1
Exhibit 23(d)(1)
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT SUBADVISORY AGREEMENT (the "Agreement"), by and between
MARKET STREET INVESTMENT MANAGEMENT COMPANY, a Pennsylvania corporation (the
"Adviser"), and MARKET STREET FUND, a Delaware business trust (the "Fund"), made
as of this ___ day of _____________, 200__, which is the date that Market Street
Fund, Inc., a Maryland corporation, reorganizes and redomesticates into the
Fund.
WHEREAS, the Fund is a series-type, open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), that currently consists of eleven investment portfolios (each, a
"Portfolio"), each such Portfolio having its own investment objective(s); and
WHEREAS; the Fund issues a separate series of shares for each Portfolio, which
shares represent fractional undivided interests in the Portfolio; and
WHEREAS, the Adviser is engaged principally in rendering investment advisory
services and is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Fund desires to retain the Adviser to provide or to arrange to
provide overall management of the Fund's Portfolios, including, but not limited
to, investment advisory and management services, in the manner and on the terms
and conditions set forth in this Agreement; and
WHEREAS, the Adviser is willing to provide or to arrange to provide, investment
advisory and management services to the Fund and the Fund's Portfolios on the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants
contained in this Agreement, the Fund and Adviser hereby agree as follows:
1. APPOINTMENT OF ADVISER. The Fund hereby appoints the Adviser to provide
investment advisory and management services for the Portfolios specified in an
appendix to this Agreement (each, a "Portfolio"), as this appendix may be
amended from time to time under this Agreement ("Appendix A"). Pursuant to this
Agreement and subject to the oversight and supervision by Fund's Board of
Trustees (the "Board"), the Adviser shall manage the investment and
reinvestment, or arrange for the investment and reinvestment of each Portfolio's
assets.
2. ACCEPTANCE OF APPOINTMENT BY ADVISER. The Adviser hereby accepts the
appointment by the Fund in the foregoing capacity and agrees, at the Adviser's
own expense, to render the services set forth herein and to provide the office
space, furnishings, equipment, and personnel required by the Adviser to perform
these services on the terms and for the compensation provided in this Agreement.
2
3. SERVICES TO BE PROVIDED BY ADVISER. In particular, the Adviser shall
furnish continuously an investment program for the Portfolio and shall determine
from time to time in the Adviser's discretion the securities and other
investments to be purchased or sold or exchanged and what portions of the
Portfolio shall be held in various securities, cash, or other investments. In
this connection, the Adviser shall provide the Fund's Board and officers, with
any reports and documentation as the Adviser, and the Fund's Board and officers
shall reasonably request regarding the Adviser's management of the Portfolio
assets. The Adviser shall not delegate any of the Adviser's duties under this
Agreement to any other Adviser without the consent and approval of the Fund's
Board and a majority of those trustees who are not parties to this Agreement or
"interested persons" of any party; provided, that, in the event the Adviser is
authorized to so delegate, the Adviser shall retain overall responsibility for
these delegated powers and functions and any and all obligations and liabilities
in connection therewith.
4. COMPLIANCE BY ADVISER WITH PORTFOLIO POLICIES AND APPLICABLE LAW. The
Adviser shall carry out the Adviser's responsibilities under this Agreement in
compliance with: (a) a Portfolio's investment objective, policies, and
restrictions, as set forth in the Fund's current registration statement, as
amended from time to time; (b) any policies or directives as the Fund's Board
may from time to time establish or issue and communicate to the Adviser in
writing; and (c) applicable law and related regulations. The Fund shall promptly
notify the Adviser in writing of changes to (a) or (b) above and shall notify
the Adviser in writing of changes to (c) above promptly after the Fund becomes
aware of these changes.
5. ADVISER'S DUTIES REGARDING PORTFOLIO TRANSACTIONS.
(a) PLACEMENT OF ORDERS. The Adviser shall take all actions the Adviser
considers necessary to implement the investment policies of the
Portfolio, and, in particular, to place all orders for the purchase or
sale of securities or other investments for the Portfolio with brokers
or dealers the Adviser selects, and, to that end, the Adviser is
authorized as the Fund's agent to give instructions to the Fund's
custodian as to deliveries of securities or other investments and
payments of cash for a Portfolio's account. In connection with the
selection of brokers or dealers and the placement of purchase and sale
orders, the Adviser is directed at all times to seek to obtain best
execution and price within the policy guidelines determined by the
Fund's Board and set forth in the Fund's current registration statement.
