SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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(as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Sec. 240.14a-12
OPTIMUM FUND TRUST
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PRELIMINARY COPY
OPTIMUM FUND TRUST
OPTIMUM LARGE CAP VALUE FUND
OPTIMUM SMALL CAP VALUE FUND
OPTIMUM INTERNATIONAL FUND
OPTIMUM FIXED INCOME FUND
OCTOBER [__], 2005
Dear Shareholder:
Enclosed is a Notice of a Joint Special Meeting of Shareholders and
related Proxy Statement for a joint special meeting of shareholders (the
"Special Meeting") of Optimum Large Cap Value Fund, Optimum Small Cap Value
Fund, Optimum International Fund and Optimum Fixed Income Fund (each a "Fund"
and together, the "Funds"). The Special Meeting will be held on November 17,
2005. The purpose of the meeting is to vote on a new sub-advisory agreement for
each of the Funds. Your vote on these proposals is necessary due to a change in
a Fund's sub-adviser or the need to add a sub-adviser to manage a Fund's growing
assets. These proposals will not result in a change to the investment management
fees paid by you. As a shareholder, you have the opportunity to voice your
opinion on matters that affect your Fund(s). This package contains information
about the proposals and the materials to use when voting by mail, telephone or
through the Internet.
Whether or not you plan to attend the Special Meeting, please read the
enclosed materials and cast your vote promptly. If you determine at a later date
that you wish to attend the Special Meeting, you may revoke your proxy and vote
in person. YOUR VOTE IS EXTREMELY IMPORTANT, NO MATTER HOW LARGE OR SMALL YOUR
HOLDINGS MAY BE.
All of the proposals have been carefully reviewed by the Funds' Board
of Trustees. The Trustees, most of whom are not affiliated with the Funds'
investment manager, are responsible for protecting your interests as a
shareholder. The Trustees believe that these proposals are in the best interests
of shareholders. They recommend that you vote FOR each proposal on which you are
entitled to vote.
The enclosed Proxy Statement has been prepared in a Q&A format in order
to assist you in understanding the proposals.
VOTING IS QUICK AND EASY. EVERYTHING YOU NEED IS ENCLOSED. To cast your
vote, simply complete the proxy card(s) enclosed in this package. Be sure to
sign the card(s) before mailing it in the postage-paid envelope. You may also
vote your shares by touch-tone telephone or through the Internet. Simply call
the toll-free number or visit the web site indicated on your proxy card(s) and
follow the recorded or online instructions.
If you have any questions before you vote, please call Georgeson
Shareholder Communications, Inc., the Funds' proxy solicitor, at 1-866-343-1411
(toll free). They will be glad to help you get your vote in quickly. You may
also receive a telephone call from Georgeson Shareholder Communications, Inc.
reminding you to vote your shares. Thank you for your participation in this
important initiative.
Sincerely,
/s/John C.E. Campbell
John C.E. Campbell
President and Chief Executive Officer
PRELIMINARY COPY
OPTIMUM FUND TRUST
OPTIMUM LARGE CAP VALUE FUND
OPTIMUM SMALL CAP VALUE FUND
OPTIMUM INTERNATIONAL FUND
OPTIMUM FIXED INCOME FUND
2005 MARKET STREET
PHILADELPHIA, PA 19103
1-800-914-0278
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 17, 2005
To the Shareholders of Optimum Large Cap Value Fund, Optimum Small Cap Value
Fund, Optimum International Fund and Optimum Fixed Income Fund:
This is your official notice that a Joint Special Meeting of
Shareholders (the "Special Meeting") of Optimum Large Cap Value Fund, Optimum
Small Cap Value Fund, Optimum International Fund and Optimum Fixed Income Fund
(each a "Fund" and together, the "Funds"), each a series of Optimum Fund Trust,
a Delaware statutory trust (the "Trust"), has been called by the Board of
Trustees of the Trust and will be held at 2001 Market Street, 2nd Floor
Auditorium, Philadelphia, PA 19103, on November 17, 2005 at 4:00 p.m., Eastern
Time. The Special Meeting has been called for the following purposes:
1. For shareholders of Optimum Large Cap Value Fund only, to
approve a new Sub-Advisory Agreement between Delaware
Management Company, a series of Delaware Management Business
Trust and the Funds' investment manager ("DMC"), and TCW
Investment Management Company ("TCW"), under which TCW would
serve as one of two sub-advisers to such Fund;
2. For shareholders of Optimum Small Cap Value Fund only, to
approve a new Sub-Advisory Agreement between DMC and The
Killen Group, Inc. ("Killen"), under which Killen would serve
as one of three sub-advisers to such Fund;
3. For shareholders of Optimum International Fund only, to
approve a new Sub-Advisory Agreement between DMC and Alliance
Capital Management L.P. ("Alliance"), under which Alliance
would serve as one of two sub-advisers to such Fund;
4. For shareholders of Optimum Fixed Income Fund only, to approve
a new Sub-Advisory Agreement between DMC and Aberdeen Asset
Management Inc. ("AAMI"), under which AAMI would serve as the
Fund's sub-adviser; and
5. The transaction of such other business as may properly come
before the Special Meeting or any adjournment thereof.
