EXHIBIT 4(k)
AMENDED AND RESTATED INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of May, 2003 (the Effective Date), and
amended and restated as of the 1st day of October, 2003, between USAA INVESTMENT
MANAGEMENT COMPANY, a corporation organized under the laws of the State of
Delaware and having its principal place of business in San Antonio, Texas (IMCO)
and 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 Fund, Inc., a
corporation organized under the laws of the state of Maryland (the Company) and
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, under its Investment Advisory Agreement with the Company
(Investment Advisory Agreement), IMCO is authorized to appoint subadvisers for
series of the Company (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain NTI to render investment advisory services
to such series (or portions thereof) of the Company as now or hereafter may be
identified in Schedule A to this Agreement, as such Schedule A may be amended
from time to time (each such series or portion thereof referred to herein as a
Fund Account and collectively as Fund Accounts); and
WHEREAS, NTI is willing to provide such services to the Fund Accounts and
IMCO upon the terms and conditions and for the compensation set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. APPOINTMENT OF NTI. IMCO hereby appoints NTI to act as an investment
subadviser for each Fund Account in accordance with the terms and conditions of
this Agreement. NTI will be an independent contractor and will have no authority
to act for or represent the Company or IMCO in any way or otherwise be deemed an
agent of the Company or IMCO except as expressly authorized in this Agreement or
another writing by the Company, IMCO and NTI. NTI accepts such appointment and
agrees to render the services herein set forth for the compensation herein
provided.
2. DUTIES OF NTI.
(a) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO and
the Company's Board of Directors (the Board), NTI, at its own expense, shall
have full discretion to manage, supervise and direct the investment and
reinvestment of Fund Accounts allocated to it by IMCO from time to time. It is
understood that a Fund Account may consist of all, a portion of, or none of the
assets of the Fund, and that IMCO has the right to allocate and reallocate such
assets to a Fund Account at any time. NTI shall perform its duties described
herein in a manner consistent with the investment objective, policies and
restrictions set forth in the then current Prospectus and Statement of
Additional Information (SAI) for each Fund. Should NTI anticipate materially
modifying its investment process, it must provide written notice in advance to
IMCO, and any affected Prospectus and SAI should be amended accordingly.
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 Company in the same manner and with the same force and effect as the Company
might or could do with respect to such purchases, sales, or other transactions,
as well as with respect to all other things necessary or incidental to the
furtherance or conduct of such purchases, sales, or other transactions.
In the performance of its duties, NTI will act in the best interests of
each Fund and will comply with (i) applicable laws and regulations, including,
but not limited to, the 1940 Act and the Investment Advisers Act of 1940, as
amended (Advisers Act), and the rules under each, (ii) the terms of this
Agreement, (iii) the stated investment objective, policies and restrictions of
each Fund, as stated in the then-current Prospectus and Statement of Additional
Information of each Fund, (iv) the Company's compliance procedures and other
policies, procedures or guidelines as the Board or IMCO reasonably may establish
from time to time, (v) the provisions of the Internal Revenue Code of 1986, as
amended (Code), applicable to "regulated investment companies" (as defined in
Section 851 of the Code), including Section 817(h), as from time to time in
effect, and (vi) the written instructions of IMCO. NTI shall establish
compliance procedures reasonably calculated to ensure compliance with the
foregoing. IMCO shall be responsible for providing NTI with the Company's
Articles of Incorporation, as amended and supplemented, the Company's Bylaws and
amendments thereto and current copies of the materials specified in Subsections
(a)(iii) and (iv) of this Section 2. IMCO shall provide NTI with prior written
notice of any material change to the Company's Registration Statement under the
Securities Act of 1933 and the 1940 Act that would affect NTI's management of a
Fund Account.
(b) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, NTI will select the
brokers or dealers that will execute purchase and sale transactions for the Fund
Accounts, subject to the conditions herein. In the selection of broker-dealers
and the placement of orders for the purchase and sale of portfolio investments
for the Fund Accounts, NTI shall use its best efforts to obtain for the Fund
Accounts the best overall terms available, except to the extent it may be
permitted to pay higher brokerage commissions for brokerage and research
services as described below. In using its best efforts to obtain the best terms
available, NTI, bearing in mind each Fund's best interests at all times, shall
consider all factors it deems relevant, including by way of illustration, price,
the size of the transaction, the nature of the market for the security, the
amount of the commission and dealer's spread or xxxx-up, the timing of the
transaction taking into account market prices and trends, the reputation,
experience and financial stability of the broker-dealer involved, the general
execution and operational facilities of the broker-dealer and the quality of
service rendered by the broker-dealer in other transactions.
Subject to such policies as the Board may determine and to the extent
authorized by Section 28(e) of the Securities Exchange Act of 1934 (Exchange
Act), NTI shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its
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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 help generate resources to pay the cost of certain expenses that the
Company is required to pay or for which the Company is required to arrange
payment.
On occasions when NTI deems the purchase or sale of a security to be in
the best interest of a Fund as well as other clients of NTI, NTI, to the extent
permitted by applicable laws and regulations, may aggregate the securities to be
purchased or sold to attempt to obtain a more favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by NTI in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to its other clients
over time.
NTI may buy securities for a Fund Account at the same time it is selling
such securities for another client account and may sell securities for a Fund
Account at the time it is buying such securities for another client account. In
such cases, subject to applicable legal and regulatory requirements, and in
compliance with such procedures of the Company as may be in effect from time to
time, NTI may effectuate cross transactions between a Fund Account and such
other account if it deems this to be advantageous.
Subject to applicable legal and regulatory requirements, including the
terms of any applicable exemptive relief granted by the Securities and Exchange
Commission, NTI may, unless instructed otherwise by the Board or IMCO, (i)
invest cash balances in shares of money market funds advised by NTI and (ii)
purchase securities issued by an "affiliated person" (as that term is defined in
the 1940 Act or interpreted under applicable rules and regulations of the
Commission) of NTI if such securities are included in the index that a Fund's
performance seeks to match.
NTI will advise the Funds' custodian or such depository or agents as may be
designated by the custodian and IMCO promptly of each purchase and sale of a
portfolio security, specifying the name of the issuer, the description and
amount or number of shares of the security purchased, the market price, the
commission and gross or net price, the trade date and settlement date, the
identity of the effecting broker or dealer and any other pertinent data that the
Funds' custodian may need to settle a security's purchase or sale. NTI shall not
have possession or custody of any Fund's investments. The Company shall be
responsible for all custodial agreements and the payment of all custodial
charges and fees and, upon NTI giving proper instructions to the custodian, NTI
shall have no responsibility or liability for the acts, omissions or other
conduct of the custodian.
Notwithstanding the foregoing, NTI agrees that IMCO shall have the right by
written notice to identify securities that may not be purchased on behalf of any
Fund and/or brokers and dealers through which portfolio transactions on behalf
of the Fund may not be effected, including, without limitation, brokers or
dealers affiliated with IMCO. NTI shall refrain from purchasing such securities
for a Fund Account or directing any portfolio transaction to any such broker or
dealer on behalf of a Fund Account, unless and until the written approval of
IMCO to do so is obtained. In addition, NTI agrees that it shall not direct
portfolio transactions for the Fund Accounts through any broker or dealer that
is an "affiliated person" (as that term is defined in the 1940 Act or
interpreted under applicable rules and regulations of the Commission) of NTI,
except as permitted under the 1940 Act. IMCO agrees that it will provide NTI
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with a list of brokers and dealers that are affiliated persons of the Funds, or
affiliated persons of such persons, and shall timely update that list as the
need arises. The Funds agree that any entity or person associated with IMCO or
NTI that is a member of a national securities exchange is authorized to effect
any transaction on such exchange for the account of the Funds that is permitted
by Section 11(a) of the Exchange Act, and the Funds consent to the retention of
compensation for such transactions.
(c) EXPENSES. NTI, at its expense, will furnish all necessary facilities
and personnel, including salaries, expenses and fees of any personnel required
for them to faithfully perform their duties under this Agreement and
administrative facilities, including bookkeeping, and all equipment and services
necessary for the efficient conduct of NTI's duties under this Agreement. In
addition, NTI shall reimburse the S&P 500 Index Fund for all license fees paid
by the S&P 500 Index Fund to Standard & Poor's in amounts not exceeding the
annual rate of 0.001% of the average daily net assets of such Fund. However, NTI
shall not be obligated to pay any expenses of IMCO, the Company or the Funds,
including without limitation, interest and taxes, brokerage commissions and
other costs in connection with the purchase or sale of securities or other
investment instruments for the Funds and custodian fees and expenses.
(d) VALUATION. Securities traded on a national securities exchange or the
NASDAQ market for which market quotes are readily available will be valued on
each day the New York Stock Exchange is open for business. For those securities
held in Fund Accounts subadvised by NTI for which market quotes are not readily
available, NTI, at its expense and in accordance with procedures and methods
established by the Board, which may be amended from time to time, will provide
such assistance to IMCO in determining the fair value of such securities as IMCO
may reasonably request, including providing market price information relating to
these assets of the Fund. NTI shall also provide reasonable assistance to IMCO
in monitoring for "significant events" that occur after the closing of a market
but before the Funds calculate their net asset values and that may affect the
valuation of any Fund Account's portfolio securities and shall notify IMCO
promptly in the event NTI determines that a significant event has occurred.
(e) REPORTS AND AVAILABILITY OF PERSONNEL. NTI, at its expense, shall
render to the Board and IMCO such periodic and special reports as the Board and
IMCO may reasonably request with respect to matters relating to the duties of
NTI set forth herein. NTI, at its expense, will make available to the Board and
IMCO at reasonable times its portfolio managers and other appropriate personnel
in order to review investment policies of the Funds and to consult with the
Board and IMCO regarding the investment affairs of the Funds, including
economic, statistical and investment matters relevant to NTI's duties hereunder.
(f) COMPLIANCE MATTERS. NTI, at its expense, will provide IMCO with such
compliance reports relating to its duties under this Agreement as may be agreed
upon by such parties from time to time. NTI also shall cooperate with and
provide reasonable assistance to IMCO, the Company's administrator, the
Company's custodian and foreign custodians, the Company's transfer agent and
pricing agents and all other agents and representatives of the Company and IMCO,
keep all such persons fully informed as to such matters as they may reasonably
deem necessary to the performance of their obligations to the Company and IMCO,
provide prompt responses to reasonable requests made by such persons and
maintain any appropriate interfaces with each so as to promote the efficient
exchange of information.
(g) BOOKS AND RECORDS. NTI will maintain for the Funds all books and
records required to be maintained by the Funds pursuant to the 1940 Act and the
rules and regulations promulgated thereunder insofar as such records relate to
the investment affairs of the Fund Accounts. Pursuant to Rule 31a-3 under the
1940 Act, NTI agrees that: (i) all records it maintains for a Fund Account are
the property of the Fund; (ii) it will surrender promptly to a Fund or IMCO any
such records (or copies of such records) upon the Fund's or IMCO's request; and
(iii) it will preserve for the periods prescribed by Rule
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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. 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.
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(b) IMCO. IMCO represents and warrants to NTI that (i) the retention of NTI
by IMCO as contemplated by this Agreement is authorized by the respective
governing documents of the Company and IMCO; (ii) the execution, delivery and
performance of each of this Agreement and the Investment Advisory Agreement does
not violate any obligation by which the Company or IMCO or their respective
property is bound, whether arising by contract, operation of law or otherwise;
(iii) each of this Agreement and the Investment Advisory Agreement has been duly
authorized by appropriate action of the Company and IMCO and when executed and
delivered by IMCO will be a legal, valid and binding obligation of the Company
and IMCO, enforceable against the Company and IMCO in accordance with its terms,
subject, as to enforcement, to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and to general equitable principles
(regardless of whether enforcement is sought in a proceeding in equity or law);
(iv) IMCO is registered as an investment adviser under the Advisers Act; (v)
IMCO has adopted a written code of ethics complying with the requirements of
Rule 17j-1 under the 1940 Act and instituted implementation procedures and that
IMCO and certain of its employees, officers and directors are subject to
reporting requirements thereunder; (vi) IMCO is not prohibited by the 1940 Act,
the Advisers Act or other law, regulation or order from performing the services
contemplated by this Agreement; and (vii) IMCO will promptly notify NTI of the
occurrence of any event that would disqualify IMCO from serving as investment
manager of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
5. LIABILITY AND INDEMNIFICATION.
(a) NTI. NTI shall indemnify and hold harmless the Company, a Fund, IMCO,
any affiliated persons thereof (within the meaning of the 0000 Xxx) and any
controlling persons thereof (as described in Section 15 of the Securities Act of
1933, as amended (the 1933 Act))(collectively, IMCO Indemnitees) for any and all
losses, claims, damages, liabilities or litigation (including reasonable legal
and other expenses) (collectively, Losses) to which the IMCO Indemnitees may
become subject under the 1933 Act, the 1940 Act, the Advisers Act, or under any
other statute, at common law or otherwise arising out of (i) any negligence,
willful misconduct, bad faith or reckless disregard of NTI in the performance of
any of its duties or obligations hereunder or (ii) any untrue statement of a
material fact contained in the Prospectus and SAI, proxy materials, reports,
advertisements, sales literature, or other materials pertaining to the Funds or
the omission to state therein a material fact known to NTI which was required to
be stated therein or necessary to make the statements therein not misleading, if
such statement or omission was made in reliance upon information furnished in
writing to IMCO or the Company by NTI Indemnitees (as defined below) for use
therein.
(b) IMCO. IMCO shall indemnify and hold harmless NTI, any affiliated
persons thereof (within the meaning of the 0000 Xxx) and any controlling persons
thereof (as described in Section 15 of the 1933 Act)(collectively, NTI
Indemnitees) for any and all Losses to which the NTI Indemnitees may become
subject under the 1933 Act, the 1940 Act, the Advisers Act, or under any other
statute, at common law or otherwise arising out of (i) any negligence, willful
misconduct, bad faith or reckless disregard by IMCO in the performance of any of
its duties or obligations hereunder or (ii) any untrue statement of a material
fact contained in the Prospectus and SAI, proxy materials, reports,
advertisements, sales literature, or other materials pertaining to the Funds or
the omission to state therein a material fact known to IMCO which was required
to be stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon information
furnished in writing by NTI Indemnitees to IMCO or the Company.
(c) Notwithstanding anything contained herein to the contrary, the NTI
Indemnitees shall not be liable to any IMCO Indemnitees for any Losses resulting
from NTI's acts or omissions as subadviser to a Fund Account except to the
extent such Losses result from a breach of contract or the negligence, willful
misconduct, bad faith or reckless disregard by the NTI Indemnitees.
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6. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall become
effective with respect to a Fund upon its initial execution with respect to a
Fund; provided, however, that this Agreement shall not become effective with
respect to a Fund unless it has first been approved in the manner required by
the 1940 Act and rules thereunder or in accordance with exemptive or other
relief granted by the SEC or its staff. This Agreement shall remain in full
force and effect continuously thereafter, except as follows:
(a) By vote of a majority of (i) the Board members who are not "interested
persons" (as defined in the 0000 Xxx) of the Company, IMCO, or NTI (Independent
Board Members) or (ii) the outstanding voting shares of a Fund, such Fund may at
any time terminate this Agreement, without the payment of any penalty, by
providing not more than 60 days' nor less than 10 days' written notice delivered
or mailed by registered mail, postage prepaid, to IMCO and NTI.
(b) This Agreement will terminate automatically with respect to a Fund,
without the payment of any penalty, unless within two years after May 1, 2003,
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 or interpreted under
applicable rules and regulations of the Commission) or if the Investment
Advisory Agreement shall terminate for any reason.
(e) Any notice of termination served on NTI by IMCO shall be without
prejudice to the obligation of NTI to complete transactions already initiated or
acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to NTI
under this Agreement automatically shall revert to IMCO. Notwithstanding any
termination of this Agreement with respect to a Fund, Sections 5, 10(a), 10(e),
11(a), and 11(c) of this Agreement shall remain in effect after any such
termination.
7. AMENDMENT OF AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. No material amendment of this Agreement shall be
effective until approved in the manner required by the 1940 Act, any rules
thereunder or any exemptive or other relief granted by the SEC or its staff
(Applicable Law).
8. APPROVAL, AMENDMENT, OR TERMINATION BY INDIVIDUAL FUND. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 0000 Xxx) of any Fund shall be
effective to continue, amend or terminate this Agreement with respect to any
such Fund notwithstanding (i) that such action has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund
affected thereby, and/or (ii) that such
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action has not been approved by the vote of a majority of the outstanding voting
securities of the Company, unless such action shall be required by any
applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of NTI to IMCO in connection with the
Funds hereunder are not to be deemed exclusive, and NTI shall be free to render
investment advisory services to others so long as its services hereunder are not
impaired thereby. It is understood that the persons employed by NTI to assist in
the performance of its duties hereunder will not devote their full time to such
services and nothing contained herein shall be deemed to limit or restrict in
any manner whatsoever the right of NTI to engage in or devote time and attention
to other businesses or to render services of whatever kind or nature. It is
understood that IMCO may appoint at any time in accordance with Applicable Law
one or more subadvisers, in addition to NTI, or IMCO itself, to perform
investment advisory services to any portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(a) ACCESS TO INFORMATION. NTI shall, upon reasonable notice, afford IMCO
at all reasonable times access to NTI's officers, employees, agents and offices
and to all its relevant books and records and shall furnish IMCO with all
relevant financial and other data and information as requested; provided,
however, that nothing contained herein shall obligate NTI to provide IMCO with
access to the books and records of NTI relating to any other accounts other than
the Funds or where such access is prohibited by law.
(b) CONFIDENTIALITY. NTI, and its officers, employees and authorized
representatives, shall treat confidentially and as proprietary information of
the Company all records and information relative to the Company and prior,
present or potential shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Company, which approval shall not be unreasonably withheld and may not be
withheld where NTI may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company.
(c) PRIVACY POLICY. NTI acknowledges that nonpublic customer information
(as defined in Regulation S-P, including any amendments thereto) of customers of
the Funds received from IMCO is subject to the limitations on redisclosure and
reuse set forth in Section 248.11 of such Regulation, and agrees such
information (i) shall not be disclosed to any third party for any purpose
without the written consent of IMCO unless permitted by exceptions set forth in
Sections 248.14 or 248.15 of such Regulation and (ii) shall be safeguarded
pursuant to procedures adopted under Section 248.30 of such Regulation if so
required.
(d) PUBLIC ANNOUNCEMENTS. No party shall issue any press release or
otherwise make any public statements with respect to the matters covered by this
Agreement without the prior written consent of the other parties hereto, which
consent shall not be unreasonably withheld; provided, however, that consent
shall not be required if, in the opinion of counsel, such disclosure is required
by law; provided further, however, that the party making such disclosure shall
provide the other parties hereto with as much prior written notice of such
disclosure as is practical under the circumstances. During the term of this
Agreement, IMCO agrees to furnish to NTI at its principal office all
Prospectuses, Statements of Additional Information, proxy statements, reports to
shareholders, sales literature, or other material prepared for distribution to
sales personnel, share-holders of the Company or the public, which refer to NTI
or its clients in any way, prior to use thereof and not to use such material if
NTI reasonably objects in writing two business days (or such other time as may
be mutually agreed upon) after receipt thereof. Advance review shall not be
required from NTI with respect to 1) sales literature in which NTI is only
referenced in a listing of subadvisers to USAA funds; and 2) other materials as
agreed upon mutually by
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IMCO and NTI. Sales literature may be furnished to NTI hereunder by first-class
or overnight mail, electronic or facsimile transmission, or hand delivery.
