
liability company organized under the laws of the Commonwealth of Massachusetts
and having its principal place of business in Boston, Massachusetts (Boston
Company).
WHEREAS, IMCO serves as the investment adviser to USAA Mutual Funds Trust,
a statutory trust organized under the laws of the State of Delaware (the Trust)
and registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, under its Investment Advisory Agreement with the Trust (Investment
Advisory Agreement), IMCO is authorized to appoint subadvisers for series of the
Trust (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain Boston Company to render investment advisory
services to such series (or portions thereof) of the Trust as now or hereafter
may be identified in Schedule A to this Agreement, as such Schedule A may be
amended from time to time (each such series or portion thereof referred to
herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, Boston Company is willing to provide such services to the Fund
Accounts and IMCO upon the terms and conditions and for the compensation set
forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. APPOINTMENT OF BOSTON COMPANY. IMCO hereby appoints Boston Company to act
as an investment adviser for each Fund Account in accordance with the terms and
conditions of this Agreement. Boston Company will be an independent contractor
and will have no authority to act for or represent the Trust or IMCO in any way
or otherwise be deemed an agent of the Trust or IMCO except as expressly
authorized in this Agreement or another writing by the Trust, IMCO and Boston
Company. Boston Company accepts such appointment and agrees to render the
services herein set forth for the compensation herein provided.
2. DUTIES OF BOSTON COMPANY.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO and
the Trust's Board of Trustees (the Board), Boston Company, at its own expense,
shall have full discretion to manage, supervise and direct the investment and
reinvestment of Fund Accounts allocated to it by IMCO from time to time. It is
understood that a Fund Account may consist of all, a portion of, or none of the
assets of the Fund, and that IMCO has the right to allocate and reallocate such
assets to a Fund Account at any time. Boston Company shall perform its duties
described herein in a manner consistent with the investment objective, policies
and restrictions
set forth in the then current Prospectus and Statement of Additional Information
(SAI) for each Fund. Should Boston Company anticipate materially modifying its
investment process, it must provide written notice in advance to IMCO, and any
affected Prospectus and SAI should be amended accordingly.
For each Fund set forth on Schedule A to this Agreement, Boston Company
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, Boston Company shall determine what investments shall be purchased,
held, sold or exchanged by each Fund Account and what portion, if any, of the
assets of each Fund Account shall be held in cash or cash equivalents, and
purchase or sell portfolio securities for each Fund Account; except that, to the
extent Boston Company wishes to hold cash or cash equivalents in excess of 10%
of a Fund Account's assets, Boston Company must request in writing and receive
advance permission from IMCO.
In accordance with Subsection (b) of this Section 2, Boston Company shall
arrange for the execution of all orders for the purchase and sale of securities
and other investments for each Fund Account and will exercise full discretion
and act for the Trust in the same manner and with the same force and effect as
the Trust might or could do with respect to such purchases, sales, or other
transactions, as well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases, sales, or other
transactions.
In the performance of its duties, Boston Company will act in the best
interests of each Fund and will comply with (i) applicable laws and regulations,
including, but not limited to, the 1940 Act and the Investment Advisers Act of
1940, as amended (Advisers Act), and the rules under each, (ii) the terms of
this Agreement, (iii) the stated investment objective, policies and restrictions
of each Fund, as stated in the then-current Registration Statement of each Fund,
(iv) the Trust's compliance procedures and other policies, procedures or
guidelines as the Board or IMCO reasonably may establish from time to time, (v)
the provisions of the Internal Revenue Code of 1986, as amended (Code),
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), as from time to time in effect, and (vi) the written instructions of
IMCO. Boston Company shall establish compliance procedures reasonably calculated
to ensure compliance with the foregoing. IMCO shall be responsible for providing
Boston Company with the Trust's Master Trust Agreement, as amended and
supplemented, the Trust's By-Laws and amendments thereto and current copies of
the materials specified in Subsections (a)(iii) and (iv) of this Section 2. IMCO
shall provide Boston Company with prior written notice of any change to the
Trust's Registration Statement that would affect Boston Company's management of
a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, Boston Company will
select the brokers or dealers that will execute purchase and sale transactions
for the Fund Accounts, subject to the conditions herein. In the selection of
broker-dealers and the placement of orders for the purchase and sale of
portfolio investments for the Fund Accounts, Boston Company shall use its best
efforts
2
to obtain for the Fund Accounts the most favorable price and execution
available, except to the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described below. In using its
best efforts to obtain the most favorable price and execution available, Boston
Company, bearing in mind each Fund's best interests at all times, shall consider
all factors it deems relevant, including by way of illustration, price, the size
of the transaction, the nature of the market for the security, the amount of the
commission and dealer's spread or xxxx-up, the timing of the transaction taking
into account market prices and trends, the reputation, experience and financial
stability of the broker-dealer involved, the general execution and operational
facilities of the broker-dealer and the quality of service rendered by the
broker-dealer in other transactions.
Subject to such policies as the Board may determine and to the extent
authorized by Section 28(e) of the Securities Exchange Act of 1934 (Exchange
Act), Boston Company shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its
having caused a Fund Account to pay a broker-dealer that provides brokerage and
research services to Boston Company an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker-dealer offering equally good execution capability in the portfolio
investment would have charged for effecting that transaction if Boston Company
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular transaction or Boston
Company's overall responsibilities with respect to the Fund and to other clients
of Boston Company as to which Boston Company exercises investment discretion.
The Board or IMCO may direct Boston Company to effect transactions in portfolio
securities through broker-dealers in a manner that will help generate resources
to pay the cost of certain expenses that the Trust is required to pay or for
which the Trust is required to arrange payment.
On occasions when Boston Company deems the purchase or sale of a security
to be in the best interest of a Fund as well as other clients of Boston Company,
Boston Company, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be purchased or sold to attempt to obtain a more
favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by Boston Company in the
manner it considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to its other clients over time.
Boston Company may buy securities for a Fund Account at the same time it is
selling such securities for another client account and may sell securities for a
Fund Account at the time it is buying such securities for another client
account. In such cases, subject to applicable legal and regulatory requirements,
and in compliance with such procedures of the Trust as may be in effect from
time to time, Boston Company may effectuate cross transactions between a Fund
Account and such other account if it deems this to be advantageous.
Boston Company will advise the Funds' custodian or such depository or
agents as may be designated by the custodian and IMCO promptly of each purchase
and sale of a portfolio security, specifying the name of the issuer, the
description and amount or number of shares of the security purchased, the market
price, the commission and gross or net price, the trade date and settlement
date, the identity of the effecting broker or dealer and any other pertinent
data that the
3
Funds' custodian may need to settle a security's purchase or sale. Boston
Company shall not have possession or custody of any Fund's investments. The
Trust shall be responsible for all custodial agreements and the payment of all
custodial charges and fees and, upon Boston Company giving proper instructions
to the custodian, Boston Company shall have no responsibility or liability for
the acts, omissions or other conduct of the custodian.
Notwithstanding the foregoing, Boston Company agrees that IMCO shall have
the right by written notice to identify securities that may not be purchased on
behalf of any Fund and/or brokers and dealers through which portfolio
transaction on behalf of the Fund may not be effected, including, without
limitation, brokers or dealers affiliated with IMCO. Boston Company shall
refrain from purchasing such securities for a Fund Account or directing any
portfolio transaction to any such broker or dealer on behalf of a Fund Account,
unless and until the written approval of IMCO to do so is obtained. In addition,
Boston Company agrees that it shall not direct portfolio transactions for the
Fund Accounts through any broker or dealer that is an "affiliated person" (as
that term is defined in the 1940 Act or interpreted under applicable rules and
regulations of the Commission) of Boston Company, except as permitted under the
1940 Act. IMCO agrees that it will provide Boston Company with a list of brokers
and dealers that are affiliated persons of the Funds, or affiliated persons of
such persons, and shall timely update that list as the need arises. The Funds
agree that any entity or person associated with IMCO or Boston Company that is a
member of a national securities exchange is authorized to effect any transaction
on such exchange for the account of the Funds that is permitted by Section 11(a)
of the Exchange Act, and the Funds consent to the retention of compensation for
such transactions.
(C) EXPENSES. Boston Company, at its expense, will furnish all necessary
facilities and personnel, including salaries, expenses and fees of any personnel
required for them to faithfully perform their duties under this Agreement and
administrative facilities, including bookkeeping, and all equipment and services
necessary for the efficient conduct of Boston Company's duties under this
Agreement. However, Boston Company shall not be obligated to pay any expenses of
IMCO, the Trust or the Funds, including without limitation, interest and taxes,
brokerage commissions and other costs in connection with the purchase or sale of
securities or other investment instruments for the Funds and custodian fees and
expenses.
(D) VALUATION. Securities traded on a national securities exchange or the
NASDAQ market for which market quotes are readily available are valued on each
day the New York Stock Exchange is open for business. For those securities for
which market quotes are not readily available, Boston Company, at its expense
and in accordance with procedures and methods established by the Board, which
may be amended from time to time, will provide assistance to IMCO in determining
the fair value of such securities, including providing market price information
relating to these assets of the Fund. Boston Company also shall monitor for
"significant events" that occur after the closing of a market but before the
Funds calculate their net asset values and that may affect the valuation of any
Fund Account's portfolio securities and shall notify IMCO immediately of the
occurrence of any such events.
(E) REPORTS AND AVAILABILITY OF PERSONNEL. Boston Company, at its expense,
shall render to the Board and IMCO such periodic and special reports as the
Board and IMCO may reasonably request with respect to matters relating to the
duties of Boston Company set forth herein. Boston Company, at its expense, will
make available to the Board and IMCO at reasonable
4
times its portfolio managers and other appropriate personnel in order to review
investment policies of the Funds and to consult with the Board and IMCO
regarding the investment affairs of the Funds, including economic, statistical
and investment matters relevant to Boston Company's duties hereunder.
(F) COMPLIANCE MATTERS. Boston Company, at its expense, will provide IMCO
with such compliance reports relating to its duties under this Agreement as may
be agreed upon by such parties from time to time. Boston Company also shall
cooperate with and provide reasonable assistance to IMCO, the Trust's
administrator, the Trust's custodian and foreign custodians, the Trust's
transfer agent and pricing agents and all other agents and representatives of
the Trust and IMCO, keep all such persons fully informed as to such matters as
they may reasonably deem necessary to the performance of their obligations to
the Trust and IMCO, provide prompt responses to reasonable requests made by such
persons and maintain any appropriate interfaces with each so as to promote the
efficient exchange of information.
(G) BOOKS AND RECORDS. Boston Company will maintain for the Funds all books
and records required to be maintained by the Funds pursuant to the 1940 Act and
the rules and regulations promulgated thereunder insofar as such records relate
to the investment affairs of the Fund Accounts. Pursuant to Rule 31a-3 under the
1940 Act, Boston Company agrees that: (i) all records it maintains for a Fund
Account are the property of the Fund; (ii) it will surrender promptly to a Fund
or IMCO any such records (or copies of such records) upon the Fund's or IMCO's
request; and (iii) it will preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records it maintains for any Fund Account.
Notwithstanding subsection (ii) above, Boston Company may maintain copies of
such records to comply with its recordkeeping obligations.
(H) PROXIES. Boston Company will, unless and until otherwise directed by
IMCO or the Board, vote proxies with respect to a Fund Account's securities and
exercise rights in corporate actions or otherwise in accordance with Boston
Company's proxy voting guidelines, as amended from time to time, which shall be
provided to IMCO.
3. ADVISORY FEE. IMCO shall pay to Boston Company as compensation for Boston
Company's services rendered pursuant to this Agreement a fee based on the
average daily net assets of each Fund Account at the annual rates set forth in
Schedule B, which schedule can be modified from time to time, subject to any
appropriate approvals required by the 1940 Act. Such fees shall be calculated
daily and payable monthly in arrears within 15 business days after the end of
such month. IMCO (and not the Funds) shall pay such fees. If Boston Company
shall serve for less than the whole of a month, the compensation as specified
shall be prorated based upon the number of calendar days during which this
Agreement is in effect during such month, and the fee shall be computed based
upon the average daily net assets of a Fund Account for such days.
4. REPRESENTATIONS AND WARRANTIES.
(A) BOSTON COMPANY. Boston Company represents and warrants to IMCO that (i)
the retention of Boston Company by IMCO as contemplated by this Agreement is
authorized by Boston Company's governing documents; (ii) the execution, delivery
and performance of this Agreement does not violate any obligation by which
Boston Company or its property is bound,
5
whether arising by contract, operation of law or otherwise; (iii) this Agreement
has been duly authorized by appropriate action of Boston Company and when
executed and delivered by Boston Company will be a legal, valid and binding
obligation of Boston Company, enforceable against Boston Company in accordance
with its terms, subject, as to enforcement, to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and to general equitable
principles (regardless of whether enforcement is sought in a proceeding in
equity or law); (iv) Boston Company is registered as an investment adviser under
the Advisers Act; (v) Boston Company has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the 1940 Act and that Boston
Company and certain of its employees, officers, partners and directors are
subject to reporting requirements thereunder and, accordingly, agrees that it
shall, on a timely basis, furnish a copy of such code of ethics to IMCO, and,
with respect to such persons, Boston Company shall furnish to IMCO all reports
and information provided under Rule 17j-1(c)(2); (vi) Boston Company is not
prohibited by the 1940 Act, the Advisers Act or other law, regulation or order
from performing the services contemplated by this Agreement; (vii) Boston
Company will promptly notify IMCO of the occurrence of any event that would
disqualify Boston Company from serving as investment manager of an investment
company pursuant to Section 9(a) of the 1940 Act or otherwise; (viii) Boston
Company has provided IMCO with a copy of its Form ADV, which as of the date of
this Agreement is its Form ADV as most recently filed with the SEC, and promptly
will furnish a copy of all amendments to IMCO at least annually; (ix) Boston
Company will notify IMCO of any "assignment" (as defined in the 0000 Xxx) of
this Agreement or change of control of Boston Company, as applicable, and any
changes in the key personnel who are either the portfolio manager(s) of any Fund
Account or senior management of Boston Company, in each case prior to or
promptly after, such change; and (x) Boston Company has adequate disaster
recovery and interruption prevention measures to ensure business resumption in
accordance with applicable law and within industry standards.
(B) IMCO. IMCO represents and warrants to Boston Company that (i) the
retention of Boston Company by IMCO as contemplated by this Agreement is
authorized by the respective governing documents of the Trust and IMCO; (ii) the
execution, delivery and performance of each of this Agreement and the Investment
Advisory Agreement does not violate any obligation by which the Trust or IMCO or
their respective property is bound, whether arising by contract, operation of
law or otherwise; (iii) each of this Agreement and the Investment Advisory
Agreement has been duly authorized by appropriate action of the Trust and IMCO
and when executed and delivered by IMCO will be a legal, valid and binding
obligation of the Trust and IMCO, enforceable against the Trust and IMCO in
accordance with its terms, subject, as to enforcement, to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to general
equitable principles (regardless of whether enforcement is sought in a
proceeding in equity or law); (iv) IMCO is registered as an investment adviser
under the Advisers Act; (v) IMCO has adopted a written code of ethics complying
with the requirements of Rule 17j-1 under the 1940 Act and that IMCO and certain
of its employees, officers and directors are subject to reporting requirements
thereunder; (vi) IMCO is not prohibited by the 1940 Act, the Advisers Act or
other law, regulation or order from performing the services contemplated by this
Agreement; and (vii) IMCO will promptly notify Boston Company of the occurrence
of any event that would disqualify IMCO from serving as investment manager of an
investment company pursuant to Section 9(a) of the 1940 Act or otherwise.
6
5. LIABILITY AND INDEMNIFICATION.
(A) BOSTON COMPANY. Boston Company shall be liable for any and all losses,
claims, damages, liabilities or litigation (including reasonable legal and other
expenses) to which the Trust, a Fund, IMCO, any affiliated persons thereof
(within the meaning of the 0000 Xxx) and any controlling persons thereof (as
described in Section 15 of the Securities Act of 1933, as amended (the 1933
Act)) (collectively, IMCO Indemnities) may become subject under the 1933 Act,
the 1940 Act, the Advisers Act, or under any other statute, at common law or
otherwise arising out of (i) any negligence, willful misconduct, bad faith or
reckless disregard of Boston Company in the performance of any of its duties or
obligations hereunder or (ii) any untrue statement of a material fact contained
in the Prospectus and SAI, proxy materials, reports, advertisements, sales
literature, or other materials pertaining to the Funds or the omission to state
therein a material fact known to Boston Company which was required to be stated
therein or necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished to IMCO or
the Trust by Boston Company Indemnities (as defined below) for use therein.