Proposals 1-4 set forth above are more fully described in the attached
Proxy Statement. Shareholders of record of the Funds as of the close of business
on September 8, 2005 are entitled to notice of, and to vote at, the Special
Meeting or any adjournment thereof. WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING, PLEASE VOTE YOUR SHARES BY MAILING THE PROXY CARD(S) IN THE
ENCLOSED POSTAGE-PAID ENVELOPE OR BY VOTING BY TELEPHONE OR THROUGH THE INTERNET
AS DESCRIBED IN MORE DETAIL IN THE ATTACHED PROXY STATEMENT. YOUR VOTE IS
IMPORTANT.
By Order of the Board of Trustees
/s/Richelle S. Maestro
Richelle S. Maestro
Secretary
October [__], 2005
______________________________________________________________________________
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AND TO SAVE THE EXPENSE OF
FURTHER MAILINGS, PLEASE MARK YOUR PROXY CARD(S), SIGN IT (THEM) AND RETURN
IT (THEM) IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU PREFER, YOU MAY INSTEAD VOTE BY TELEPHONE OR THROUGH
THE INTERNET. YOU MAY REVOKE YOUR PROXY AT ANY TIME AT OR BEFORE THE
SPECIAL MEETING OR VOTE IN PERSON IF YOU ATTEND THE SPECIAL MEETING.
______________________________________________________________________________
TABLE OF CONTENTS
Page
----
SPECIAL MEETING INFORMATION...................................................................................
PURPOSE OF THE SPECIAL MEETING................................................................................
OVERVIEW OF THE PROPOSALS.....................................................................................
VOTING INFORMATION............................................................................................
PROPOSAL 1: FOR SHAREHOLDERS OF OPTIMUM LARGE CAP VALUE FUND ONLY, APPROVAL
OF THE PROPOSED SUB-ADVISORY AGREEMENT BETWEEN DMC AND TCW....................................................
PROPOSAL 2: FOR SHAREHOLDERS OF OPTIMUM SMALL CAP VALUE FUND ONLY, APPROVAL
OF THE PROPOSED SUB-ADVISORY AGREEMENT BETWEEN DMC AND KILLEN.................................................
PROPOSAL 3: FOR SHAREHOLDERS OF OPTIMUM INTERNATIONAL FUND ONLY, APPROVAL
OF THE PROPOSED SUB-ADVISORY AGREEMENT BETWEEN DMC AND ALLIANCE...............................................
PROPOSAL 4: FOR SHAREHOLDERS OF OPTIMUM FIXED INCOME FUND ONLY, APPROVAL
OF THE PROPOSED SUB-ADVISORY AGREEMENT BETWEEN DMC AND AAMI...................................................
ADDITIONAL INFORMATION ABOUT DMC AND THE TRUST'S OTHER SERVICE PROVIDERS......................................
VOTING REQUIREMENTS...........................................................................................
PRINCIPAL SHAREHOLDERS........................................................................................
SHAREHOLDER REPORTS...........................................................................................
SHAREHOLDER PROPOSALS.........................................................................................
EXHIBIT A: PROPOSED TCW SUB-ADVISORY AGREEMENT................................................................
EXHIBIT B: PROPOSED KILLEN SUB-ADVISORY AGREEMENT.............................................................
EXHIBIT C: PROPOSED ALLIANCE SUB-ADVISORY AGREEMENT...........................................................
EXHIBIT D: PROPOSED AAMI SUB-ADVISORY AGREEMENT...............................................................
