Exhibit (d)(16)
INTERIM SUB-ADVISORY AGREEMENT
(International Equity Fund)
AGREEMENT made as of September 25, 2000 between Firstar Investment
Research & Management Company, LLC ("FIRMCO"), a Wisconsin corporation (the
"Adviser"), and Xxxx Xxxxxx Inc., a New York corporation ("Sub-Adviser").
WHEREAS, Mercantile Mutual Funds, Inc. (the "Fund") is registered as
an open-end, management investment company under the Investment Company Act of
1940, as amended (the "1940 Act");
WHEREAS, the Adviser has been appointed investment adviser to the
Fund's International Equity Portfolio (the "Portfolio");
WHEREAS, the Adviser previously has retained Sub-Adviser to assist it
in the provision of a continuous investment program for the Portfolio and Sub-
Adviser currently is providing such assistance pursuant to a Sub-Advisory
Agreement dated as of August 29, 1996;
WHEREAS, Old Mutual plc is this day acquiring, a controlling interest
in United Asset Management Corporation, which in turn owns a controlling
interest in Sub-Adviser (the "Transaction");
WHEREAS, the Adviser desires to retain Sub-Adviser to assist in the
provision of a continuous investment program for the Portfolio following the
Transaction and Sub-Adviser is willing to do so; and
WHEREAS, the Board of Directors of the Fund has approved this
Agreement and 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 Sub-Adviser to act as
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sub-adviser to the Portfolio as permitted by the Adviser's Advisory Agreement
with the Fund pertaining to the Portfolio. Intending to be legally bound, 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 the Fund's
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Board of Directors, Sub-Adviser will assist the Adviser in providing a
continuous investment program for the Portfolio, including investment research
and management with respect to all securities and investments and cash
equivalents in the Portfolio. Sub-Adviser will provide services under this
Agreement in accordance with the Portfolio's investment objective, policies and
restrictions as
stated in the Portfolio's prospectus and resolutions of the Fund's Board of
Directors applicable to the Portfolio.
Without limiting the generality of the foregoing, Sub-Adviser further
agrees that it:
(a) will prepare, subject to the Adviser's approval, lists of
foreign countries for investment by the Portfolio and determine from
time to time what securities and other investments will be purchased,
retained or sold for the Portfolio, including, with the assistance of
the Adviser, the Portfolio's investments in futures and forward
currency contracts;
(b) will manage in consultation with the Adviser the Portfolio's
temporary investments in securities;
(c) will place orders pursuant to its investment determinations
for the Portfolio either directly with the issuer or with any broker
or dealer;
(d) will not purchase shares of the Portfolio for itself or for
accounts with respect to which it exercises sole investment discretion
in connection with such transactions except as permitted by the Fund's
Board of Directors or by federal, state and local law;
(e) will manage the Portfolio's overall cash position, and
determine from time to time what portion of the Portfolio's assets
will be held in different currencies;
(f) will provide the Adviser with foreign broker research, a
quarterly review of international economic and investment
developments, and occasional "White Papers" on international
investment issues;
(g) will attend regular business and investment-related meetings
with the Fund's Board of Directors and the Adviser if requested to do
so by the Fund and/or the Adviser; and
(h) will maintain books and records with respect to the
securities transactions for the Portfolio, furnish to the Adviser and
the Fund's Board of Directors such periodic and special reports as
they may request with respect to the Portfolio, and provide in advance
to the Adviser all reports to the Board of Directors for examination
and review within a reasonable time prior to the Fund's Board
meetings.
3. Covenants by Sub-Adviser. Sub-Adviser agrees with respect to the
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services provided to the Portfolio that it:
(a) will conform with all Rules and Regulations of the
Securities and Exchange Commission;
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(b) will telecopy trade information to the Adviser on the first
business day following the day of the trade and cause broker
confirmations to be sent directly to the Adviser; and
(c) will treat confidentially and as proprietary information of
the Fund all records and other information relative to the Fund 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 Fund, which approval shall not be
unreasonably withheld and may not be withheld and will be deemed
granted where 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
the Fund).
4. Services Not Exclusive. The services furnished by Sub-Adviser
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hereunder are deemed not to be exclusive, and nothing in this Agreement shall
(i) prevent Sub-Adviser or any affiliated person (as defined in the 0000 Xxx) of
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 Portfolio or (ii)
limit or restrict 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 Portfolio 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, that Sub-Adviser agrees that it will not undertake any
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activities which, in its reasonable judgment, will adversely affect the
performance of its obligations to the Portfolio under this Agreement.
5. Portfolio Transactions. Investment decisions for the Portfolio
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shall be made by Sub-Adviser independently from those for any other investment
companies and accounts advised or managed by Sub-Adviser. The Portfolio 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 Portfolio and/or another investment
company or account, the transaction will be averaged as to price, and available
investments allocated as to amount, in a manner which Sub-Adviser believes to be
equitable to the Portfolio and such other investment company or account. In
some instances, this investment procedure may adversely affect the price paid or
received by the Portfolio or the size of the position obtained or sold by the
Portfolio. To the extent permitted by law, Sub-Adviser may aggregate the
securities to be sold or purchased for the Portfolio with those to be sold or
purchased for other investment companies or accounts in order to obtain best
execution.
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 Portfolio's policies and restrictions regarding brokerage allocations.