Boston Company shall indemnify and hold harmless the IMCO Indemnities for any
and all such losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses).
(B) IMCO. IMCO shall be liable for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which Boston Company, any affiliated persons thereof (within the meaning of the
0000 Xxx) and any controlling persons thereof (as described in Section 15 of the
1933 Act) (collectively, Boston Company Indemnities) may become subject under
the 1933 Act, the 1940 Act, the Advisers Act, or under any other statute, at
common law or otherwise arising out of (i) any negligence, willful misconduct,
bad faith or reckless disregard by IMCO in the performance of any of its duties
or obligations hereunder or (ii) any untrue statement of a material fact
contained in the Prospectus and SAI, proxy materials, reports, advertisements,
sales literature, or other materials pertaining to the Funds or the omission to
state therein a material fact known to IMCO which was required to be stated
therein or necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon information furnished to IMCO or
the Trust by Boston Company. IMCO shall indemnify and hold harmless Boston
Company Indemnities for any and all such losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses).
6. DURATION AND TERMINATION OF THIS AGREEMENT. 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 Trust, IMCO, or Boston Company
(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'
7
written notice delivered or mailed by registered mail, postage prepaid, to IMCO
and Boston Company.
(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, Boston
Company 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 Boston Company.
Boston Company 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 Boston Company by IMCO shall be
without prejudice to the obligation of Boston Company to complete transactions
already initiated or acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to Boston
Company 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), 11(c) and 11(g) 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
8
majority of the outstanding voting securities of the Trust, unless such action
shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of Boston Company to IMCO in
connection with the Funds hereunder are not to be deemed exclusive, and Boston
Company shall be free to render investment advisory services to others so long
as its services hereunder are not impaired thereby. It is understood that the
persons employed by Boston Company to assist in the performance of its duties
hereunder will not devote their full time to such services and nothing contained
herein shall be deemed to limit or restrict in any manner whatsoever the right
of Boston Company to engage in or devote time and attention to other businesses
or to render services of whatever kind or nature. It is understood that IMCO may
appoint at any time in accordance with Applicable Law one or more subadvisers,
in addition to Boston Company, or IMCO itself, to perform investment advisory
services to any portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. Boston Company shall, upon reasonable notice,
afford IMCO at all reasonable times access to Boston Company's officers,
employees, agents and offices and to all its relevant books and records and
shall furnish IMCO with all relevant financial and other data and information as
requested; provided, however, that nothing contained herein shall obligate
Boston Company to provide IMCO with access to the books and records of Boston
Company relating to any other accounts other than the Funds.
(B) CONFIDENTIALITY. Boston Company, and its officers, employees and
authorized representatives, shall treat confidentially and as proprietary
information of the Trust all records and information relative to the Trust and
prior, present or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Trust, which approval shall not be unreasonably withheld and may not be
withheld where Boston Company may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust.
(C) PRIVACY POLICY. Boston Company acknowledges that nonpublic customer
information (as defined in Regulation S-P, including any amendments thereto) of
customers of 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.
9
(E) NOTIFICATIONS. Boston Company agrees that it will promptly notify IMCO
in the event that Boston Company expects to become the subject of an
administrative proceeding or enforcement action by the Commission or other
regulatory body with applicable jurisdiction.
(F) INSURANCE. Boston Company agrees to maintain errors and omissions or
professional liability insurance coverage in an amount that is reasonable in
light of the nature and scope of Boston Company's business activities.
(G) SHAREHOLDER MEETING EXPENSES. In the event that the Trust shall be
required to call a meeting of shareholders solely due to actions involving
Boston Company, including, without limitation, a change of control of Boston
Company, Boston Company shall bear all reasonable expenses associated with such
shareholder meeting.
11. MISCELLANEOUS.
(A) NOTICES. All notices or other communications given under this Agreement
shall be made by guaranteed overnight delivery, telecopy or certified mail;
notice is effective when received. Notice shall be given to the parties at the
following addresses:
IMCO: USAA Investment Management Company
0000 Xxxxxxxxxxxxxx Xxxx, X-X0-X
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Securities Counsel
Boston Company: The Boston Company Asset Management, LLC
Xxx Xxxxxx Xxxxx, 000-0000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Risk Management and Compliance Department
(B) SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected 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.
10
(F) ENTIRE AGREEMENT. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act.
IN WITNESS WHEREOF, IMCO and Boston Company have caused this Agreement to
be executed as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT COMPANY
By: /S/ XXXX X. XXXXXX By: /S/ XXXXXXXXXXX X. XXXXX
------------------------- ------------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
By: /S/ XXXXX X. XXXXXXXX
-------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
Attest: THE BOSTON COMPANY ASSET MANAGEMENT, LLC
By: /S/ XXXXXXX X. XXXXXXX By: /S/ XXXXX X. XXXXXXX
-------------------------- ---------------------------
Name: Xxxxxxx X. XxXxxxx Name: Xxxxx X. Xxxxxxx
Title: Asst. Vice President Title: Chief Executive Officer
11
SCHEDULE A
EMERGING MARKETS FUND
12
SCHEDULE B
FEES
RATE PER ANNUM OF THE AVERAGE DAILY NET
FUND ACCOUNT ASSETS OF THE FUND ACCOUNT
Emerging Markets Fund 0.69%
13
EXHIBIT D (ix)
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of August, 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 Grantham, Mayo, Van Otterloo & Co. LLC, a limited
liability company organized under the laws of the State of Massachusetts and
having its principal place of business in Boston, Massachusetts (GMO).
WHEREAS, IMCO serves as the investment adviser to USAA Mutual Funds Trust,
a statutory trust organized under the laws of the State of Delaware (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 GMO 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, GMO 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 GMO. IMCO hereby appoints GMO to act as an investment
subadviser for each Fund Account in accordance with the terms and conditions of
this Agreement. GMO 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 GMO. GMO accepts such appointment and
agrees to render the services herein set forth for the compensation herein
provided.
2. DUTIES OF GMO.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO and
the Trust's Board of Directors (the Board), GMO, 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. GMO 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 GMO 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, GMO 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, GMO 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 GMO
wishes to hold cash or cash equivalents in excess of 10% of a Fund Account's
assets for longer than two consecutive business days, GMO must request in
writing and receive advance permission from IMCO.
In accordance with Subsection (b) of this Section 2, GMO 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, GMO will act in the best interests of
each Fund and will comply with (i) applicable laws and regulations, including,
but not limited to, the 1940 Act and the Investment Advisers Act of 1940, as
amended (Advisers Act), and the rules under each, (ii) the terms of this
Agreement, (iii) the stated investment objective, policies and restrictions of
each Fund, as stated in the then-current Prospectus and Statement of Additional
Information of each Fund, (iv) the Trust's compliance procedures and other
policies, procedures or guidelines as the Board or IMCO reasonably may establish
from time to time, (v) the provisions of the Internal Revenue Code of 1986, as
amended (Code), applicable to "regulated investment companies" (as defined in
Section 851 of the Code), including Section 817(h), as from time to time in
effect, and (vi) the written instructions of IMCO. GMO shall establish
compliance procedures reasonably calculated to ensure compliance with the
foregoing with respect to each Fund Account. IMCO shall be responsible for
providing GMO with the Trust's Master Trust Agreement, as amended and
supplemented, the Trust'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 GMO with prior written notice of any material change to the
Trust's Registration Statement under the Securities Act of 1933 and the 1940
Act that would affect GMO's management of a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, GMO 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, GMO 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, GMO, 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), GMO 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 GMO 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 GMO 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 GMO's overall
responsibilities with respect to the Fund and to other clients of GMO as to
which GMO exercises investment discretion.
2
On occasions when GMO deems the purchase or sale of a security to be in the
best interest of a Fund as well as other clients of GMO, GMO, 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 GMO 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.
GMO 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, GMO may effectuate cross transactions between a Fund Account and such
other account if it deems this to be advantageous.
GMO 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. GMO 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 GMO giving proper instructions to the custodian, GMO
shall have no responsibility or liability for the acts, omissions or other
conduct of the custodian.
Notwithstanding the foregoing, GMO 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. GMO 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, GMO 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 GMO,
except as permitted under the 1940 Act. IMCO agrees that it will provide GMO
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
GMO 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. GMO, 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 GMO's duties under this Agreement.
However, GMO 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 will be valued on
each day the New York Stock Exchange is open for business. For those securities
held in Fund Accounts subadvised by GMO for which market quotes are not readily
available, GMO, at its expense, 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. GMO also shall provide reasonable assistance to IMCO in monitoring for
"significant events" that may affect the valuation of any Fund Account's
portfolio securities and shall notify IMCO promptly in the event GMO determines
that a significant event has occurred.
3
(E) REPORTS AND AVAILABILITY OF PERSONNEL. GMO, 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
GMO set forth herein. GMO, 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 GMO's duties hereunder.
(F) COMPLIANCE MATTERS. GMO, 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. GMO 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 (including
promptly informing such persons as reasonably deemed necessary about compliance,
trading, and pricing issues that may arise from time to time), 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. GMO 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, GMO 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, GMO may maintain copies of such records to comply with its
recordkeeping obligations.
(H) PROXIES. GMO 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 GMO's proxy voting
guidelines, as amended from time to time, which shall be provided to IMCO.
3. ADVISORY FEE. IMCO shall pay to GMO as compensation for GMO'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 GMO 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) GMO. GMO represents and warrants to IMCO that (i) the retention of GMO
by IMCO as contemplated by this Agreement is authorized by GMO's governing
documents; (ii) the execution, delivery and performance of this Agreement does
not violate any obligation by which GMO 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 GMO and when executed and
delivered by GMO will be a legal, valid and binding obligation of GMO,
enforceable against GMO 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) GMO is
registered as an investment adviser under the Advisers Act; (v) GMO 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 GMO 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
4
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 such persons; (vi) GMO 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) GMO will
promptly notify IMCO of the occurrence of any event that would disqualify GMO
from serving as investment manager of an investment company pursuant to Section
9(a) of the 1940 Act or otherwise; (viii) GMO 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) GMO will notify IMCO of any "assignment" (as
defined in the 0000 Xxx) of this Agreement or change of control of GMO, as
applicable, and any changes in the key personnel who are either the portfolio
manager(s) of any Fund Account or senior management of GMO, in each case prior
to or promptly after, such change; and (x) GMO 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 GMO that (i) the retention of GMO
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 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 GMO 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) GMO. GMO shall indemnify and hold harmless the Trust, a Fund, IMCO, any
affiliated persons thereof (within the meaning of the 0000 Xxx) and any
controlling persons thereof (as described in Section 15 of the Securities Act of
1933, as amended (the 1933 Act)) (collectively, IMCO Indemnities) for any and
all losses, claims, damages, liabilities or litigation (including reasonable
legal and other expenses) to which the IMCO Indemnities may become subject under
the 1933 Act, the 1940 Act, the Advisers Act, or under any other statute, at
common law or otherwise caused by (i) any negligence, willful misconduct, bad
faith or reckless disregard of any GMO Indemnities (defined below in section
5(b)) in the performance of their 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 GMO 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 GMO Indemnities (as
defined below) for use therein.
(B) IMCO. IMCO shall indemnify and hold harmless GMO, 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, GMO
Indemnities) for any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) to which the GMO Indemnities may
become subject under the 1933 Act, the 1940 Act, the Advisers Act, or under any
other statute, at common law or otherwise caused by (i) any negligence, willful
misconduct, bad faith or reckless disregard by any IMCO Indemnities in the
performance of their 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
5
materials pertaining to the Funds or the omission to state therein a material
fact known to IMCO which was required to be stated therein or necessary to make
the statements therein not misleading, unless such statement or omission was
made in reliance upon information furnished by GMO Indemnities to IMCO or the
Trust.
6. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall become
effective with respect to a Fund upon its execution; provided, however, that
this Agreement shall not become effective with respect to a Fund unless it has
first been approved in the manner required by the 1940 Act and rules thereunder
or in accordance with exemptive or other relief granted by the SEC or its staff.
This Agreement shall remain in full force and effect continuously thereafter,
except as follows:
(a) By vote of a majority of (i) the Board members who are not "interested
persons" (as defined in the 0000 Xxx) of the Trust, IMCO, or GMO (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 GMO.
(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, GMO 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 GMO. GMO 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 GMO by IMCO shall be without
prejudice to the obligation of GMO to complete transactions already initiated or
acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to GMO
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, but only to the extent that they relate to actions of IMCO or GMO
prior to 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
6
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 GMO to IMCO in connection with the
Funds hereunder are not to be deemed exclusive, and GMO 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 GMO 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 GMO 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 GMO, or IMCO itself, to perform
investment advisory services to any portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. GMO shall, upon reasonable notice, afford IMCO
at all reasonable times access to GMO'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 GMO to provide IMCO with
access to the books and records of GMO relating to any other accounts other than
the Funds or where such access is prohibited by law.
(B) CONFIDENTIALITY. GMO, 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 GMO
may be exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities, or
when so requested by the Trust.
IMCO, the Trust, and each of their directors, officers, employees and
authorized representatives, shall treat confidentially and as proprietary
information of GMO all records and information relating to GMO that GMO may
furnish to IMCO and/or the Trust, and will not use such records and information
for any purpose other than performance of their responsibilities and duties in
connection with this Agreement, except after prior notification to and approval
in writing by GMO, which approval shall not be unreasonably withheld and may not
be withheld where IMCO and/or the Trust 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 GMO.
(C) PRIVACY POLICY. GMO acknowledges that nonpublic customer information
(as defined in Regulation S-P, including any amendments thereto) of customers of
the Funds received from IMCO is subject to the limitations on redisclosure and
reuse set forth in Section 248.11 of such Regulation, and agrees such
information (i) shall not be disclosed to any third party for any purpose
without the written consent of IMCO unless permitted by exceptions set forth in
Sections 248.14 or 248.15 of such Regulation and (ii) shall be safeguarded
pursuant to procedures adopted under Section 248.30 of such Regulation if so
required.
(D) PUBLIC ANNOUNCEMENTS. No party shall issue any press release or
otherwise make any public statements with respect to the matters covered by this
Agreement without the prior written consent of the other parties hereto, which
consent shall not be unreasonably withheld; provided, however, that consent
shall not be required if, in the opinion of counsel, such disclosure is required
by law; provided further, however, that the party making such disclosure shall
provide the other parties hereto with as much prior written notice of such
disclosure as is practical under the circumstances. During the term of this
7
Agreement, IMCO agrees to furnish to GMO 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 Trust or the public, which refer to GMO or
its clients in any way, prior to use thereof and not to use such material if GMO
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 GMO with respect to 1) sales literature in which GMO is only
referenced in a listing of subadvisers to USAA funds; and 2) other materials as
agreed upon mutually by IMCO and GMO. Sales literature may be furnished to GMO
hereunder by first-class or overnight mail, electronic or facsimile
transmission, or hand delivery.
(E) NOTIFICATIONS. GMO agrees that it will promptly notify IMCO in the
event that GMO 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. GMO 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 GMO's business activities.
(G) SHAREHOLDER MEETING AND OTHER EXPENSES. In the event that the Trust
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 GMO, including, without limitation, a change of
control of GMO, GMO shall bear all reasonable expenses associated with such
shareholder meeting, information statement, or prospectus supplement.
11. MISCELLANEOUS.
(A) NOTICES. All notices or other communications given under this Agreement
shall be made by guaranteed overnight delivery, telecopy or certified mail;
notice is effective when received. Notice shall be given to the parties at the
following addresses:
IMCO: USAA Investment Management Company
0000 Xxxxxxxxxxxxxx Xxxx, X-X0-X
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Securities Counsel
GMO: Grantham, Mayo, Van Otterloo & Co. LLC
00 Xxxxx Xxxxx
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx X. 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.