(e) NOTIFICATIONS. NTI agrees that it will promptly notify IMCO in the
event that NTI or any of its affiliates is or expects to become the subject of
an administrative proceeding or enforcement action by the Commission or other
regulatory body with applicable jurisdiction.
(f) INSURANCE. NTI agrees to maintain errors and omissions or professional
liability insurance coverage in an amount that is reasonable in light of the
nature and scope of NTI's business activities.
(g) SHAREHOLDER MEETING AND OTHER EXPENSES. In the event that the Company
shall be required to call a meeting of shareholders, send an information
statement to shareholders, or send a prospectus supplement to shareholders
solely due to actions involving NTI, including, without limitation, a change of
control of NTI, 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
(b) SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors.
(c) GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the State of Texas, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act. To the extent that the
applicable laws of the State of Texas conflict with the applicable provisions of
the 1940 Act, the latter shall control.
(d) Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9
(e) HEADINGS. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
(f) ENTIRE AGREEMENT. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act.
IN WITNESS WHEREOF, IMCO and NTI have caused this Agreement to be executed
as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT
COMPANY
By: /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: NORTHERN TRUST INVESTMENTS, N.A.
By: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------- -----------------------------
Name: Xxxxxxx X. Xxxxxxxx Name: Xxxxx X. Xxxxxxxxx
Title: Attorney Title: Vice President
10
SCHEDULE A
S&P 500 Index Fund
Nasdaq-100 Index Fund
11
SCHEDULE B
FEES
Rate per annum of the average daily net
Fund Account assets of the Fund Account
S&P 500 Index Fund 0.02% on the first $1.5 billion of assets
0.01% on assets over $1.5 billion and up to
$3 billion
0.005% on assets over $3 billion
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
* 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
(September 30 of each year), the Asset-Based Fee is less than the Minimum Annual
Fee, IMCO shall pay, within 15 days after the end of such annual period, NTI the
difference between the Minimum Annual Fee and the Asset-Based Fee. For the
annual period ended September 30, 2004, NTI agrees to waive the Minimum Annual
Fee.
12
EXHIBIT 4(l)
USAA Contract Control Number: 0000130510
INVESTMENT ACCOUNTING AGREEMENT
THIS AGREEMENT made and effective as of May 1, 2003, by and between
USAA Mutual Fund, Inc. (the "Company"), a Maryland corporation on behalf of
USAA S&P 500 Index Fund (the "Fund"), a series of the Company, and The
Northern Trust Company ("Northern Trust").
WHEREAS, the Company is registered as an "investment company" under
the Investment Company Act of 1940 (the "1940 Act") and the Fund is a duly
authorized series of the Company; and
WHEREAS, NORTHERN TRUST performs certain investment accounting and
compliance services in connection with maintaining certain accounting
records of one or more investment companies; and
WHEREAS, NORTHERN TRUST may perform certain investment accounting and
compliance services on a computerized accounting system (the "Portfolio
Accounting System"); and
WHEREAS, the Company desires to appoint NORTHERN TRUST as investment
accounting agent for the Fund, and NORTHERN TRUST is willing to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto, intending to be legally bound, mutually
covenant and agree as follows:
1. APPOINTMENT OF INVESTMENT ACCOUNTING AGENT. The Company hereby
constitutes and appoints NORTHERN TRUST as investment accounting agent
for the Fund to perform accounting and limited compliance functions
related to portfolio transactions required of the Fund under Rule
31a-1 of the 1940 Act and to calculate the net asset value of the
Fund. Notwithstanding Section 11.I, NORTHERN TRUST may assign all or a
portion of its duties and responsibilities hereunder to one or more of
NORTHERN TRUST's affiliates upon advance written notice of such
assignment to the Company. Nevertheless, any assignment by NORTHERN
TRUST to a person or entity which is not an affiliate of NORTHERN
TRUST of all or a portion of NORTHERN TRUST's duties and
responsibilities hereunder shall comply with Section 11.I.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents, warrants and acknowledges to NORTHERN TRUST:
A. That it is a corporation duly organized and existing and in good
standing under the laws of Maryland, and that it is registered
under the 1940 Act; and
B. That it has the requisite power and authority under applicable law,
its charter or articles of incorporation and its bylaws to enter
into this Agreement; that it has taken all requisite action
necessary to appoint NORTHERN TRUST as investment accounting agent
for the Fund; that this Agreement has been duly executed and
delivered by the Company on behalf of the Fund; and that this
Agreement constitutes a legal, valid and binding obligation of the
Company, enforceable in accordance with its terms.
1
3. REPRESENTATIONS AND WARRANTIES OF NORTHERN TRUST. NORTHERN TRUST
hereby represents, warrants and acknowledges to the Company:
A. That it is a corporation duly organized and existing and in good
standing under the laws of the State of Illinois;
B. That it has the requisite power and authority under applicable law,
its charter or articles of incorporation and its bylaws to enter
into and perform this Agreement; that this Agreement has been duly
executed and delivered by NORTHERN TRUST; and that this Agreement
constitutes a legal, valid and binding obligation of NORTHERN
TRUST, enforceable in accordance with its terms; and
C. That the accounts maintained and preserved by NORTHERN TRUST shall
be the property of the Company and/or the Fund and that it will not
use any information made available to it under the terms hereof for
any purpose other than complying with its duties and
responsibilities hereunder or as specifically authorized in writing
by the Company for itself and on behalf of the Fund.
4. DUTIES AND RESPONSIBILITIES OF THE COMPANY.
A. The Company shall turn over to NORTHERN TRUST all of the Fund's
accounts previously maintained, if any.
B. The Company shall provide to NORTHERN TRUST the information
necessary to perform NORTHERN TRUST's duties and responsibilities
hereunder in writing or its electronic or digital equivalent prior
to the close of the New York Stock Exchange on each day on which
NORTHERN TRUST prices the Funds' securities and foreign currency
holdings.
C. The Company shall furnish NORTHERN TRUST with the declaration,
record and payment dates and amounts of any dividends or income and
any other special actions required concerning the securities in the
portfolio when such information is not readily available from
generally accepted securities industry services or publications.
D. The Company shall pay to NORTHERN TRUST such compensation at such
time as may from time to time be agreed upon in writing by NORTHERN
TRUST and the Company. The initial compensation schedule is
attached as Exhibit A.
E. The Company shall provide to NORTHERN TRUST, as conclusive proof of
any fact or matter required to be ascertained from the Company as
reasonably determined by NORTHERN TRUST, a certificate signed by
the Company's president or other officer of the Company, or other
authorized individual, as reasonably requested by NORTHERN TRUST.
The Company shall also provide to NORTHERN TRUST instructions with
respect to any matter concerning this Agreement requested by
NORTHERN TRUST. NORTHERN TRUST may rely upon any instruction or
information furnished by any person reasonably believed by it to be
an officer or agent of the Company, and shall not be held to have
notice of any change of authority of any such person until receipt
of written notice thereof from the Company.
F. The Company shall preserve the confidentiality of the Portfolio
Accounting System and the tapes, books, reference manuals,
instructions, records, programs, documentation and information of,
and other materials relevant to, the Portfolio Accounting System
and the business of NORTHERN TRUST ("Confidential Information").
The Company shall not voluntarily disclose such Confidential
Information to any other person other than its own employees or
agents who reasonably have a need to know such information pursuant
to this Agreement. The Company shall return all such Confidential
Information to NORTHERN TRUST upon termination or expiration of
this Agreement. The Company acknowledges that NORTHERN TRUST may
contract with third parties for its Portfolio Accounting System and
may change Portfolio Accounting Systems at any time if such change
will not materially affect the services provided under this
Agreement. The Company further acknowledges that the
2
confidentiality provisions of this Agreement as they relate to the
Portfolio Accounting System are intended to provide protection to
NORTHERN TRUST, third party system providers and any of their
respective agents.
G. If NORTHERN TRUST shall provide the Company direct access to the
computerized accounting and reporting system used hereunder or if
NORTHERN TRUST and the Company shall agree to utilize any
electronic system of communication, the Company shall be fully
responsible for any and all consequences of the use or misuse of
the terminal device, passwords, access instructions and other means
of access to such system(s) which are utilized by, assigned to or
otherwise made available to the Company. The Company agrees to
implement and enforce appropriate security policies and procedures
to prevent unauthorized or improper access to or use of such
system(s). NORTHERN TRUST shall be fully protected in acting
hereunder upon any instructions, communications, data or other
information received by NORTHERN TRUST by such means as fully and
to the same extent as if delivered to NORTHERN TRUST by written
instrument signed by the requisite authorized representative(s) of
the Company.
5. DUTIES AND RESPONSIBILITIES OF NORTHERN TRUST.
A. NORTHERN TRUST shall calculate the Fund's net asset value, in
accordance with the Fund's prospectus. NORTHERN TRUST will price
the securities of the Fund for which market quotations are
available by the use of outside services designated by the Company
which are normally used and contracted with for this purpose; all
other securities will be priced in accordance with the Company's
instructions.
B. NORTHERN TRUST shall prepare and maintain, with the direction and
as interpreted by the Company or the Fund's accountants and/or
other advisors, in complete, accurate, and current form, all
accounts and records needed to be maintained as a basis for
calculation of the Fund's net asset value, and as further agreed
upon by the parties in writing, and shall preserve such records in
the manner and for the periods required by law or for such longer
period as the parties may agree upon in writing.
C. NORTHERN TRUST shall make available to the Company for inspection
or reproduction within a reasonable time, upon demand, all accounts
and records of the Fund maintained and preserved by NORTHERN TRUST.
In addition, NORTHERN TRUST shall periodically provide certain
records to various parties, all as specifically set forth in
Exhibit B.
D. NORTHERN TRUST shall be entitled to rely conclusively on the
completeness and correctness of any and all accounts and records
turned over to it by the Company.
E. NORTHERN TRUST shall assist the Fund's independent accountants, or
upon approval of the Company or upon demand, any regulatory body,
in any requested review of the Fund's accounts and records
maintained by NORTHERN TRUST but shall be reimbursed by the Company
for all expenses and employee time invested in any such review
outside of routine and normal periodic reviews. Inspections
conducted by the Securities and Exchange Commission shall be
considered routine.
F. Upon receipt from the Company of any necessary information or
instructions, NORTHERN TRUST shall provide information from the
books and records it maintains for the Company with respect to the
Fund that the Company needs for Fund tax returns, questionnaires,
or periodic reports to shareholders and such other reports and
information requests as the Company and NORTHERN TRUST shall agree
upon from time to time.
G. NORTHERN TRUST shall not have any responsibility hereunder to the
Company, the Fund, the Fund's shareowners or any other person or
entity for moneys or securities of the Fund, whether held by the
Fund or custodians of the Fund.
3
H. NORTHERN TRUST agrees that it shall hold in strict confidence all
data and information obtained from the Fund or any related party
(unless such information is or becomes readily ascertainable from
public or published information or trade sources) and shall ensure
that its officers, employees and authorized representatives do not
disclose such information to others without the prior written
consent of the Fund, except if disclosure is required by the
Securities and Exchange Commission or other regulator body or the
Fund's auditors or in the opinion of counsel such disclosure is
required by law, and then only with as much prior written notice to
the Fund as is practical under the circumstances.
6. INDEMNIFICATION.
A. The Company shall indemnify and hold NORTHERN TRUST harmless from
and against any and all costs, expenses, losses, damages, charges,
reasonable counsel fees, payments and liabilities which may be
asserted against or incurred by NORTHERN TRUST, or for which it may
be liable, arising out of or attributable to:
1. NORTHERN TRUST's action or omission to act pursuant hereto except
for any loss or damage arising from any negligent act or willful
misconduct of NORTHERN TRUST.
2. NORTHERN TRUST's payment of money as requested by the Company, or
the taking of any action which might make NORTHERN TRUST liable for
payment of money; provided, however, that NORTHERN TRUST shall not
be obligated to expend its own moneys or to take any such action
except in NORTHERN TRUST's sole discretion.
3. NORTHERN TRUST's action or omission to act hereunder upon any
instructions, advice, notice, request, consent, certificate or
other instrument or paper reasonably believed by it to be genuine
and to have been properly executed and/or authorized.
4. NORTHERN TRUST's action or omission to act in good faith reliance
on the opinion of outside counsel acceptable to both the Company
and NORTHERN TRUST.
5. NORTHERN TRUST's action or omission to act in good faith reliance
on statements of counsel to the Company, the Company's or the
Fund's independent accountants, and the Company's officers or other
authorized individuals provided by Company resolution.
6. The legality of the issue, sale or purchase of any shares of the
Fund, the sufficiency of the purchase or sale price, or the
declaration of any dividend by the Fund, whether paid in cash or
stock.
7. Any error, omission, inaccuracy or other deficiency in the Fund's
accounts and records or other information provided by the Company
or on behalf of the Company to NORTHERN TRUST, of the failure of
the Company to provide, or provide in a timely manner, the
information needed by NORTHERN TRUST to perform its functions as
specified in Section 4.C. hereunder.
8. The Company's refusal or failure to comply with the terms of this
Agreement, the Company's negligence or willful misconduct in
connection with the performance of its duties hereunder, or the
failure of any representation of the Company hereunder to be and
remain true and correct in all respects at all times.
9. The use or misuse, whether authorized or unauthorized, of the
Portfolio Accounting System or other computerized recordkeeping and
reporting system to which NORTHERN TRUST provides the Company
direct access hereunder or of any other electronic system of
communication used hereunder by the Company or by any person who
acquires access to such system(s) through a terminal device,
passwords, access instruction or other means of access to such
system(s) which are utilized by, assigned to or otherwise made
available to the Company, except to the extent attributable to any
negligence or willful misconduct by NORTHERN TRUST.
4
B. NORTHERN TRUST shall indemnify and hold the Company harmless from
and against any and all costs, expenses, losses, damages, charges,
reasonable counsel fees, payments and liabilities which may be
asserted against or incurred by the Company, or for which it may be
liable, arising out of or attributable to:
1. NORTHERN TRUST's refusal or failure to comply with the terms of
this Agreement or the failure of any representation or warranty of
NORTHERN TRUST hereunder to be and remain true and correct in all
respects at all times.
2. Any negligent or willful misconduct of NORTHERN TRUST, including
direct losses occasioned by the negligent error of NORTHERN TRUST
in calculating the Fund's net asset value; provided, however, that
NORTHERN TRUST may take reasonable steps at its own expense to
mitigate any monetary damages occurring as a result of NORTHERN
TRUST's actions.
3. The failure of NORTHERN TRUST to materially comply with applicable
law in connection with the performance of its duties hereunder.
In no event shall NORTHERN TRUST or the Company be liable for
consequential, special or punitive damages.
7. FORCE MAJEURE. NORTHERN TRUST shall not be responsible or liable for
its failure or delay in performance of its obligations under this
Agreement arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control, including, without
limitation: any interruption, loss or malfunction of any utility,
transportation, computer (hardware or software) or communication
service; inability to obtain labor, material, equipment or
transportation, or a delay in mails; government or exchange action,
statute, ordinance, rulings, regulations or direction; war, strike,
riot, emergency, civil disturbance, terrorism, vandalism, explosions,
labor disputes, freezes, floods, fires, tornadoes, acts of God or
public enemy, revolutions, or insurrection.
8. PROCEDURES. NORTHERN TRUST and the Company may from time to time adopt
procedures as they agree upon, and NORTHERN TRUST may conclusively
assume that any procedure approved in writing or directed by the
Company or its accountants or other advisors does not conflict with or
violate any requirements of the Fund's prospectus or the Company's,
charter or articles of incorporation, bylaws, any applicable law, rule
or regulation, or any order, decree or agreement by which the Company
may be bound.
9. TERM AND TERMINATION. The initial term of this Agreement shall be a
period of one year commencing on the effective date hereof. This
Agreement shall continue thereafter until terminated by either party
by notice in writing received by the other party not less than sixty
(60) days prior to the date upon which such termination shall take
effect. Upon termination of this Agreement:
A. The Company shall pay to NORTHERN TRUST its fees and compensation
due hereunder.
B. The Company shall designate a successor (which may be the Company)
by notice in writing to NORTHERN TRUST on or before the termination
date.
C. NORTHERN TRUST shall deliver to the successor, or if none has been
designated, to the Company, in a format designated by the Company
or the successor, all records, funds and other properties of the
Company or the Fund deposited with or held by NORTHERN TRUST
hereunder. In the event that neither a successor nor the Company
takes delivery of all records, funds and other properties of the
Company or the Fund by the termination date, NORTHERN TRUST's sole
obligation with respect thereto from the termination date until
delivery to a successor or the Company shall be to exercise
reasonable care to hold the same in custody in its form and
condition as of the termination date, and NORTHERN TRUST shall be
entitled to reasonable compensation therefor, including but not
limited to all of its out-of-pocket costs and expenses incurred in
connection therewith.
5
10. NOTICES. Notices, requests, instructions and other writings addressed
to the Company at USAA Mutual Fund, Inc., 0000 Xxxxxxxxxxxxxx Xxxx,
XX0X, Xxx Xxxxxxx, Xxxxx 00000, Attention: Xxxxxxx Xxxxxxx, or at such
address as that the Company may have designated to NORTHERN TRUST in
writing, shall be deemed to have been properly given to the Company
hereunder; and notices, requests, instructions and other writings
addressed to NORTHERN TRUST at its offices at 00 Xxxxx XxXxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxx 00000; Attention: Xxxxx Xxxxxxx, or to such other
address as it may have designated to the Fund in writing, shall be
deemed to have been properly given to NORTHERN TRUST hereunder.
11. MISCELLANEOUS.
A. This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of
the State of New York, without reference to the choice of laws
principles thereof.
B. All terms and provisions of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto
and their respective successors and permitted assigns.
C. The representations, warranties, and indemnifications extended
hereunder, and the provisions of Section 4.G. are intended to and
shall continue after and survive the expiration, termination or
cancellation of this Agreement.
D. No provisions of the Agreement may be amended or modified in any
manner except by a written agreement properly authorized and
executed by each party hereto.
E. The failure of either party to insist upon the performance of any
terms or conditions of this Agreement or to enforce any rights
resulting from any breach of any of the terms or conditions of this
Agreement, including the payment of damages, shall not be construed
as a continuing or permanent waiver of any such terms, conditions,
rights or privileges, but the same shall continue and remain in
full force and effect as if no such forbearance or waiver had
occurred.
F. The captions in this Agreement are included for convenience of
reference only, and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.
G. This Agreement may be executed in two or more separate
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
H. If any provision of this Agreement shall be determined to be
invalid or unenforceable, the remaining provisions of this
Agreement shall not be affected thereby, and every provision of
this Agreement shall remain in full force and effect and shall
remain enforceable to the fullest extent permitted by applicable
law.
I. This Agreement may not be assigned by either party hereto without
the prior written consent of the other.
J. Neither the execution nor performance of this Agreement shall be
deemed to create a partnership or joint venture by and between the
Company and NORTHERN TRUST.
K. Except as specifically provided herein, this Agreement does not in
any way affect any other agreements entered into among the parties
hereto and any actions taken or omitted by any party.
L. Notice is hereby given that a copy of the Company's articles of
incorporation and all amendments thereto is on file with the
Secretary of State of the state of its organization; that this
Agreement has been executed on behalf of the Company by the
undersigned duly authorized representative of the
6
Company in his/her capacity as such and not individually. The
Company is authorized to issue shares of capital stock in separate
series, with each such series representing interests in a separate
portfolio of securities and other assets. Under no circumstances
shall the rights, obligations or liabilities under this Agreement
with respect to the Fund constitute a right, obligation or
liability with respect to any other series of the Company, and
NORTHERN TRUST shall look solely to the assets of the Fund with
respect to any such liability.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective and duly authorized officers, to be effective as of
the day and year first above written.