(b) SELECTION OF BROKERS AND DEALERS. To the extent permitted by the
policy guidelines set forth in the Fund's current registration
statement, in the selection of brokers and dealers to execute portfolio
transactions, the Adviser is authorized to consider not only the
available prices and rates of brokerage commissions but also other
relevant factors, which may include, without limitation: the execution
capabilities of the brokers and dealers; the research, custody, and
other services provided by the brokers and dealers that the Adviser
believes will enhance the Adviser's general portfolio management
capabilities; the size of the transaction; the difficulty of execution;
the operational facilities of these brokers and dealers;
2
3
the risk to this broker or dealer of positioning a block of securities;
and the overall quality of brokerage and research services provided by
these brokers and dealers. In connection with the foregoing, the Adviser
is specifically authorized to pay those brokers and dealers who provide
brokerage and research services to the Adviser, a higher commission than
that charged by other brokers and dealers if the Adviser determines in
good faith that the amount of the commission is reasonable in relation
to the value of these services in terms of either the particular
transaction or in terms of the Adviser's overall responsibilities with
respect to the Portfolio and to any other client accounts or portfolios
that the Adviser advises. The execution of these transactions shall not
be considered to represent an unlawful breach of any duty created by
this Agreement or otherwise.
(c) SOFT DOLLAR ARRANGEMENTS. On an ongoing basis, but not less often
than annually, the Adviser shall identify and provide a written
description to the Fund of all "soft dollar" arrangements that the
Adviser maintains with respect to the Portfolio or with brokers or
dealers that execute transactions for the Portfolio. Prior to the
commencement of the active management of the Portfolio, and periodically
thereafter, but not less often than annually, the Adviser shall provide
the Fund with a written description of all arrangements with third
parties and other individuals, entities, brokers, or money management
firms that have or may receive or share in the payment of fees for
services in connection with securing or continuing this Agreement.
(d) AGGREGATED TRANSACTIONS. The Adviser also is authorized to aggregate
purchase and sale orders for securities held (or to be held) in the
Portfolio with similar orders being made on the same day for other
client accounts or portfolios that the Adviser manages. When an order is
so aggregated: (a) the actual prices applicable to the aggregated
transaction will be averaged, and the Portfolio and each other account
or portfolio participating in the aggregated transaction shall be
treated as having purchased or sold the Portfolio's portion of the
securities at this average price; and (b) all transaction costs incurred
in effecting the aggregated transaction shall be shared on a pro-rata
basis among the accounts or portfolios (including the Portfolio)
participating in the transaction. When recommending or effecting a
transaction in a particular security or investment for more than one
client account or portfolio (including the Portfolio), the Adviser may
allocate the recommendations or transactions among all accounts and
portfolios for whom the recommendation is made or transaction is
effected on a basis that the Adviser considers equitable. The Adviser
recognizes that in some cases this procedure may adversely affect the
size of the position obtainable for the Portfolio.
6. NON-EXCLUSIVITY OF ADVISER'S SERVICES. The Adviser's services under this
Agreement are not exclusive. The Adviser may provide the same or similar
services to other clients. The Adviser acknowledges that, except when
transactions for multiple clients are aggregated, transactions in a specific
security or other investment may not be recommended or executed at the same time
or price for all client accounts or portfolios (including the Portfolio) for
which that security or investment is recommended or executed. This Agreement
does not require the
3
4
Adviser to give priority to the Portfolio over other client accounts or
portfolios. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund or the Portfolio
or otherwise be deemed an agent of the Fund or the Portfolio.
7. DELEGATION OF PROXY VOTING RIGHTS. The Fund delegates the Fund's
discretionary authority to exercise voting rights with respect to the securities
and other investments in the Portfolio to the Adviser. The Adviser shall
exercise these voting rights unless and until the Adviser revokes this
delegation in writing. The Adviser may revoke this delegation at any time
without cause. The Adviser shall maintain and preserve a record, in an easily
accessible place for a period of not less than three (3) years, of the Adviser's
voting procedures, and of the Adviser's actual votes, and the Adviser shall
supply this record to the Adviser, or any authorized representative of the
Adviser, upon the written request of the Adviser or the Adviser's authorized
representative, as appropriate.