8
(D) COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(E) HEADINGS. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
(F) ENTIRE AGREEMENT. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act.
IN WITNESS WHEREOF, IMCO and GMO have caused this Agreement to be executed
as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT COMPANY
By: /S/ XXXX X. XXXXXX By: /S/ XXXXXXXXXXX X. XXXXX
--------------------- ----------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
By: /S/ XXXXX X. XXXXXXXX
---------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
EVP Corp Services
Attest: GRANTHAM, MAYO, VAN OTTERLOO & CO. LLC
By: /S/ XXXXXXX XXXXXXXX By: /S/ XX XXXXXXXXX
----------------------- ----------------------
Name: Xxxxxxx Xxxxxxxx Name: Xxxxxxx X. Xxxxx
Title: Legal Counsel Title: Partner, General Counsel
9
SCHEDULE A
Income Stock Fund
10
SCHEDULE B
FEES
RATE PER ANNUM OF THE AVERAGE DAILY NET
FUND ACCOUNT ASSETS OF THE FUND ACCOUNT
Income Stock Fund 0.18%*
---------------------
* GMO agrees that it will not seek to increase this fee rate during the period
ending July 31, 2008 (the Lock). This Lock does not limit the rights of the
Fund's shareholders, the Fund's Board, or IMCO as set forth in Section 6 of the
Agreement ("Duration and Termination of this Agreement").
11
EXHIBIT D (x)
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of August, 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 Mutual Funds Trust,
a statutory trust organized under the laws of the State of Delaware (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
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 Master Trust Agreement, 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
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.
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
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
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
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
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.
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
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.
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
By: /S/ XXXX X. XXXXXX By: /S/ XXXXXXXXXXX X. XXXXX
----------------------------- ------------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
By: /S/ XXXXX X. XXXXXXXX
------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
EVP Corp Services
Attest: XXXXXX XXXXXX AND COMPANY, L.P.
By: /S/ XXXXXX X. XXXXXXX By: /S/ XXXXXX XXXXXXXX
------------------------------ -------------------------------
Name: Xxxxxx X. Xxxxxxx Name: Xxxxxx Xxxxxxxx
Title: Vice President Title: Chairman & CEO
11
SCHEDULE A
BALANCED STRATEGY FUND
FIRST START GROWTH FUND
GROWTH FUND
GROWTH & INCOME FUND
12
SCHEDULE B
FEES
FUND ACCOUNT RATE PER ANNUM OF THE AVERAGE DAILY
NET ASSETS OF THE FUND ACCOUNT
Balanced Strategy Fund 0.20%*
First Start Growth Fund 0.20%*
Growth Fund 0.20%*
Growth & Income Fund 0.20%*
---------------
* Xxxxxx agrees that it will not seek to increase this fee rate during the
period ending February 28, 2011 (the Lock). This 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").
13
EXHIBIT D (xi)
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of August, 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 XXXXXXX CAPITAL MANAGEMENT, LLC, a limited liability
company organized under the laws of the State of Delaware and having its
principal place of business in Denver, Colorado (Marsico).
WHEREAS, IMCO serves as the investment adviser to USAA Mutual Funds Trust,
a business trust organized under the laws of the State of Delaware (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 Marsico 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, Marsico 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 MARSICO. IMCO hereby appoints Marsico to act as an
investment adviser for each Fund Account in accordance with the terms and
conditions of this Agreement. Marsico 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 Marsico. Marsico
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.
2. DUTIES OF MARSICO.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO and
the Trust's Board of Trustees (the Board), Marsico, 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. Marsico shall perform its duties described
herein in a manner consistent with the investment objectives, policies, and
restrictions set forth in the then-current prospectus and statement of
additional information (SAI) for each Fund. Should Xxxxxxx
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, Xxxxxxx 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, Xxxxxxx 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
Xxxxxxx wishes to hold cash or cash equivalents in excess of 10% of a Fund
Account's assets, Xxxxxxx must request in writing and receive advance permission
from IMCO.
In accordance with Subsection (b) of this Section 2, Xxxxxxx 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, Xxxxxxx 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), including Section 817(h) as from time to time in effect, and (vi) the
written instructions of IMCO. Xxxxxxx shall establish compliance procedures
reasonably calculated to ensure compliance with the foregoing. IMCO shall be
responsible for providing Xxxxxxx with the Trust's Master Trust Agreement, 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 Xxxxxxx with prior written notice of any material
change to the Trust's Registration Statement under the Securities Act of 1933
and the 1940 Act that would affect Xxxxxxx'x management of a Fund Account.
No statement in this Agreement or any other document constitutes a
representation by Xxxxxxx regarding the rate of growth or return of a Fund
Account. Neither Xxxxxxx nor any of its officers, directors, or employees make
any representations or warranties, express or implied, that any level of
performance or investment results will be achieved by any Fund Account, or that
any Fund Account will perform comparably with any standard or index, including
the performance achieved for other clients of Xxxxxxx.
2
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, Xxxxxxx 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, Xxxxxxx 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 or
research services as described below. In using its best efforts to obtain the
best terms available, Xxxxxxx, 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), Xxxxxxx 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 or research
services to Xxxxxxx 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 Xxxxxxx determines in good faith that such
amount of commission was reasonable in relation to the value of the brokerage or
research services provided by such broker-dealer, viewed in terms of either that
particular transaction or Xxxxxxx'x overall responsibilities with respect to the
Fund and to other clients of Xxxxxxx as to which Xxxxxxx exercises investment
discretion. The Board or IMCO may direct Xxxxxxx to effect up to 25% of all
transactions in portfolio securities for a Fund Account 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. Xxxxxxx will treat such a direction as a decision by the Board
or IMCO to retain, to the extent of the direction, the discretion that Xxxxxxx
otherwise would exercise to select broker-dealers and negotiate commissions for
the Fund Account.
On occasions when Xxxxxxx deems the purchase or sale of a security to be in
the best interest of a Fund as well as other clients of Marsico, Marsico, 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 Xxxxxxx 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.
Xxxxxxx 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, Xxxxxxx may effectuate cross transactions between a Fund Account
and such other account if it deems this to be advantageous.
3
Xxxxxxx 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. Xxxxxxx 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 Xxxxxxx giving proper instructions to the custodian,
Xxxxxxx shall have no responsibility or liability for the acts, omissions or
other conduct of the custodian.
Notwithstanding the foregoing, Xxxxxxx 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. Upon receipt of a list of
such securities or broker-dealers, Xxxxxxx 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, Xxxxxxx 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
Xxxxxxx, except as permitted under the 1940 Act. IMCO agrees that it will
provide Xxxxxxx 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 Xxxxxxx 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.
IMCO and the Trust hereby approve Xxxxxxx'x placement of orders for the
purchase or sale of securities for a Fund Account with Banc of America
Securities LLC ("BAS") (a broker-dealer that is an affiliated person of Xxxxxxx
through their common ownership by Bank of America Corporation), or any other
affiliated broker-dealer, to the extent permitted by the 1940 Act and other law.
BAS or another affiliated broker-dealer will not deal as principal for its own
account in such transactions, but will act as agent for other persons including
the Fund Account. IMCO and the Trust are aware that the affiliation between
Xxxxxxx and an affiliated broker-dealer (such as BAS) could give Xxxxxxx or its
parent, Bank of America Corporation, an indirect interest in brokerage
commissions received by the affiliated broker-dealer, which could create a
potential conflict of interest when Xxxxxxx considers whether to use an
affiliated broker-dealer. Xxxxxxx generally will use an affiliated broker-dealer
for a Fund Account only when it believes that this is in the Fund Account's best
interests because the affiliated broker-dealer is expected to provide best
execution.
IMCO and the Trust hereby authorize Xxxxxxx and any affiliated
broker-dealer (including BAS) to effect agency cross transactions, in which the
affiliated broker-dealer acts as broker for parties on both sides of the
transaction, for any Fund Account, to the extent permitted by the 1940 Act and
other law. IMCO and the Trust acknowledge that Xxxxxxx'x affiliated
broker-
4
dealer will generally receive compensation from the other party to such
transactions (the amount of which may vary), and that agency cross trades could
create potentially conflicting divisions of loyalties and responsibilities,
because the affiliated broker-dealer acts for and receives commissions from both
parties, while Xxxxxxx advise the Fund Account to enter into the trade. IMCO and
the Trust may at any time revoke their consent to the execution of future agency
cross trades for a Fund account by giving written notice to Xxxxxxx or the
affiliated broker-dealer.
(C) EXPENSES. Xxxxxxx, 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 Xxxxxxx'x duties under this Agreement.
However, Xxxxxxx 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 will be 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, Xxxxxxx, 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. Xxxxxxx also shall make reasonable efforts to
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. Xxxxxxx, 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
Xxxxxxx set forth herein. Xxxxxxx, 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 Xxxxxxx'x duties
hereunder.
(F) COMPLIANCE MATTERS. Xxxxxxx, 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. Xxxxxxx 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. Xxxxxxx 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
5
Accounts. Pursuant to Rule 31a-3 under the 1940 Act, Xxxxxxx 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, Xxxxxxx may maintain
copies of such records to comply with its recordkeeping obligations.
(H) PROXIES. Xxxxxxx 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 Xxxxxxx'x proxy
voting guidelines, as amended from time to time, which shall be provided to
IMCO.
3. ADVISORY FEE. IMCO shall pay to Xxxxxxx as compensation for Xxxxxxx'x
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 Xxxxxxx 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) XXXXXXX. Xxxxxxx represents and warrants to IMCO that (i) the retention
of Xxxxxxx by IMCO as contemplated by this Agreement is authorized by Xxxxxxx'x
governing documents; (ii) the execution, delivery and performance of this
Agreement does not violate any obligation by which Xxxxxxx 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 Xxxxxxx and when
executed and delivered by Xxxxxxx will be a legal, valid and binding obligation
of Xxxxxxx, enforceable against Xxxxxxx 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) Xxxxxxx is registered as an investment adviser under the Advisers Act; (v)
Xxxxxxx has adopted a written code of ethics complying with the requirements of
Rule 17j-1 under the 1940 Act and instituted implementation procedures and
Xxxxxxx 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
information that IMCO reasonably requests concerning such code of ethics; (vi)
Xxxxxxx 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) Xxxxxxx will promptly notify IMCO of the occurrence of any event that
would disqualify Xxxxxxx from serving as investment manager of an investment
company pursuant to Section 9(a) of the 1940 Act or otherwise; (viii) Xxxxxxx
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) Xxxxxxx will
notify IMCO of any "assignment" (as defined in the
6
0000 Xxx) of this Agreement or change of control of Xxxxxxx, as applicable, and
any changes in the key personnel who are either the portfolio manager(s) of any
Fund Account or senior management of Xxxxxxx, in each case prior to or promptly
after, such change; and (x) Xxxxxxx 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 Xxxxxxx that (i) the retention of
Xxxxxxx 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 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
Xxxxxxx 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) XXXXXXX. Xxxxxxx 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 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 Xxxxxxx 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 Xxxxxxx which was required to be stated therein
or necessary to make the statements therein not misleading, if such statement or
omission was made primarily in reliance upon information furnished to IMCO or
the Trust by Xxxxxxx Indemnitees (as defined below) for use therein. Xxxxxxx
shall indemnify and hold harmless the IMCO Indemnitees 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 Xxxxxxx, any affiliated persons thereof (within the meaning of the 0000
Xxx) and any controlling persons thereof (as
7
described in Section 15 of the 1933 Act) (collectively, Xxxxxxx 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 primarily in reliance upon
information furnished to IMCO or the Trust. IMCO shall indemnify and hold
harmless Xxxxxxx Indemnitees 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 Trust, IMCO, or Xxxxxxx
(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 Xxxxxxx.
(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,
Xxxxxxx 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 Xxxxxxx. Xxxxxxx
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.
8
(e) Any notice of termination served on Xxxxxxx by IMCO shall be without
prejudice to the obligation of Xxxxxxx to complete transactions already
initiated or acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to Xxxxxxx
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 Xxxxxxx to IMCO in connection with
the Funds hereunder are not to be deemed exclusive, and Xxxxxxx 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 Xxxxxxx
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 Xxxxxxx 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 Xxxxxxx, or IMCO itself,
to perform investment advisory services to any portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. Xxxxxxx shall, upon reasonable notice, afford
IMCO at all reasonable times access to Xxxxxxx'x 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 Xxxxxxx to provide IMCO
with access to the books and records of Xxxxxxx relating to any other accounts
other than the Funds.
(B) CONFIDENTIALITY. Xxxxxxx, and its officers, employees and authorized
representatives, shall treat confidentially and as proprietary information of
the Trust all records
9
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 Xxxxxxx 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. Marsico 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. Marsico may disclose nonpublic customer information
to broker-dealers, custodians, and other third parties to the extent necessary
or appropriate to perform its duties under this Agreement.
(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 (as in the case of registration statements and other documents that are
required to be publicly filed); 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.
Marsico also may disclose non-confidential information about its service as
sub-adviser to the Trust to other clients or potential clients after the
information has been disclosed in publicly filed documents.
(E) NOTIFICATIONS. Marsico agrees that it will promptly notify IMCO in the
event that Marsico 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. Marsico 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 Xxxxxxx'x business activities.
(G) SHAREHOLDER MEETING EXPENSES. In the event that the Trust shall be
required to call a meeting of shareholders solely due to actions initiated
solely by Marsico, including, without limitation, a change of control of
Marsico, Marsico shall bear all reasonable expenses associated with such
shareholder meeting.
11. MISCELLANEOUS.
(A) NOTICES. All notices or other communications given under this Agreement
shall be made by guaranteed overnight delivery, telecopy or certified mail;
notice is effective when received. Notice shall be given to the parties at the
following addresses:
10
IMCO: USAA Investment Management Company
0000 Xxxxxxxxxxxxxx Xxxx, X-X0-X
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Securities Counsel
Marsico: 0000 Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Legal/Compliance Dept. and Client Services Dept.
(B) SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors.
(C) GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the State of Texas, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act. To the extent that the
applicable laws of the State of Texas conflict with the applicable provisions of
the 1940 Act, the latter shall control.
(D) COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(E) HEADINGS. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
(F) ENTIRE AGREEMENT. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act.
11
IN WITNESS WHEREOF, IMCO and Marsico have caused this Agreement to be
executed as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT COMPANY
By: /S/ XXXX X. XXXXXX By: /S/ XXXXXXXXXXX X. XXXXX
----------------------------------- -------------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
By: /S/ XXXXX X. XXXXXXXX
-------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
Attest: XXXXXXX CAPITAL MANAGEMENT, LLC
By: /S/ XXXXXX X. XXXXXX By: /S/ XXXXXXXXXX X. XXXXXXX
----------------------------------- --------------------------------
Name: Xxxxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxxxx
Title: Vice President and Title: President and Chief Operating
General Counsel Officer
12
SCHEDULE A
AGGRESSIVE GROWTH FUND
GROWTH FUND
13
SCHEDULE B
FEES
RATE PER ANNUM OF THE AVERAGE DAILY NET
ASSETS OF THE FUND ACCOUNT
FUND ACCOUNT
Aggressive Growth Fund 0.35%*
Growth Fund 0.35%*
-----------------------
* Marsico agrees that it will not seek to increase this fee rate during the
period ending December 31, 2009 (the Lock). This 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").
14
EXHIBIT D (xii)
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of August, 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 MASSACHUSETTS FINANCIAL SERVICES COMPANY, a
corporation organized under the laws of the State of Delaware and having its
principal place of business in Boston, Massachusetts (MFS).
WHEREAS, IMCO serves as the investment adviser to USAA Mutual Funds Trust,
a statutory trust organized under the laws of the State of Delaware (the Trust)
and registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, under its Investment Advisory Agreement with the Trust (Investment
Advisory Agreement), IMCO is authorized to appoint subadvisers for series of the
Trust (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain MFS to render investment advisory services
to such series (or portions thereof) of the Trust as now or hereafter may be
identified in Schedule A to this Agreement, as such Schedule A may be amended
from time to time (each such series or portion thereof referred to herein as a
Fund Account and collectively as Fund Accounts); and
WHEREAS, MFS is willing to provide such services to the Fund Accounts and
IMCO upon the terms and conditions and for the compensation set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. APPOINTMENT OF MFS. IMCO hereby appoints MFS to act as an investment
adviser for each Fund Account in accordance with the terms and conditions of
this Agreement. MFS will be an independent contractor and will have no authority
to act for or represent the Trust or IMCO in any way or otherwise be deemed an
agent of the Trust or IMCO except as expressly authorized in this Agreement or
another writing by the Trust, IMCO and MFS. MFS accepts such appointment and
agrees to render the services herein set forth for the compensation herein
provided.