The Northern Trust Company
By:/s/ Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: Vice President
USAA Mutual Fund, Inc., on behalf of its series
USAA S&P 500 Index Fund
By: /s/ Xxxxxxxxxxx X. Xxxxx
Name: Xxxxxxxxxxx X. Xxxxx
Title: President
7
EXHIBIT A
There will not be any separate payment of any Investment Accounting fee under
this Agreement. All fees in connection with the management of the Fund and the
Accounting and compliance services provided to the Fund will be paid under and
in conjunction with the investment sub-advisory agreement between the Company
and Northern Trust Investments Inc. ("NTI"), an affiliate of NORTHERN TRUST.
NORTHERN TRUST shall look solely to NTI for payment for services provided under
this Agreement.
USAA Mutual Fund, Inc. , on behalf of The Northern Trust Company
its series USAA S&P 500 Index Fund
By: /s/ Xxxxxxxxxxx X. Xxxxx By: /s/ Xxxxx Xxxxxxx
Name: Xxxxxxxxxxx X. Xxxxx Name: Xxxxx Xxxxxxx
Title: President Title: Vice President
Exhibit A is hereby Agreed to By
Northern Trust Investments, Inc.
By: /s/ Xxxxx X. Xxxxxxxxx
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
8
EXHIBIT B
On a daily basis, NORTHERN TRUST shall provide the following accounting
functions with respect to the Fund:
A. Journalize the Fund's investment, capital share and income and expense
activities;
B. Verify investment buy/sell trade tickets when received from the Fund's
investment adviser.
C. Maintain ledgers for investment securities;
D. Maintain historical tax lots in accordance with the specific identification
method for each security;
E. Reconcile cash and investment balances with the custodian, and provide the
Fund's investment sub-adviser with the beginning cash balance available for
investment purposes;
F. Update the cash availability throughout the day as required by the Fund's
investment sub-adviser;
G. Calculate various contractual expenses (e.g., adviser and custody fees);
H. Determine the Fund's net investment income;
I. Obtain security market prices from independent pricing services approved by
the Fund's Board or if such prices are unavailable, then follow fair value
procedures approved by the Fund's Board in order to calculate the market value
of the Fund's investments;
J. Transmit or mail a copy of the portfolio valuations to the Fund's investment
adviser/sub-adviser when requested;
K. Compute the net assets and net asset value of the Fund and transmit via email
(fax for backup purposes) to the Fund's transfer agent and the Fund's investment
adviser no later than 5:30 p.m. CST same day unless circumstances prevent such.
If the Fund's net assets and net asset value cannot be computed or transmitted
to the Fund's transfer agent and the Fund's investment adviser by 5:30 p.m. CST
same day, NORTHERN TRUST will telephone the Fund's transfer agent pricing pager
and the Fund's investment adviser (or other person designated by the Fund from
time to time); and NORTHERN TRUST will electronically deliver to the Fund's
transfer agent a daily pricing file (via FTP) by 5:30 p.m. CST. If the pricing
file cannot be transmitted to the Fund's transfer agent by 5:30 p.m. CST same
day, NORTHERN TRUST will call the Fund's transfer agent pricing pager ; and
L. Post to and prepare the Fund's general ledger and transmit electronically or
via fax to the Fund's transfer agent and the Fund's investment adviser no later
than 8:00 a.m. CST next day unless circumstances so prevent. If the Fund's
general ledger cannot be transmitted to the Fund's transfer agent and the Fund's
investment adviser by 8:00 a.m. CST next day, NORTHERN TRUST will contact the
Fund's transfer agent pricing pager and the Fund's investment adviser (or other
person designated by the Fund from time to time).
9
In addition NORTHERN TRUST will:
A. Supply readily available Fund statistical data to the Company as reasonably
requested on an ongoing basis;
B. Provide information necessary for the Fund to prepare federal and state tax
returns, annual and semi-annual reports, Form N-SARs and proxy statements;
C. Provide all Fund records supporting and necessary for the Fund to monitor the
Fund's status as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code") from time to time;
D. Provide information necessary for the Fund to determine the amount of
dividends and other distributions payable to shareholders as necessary to, among
other things, maintain the qualification as a regulated investment company of
the Fund under the Code;
E. Provide all Fund records supporting and necessary for the Fund to prepare
annual and semi-annual trial balances for financial statement preparation that
includes all adjustments for last day trades, last day cap stock, and any other
adjusting journal entries set forth by the Fund or the Fund's auditors;
F. Provide all Fund records supporting and necessary for the Fund to prepare
annual and semi-annual portfolio of investments schedules for financial
statement preparation with all relevant footnotes (non-income producing,
restricted securities, etc.) as well as a schedule of the futures;
G. Provide the following information for the periods as required by the Fund's
investment adviser: wash sale reports; dividends eligible for the corporate
received deduction; income earned from U.S. government and agency securities;
reports identifying the gain or loss on individual security transactions; and
reports to calculate the shareholder state tax information for our South
Carolina and Massachusetts shareholders;
H. Provide all Fund records supporting and necessary for the Fund to prepare the
Fund's Statement of Net Assets and Liabilities, the Statement of Operations and
the Statement of Changes in Net Assets; and
I. Provide SAS 70 upon request.
10
PAGE>
EXHIBIT 4(n)
AMENDED AND RESTATED
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 18th day of October, 2002 (the Effective Date),
and amended and restated as of the 1st day of May, 2003, between USAA INVESTMENT
MANAGEMENT COMPANY, a corporation organized under the laws of the State of
Delaware and having its principal place of business in San Antonio, Texas (IMCO)
and 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 Fund, Inc. a
corporation organized under the laws of the state of Maryland (the Company) and
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, under its Investment Advisory Agreement with the Company
(Investment Advisory Agreement), IMCO is authorized to appoint subadvisers for
series of the Company (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain Batterymarch to render investment advisory
services to such series (or portions thereof) of the Company as now or hereafter
may be identified in Schedule A to this Agreement, as such Schedule A may be
amended from time to time (each such series or portion thereof referred to
herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, Batterymarch is willing to provide such services to the Fund
Accounts and IMCO upon the terms and conditions and for the compensation set
forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. APPOINTMENT OF BATTERYMARCH. IMCO hereby appoints Batterymarch to act
as subadviser for each Fund Account in accordance with the terms and conditions
of this Agreement. Batterymarch will be an independent contractor and will have
no authority to act for or represent the Company or IMCO in any way or otherwise
be deemed an agent of the Company or IMCO except as expressly authorized in this
Agreement or another writing by the Company, IMCO and Batterymarch. Batterymarch
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.
2. DUTIES OF BATTERYMARCH.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of IMCO and
the Company's Board of Directors (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 Company in the same manner and with the same force and effect as
the Company might or could do with respect to such purchases, sales, or other
transactions, as well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases, sales, or other
transactions.
In the performance of its duties, Batterymarch will act in the best
interests of each Fund and will comply with (i) applicable laws and regulations,
including, but not limited to, the 1940 Act and the Investment Advisers Act of
1940, as amended (Advisers Act), and the rules under each, (ii) the terms of
this Agreement, (iii) the stated investment objective, policies and restrictions
of each Fund, as stated in the then-current Registration Statement of each Fund,
(iv) the Company's compliance procedures and other policies, procedures or
guidelines as the Board or IMCO reasonably may establish from time to time, (v)
the provisions of the Internal Revenue Code of 1986, as amended (Code),
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), as from time to time in effect, and (vi) the written instructions of
IMCO. Batterymarch shall establish compliance procedures reasonably calculated
to ensure compliance with the foregoing. IMCO shall be responsible for providing
Batterymarch with the Company's Articles of Incorporation, as amended and
supplemented, the Company's By-Laws and amendments thereto and current copies of
the materials specified in Subsections (a)(iii) and (iv) of this Section 2. IMCO
shall provide Batterymarch with prior written notice of any material change to
the Company's Registration Statement that would affect Batterymarch's management
of a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, Batterymarch will
select the brokers or dealers that will execute purchase and sale transactions
for the Fund Accounts, subject to the conditions herein. In the selection of
broker-dealers and the placement of orders for the purchase and sale of
portfolio investments for the Fund Accounts, Batterymarch shall use its best
efforts to obtain for the Fund Accounts the most favorable price and execution
available, except to the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described below. In using its
best efforts to obtain the most favorable price and execution available,
Batterymarch, bearing in mind each Fund's best interests at all times, shall
consider all factors it deems relevant, including by way of illustration, price,
the size of the transaction, the nature of the market for the security, the
amount of the commission and dealer's spread or xxxx-up, the timing of the
transaction taking into account market prices and trends, the reputation,
experience and financial stability of the broker-dealer involved, the general
execution and operational facilities of the broker-dealer and the quality of
service rendered by the broker-dealer in other transactions.
Batterymarch shall not be responsible for any acts or omissions by any such
broker or brokers, or any third party not owned by Batterymarch, provided that
Batterymarch is not negligent in the selection of such broker or brokers, or
third parties.
Subject to such policies as the Board may determine and to the extent
authorized by Section 28(e) of the Securities Exchange Act of 1934 (Exchange
Act), Batterymarch shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its
having caused a Fund Account to pay a broker-dealer that provides brokerage and
research services to Batterymarch an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker-dealer offering equally good execution capability in the portfolio
investment would have charged for effecting that transaction if Batterymarch
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular transaction or
Batterymarch's overall responsibilities with respect to the Fund and to other
clients of Batterymarch as to which Batterymarch exercises investment
discretion. The Board or IMCO may direct Batterymarch to effect transactions in
portfolio securities through broker-dealers in a manner that will help generate
resources to pay the cost of certain expenses that the Company is required to
pay or for which the Company is required to arrange payment.
On occasions when Batterymarch deems the purchase or sale of a security to
be in the best interest of a Fund as well as other clients of Batterymarch,
Batterymarch, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be purchased or sold to attempt to obtain a more
favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by Batterymarch in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to its other clients over time.
Batterymarch may buy securities for a Fund Account at the same time it is
selling such securities for another client account and may sell securities for a
Fund Account at the time it is buying such securities for another client
account. In such cases, subject to applicable legal and regulatory requirements,
and in compliance with such procedures of the Company as may be in effect from
time to time, Batterymarch may effectuate cross transactions between a Fund
Account and such other account if it deems this to be advantageous.
Batterymarch will advise the Funds' custodian or such depository or agents
as may be designated by the custodian and IMCO promptly of each purchase and
sale of a portfolio security, specifying the name of the issuer, the description
and amount or number of shares of the security purchased, the market price, the
commission and gross or net price, the trade date and settlement date, the
identity of the effecting broker or dealer and any other pertinent data that the
Funds' custodian may need to settle a security's purchase or sale. Batterymarch
shall not have possession or custody of any Fund's investments. The Company
shall be responsible for all custodial agreements and the payment of all
custodial charges and fees and, upon Batterymarch giving proper instructions to
the custodian, Batterymarch shall have no responsibility or liability for the
acts, omissions or other conduct of the custodian.
Notwithstanding the foregoing, Batterymarch agrees that IMCO shall have the
right by written notice to identify securities that may not be purchased on
behalf of any Fund and/or brokers and dealers through which portfolio
transaction on behalf of the Fund may not be effected, including, without
limitation, brokers or dealers affiliated with IMCO. Batterymarch shall refrain
from purchasing such securities for a Fund Account or directing any portfolio
transaction to any such broker or dealer on behalf of a Fund Account, unless and
until the written approval of IMCO to do so is obtained.
In addition, Batterymarch agrees that it shall not direct portfolio
transactions for the Fund Accounts through any broker or dealer that is an
"affiliated person" (as that term is defined in the 1940 Act or interpreted
under applicable rules and regulations of the Commission) of Batterymarch,
except as permitted under the 1940 Act. IMCO agrees that it will provide
Batterymarch with a list of brokers and dealers that are affiliated persons of
the Funds, or affiliated persons of such persons, and shall timely update that
list as the need arises. The Funds agree that any entity or person associated
with IMCO or Batterymarch that is a member of a national securities exchange is
authorized to effect any transaction on such exchange for the account of the
Funds that is permitted by Section 11(a) of the Exchange Act, and the Funds
consent to the retention of compensation for such transactions.
(C) EXPENSES. Batterymarch, at its expense, will furnish all necessary
facilities and personnel, including salaries, expenses and fees of any personnel
required for them to faithfully perform their duties under this Agreement and
administrative facilities, including bookkeeping, and all equipment and services
necessary for the efficient conduct of Batterymarch's duties under this
Agreement. However, Batterymarch shall not be obligated to pay any expenses of
IMCO, the Company or the Funds, including without limitation, interest and
taxes, brokerage commissions and other costs in connection with the purchase or
sale of securities or other investment instruments for the Funds and custodian
fees and expenses.
(D) VALUATION. Securities traded on a national securities exchange or the
NASDAQ market for which market quotes are readily available are valued on each
day the New York Stock Exchange is open for business. For those securities for
which market quotes are not readily available, Batterymarch, at its expense and
in accordance with procedures and methods established by the Board, which may be
amended from time to time, will provide assistance to IMCO in determining the
fair value of such securities, including providing market price information
relating to these assets of the Fund. Batterymarch also shall monitor for
"significant events" that occur after the closing of a market but before the
Funds calculate their net asset values and that may affect the valuation of any
Fund Account's portfolio securities and shall notify IMCO immediately of the
occurrence of any such events.
(E) REPORTS AND AVAILABILITY OF PERSONNEL. Batterymarch, at its expense,
shall render to the Board and IMCO such periodic and special reports as the
Board and IMCO may reasonably request with respect to matters relating to the
duties of Batterymarch set forth herein. Batterymarch, at its expense, will make
available to the Board and IMCO at reasonable times its portfolio managers and
other appropriate personnel in order to review investment policies of the Funds
and to consult with the Board and IMCO regarding the investment affairs of the
Funds, including economic, statistical and investment matters relevant to
Batterymarch's duties hereunder.
(F) COMPLIANCE MATTERS. Batterymarch, at its expense, will provide IMCO
with such compliance reports relating to its duties under this Agreement as may
be agreed upon by such parties from time to time. Batterymarch also shall
cooperate with and provide reasonable assistance to IMCO, the Company's
administrator, the Company's custodian and foreign custodians, the Company's
transfer agent and pricing agents and all other agents and representatives of
the Company and IMCO, keep all such persons fully informed as to such matters as
they may reasonably deem necessary to the performance of their obligations to
the Company and IMCO, provide prompt responses to reasonable requests made by
such persons and maintain any appropriate interfaces with each so as to promote
the efficient exchange of information.
(G) BOOKS AND RECORDS. Batterymarch will maintain for the Funds all books
and records required to be maintained by the Funds pursuant to the 1940 Act and
the rules and regulations promulgated thereunder insofar as such records relate
to the investment affairs of the Fund Accounts. Pursuant to Rule 31a-3 under the
1940 Act, Batterymarch agrees that: (i) all records it maintains for a Fund
Account are the property of the Fund; (ii) it will surrender promptly to a Fund
or IMCO any such records (or copies of such records) upon the Fund's or IMCO's
request; and (iii) it will preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records it maintains for any Fund Account.
Notwithstanding subsection (ii) above, Batterymarch may maintain copies of such
records to comply with its recordkeeping obligations.
(H) PROXIES. Batterymarch 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
Batterymarch's proxy voting guidelines, as amended from time to time, which
shall be provided to IMCO.
IMCO agrees to instruct the Custodian to forward to Batterymarch copies of
all proxies and shareholder communications relating to securities held in the
Fund Account. IMCO agrees that Batterymarch will not be liable for failing to
vote any proxies where it has not received such proxies or related shareholder
communications on a timely basis. 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.
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 Company and IMCO; (ii)
the execution, delivery and performance of each of this Agreement and the
Investment Advisory Agreement does not violate any obligation by which the
Company or IMCO or their respective property is bound, whether arising by
contract, operation of law or otherwise; (iii) each of this Agreement and the
Investment Advisory Agreement has been duly authorized by appropriate action of
the Company and IMCO and when executed and delivered by IMCO will be a legal,
valid and binding obligation of the Company and IMCO, enforceable against the
Company and IMCO in accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and to general equitable principles (regardless of whether enforcement
is sought in a proceeding in equity or law); (iv) IMCO is registered as an
investment adviser under the Advisers Act; (v) IMCO has adopted a written code
of ethics complying with the requirements of Rule 17j-1 under the 1940 Act and
that IMCO and certain of its employees, officers and directors are subject to
reporting requirements thereunder; (vi) IMCO is not prohibited by the 1940 Act,
the Advisers Act or other law, regulation or order from performing the services
contemplated by this Agreement; and (vii) IMCO will promptly notify Batterymarch
of the occurrence of any event that would disqualify IMCO from serving as
investment manager of an investment company pursuant to Section 9(a) of the 1940
Act or otherwise.
5. LIABILITY AND INDEMNIFICATION.
(A) BATTERYMARCH. Batterymarch shall be liable for any and all losses,
claims, damages, liabilities or litigation (including reasonable legal and other
expenses) to which the Company, a Fund, IMCO, any affiliated persons thereof
(within the meaning of the 0000 Xxx) and any controlling persons thereof (as
described in Section 15 of the Securities Act of 1933, as amended (the 1933
Act)) (collectively, IMCO Indemnities) may become subject under the 1933 Act,
the 1940 Act, the Advisers Act, or under any other statute, at common law or
otherwise arising out of (i) any negligence, willful misconduct, bad faith or
reckless disregard of Batterymarch in the performance of any of its duties or
obligations hereunder or (ii) any untrue statement of a material fact contained
in the Prospectus and SAI, proxy materials, reports, advertisements, sales
literature, or other materials pertaining to the Funds or the omission to state
therein a material fact known to Batterymarch which was required to be stated
therein or necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished to IMCO or
the Company by Batterymarch Indemnities (as defined below) for use therein.
Batterymarch shall indemnify and hold harmless the IMCO Indemnities for any and
all such losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses). IMCO 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
or omission was made in reliance upon information furnished to IMCO or the
Company. IMCO shall indemnify and hold harmless Batterymarch Indemnities for any
and all such losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses). Batterymarch 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 this Agreement with respect to a Fund,
Sections 5, 10(a), 10(e), 11(a), and 11(c) of this Agreement shall remain in
effect after any such termination.
7. AMENDMENT OF AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. No material amendment of this Agreement shall be
effective until approved in the manner required by the 1940 Act, any rules
thereunder or any exemptive or other relief granted by the SEC or its staff
(Applicable Law).
8. APPROVAL, AMENDMENT, OR TERMINATION BY INDIVIDUAL FUND. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 0000 Xxx) of any Fund shall be
effective to continue, amend or terminate this Agreement with respect to any
such Fund notwithstanding (i) that such action has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund
affected thereby, and/or (ii) that such action has not been approved by the vote
of a majority of the outstanding voting securities of the Company, unless such
action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of Batterymarch to IMCO in connection
with the Funds hereunder are not to be deemed exclusive, and Batterymarch shall
be free to render investment advisory services to others so long as its services
hereunder are not impaired thereby. It is understood that the persons employed
by Batterymarch to assist in the performance of its duties hereunder will not
devote their full time to such services and nothing contained herein shall be
deemed to limit or restrict in any manner whatsoever the right of Batterymarch
to engage in or devote time and attention to other businesses or to render
services of whatever kind or nature. It is understood that IMCO may appoint at
any time in accordance with Applicable Law one or more subadvisers, in addition
to Batterymarch, or IMCO itself, to perform investment advisory services to any
portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. Batterymarch shall, upon reasonable notice,
afford IMCO at all reasonable times access to Batterymarch's officers,
employees, agents and offices and to all its relevant books and records and
shall furnish IMCO with all relevant financial and other data and information as
requested; provided, however, that nothing contained herein shall obligate
Batterymarch to provide IMCO with access to the books and records of
Batterymarch relating to any other accounts other than the Funds.