8. AFFILIATED BROKERS. The Adviser or any of the Adviser's affiliates may
act as broker in connection with the purchase or sale of securities or other
investments for the Portfolio, subject to: (a) the requirement that the Adviser
seek to obtain best execution and price within the policy guidelines determined
by the Fund's Board and set forth in the Fund's current registration statement;
(b) the provisions of the Investment Advisers Act of 1940, as amended (the
"Advisers Act"); (c) the provisions of the Securities Exchange Act of 1934, as
amended, including, but not limited to, Section 11(a) thereof; and (d) other
applicable provisions of law. These brokerage services are not within the scope
of the duties of the Adviser under this Agreement. Subject to the requirements
of applicable law and any procedures adopted by Fund's Board, the Adviser or the
Adviser's affiliate may receive brokerage commissions, fees, or other
remuneration from the Portfolio or the Fund for these services in addition to
the Adviser's fees for services under this Agreement.
9. CUSTODY. Nothing in this Agreement shall require the Adviser to take or
receive physical possession of cash, securities, or other investments of
the Portfolio.
10. REGISTRATION OF ADVISER. The Adviser is registered as an investment
adviser with the U.S. Securities and Exchange Commission under the Advisers Act.
The Adviser shall remain so registered throughout the term of this Agreement and
shall notify the Adviser immediately if the Adviser ceases to be so registered
as an investment adviser.
11. REPRESENTATIONS AND COVENANTS OF ADVISER.
(a) The Adviser: (a) is duly organized and validly existing under
Pennsylvania law with the power to own and possess the Adviser's
assets and carry on the Adviser's business as this business is now
being conducted; (b) has the authority to enter into and perform the
services contemplated by this Agreement; (c) is not prohibited by
the Investment Company Act of 1940, as amended (the "1940 Act"), or
the Advisers Act from performing the services contemplated by this
Agreement; (d) has met, and shall continue to seek to meet for the
duration of this Agreement, any other applicable federal or state
requirements, or the applicable requirements of any regulatory or
industry self-regulatory
4
5
agency, necessary to be met in order to perform the services
contemplated by this Agreement; and (e) shall promptly notify the
Fund of the occurrence of any event that would disqualify the
Adviser from serving as an investment adviser to an investment
company pursuant to Section 9(a) of the 0000 Xxx.
(b) The Adviser shall manage the amounts in a Portfolio in accordance
with the prospectus and statement of additional information, with
respect to the Portfolio, and in compliance with Section 817(h) of
the United States Internal Revenue Code of 1986, as amended (the
"Code"), to the extent applicable, and United States Treasury
Regulation Section 1.817-5; furthermore, the Adviser shall promptly
inform the Fund if any information in the prospectus or statement of
additional information, with respect to the Portfolio, or if any
action relating to the Adviser or the Adviser's services to the
Portfolio is (or will become) inaccurate, incomplete, or no longer
compliant with Code Section 817(h) or Section 1.817-5, supra.
12. REPRESENTATIONS AND COVENANTS OF THE FUND. The Fund: (a) is duly
organized and validly existing under Delaware law with the power to own and
possess the Fund's assets and carry on the Fund's business as this business is
now being conducted; (b) has the authority to enter into and perform the
services contemplated by this Agreement; and (c) represents that the Fund is
(and during the term of this Agreement, will remain) registered as an open-end
management investment company under the 1940 Act and that the Fund's shares
representing an interest in the Portfolio are (and during the term of this
Agreement will remain) registered under the Securities Act of 1933 and under any
applicable state securities laws.
13. ADVISER CODE OF ETHICS. The Adviser certifies that the Adviser has
adopted a written code of ethics complying with the requirements of Rule 17j-1
under the 1940 Act, and that the Adviser has instituted procedures reasonably
necessary to prevent Access Persons from violating the Adviser's code of ethics.
The Adviser will provide the Fund with a copy of that code, together with
evidence of the code's adoption. Within twenty (20) days of the end of each
calendar quarter during which this Agreement remains in effect, the president or
a vice president of the Adviser shall certify to the Fund that the Adviser has
complied with the requirements of Rule 17j-1 during the previous quarter and
that there have been no violations of the Adviser's code of ethics or, if a
violation has occurred, that appropriate action has been taken in response to
the violation; provided, that, no less frequently than annually, the appropriate
officer of the Adviser shall furnish a written report to the Adviser that
complies with the requirements of Rule 17j-1 with respect to these reports
regarding issues, material violations, and any related sanctions in connection
with the administration of the code of ethics, or as otherwise required pursuant
to Rule 17j-1. Upon written request of the Fund, the Adviser shall permit
representatives of the Fund to examine the reports (or summaries of the reports)
required to be made to the Adviser by Rule 17j-1(d)(1) and other records
evidencing enforcement of the code of ethics.