2. DUTIES OF MFS.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO and
the Trust's Board of Trustees (the Board), MFS, at its own expense, shall have
full discretion to manage, supervise and direct the investment and reinvestment
of Fund Accounts allocated to it by IMCO from time to time. It is understood
that a Fund Account may consist of all, a portion of, or none of the assets of
the Fund, and that IMCO has the right to allocate and reallocate such assets to
a Fund Account at any time. MFS shall perform its duties described herein in a
manner consistent with the investment objective, policies and restrictions set
forth in the then current Prospectus and Statement of Additional Information
(SAI) for each Fund. Should MFS
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, MFS 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, MFS shall determine what investments shall be purchased, held, sold
or exchanged by each Fund Account and what portion, if any, of the assets of
each Fund Account shall be held in cash or cash equivalents, and purchase or
sell portfolio securities for each Fund Account; except that, to the extent MFS
wishes to hold cash or cash equivalents in excess of 10% of a Fund Account's
assets, MFS must request in writing and receive advance permission from IMCO.
In accordance with Subsection (b) of this Section 2, MFS shall arrange for
the execution of all orders for the purchase and sale of securities and other
investments for each Fund Account and will exercise full discretion and act for
the Trust in the same manner and with the same force and effect as the Trust
might or could do with respect to such purchases, sales, or other transactions,
as well as with respect to all other things necessary or incidental to the
furtherance or conduct of such purchases, sales, or other transactions.
In the performance of its duties, MFS will act in the best interests of
each Fund and will comply with (i) applicable laws and regulations, including,
but not limited to, the 1940 Act and the Investment Advisers Act of 1940, as
amended (Advisers Act), and the rules under each, (ii) the terms of this
Agreement, (iii) the stated investment objective, policies and restrictions of
each Fund, as stated in the then-current Registration Statement of each Fund,
(iv) the Trust's compliance procedures and other policies, procedures or
guidelines as the Board or IMCO reasonably may establish from time to time, (v)
the provisions of the Internal Revenue Code of 1986, as amended (Code),
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), as from time to time in effect, and (vi) the written instructions of
IMCO. MFS shall establish compliance procedures reasonably calculated to ensure
compliance with the foregoing. IMCO shall be responsible for providing MFS with
the Trust's Master Trust Agreement, as amended and supplemented, the Trust's
By-Laws and amendments thereto and current copies of the materials specified in
Subsections (a)(iii) and (iv) of this Section 2. IMCO shall provide MFS with
prior written notice of any material change to the Trust's Registration
Statement that would affect MFS's management of a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, MFS will select the
brokers or dealers that will execute purchase and sale transactions for the Fund
Accounts, subject to the conditions herein. In the selection of broker-dealers
and the placement of orders for the purchase and sale of portfolio investments
for the Fund Accounts, MFS shall use its best efforts to obtain for the Fund
Accounts the most favorable price and execution available, except to the extent
it may be permitted to pay higher brokerage commissions for brokerage and
research services as described below. In using its best efforts to obtain the
most favorable price and execution available, MFS, bearing in mind each Fund's
best interests at all times, shall consider all factors it deems relevant,
including by way of
2
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), MFS shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused a Fund Account to pay a broker-dealer that provides brokerage and
research services to MFS an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another
broker-dealer offering equally good execution capability in the portfolio
investment would have charged for effecting that transaction if MFS determines
in good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker-dealer,
viewed in terms of either that particular transaction or MFS's overall
responsibilities with respect to the Fund and to other clients of MFS as to
which MFS exercises investment discretion. The Board or IMCO may direct MFS to
effect transactions in portfolio securities through broker-dealers in a manner
that will help generate resources to pay the cost of certain expenses that the
Trust is required to pay or for which the Trust is required to arrange payment.
On occasions when MFS deems the purchase or sale of a security to be in the
best interest of a Fund as well as other clients of MFS, MFS, to the extent
permitted by applicable laws and regulations, may aggregate the securities to be
purchased or sold to attempt to obtain a more favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by MFS in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to its other clients
over time.
MFS may buy securities for a Fund Account at the same time it is selling
such securities for another client account and may sell securities for a Fund
Account at the time it is buying such securities for another client account. In
such cases, subject to applicable legal and regulatory requirements, and in
compliance with such procedures of the Trust as may be in effect from time to
time, MFS may effectuate cross transactions between a Fund Account and such
other account if it deems this to be advantageous.
MFS will advise the Funds' custodian or such depository or agents as may be
designated by the custodian and IMCO promptly of each purchase and sale of a
portfolio security, specifying the name of the issuer, the description and
amount or number of shares of the security purchased, the market price, the
commission and gross or net price, the trade date and settlement date, the
identity of the effecting broker or dealer and any other pertinent data that the
Funds' custodian may need to settle a security's purchase or sale. MFS shall not
have possession or custody of any Fund's investments. The Trust shall be
responsible for all custodial agreements and the payment of all custodial
charges and fees and, upon MFS giving proper instructions to the custodian or
such depository or agents as may be designated by the custodian and IMCO, MFS
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.
3
Notwithstanding the foregoing, MFS agrees that IMCO shall have the right by
written notice to identify securities that may not be purchased on behalf of any
Fund and/or brokers and dealers through which portfolio transaction on behalf of
the Fund may not be effected, including, without limitation, brokers or dealers
affiliated with IMCO. MFS shall refrain from purchasing such securities for a
Fund Account or directing any portfolio transaction to any such broker or dealer
on behalf of a Fund Account, unless and until the written approval of IMCO to do
so is obtained. In addition, MFS agrees that it shall not direct portfolio
transactions for the Fund Accounts through any broker or dealer that is an
"affiliated person" (as that term is defined in the 1940 Act or interpreted
under applicable rules and regulations of the Commission) of MFS, except as
permitted under the 1940 Act. IMCO agrees that it will provide MFS with a list
of brokers and dealers that are affiliated persons of the Funds, or affiliated
persons of such persons, and shall timely update that list as the need arises.
The Funds agree that any entity or person associated with IMCO or MFS that is a
member of a national securities exchange is authorized to effect any transaction
on such exchange for the account of the Funds that is permitted by Section 11(a)
of the Exchange Act, and the Funds consent to the retention of compensation for
such transactions.
(C) EXPENSES. MFS, at its expense, will furnish all necessary facilities
and personnel, including salaries, expenses and fees of any personnel required
for them to faithfully perform their duties under this Agreement and
administrative facilities, including bookkeeping, and all equipment and services
necessary for the efficient conduct of MFS's duties under this Agreement.
However, MFS shall not be obligated to pay any expenses of IMCO, the Trust or
the Funds, including without limitation, interest and taxes, brokerage
commissions and other costs in connection with the purchase or sale of
securities or other investment instruments for the Funds and custodian fees and
expenses.
(D) VALUATION. Securities traded on a national securities exchange or the
NASDAQ market for which market quotes are readily available are valued on each
day the New York Stock Exchange is open for business. For those securities for
which market quotes are not readily available, MFS, at its expense and in
accordance with procedures and methods established by the Board, which may be
amended from time to time, will provide assistance to IMCO in determining the
fair value of such securities, including providing market price information
relating to these assets of the Fund. MFS also shall monitor for "significant
events" that occur after the closing of a market but before the Funds calculate
their net asset values and that may affect the valuation of any Fund Account's
portfolio securities and shall notify IMCO immediately of the occurrence of any
such events.
(E) REPORTS AND AVAILABILITY OF PERSONNEL. MFS, at its expense, shall
render to the Board and IMCO such periodic and special reports as the Board and
IMCO may reasonably request with respect to matters relating to the duties of
MFS set forth herein. MFS, at its expense, will make available to the Board and
IMCO at reasonable times its portfolio managers and other appropriate personnel
in order to review investment policies of the Funds and to consult with the
Board and IMCO regarding the investment affairs of the Funds, including
economic, statistical and investment matters relevant to MFS's duties hereunder.
(F) COMPLIANCE MATTERS. MFS, at its expense, will provide IMCO with such
compliance reports relating to its duties under this Agreement as may be agreed
upon by such
4
parties from time to time. MFS also shall cooperate with and provide reasonable
assistance to IMCO, the Trust's administrator, the Trust's custodian and foreign
custodians, the Trust's transfer agent and pricing agents and all other agents
and representatives of the Trust and IMCO, keep all such persons fully informed
as to such matters as they may reasonably deem necessary to the performance of
their obligations to the Trust and IMCO, provide prompt responses to reasonable
requests made by such persons and maintain any appropriate interfaces with each
so as to promote the efficient exchange of information.
(G) BOOKS AND RECORDS. MFS acknowledges that certain books and records are
required to be maintained by the Funds pursuant to the 1940 Act and the rules
and regulations promulgated thereunder. MFS agrees to assist IMCO with such book
and records requirements by providing to IMCO certain information relating to
such books and records, as agreed to by IMCO and MFS, insofar as such
information relates to the investment affairs of the Fund Accounts. Pursuant to
Rule 31a-3 under the 1940 Act, MFS agrees that: (i) all records it maintains for
a Fund Account are the property of the Fund; (ii) it will surrender promptly to
a Fund or IMCO any such records (or copies of such records) upon the Fund's or
IMCO's request; and (iii) it will preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records it maintains for any Fund Account.
Notwithstanding subsection (ii) above, MFS may maintain copies of such records
to comply with its recordkeeping obligations.
(H) PROXIES. MFS will, unless and until otherwise directed by IMCO or the
Board, vote proxies with respect to a Fund Account's securities and exercise
rights in corporate actions or otherwise in accordance with MFS's proxy voting
guidelines, as amended from time to time, which shall be provided to IMCO.
3. ADVISORY FEE. IMCO shall pay to MFS as compensation for MFS's services
rendered pursuant to this Agreement a fee based on the average daily net assets
of each Fund Account at the annual rates set forth in Schedule B, which schedule
can be modified from time to time, subject to any appropriate approvals required
by the 1940 Act. Such fees shall be calculated daily and payable monthly in
arrears within 15 business days after the end of such month. IMCO (and not the
Funds) shall pay such fees. If MFS shall serve for less than the whole of a
month, the compensation as specified shall be prorated based upon the number of
calendar days during which this Agreement is in effect during such month, and
the fee shall be computed based upon the average daily net assets of a Fund
Account for such days.
4. REPRESENTATIONS AND WARRANTIES.
(A) MFS. MFS represents and warrants to IMCO that (i) the retention of MFS
by IMCO as contemplated by this Agreement is authorized by MFS's governing
documents; (ii) the execution, delivery and performance of this Agreement does
not violate any obligation by which MFS or its property is bound, whether
arising by contract, operation of law or otherwise; (iii) this Agreement has
been duly authorized by appropriate action of MFS and when executed and
delivered by MFS will be a legal, valid and binding obligation of MFS,
enforceable against MFS in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general equitable principles (regardless of
whether enforcement is sought in a proceeding in equity or law); (iv) MFS is
registered as an investment adviser under the Advisers Act; (v) MFS has adopted
a written code
5
of ethics complying with the requirements of Rule 17j-1 under the 1940 Act and
that MFS and certain of its employees, officers, partners and directors are
subject to reporting requirements thereunder and, accordingly, agrees that it
shall, on a timely basis, furnish a copy of such code of ethics to IMCO and,
with respect to such persons, MFS shall furnish to IMCO all reports and
information provided under Rule 17j-1(c)(2); (vi) MFS is not prohibited by the
1940 Act, the Advisers Act or other law, regulation or order from performing the
services contemplated by this Agreement; (vii) MFS will promptly notify IMCO of
the occurrence of any event that would disqualify MFS from serving as investment
manager of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise; (viii) MFS has provided IMCO with a copy of its Form ADV, which as of
the date of this Agreement is its Form ADV as most recently filed with the SEC,
and promptly will furnish a copy of all amendments to IMCO at least annually;
(ix) MFS will notify IMCO of any "assignment" (as defined in the 0000 Xxx) of
this Agreement or change of control of MFS, as applicable, and any changes in
the key personnel who are either the portfolio manager(s) of any Fund Account or
senior management of MFS, in each case prior to or promptly after, such change;
and (x) MFS has adequate disaster recovery and interruption prevention measures
for business resumption in accordance with relevant provisions of the 1940 Act
and within industry standards.
(B) IMCO. IMCO represents and warrants to MFS that (i) the retention of MFS
by IMCO as contemplated by this Agreement is authorized by the respective
governing documents of the Trust and IMCO; (ii) the execution, delivery and
performance of each of this Agreement and the Investment Advisory Agreement does
not violate any obligation by which the Trust or IMCO or their respective
property is bound, whether arising by contract, operation of law or otherwise;
(iii) each of this Agreement and the Investment Advisory Agreement has been duly
authorized by appropriate action of the Trust and IMCO and when executed and
delivered by IMCO will be a legal, valid and binding obligation of the Trust and
IMCO, enforceable against the Trust and IMCO in accordance with its terms,
subject, as to enforcement, to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and to general equitable principles
(regardless of whether enforcement is sought in a proceeding in equity or law);
(iv) IMCO is registered as an investment adviser under the Advisers Act; (v)
IMCO has adopted a written code of ethics complying with the requirements of
Rule 17j-1 under the 1940 Act and that IMCO and certain of its employees,
officers and directors are subject to reporting requirements thereunder; (vi)
IMCO is not prohibited by the 1940 Act, the Advisers Act or other law,
regulation or order from performing the services contemplated by this Agreement;
and (vii) IMCO will promptly notify MFS of the occurrence of any event that
would disqualify IMCO from serving as investment manager of an investment
company pursuant to Section 9(a) of the 1940 Act or otherwise.
5. LIABILITY AND INDEMNIFICATION.
(A) MFS. MFS shall be liable for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which the Trust, a Fund, IMCO, any affiliated persons thereof (within the
meaning of the 0000 Xxx) and any controlling persons thereof (as described in
Section 15 of the Securities Act of 1933, as amended (the 1933 Act))
(collectively, IMCO Indemnities) may become subject under the 1933 Act, the 1940
Act, the Advisers Act, or under any other applicable statute, at common law or
otherwise directly arising out of (i) any gross negligence, willful misconduct,
bad faith or reckless disregard of MFS in the
6
performance of any of its duties or obligations hereunder or (ii) any untrue
statement of a material fact contained in the Prospectus and SAI, proxy
materials, reports, advertisements, sales literature, or other materials
pertaining to the Funds or the omission to state therein a material fact known
to MFS which was required to be stated therein or necessary to make the
statements therein not misleading, if such statement or omission was made in
reliance upon written information furnished to IMCO or the Trust by MFS
Indemnities (as defined below) for use therein. MFS shall indemnify and hold
harmless the IMCO Indemnities for any and all such losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses).
(B) IMCO. IMCO shall be liable for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which MFS, any affiliated persons thereof (within the meaning of the 0000 Xxx)
and any controlling persons thereof (as described in Section 15 of the 1933 Act)
(collectively, MFS Indemnities) may become subject under the 1933 Act, the 1940
Act, the Advisers Act, or under any other statute, at common law or otherwise
arising out of (i) any negligence, willful misconduct, bad faith or reckless
disregard by IMCO in the performance of any of its duties or obligations
hereunder or (ii) any untrue statement of a material fact contained in the
Prospectus and SAI, proxy materials, reports, advertisements, sales literature,
or other materials pertaining to the Funds or the omission to state therein a
material fact known to IMCO which was required to be stated therein or necessary
to make the statements therein not misleading, unless such statement or omission
was made in reliance upon information furnished by MFS to IMCO or the Trust.
IMCO shall indemnify and hold harmless MFS Indemnities for any and all such
losses, claims, damages, liabilities or litigation (including reasonable legal
and other expenses).
6. DURATION AND TERMINATION OF THIS AGREEMENT. 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 MFS (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 MFS.
