Exhibit (d) (5)
INTERIM SUB-ADVISORY AGREEMENT
(International Equity Fund)
AGREEMENT made as of immediately after the close of business on
January 26, 2001 between MERCANTILE-SAFE DEPOSIT & TRUST COMPANY (the
"Adviser"), a Maryland trust company, and XXXXXX XXXXXXX XXXX XXXXXX INVESTMENT
MANAGEMENT LIMITED (the "Sub-Adviser"), a United Kingdom corporation, registered
under the U.S. Investment Advisers Act of 1940, as amended, and a member of the
Investment Management Regulatory Organization ("IMRO") and registered by IMRO in
the conduct of its affairs.
WHEREAS, M.S.D.&T. Funds, Inc. ("M.S.D.&T.") is registered as an open-
end, management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Adviser has been appointed investment adviser to
M.S.D.&T.'s International Equity Fund (the "Fund"); and
WHEREAS, the Adviser desires to retain the Sub-Adviser to assist it in
the provision of a continuous investment program for the Fund Account (as
hereinafter defined) as permitted by the Adviser's Advisory Agreement with
M.S.D.&T. pertaining to the Fund, and the Sub-Adviser is willing to do so; and
WHEREAS, the Board of Directors of the Fund has approved this
Agreement, and the Sub-Adviser is willing to furnish such services upon the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Adviser hereby appoints the Sub-Adviser to act
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as sub-adviser to the Fund for that portion of the assets of the Fund which the
Adviser, as fiduciary for M.S.D.&T., determines to assign to the Sub-Adviser
(such assets being referred to as the "Fund Account"). It is understood that
the Fund Account may consist of all, a portion of or none of the assets of the
Fund, and that the Adviser has the right to allocate and reallocate such assets
to the Fund Account at any time, and from time to time, upon such notice to the
Sub-Adviser as, in the Adviser's opinion, may be reasonably necessary to ensure
orderly management of the Fund Account or the Fund. Intending to be legally
bound, the Sub-Adviser accepts such appointment and agrees to render the
services herein set forth for the compensation herein provided.
2. Sub-Advisory Services. Subject to the supervision of M.S.D.&T.'s
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Board of Directors, the Sub-Adviser will assist the Adviser in providing a
continuous investment program for the Fund Account, including research and
management with respect to all securities and investments and cash equivalents
held in the Fund Account. The Sub-Adviser will provide
services under this Agreement in accordance with the Fund's investment
objective, policies and restrictions as stated in the Fund's prospectus and
statement of additional information and resolutions of M.S.D.&T.'s Board of
Directors applicable to the Fund. The Adviser shall provide the Sub-Adviser with
copies of such prospectus, statement of additional information and resolutions
as the same become available from time to time.
Without limiting the generality of the foregoing, the Sub-Adviser
further agrees that it will:
(a) prepare, subject to the Adviser's approval, lists of foreign
countries for investment by the Fund Account, determine from time to time
what securities and other investments will be purchased, retained or sold
for the Fund Account, including the Fund Account's investments in futures,
spot and forward currency contracts, and make deposits with appropriate
counterparties; provided, however, that the Sub-Adviser shall not be
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responsible for taking action with respect to any proxies, notices, reports
or other communications relating to any of the Fund Account's portfolio
securities;
(b) manage in consultation with the Adviser the Fund Account's
temporary investments in securities;
(c) place orders for the Fund Account either directly with the
issuer or with any broker or dealer;
(d) manage the Fund Account's overall cash position, and
determine from time to time what portion of the Fund Account's assets will
be held in different currencies;
(e) provide the Adviser with a quarterly review of international
economic and investment developments and, if any are produced by the Sub-
Adviser, occasional "White Papers" on international investment issues;
(f) under normal circumstances, attend not more than two regular
business and investment-related meetings in the United States each year
with M.S.D.&T.'s Board of Directors and the Adviser if requested to do so
by M.S.D.&T. and/or the Adviser; and
(g) maintain books and records with respect to the securities
transactions for the Fund Account, furnish to the Adviser and M.S.D.&T.'s
Board of Directors such periodic and special reports as they may reasonably
request with respect to the Fund Account, and provide in advance to the
Adviser all reports to the Board of Directors for examination and review
within a reasonable time prior to M.S.D.&T. Board meetings. The Adviser
hereby undertakes to provide the Sub-Adviser with at least fourteen days
prior written notice of the date, time and location of all M.S.D.&T. Board
meetings pertaining to the Fund Account.
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3. Subcontractors. It is understood that the Sub-Adviser may from
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time to time engage or associate itself with such person or persons as the Sub-
Adviser may believe to be particularly fitted to assist the Sub-Adviser in the
performance of certain ministerial or administrative services required by this
Agreement; provided, however, that such person or persons shall have been
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approved by the Board of Directors of M.S.D.&T., that the compensation of such
person or persons shall be paid by the Sub-Adviser and that the Sub-Adviser
shall be as fully responsible to the Adviser and M.S.D.&T. for the acts and
omissions of any subcontractor as it is for its own acts and omissions.