(B) CONFIDENTIALITY. Batterymarch, and its officers, employees and
authorized representatives, shall treat confidentially and as proprietary
information of the Company all records and information relative to the Company
and prior, present or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably withheld and may not be
withheld where Batterymarch may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Company.
(C) PRIVACY POLICY. Batterymarch acknowledges that nonpublic customer
information (as defined in Regulation S-P, including any amendments thereto) of
customers of the Funds received from IMCO is subject to the limitations on
redisclosure and reuse set forth in Section 248.11 of such Regulation, and
agrees such information (i) shall not be disclosed to any third party for any
purpose without the written consent of IMCO unless permitted by exceptions set
forth in Sections 248.14 or 248.15 of such Regulation and (ii) shall be
safeguarded pursuant to procedures adopted under Section 248.30 of such
Regulation if so required.
(D) PUBLIC ANNOUNCEMENTS. No party shall issue any press release or
otherwise make any public statements with respect to the matters covered by this
Agreement without the prior written consent of the other parties hereto, which
consent shall not be unreasonably withheld; provided, however, that consent
shall not be required if, in the opinion of counsel, such disclosure is required
by law; provided further, however, that the party making such disclosure shall
provide the other parties hereto with as much prior written notice of such
disclosure as is practical under the circumstances.
(E) NOTIFICATIONS. Batterymarch agrees that it will promptly notify IMCO in
the event that Batterymarch or any of its affiliates is or expects to become the
subject of an administrative proceeding or enforcement action by the Commission
or other regulatory body with applicable jurisdiction. Notwithstanding the
above, Batterymarch is not obligated to notify the Company or IMCO of any
routine regulatory inspection of Batterymarch except to the extent a Fund
Account is involved.
(F) INSURANCE. Batterymarch agrees to maintain errors and omissions or
professional liability insurance coverage in an amount that is reasonable in
light of the nature and scope of Batterymarch's business activities.
(G) SHAREHOLDER MEETING EXPENSES. In the event that the Company shall be
required to call a meeting of shareholders solely due to actions involving
Batterymarch, including, without limitation, a change of control of
Batterymarch, Batterymarch shall bear all reasonable expenses associated with
such shareholder meeting.
11. MISCELLANEOUS.
(A) NOTICES. All notices or other communications given under this Agreement
shall be made by guaranteed overnight delivery, telecopy or certified mail;
notice is effective when received. Notice shall be given to the parties at the
following addresses:
IMCO: USAA Investment Management Company
0000 Xxxxxxxxxxxxxx Xxxx, X-X0-X
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Securities Counsel & Compliance Dept.
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.
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/ Xxxx X. Xxxxxx
---------------------------
Name: Xxxx X. Xxxxxx
Title: Authorized Signatory
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
SCHEDULE A
USAA CAPITAL GROWTH FUND
SCHEDULE B
FEES
FUND ACCOUNT RATE PER ANNUM OF THE AVERAGE DAILY NET
------------ ASSETS OF THE FUND ACCOUNT
---------------------------------------
USAA Capital Growth Fund 0.50%
EXHIBIT 4(o)
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 12th day of July, 2003 (the Effective Date),
between USAA INVESTMENT MANAGEMENT COMPANY, a corporation organized under the
laws of the State of Delaware and having its principal place of business in San
Antonio, Texas (IMCO) and 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 Fund,
Inc., a corporation organized under the laws of the state of Maryland (the
Company) and registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, under its Investment Advisory Agreement with the Company
(Investment Advisory Agreement), IMCO is authorized to appoint subadvisers for
series of the Company (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain GMO to render investment advisory
services to such series (or portions thereof) of the Company as now or hereafter
may be identified in Schedule A to this Agreement, as such Schedule A may be
amended from time to time (each such series or portion thereof referred to
herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, 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 Company or IMCO in any way or otherwise be deemed an
agent of the Company or IMCO except as expressly authorized in this Agreement or
another writing by the Company, IMCO and 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 Company'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 Company in the same manner and with the same force and effect as the
Company might or could do with respect to such purchases, sales, or other
transactions, as well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases, sales, or other
transactions.
In the performance of its duties, 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 Company's compliance procedures and other
policies, procedures or guidelines as the Board or IMCO reasonably may establish
from time to time, (v) the provisions of the Internal Revenue Code of 1986, as
amended (Code), applicable to "regulated investment companies" (as defined in
Section 851 of the Code), including Section 817(h), as from time to time in
effect, and (vi) the written instructions of IMCO. 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 Company's Articles of Incorporation, as amended and
supplemented, the Company's Bylaws and amendments thereto and current copies of
the materials specified in Subsections (a)(iii) and (iv) of this Section 2. IMCO
shall provide GMO with prior written notice of any material change to the
Company's Registration Statement under the Securities Act of 1933 and the 1940
Act that would affect 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.
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 Company 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 Company 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 Company or
the Funds, including without limitation, interest and taxes, brokerage
commissions and other costs in connection with the purchase or sale of
securities or other investment instruments for the Funds and custodian fees and
expenses.
(D) VALUATION. Securities traded on a national securities exchange or
the NASDAQ market for which market quotes are readily available 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.
(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 Company's administrator, the
Company's custodian and foreign custodians, the Company's transfer agent and
pricing agents and all other agents and representatives of the Company and IMCO
(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 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 Company and IMCO; (ii) the execution, delivery and
performance of each of this Agreement and the Investment Advisory Agreement does
not violate any obligation by which the Company or IMCO or their respective
property is bound, whether arising by contract, operation of law or otherwise;
(iii) each of this Agreement and the Investment Advisory Agreement has been duly
authorized by appropriate action of the Company and IMCO and when executed and
delivered by IMCO will be a legal, valid and binding obligation of the Company
and IMCO, enforceable against the Company and IMCO in accordance with its terms,
subject, as to enforcement, to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and to general equitable principles
(regardless of whether enforcement is sought in a proceeding in equity or law);
(iv) IMCO is registered as an investment adviser under the Advisers Act; (v)
IMCO has adopted a written code of ethics complying with the requirements of
Rule 17j-1 under the 1940 Act and instituted implementation procedures and that
IMCO and certain of its employees, officers and directors are subject to
reporting requirements thereunder; (vi) IMCO is not prohibited by the 1940 Act,
the Advisers Act or other law, regulation or order from performing the services
contemplated by this Agreement; and (vii) IMCO will promptly notify 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 Company, a Fund,
IMCO, any affiliated persons thereof (within the meaning of the 0000 Xxx) and
any controlling persons thereof (as described in Section 15 of the Securities
Act of 1933, as amended (the 1933 Act))(collectively, IMCO Indemnities) for any
and all losses, claims, damages, liabilities or litigation (including reasonable
legal and other expenses) 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 Company 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 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 Company.
6. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall become
effective with respect to a Fund upon its execution; provided, however, that
this Agreement shall not become effective with respect to a Fund unless it has
first been approved in the manner required by the 1940 Act and rules thereunder
or in accordance with exemptive or other relief granted by the SEC or its staff.
This Agreement shall remain in full force and effect continuously thereafter,
except as follows:
(a) By vote of a majority of (i) the Board members who are not
"interested persons" (as defined in the 0000 Xxx) of the Company, IMCO, or 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 the outstanding voting securities of any other Fund
affected thereby, and/or (ii) that such action has not been approved by the vote
of a majority of the outstanding voting securities of the Company, unless such
action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of 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 Company all records and information relative to the Company and prior,
present or potential shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Company, which approval shall not be unreasonably withheld and may not be
withheld where 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 Company.
IMCO, the Company, 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 Company, 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 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 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
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 Company 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
Company shall be required to call a meeting of shareholders, send an information
statement to shareholders, or send a prospectus supplement to shareholders
solely due to actions involving 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.
(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 Xxxxxxxx
-----------------------------
Name: Xxxxx Xxxxxxxx
Title: Authorized Signatory
Attest: GRANTHAM, MAYO, VAN OTTERLOO & CO. LLC
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxx
------------------------------ -----------------------------
Name: Xxxxx X. Xxxxx Name: Xxxxxxx X. Xxxxx
Title: Legal Counsel Title: Partner, General Counsel
SCHEDULE A
INCOME STOCK FUND
SCHEDULE B
FEES
RATE PER ANNUM OF THE AVERAGE DAILY NET
FUND ACCOUNT ASSETS OF THE FUND ACCOUNT
------------ ---------------------------------------
Income Stock Fund 0.18%
EXHIBIT 4(p)
AMENDED AND RESTATED
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 18th day of October, 2002 (the Effective
Date), and amended and restated as of the 1st day of May, 2003, between USAA
INVESTMENT MANAGEMENT COMPANY, a corporation organized under the laws of the
State of Delaware and having its principal place of business in San Antonio,
Texas (IMCO) and DRESDNER RCM GLOBAL INVESTORS LLC, a limited liability company
organized under the laws of the State of Delaware and having its principal place
of business in San Francisco, California (Dresdner).
WHEREAS, IMCO serves as the investment adviser to USAA Mutual Fund,
Inc., a corporation organized under the laws of the state of Maryland (the
Company) and registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, under its Investment Advisory Agreement with the Company
(Investment Advisory Agreement), IMCO is authorized to appoint subadvisers for
series of the Company (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain Dresdner to render investment advisory
services to such series (or portions thereof) of the Company as now or hereafter
may be identified in Schedule A to this Agreement, as such Schedule A may be
amended from time to time (each such series or portion thereof referred to
herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, Dresdner is willing to provide such services to the Fund
Accounts and IMCO upon the terms and conditions and for the compensation set
forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. APPOINTMENT OF DRESDNER. IMCO hereby appoints Dresdner to act as an
investment adviser for each Fund Account in accordance with the terms and
conditions of this Agreement. Dresdner will be an independent contractor and
will have no authority to act for or represent the Company or IMCO in any way or
otherwise be deemed an agent of the Company or IMCO except as expressly
authorized in this Agreement or another writing by the Company, IMCO and
Dresdner. Dresdner accepts such appointment and agrees to render the services
herein set forth for the compensation herein provided.
2. DUTIES OF DRESDNER.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of
IMCO and the Company's Board of Directors (the Board), Dresdner, at its own
expense, shall have full discretion to manage, supervise and direct the
investment and reinvestment of Fund Accounts allocated to it by IMCO from time
to time. It is understood that a Fund Account may consist of all, a portion of,
or none of the assets of the Fund, and that IMCO has the right to allocate and
reallocate such assets to a Fund Account at any time. Dresdner shall perform its
duties described herein in a manner consistent with the investment objective,
policies, and restrictions set forth in the then current Prospectus and
Statement of Additional Information (SAI) for each Fund. Should Dresdner
anticipate materially modifying its investment process, it must provide written
notice in advance to IMCO, and any affected Prospectus and SAI should be amended
accordingly.
For each Fund set forth on Schedule A to this Agreement, Dresdner
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, Dresdner shall determine what investments shall be purchased, held,
sold or exchanged by each Fund Account and what portion, if any, of the assets
of each Fund Account shall be held in cash or cash equivalents, and purchase or
sell portfolio securities for each Fund Account; except that, to the extent
Dresdner wishes to hold cash or cash equivalents in excess of 10% of a Fund
Account's assets, Dresdner must request in writing and receive advance
permission from IMCO.
In accordance with Subsection (b) of this Section 2, Dresdner shall
arrange for the execution of all orders for the purchase and sale of securities
and other investments for each Fund Account and will exercise full discretion
and act for the Company in the same manner and with the same force and effect as
the Company might or could do with respect to such purchases, sales, or other
transactions, as well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases, sales, or other
transactions.
In the performance of its duties, Dresdner will act in the best
interests of each Fund and will comply with (i) applicable laws and regulations,
including, but not limited to, the 1940 Act and the Investment Advisers Act of
1940, as amended (Advisers Act), and the rules under each, (ii) the terms of
this Agreement, (iii) the stated investment objective, policies and restrictions
of each Fund, as stated in the then-current Registration Statement of each Fund,
(iv) the Company's compliance procedures and other policies, procedures or
guidelines as the Board or IMCO reasonably may establish from time to time, (v)
the provisions of the Internal Revenue Code of 1986, as amended (Code),
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), as from time to time in effect, and (vi) the written instructions of
IMCO. Dresdner shall establish compliance procedures reasonably calculated to
ensure compliance with the foregoing. IMCO shall be responsible for providing
Dresdner with the Company's Articles of Incorporation, as amended and
supplemented, the Company's By-Laws and amendments thereto and current copies of
the materials specified in Subsections (a)(iii) and (iv) of this Section 2. IMCO
shall provide Dresdner with prior written notice of any material change to the
Company's Registration Statement that would affect Dresdner's management of a
Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, Dresdner will select
the brokers or dealers that will execute purchase and sale transactions for the
Fund Accounts, subject to the conditions herein. In the selection of
broker-dealers and the placement of orders for the purchase and sale of
portfolio investments for the Fund Accounts, Dresdner shall use its best efforts
to obtain for the Fund Accounts the most favorable price and execution
available, except to the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described below. In using its
best efforts to obtain the most favorable price and execution available,
Dresdner, bearing in mind each Fund's best interests at all times, shall
consider all factors it deems relevant, including by way of illustration, price,
the size of the transaction, the nature of the market for the security, the
amount of the commission and dealer's spread or xxxx-up, the timing of the
transaction taking into account market prices and trends, the reputation,
experience and financial stability of the broker-dealer involved, the general
execution and operational facilities of the broker-dealer and the quality of
service rendered by the broker-dealer in other transactions.
Subject to such policies as the Board may determine and to the extent
authorized by Section 28(e) of the Securities Exchange Act of 1934 (Exchange
Act), Dresdner shall not be deemed to have acted unlawfully or to have breached
any duty created by this Agreement or otherwise solely by reason of its having
caused a Fund Account to pay a broker-dealer that provides brokerage and
research services to Dresdner an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another
broker-dealer offering equally good execution capability in the portfolio
investment would have charged for effecting that transaction if Dresdner
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular transaction or
Dresdner's overall responsibilities with respect to the Fund and to other
clients of Dresdner as to which Dresdner exercises investment discretion. The
Board or IMCO may direct Dresdner to effect up to 25% of transactions in
portfolio securities through broker-dealers in a manner that will help generate
resources to pay the cost of certain expenses that the Company is required to
pay or for which the Company is required to arrange payment.
On occasions when Dresdner deems the purchase or sale of a security to
be in the best interest of a Fund as well as other clients of Dresdner,
Dresdner, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be purchased or sold to attempt to obtain a more
favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by Dresdner in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund and to its other clients over time.
Dresdner may buy securities for a Fund Account at the same time it is
selling such securities for another client account and may sell securities for a
Fund Account at the time it is buying such securities for another client
account. In such cases, subject to applicable legal and regulatory requirements,
and in compliance with such procedures of the Company as may be in effect from
time to time, Dresdner may effectuate cross transactions between a Fund Account
and such other account if it deems this to be advantageous.
Dresdner will advise the Funds' custodian or such depository or agents
as may be designated by the custodian and IMCO promptly of each purchase and
sale of a portfolio security, specifying the name of the issuer, the description
and amount or number of shares of the security purchased, the market price, the
commission and gross or net price, the trade date and settlement date, the
identity of the effecting broker or dealer and any other pertinent data that the
Funds' custodian may need to settle a security's purchase or sale. Dresdner
shall not have possession or custody of any Fund's investments. The Company
shall be responsible for all custodial agreements and the payment of all
custodial charges and fees and, upon Dresdner giving proper instructions to the
custodian, Dresdner shall have no responsibility or liability for the acts,
omissions or other conduct of the custodian.
Notwithstanding the foregoing, Dresdner agrees that IMCO shall have
the right by written notice to identify securities that may not be purchased on
behalf of any Fund and/or brokers and dealers through which portfolio
transaction on behalf of the Fund may not be effected, including, without
limitation, brokers or dealers affiliated with IMCO. Dresdner shall refrain from
purchasing such securities for a Fund Account or directing any portfolio
transaction to any such broker or dealer on behalf of a Fund Account, unless and
until the written approval of IMCO to do so is obtained. In addition, Dresdner
agrees that it shall not direct portfolio transactions for the Fund Accounts
through any broker or dealer that is an "affiliated person" (as that term is
defined in the 1940 Act or interpreted under applicable rules and regulations of
the Commission) of Dresdner, except as permitted under the 1940 Act. IMCO agrees
that it will provide Dresdner with a list of brokers and dealers that are
affiliated persons of the Funds, or affiliated persons of such persons, and
shall timely update that list as the need arises. The Funds agree that any
entity or person associated with IMCO or Dresdner that is a member of a national
securities exchange is authorized to effect any transaction on such exchange for
the account of the Funds that is permitted by Section 11(a) of the Exchange Act,
and the Funds consent to the retention of compensation for such transactions.
(C) EXPENSES. Dresdner, at its expense, will furnish all necessary
facilities and personnel, including salaries, expenses and fees of any personnel
required for them to faithfully perform their duties under this Agreement and
administrative facilities, including bookkeeping, and all equipment and services
necessary for the efficient conduct of Dresdner's duties under this Agreement.
However, Dresdner shall not be obligated to pay any expenses of IMCO, the
Company or the Funds, including without limitation, interest and taxes,
brokerage commissions and other costs in connection with the purchase or sale of
securities or other investment instruments for the Funds and custodian fees and
expenses.
(D) VALUATION. Securities traded on a national securities exchange or
the NASDAQ market for which market quotes are readily available are valued on
each day the New York Stock Exchange is open for business. For those securities
for which market quotes are not readily available, Dresdner, at its expense and
in accordance with procedures and methods established by the Board, which may be
amended from time to time, will provide assistance to IMCO in determining the
fair value of such securities, including providing market price information
relating to these assets of the Fund. Dresdner also shall monitor for
"significant events" that occur after the closing of a market but before the
Funds calculate their net asset values and that may affect the valuation of any
Fund Account's portfolio securities and shall notify IMCO immediately of the
occurrence of any such events.
(E) REPORTS AND AVAILABILITY OF PERSONNEL. Dresdner, at its expense,
shall render to the Board and IMCO such periodic and special reports as the
Board and IMCO may reasonably request with respect to matters relating to the
duties of Dresdner set forth herein. Dresdner, at its expense, will make
available to the Board and IMCO at reasonable times its portfolio managers and
other appropriate personnel in order to review investment policies of the Funds
and to consult with the Board and IMCO regarding the investment affairs of the
Funds, including economic, statistical and investment matters relevant to
Dresdner's duties hereunder.
(F) COMPLIANCE MATTERS. Dresdner, at its expense, will provide IMCO
with such compliance reports relating to its duties under this Agreement as may
be agreed upon by such parties from time to time. Dresdner also shall cooperate
with and provide reasonable assistance to IMCO, the Company's administrator, the
Company's custodian and foreign custodians, the Company's transfer agent and
pricing agents and all other agents and representatives of the Company and IMCO,
keep all such persons fully informed as to such matters as they may reasonably
deem necessary to the performance of their obligations to the Company and IMCO,
provide prompt responses to reasonable requests made by such persons and
maintain any appropriate interfaces with each so as to promote the efficient
exchange of information.
