Exhibit 5(f)
SUB-ADVISORY AGREEMENT
(International Equity Fund)
AGREEMENT made as of March 19, 1996 between MERCANTILE-SAFE DEPOSIT &
TRUST COMPANY, a Maryland trust company (the "Adviser"), and CASTLEINTERNATIONAL
ASSET MANAGEMENT LIMITED, a U.K. corporation registered under the U.S.
Investment Advisers Act of 1940, as amended, and a member of the Investment
Management Regulatory Organization ("IMRO") and regulated by IMRO in the conduct
of its affairs ("Sub-Adviser").
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 Sub-Adviser to assist it in the
provision of a continuous investment program for the Fund and Sub-Adviser is
willing to do so; and
WHEREAS, the Board of Directors of the Fund has approved this
Agreement, subject to approval by the shareholders of the Fund, 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. Effective March 19, 1996, the Adviser hereby
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appoints Sub-Adviser to act 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, 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, 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.
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
prospectuses and resolutions of M.S.D. & T.'s Board of Directors applicable to
the Fund.
Adviser hereby undertakes to provide Sub-Adviser with copies of such
prospectuses and resolutions as the same became available from time to time.
Without limiting the generality of the foregoing, Sub-Adviser further
agrees that it will:
(a) prepare, subject to the Adviser's approval, lists of foreign
countries for investment by the Fund and 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, the Fund's
investments in futures and forward currency contracts; provided, however,
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that 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 in consultation with the Adviser the Fund's temporary
investments in securities;
(c) place orders for the Fund either directly with the issuer or
with any broker or dealer;
(d) provide, at Sub-Adviser's expense, using one or more pricing
services believed by Sub-Adviser to be reliable, the value of the portfolio
securities and other assets of the Fund in accordance with the 1940 Act,
the Fund's current prospectuses and applicable resolutions of the Board of
Directors of M.S.D. & T. on each day that the Fund's assets are required to
be valued, such information to be transmitted by telephone, telecopy or
other transmission as soon as possible and in any event within 24 hours of
the time of valuation to BISYS Fund Services Ohio, Inc., as fund
accountant, or to such other person(s) as the Adviser may direct for the
benefit of the Fund;
(e) manage the Fund's overall cash position, and determine from
time to time what portion of the Fund's assets will be held in different
currencies;
(f) 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) 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
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(h) 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 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. Adviser hereby undertakes to provide
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.
3. Subcontractors. It is understood that Sub-Adviser may from time
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to time engage or associate itself with such person or persons as Sub-Adviser
may believe to be particularly fitted to assist 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 approved by the
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Board of Directors of M.S.D. & T., that the compensation of such person or
persons shall be paid by Sub-Adviser and that 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. Sub-Adviser agrees with respect to the
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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 and will also
conform with all Rules and Regulations of IMRO;
(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 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 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.).
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5. Services Not Exclusive.
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(a) The services furnished by Sub-Adviser 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 Fund 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 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
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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 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.
6. Portfolio Transactions. Investment decisions for the Fund shall
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be made by Sub-Adviser independently from those for any other investment
companies and accounts advised or managed by 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 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, 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.
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. Sub-
Adviser shall place orders pursuant to its investment determination for the Fund
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
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orders, after taking into account all factors 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, 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 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 Fund 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 Fund and
to M.S.D. & T. In no instance will portfolio securities be purchased from or
sold to 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, 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.
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.
8. Expenses. During the term of this Agreement, 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 brokerage commissions and other transaction charges, if any)
purchased for the Fund.
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9. Compensation. For the services provided and the expenses assumed
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with respect to the Fund pursuant to this Agreement, Sub-Adviser will be
entitled to a fee, computed daily and payable quarterly, from the Adviser,
calculated at the annual rate of .45% of the Fund's average daily net assets.
Notwithstanding any other provision of the Agreement, all fees payable to Sub-
Adviser pursuant to this Agreement shall be withheld by Adviser until such time
as this Agreement shall have been approved by vote of the lesser (1) 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. Upon such approval, the Adviser
shall forthwith remit to the Sub-Adviser all withheld fees, with interest at a
rate to be agreed upon by the Adviser and Sub-Adviser. If such approval is not
obtained within 120 days after the effective date of this Agreement, this
Agreement shall terminate and all withheld fees shall be retained by the
Adviser, but all other provisions of this Agreement shall be effective in
accordance with their terms.
10. 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, negligence or reckless
disregard of its duties. Notwithstanding the foregoing it is agreed that the
relative investment performance of the Fund shall not constitute a breach by the
Sub-Adviser of these obligations.
11. 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 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 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 July 20, 1997 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%
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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 Adviser, 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).
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 shall be
effective with respect to the Fund until approved by the 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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000 X. Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, 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
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.
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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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.
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
Attest:
/s/ Xxxxx X. Xxxxxxxx By: /s/ Xxxxx X. Xxxxxxxxxx
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CASTLEINTERNATIONAL ASSET
MANAGEMENT LIMITED
Attest:
--------------------- By: /s/ Xxxxxxx X. Xxxxxxxx
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Xxxxxxx X. Xxxxxxxx
Managing Director
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