4. Covenants by Sub-Adviser. The Sub-Adviser agrees with respect to
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the services provided to the Fund that it:
(a) will conform with all Rules and Regulations of the Securities
and Exchange Commission ("SEC") applicable to it;
(b) will provide by facsimile trade information to the Adviser on
the first business day following the day of the trade; and
(c) will treat confidentially and as proprietary information of
M.S.D. & T. all records and other information relative to the Fund, the
Fund Account 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 M.S.D. & T., which approval shall not be
unreasonably withheld and may not be withheld and will be deemed granted
where the Sub-Adviser 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
M.S.D. & T.).
5. Services Not Exclusive.
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(a) The services furnished by the Sub-Adviser hereunder are deemed
not to be exclusive, and nothing in this Agreement shall (i) prevent the Sub-
Adviser or any affiliated person (as defined in the 0000 Xxx) of the Sub-Adviser
from acting as investment adviser or manager for any other person or persons,
including other management investment companies with investment objectives and
policies the same as or similar to those of the Fund or (ii) limit or restrict
the Sub-Adviser or any such affiliated person from buying, selling or trading
any securities or other investments (including any securities or other
investments which the Fund is eligible to buy) for its or their own accounts or
for the accounts of others for whom it or they may be acting; provided, however,
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that the Sub-Adviser agrees that it will not undertake any activities which, in
its reasonable judgment, will adversely affect the performance of its
obligations to the Fund under this Agreement.
(b) Nothing contained herein, however, shall prohibit the Sub-Adviser
from advertising or soliciting the public generally with respect to products or
services, regardless of whether such advertisement or solicitation may include
prior, present or potential shareholders of M.S.D. & T.
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6. Portfolio Transactions. Investment decisions for the Fund Account
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shall be made by the Sub-Adviser independently from those for any other
investment companies and accounts advised or managed by the Sub-Adviser. The
Fund Account and such investment companies and accounts may, however, invest in
the same securities. When a purchase or sale of the same security is made at
substantially the same time on behalf of the Fund Account and/or another
investment company or account, the transaction will be allocated in a manner
which the Sub-Adviser believes to be equitable to the Fund Account and such
other investment company or account. In some instances, this investment
procedure may adversely affect the price paid or received by the Fund Account or
the size of the position obtained or sold by the Fund Account. To the extent
permitted by law, the Sub-Adviser may aggregate the securities to be sold or
purchased for the Fund Account with those to be sold or purchased for other
investment companies or accounts in order to obtain best execution.
The Sub-Adviser shall place orders for the purchase and sale of
portfolio securities and will solicit broker-dealers to execute transactions in
accordance with the Fund's policies and restrictions regarding brokerage
allocations. The Sub-Adviser shall place orders pursuant to its investment
determinations for the Fund Account either directly with the issuer or with any
broker or dealer selected by the Sub-Adviser. In executing portfolio
transactions and selecting brokers or dealers, the Sub-Adviser shall use its
reasonable best efforts to seek the most favorable execution of orders, after
taking into account all factors the Sub-Adviser deems relevant, including the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, both for the specific transaction and
on a continuing basis. Consistent with this obligation, the Sub-Adviser may, to
the extent permitted by law, purchase and sell portfolio securities to and from
brokers and dealers who provide brokerage and research services (within the
meaning of Section 28(e) of the Securities Exchange Act of 1934) to or for the
benefit of the Fund Account and/or other accounts over which the Sub-Adviser or
any of its affiliates exercises investment discretion. The Sub-Adviser is
authorized to pay to a broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction for the Fund Account
which is in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction if the Sub-Adviser determines in
good faith that such commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Sub-Adviser's overall
responsibilities to the Fund and to M.S.D.&T. In no instance will portfolio
securities be purchased from or sold to the Sub-Adviser, or the Fund's principal
underwriter, or any affiliated person thereof except as permitted by the
Securities and Exchange Commission.
7. Books and Records. In compliance with the requirements of Rule
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31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for M.S.D.&T. are the property of M.S.D.&T. and further agrees to
surrender promptly to M.S.D.&T. any of such records upon M.S.D.&T.'s request;
provided, however, that the Sub-Adviser may make and retain photocopies of such
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records in order to comply with applicable regulatory requirements. The Sub-
Adviser further agrees to preserve for the periods prescribed
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by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule
31a-1 under the 1940 Act.
8. Expenses. During the term of this Agreement, the Sub-Adviser will
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pay all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities, commodities and other investments
(including, but not limited to, foreign taxes, brokerage commissions and other
transaction charges, if any) purchased for the Fund Account.
9. Compensation. For the services provided and the expenses assumed
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with respect to the Fund Account pursuant to this Agreement, the Sub-Adviser
will be entitled to a fee, computed daily and payable quarterly, from the
Adviser, calculated at the annual rate of 0.45% of the average daily net assets
in the Fund Account.