PRELIMINARY COPY
JOINT SPECIAL MEETING OF SHAREHOLDERS OF
OPTIMUM LARGE CAP VALUE FUND
OPTIMUM SMALL CAP VALUE FUND
OPTIMUM INTERNATIONAL FUND
OPTIMUM FIXED INCOME FUND
FOUR SEPARATE SERIES OF OPTIMUM FUND TRUST
TO BE HELD ON NOVEMBER 17, 2005
PROXY STATEMENT
SPECIAL MEETING INFORMATION
Q. Who is asking for my vote?
The Board of Trustees (the "Board" or the "Trustees") of Optimum Fund
Trust (the "Trust"), in connection with the Joint Special Meeting of
Shareholders of the Optimum Large Cap Value Fund ("Large Cap Value Fund"),
Optimum Small Cap Value Fund ("Small Cap Value Fund"), Optimum International
Fund ("International Fund") and Optimum Fixed Income Fund ("Fixed Income Fund"),
four separate series of the Trust (each a "Fund" and together, the "Funds"), to
be held at 4:00 p.m., Eastern Time, on November 17, 2005 (the "Special Meeting")
at 2001 Market Street, 2nd Floor Auditorium, Philadelphia, PA 19103, is
requesting your vote on several matters. It is expected that the Notice of the
Special Meeting, the proxy card(s), and this Proxy Statement will be first
mailed to shareholders of record on or about October [__], 2005.
Q. Who is eligible to vote?
Shareholders of record of the Funds at the close of business on
September 8, 2005 (the "Record Date") are entitled to notice of, and to vote at,
the Special Meeting or at any adjournment of the Special Meeting. Shareholders
of record of a Fund will be entitled to one vote for each dollar of net asset
value per share of such Fund and a proportionate fractional vote for any
fractional dollar value held as of the Record Date on each matter presented at
the Special Meeting with respect to that Fund.
PURPOSE OF THE SPECIAL MEETING
Q. What is the purpose of the Special Meeting?
The purpose of the Special Meeting is to consider the proposals
described below (each a "Proposal" and together, the "Proposals"), and any other
business that may properly come before the Special Meeting:
Proposal 1 For shareholders of the Large Cap Value Fund
only, to approve a new Sub-Advisory Agreement
between Delaware Management Company, a series of
Delaware Management Business Trust and the
Funds' investment manager ("DMC"), and TCW
Investment Management Company ("TCW"), under
which TCW would serve as one of two sub-advisers
to such Fund.
Proposal 2 For shareholders of the Small Cap Value Fund
only, to approve a new Sub-Advisory Agreement
between DMC and The Killen Group, Inc.
("Killen"), under which Killen would serve as
one of three sub-advisers to such Fund.
Proposal 3 For shareholders of the International Fund only,
to approve a new Sub-Advisory Agreement between
DMC and Alliance Capital Management L.P.
("Alliance"), under which Alliance would serve
as one of two sub-advisers to such Fund.
Proposal 4 For shareholders of the Fixed Income Fund only,
to approve a new Sub-Advisory Agreement between
DMC and Aberdeen Asset Management Inc. ("AAMI"),
under which AAMI would serve as the Fund's
sub-adviser.
The approval of one or more of the Proposals is not dependent upon the
approval of any other Proposal.
OVERVIEW OF THE PROPOSALS
Q. Why are the Sub-Advisory Agreements for the Funds being proposed?
For each of the Large Cap Value Fund and International Fund, TCW and
Alliance each have already replaced a prior sub-adviser for each respective Fund
pursuant to an interim sub-advisory agreement. In addition to the approval of
the interim agreements, the Board also approved a final sub-advisory agreement
with each sub-adviser to be submitted to shareholders of the Large Cap Value and
International Funds for approval. For the Large Cap Value Fund, DMC recommended
that TCW replace Morgan Stanley Investment Management, Inc. (doing business as
Van Kampen) ("Van Kampen") as a sub-adviser to the Fund, and the Fund's Board
approved an Interim Sub-Advisory Agreement between DMC and TCW on August 2, 2005
(the "Interim TCW Agreement"), pursuant to which TCW is currently acting as a
sub-adviser to the Fund. Massachusetts Financial Services Company ("MFS")(1)
currently serves, and will continue to serve, as the other sub-adviser to the
Large Cap Value Fund. For the International Fund, DMC recommended that Alliance
replace Marsico Capital Management, LLC ("Marsico") as a sub-adviser to such
Fund, and the Fund's Board approved an Interim Sub-Advisory Agreement between
DMC and Alliance on September 15, 2005 (the "Interim Alliance Agreement"),
pursuant to which Alliance has acted as a sub-adviser to the Fund. Mondrian
Investment Partners Limited ("Mondrian")(2) currently serves, and will continue
to serve, as the other sub-adviser to the International Fund.