(G) BOOKS AND RECORDS. Dresdner will maintain for the Funds all books
and records required to be maintained by the Funds pursuant to the 1940 Act and
the rules and regulations promulgated thereunder insofar as such records relate
to the investment affairs of the Fund Accounts. Pursuant to Rule 31a-3 under the
1940 Act, Dresdner agrees that: (i) all records it maintains for a Fund Account
are the property of the Fund; (ii) it will surrender promptly to a Fund or IMCO
any such records (or copies of such records) upon the Fund's or IMCO's request;
and (iii) it will preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records it maintains for any Fund Account. Notwithstanding
subsection (ii) above, Dresdner may maintain copies of such records to comply
with its recordkeeping obligations.
(H) PROXIES. Dresdner will, unless and until otherwise directed by
IMCO or the Board, vote proxies with respect to a Fund Account's securities and
exercise rights in corporate actions or otherwise in accordance with Dresdner's
proxy voting guidelines, as amended from time to time, which shall be provided
to IMCO.
3. ADVISORY FEE. IMCO shall pay to Dresdner as compensation for Dresdner's
services rendered pursuant to this Agreement a fee based on the average daily
net assets of each Fund Account at the annual rates set forth in Schedule B,
which schedule can be modified from time to time, subject to any appropriate
approvals required by the 1940 Act. Such fees shall be calculated daily and
payable monthly in arrears within 15 business days after the end of such month.
IMCO (and not the Funds) shall pay such fees. If Dresdner shall serve for less
than the whole of a month, the compensation as specified shall be prorated based
upon the number of calendar days during which this Agreement is in effect during
such month, and the fee shall be computed based upon the average daily net
assets of a Fund Account for such days.
4. REPRESENTATIONS AND WARRANTIES.
(A) DRESDNER. Dresdner represents and warrants to IMCO that (i) the
retention of Dresdner by IMCO as contemplated by this Agreement is authorized by
Dresdner's governing documents; (ii) the execution, delivery and performance of
this Agreement does not violate any obligation by which Dresdner or its property
is bound, whether arising by contract, operation of law or otherwise; (iii) this
Agreement has been duly authorized by appropriate action of Dresdner and when
executed and delivered by Dresdner will be a legal, valid and binding obligation
of Dresdner, enforceable against Dresdner in accordance with its terms, subject,
as to enforcement, to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to general equitable principles
(regardless of whether enforcement is sought in a proceeding in equity or law);
(iv) Dresdner is registered as an investment adviser under the Advisers Act; (v)
Dresdner has adopted a written code of ethics complying with the requirements of
Rule 17j-1 under the 1940 Act and that Dresdner and certain of its employees,
officers, partners and directors are subject to reporting requirements
thereunder and, accordingly, agrees that it shall, on a timely basis, furnish a
copy of such code of ethics to IMCO, and shall cause its employees, officers,
partners and directors to furnish to IMCO all reports and information required
to be provided under such code of ethics with respect to such persons; (vi)
Dresdner is not prohibited by the 1940 Act, the Advisers Act or other law,
regulation or order from performing the services contemplated by this Agreement;
(vii) Dresdner will promptly notify IMCO of the occurrence of any event that
would disqualify Dresdner from serving as investment manager of an investment
company pursuant to Section 9(a) of the 1940 Act or otherwise; (viii) Dresdner
has provided IMCO with a copy of its current Form ADV-Part II, and promptly will
furnish a copy of all amendments to IMCO at least annually; (ix) Dresdner will
notify IMCO of any "assignment" (as defined in the 0000 Xxx) of this Agreement
or change of control of Dresdner, as applicable, and any changes in the key
personnel who are either the portfolio manager(s) of any Fund Account or senior
management of Dresdner, in each case prior to or promptly after, such change;
and (x) Dresdner has adequate disaster recovery and interruption prevention
measures to ensure business resumption in accordance with applicable law and
within industry standards.
(B) IMCO. IMCO represents and warrants to Dresdner that (i) the
retention of Dresdner by IMCO as contemplated by this Agreement is authorized by
the respective governing documents of the Company and IMCO; (ii) the execution,
delivery and performance of each of this Agreement and the Investment Advisory
Agreement does not violate any obligation by which the Company or IMCO or their
respective property is bound, whether arising by contract, operation of law or
otherwise; (iii) each of this Agreement and the Investment Advisory Agreement
has been duly authorized by appropriate action of the Company and IMCO and when
executed and delivered by IMCO will be a legal, valid and binding obligation of
the Company and IMCO, enforceable against the Company and IMCO in accordance
with its terms, subject, as to enforcement, to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and to general equitable
principles (regardless of whether enforcement is sought in a proceeding in
equity or law); (iv) IMCO is registered as an investment adviser under the
Advisers Act; (v) IMCO has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and that IMCO and certain of its
employees, officers and directors are subject to reporting requirements
thereunder; (vi) IMCO is not prohibited by the 1940 Act, the Advisers Act or
other law, regulation or order from performing the services contemplated by this
Agreement; and (vii) IMCO will promptly notify Dresdner of the occurrence of any
event that would disqualify IMCO from serving as investment manager of an
investment company pursuant to Section 9(a) of the 1940 Act or otherwise.
5. LIABILITY AND INDEMNIFICATION.
(A) DRESDNER. Dresdner shall be liable for any and all losses, claims,
damages, liabilities or litigation (including reasonable legal and other
expenses) to which the Company, a Fund, IMCO, any affiliated persons thereof
(within the meaning of the 0000 Xxx) and any controlling persons thereof (as
described in Section 15 of the Securities Act of 1933, as amended (the 1933
Act)) (collectively, IMCO Indemnities) may become subject under the 1933 Act,
the 1940 Act, the Advisers Act, or under any other statute, at common law or
otherwise arising out of (i) any negligence, willful misconduct, bad faith or
reckless disregard of Dresdner in the performance of any of its duties or
obligations hereunder or (ii) any untrue statement of a material fact contained
in the Prospectus and SAI, proxy materials, reports, advertisements, sales
literature, or other materials pertaining to the Funds or the omission to state
therein a material fact known to Dresdner which was required to be stated
therein or necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished to IMCO or
the Company by Dresdner Indemnities (as defined below) for use therein. Dresdner
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 Dresdner, any affiliated persons thereof (within the meaning
of the 0000 Xxx) and any controlling persons thereof (as described in Section 15
of the 1933 Act) (collectively, Dresdner Indemnities) may become subject under
the 1933 Act, the 1940 Act, the Advisers Act, or under any other statute, at
common law or otherwise arising out of (i) any negligence, willful misconduct,
bad faith or reckless disregard by IMCO in the performance of any of its duties
or obligations hereunder or (ii) any untrue statement of a material fact
contained in the Prospectus and SAI, proxy materials, reports, advertisements,
sales literature, or other materials pertaining to the Funds or the omission to
state therein a material fact known to IMCO which was required to be stated
therein or necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon information furnished to IMCO or
the Company. IMCO shall indemnify and hold harmless Dresdner Indemnities for any
and all such losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses).
6. DURATION AND TERMINATION OF THIS AGREEMENT. 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
Dresdner (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 Dresdner.
(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, Dresdner 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 Dresdner.
Dresdner 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 Dresdner by IMCO shall be
without prejudice to the obligation of Dresdner to complete transactions already
initiated or acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to
Dresdner under this Agreement automatically shall revert to IMCO.
Notwithstanding any termination of this Agreement with respect to a Fund,
Sections 5, 10(a), 10(e), 11(a), and 11(c) of this Agreement shall remain in
effect after any such termination.
7. AMENDMENT OF AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. No material amendment of this Agreement shall be
effective until approved in the manner required by the 1940 Act, any rules
thereunder or any exemptive or other relief granted by the SEC or its staff
(Applicable Law).
8. APPROVAL, AMENDMENT, OR TERMINATION BY INDIVIDUAL FUND. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 0000 Xxx) of any Fund shall be
effective to continue, amend or terminate this Agreement with respect to any
such Fund notwithstanding (i) that such action has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund
affected thereby, and/or (ii) that such action has not been approved by the vote
of a majority of the outstanding voting securities of the Company, unless such
action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of Dresdner to IMCO in connection
with the Funds hereunder are not to be deemed exclusive, and Dresdner shall be
free to render investment advisory services to others so long as its services
hereunder are not impaired thereby. It is understood that the persons employed
by Dresdner to assist in the performance of its duties hereunder will not devote
their full time to such services and nothing contained herein shall be deemed to
limit or restrict in any manner whatsoever the right of Dresdner to engage in or
devote time and attention to other businesses or to render services of whatever
kind or nature. It is understood that IMCO may appoint at any time in accordance
with Applicable Law one or more subadvisers, in addition to Dresdner, or IMCO
itself, to perform investment advisory services to any portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. Dresdner shall, upon reasonable notice,
afford IMCO at all reasonable times access to Dresdner's officers, employees,
agents and offices and to all its relevant books and records and shall furnish
IMCO with all relevant financial and other data and information as requested;
provided, however, that nothing contained herein shall obligate Dresdner to
provide IMCO with access to the books and records of Dresdner relating to any
other accounts other than the Funds.
(B) CONFIDENTIALITY. Dresdner, and its officers, employees and
authorized representatives, shall treat confidentially and as proprietary
information of the Company all records and information relative to the Company
and prior, present or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably withheld and may not be
withheld where Dresdner may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company. IMCO agrees to
maintain in strict confidence and for use only with respect to the Fund all
investment advice given by Dresdner.
(C) PRIVACY POLICY. Dresdner acknowledges that nonpublic customer
information (as defined in Regulation S-P, including any amendments thereto) of
customers of the Funds received from IMCO is subject to the limitations on
redisclosure and reuse set forth in Section 248.11 of such Regulation, and
agrees such information (i) shall not be disclosed to any third party for any
purpose without the written consent of IMCO unless permitted by exceptions set
forth in Sections 248.14 or 248.15 of such Regulation and (ii) shall be
safeguarded pursuant to procedures adopted under Section 248.30 of such
Regulation if so required.
(D) PUBLIC ANNOUNCEMENTS. No party shall issue any press release or
otherwise make any public statements with respect to the matters covered by this
Agreement without the prior written consent of the other parties hereto, which
consent shall not be unreasonably withheld; provided, however, that consent
shall not be required if, in the opinion of counsel, such disclosure is required
by law; provided further, however, that the party making such disclosure shall
provide the other parties hereto with as much prior written notice of such
disclosure as is practical under the circumstances.
(E) NOTIFICATIONS. Dresdner agrees that it will promptly notify IMCO
in the event that Dresdner or any of its affiliates is or expects to become the
subject of an administrative proceeding or enforcement action by the Commission
or other regulatory body with applicable jurisdiction.
(F) INSURANCE. Dresdner agrees to maintain errors and omissions or
professional liability insurance coverage in an amount that is reasonable in
light of the nature and scope of Dresdner's business activities.
(G) SHAREHOLDER MEETING EXPENSES. In the event that the Company shall
be required to call a meeting of shareholders solely due to actions involving
Dresdner, including, without limitation, a change of control of Dresdner,
Dresdner shall bear all reasonable expenses associated with such shareholder
meeting.
11. MISCELLANEOUS.
(A) NOTICES. All notices or other communications given under this
Agreement shall be made by guaranteed overnight delivery, telecopy or certified
mail; notice is effective when received. Notice shall be given to the parties at
the following addresses:
IMCO: USAA Investment Management Company
0000 Xxxxxxxxxxxxxx Xxxx, X-X0-X
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Securities Counsel & Compliance Dept.
Dresdner: Dresdner RCM Global Investors LLC
Xxxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Legal Services 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.
IN WITNESS WHEREOF, IMCO and Dresdner have caused this Agreement to be
executed as of the date first set forth above.
Attest: USAA INVESTMENT MANAGEMENT
COMPANY
By: /s/ Xxxx X. Xxxxxx By: /s/ Xxxxxxxxxxx X. Xxxxx
------------------------- --------------------------
Name: Xxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxx
Title: Secretary Title: President
By: /s/ Xxxx X. Xxxxxx
--------------------------
Name: Xxxx X. Xxxxxx
Title: Authorized Signatory
Attest: DRESDNER RCM GLOBAL INVESTORS LLC
By: /s/ Xxxxxx X. Xxxx By: /s/ Xxx X. Xxxxxxxxxx
-------------------------- -------------------------
Name: Xxxxxx X. Xxxx Name: Xxx X. Xxxxxxxxxx
Title: Assistant Director, Legal Title: Co-Deputy Director,
Services Client Relations
SCHEDULE A
USAA GROWTH FUND
SCHEDULE B
FEES
RATE PER ANNUM OF THE AVERAGE DAILY NET
ASSETS OF THE FUND ACCOUNT
FUND ACCOUNT ---------------------------------------
------------
USAA Growth Fund 0.20%
EXHIBIT 4(q)
AMENDED AND RESTATED
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 18th day of October, 2002 (the Effective
Date), and amended and restated as of the 1st day of May, 2003, between USAA
INVESTMENT MANAGEMENT COMPANY, a corporation organized under the laws of the
State of Delaware and having its principal place of business in San Antonio,
Texas (IMCO) and EAGLE ASSET MANAGEMENT, INC., a corporation organized under the
laws of the State of Florida and having its principal place of business in St.
Petersburg, Florida (Eagle).
WHEREAS, IMCO serves as the investment adviser to USAA Mutual Fund,
Inc., a corporation organized under the laws of the state of Maryland (the
Company) and registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, under its Investment Advisory Agreement with the Company
(Investment Advisory Agreement), IMCO is authorized to appoint subadvisers for
series of the Company (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain Eagle to render investment advisory
services to such series (or portions thereof) of the Company as now or hereafter
may be identified in Schedule A to this Agreement, as such Schedule A may be
amended from time to time (each such series or portion thereof referred to
herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, Eagle 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 EAGLE. IMCO hereby appoints Eagle to act as an
investment adviser for each Fund Account in accordance with the terms and
conditions of this Agreement. Eagle will be an independent contractor and will
have no authority to act for or represent the Company or IMCO in any way or
otherwise be deemed an agent of the Company or IMCO except as expressly
authorized in this Agreement or another writing by the Company, IMCO and Eagle.
Eagle accepts such appointment and agrees to render the services herein set
forth for the compensation herein provided.
2. DUTIES OF EAGLE.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of
IMCO and the Company's Board of Directors (the Board), Eagle, 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. Eagle shall perform its
duties described herein in a manner consistent with the investment objective,
policies, restrictions set forth in the then current Prospectus and Statement of
Additional Information (SAI) for each Fund. Should Eagle 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, Eagle 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, Eagle 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
Eagle wishes to hold cash or cash equivalents in excess of 10% of a Fund
Account's assets for longer than two consecutive business days, Eagle must
request in writing and receive advance permission from IMCO.
In accordance with Subsection (b) of this Section 2, Eagle shall
arrange for the execution of all orders for the purchase and sale of securities
and other investments for each Fund Account and will exercise full discretion
and act for the Company in the same manner and with the same force and effect as
the Company might or could do with respect to such purchases, sales, or other
transactions, as well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases, sales, or other
transactions.
In the performance of its duties, Eagle will act in the best interests
of each Fund and will comply with (i) applicable laws and regulations,
including, but not limited to, the 1940 Act and the Investment Advisers Act of
1940, as amended (Advisers Act), and the rules under each, (ii) the terms of
this Agreement, (iii) the stated investment objective, policies and restrictions
of each Fund, as stated in the then-current Registration Statement of each Fund,
(iv) the Company's compliance procedures and other policies, procedures or
guidelines as the Board or IMCO reasonably may establish from time to time, (v)
the provisions of the Internal Revenue Code of 1986, as amended (Code),
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), as from time to time in effect, and (vi) the written instructions of
IMCO. Eagle shall establish compliance procedures reasonably calculated to
ensure compliance with the foregoing. IMCO shall be responsible for providing
Eagle with the Company's Articles of Incorporation, as amended and supplemented,
the Company's By-Laws and amendments thereto and current copies of the materials
specified in Subsections (a)(iii) and (iv) of this Section 2. IMCO shall provide
Eagle with prior written notice of any material change to the Company's
Registration Statement that would affect Eagle's management of a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, Eagle 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, Eagle 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, Eagle, 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), Eagle 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 Eagle 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 Eagle 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 Eagle's overall
responsibilities with respect to the Fund and to other clients of Eagle as to
which Eagle exercises investment discretion. The Board or IMCO may direct Eagle
to effect transactions in portfolio securities through broker-dealers in a
manner that will help generate resources to pay the cost of certain expenses
that the Company is required to pay or for which the Company is required to
arrange payment.
On occasions when Eagle deems the purchase or sale of a security to be
in the best interest of a Fund as well as other clients of Eagle, Eagle, 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 Eagle 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.
Eagle may buy securities for a Fund Account at the same time it is
selling such securities for another client account and may sell securities for a
Fund Account at the time it is buying such securities for another client
account. In such cases, subject to applicable legal and regulatory requirements,
and in compliance with such procedures of the Company as may be in effect from
time to time, Eagle may effectuate cross transactions between a Fund Account and
such other account if it deems this to be advantageous.
Eagle 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. Eagle shall
not have possession or custody of any Fund's investments. The Company shall be
responsible for all custodial agreements and the payment of all custodial
charges and fees and, upon Eagle giving proper instructions to the custodian,
Eagle shall have no responsibility or liability for the acts, omissions or other
conduct of the custodian.
Notwithstanding the foregoing, Eagle 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. Eagle 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, Eagle
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 Eagle, except as permitted under the 1940 Act. IMCO agrees
that it will provide Eagle 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 Eagle 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. Eagle, 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 Eagle's duties under this Agreement.
However, Eagle shall not be obligated to pay any expenses of IMCO, the Company
or the Funds, including without limitation, interest and taxes, brokerage
commissions and other costs in connection with the purchase or sale of
securities or other investment instruments for the Funds and custodian fees and
expenses.
(D) VALUATION. Securities traded on a national securities exchange or
the NASDAQ market for which market quotes are readily available are valued on
each day the New York Stock Exchange is open for business. For those securities
for which market quotes are not readily available, Eagle, 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. Eagle 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. Eagle, 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 Eagle set forth herein. Eagle, 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 Eagle's
duties hereunder.
(F) COMPLIANCE MATTERS. Eagle, 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. Eagle also shall cooperate with
and provide reasonable assistance to IMCO, the Company's administrator, the
Company's custodian and foreign custodians, the Company's transfer agent and
pricing agents and all other agents and representatives of the Company and IMCO,
keep all such persons fully informed as to such matters as they may reasonably
deem necessary to the performance of their obligations to the Company and IMCO,
provide prompt responses to reasonable requests made by such persons and
maintain any appropriate interfaces with each so as to promote the efficient
exchange of information.
(G) BOOKS AND RECORDS. Eagle 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, Eagle 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, Eagle may maintain copies of such records to comply with its
recordkeeping obligations.
(H) PROXIES. Eagle 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 Eagle's
proxy voting guidelines, as amended from time to time, which shall be provided
to IMCO.