14. FEE PROVISIONS.
(a) FEE. For the services rendered, the facilities furnished, and the
expenses assumed by the Adviser, the Fund shall pay the Adviser
quarterly fees, in arrears,
5
6
based on the combined net assets of all Portfolios managed by the
Adviser, calculated daily at the annual rates specified with respect to
a Portfolio in an appendix to this Agreement, as this appendix may be
amended from time to time under this Agreement ("Appendix B"). The
Adviser's fee shall be accrued daily at 1/365th of the applicable annual
rate set forth in Appendix B. For the purpose of accruing compensation,
the net assets of a Portfolio shall be determined in the manner and on
the dates set forth in the Fund's current prospectus, and, on days on
which the net assets are not so determined, the net asset value
computation to be used shall be as determined on the immediately
preceding day on which the net assets were determined.
(b) SPECIAL FEE PROVISIONS. In the event of termination of this
Agreement with respect to a Portfolio, all compensation due through the
date of termination will be calculated on a pro-rated basis through the
date of termination and paid within thirty (30) business days of the
date of termination. During any period when the determination of net
asset value is suspended, the net asset value of the Portfolio as of the
last business day prior to the suspension shall for this purpose be
deemed to be the net asset value at the close of each succeeding
business day until the Portfolio's net asset value is again determined.
15. RECORDS.
(a) MAINTENANCE OF RECORDS. The Adviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under
the 1940 Act, all records relating to the Portfolio's investments that
are required to be maintained by the Fund pursuant to the requirements
of paragraphs (b)(5), (b)(6), (b)(7), (b)(9), (b)(10), and (f) of Rule
31a-1 under the 1940 Act.
(b) OWNERSHIP OF RECORDS. The Adviser agrees that all books and records
which the Adviser maintains for the Portfolio or the Fund are the Fund's
property and further agrees to surrender promptly to the Fund any books,
records, or information upon the Fund's request; provided, however, that
the Adviser may retain copies of the records. All the requested books
and records shall be made available, within five (5) business days of a
written request, to the Fund's accountants or auditors during regular
business hours at the Adviser's offices. The Fund or the Fund's
authorized representatives shall have the right to copy any records in
the possession of the Adviser that pertain to the Portfolio or the Fund.
These books, records, information, or reports shall be made available to
properly authorized government representatives consistent with state and
federal law and/or regulations. In the event of the termination of this
Agreement, all these books, records, or other information shall be
returned to the Fund. The Adviser agrees that the policies and
procedures the Adviser has established for managing the Portfolio,
including, but not limited to, all policies and procedures designed to
ensure compliance with federal and state regulations governing the
Adviser/client relationship and management and operation of the
Portfolio, shall be made
6
7
available for inspection by the Fund or either of their authorized
representatives not less frequently than annually.
16. CONFIDENTIALITY.
(a) NON-DISCLOSURE BY ADVISER. The Adviser agrees that the Adviser will
not disclose or use any records or confidential information obtained
pursuant to this Agreement in any manner whatsoever, except as
authorized in this Agreement or specifically by the Fund, or if this
disclosure is required by federal or state regulatory authorities.
(b) NON-DISCLOSURE EXCEPTIONS. The Adviser may disclose the investment
performance of the Portfolio and the Portfolio; provided, that the
disclosure does not reveal the identity of the Portfolio, or the Fund.
The Adviser may, however, disclose that the Fund and the Portfolio are
the Fund's clients; provided, that the disclosure does not reveal the
investment performance or the composition of the Portfolio.
17. LIMITATION OF LIABILITY OF ADVISER. In the absence of willful
misfeasance, bad faith, or gross negligence on the part of the Adviser or the
Adviser's officers, directors, or employees, or reckless disregard by the
Adviser of the Adviser's duties under this Agreement (together, "disabling
conduct"), the Adviser shall not be liable to the Portfolio or the Fund, or to
any shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding, or sale of any security, except to the
extent otherwise provided in Section 36(b) of the 1940 Act concerning loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services.
18. EFFECTIVENESS. This Agreement shall not become effective with respect to
a Portfolio until this Agreement is approved by the Fund's Board, including a
majority of trustees who are not parties to this Agreement or "interested
persons" of any party to this Agreement, and, to the extent required by law, a
majority of the outstanding shares of the Portfolio. Subject to receipt of all
necessary approvals, this Agreement shall be effective as of the date, and for
the term, provided in Appendix A with respect to a Portfolio.