(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, MFS may
continue to serve hereunder in a manner consistent with the 1940 Act and the
rules thereunder.
7
(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 MFS. MFS 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 MFS by IMCO shall be without
prejudice to the obligation of MFS to complete transactions already initiated or
acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to MFS
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, (if previously agreed to by the parties to this Agreement), or
termination of this Agreement by the holders of a majority of the outstanding
voting securities (as defined in the 0000 Xxx) of any Fund shall be effective to
continue, amend or terminate this Agreement with respect to any such Fund
notwithstanding (i) that such action has not been approved by the holders of a
majority of the outstanding voting securities of any other Fund affected
thereby, and/or (ii) that such action has not been approved by the vote of a
majority of the outstanding voting securities of the Trust, unless such action
shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of MFS to IMCO in connection with the
Funds hereunder are not to be deemed exclusive, and MFS shall be free to render
investment advisory services to others so long as its services hereunder are not
impaired thereby. It is understood that the persons employed by MFS to assist in
the performance of its duties hereunder will not devote their full time to such
services and nothing contained herein shall be deemed to limit or restrict in
any manner whatsoever the right of MFS to engage in or devote time and attention
to other businesses or to render services of whatever kind or nature. It is
understood that IMCO may appoint at any time in accordance with Applicable Law
one or more subadvisers, in addition to MFS, or IMCO itself, to perform
investment advisory services to any portion of the Funds.
8
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. MFS shall, upon reasonable notice, afford IMCO
at all reasonable times access to MFS's officers, employees, agents and offices
and to all its relevant books and records and shall furnish IMCO with all
relevant financial and other data and information as requested; provided,
however, that nothing contained herein shall obligate MFS to provide IMCO with
access to the books and records of MFS relating to any other accounts other than
the Funds.
(B) CONFIDENTIALITY. MFS, and its officers, employees and authorized
representatives, shall treat confidentially and as proprietary information of
the Trust all records and information relative to the Trust and prior, present
or potential shareholders, and will not use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld where MFS
may be exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities, or
when so requested by the Trust.
(C) PRIVACY POLICY. MFS acknowledges that nonpublic customer information
(as defined in Regulation S-P, including any amendments thereto) of customers of
the Funds received from IMCO is subject to the limitations on redisclosure and
reuse set forth in Section 248.11 of such Regulation, and agrees such
information (i) shall not be disclosed to any third party for any purpose
without the written consent of IMCO unless permitted by exceptions set forth in
Sections 248.14 or 248.15 of such Regulation and (ii) shall be safeguarded
pursuant to procedures adopted under Section 248.30 of such Regulation if so
required.
(D) PUBLIC ANNOUNCEMENTS. No party shall issue any press release or
otherwise make any public statements with respect to the matters covered by this
Agreement without the prior written consent of the other parties hereto, which
consent shall not be unreasonably withheld; provided, however, that consent
shall not be required if, in the opinion of counsel, such disclosure is required
by law; provided further, however, that the party making such disclosure shall
provide the other parties hereto with as much prior written notice of such
disclosure as is practical under the circumstances.
(E) NOTIFICATIONS. MFS agrees that it will promptly notify IMCO in the
event that MFS becomes the subject of an administrative proceeding or
enforcement action, with respect to the subadvisory services it performs to the
Trust pursuant to this Agreement, by the Commission or other regulatory body
with applicable jurisdiction.
(F) INSURANCE. MFS agrees to maintain errors and omissions or professional
liability insurance coverage in an amount that is reasonable in light of the
nature and scope of MFS's business activities.
9
11. MISCELLANEOUS.
(A) NOTICES. All notices or other communications given under this Agreement
shall be made by guaranteed overnight delivery, telecopy or certified mail;
notice is effective when received. Notice shall be given to the parties at the
following addresses:
IMCO: USAA Investment Management Company
0000 Xxxxxxxxxxxxxx Xxxx, X-X0-X
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Securities Counsel
MFS: Massachusetts Financial Services Company
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention : Xxxx 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.
10
IN WITNESS WHEREOF, IMCO and MFS have caused this Agreement to be executed
as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT COMPANY
By: /S/ XXXX X. XXXXXX By: /S/ XXXXXXXXXXX X. XXXXX
------------------------- ----------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
By: /S/ XXXXX X. XXXXXXXX
---------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
EVP Corp Services
Attest: MASSACHUSETTS FINANCIAL SERVICES
COMPANY
By: /S/ XXXXX X. XXXXXX By: /S/ XXXXXX X. XXXXXXX
---------------------------------- ----------------------------
Name: Xxxxx X. Xxxxxx Name: Xxxxxx X. Xxxxxxx
Title: Assistant Secretary Title: President
11
SCHEDULE A
CORNERSTONE STRATEGY FUND (INTERNATIONAL STOCKS)
INTERNATIONAL FUND
WORLD GROWTH FUND
12
SCHEDULE B
FEES
RATE PER ANNUM OF THE AGGREGATE AVERAGE DAILY
FUND ACCOUNT NET ASSETS OF THE FUND ACCOUNTS
------------------------------------------------
Cornerstone Strategy Fund 0.29%*
(International Stocks)
International Fund 0.29%*
World Growth Fund 0.29%*
----------------------------
* MFS agrees that it will not seek to increase this fee rate during the period
ending December 31, 2009 (the Lock). This 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").
13
EXHIBIT D (xiii)
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of August, 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 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 Mutual Funds Trust,
a statutory trust organized under the laws of the State of Delaware (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
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 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, 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 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 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 Trust's Board of Directors (the Board), NTI, at its own expense, shall have
full discretion to manage, supervise and direct the investment and reinvestment
of Fund Accounts allocated to it by IMCO from time to time. It is understood
that a Fund Account may consist of all, a portion of, or none of the assets of
the Fund, and that IMCO has the right to allocate and reallocate such assets to
a Fund Account at any time. NTI shall perform its duties described herein in a
manner consistent with the investment objective, policies and restrictions set
forth in the then current Prospectus and Statement of Additional Information
(SAI) for each Fund. Should NTI anticipate materially modifying its investment
process, it must provide written notice in advance to IMCO, and any affected
Prospectus and SAI should be amended accordingly.
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.
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 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, 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 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), 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 Trust's Master
Trust Agreement, as amended and supplemented, the Trust'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 Trust'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
2
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 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 Trust 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 Trust shall be
responsible for all custodial agreements and the payment of all custodial
charges and fees and, upon NTI giving proper instructions to the custodian, NTI
shall have no responsibility or liability for the acts, omissions or other
conduct of the custodian.
Notwithstanding the foregoing, NTI agrees that IMCO shall have the right by
written notice to identify securities that may not be purchased on behalf of any
Fund and/or brokers and dealers through which portfolio transactions on behalf
of the Fund may not be effected, including, without limitation, brokers or
dealers affiliated with IMCO. NTI shall refrain from purchasing such securities
for a Fund Account or directing any portfolio transaction to any such broker or
dealer on behalf of a Fund Account, unless and until the written approval of
IMCO to do so is obtained. In addition, NTI agrees that it shall not direct
portfolio transactions for the Fund Accounts through any broker or dealer that
is an "affiliated person" (as that term is defined in the 1940 Act or
interpreted under applicable rules and regulations of the Commission) of NTI,
except as permitted under the 1940 Act. IMCO agrees that it will provide NTI
with a list of brokers and dealers that are affiliated persons of the Funds, or
affiliated persons of such persons, and shall timely update that list as the
need arises. The Funds agree that any entity or person associated with IMCO or
NTI that is a member of a national securities exchange is authorized to effect
any transaction on such exchange for the account of the Funds that is permitted
by Section 11(a) of the Exchange Act, and the Funds consent to the retention of
compensation for such transactions.
(C) EXPENSES. NTI, at its expense, will furnish all necessary facilities
and personnel, including salaries, expenses and fees of any personnel required
for them to faithfully perform their duties under this Agreement and
administrative facilities, including bookkeeping, and all equipment and services
necessary for the efficient conduct of NTI's duties under this Agreement. In
addition, NTI shall reimburse the S&P 500 Index Fund for all license fees paid
by the S&P 500 Index Fund to Standard & Poor's in amounts not exceeding the
annual rate of 0.001% of the average daily net assets of such Fund. However, NTI
shall not be obligated to pay any expenses of IMCO, the Trust or the Funds,
including without
3
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 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 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. NTI will maintain for the Funds all books and
records required to be maintained by the Funds pursuant to the 1940 Act and the
rules and regulations promulgated thereunder insofar as such records relate to
the investment affairs of the Fund Accounts. Pursuant to Rule 31a-3 under the
1940 Act, NTI agrees that: (i) all records it maintains for a Fund Account are
the property of the Fund; (ii) it will surrender promptly to a Fund or IMCO any
such records (or copies of such records) upon the Fund's or IMCO's request; and
(iii) it will preserve for the periods prescribed by Rule 31a-2 under the 1940
Act the records it maintains for any Fund Account. Notwithstanding subsection
(ii) above, NTI may maintain copies of such records to comply with its
recordkeeping obligations.
(H) PROXIES. NTI will, unless and until otherwise directed by IMCO or the
Board, vote proxies with respect to a Fund Account's securities and exercise
rights in corporate actions or otherwise in accordance with NTI's proxy voting
guidelines, as amended from time to time, which shall be provided to IMCO.
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.
4
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 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 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 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 Indemnitees) for any and
all losses, claims, damages, liabilities or litigation (including reasonable
legal and other expenses)
5
(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 Trust 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 Trust.
(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 Trust, IMCO, or NTI (Independent
Board Members) or (ii) the outstanding voting shares of a Fund, such Fund may at
any time terminate this Agreement, without the payment of any penalty, by
providing not more than 60 days' nor less than 10 days' written notice delivered
or mailed by registered mail, postage prepaid, to IMCO and NTI.
(b) This Agreement will terminate automatically with respect to a Fund,
without the payment of any penalty, unless within two years after its initial
effectiveness and at least annually thereafter, the continuance of the Agreement
is specifically approved by (i) the Board or the shareholders of the Fund by the
affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a
majority of the Independent Board Members, by vote cast in person at a meeting
called for the purpose of voting on such approval. If the continuance of this
Agreement is submitted to the shareholders of the Fund for their approval and
such shareholders fail to approve such continuance as provided herein, NTI may
continue to serve hereunder in a manner consistent with the 1940 Act and the
rules thereunder.
(c) IMCO may at any time terminate this Agreement with respect to a Fund,
without the payment of any penalty, by written notice delivered in person or by
facsimile, or mailed by registered mail, postage prepaid, to NTI. NTI may at any
time, without the payment of any penalty, terminate this Agreement with respect
to a Fund by 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
6
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 Trust, 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 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 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 Trust.
(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
7
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 Trust 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 Trust
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, NTI shall bear all reasonable expenses associated with such
shareholder meeting, information statement, or prospectus supplement and
attributable to such change in control.
11. MISCELLANEOUS.
(A) NOTICES. All notices or other communications given under this Agreement
shall be made by guaranteed overnight delivery, telecopy or certified mail;
notice is effective when received. Notice shall be given to the parties at the
following addresses:
IMCO: USAA Investment Management Company
0000 Xxxxxxxxxxxxxx Xxxx, 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
8
(B) SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors.
(C) GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the State of Texas, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act. To the extent that the
applicable laws of the State of Texas conflict with the applicable provisions of
the 1940 Act, the latter shall control.
(D) COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(E) HEADINGS. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
(F) ENTIRE AGREEMENT. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act.
IN WITNESS WHEREOF, IMCO and NTI have caused this Agreement to be executed
as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT COMPANY
By: /S/ XXXX X. XXXXXX By: /S/ XXXXXXXXXXX X. XXXXX
--------------------- ----------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
By: /S/ XXXXX X. XXXXXXXX
--------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
EVP Corp Services
Attest: NORTHERN TRUST INVESTMENTS, N.A.
By: /S/ XXXXX X. XXXXX By: /S/ XXXX XXXXXXXX
-------------------------- -------------------
Name: Xxxxx X. Xxxxx Name: Xxxx Xxxxxxxx
Title: 2nd Vice President Title: Senior Vice President
9
SCHEDULE A
S&P 500 Index Fund
Nasdaq-100 Index Fund
USAA Growth and Tax Strategy Fund
10
SCHEDULE B
FEES
Rate per annum of the average daily net
Fund Account assets of the Fund Account
S&P 500 Index Fund 0.02% on the first $1.5 billion of assets
0.01% on assets over $1.5 billion and up to
$3 billion
0.005% on assets over $3 billion
Nasdaq-100 Index Fund* 0.06% on the first $100 million of assets
0.04% on assets over $100 million and up to
$250 million
0.03% on assets over $250 million
USAA Growth and 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 Nasdaq-100 Index Fund shall be the
greater of $50,000 (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
(August 1 to July 31 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.
**The annual fee paid to NTI for the managing the Growth and 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 (August 1, to July 31 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 the fee rates for the Growth & Tax
Strategy Fund during the period ending November 30, 2009 (the Lock). This Lock
does not limit the rights of the Fund's shareholders, a Fund's Board, or IMCO as
set forth in Section 6 of the Agreement ("Duration and Termination of this
Agreement").
11
EXHIBIT D (xiv)
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of August, 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 OFI INSTITUTIONAL ASSET MANAGEMENT, a corporation
organized under the laws of the State of New York and having its principal place
of business in New York (OFI).
WHEREAS, IMCO serves as the investment adviser to USAA Mutual Funds Trust,
a statutory trust organized under the laws of the State of Delaware (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 OFI 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, OFI 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 OFI. IMCO hereby appoints OFI to act as an investment
adviser for each Fund Account in accordance with the terms and conditions of
this Agreement. OFI 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 OFI. OFI accepts such appointment and
agrees to render the services herein set forth for the compensation herein
provided.
2. DUTIES OF OFI.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO and
the Trust's Board of Trustees (the Board), OFI, 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. OFI 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 OFI 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, OFI 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, OFI 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 OFI
wishes to hold cash or cash equivalents in excess of 10% of a Fund Account's
assets, OFI must request in writing and receive advance permission from IMCO.
In accordance with Subsection (b) of this Section 2, OFI 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, OFI 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. OFI shall establish compliance procedures reasonably calculated to ensure
compliance with the foregoing. IMCO shall be responsible for providing OFI with
the Trust's Master Trust Agreement, 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 OFI with
prior written notice of any material change to the Trust's Registration
Statement that would affect OFI's management of a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, OFI 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, OFI 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, OFI, bearing in mind each Fund's
best interests at all times, shall consider all factors it deems relevant,
including by way of
2
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), OFI 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 OFI 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 OFI 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 OFI's overall
responsibilities with respect to the Fund and to other clients of OFI as to
which OFI exercises investment discretion. The Board or IMCO may direct OFI 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 OFI deems the purchase or sale of a security to be in the
best interest of a Fund as well as other clients of OFI, OFI, 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 OFI 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.
OFI 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, OFI may effectuate cross transactions between a Fund Account and such
other account if it deems this to be advantageous.
OFI 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. OFI 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 OFI giving proper instructions to the custodian, OFI
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.
3
Notwithstanding the foregoing, OFI 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. OFI 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, OFI 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 OFI, except as
permitted under the 1940 Act. IMCO agrees that it will provide OFI 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 OFI 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. OFI, 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 OFI's duties under this Agreement.
However, OFI 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, OFI, at its expense, will provide
assistance to IMCO regarding the valuation of securities that are the subject of
a significant event, not registered for public sale, not traded on any
securities markets, or otherwise deemed illiquid for purposes of the 0000 Xxx.
The parties acknowledge that IMCO is responsible for final pricing
determinations and calculations, and that OFI will take such steps as necessary
to assist IMCO in reaching such pricing determinations for Fund Account
securities. OFI 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. OFI, 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
OFI set forth herein. OFI, 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 OFI's duties hereunder.
4
(F) COMPLIANCE MATTERS. OFI, 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. OFI 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. OFI 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, OFI 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, OFI may maintain copies of such records to comply with its
recordkeeping obligations.
(H) PROXIES. Unless and until OFI 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 OFI as compensation for OFI'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 OFI 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.