3. ADVISORY FEE. IMCO shall pay to Eagle as compensation for Eagle'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 Eagle 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) EAGLE. Eagle represents and warrants to IMCO that (i) the
retention of Eagle by IMCO as contemplated by this Agreement is authorized by
Eagle's governing documents; (ii) the execution, delivery and performance of
this Agreement does not violate any obligation by which Eagle 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 Eagle and when
executed and delivered by Eagle will be a legal, valid and binding obligation of
Eagle, enforceable against Eagle 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) Eagle is
registered as an investment adviser under the Advisers Act; (v) Eagle has
adopted a written code of ethics complying with the requirements of Rule 17j-1
under the 1940 Act and that Eagle 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, and with respect to such persons, Eagle shall
furnish to IMCO all reports and information provided under Rule 17j-1(c)(2);
(vi) Eagle 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) Eagle will promptly notify IMCO of the occurrence of any event that would
disqualify Eagle from serving as investment manager of an investment company
pursuant to Section 9(a) of the 1940 Act or otherwise; (viii) Eagle 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) Eagle will notify IMCO of any
"assignment" (as defined in the 0000 Xxx) of this Agreement or change of control
of Eagle, as applicable, and any changes in the key personnel who are either the
portfolio manager(s) of any Fund Account or senior management of Eagle, in each
case prior to or promptly after, such change; and (x) Eagle 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 Eagle that (i) the retention
of Eagle by IMCO as contemplated by this Agreement is authorized by the
respective governing documents of the Company and IMCO; (ii) the execution,
delivery and performance of each of this Agreement and the Investment Advisory
Agreement does not violate any obligation by which the Company or IMCO or their
respective property is bound, whether arising by contract, operation of law or
otherwise; (iii) each of this Agreement and the Investment Advisory Agreement
has been duly authorized by appropriate action of the Company and IMCO and when
executed and delivered by IMCO will be a legal, valid and binding obligation of
the Company and IMCO, enforceable against the Company and IMCO in accordance
with its terms, subject, as to enforcement, to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and to general equitable
principles (regardless of whether enforcement is sought in a proceeding in
equity or law); (iv) IMCO is registered as an investment adviser under the
Advisers Act; (v) IMCO has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and that IMCO and certain of its
employees, officers and directors are subject to reporting requirements
thereunder; (vi) IMCO is not prohibited by the 1940 Act, the Advisers Act or
other law, regulation or order from performing the services contemplated by this
Agreement; and (vii) IMCO will promptly notify Eagle 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) EAGLE. Eagle shall be liable for any and all losses, claims,
damages, liabilities or litigation (including reasonable legal and other
expenses) to which the Company, a Fund, IMCO, any affiliated persons thereof
(within the meaning of the 0000 Xxx) and any controlling persons thereof (as
described in Section 15 of the Securities Act of 1933, as amended (the 1933
Act)) (collectively, IMCO Indemnities) may become subject under the 1933 Act,
the 1940 Act, the Advisers Act, or under any other statute, at common law or
otherwise arising out of (i) any negligence, willful misconduct, bad faith or
reckless disregard of Eagle 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 Eagle which was required to be stated therein
or necessary to make the statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to IMCO or the Company
by Eagle Indemnities (as defined below) for use therein. Eagle 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). However, Eagle shall have no liability to a Fund or its shareholders
for damages or losses connected with or arising out of services rendered under
this Agreement, unless such damages or losses result from Eagle's negligence,
willful misconduct, bad faith or reckless disregard of its duties and
obligations.
(B) IMCO. IMCO shall be liable for any and all losses, claims,
damages, liabilities or litigation (including reasonable legal and other
expenses) to which Eagle, 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, Eagle Indemnities) may become subject under the
1933 Act, the 1940 Act, the Advisers Act, or under any other statute, at common
law or otherwise arising out of (i) any negligence, willful misconduct, bad
faith or reckless disregard by IMCO in the performance of any of its duties or
obligations hereunder or (ii) any untrue statement of a material fact contained
in the Prospectus and SAI, proxy materials, reports, advertisements, sales
literature, or other materials pertaining to the Funds or the omission to state
therein a material fact known to IMCO which was required to be stated therein or
necessary to make the statements therein not misleading, unless such statement
or omission was made in reliance upon information furnished to IMCO or the
Company. IMCO shall indemnify and hold harmless Eagle 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 Company, IMCO, or Eagle
(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 Eagle.
(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, Eagle 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 Eagle. Eagle
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 Eagle by IMCO shall be without
prejudice to the obligation of Eagle to complete transactions already initiated
or acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to
Eagle under this Agreement automatically shall revert to IMCO. Notwithstanding
any termination of this Agreement with respect to a Fund, Sections 5, 10(a),
10(e), 11(a) and 11(c) of this Agreement shall remain in effect after any such
termination.
7. AMENDMENT OF AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. No material amendment of this Agreement shall be
effective until approved in the manner required by the 1940 Act, any rules
thereunder or any exemptive or other relief granted by the SEC or its staff
(Applicable Law).
8. APPROVAL, AMENDMENT, OR TERMINATION BY INDIVIDUAL FUND. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 0000 Xxx) of any Fund shall be
effective to continue, amend or terminate this Agreement with respect to any
such Fund notwithstanding (i) that such action has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund
affected thereby, and/or (ii) that such action has not been approved by the vote
of a majority of the outstanding voting securities of the Company, unless such
action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of Eagle to IMCO in connection
with the Funds hereunder are not to be deemed exclusive, and Eagle 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 Eagle 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 Eagle 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 Eagle, or IMCO
itself, to perform investment advisory services to any portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. Eagle shall, upon reasonable notice, afford
IMCO at all reasonable times access to Eagle'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 Eagle to provide IMCO with
access to the books and records of Eagle relating to any other accounts other
than the Funds.
(B) CONFIDENTIALITY. Eagle, and its officers, employees and authorized
representatives, shall treat confidentially and as proprietary information of
the Company all records and information relative to the Company and prior,
present or potential shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Company, which approval shall not be unreasonably withheld and may not be
withheld where Eagle may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company.
(C) PRIVACY POLICY. Eagle 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. Eagle agrees that it will promptly notify IMCO in
the event that Eagle 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. Eagle 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 Eagle's business activities.
(G) SHAREHOLDER MEETING EXPENSES. In the event that the Company shall
be required to call a meeting of shareholders solely due to actions involving
Eagle, including, without limitation, a change of control of Eagle, Eagle shall
bear all reasonable expenses associated with such shareholder meeting.
11. MISCELLANEOUS.
(A) NOTICES. All notices or other communications given under this
Agreement shall be made by guaranteed overnight delivery, telecopy or certified
mail; notice is effective when received. Notice shall be given to the parties at
the following addresses:
IMCO: USAA Investment Management Company
0000 Xxxxxxxxxxxxxx Xxxx, X-X0-X
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Securities Counsel & Compliance Dept.
Eagle: Eagle Asset Management, Inc.
000 Xxxxxxxx Xxxxxxx
Xx. Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Executive Vice President, Sales and Marketing
(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 Eagle 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/ Xxxx X. Xxxxxx
---------------------------
Name: Xxxx X. Xxxxxx
Title: Authorized Signatory
Attest: EAGLE ASSET MANAGEMENT, INC.
By: /s/ Xxxxxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxx
-------------------------- ---------------------------
Name: Xxxxxxx X. Xxxxx Name: Xxxxxxx X. Xxxx
Title: Secretary Title: President
SCHEDULE A
USAA SMALL CAP STOCK FUND
SCHEDULE B
FEES
RATE PER ANNUM OF THE AVERAGE DAILY NET
FUND ACCOUNT ASSETS OF THE FUND ACCOUNT
------------ ---------------------------------------
USAA Small Cap Stock Fund 0.56% -- First $100 million
0.45% -- Amounts above $100 million
EXHIBIT 4(r)
AMENDED AND RESTATED
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 18th day of October, 2002 (the Effective
Date), and amended and restated as of the 1st day of May, 2003, between USAA
INVESTMENT MANAGEMENT COMPANY, a corporation organized under the laws of the
State of Delaware and having its principal place of business in San Antonio,
Texas (IMCO) and 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 Fund,
Inc., a corporation organized under the laws of the state of Maryland (the
Company) and registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, under its Investment Advisory Agreement with the Company
(Investment Advisory Agreement), IMCO is authorized to appoint subadvisers for
series of the Company (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain Marsico to render investment advisory
services to such series (or portions thereof) of the Company as now or hereafter
may be identified in Schedule A to this Agreement, as such Schedule A may be
amended from time to time (each such series or portion thereof referred to
herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, 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 Company or IMCO in any way or
otherwise be deemed an agent of the Company or IMCO except as expressly
authorized in this Agreement or another writing by the Company, IMCO and
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 Company's Board of Directors (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 Marsico
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, Marsico 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, Marsico 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
Marsico wishes to hold cash or cash equivalents in excess of 10% of a Fund
Account's assets, Marsico must request in writing and receive advance permission
from IMCO.
In accordance with Subsection (b) of this Section 2, Marsico shall
arrange for the execution of all orders for the purchase and sale of securities
and other investments for each Fund Account and will exercise full discretion
and act for the Company in the same manner and with the same force and effect as
the Company might or could do with respect to such purchases, sales, or other
transactions, as well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases, sales, or other
transactions.
In the performance of its duties, Marsico will act in the best
interests of each Fund and will comply with (i) applicable laws and regulations,
including, but not limited to, the 1940 Act and the Investment Advisers Act of
1940, as amended (Advisers Act), and the rules under each, (ii) the terms of
this Agreement, (iii) the stated investment objective, policies and restrictions
of each Fund, as stated in the then-current Registration Statement of each Fund,
(iv) the Company's compliance procedures and other policies, procedures or
guidelines as the Board or IMCO reasonably may establish from time to time, (v)
the provisions of the Internal Revenue Code of 1986, as amended (Code),
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), as from time to time in effect, and (vi) the written instructions of
IMCO. Marsico shall establish compliance procedures reasonably calculated to
ensure compliance with the foregoing. IMCO shall be responsible for providing
Marsico with the Company's Articles of Incorporation, as amended and
supplemented, the Company's By-Laws and amendments thereto and current copies of
the materials specified in Subsections (a)(iii) and (iv) of this Section 2. IMCO
shall provide Marsico with prior written notice of any material change to the
Company's Registration Statement that would affect Xxxxxxx'x management of a
Fund Account.
No statement in this Agreement or any other document constitutes a
representation by Marsico regarding the rate of growth or return of a Fund
Account. Neither Marsico 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 Marsico.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, Marsico 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, Marsico 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 or research services as described below. In using its
best efforts to obtain the most favorable price and execution available,
Marsico, 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), Marsico 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 Marsico 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 Marsico 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 Marsico as to which Marsico exercises investment
discretion. The Board or IMCO may direct Marsico 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 Company is required to pay or for which the Company is
required to arrange payment. Marsico will treat such a direction as a decision
by the Board or IMCO to retain, to the extent of the direction, the discretion
that Marsico otherwise would exercise to select broker-dealers and negotiate
commissions for the Fund Account.
On occasions when Marsico 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 Marsico 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.
Marsico may buy securities for a Fund Account at the same time it is
selling such securities for another client account and may sell securities for a
Fund Account at the time it is buying such securities for another client
account. In such cases, subject to applicable legal and regulatory requirements,
and in compliance with such procedures of the Company as may be in effect from
time to time, Marsico may effectuate cross transactions between a Fund Account
and such other account if it deems this to be advantageous.
Marsico 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. Marsico shall
not have possession or custody of any Fund's investments. The Company shall be
responsible for all custodial agreements and the payment of all custodial
charges and fees and, upon Marsico giving proper instructions to the custodian,
Marsico shall have no responsibility or liability for the acts, omissions or
other conduct of the custodian.
Notwithstanding the foregoing, Marsico 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, Marsico 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, Marsico 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
Marsico, except as permitted under the 1940 Act. IMCO agrees that it will
provide Marsico 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 Marsico 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 Marsico
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
Marsico and an affiliated broker-dealer (such as BAS) could give Marsico 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 Marsico considers whether to use an
affiliated broker-dealer. Marsico 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 Marsico 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-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 Marsico 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 Marsico or the
affiliated broker-dealer.
(C) EXPENSES. Marsico, 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, Marsico shall not be obligated to pay any expenses of IMCO, the Company
or the Funds, including without limitation, interest and taxes, brokerage
commissions and other costs in connection with the purchase or sale of
securities or other investment instruments for the Funds and custodian fees and
expenses.
(D) VALUATION. Securities traded on a national securities exchange or
the NASDAQ market for which market quotes are readily available are valued on
each day the New York Stock Exchange is open for business. For those securities
for which market quotes are not readily available, Marsico, 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. Marsico 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. Marsico, 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 Marsico set forth herein. Marsico, 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. Marsico, 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. Marsico also shall cooperate
with and provide reasonable assistance to IMCO, the Company's administrator, the
Company's custodian and foreign custodians, the Company's transfer agent and
pricing agents and all other agents and representatives of the Company and IMCO,
keep all such persons fully informed as to such matters as they may reasonably
deem necessary to the performance of their obligations to the Company and IMCO,
provide prompt responses to reasonable requests made by such persons and
maintain any appropriate interfaces with each so as to promote the efficient
exchange of information.
(G) BOOKS AND RECORDS. Marsico 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, Marsico 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, Marsico may maintain copies of such records to comply
with its recordkeeping obligations.
(H) PROXIES. Marsico 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 Marsico 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 Marsico 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) MARSICO. Marsico represents and warrants to IMCO that (i) the
retention of Marsico 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 Marsico 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 Marsico and when
executed and delivered by Marsico will be a legal, valid and binding obligation
of Marsico, enforceable against Marsico 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) Marsico is registered as an investment adviser under the Advisers Act; (v)
Marsico has adopted a written code of ethics complying with the requirements of
Rule 17j-1 under the 1940 Act and that Marsico 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) Marsico 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) Marsico will promptly notify IMCO
of the occurrence of any event that would disqualify Marsico from serving as
investment manager of an investment company pursuant to Section 9(a) of the 1940
Act or otherwise; (viii) Marsico 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) Marsico will notify IMCO of any "assignment" (as defined in
the 0000 Xxx) of this Agreement or change of control of Marsico, as applicable,
and any changes in the key personnel who are either the portfolio manager(s) of
any Fund Account or senior management of Marsico, in each case prior to or
promptly after, such change; and (x) Marsico 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 Marsico that (i) the
retention of Marsico by IMCO as contemplated by this Agreement is authorized by
the respective governing documents of the Company and IMCO; (ii) the execution,
delivery and performance of each of this Agreement and the Investment Advisory
Agreement does not violate any obligation by which the Company or IMCO or their
respective property is bound, whether arising by contract, operation of law or
otherwise; (iii) each of this Agreement and the Investment Advisory Agreement
has been duly authorized by appropriate action of the Company and IMCO and when
executed and delivered by IMCO will be a legal, valid and binding obligation of
the Company and IMCO, enforceable against the Company and IMCO in accordance
with its terms, subject, as to enforcement, to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and to general equitable
principles (regardless of whether enforcement is sought in a proceeding in
equity or law); (iv) IMCO is registered as an investment adviser under the
Advisers Act; (v) IMCO has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and that IMCO and certain of its
employees, officers and directors are subject to reporting requirements
thereunder; (vi) IMCO is not prohibited by the 1940 Act, the Advisers Act or
other law, regulation or order from performing the services contemplated by this
Agreement; and (vii) IMCO will promptly notify Marsico 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) MARSICO. Marsico shall be liable for any and all losses, claims,
damages, liabilities or litigation (including reasonable legal and other
expenses) to which the Company, a Fund, IMCO, any affiliated persons thereof
(within the meaning of the 0000 Xxx) and any controlling persons thereof (as
described in Section 15 of the Securities Act of 1933, as amended (the 1933
Act)) (collectively, IMCO 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 Marsico 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 Marsico 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 Company by Marsico Indemnitees (as defined below) for use therein. Marsico
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 Marsico, 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, Marsico 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 Company. IMCO shall indemnify and hold harmless Marsico
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 Company, IMCO, or
Marsico (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 Marsico.
(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, Marsico 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 Marsico.
Marsico 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 Marsico by IMCO shall be
without prejudice to the obligation of Marsico to complete transactions already
initiated or acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to
Marsico under this Agreement automatically shall revert to IMCO. Notwithstanding
any termination of this Agreement with respect to a Fund, Sections 5, 10(a),
10(e), 11(a) and 11(c) of this Agreement shall remain in effect after any such
termination.
7. AMENDMENT OF AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. No material amendment of this Agreement shall be
effective until approved in the manner required by the 1940 Act, any rules
thereunder or any exemptive or other relief granted by the SEC or its staff
(Applicable Law).
8. APPROVAL, AMENDMENT, OR TERMINATION BY INDIVIDUAL FUND. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 0000 Xxx) of any Fund shall be
effective to continue, amend or terminate this Agreement with respect to any
such Fund notwithstanding (i) that such action has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund
affected thereby, and/or (ii) that such action has not been approved by the vote
of a majority of the outstanding voting securities of the Company, unless such
action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of Marsico to IMCO in connection
with the Funds hereunder are not to be deemed exclusive, and Marsico 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 Marsico 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 Marsico 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 Marsico, or IMCO
itself, to perform investment advisory services to any portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. Marsico 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 Marsico to
provide IMCO with access to the books and records of Marsico relating to any
other accounts other than the Funds.
(B) CONFIDENTIALITY. Marsico, and its officers, employees and
authorized representatives, shall treat confidentially and as proprietary
information of the Company all records and information relative to the Company
and prior, present or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably withheld and may not be
withheld where Marsico may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company.
(C) PRIVACY POLICY. 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 Company 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:
IMCO: USAA Investment Management Company
0000 Xxxxxxxxxxxxxx Xxxx, X-X0-X
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Securities Counsel & Compliance Dept.
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.
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/ Xxxx X. Xxxxxx
---------------------------
Name: Xxxx X. Xxxxxx
Title: Authorized Signatory
Attest: XXXXXXX CAPITAL MANAGEMENT, LLC
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxxxxxxx X. Xxxxxxx
-------------------------- ----------------------------
Name: Xxxxxx X. Xxxxxx Name: Xxxxxxxxxxx X. Xxxxxxx
Title: Vice President Title: President
and General Counsel
SCHEDULE A
USAA AGGRESSIVE GROWTH FUND
USAA FIRST START GROWTH FUND
USAA GROWTH FUND
SCHEDULE B
FEES
RATE PER ANNUM OF THE AVERAGE DAILY NET
ASSETS OF THE FUND ACCOUNT
FUND ACCOUNT ---------------------------------------
------------
USAA Aggressive Growth Fund 0.20%
USAA First Start Growth Fund 0.20%
USAA Growth Fund 0.20%
EXHIBIT 4 (s)
AMENDED AND RESTATED
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 18th day of October, 2002 (the Effective
Date), and amended and restated as of the 1st day of May, 2003, between USAA
INVESTMENT MANAGEMENT COMPANY, a corporation organized under the laws of the
State of Delaware and having its principal place of business in San Antonio,
Texas (IMCO) and WELLINGTON MANAGEMENT COMPANY, LLP, a limited liability
partnership organized under the laws of the Commonwealth of Massachusetts and
having its principal place of business in Boston, Massachusetts (Wellington
Management).
WHEREAS, IMCO serves as the investment adviser to USAA Mutual Fund,
Inc., a corporation organized under the laws of the state of Maryland (the
Company) and registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, under its Investment Advisory Agreement with the Company
(Investment Advisory Agreement), IMCO is authorized to appoint subadvisers for
series of the Company (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain Wellington Management to render
investment advisory services to such series (or portions thereof) of the Company
as now or hereafter may be identified in Schedule A to this Agreement, as such
Schedule A may be amended from time to time (each such series or portion thereof
referred to herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, Wellington Management is willing to provide such services to
the Fund Accounts and IMCO upon the terms and conditions and for the
compensation set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. APPOINTMENT OF WELLINGTON MANAGEMENT. IMCO hereby appoints Wellington
Management to act as an investment subadviser for each Fund Account in
accordance with the terms and conditions of this Agreement. Wellington
Management will be an independent contractor and will have no authority to act
for or represent the Company or IMCO in any way or otherwise be deemed an agent
of the Company or IMCO except as expressly authorized in this Agreement or
another writing by the Company, IMCO and Wellington Management. Wellington
Management accepts such appointment and agrees to render the services herein set
forth for the compensation herein provided.