Sub-Adviser shall place orders pursuant to its investment determinations for the
Portfolio either directly with the issuer or with any broker or dealer selected
by Sub-Adviser. In executing portfolio transactions and selecting brokers or
dealers, Sub-Adviser shall use its reasonable best efforts to seek the most
favorable execution of orders, after taking into account all factors Sub-Adviser
deems relevant, including the breadth of the market in
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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, 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 Portfolio and/or
other accounts over which Sub-Adviser or any of its affiliates exercises
investment discretion. 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 Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if 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 Sub-Adviser's overall responsibilities to the Portfolio and to
the Fund. In no instance will portfolio securities be purchased from or sold to
the Adviser, Sub-Adviser, or the Portfolio's principal underwriter, or any
affiliated person thereof except as permitted by the Securities and Exchange
Commission.
6. Books and Records. In compliance with the requirements of Rule
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31a-3 under the 1940 Act, Sub-Adviser hereby agrees that all records which it
maintains for the Fund are the property of the Fund and further agrees to
surrender promptly to the Fund any of such records upon the Fund's request.
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act.
7. Expenses. During the term of this Agreement, Sub-Adviser will pay
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all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities, commodities and other investments
(including brokerage commissions and other transaction charges, if any)
purchased for the Portfolio.
8. Compensation.
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(a) For the services provided and the expenses assumed with
respect to the Portfolio pursuant to this Agreement, Sub-Adviser will be
entitled to a fee, computed daily and payable monthly, from Adviser, calculated
at the annual rate of .75% of the first $50 million of the Portfolio's average
daily net assets, plus .50% of the next $50 million of average daily net assets,
plus .25% of average daily net assets in excess of $100 million.
(b) If the Adviser reimburses the Fund, pursuant to Section 8(b)
of the Advisory Agreement with respect to the Portfolio, Sub-Adviser will bear
its share of the amount of such reimbursement by waiving fees otherwise payable
to it hereunder on a proportionate basis to be determined by comparing the
aggregate fees otherwise payable to it hereunder with respect to the Portfolio
to the aggregate fees otherwise payable by the Fund to the Adviser under the
Advisory Agreement with respect to the Portfolio.
(c) The fees payable by the Adviser under this Section 8 will be
maintained in an interest-bearing escrow account on behalf of the Portfolio
pursuant to an Escrow Agreement by and among the Fund, the Adviser, Sub-Adviser
and the Fund's custodian dated as of
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the date hereof. If the shareholders of the Portfolio approve a sub-advisory
agreement between the Adviser and Sub-Adviser within 150 days of the date of
this Agreement, the Fund, the Adviser and Sub-Adviser shall give mutual written
directions to the Escrow Agent to disburse the full amount held in the escrow
account, including interest earned, on behalf of the Portfolio to the Sub-
Adviser. If shareholders of the Portfolio do not approve a sub-advisory
agreement between the Adviser and Sub-Adviser within 150 days of the date of
this Agreement, then the Escrow Agent shall disburse to the Sub-Adviser out of
the escrow account the lesser of (a) the Sub-Adviser's costs incurred in
performing this Agreement, plus interest earned on such amount while in escrow,
or (b) the total amount in the escrow account, plus interest earned.
9. Standard of Care; Limitation of Liability. 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 Sub-
Adviser in the absence of bad faith, willful misconduct, gross negligence or
reckless disregard of its duties.
10. Reference to Sub-Adviser. Neither the Adviser nor any affiliate
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or agent of it shall make reference to or use the name of Sub-Adviser or any of
its affiliates, or any of their clients, except references concerning the
identity of and services provided by Sub-Adviser to the Portfolio, which
references shall not differ in substance from those included in the current
registration statement pertaining to the Portfolio, this Agreement and the
Advisory Agreement between the Adviser and the Fund with respect to the
Portfolio, in any advertising or promotional materials without the prior
approval of Sub-Adviser, which approval shall not be unreasonably withheld or
delayed. The Adviser hereby agrees to make all reasonable efforts to cause the
Fund and any affiliate thereof to satisfy the foregoing obligation.
11. Duration and Termination. This Agreement shall be effective as
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of the date hereof and, unless sooner terminated as provided herein, shall
continue for not more than 150 days. This Agreement is terminable at any time
without the payment of any penalty, on not more than 10 days' written notice to
the Sub-Adviser, by the Fund's Board of Directors or by vote of the lesser of
(a) 67% of the shares of the Portfolio represented at a meeting if holders of
more than 50% of the outstanding shares of the Portfolio are present in person
or by proxy or (b) more than 50% of the outstanding shares of the Portfolio.
This Agreement will terminate automatically in the event of its assignment (as
defined in the 1940 Act).
12. 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 shall be
effective with respect to the Portfolio until approved by the vote of a majority
of the outstanding voting securities of the Portfolio.
13. Notice. Any notice, advice or report to be given pursuant to
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this Agreement shall be delivered or mailed:
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To Sub-Adviser at:
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000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
To the Adviser at:
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One Firstar Plaza
7th and Xxxxxxxxxx Xxxxxxx
Xxxxx 0000
Xx. Xxxxx, XX 00000
To the Fund at:
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c/o W. Xxxxx XxXxxxxx, Esq.
Drinker Xxxxxx & Xxxxx LLP
One Xxxxx Square
00/xx/ xxx Xxxxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000-0000
14. 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.
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.
15. 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.
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.
FIRSTAR INVESTMENT RESEARCH &
MANAGEMENT COMPANY, LLC
Attest:
By: /s/ Xxxxx X. Xxxxxx
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XXXX XXXXXX INC.
Attest:
signature illegible By: signature illegible
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