Exhibit (d)(4)
SUB-ADVISORY AGREEMENT
(Capital Opportunities Fund)
AGREEMENT made as of July 5, 2000 between MERCANTILE-SAFE DEPOSIT &
TRUST COMPANY (the "Adviser"), a Maryland trust company, and DELAWARE MANAGEMENT
COMPANY (the "Sub-Adviser"), a series of Delaware Management Business Trust, a
Delaware business trust.
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 Capital Opportunities 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 and the Sub-
Adviser is willing to do so; and
WHEREAS, the Board of Directors of the Fund and the Fund's sole
shareholder 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 as permitted by the Adviser's Advisory Agreement with
M.S.D. & T. pertaining to 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. &
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T.'s Board of Directors, the Sub-Adviser will assist the Adviser in providing a
continuous investment program for the Fund, including research and management
with respect to all securities and investments and cash equivalents in the Fund.
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 hereby
undertakes to 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) determine from time to time what securities and other
investments will be purchased, retained or sold for the Fund, including,
with the assistance of the Adviser, each initial investment by the Fund in
any particular type of option or futures contract; provided, however, that
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the Sub-Adviser shall not be responsible for taking action with respect to
any proxies, notices, reports or other communications relating to any of
the Fund's portfolio securities;
(b) manage the Fund's temporary investments in securities,
including consulting with the Adviser with respect to any temporary
investments in securities not rated in the top rating category by one or
more nationally recognized statistical rating organizations or not deemed
by the Sub-Adviser to be of comparable quality;
(c) place orders for the Fund either directly with issuers of
securities or with any broker or dealer;
(d) manage the Fund's overall cash position;
(e) attend regular business and investment-related meetings 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
(f) maintain books and records with respect to the securities
transactions for the Fund, 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, 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 thirty days prior
written notice of the date, time and location of all M.S.D. & T. Board
meetings pertaining to the Fund.
3. 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 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
M.S.D. & T. 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 lawfully to report composite investment
performance in advertising and otherwise 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 involved in litigation or
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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.).
4. 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, that the Sub-Adviser agrees that it will not undertake any
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activities which, in its reasonable judgment, will materially 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.
5. Portfolio Transactions. Investment decisions for the Fund shall
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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 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 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 the Sub-Adviser believes to be equitable to the
Fund and such other investment company or account. In some instances, this
investment procedure may adversely affect the price paid or received by the Fund
or the size of the position obtained or sold by the Fund. To the extent
permitted by law, the Sub-Adviser may aggregate the securities to be sold or
purchased for the Fund with those to be sold or purchased for other investment
companies or accounts in order to obtain best execution. The Sub-Adviser is
hereby granted the express authority to take all necessary action in the name
and on behalf of the Fund in order to effect private securities transactions.
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 policies and restrictions regarding brokerage allocations
provided in writing by M.S.D. & T. to the Sub-Adviser and such other policies
and restrictions that may be agreed to by M.S.D. & T. and the Sub-Adviser from
time to time. The Sub-Adviser shall place orders pursuant to its investment
determinations for the Fund 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
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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 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 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.
6. 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
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of such records in order to comply with applicable regulatory requirements. The
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, the Sub-Adviser
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will 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 brokerage commissions and other transaction charges, if
any) purchased for the Fund.
8. Compensation. For the services provided and the expenses assumed
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with respect to the Fund 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 0.70% of the first $1 billion of the Fund's
average daily net assets, plus 0.60% of the Fund's average daily net assets in
excess of $1 billion.
9. 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.
10. 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, 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.
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11. Duration and Termination. Unless sooner terminated, this
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Agreement shall continue until April 30, 2002 and thereafter shall continue
automatically for successive annual periods, provided such continuance is
specifically approved at least annually by M.S.D. & T.'s Board of Directors or
vote of the lesser of (a) 67% of the shares of the Fund represented at a meeting
if holders of more than 50% of the outstanding shares of the Fund are present in
person or by proxy or (b) more than 50% of the outstanding shares of the Fund,
provided that in either event its continuance also is approved by a majority of
M.S.D. & T.'s Directors who are not "interested persons" (as defined in the 0000
Xxx) of any party to this Agreement, by vote cast in person at a meeting called
for the purpose of voting on such approval. 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 the lesser of (a) 67% of the
shares of the Fund represented at a meeting if holders of more than 50% of the
outstanding shares of the Fund are present in person or by proxy or (b) more
than 50% of the outstanding shares of the Fund. 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 for which
approval by the outstanding voting securities of the Fund is required under the
1940 Act shall be effective until approved by the vote of a majority of the
outstanding voting securities of the Fund.
13. 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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Xxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
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
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.
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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.
MERCANTILE-SAFE DEPOSIT & TRUST
COMPANY
By: /s/ Xxxxx X. Xxxxxxxx
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Name Xxxxx X. Xxxxxxxx
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Title: Senior Vice President
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DELAWARE MANAGEMENT COMPANY,
a series of Delaware Management Business Trust
By: /s/ Xxxxxxx X. Xxxxx, Xx.
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Name Xxxxxxx X. Xxxxx, Xx.
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Title: Executive Vice President/Chief Investment Officer
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