2. DUTIES OF WELLINGTON MANAGEMENT.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of
IMCO and the Company's Board of Directors (the Board), Wellington Management, at
its own expense, shall have full discretion to manage, supervise and direct the
investment and reinvestment of
Fund Accounts allocated to it by IMCO from time to time. It is understood that a
Fund Account may consist of all, a portion of, or none of the assets of the
Fund, and that IMCO has the right to allocate and reallocate such assets to a
Fund Account at any time. Wellington Management shall 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 Company in the same manner and with the same
force and effect as the Company might or could do with respect to such
purchases, sales, or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct of such purchases,
sales, or other transactions.
In the performance of its duties, Wellington Management will act in
the best interests of each Fund and will comply with (i) applicable laws and
regulations, including, but not limited to, the 1940 Act and the Investment
Advisers Act of 1940, as amended (Advisers Act), and the rules under each, (ii)
the terms of this Agreement, (iii) the stated investment objective, policies and
restrictions of each Fund, as stated in the then-current Prospectus and
Statement of Additional Information of each Fund, (iv) the Company's compliance
procedures and other policies, procedures or guidelines as the Board or IMCO
reasonably may establish from time to time, (v) the provisions of the Internal
Revenue Code of 1986, as amended (Code), applicable to "regulated investment
companies" (as defined in Section 851 of the Code), as from time to time in
effect, and (vi) the written instructions of IMCO. Wellington Management shall
establish compliance procedures reasonably calculated to ensure compliance with
the foregoing. IMCO shall be responsible for providing Wellington Management
with the Company's Articles of Incorporation, as amended and supplemented, the
Company's By-Laws and amendments thereto and current copies of the materials
specified in Subsections (a)(iii) and (iv) of this Section 2. IMCO shall provide
Wellington Management with prior written notice of any material change to
2
the Company's Registration Statement that would affect Wellington Management's
management of a Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, Wellington Management
will select the brokers or dealers that will execute purchase and sale
transactions for the Fund Accounts, subject to the conditions herein. In the
selection of broker-dealers and the placement of orders for the purchase and
sale of portfolio investments for the Fund Accounts, Wellington Management shall
use its best efforts to obtain for the Fund Accounts the most favorable price
and execution available, except to the extent it may be permitted to pay higher
brokerage commissions for brokerage and research services as described below. In
using its best efforts to obtain the most favorable price and execution
available, Wellington Management, bearing in mind each Fund's best interests at
all times, shall consider all factors it deems relevant, including by way of
illustration, price, the size of the transaction, the nature of the market for
the security, the amount of the commission and dealer's spread or xxxx-up, the
timing of the transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker-dealer involved,
the general execution and operational facilities of the broker-dealer and the
quality of service rendered by the broker-dealer in other transactions.
Subject to such policies as the Board may determine and to the extent
authorized by Section 28(e) of the Securities Exchange Act of 1934 (Exchange
Act), Wellington Management shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused a Fund Account to pay a broker-dealer that provides
brokerage and research services to Wellington Management an amount of commission
for effecting a portfolio investment transaction in excess of the amount of
commission another broker-dealer offering equally good execution capability in
the portfolio investment would have charged for effecting that transaction if
Wellington Management determines in good faith that such amount of commission
was reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or Wellington Management's overall responsibilities with respect to
the Fund and to other clients of Wellington Management as to which Wellington
Management exercises investment discretion. The Board or IMCO may direct
Wellington Management to effect transactions in portfolio securities through
broker-dealers in a manner that will help generate resources to pay the cost of
certain expenses that the Company is required to pay or for which the Company is
required to arrange payment.
On occasions when Wellington Management deems the purchase or sale of
a security to be in the best interest of a Fund as well as other clients of
Wellington Management, Wellington Management, to the extent permitted by
applicable laws and regulations, may aggregate the securities to be purchased or
sold to attempt to obtain a more favorable price or lower brokerage commissions
and efficient execution. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction, will be
made by Wellington Management in the manner it considers to be the most
equitable and consistent with its fiduciary obligations to the Fund and to its
other clients over time.
Wellington Management may buy securities for a Fund Account at the
same time it is selling such securities for another client account and may sell
securities for a Fund Account at the time it is buying such securities for
another client account. In such cases, subject to
3
applicable legal and regulatory requirements, and in compliance with such
procedures of the Company as may be in effect from time to time, Wellington
Management may effectuate cross transactions between a Fund Account and such
other account if it deems this to be advantageous.
Wellington Management will advise the Funds' custodian or such
depository or agents as may be designated by the custodian and IMCO promptly of
each purchase and sale of a portfolio security, specifying the name of the
issuer, the description and amount or number of shares of the security
purchased, the market price, the commission and gross or net price, the trade
date and settlement date, the identity of the effecting broker or dealer and any
other pertinent data that the Funds' custodian may need to settle a security's
purchase or sale. Wellington Management shall not have possession or custody of
any Fund's investments. The Company shall be responsible for all custodial
agreements and the payment of all custodial charges and fees and, upon
Wellington Management giving proper instructions to the custodian, Wellington
Management shall have no responsibility or liability for the acts, omissions or
other conduct of the custodian.
Notwithstanding the foregoing, Wellington Management agrees that IMCO
shall have the right by written notice to identify securities that may not be
purchased on behalf of any Fund and/or brokers and dealers through which
portfolio transactions on behalf of the Fund may not be effected, including,
without limitation, brokers or dealers affiliated with IMCO. Wellington
Management shall refrain from purchasing such securities for a Fund Account or
directing any portfolio transaction to any such broker or dealer on behalf of a
Fund Account, unless and until the written approval of IMCO to do so is
obtained. In addition, Wellington Management agrees that it shall not direct
portfolio transactions for the Fund Accounts through any broker or dealer that
is an "affiliated person" (as that term is defined in the 1940 Act or
interpreted under applicable rules and regulations of the Commission) of
Wellington Management, except as permitted under the 1940 Act. IMCO agrees that
it will provide Wellington Management with a list of brokers and dealers that
are affiliated persons of the Funds, or affiliated persons of such persons, and
shall timely update that list as the need arises. The Funds agree that any
entity or person associated with IMCO or Wellington Management that is a member
of a national securities exchange is authorized to effect any transaction on
such exchange for the account of the Funds that is permitted by Section 11(a) of
the Exchange Act, and the Funds consent to the retention of compensation for
such transactions.
(C) EXPENSES. Wellington Management, at its expense, will furnish all
necessary facilities and personnel, including salaries, expenses and fees of any
personnel required for them to faithfully perform their duties under this
Agreement and administrative facilities, including bookkeeping, and all
equipment and services necessary for the efficient conduct of Wellington
Management's duties under this Agreement. However, Wellington Management shall
not be obligated to pay any expenses of IMCO, the Company or the Funds,
including without limitation, interest and taxes, brokerage commissions and
other costs in connection with the purchase or sale of securities or other
investment instruments for the Funds and custodian fees and expenses.
(D) VALUATION. Securities traded on a national securities exchange or
the NASDAQ market for which market quotes are readily available are valued on
each day the New York Stock Exchange is open for business. For those securities
held in Fund Accounts subadvised by Wellington Management for which market
quotes are not readily available, Wellington Management, at its expense and in
accordance with procedures and methods established by the
4
Board, which may be amended from time to time, will provide assistance to IMCO
in determining the fair value of such securities, including providing market
price information relating to these assets of the Fund. Wellington Management
also shall monitor for "significant events" that occur after the closing of a
market but before the Funds calculate their net asset values and that may affect
the valuation of any Fund Account's portfolio securities and shall notify IMCO
immediately of the occurrence of any such events.
(E) REPORTS AND AVAILABILITY OF PERSONNEL. Wellington Management, at
its expense, shall render to the Board and IMCO such periodic and special
reports as the Board and IMCO may reasonably request with respect to matters
relating to the duties of Wellington Management set forth herein. Wellington
Management, at its expense, will make available to the Board and IMCO at
reasonable times its portfolio managers and other appropriate personnel in order
to review investment policies of the Funds and to consult with the Board and
IMCO regarding the investment affairs of the Funds, including economic,
statistical and investment matters relevant to Wellington Management's duties
hereunder.
(F) COMPLIANCE MATTERS. Wellington Management, at its expense, will
provide IMCO with such compliance reports relating to its duties under this
Agreement as may be agreed upon by such parties from time to time. Wellington
Management also shall cooperate with and provide reasonable assistance to IMCO,
the Company's administrator, the Company's custodian and foreign custodians, the
Company's transfer agent and pricing agents and all other agents and
representatives of the Company and IMCO, keep all such persons fully informed as
to such matters as they may reasonably deem necessary to the performance of
their obligations to the Company and IMCO, provide prompt responses to
reasonable requests made by such persons and maintain any appropriate interfaces
with each so as to promote the efficient exchange of information.
(G) BOOKS AND RECORDS. Wellington Management will maintain for the
Funds all books and records required to be maintained by the Funds pursuant to
the 1940 Act and the rules and regulations promulgated thereunder insofar as
such records relate to the investment affairs of the Fund Accounts. Pursuant to
Rule 31a-3 under the 1940 Act, Wellington Management agrees that: (i) all
records it maintains for a Fund Account are the property of the Fund; (ii) it
will surrender promptly to a Fund or IMCO any such records (or copies of such
records) upon the Fund's or IMCO's request; and (iii) it will preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records it maintains for
any Fund Account. Notwithstanding subsection (ii) above, Wellington Management
may maintain copies of such records to comply with its recordkeeping
obligations.
(H) PROXIES. Wellington Management will, unless and until otherwise
directed by IMCO or the Board, vote proxies with respect to a Fund Account's
securities and exercise rights in corporate actions or otherwise in accordance
with Wellington Management's proxy voting guidelines, as amended from time to
time, which shall be provided to IMCO.
3. ADVISORY FEE. IMCO shall pay to Wellington Management as compensation
for Wellington Management's services rendered pursuant to this Agreement a fee
based on the average daily net assets of each Fund Account at the annual rates
set forth in Schedule B, which schedule can be modified from time to time,
subject to any appropriate approvals required by the 1940 Act. Such fees shall
be calculated daily and payable monthly in arrears within 15 business
5
days after the end of such month. IMCO (and not the Funds) shall pay such fees.
If Wellington Management shall serve for less than the whole of a month, the
compensation as specified shall be prorated based upon the number of calendar
days during which this Agreement is in effect during such month, and the fee
shall be computed based upon the average daily net assets of a Fund Account for
such days.
4. REPRESENTATIONS AND WARRANTIES.
(A) WELLINGTON MANAGEMENT. Wellington Management represents and
warrants to IMCO that (i) the retention of Wellington Management by IMCO as
contemplated by this Agreement is authorized by Wellington Management's
governing documents; (ii) the execution, delivery and performance of this
Agreement does not violate any obligation by which Wellington Management or its
property is bound, whether arising by contract, operation of law or otherwise;
(iii) this Agreement has been duly authorized by appropriate action of
Wellington Management and when executed and delivered by Wellington Management
will be a legal, valid and binding obligation of Wellington Management,
enforceable against Wellington Management in accordance with its terms, subject,
as to enforcement, to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to general equitable principles
(regardless of whether enforcement is sought in a proceeding in equity or law);
(iv) Wellington Management is registered as an investment adviser under the
Advisers Act; (v) Wellington Management has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the 1940 Act and that
Wellington Management and certain of its employees, officers and partners are
subject to reporting requirements thereunder and, accordingly, agrees that it
shall, on a timely basis, furnish a copy of such code of ethics to IMCO, and,
with respect to such persons, Wellington Management shall furnish to IMCO all
reports and information provided under Rule 17j(c)(2); (vi) Wellington
Management is not prohibited by the 1940 Act, the Advisers Act or other law,
regulation or order from performing the services contemplated by this Agreement;
(vii) Wellington Management will promptly notify IMCO of the occurrence of any
event that would disqualify Wellington Management from serving as investment
manager of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise; (viii) Wellington Management has provided IMCO with a copy of its
Form ADV, which as of the date of this Agreement is its Form ADV as most
recently filed with the SEC, and promptly will furnish a copy of all amendments
to IMCO at least annually; (ix) Wellington Management will notify IMCO of any
"assignment" (as defined in the 0000 Xxx) of this Agreement or change of control
of Wellington Management, as applicable, and any changes in the key personnel
who are either the portfolio manager(s) of any Fund Account or senior management
of Wellington Management, in each case prior to or promptly after, such change;
and (x) Wellington Management has adequate disaster recovery and interruption
prevention measures reasonably designed to ensure business resumption in
accordance with applicable law and within industry standards.
(B) IMCO. IMCO represents and warrants to Wellington Management that
(i) the retention of Wellington Management by IMCO as contemplated by this
Agreement is authorized by the respective governing documents of the Company and
IMCO; (ii) the execution, delivery and performance of each of this Agreement and
the Investment Advisory Agreement does not violate any obligation by which the
Company or IMCO or their respective property is bound, whether arising by
contract, operation of law or otherwise; (iii) each of this Agreement and the
Investment Advisory Agreement has been duly authorized by appropriate action of
the Company
6
and IMCO and when executed and delivered by IMCO will be a legal, valid and
binding obligation of the Company and IMCO, enforceable against the Company and
IMCO in accordance with its terms, subject, as to enforcement, to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and to general equitable principles (regardless of whether enforcement is sought
in a proceeding in equity or law); (iv) IMCO is registered as an investment
adviser under the Advisers Act; (v) IMCO has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the 1940 Act and that IMCO
and certain of its employees, officers and directors are subject to reporting
requirements thereunder; (vi) IMCO is not prohibited by the 1940 Act, the
Advisers Act or other law, regulation or order from performing the services
contemplated by this Agreement; and (vii) IMCO will promptly notify Wellington
Management of the occurrence of any event that would disqualify IMCO from
serving as investment manager of an investment company pursuant to Section 9(a)
of the 1940 Act or otherwise.
5. LIABILITY AND INDEMNIFICATION.
(A) WELLINGTON MANAGEMENT. Wellington Management shall indemnify and
hold harmless the Trust, a Fund, IMCO, any affiliated persons thereof (within
the meaning of the 0000 Xxx) and any controlling persons thereof (as described
in Section 15 of the Securities Act of 1933, as amended (the 1933 Act))
(collectively, IMCO Indemnities) for any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which the IMCO Indemnities may become subject under the 1933 Act, the 1940 Act,
the Advisers Act, or under any other statute, at common law or otherwise arising
out of (i) any gross negligence, willful misconduct, bad faith or reckless
disregard of Wellington Management in the performance of any of its duties or
obligations hereunder or (ii) any untrue statement of a material fact contained
in the Prospectus and SAI, proxy materials, reports, advertisements, sales
literature, or other materials pertaining to the Funds or the omission to state
therein a material fact known to Wellington Management which was required to be
stated therein or necessary to make the statements therein not misleading, if
such statement or omission was made in reliance upon information furnished in
writing to IMCO or the Company by Wellington Management Indemnities (as defined
below) for use therein.
(B) IMCO. IMCO shall indemnify and hold harmless the Wellington
Management, any affiliated persons thereof (within the meaning of the 0000 Xxx)
and any controlling persons thereof (as described in Section 15 of the
Securities Act of 1933) (collectively, Wellington Management Indemnities) for
any and all losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses) to which the Wellington Indemnities may
become subject under the 1933 Act, the 1940 Act, the Advisers Act, or under any
other statute, at common law or otherwise arising out of (i) any gross
negligence, willful misconduct, bad faith or reckless disregard by IMCO in the
performance of any of its duties or obligations hereunder or (ii) any untrue
statement of a material fact contained in the Prospectus and SAI, proxy
materials, reports, advertisements, sales literature, or other materials
pertaining to the Funds or the omission to state therein a material fact known
to IMCO which was required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon information furnished in writing by Wellington Indemnities to IMCO
or the Trust.
7
6. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall become
effective with respect to a Fund upon its execution; provided, however, that
this Agreement shall not become effective with respect to a Fund unless it has
first been approved in the manner required by the 1940 Act and rules thereunder
or in accordance with exemptive or other relief granted by the SEC or its staff.
This Agreement shall remain in full force and effect continuously thereafter,
except as follows:
(a) By vote of a majority of (i) the Board members who are not
"interested persons" (as defined in the 0000 Xxx) of the Company, IMCO, or
Wellington Management (Independent Board Members) or (ii) the outstanding voting
shares of a Fund, such Fund may at any time terminate this Agreement, without
the payment of any penalty, by providing not more than 60 days' nor less than 10
days' written notice delivered or mailed by registered mail, postage prepaid, to
IMCO and Wellington Management.
(b) This Agreement will terminate automatically with respect to a
Fund, without the payment of any penalty, unless within two years after its
initial effectiveness and at least annually thereafter, the continuance of the
Agreement is specifically approved by (i) the Board or the shareholders of the
Fund by the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Independent Board Members, by vote cast in
person at a meeting called for the purpose of voting on such approval. If the
continuance of this Agreement is submitted to the shareholders of the Fund for
their approval and such shareholders fail to approve such continuance as
provided herein, Wellington Management may continue to serve hereunder in a
manner consistent with the 1940 Act and the rules thereunder.
(c) IMCO may at any time terminate this Agreement with respect to a
Fund, without the payment of any penalty, by written notice delivered in person
or by facsimile, or mailed by registered mail, postage prepaid, to Wellington
Management. Wellington Management may at any time, without the payment of any
penalty, terminate this Agreement with respect to a Fund by not less than 90
days' written notice delivered or mailed by registered mail, postage prepaid, to
IMCO.
(d) This Agreement automatically and immediately shall terminate with
respect to the Funds, without the payment of any penalty, in the event of its
assignment (as that term is defined in the 1940 Act or interpreted under
applicable rules and regulations of the Commission) or if the Investment
Advisory Agreement shall terminate for any reason.
(e) Any notice of termination served on Wellington Management by IMCO
shall be without prejudice to the obligation of Wellington Management to
complete transactions already initiated or acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to
Wellington Management under this Agreement automatically shall revert to IMCO.
Notwithstanding any termination of this Agreement with respect to a Fund,
Sections 5, 10(a), 10(e), 11(a) and 11(c) of this Agreement shall remain in
effect after any such termination.
7. AMENDMENT OF AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against
8
whom enforcement of the change, waiver, discharge or termination is
sought. No material amendment of this Agreement shall be effective until
approved in the manner required by the 1940 Act, any rules thereunder or any
exemptive or other relief granted by the SEC or its staff (Applicable Law).
8. APPROVAL, AMENDMENT, OR TERMINATION BY INDIVIDUAL FUND. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 0000 Xxx) of any Fund shall be
effective to continue, amend or terminate this Agreement with respect to any
such Fund notwithstanding (i) that such action has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund
affected thereby, and/or (ii) that such action has not been approved by the vote
of a majority of the outstanding voting securities of the Company, unless such
action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of Wellington Management to IMCO
in connection with the Funds hereunder are not to be deemed exclusive, and
Wellington Management shall be free to render investment advisory services to
others so long as its services hereunder are not impaired thereby. It is
understood that the persons employed by Wellington Management to assist in the
performance of its duties hereunder will not devote their full time to such
services and nothing contained herein shall be deemed to limit or restrict in
any manner whatsoever the right of Wellington Management to engage in or devote
time and attention to other businesses or to render services of whatever kind or
nature. It is understood that IMCO may appoint at any time in accordance with
Applicable Law one or more subadvisers, in addition to Wellington Management, or
IMCO itself, to perform investment advisory services to any portion of the
Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. Wellington Management shall, upon reasonable
notice, afford IMCO at all reasonable times access to Wellington Management's
officers, employees, agents and offices and to all its relevant books and
records and shall furnish IMCO with all relevant financial and other data and
information as requested; provided, however, that nothing contained herein shall
obligate Wellington Management to provide IMCO with access to the books and
records of Wellington Management relating to any other accounts other than the
Funds or where such access is prohibited by law.