OFI 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 OFI (the
Substantially Similar Services) and (ii) OFI charges a lower fee for providing
the Substantially Similar Services than it charges with respect to the Fund
Account, then OFI 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) OFI. OFI represents and warrants to IMCO that (i) the retention of OFI
by IMCO as contemplated by this Agreement is authorized by OFI's governing
documents; (ii) the
5
execution, delivery and performance of this Agreement does not violate any
obligation by which OFI 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 OFI and when executed and delivered by OFI will be a
legal, valid and binding obligation of OFI, enforceable against OFI 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) OFI is registered as an investment adviser
under the Advisers Act; (v) OFI has adopted a written code of ethics complying
with the requirements of Rule 17j-1 under the 1940 Act and that OFI 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, OFI shall furnish to IMCO all reports and information provided under
Rule 17j-1(c)(2); (vi) OFI 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) OFI will promptly notify IMCO of the occurrence of any
event that would disqualify OFI from serving as investment manager of an
investment company pursuant to Section 9(a) of the 1940 Act or otherwise; (viii)
OFI 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) OFI will notify
IMCO of any "assignment" (as defined in the 0000 Xxx) of this Agreement or
change of control of OFI, as applicable, and any changes in the key personnel
who are either the portfolio manager(s) of any Fund Account or senior management
of OFI, in each case prior to or promptly after, such change; and (x) OFI has
adequate disaster recovery and interruption prevention measures to ensure
business resumption in accordance with applicable law and within industry
standards. OFI makes no representation or warranty, express or implied, that any
level of performance or investment results will be achieved by the Fund, whether
on a relative or absolute basis.
(B) IMCO. IMCO represents and warrants to OFI that (i) the retention of OFI
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;
(vii) IMCO will promptly notify OFI 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; and (viii) IMCO and/or
its affiliates have adopted and use their best efforts to enforce their policies
to identify and prevent investors in the Fund from
6
market timing the purchase and sale of the Fund's shares or engaging in
arbitrage activity to the detriment of long-term investors in the Fund.
5. LIABILITY AND INDEMNIFICATION.
(A) OFI. OFI 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 OFI 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 OFI which was required to be stated therein or necessary
to make the statements therein not misleading, if such statement or omission was
made in reliance upon information furnished in writing to IMCO or the Trust by
OFI Indemnities (as defined below) for use therein. OFI 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);
PROVIDED, HOWEVER, that in no case is OFI's indemnity hereunder deemed to
protect a person against any liability to which any such person would otherwise
be subject by reason of willful misconduct, bad faith or gross negligence in
performance of its duties under this Agreement or the Investment Advisory
Agreement with the Trust.
(B) IMCO. IMCO shall be liable for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which OFI, 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, OFI Indemnities) may become subject under the 1933 Act, the 1940
Act, the Advisers Act, or under any other statute, at common law or otherwise
arising out of (i) any negligence, willful misconduct, bad faith or reckless
disregard by IMCO in the performance of any of its duties or obligations
hereunder or (ii) any untrue statement of a material fact contained in the
Prospectus and SAI, proxy materials, reports, advertisements, sales literature,
or other materials pertaining to the Funds or the omission to state therein a
material fact known to IMCO which was required to be stated therein or necessary
to make the statements therein not misleading, unless such statement or omission
was made in reliance upon information furnished in writing to IMCO or the Trust.
IMCO shall indemnify and hold harmless OFI Indemnities for any and all such
losses, claims, damages, liabilities or litigation (including reasonable legal
and other expenses); PROVIDED, HOWEVER, that in no case shall IMCO's indemnity
hereunder be deemed to protect a person against any liability to which any such
person would otherwise be subject by reason of willful misconduct, bad faith or
gross negligence in the performance of its duties under this Agreement.
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
7
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 OFI (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 OFI.
(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, OFI 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 OFI. OFI 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 OFI by IMCO shall be without
prejudice to the obligation of OFI to complete transactions already initiated or
acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to OFI
under this Agreement automatically shall revert to IMCO. Notwithstanding any
termination of this Agreement with respect to a Fund, Sections 5, 10(a), 10(e),
11(a), and 11(c) of this Agreement shall remain in effect after any such
termination.
7. AMENDMENT OF AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. No material amendment of this Agreement shall be
effective until approved in the manner required by the 1940 Act, any rules
thereunder or any exemptive or other relief granted by the SEC or its staff
(Applicable Law).
8. APPROVAL, AMENDMENT, OR TERMINATION BY INDIVIDUAL FUND. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the
outstanding
8
voting securities (as defined in the 0000 Xxx) of any Fund shall be effective to
continue, amend or terminate this Agreement with respect to any such Fund
notwithstanding (i) that such action has not been approved by the holders of a
majority of the outstanding voting securities of any other Fund affected
thereby, and/or (ii) that such action has not been approved by the vote of a
majority of the outstanding voting securities of the Trust, unless such action
shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of OFI to IMCO in connection with the
Funds hereunder are not to be deemed exclusive, and OFI 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 OFI 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 OFI 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 OFI, or IMCO itself, to perform
investment advisory services to any portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. OFI shall, upon reasonable notice, afford IMCO
at all reasonable times access to OFI'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 OFI to provide IMCO with
access to the books and records of OFI relating to any other accounts other than
the Funds.
(B) CONFIDENTIALITY. All information and advice furnished by one party to
the other party (including their respective officers, employees and authorized
representatives) shall be treated confidentially and as proprietary information.
Each party 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 other party, which approval shall
not be unreasonably withheld and may not be withheld where a party 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 other party.
(C) PRIVACY POLICY. OFI 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
9
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. OFI agrees that it will promptly notify IMCO in the
event that: (i) OFI becomes or reasonably expects to become the subject of an
administrative proceeding or enforcement action by the Commission or other
regulatory body with applicable jurisdiction or (ii) to the best of OFI's
knowledge, any affiliate of OFI becomes or reasonably expects to become the
subject of an administrative proceeding or enforcement action by the Commission
or other regulatory body with applicable jurisdiction that could reasonably be
expected to have a material adverse effect upon the ability of OFI to perform
its duties under this Agreement..
(F) INSURANCE. OFI 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 OFI's 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 OFI, including, without limitation, a change of control of OFI or a
portfolio manager change, OFI shall bear all reasonable expenses associated with
such shareholder meeting, information statement, or prospectus supplement;
provided however, OFI shall not be responsible for any expenses relating to such
other matters in connection with or included in any shareholder meeting,
information statement, or prospectus supplement that is not due to OFI's
actions.
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
OFI: OppenheimerFunds, Inc.
Two World Financial Center
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxx Xxxxxxxxxx, Vice President & Associate
Counsel
With a copy to:
OFI Institutional Asset Management
10
0000 Xxxxx Xxxxxx Xxx
Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxx Xxxxxxxxx
(B) SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors.
(C) GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the State of Texas, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act. To the extent that the
applicable laws of the State of Texas conflict with the applicable provisions of
the 1940 Act, the latter shall control.
(D) COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(E) HEADINGS. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
(F) ENTIRE AGREEMENT. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act.
11
IN WITNESS WHEREOF, IMCO and OFI have caused this Agreement to be executed
as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT COMPANY
By: /S/ XXXX X. XXXXXX By: /S/ XXXXXXXXXXX X. XXXXX
----------------------------------- ---------------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
By: /S/ XXXXX X. XXXXXXXX
--------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
EVP Corp Services
Attest: OFI INSTITUTIONAL ASSET MANAGEMENT
By: /S/ XXXXX X. XXXXXXXX By: /S/ XXXXXXX X. XXXXXXX
--------------------------- --------------------------
Name: Xxxxx X. Xxxxxxxx Name: Xxxxxxx X. xxxxxxx
Title: Assistant Secretary Title: President
12
SCHEDULE A
INCOME STOCK FUND
13
SCHEDULE B
FEES
FUND ACCOUNT RATE PER ANNUM OF THE AVERAGE DAILY
NET ASSETS OF THE FUND ACCOUNT
Income Stock Fund 0.085% on amounts up to $500 million; and
0.075% on amounts in excess of $500 million.*
-------------------------
* OFI agrees that it will not seek to increase these fee rates during the period
ending July 31, 2008 (the Lock). This Lock does not limit the rights of the
Fund's shareholders, the Fund's Board, or IMCO as set forth in Section 6 of the
Agreement ("Duration and Termination of this Agreement").
14
EXHIBIT D (xv)
FORM OF
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of August, 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 WELLINGTON MANAGEMENT COMPANY, LLP, a limited
liability partnership organized under the laws of the Commonwealth of
Massachusetts and having its principal place of business in Boston,
Massachusetts (Wellington Management).
WHEREAS, IMCO serves as the investment adviser to USAA Mutual Funds Trust,
a statutory trust organized under the laws of the State of Delaware (the Trust)
and registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, under its Investment Advisory Agreement with the Trust (Investment
Advisory Agreement), IMCO is authorized to appoint subadvisers for series of the
Trust (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain Wellington Management to render investment
advisory services to such series (or portions thereof) of the Trust as now or
hereafter may be identified in Schedule A to this Agreement, as such Schedule A
may be amended from time to time (each such series or portion thereof referred
to herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, Wellington Management is willing to provide such services to the
Fund Accounts and IMCO upon the terms and conditions and for the compensation
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. APPOINTMENT OF WELLINGTON MANAGEMENT. IMCO hereby appoints Wellington
Management to act as an investment subadviser for each Fund Account in
accordance with the terms and conditions of this Agreement. Wellington
Management will be an independent contractor and will have no authority to act
for or represent the Trust or IMCO in any way or otherwise be deemed an agent of
the Trust or IMCO except as expressly authorized in this Agreement or another
writing by the Trust, IMCO and Wellington Management. Wellington Management
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.
2. DUTIES OF WELLINGTON MANAGEMENT.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO and
the Trust's Board of Trustees (the Board), Wellington Management, at its own
expense, shall have full discretion to manage, supervise and direct the
investment and reinvestment of Fund Accounts allocated to it by IMCO from time
to time. It is understood that a Fund Account may consist of all, a portion of,
or none of the assets of the Fund, and that IMCO has the right to allocate and
reallocate such assets to a Fund Account at any time. Wellington Management
shall
perform its duties described herein in a manner consistent with the investment
objective, policies and restrictions set forth in the then current Prospectus
and Statement of Additional Information (SAI) for each Fund. Should Wellington
Management anticipate materially modifying its investment process, it must
provide written notice in advance to IMCO, and any affected Prospectus and SAI
should be amended accordingly.
For each Fund set forth on Schedule A to this Agreement, Wellington
Management 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, Wellington Management shall determine what investments shall be
purchased, held, sold or exchanged by each Fund Account and what portion, if
any, of the assets of each Fund Account shall be held in cash or cash
equivalents, and purchase or sell portfolio securities for each Fund Account;
except that, to the extent Wellington Management wishes to hold cash or cash
equivalents in excess of 10% of a Fund Account's assets for longer than two
consecutive business days, Wellington Management must request in writing and
receive advance permission from IMCO.
In accordance with Subsection (b) of this Section 2, Wellington Management
shall arrange for the execution of all orders for the purchase and sale of
securities and other investments for each Fund Account and will exercise full
discretion and act for the Trust in the same manner and with the same force and
effect as the Trust might or could do with respect to such purchases, sales, or
other transactions, as well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases, sales, or other
transactions.
In the performance of its duties, Wellington Management will act in the
best interests of each Fund and will comply with (i) applicable laws and
regulations, including, but not limited to, the 1940 Act and the Investment
Advisers Act of 1940, as amended (Advisers Act), and the rules under each, (ii)
the terms of this Agreement, (iii) the stated investment objective, policies and
restrictions of each Fund, as stated in the then-current Prospectus and
Statement of Additional Information of each Fund, (iv) the Trust's compliance
procedures and other policies, procedures or guidelines as the Board or IMCO
reasonably may establish from time to time, (v) the provisions of the Internal
Revenue Code of 1986, as amended (Code), applicable to "regulated investment
companies" (as defined in Section 851 of the Code), as from time to time in
effect, and (vi) the written instructions of IMCO. Wellington Management shall
establish compliance procedures reasonably calculated to ensure compliance with
the foregoing. IMCO shall be responsible for providing Wellington Management
with the Trust's Master Trust Agreement, as amended and supplemented, the
Trust's By-Laws and amendments thereto and current copies of the materials
specified in Subsections (a)(iii) and (iv) of this Section 2. IMCO shall provide
Wellington Management with prior written notice of any material change to the
Trust's Registration Statement that would affect Wellington Management's
management of a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, Wellington Management
will select the brokers
2
or dealers that will execute purchase and sale transactions for the Fund
Accounts, subject to the conditions herein. In the selection of broker-dealers
and the placement of orders for the purchase and sale of portfolio investments
for the Fund Accounts, Wellington Management shall use its best efforts to
obtain for the Fund Accounts the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage commissions for
brokerage and research services as described below. In using its best efforts to
obtain the most favorable price and execution available, Wellington Management,
bearing in mind each Fund's best interests at all times, shall consider all
factors it deems relevant, including by way of illustration, price, the size of
the transaction, the nature of the market for the security, the amount of the
commission and dealer's spread or xxxx-up, the timing of the transaction taking
into account market prices and trends, the reputation, experience and financial
stability of the broker-dealer involved, the general execution and operational
facilities of the broker-dealer and the quality of service rendered by the
broker-dealer in other transactions.
Subject to such policies as the Board may determine and to the extent
authorized by Section 28(e) of the Securities Exchange Act of 1934 (Exchange
Act), Wellington Management shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused a Fund Account to pay a broker-dealer that provides
brokerage and research services to Wellington Management an amount of commission
for effecting a portfolio investment transaction in excess of the amount of
commission another broker-dealer offering equally good execution capability in
the portfolio investment would have charged for effecting that transaction if
Wellington Management determines in good faith that such amount of commission
was reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or Wellington Management's overall responsibilities with respect to
the Fund and to other clients of Wellington Management as to which Wellington
Management exercises investment discretion. The Board or IMCO may direct
Wellington Management to effect transactions in portfolio securities through
broker-dealers in a manner that will help generate resources to pay the cost of
certain expenses that the Trust is required to pay or for which the Trust is
required to arrange payment.
On occasions when Wellington Management deems the purchase or sale of a
security to be in the best interest of a Fund as well as other clients of
Wellington Management, Wellington Management, to the extent permitted by
applicable laws and regulations, may aggregate the securities to be purchased or
sold to attempt to obtain a more favorable price or lower brokerage commissions
and efficient execution. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction, will be
made by Wellington Management in the manner it considers to be the most
equitable and consistent with its fiduciary obligations to the Fund and to its
other clients over time.
Wellington Management may buy securities for a Fund Account at the same
time it is selling such securities for another client account and may sell
securities for a Fund Account at the time it is buying such securities for
another client account. In such cases, subject to applicable legal and
regulatory requirements, and in compliance with such procedures of the Trust as
may be in effect from time to time, Wellington Management may effectuate cross
transactions between a Fund Account and such other account if it deems this to
be advantageous.
3
Wellington Management will advise the Funds' custodian or such depository
or agents as may be designated by the custodian and IMCO promptly of each
purchase and sale of a portfolio security, specifying the name of the issuer,
the description and amount or number of shares of the security purchased, the
market price, the commission and gross or net price, the trade date and
settlement date, the identity of the effecting broker or dealer and any other
pertinent data that the Funds' custodian may need to settle a security's
purchase or sale. Wellington Management shall not have possession or custody of
any Fund's investments. The Trust shall be responsible for all custodial
agreements and the payment of all custodial charges and fees and, upon
Wellington Management giving proper instructions to the custodian, Wellington
Management shall have no responsibility or liability for the acts, omissions or
other conduct of the custodian.
Notwithstanding the foregoing, Wellington Management agrees that IMCO shall
have the right by written notice to identify securities that may not be
purchased on behalf of any Fund and/or brokers and dealers through which
portfolio transactions on behalf of the Fund may not be effected, including,
without limitation, brokers or dealers affiliated with IMCO. Wellington
Management shall refrain from purchasing such securities for a Fund Account or
directing any portfolio transaction to any such broker or dealer on behalf of a
Fund Account, unless and until the written approval of IMCO to do so is
obtained. In addition, Wellington Management agrees that it shall not direct
portfolio transactions for the Fund Accounts through any broker or dealer that
is an "affiliated person" (as that term is defined in the 1940 Act or
interpreted under applicable rules and regulations of the Commission) of
Wellington Management, except as permitted under the 1940 Act. IMCO agrees that
it will provide Wellington Management with a list of brokers and dealers that
are affiliated persons of the Funds, or affiliated persons of such persons, and
shall timely update that list as the need arises. The Funds agree that any
entity or person associated with IMCO or Wellington Management that is a member
of a national securities exchange is authorized to effect any transaction on
such exchange for the account of the Funds that is permitted by Section 11(a) of
the Exchange Act, and the Funds consent to the retention of compensation for
such transactions.