10. Standard of Care; Limitation of Liability. The Sub-Adviser shall
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exercise due care and diligence and use the same skill and care in providing its
services hereunder as it uses in providing services to other investment
companies, but shall not be liable for any action taken or omitted by the Sub-
Adviser in the absence of bad faith, willful misconduct, negligence or reckless
disregard of its duties. Notwithstanding the foregoing, it is agreed that the
relative investment performance of the Fund Account shall not constitute a
breach by the Sub-Adviser of these obligations.
The Sub-Adviser shall not be liable for (i) any acts of the Adviser or
any other sub-adviser to the Fund with respect to the portion of the assets of
the Fund not managed by the Sub-Adviser, except for acts of the Adviser or any
other sub-adviser which result from the negligent acts or omissions of the Sub-
Adviser (or acts or omissions of the Sub-Adviser that constitute bad faith,
willful misconduct or reckless disregard of its duties), and (ii) acts of the
Sub-Adviser (other than acts or omissions of the Sub-Adviser that constitute bad
faith, willful misconduct, negligence or reckless disregard of its duties),
which result from the acts of the Adviser, including, but not limited to, a
failure of the Adviser to provide accurate and current information with respect
to any records maintained by the Adviser or any other sub-adviser to the Fund,
which records are not also required to be maintained by the Sub-Adviser. The
Adviser agrees that Sub-Adviser shall manage the Fund Account as if it was a
separate operating Fund and shall comply with the provisions of this Agreement
(including, but not limited to the Fund's investment objective, guidelines,
policies and restrictions and the qualification requirements of the Fund as a
regulated investment company under the Internal Revenue Code) and the provisions
of the 1940 Act with respect to the Fund Account without regard to those assets
of the Fund not allocated to the Sub-Adviser. The Adviser shall indemnify the
Sub-Adviser from any liability arising from the conduct of the Adviser and/or
any other sub-adviser with respect to the portion of the Fund's assets not
allocated to the Sub-Adviser, except for liability arising from acts of the
Adviser or any other sub-adviser which result from the negligent acts or
omissions of the Sub-Adviser (or acts or omissions of the Sub-Adviser that
constitute bad faith, willful misconduct or reckless disregard of its duties).
11. Reference to Sub-Adviser. Neither the Adviser nor any affiliate
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or agent of the Adviser shall make reference to or use the name of the Sub-
Adviser or any of its affiliates,
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or any of their clients, except references concerning the identity of and
services provided by the Sub-Adviser to the Fund, which references shall not
differ in substance from those included in the current registration statement
pertaining to the Fund, this Agreement and the Advisory Agreement between the
Adviser and M.S.D.&T. with respect to the Fund, in any advertising or
promotional materials without the prior approval of the Sub-Adviser, which
approval shall not be unreasonably withheld or delayed. The Adviser hereby
agrees to make all reasonable efforts to cause M.S.D.&T. and any affiliate
thereof to satisfy the foregoing obligation.
12. Duration and Termination. Unless sooner terminated, this
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Agreement shall continue until June 25, 2001. This Agreement is terminable at
any time without penalty, on 60 days' notice, by the Adviser, the Sub-Adviser or
by M.S.D.&T.'s Board of Directors or by vote of a majority of the outstanding
voting securities of the Fund. This Agreement will also terminate automatically
on the date a superceding Agreement is approved by vote of a majority of the
outstanding voting securities of the Fund. (As used in this Agreement, the term
"majority of the outstanding voting securities" shall have the same meaning as
ascribed to such term in the 1940 Act.)
13. Amendment of This Agreement. No provision of this Agreement may
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be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement for which
approval by the outstanding voting securities of the Fund is required under the
1940 Act shall be effective until approved by vote of a majority of the
outstanding voting securities of the Fund.
14. Notice. Any notice, advice or report to be given pursuant to
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this Agreement shall be delivered or mailed:
To Sub-Adviser at:
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00 Xxxxx Xxxxxx
Xxxxxx Xxxxx
Xxxxxx X00 0XX
England
Attention: Compliance Manager
To the Adviser at:
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Xxx Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
To M.S.D.&T. at:
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Xxx Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
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15. Miscellaneous. The captions in this Agreement are included for
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convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. 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.
The Sub-Adviser may perform its services through its affiliates,
employees, officers or agents, and the Adviser shall not be entitled to the
advice, recommendation or judgment of any specific person; provided, however,
that the persons identified in the prospectus of the Fund shall perform the
portfolio management duties described therein until the Sub-Adviser provides the
Adviser with reasonable notice under the circumstances that one or more other
affiliates, employees, officers or agents identified in such notice shall assume
such duties as of a specific date.
The Sub-Adviser warrants that it has delivered, and the Adviser
acknowledges that it has received, a copy of (i) Part II of the Sub-Adviser's
Form ADV as filed with the SEC; and (ii) the Sub-Adviser's Terms of Business,
which are required to be provided by the Sub-Adviser's IMRO Rules and which
govern the Sub-Adviser's activities in the United Kingdom.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and shall be governed by
Maryland law.
16. Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
MERCANTILE-SAFE DEPOSIT & TRUST
COMPANY
By: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
Senior Vice President
XXXXXX XXXXXXX XXXX XXXXXX
INVESTMENT MANAGEMENT LIMITED
By: /s/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxx
Managing Director
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