19. TERMINATION. This Agreement may be terminated at any time with respect
to a Portfolio without the payment of any penalty, by the Fund's Board, or by
vote of a majority of the outstanding shares of the Portfolio, on sixty (60)
days written notice to the Adviser or by the Adviser, on sixty (60) days written
notice to the other. This Agreement shall automatically terminate in the event
of this Agreement's assignment.
20. AMENDMENT. This Agreement may be amended with respect to a Portfolio in
writing by the parties only if the amendment is specifically approved by: (a) a
majority of those trustees who are not parties to this Agreement or "interested
persons" of any party cast in person at a
7
8
meeting called for the purpose of voting on the Agreement's approval; and (b) if
required by applicable law, the vote of a majority of outstanding shares of the
affected Portfolio(s).
21. DEFINITIONS. The terms "assignment," "affiliated person," and
"interested person," when used in this Agreement, shall have the respective
meanings specified in Section 2(a) the 1940 Act. The term "majority of the
outstanding shares" means the lesser of (a) sixty-seven percent (67%) or more of
the shares present at a meeting if more than fifty percent (50%) of these shares
are present or represented by proxy or (b) more than fifty percent (50%) of the
outstanding shares.
24. GOVERNING LAW. This Agreement shall be construed in accordance with
Delaware law and applicable provisions of the Advisers Act and 1940 Act.
25. 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.
8
9
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
Market Street Investment Management Company
By:
----------------------------------------
Name: Xxxxx X. Xxxxx
Title: President
ATTEST:
----------------------------
Market Street Fund
By:
----------------------------------------
Name: Xxxxxxx Xxxxx
Title: President
ATTEST:
----------------------------
9
10
APPENDIX A
TO THE INVESTMENT ADVISORY AGREEMENT BETWEEN MARKET STREET
INVESTMENT MANAGEMENT COMPANY AND
MARKET STREET FUND
PORTFOLIO(s) EFFECTIVE DATE AND TERM
------------ -----------------------
All Pro Broad Equity Portfolio The effective date of this Agreement with
All Pro Large Cap Growth Portfolio respect to this Portfolio shall be the ___ day
All Pro Large Cap Value Portfolio of _____________, 200__. The term of this
All Pro Small Cap Growth Portfolio Agreement shall continue for two (2) years and
All Pro Small Cap Value Portfolio shall thereafter continue in effect from year to
Equity 500 Index Portfolio year so long as the Agreement's continuance is
International Portfolio specifically approved at least annually by: (a)
Balanced Portfolio the Fund's Board, or by the vote of a majority
Money Market Portfolio of the outstanding shares of the Portfolio, and
Mid Cap Growth Portfolio (b) a majority of those trustees who are not
Bond Portfolio parties to this Agreement or interested persons
of any party cast in person at a meeting called
for the purpose of voting on the Agreement's
approval.
Market Street Investment Management Company
By: Date:
--------------------------------- -----------------------------
Name: Xxxxx X. Xxxxx
Title: President
Market Street Fund
By: Date:
--------------------------------- -----------------------------
Name: Xxxxxxx Xxxxx
Title: President
X-0
00
XXXXXXXX X
TO THE INVESTMENT ADVISORY AGREEMENT BETWEEN MARKET STREET
INVESTMENT MANAGEMENT COMPANY AND
MARKET STREET FUND
PORTFOLIOS FEE
---------- ---
(as a %age of the average daily net assets, calculated
as described in Section 14 of this Agreement)
All Pro Broad Equity 0.75% on the first $200 million, and 0.70% on assets in
excess of $200 million
All Pro Large Cap Growth 0.70% on the first $200 million, and 0.65% on assets in
excess of $200 million
All Pro Large Cap Value 0.70% on the first $200 million, and 0.65% on assets in
excess of $200 million
All Pro Small Cap Growth 0.90% on the first $200 million, and 0.85% on assets in
excess of $200 million
All Pro Small Cap Value 0.90% on the first $200 million, and 0.85% on assets in
excess of $200 million
Equity 500 Index 0.24%
International 0.75% on the first $500 million, and 0.70% on assets in
excess of $500 million
Mid Cap Growth 0.75% on the first $200 million, and 0.70% on assets
excess of $200 million
Balanced 0.55%
Bond 0.40%
Money Market 0.25%
Market Street Investment Management Company
By: Date:
--------------------------------- -----------------------------
Name: Xxxxx X. Xxxxx
Title: President
Market Street Fund
By: Date:
--------------------------------- -----------------------------
Name: Xxxxxxx Xxxxx
Title: President
B-1