(C) EXPENSES. Wellington Management, at its expense, will furnish all
necessary facilities and personnel, including salaries, expenses and fees of any
personnel required for them to faithfully perform their duties under this
Agreement and administrative facilities, including bookkeeping, and all
equipment and services necessary for the efficient conduct of Wellington
Management's duties under this Agreement. However, Wellington Management shall
not be obligated to pay any expenses of IMCO, the Trust or the Funds, including
without limitation, interest and taxes, brokerage commissions and other costs in
connection with the purchase or sale of securities or other investment
instruments for the Funds and custodian fees and expenses.
(D) VALUATION. Securities traded on a national securities exchange or the
NASDAQ market for which market quotes are readily available are valued on each
day the New York Stock Exchange is open for business. For those securities held
in Fund Accounts subadvised by Wellington Management for which market quotes are
not readily available, Wellington Management, at its expense and in accordance
with procedures and methods established by the Board, which may be amended from
time to time, will provide assistance to IMCO in determining the fair value of
such securities, including providing market price information relating to these
assets of the Fund. Wellington Management also shall monitor for "significant
events" that occur after the closing of a market but before the Funds calculate
their net asset values and that may affect
4
the valuation of any Fund Account's portfolio securities and shall notify IMCO
immediately of the occurrence of any such events.
(E) REPORTS AND AVAILABILITY OF PERSONNEL. Wellington Management, at its
expense, shall render to the Board and IMCO such periodic and special reports as
the Board and IMCO may reasonably request with respect to matters relating to
the duties of Wellington Management set forth herein. Wellington Management, at
its expense, will make available to the Board and IMCO at reasonable times its
portfolio managers and other appropriate personnel in order to review investment
policies of the Funds and to consult with the Board and IMCO regarding the
investment affairs of the Funds, including economic, statistical and investment
matters relevant to Wellington Management's duties hereunder.
(F) COMPLIANCE MATTERS. Wellington Management, at its expense, will provide
IMCO with such compliance reports relating to its duties under this Agreement as
may be agreed upon by such parties from time to time. Wellington Management also
shall cooperate with and provide reasonable assistance to IMCO, the Trust's
administrator, the Trust's custodian and foreign custodians, the Trust's
transfer agent and pricing agents and all other agents and representatives of
the Trust and IMCO, keep all such persons fully informed as to such matters as
they may reasonably deem necessary to the performance of their obligations to
the Trust and IMCO, provide prompt responses to reasonable requests made by such
persons and maintain any appropriate interfaces with each so as to promote the
efficient exchange of information.
(G) BOOKS AND RECORDS. Wellington Management will maintain for the Funds
all books and records required to be maintained by the Funds pursuant to the
1940 Act and the rules and regulations promulgated thereunder insofar as such
records relate to the investment affairs of the Fund Accounts. Pursuant to Rule
31a-3 under the 1940 Act, Wellington Management agrees that: (i) all records it
maintains for a Fund Account are the property of the Fund; (ii) it will
surrender promptly to a Fund or IMCO any such records (or copies of such
records) upon the Fund's or IMCO's request; and (iii) it will preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records it maintains for
any Fund Account. Notwithstanding subsection (ii) above, Wellington Management
may maintain copies of such records to comply with its recordkeeping
obligations.
(H) PROXIES. Wellington Management will, unless and until otherwise
directed by IMCO or the Board, vote proxies with respect to a Fund Account's
securities and exercise rights in corporate actions or otherwise in accordance
with Wellington Management's proxy voting guidelines, as amended from time to
time, which shall be provided to IMCO.
3. ADVISORY FEE. IMCO shall pay to Wellington Management as compensation for
Wellington Management's services rendered pursuant to this Agreement a fee based
on the average daily net assets of each Fund Account at the annual rates set
forth in Schedule B, which schedule can be modified from time to time, subject
to any appropriate approvals required by the 1940 Act. Such fees shall be
calculated daily and payable monthly in arrears within 15 business days after
the end of such month. IMCO (and not the Funds) shall pay such fees. If
Wellington Management shall serve for less than the whole of a month, the
compensation as specified shall be prorated based upon the number of calendar
days during which this Agreement is in effect
5
during such month, and the fee shall be computed based upon the average daily
net assets of a Fund Account for such days.
4. REPRESENTATIONS AND WARRANTIES.
(A) WELLINGTON MANAGEMENT. Wellington Management represents and warrants to
IMCO that (i) the retention of Wellington Management by IMCO as contemplated by
this Agreement is authorized by Wellington Management's governing documents;
(ii) the execution, delivery and performance of this Agreement does not violate
any obligation by which Wellington Management or its property is bound, whether
arising by contract, operation of law or otherwise; (iii) this Agreement has
been duly authorized by appropriate action of Wellington Management and when
executed and delivered by Wellington Management will be a legal, valid and
binding obligation of Wellington Management, enforceable against Wellington
Management in accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and to general equitable principles (regardless of whether enforcement
is sought in a proceeding in equity or law); (iv) Wellington Management is
registered as an investment adviser under the Advisers Act; (v) Wellington
Management has adopted a written code of ethics complying with the requirements
of Rule 17j-1 under the 1940 Act and that Wellington Management and certain of
its employees, officers and partners are subject to reporting requirements
thereunder and, accordingly, agrees that it shall, on a timely basis, furnish a
copy of such code of ethics to IMCO, and, with respect to such persons,
Wellington Management shall furnish to IMCO all reports and information provided
under Rule 17j-1(c)(2); (vi) Wellington Management is not prohibited by the 1940
Act, the Advisers Act or other law, regulation or order from performing the
services contemplated by this Agreement; (vii) Wellington Management will
promptly notify IMCO of the occurrence of any event that would disqualify
Wellington Management from serving as investment manager of an investment
company pursuant to Section 9(a) of the 1940 Act or otherwise; (viii) Wellington
Management has provided IMCO with a copy of its Form ADV, which as of the date
of this Agreement is its Form ADV as most recently filed with the SEC, and
promptly will furnish a copy of all amendments to IMCO at least annually; (ix)
Wellington Management will notify IMCO of any "assignment" (as defined in the
0000 Xxx) of this Agreement or change of control of Wellington Management, as
applicable, and any changes in the key personnel who are either the portfolio
manager(s) of any Fund Account or senior management of Wellington Management, in
each case prior to or promptly after, such change; and (x) Wellington Management
has adequate disaster recovery and interruption prevention measures reasonably
designed to ensure business resumption in accordance with applicable law and
within industry standards.
(B) IMCO. IMCO represents and warrants to Wellington Management that (i)
the retention of Wellington Management by IMCO as contemplated by this Agreement
is authorized by the respective governing documents of the Trust and IMCO; (ii)
the execution, delivery and performance of each of this Agreement and the
Investment Advisory Agreement does not violate any obligation by which the Trust
or IMCO or their respective property is bound, whether arising by contract,
operation of law or otherwise; (iii) each of this Agreement and the Investment
Advisory Agreement has been duly authorized by appropriate action of the Trust
and IMCO and when executed and delivered by IMCO will be a legal, valid and
binding obligation of the Trust and IMCO, enforceable against the Trust and IMCO
in accordance with its terms, subject, as to enforcement, to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights
6
generally and to general equitable principles (regardless of whether enforcement
is sought in a proceeding in equity or law); (iv) IMCO is registered as an
investment adviser under the Advisers Act; (v) IMCO has adopted a written code
of ethics complying with the requirements of Rule 17j-1 under the 1940 Act and
that IMCO and certain of its employees, officers and directors are subject to
reporting requirements thereunder; (vi) IMCO is not prohibited by the 1940 Act,
the Advisers Act or other law, regulation or order from performing the services
contemplated by this Agreement; and (vii) IMCO will promptly notify Wellington
Management of the occurrence of any event that would disqualify IMCO from
serving as investment manager of an investment company pursuant to Section 9(a)
of the 1940 Act or otherwise.
5. LIABILITY AND INDEMNIFICATION.
(A) WELLINGTON MANAGEMENT. Wellington Management shall indemnify and hold
harmless the Trust, a Fund, IMCO, any affiliated persons thereof (within the
meaning of the 0000 Xxx) and any controlling persons thereof (as described in
Section 15 of the Securities Act of 1933, as amended (the 1933
Act)) (collectively, IMCO Indemnities) for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which the IMCO Indemnities may become subject under the 1933 Act, the 1940 Act,
the Advisers Act, or under any other statute, at common law or otherwise arising
out of (i) any gross negligence, willful misconduct, bad faith or reckless
disregard of Wellington Management in the performance of any of its duties or
obligations hereunder or (ii) any untrue statement of a material fact contained
in the Prospectus and SAI, proxy materials, reports, advertisements, sales
literature, or other materials pertaining to the Funds or the omission to state
therein a material fact known to Wellington Management which was required to be
stated therein or necessary to make the statements therein not misleading, if
such statement or omission was made in reliance upon information furnished in
writing to IMCO or the Trust by Wellington Management Indemnities (as defined
below) for use therein.
(B) IMCO. IMCO shall indemnify and hold harmless Wellington Management, any
affiliated persons thereof (within the meaning of the 1940 Act) (collectively,
Wellington Management Indemnities) for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which the Wellington Indemnities may become subject under the 1933 Act, the 1940
Act, the Advisers Act, or under any other statute, at common law or otherwise
arising out of (i) any gross negligence, willful misconduct, bad faith or
reckless disregard by IMCO in the performance of any of its duties or
obligations hereunder or (ii) any untrue statement of a material fact contained
in the Prospectus and SAI, proxy materials, reports, advertisements, sales
literature, or other materials pertaining to the Funds or the omission to state
therein a material fact known to IMCO which was required to be stated therein or
necessary to make the statements therein not misleading, unless such statement
or omission was made in reliance upon information furnished in writing by
Wellington Indemnities to IMCO or the Trust.
6. DURATION AND TERMINATION OF THIS AGREEMENT. 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
7
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 Trust, IMCO, or Wellington
Management (Independent Board Members) or (ii) the outstanding voting shares of
a Fund, such Fund may at any time terminate this Agreement, without the payment
of any penalty, by providing not more than 60 days' nor less than 10 days'
written notice delivered or mailed by registered mail, postage prepaid, to IMCO
and Wellington Management.
(b) This Agreement will terminate automatically with respect to a Fund,
without the payment of any penalty, unless within two years after its initial
effectiveness and at least annually thereafter, the continuance of the Agreement
is specifically approved by (i) the Board or the shareholders of the Fund by the
affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a
majority of the Independent Board Members, by vote cast in person at a meeting
called for the purpose of voting on such approval. If the continuance of this
Agreement is submitted to the shareholders of the Fund for their approval and
such shareholders fail to approve such continuance as provided herein,
Wellington Management may continue to serve hereunder in a manner consistent
with the 1940 Act and the rules thereunder.
(c) IMCO may at any time terminate this Agreement with respect to a Fund,
without the payment of any penalty, by written notice delivered in person or by
facsimile, or mailed by registered mail, postage prepaid, to Wellington
Management. Wellington Management may at any time, without the payment of any
penalty, terminate this Agreement with respect to a Fund by not less than 90
days' written notice delivered or mailed by registered mail, postage prepaid, to
IMCO.
(d) This Agreement automatically and immediately shall terminate with
respect to the Funds, without the payment of any penalty, in the event of its
assignment (as that term is defined in the 1940 Act or interpreted under
applicable rules and regulations of the Commission) or if the Investment
Advisory Agreement shall terminate for any reason.
(e) Any notice of termination served on Wellington Management by IMCO shall
be without prejudice to the obligation of Wellington Management to complete
transactions already initiated or acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to
Wellington Management under this Agreement automatically shall revert to IMCO.
Notwithstanding any termination of this Agreement with respect to a Fund,
Sections 5, 10(a), 10(e), 11(a), 11(c) and 11(g) 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
8. APPROVAL, AMENDMENT, OR TERMINATION BY INDIVIDUAL FUND. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 0000 Xxx) of any Fund shall be
effective to continue, amend or terminate this Agreement with respect to any
such Fund notwithstanding (i) that such action has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund
affected thereby, and/or (ii) that such action has not been approved by the vote
of a majority of the outstanding voting securities of the Trust, unless such
action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of Wellington Management to IMCO in
connection with the Funds hereunder are not to be deemed exclusive, and
Wellington Management shall be free to render investment advisory services to
others so long as its services hereunder are not impaired thereby. It is
understood that the persons employed by Wellington Management to assist in the
performance of its duties hereunder will not devote their full time to such
services and nothing contained herein shall be deemed to limit or restrict in
any manner whatsoever the right of Wellington Management to engage in or devote
time and attention to other businesses or to render services of whatever kind or
nature. It is understood that IMCO may appoint at any time in accordance with
Applicable Law one or more subadvisers, in addition to Wellington Management, or
IMCO itself, to perform investment advisory services to any portion of the
Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. Wellington Management shall, upon reasonable
notice, afford IMCO at all reasonable times access to Wellington Management's
officers, employees, agents and offices and to all its relevant books and
records and shall furnish IMCO with all relevant financial and other data and
information as requested; provided, however, that nothing contained herein shall
obligate Wellington Management to provide IMCO with access to the books and
records of Wellington Management relating to any other accounts other than the
Funds or where such access is prohibited by law.
(B) CONFIDENTIALITY. Wellington Management, and its officers, employees and
authorized representatives, shall treat confidentially and as proprietary
information of the Trust all records and information relative to the Trust and
prior, present or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Trust, which approval shall not be unreasonably withheld and may not be
withheld where Wellington Management may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the Trust.
(C) PRIVACY POLICY. Wellington Management acknowledges that nonpublic
customer information (as defined in Regulation S-P, including any amendments
thereto) of customers of the Funds received from IMCO is subject to the
limitations on redisclosure and reuse set forth in Section 248.11 of such
Regulation, and agrees such information (i) shall not be disclosed to any third
party for any purpose without the written consent of IMCO unless permitted by
exceptions
9
set forth in Sections 248.14 or 248.15 of such Regulation and (ii) shall be
safeguarded pursuant to procedures adopted under Section 248.30 of such
Regulation if so required.
(D) PUBLIC ANNOUNCEMENTS. No party shall issue any press release or
otherwise make any public statements with respect to the matters covered by this
Agreement without the prior written consent of the other parties hereto, which
consent shall not be unreasonably withheld; provided, however, that consent
shall not be required if, in the opinion of counsel, such disclosure is required
by law; provided further, however, that the party making such disclosure shall
provide the other parties hereto with as much prior written notice of such
disclosure as is practical under the circumstances. During the term of this
Agreement, IMCO agrees to furnish to Wellington Management at its principal
office all Prospectuses, Statements of Additional Information, proxy statements,
reports to shareholders, sales literature, or other material prepared for
distribution to sales personnel, shareholders of the Trust or the public, which
refer to Wellington Management or its clients in any way, prior to use thereof
and not to use such material if Wellington Management reasonably objects in
writing two business days (or such other time as may be mutually agreed upon)
after receipt thereof. Advance review shall not be required from Wellington
Management with respect to 1) sales literature in which Wellington Management is
only referenced in a listing of subadvisers to USAA funds; and 2) other
materials as agreed upon mutually by IMCO and Wellington Management. Sales
literature may be furnished to Wellington Management hereunder by first-class or
overnight mail, electronic or facsimile transmission, or hand delivery.
(E) NOTIFICATIONS. Wellington Management agrees that it will promptly
notify IMCO in the event that Wellington Management or any of its affiliates is
or expects to become the subject of an administrative proceeding or enforcement
action by the Commission or other regulatory body with applicable jurisdiction.