(B) CONFIDENTIALITY. Wellington Management, and its officers, employees
and authorized representatives, shall treat confidentially and as proprietary
information of the Company all records and information relative to the Company
and prior, present or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably withheld and may not be
withheld where Wellington Management may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the
Company.
9
(C) PRIVACY POLICY. Wellington Management acknowledges that nonpublic
customer information (as defined in Regulation S-P, including any amendments
thereto) of customers of the Funds received from IMCO is subject to the
limitations on redisclosure and reuse set forth in Section 248.11 of such
Regulation, and agrees such information (i) shall not be disclosed to any third
party for any purpose without the written consent of IMCO unless permitted by
exceptions set forth in Sections 248.14 or 248.15 of such Regulation and (ii)
shall be safeguarded pursuant to procedures adopted under Section 248.30 of such
Regulation if so required.
(D) PUBLIC ANNOUNCEMENTS. No party shall issue any press release or
otherwise make any public statements with respect to the matters covered by this
Agreement without the prior written consent of the other parties hereto, which
consent shall not be unreasonably withheld; provided, however, that consent
shall not be required if, in the opinion of counsel, such disclosure is required
by law; provided further, however, that the party making such disclosure shall
provide the other parties hereto with as much prior written notice of such
disclosure as is practical under the circumstances. During the term of this
Agreement, IMCO agrees to furnish to Wellington Management at its principal
office all Prospectuses, Statements of Additional Information, proxy statements,
reports to shareholders, sales literature, or other material prepared for
distribution to sales personnel, shareholders of the Trust or the public, which
refer to Wellington Management or its clients in any way, prior to use thereof
and not to use such material if Wellington Management reasonably objects in
writing two business days (or such other time as may be mutually agreed upon)
after receipt thereof. Advance review shall not be required from Wellington
Management with respect to 1) sales literature in which Wellington Management is
only referenced in a listing of subadvisers to USAA funds; and 2) other
materials as agreed upon mutually by IMCO and Wellington Management. Sales
literature may be furnished to Wellington Management hereunder by first-class or
overnight mail, electronic or facsimile transmission, or hand delivery.
E) NOTIFICATIONS. Wellington Management agrees that it will promptly
notify IMCO in the event that Wellington Management or any of its affiliates is
or expects to become the subject of an administrative proceeding or enforcement
action by the Commission or other regulatory body with applicable jurisdiction.
(F) INSURANCE. Wellington Management agrees to maintain errors and
omissions or professional liability insurance coverage in an amount that is
reasonable in light of the nature and scope of Wellington Management's business
activities.
(G) SHAREHOLDER MEETING EXPENSES. In the event that the Company shall
be required to call a meeting of shareholders solely due to actions involving
Wellington Management, including, without limitation, a change of control of
Wellington Management, Wellington Management shall bear all reasonable expenses
associated with such shareholder meeting.
11. MISCELLANEOUS.
(A) NOTICES. All notices or other communications given under this
Agreement shall be made by guaranteed overnight delivery, telecopy or certified
mail; notice is effective when received. Notice shall be given to the parties at
the following addresses:
10
IMCO: USAA Investment Management Company
0000 Xxxxxxxxxxxxxx Xxxx, X-X0-X
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Securities Counsel & Compliance Dept.
Wellington Management: Wellington Management Company, LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Legal Department
(B) SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors.
(C) GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Texas, without giving effect to the conflicts of
laws principles thereof, and in accordance with the 1940 Act. To the extent that
the applicable laws of the State of Texas conflict with the applicable
provisions of the 1940 Act, the latter shall control.
(D) COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(E) HEADINGS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(F) ENTIRE AGREEMENT. This Agreement states the entire agreement of
the parties hereto, and is intended to be the complete and exclusive statement
of the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act.
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/ Xxxx X. Xxxxxx
--------------------------
Name: Xxxx X. Xxxxxx
Title: Authorized Signatory
Attest: WELLINGTON MANAGEMENT COMPANY, LLP
By: /s/ Xxxx X. Xxxxx By: /s/ Xxxxx X. Xxxxxxxx
------------------------ --------------------------
Name: Xxxx X. Xxxxx Name: Xxxxx X. Xxxxxxxx
Title: Vice President and Counsel Title: President
12
SCHEDULE A
USAA GROWTH & INCOME FUND
USAA SCIENCE & TECHNOLOGY FUND
13
SCHEDULE B
FEES
RATE PER ANNUM OF THE AVERAGE DAILY NET
FUND ACCOUNT ASSETS OF THE FUND ACCOUNT
------------ ---------------------------------------
USAA Growth & Income Fund 0.20%
USAA Science & Technology Fund 0.45% - First $100 million
0.35% - Amounts above $100 million
14
EXHIBIT 4(t)
AMENDED AND RESTATED
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 18th day of October, 2002 (the Effective
Date), and amended and restated as of the 1st day of May, 2003, between USAA
INVESTMENT MANAGEMENT COMPANY, a corporation organized under the laws of the
State of Delaware and having its principal place of business in San Antonio,
Texas (IMCO) and WESTWOOD MANAGEMENT CORPORATION, a corporation organized under
the laws of the State of New York and having its principal place of business in
Dallas, Texas (Westwood).
WHEREAS, IMCO serves as the investment adviser to USAA Mutual Fund,
Inc. a corporation organized under the laws of the state of Maryland (the
Company) and registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, under its Investment Advisory Agreement with the Company
(Investment Advisory Agreement), IMCO is authorized to appoint subadvisers for
series of the Company (each a Fund, or collectively Funds); and
WHEREAS, IMCO wishes to retain Westwood to render investment advisory
services to such series (or portions thereof) of the Company as now or hereafter
may be identified in Schedule A to this Agreement, as such Schedule A may be
amended from time to time (each such series or portion thereof referred to
herein as a Fund Account and collectively as Fund Accounts); and
WHEREAS, Westwood 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 WESTWOOD. IMCO hereby appoints Westwood to act as an
investment adviser for each Fund Account in accordance with the terms and
conditions of this Agreement. Westwood will be an independent contractor and
will have no authority to act for or represent the Company or IMCO in any way or
otherwise be deemed an agent of the Company or IMCO except as expressly
authorized in this Agreement or another writing by the Company, IMCO and
Westwood. Westwood accepts such appointment and agrees to render the services
herein set forth for the compensation herein provided.
2. DUTIES OF WESTWOOD.
(A) AUTHORITY TO INVEST. Subject to the control and supervision of
IMCO and the Company's Board of Directors (the Board), Westwood, 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. Westwood 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 Westwood 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, Westwood 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, Westwood 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
Westwood wishes to hold cash or cash equivalents in excess of 10% of a Fund
Account's assets, Westwood must request in writing and receive advance
permission from IMCO.
In accordance with Subsection (b) of this Section 2, Westwood shall
arrange for the execution of all orders for the purchase and sale of securities
and other investments for each Fund Account and will exercise full discretion
and act for the Company in the same manner and with the same force and effect as
the Company might or could do with respect to such purchases, sales, or other
transactions, as well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases, sales, or other
transactions.
In the performance of its duties, Westwood will act in the best
interests of each Fund and will comply with (i) applicable laws and regulations,
including, but not limited to, the 1940 Act and the Investment Advisers Act of
1940, as amended (Advisers Act), and the rules under each, (ii) the terms of
this Agreement, (iii) the stated investment objective, policies and restrictions
of each Fund, as stated in the then-current Registration Statement of each Fund,
(iv) the Company's compliance procedures and other policies, procedures or
guidelines as the Board or IMCO reasonably may establish from time to time, (v)
the provisions of the Internal Revenue Code of 1986, as amended (Code),
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), as from time to time in effect, and (vi) the written instructions of
IMCO. Westwood shall establish compliance procedures reasonably calculated to
ensure compliance with the foregoing. IMCO shall be responsible for providing
Westwood with the Company's Articles of Incorporation, as amended and
supplemented, the Company's By-Laws and amendments thereto and current copies of
the materials specified in Subsections (a)(iii) and (iv) of this Section 2. IMCO
shall provide Westwood with prior written notice of any material change to the
Company's Registration Statement that would affect Westwood's management of a
Fund Account.
(B) PORTFOLIO TRANSACTIONS. In connection with the management of the
investment and reinvestment of the Fund Accounts' assets, Westwood 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, Westwood 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,
Westwood, 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), Westwood 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 Westwood 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 Westwood
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
Westwood's overall responsibilities with respect to the Fund and to other
clients of Westwood as to which Westwood exercises investment discretion. The
Board or IMCO may direct Westwood to effect transactions in portfolio securities
through broker-dealers in a manner that will help generate resources to pay the
cost of certain expenses that the Company is required to pay or for which the
Company is required to arrange payment.
On occasions when Westwood deems the purchase or sale of a security to
be in the best interest of a Fund as well as other clients of Westwood,
Westwood, 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 Westwood 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.
Westwood may buy securities for a Fund Account at the same time it is
selling such securities for another client account and may sell securities for a
Fund Account at the time it is buying such securities for another client
account. In such cases, subject to applicable legal and regulatory requirements,
and in compliance with such procedures of the Company as may be in effect from
time to time, Westwood may effectuate cross transactions between a Fund Account
and such other account if it deems this to be advantageous.
Westwood 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. Westwood
shall not have possession or custody of any Fund's investments. The Company
shall be responsible for all custodial agreements and the payment of all
custodial charges and fees and, upon Westwood giving proper instructions to the
custodian, Westwood shall have no responsibility or liability for the acts,
omissions or other conduct of the custodian.
Notwithstanding the foregoing, Westwood 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. Westwood 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, Westwood
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 Westwood, except as permitted under the 1940 Act. IMCO agrees
that it will provide Westwood 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 Westwood 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. Westwood, 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 Westwood's duties under this Agreement.
However, Westwood shall not be obligated to pay any expenses of IMCO, the
Company or the Funds, including without limitation, interest and taxes,
brokerage commissions and other costs in connection with the purchase or sale of
securities or other investment instruments for the Funds and custodian fees and
expenses.
(D) VALUATION. Securities traded on a national securities exchange or
the NASDAQ market for which market quotes are readily available are valued on
each day the New York Stock Exchange is open for business. For those securities
for which market quotes are not readily available, Westwood, 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. Westwood 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. Westwood, 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 Westwood set forth herein. Westwood, 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
Westwood's duties hereunder.
(F) COMPLIANCE MATTERS. Westwood, 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. Westwood also shall cooperate
with and provide reasonable assistance to IMCO, the Company's administrator, the
Company's custodian and foreign custodians, the Company's transfer agent and
pricing agents and all other agents and representatives of the Company and IMCO,
keep all such persons fully informed as to such matters as they may reasonably
deem necessary to the performance of their obligations to the Company and IMCO,
provide prompt responses to reasonable requests made by such persons and
maintain any appropriate interfaces with each so as to promote the efficient
exchange of information.
(G) BOOKS AND RECORDS. Westwood 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, Westwood 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, Westwood may maintain copies of such records to comply
with its recordkeeping obligations.
(H) PROXIES. Westwood 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 Westwood's
proxy voting guidelines, as amended from time to time, which shall be provided
to IMCO.
3. ADVISORY FEE. IMCO shall pay to Westwood as compensation for Westwood'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 Westwood 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) WESTWOOD. Westwood represents and warrants to IMCO that (i) the
retention of Westwood by IMCO as contemplated by this Agreement is authorized by
Westwood's governing documents; (ii) the execution, delivery and performance of
this Agreement does not violate any obligation by which Westwood 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 Westwood and when
executed and delivered by Westwood will be a legal, valid and binding obligation
of Westwood, enforceable against Westwood 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) Westwood is registered as an investment adviser under the Advisers Act; (v)
Westwood has adopted a written code of ethics complying with the requirements of
Rule 17j-1 under the 1940 Act and that Westwood 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, Westwood
shall furnish to IMCO all reports and information provided under Rule
17j-1(c)(2); (vi) Westwood 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) Westwood will promptly notify IMCO of the occurrence of
any event that would disqualify Westwood from serving as investment manager of
an investment company pursuant to Section 9(a) of the 1940 Act or otherwise;
(viii) Westwood 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)
Westwood will notify IMCO of any "assignment" (as defined in the 0000 Xxx) of
this Agreement or change of control of Westwood, as applicable, and any changes
in the key personnel who are either the portfolio manager(s) of any Fund Account
or senior management of Westwood, in each case prior to or promptly after, such
change; and (x) Westwood 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 Westwood that (i) the
retention of Westwood by IMCO as contemplated by this Agreement is authorized by
the respective governing documents of the Company and IMCO; (ii) the execution,
delivery and performance of each of this Agreement and the Investment Advisory
Agreement does not violate any obligation by which the Company or IMCO or their
respective property is bound, whether arising by contract, operation of law or
otherwise; (iii) each of this Agreement and the Investment Advisory Agreement
has been duly authorized by appropriate action of the Company and IMCO and when
executed and delivered by IMCO will be a legal, valid and binding obligation of
the Company and IMCO, enforceable against the Company and IMCO in accordance
with its terms, subject, as to enforcement, to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and to general equitable
principles (regardless of whether enforcement is sought in a proceeding in
equity or law); (iv) IMCO is registered as an investment adviser under the
Advisers Act; (v) IMCO has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and that IMCO and certain of its
employees, officers and directors are subject to reporting requirements
thereunder; (vi) IMCO is not prohibited by the 1940 Act, the Advisers Act or
other law, regulation or order from performing the services contemplated by this
Agreement; and (vii) IMCO will promptly notify Westwood 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) WESTWOOD. Westwood shall be liable for any and all losses, claims,
damages, liabilities or litigation (including reasonable legal and other
expenses) to which the Company, a Fund, IMCO, any affiliated persons thereof
(within the meaning of the 0000 Xxx) and any controlling persons thereof (as
described in Section 15 of the Securities Act of 1933, as amended (the 1933
Act)) (collectively, IMCO Indemnities) may become subject under the 1933 Act,
the 1940 Act, the Advisers Act, or under any other statute, at common law or
otherwise arising out of (i) any negligence, willful misconduct, bad faith or
reckless disregard of Westwood 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 Westwood which was required to be stated
therein or necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished to IMCO or
the Company by Westwood Indemnities (as defined below) for use therein. Westwood
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 Westwood, 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, Westwood Indemnities) may become subject under
the 1933 Act, the 1940 Act, the Advisers Act, or under any other statute, at
common law or otherwise arising out of (i) any negligence, willful misconduct,
bad faith or reckless disregard by IMCO in the performance of any of its duties
or obligations hereunder or (ii) any untrue statement of a material fact
contained in the Prospectus and SAI, proxy materials, reports, advertisements,
sales literature, or other materials pertaining to the Funds or the omission to
state therein a material fact known to IMCO which was required to be stated
therein or necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon information furnished to IMCO
or the Company. IMCO shall indemnify and hold harmless Westwood 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
Westwood (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 Westwood.
(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, Westwood 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 Westwood.
Westwood 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 Westwood by IMCO shall be
without prejudice to the obligation of Westwood to complete transactions already
initiated or acted upon with respect to a Fund.
Upon termination of this Agreement, the duties of IMCO delegated to
Westwood under this Agreement automatically shall revert to IMCO.
Notwithstanding any termination of this Agreement with respect to a Fund,
Sections 5, 10(a), 10(e), 11(a), and 11(c) of this Agreement shall remain in
effect after any such termination.
7. AMENDMENT OF AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. No material amendment of this Agreement shall be
effective until approved in the manner required by the 1940 Act, any rules
thereunder or any exemptive or other relief granted by the SEC or its staff
(Applicable Law).
8. APPROVAL, AMENDMENT, OR TERMINATION BY INDIVIDUAL FUND. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 0000 Xxx) of any Fund shall be
effective to continue, amend or terminate this Agreement with respect to any
such Fund notwithstanding (i) that such action has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund
affected thereby, and/or (ii) that such action has not been approved by the vote
of a majority of the outstanding voting securities of the Company, unless such
action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE. The services of Westwood to IMCO in connection
with the Funds hereunder are not to be deemed exclusive, and Westwood 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 Westwood 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 Westwood 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 Westwood, or IMCO
itself, to perform investment advisory services to any portion of the Funds.
10. ADDITIONAL AGREEMENTS.
(A) ACCESS TO INFORMATION. Westwood shall, upon reasonable notice,
afford IMCO at all reasonable times access to Westwood'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 Westwood to
provide IMCO with access to the books and records of Westwood relating to any
other accounts other than the Funds.
(B) CONFIDENTIALITY. Westwood, and its officers, employees and
authorized representatives, shall treat confidentially and as proprietary
information of the Company all records and information relative to the Company
and prior, present or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably withheld and may not be
withheld where Westwood may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company.
(C) PRIVACY POLICY. Westwood 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. Westwood agrees that it will promptly notify IMCO
in the event that Westwood 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. Westwood 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 Westwood's business activities.
(G) SHAREHOLDER MEETING EXPENSES. In the event that the Company shall
be required to call a meeting of shareholders solely due to actions involving
Westwood, including, without limitation, a change of control of Westwood,
Westwood shall bear all reasonable expenses associated with such shareholder
meeting.
11. MISCELLANEOUS.
(A) NOTICES. All notices or other communications given under this
Agreement shall be made by guaranteed overnight delivery, telecopy or certified
mail; notice is effective when received. Notice shall be given to the parties at
the following addresses:
IMCO: USAA Investment Management Company
0000 Xxxxxxxxxxxxxx Xxxx, X-X0-X
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Securities Counsel & Compliance Dept.
Westwood: Westwood Management Corp.
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx Xxxxx, Executive Vice President
(B) SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors.
(C) GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Texas, without giving effect to the conflicts of
laws principles thereof, and in accordance with the 1940 Act. To the extent that
the applicable laws of the State of Texas conflict with the applicable
provisions of the 1940 Act, the latter shall control.
(D) COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(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 Westwood 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/ Xxxx X. Xxxxxx
-----------------------------
Name: Xxxx X. Xxxxxx
Title: Authorized Signatory
Attest: WESTWOOD MANAGEMENT CORPORATION
By: /s/ Xxxxxx X. Xxx By: /s/ Xxxxx X. Xxxxx
------------------------- -----------------------------
Name: Xxxxxx X. Xxx Name: Xxxxx X. Xxxxx
Title: Vice President - Title: President & COO
Operations & Compliance
SCHEDULE A
USAA VALUE FUND
SCHEDULE B1
FEES
FUND ACCOUNT RATE PER ANNUM OF THE AVERAGE DAILY NET
------------ ASSETS OF THE FUND ACCOUNT
---------------------------------------
USAA Value Fund 0.20% - for the first $250 million of the
Fund Account
0.18% - for the portion of the Fund
Account in excess of $250 million
-------------------
1 USAA and Westwood agree that each of them will treat as confidential all
facts, circumstances, and information relating to the fee schedule herein
("Confidential Information") and that they will not disclose this Information to
any third parties except (i) to their legal advisors, (ii) with the prior
written consent of the other party, (iii) as required by law, (iv) as necessary
to gain or retain regulatory approvals, or (v) if such information is in the
public domain.
SCHEDULES AMENDED JULY 12, 2003