(F) INSURANCE. Wellington Management agrees to maintain errors and
omissions or professional liability insurance coverage in an amount that is
reasonable in light of the nature and scope of Wellington Management's business
activities.
(G) SHAREHOLDER MEETING EXPENSES. In the event that the Trust shall be
required to call a meeting of shareholders solely due to actions involving
Wellington Management, including, without limitation, a change of control of
Wellington Management, Wellington Management shall bear all reasonable expenses
associated with such shareholder meeting.
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
10
Wellington Management: Wellington Management Company, LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Legal Department
(B) SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors.
(C) GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the State of Texas, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act. To the extent that the
applicable laws of the State of Texas conflict with the applicable provisions of
the 1940 Act, the latter shall control.
(D) COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(E) HEADINGS. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
(F) ENTIRE AGREEMENT. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act.
11
IN WITNESS WHEREOF, IMCO and Wellington Management have caused this
Agreement to be executed as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT COMPANY
By: /S/ XXXX X. XXXXXX By: /S/ XXXXXXXXXXX X. XXXXX
------------------------------- ----------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
By: /S/ XXXXX X. XXXXXXXX
----------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
EVP Corp Services
Attest: WELLINGTON MANAGEMENT COMPANY, LLP
By: /S/ XXXX X. XXXXX By: /S/ XXXXX X. XXXXXXX
-------------------------------- ---------------------------------
Name: Xxxx X. Xxxxx Name: Xxxxx X. Xxxxxxx
Title: Vice President and Counsel Title: Senior Vice President
12
SCHEDULE A
BALANCED STRATEGY FUNd
CORNERSTONE STRATEGY FUND (U. S. STOCKS)
GROWTH & INCOME FUNd
SCIENCE & TECHNOLOGY FUNd
SMALL CAP STOCK FUNd
13
SCHEDULE B
FEES
RATE PER ANNUM OF THE AVERAGE DAILY NET
FUND ACCOUNT ASSETS OF THE FUND ACCOUNT
Balanced Strategy Fund 0.20%
Cornerstone Strategy Fund (U.S. Stocks) 0.20%
Growth & Income Fund 0.20%
Science & Technology Fund 0.45% -- First $100 million
0.35% -- Amounts above $100 million
Small Cap Stock Fund 0.70%
14
EXHIBIT D (xvi)
FORM OF
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of October, 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 CREDIT SUISSE ASSET MANAGEMENT, LLC, a limited
liability company organized under the laws of the State of Delaware and having
its principal place of business in New York, New York (Credit Suisse).
WHEREAS, IMCO serves as the investment adviser to USAA Mutual Funds
Trust, a statutory trust organized under the laws of the State of Delaware (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 Credit Suisse to render investment
advisory services to such Funds (or portions thereof) 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 Fund or portion thereof referred to herein as a
Fund Account and collectively as Fund Accounts); and
WHEREAS, Credit Suisse 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 CREDIT SUISSE. IMCO hereby appoints Credit Suisse to act
as an investment adviser for each Fund Account in accordance with the terms and
conditions of this Agreement. Credit Suisse 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 Credit
Suisse. Credit Suisse accepts such appointment and agrees to render the services
herein set forth for the compensation herein provided.
2. DUTIES OF CREDIT SUISSE.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO
and the Trust's Board of Trustees (the Board), Credit Suisse, 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. Credit Suisse 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 Credit Suisse 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, Credit Suisse
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, Credit Suisse 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 Credit Suisse wishes to hold cash or cash equivalents in excess of 10% of
a Fund Account's assets, Credit Suisse must request in writing and receive
advance permission from IMCO.
In accordance with Subsection (b) of this Section 2, Credit Suisse
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, Credit Suisse 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. Credit Suisse shall establish compliance procedures reasonably calculated
to ensure compliance with the foregoing. IMCO shall be responsible for providing
Credit Suisse with the Trust's Master Trust Agreement, 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 Credit Suisse with prior written notice of any material change to
the Trust's Registration Statement that would affect Credit Suisse's management
of a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, Credit Suisse 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, Credit Suisse shall use its best
efforts to obtain for the Fund Accounts the best execution available, except to
the extent it may be permitted to pay higher
2
brokerage commissions for brokerage and research services as described below. In
using its best efforts to obtain the best execution available, Credit Suisse,
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), Credit Suisse 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 Credit Suisse 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 Credit Suisse
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 Credit
Suisse's overall responsibilities with respect to the Fund and to other clients
of Credit Suisse as to which Credit Suisse exercises investment discretion. The
Board or IMCO may direct Credit Suisse 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 Credit Suisse deems the purchase or sale of a
security to be in the best interest of a Fund as well as other clients of Credit
Suisse, Credit Suisse, 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 Credit Suisse
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.
Credit Suisse 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, Credit Suisse may effectuate cross transactions between a Fund
Account and such other account if it deems this to be advantageous.
Credit Suisse 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.
Credit Suisse shall not have possession or custody of any Fund's investments.
The Trust shall be responsible for all custodial
3
agreements and the payment of all custodial charges and fees and, upon Credit
Suisse giving proper instructions to the custodian, Credit Suisse 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, Credit Suisse 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. Credit Suisse 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,
Credit Suisse 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 Securities and Exchange Commission (the Commission)) of
Credit Suisse, except as permitted under the 1940 Act. IMCO agrees that it will
provide Credit Suisse 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 Credit Suisse 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. Credit Suisse, 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 Credit Suisse's duties under this
Agreement. However, Credit Suisse 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, Credit Suisse, at its
expense, will provide assistance to IMCO regarding the valuation of securities
that are the subject of a significant event, not registered for public sale, not
traded on any securities markets, or otherwise deemed illiquid for purposes of
the 0000 Xxx. The parties acknowledge that IMCO is responsible for final pricing
determinations and calculations, and that Credit Suisse will take such steps as
necessary to assist IMCO in reaching such pricing determinations for Fund
Account securities. Credit Suisse 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. Credit Suisse, at its
expense, shall render to the Board and IMCO such periodic and special reports as
the Board and IMCO may
4
reasonably request with respect to matters relating to the duties of Credit
Suisse set forth herein. Credit Suisse, 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 Credit
Suisse's duties hereunder.
(F) COMPLIANCE MATTERS. Credit Suisse, 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. Credit Suisse 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. Credit Suisse 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, Credit Suisse 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, Credit Suisse may maintain copies of such
records to comply with its recordkeeping obligations.
(H) PROXIES. Unless and until Credit Suisse 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 Credit Suisse as compensation for
Credit Suisse'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 Credit Suisse 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) CREDIT SUISSE. Credit Suisse represents and warrants to IMCO that
(i) the retention of Credit Suisse by IMCO as contemplated by this Agreement is
authorized by Credit Suisse's governing documents; (ii) the execution, delivery
and performance of this Agreement does not violate any obligation by which
Credit Suisse or its property is bound, whether arising by contract, operation
of law or otherwise; (iii) this Agreement has been duly authorized by
5
appropriate action of Credit Suisse and when executed and delivered by
Credit Suisse will be a legal, valid and binding obligation of Credit Suisse,
enforceable against Credit Suisse 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) Credit
Suisse is registered as an investment adviser under the Advisers Act; (v) Credit
Suisse has adopted a written code of ethics complying with the requirements of
Rule 17j-1 under the 1940 Act and that Credit Suisse 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, Credit Suisse shall furnish to IMCO all reports and information
provided under Rule 17j-1(c)(2); (vi) Credit Suisse 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) Credit Suisse will promptly
notify IMCO of the occurrence of any event that would disqualify Credit Suisse
from serving as investment manager of an investment company pursuant to Section
9(a) of the 1940 Act or otherwise; (viii) Credit Suisse 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) Credit Suisse will notify IMCO of any
"assignment" (as defined in the 0000 Xxx) of this Agreement or change of control
of Credit Suisse, as applicable, and any changes in the key personnel who are
either the portfolio manager(s) of any Fund Account or senior management of
Credit Suisse, in each case prior to or promptly after, such change; and (x)
Credit Suisse has adequate disaster recovery and interruption prevention
measures to ensure business resumption in accordance with applicable law and
within industry standards. Credit Suisse makes no representation or warranty,
express or implied, that any level of performance or investment results will be
achieved by the Fund, whether on a relative or absolute basis.
(B) IMCO. IMCO represents and warrants to Credit Suisse that (i) the
retention of Credit Suisse 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; (vii) IMCO will promptly notify Credit Suisse 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; and
(viii) IMCO and/or its affiliates have adopted and use their best efforts to
enforce their policies to identify and prevent investors in the
6
Fund from market timing the purchase and sale of the Fund's shares or engaging
in arbitrage activity to the detriment of long-term investors in the Fund.
5. LIABILITY AND INDEMNIFICATION.
(A) CREDIT SUISSE. Credit Suisse 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 by Credit Suisse 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 Credit Suisse which was required to be stated
therein or necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished in writing
to IMCO or the Trust by Credit Suisse Indemnities (as defined below) for use
therein. Credit Suisse 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); PROVIDED, HOWEVER, that in no
case is Credit Suisse's indemnity hereunder deemed to protect a person against
any liability to which any such person would otherwise be subject by reason of
willful misconduct, bad faith or gross negligence in performance of its duties
under this Agreement or the Investment Advisory Agreement with the Trust.
(B) IMCO. IMCO shall be liable for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which Credit Suisse, 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, Credit Suisse Indemnities) may become subject under the
1933 Act, the 1940 Act, the Advisers Act, or under any other statute, at common
law or otherwise arising out of (i) any negligence, willful misconduct, bad
faith or reckless disregard by IMCO in the performance of any of its duties or
obligations hereunder or (ii) any untrue statement of a material fact contained
in the Prospectus and SAI, proxy materials, reports, advertisements, sales
literature, or other materials pertaining to the Funds or the omission to state
therein a material fact known to IMCO which was required to be stated therein or
necessary to make the statements therein not misleading, unless such statement
or omission was made in reliance upon information furnished in writing to IMCO
or the Trust. IMCO shall indemnify and hold harmless Credit Suisse Indemnities
for any and all such losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses); PROVIDED, HOWEVER, that in no
case shall IMCO's indemnity hereunder be deemed to protect a person against any
liability to which any such person would otherwise be subject by reason of
willful misconduct, bad faith or gross negligence in the performance of its
duties under this Agreement.
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
7
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 Credit
Suisse (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 Credit Suisse.
(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, Credit
Suisse 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 Credit
Suisse. Credit Suisse 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 Credit Suisse by IMCO shall be
without prejudice to the obligation of Credit Suisse to complete transactions
already initiated or acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to
Credit Suisse 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
8
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 Credit Suisse to IMCO in
connection with the Funds hereunder are not to be deemed exclusive, and Credit
Suisse 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 Credit Suisse 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 Credit Suisse 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 Credit Suisse, or IMCO itself, to perform investment advisory
services to any portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. Credit Suisse shall, upon reasonable notice,
afford IMCO at all reasonable times access to Credit Suisse'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
Credit Suisse to provide IMCO with access to the books and records of Credit
Suisse relating to any other accounts other than the Funds.
(B) CONFIDENTIALITY. All information and advice furnished by one party
to the other party (including their respective officers, employees and
authorized representatives) shall be treated confidentially and as proprietary
information. Each party 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 other party,
which approval shall not be unreasonably withheld and may not be withheld where
a party 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 other party.
(C) PRIVACY POLICY. Credit Suisse 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
9
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. Credit Suisse agrees that it will promptly notify
IMCO in the event that: (i) Credit Suisse becomes or reasonably expects to
become the subject of an administrative proceeding or enforcement action by the
Commission or other regulatory body with applicable jurisdiction or (ii) to the
best of Credit Suisse's knowledge, any affiliate of Credit Suisse becomes or
reasonably expects to become the subject of an administrative proceeding or
enforcement action by the Commission or other regulatory body with applicable
jurisdiction that could reasonably be expected to have a material adverse effect
upon the ability of Credit Suisse to perform its duties under this Agreement.
(F) INSURANCE. Credit Suisse 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 Credit Suisse's 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 Credit Suisse, including, without limitation, a change of control of
Credit Suisse or a portfolio manager change, Credit Suisse shall bear all
reasonable expenses associated with such shareholder meeting, information
statement, or prospectus supplement.
11. MISCELLANEOUS.
(A) NOTICES. All notices or other communications given under this
Agreement shall be made by guaranteed overnight delivery, telecopy or certified
mail; notice is effective when received. Notice shall be given to the parties at
the following addresses:
IMCO: USAA Investment Management Company
0000 Xxxxxxxxxxxxxx Xxxx, X-X0-X
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Securities Counsel
Credit Suisse: Credit Suisse Asset Management, LLC
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: General Counsel
10
(B) SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors.
(C) GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the State of Texas, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act. To the extent that the
applicable laws of the State of Texas conflict with the applicable provisions of
the 1940 Act, the latter shall control.
(D) COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(E) HEADINGS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(F) ENTIRE AGREEMENT. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act.
IN WITNESS WHEREOF, IMCO and Credit Suisse have caused this Agreement
to be executed as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT COMPANY
By: By:
------------------------------- ----------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
By: ___________________________
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
Attest: CREDIT SUISSE ASSET MANAGEMENT, LLC
By: By:
-------------------------------- -------------------------------
Name: Name:
Title: Title:
11
SCHEDULE A
CORNERSTONE STRATEGY FUND
FIRST START GROWTH FUND
12
SCHEDULE B
FEES
FUND ACCOUNT RATE PER ANNUM OF THE AVERAGE
DAILY NET ASSETS OF THE FUND ACCOUNT
Cornerstone Strategy Fund 0.15%*
First Start Growth Fund 0.15%*
---------------------------
* Credit Suisse agrees that it will not seek to increase these fee rates
during the period ending September 30, 2010 (the Lock). This Lock does not
limit the rights of the Fund's shareholders, the Fund's Board, or IMCO as
set forth in Section 6 of the Agreement ("Duration and Termination of this
Agreement").
13
EXHIBIT D (xvii)
AMENDMENT NO. 1
TO INVESTMENT SUBADVISORY AGREEMENT
AMENDMENT NO. 1 made as of the 1st day of August 2006, to the Investment
Subadvisory Agreement made as of the 1st day of August 2006, 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 Mutual Funds Trust (the Trust).
IMCO and Batterymarch agree to modify and amend the Investment Subadvisory
Agreement described above (Agreement) as follows:
1. NEW FUND. IMCO hereby appoints Batterymarch as an investment subadviser
of the USAA First Start Growth Fund on the terms and conditions set forth in the
Agreement.
2. SCHEDULE A. Schedule A to the Agreement, setting forth the Funds of the
Trust for which Batterymarch 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 Batterymarch 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.
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
By: /S/ XXXX X. XXXXXX By: /S/ XXXXXXXXXXX X. XXXXX
------------------------------- ------------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
By: /S/ XXXXX X. XXXXXXXX
---------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Authorized Signatory
Attest: BATTERYMARCH FINANCIAL MANAGEMENT, INC.
By: /S/ XXXXXXX X. XXXXXXX By: /S/ XXXXXXX XXXXX
--------------------------------- ---------------------------------
Name: Xxxxxx X. Xxxxxxx Name: Xxxxxxx Xxxxx
Title: Assistant Secretary Title: President & CFO
SCHEDULE A
FUND EFFECTIVE DATE
CAPITAL GROWTH FUND AUGUST 1, 2006
CORNERSTONE STRATEGY FUND AUGUST 1, 2006
SMALL CAP STOCK FUND AUGUST 1, 2006
FIRST START GROWTH FUND AUGUST 1, 2006
SCHEDULE B
FEES
FUND ACCOUNT RATE PER ANNUM OF THE AVERAGE DAILY
NET ASSETS OF THE FUND ACCOUNTS
Capital Growth Fund, First Start 0.25% on the first $250 million of
Growth Fund, and Cornerstone assets
Strategy Fund* 0.21% on assets over $250 million
and up to $500 million
0.17% on assets over $500 million
FUND ACCOUNT RATE PER ANNUM OF THE AVERAGE DAILY
NET ASSETS OF THE FUND ACCOUNT
Small Cap Stock Fund 0.50%
-------------------------
* Batterymarch agrees that it will not seek to increase this fee rate during the
period ending November 30, 2009 (the Lock). This 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").