- ---------------------
(1) MFS is located at 500 Boylston Street, Boston, Massachusetts 02116.
(2) Mondrian is located at located at 80 Cheapside, 3rd Floor, London, England
EC2V 6EE.
For the Small Cap Value Fund, DMC recommended that an additional
sub-adviser be appointed to manage the Fund's growing assets. DMC has been
advised by one of the Small Cap Value Fund's two current sub-advisers, Hotchkis
& Wiley Capital Management, LLC ("Hotchkis")(3), that it is soon approaching the
maximum level of assets that it can manage effectively for such Fund. As a
result, DMC recommended to the Board that Killen be appointed as a third
sub-adviser for the Small Cap Value Fund in order to accommodate the Fund's
current and future asset growth. On June 16, 2005, the Fund's Board approved
Killen as an additional sub-adviser for the Fund, subject to shareholder
approval of a Sub-Advisory Agreement between DMC and Killen (the "Proposed
Killen Agreement").
For the Fixed Income Fund, the business and certain assets related to
the Deutsche Investment Management Americas Inc. ("DIMA")(4) Philadelphia active
fixed income portfolio management team (the "DIMA Fixed Income Group") currently
responsible for managing a segment of the Fund's assets is being sold by DIMA's
ultimate parent, Deutsche Bank AG ("Deutsche"), to Aberdeen Asset Management PLC
("Aberdeen"). If the sale is completed (the "Deutsche Sale"), the DIMA Fixed
Income Group will become part of AAMI, a subsidiary of Aberdeen. DMC has
recommended that the DIMA Fixed Income Group continue to provide sub-advisory
services to the Fixed Income Fund after the Deutsche Sale. However, in order for
the DIMA Fixed Income Group to continue managing a segment of the Fixed Income
Fund's assets after the Deutsche Sale, DMC must enter into a new sub-advisory
agreement with AAMI.
The Investment Company Act of 1940, as amended (the "1940 Act"),
requires that the applicable Funds' shareholders approve the proposed final
sub-advisory agreements with TCW, Killen, Alliance and AAMI before the Trust
enters into such agreements on behalf of the Funds. However, the Trust may not
be required to seek shareholder approval of sub-advisory agreements in the
future if it is granted relief from certain requirements of the 1940 Act by the
U.S. Securities and Exchange Commission ("SEC"), which relief the Trust has
requested. If granted by the SEC, DMC would be permitted to enter into
sub-advisory agreements with sub-advisers approved by the Board, subject to
certain conditions, but without the requirement of seeking shareholder approval.
In addition, the SEC has proposed Rule 15a-5 under the 1940 Act that, if adopted
as proposed, would permit the Trust and DMC to employ a manager of managers
structure with respect to the Funds without receiving the relief the Trust has
requested. To date, the proposed rule has not been adopted.
Q. How do the Trustees recommend that I vote on these Proposals?
The Trustees recommend that shareholders vote FOR each Proposal.
Q. Who is paying for expenses related to the Special Meeting?
- ----------------
(3) Hotchkis is located at 725 South Figueroa Street, 39th Floor, Los Angeles,
California 90017-5439.
(4) DIMA is located at 345 Park Avenue, New York, New York 10154.
Each Fund will bear its proportionate share of the costs relating to
the Proxy Statement preparation, printing, mailing and solicitation and the
Special Meeting, except that DIMA will bear the costs of the Proxy Statement
relating to the Fixed Income Fund.
Q. When will the Proposals take effect if they are approved?
If the Proposals are approved by the Funds' shareholders: (i) TCW will
continue managing the portion of the Large Cap Value Fund that it is currently
managing pursuant to the Interim TCW Agreement (as described herein); (ii)
Killen will begin managing a portion of the Small Cap Value Fund shortly after
obtaining shareholder approval of the Proposed Killen Agreement; (iii) Alliance
will continue managing the portion of the International Fund that it is
currently managing pursuant to the Interim Alliance Agreement (as described
herein); and (iv) AAMI will begin managing the portion of the Fixed Income Fund
currently managed by DIMA immediately after the closing of the Deutsche Sale,
which is anticipated to occur on or about November 30, 2005.
VOTING INFORMATION
Q. How do I vote my shares?
You may vote your shares by attending the Special Meeting in person, by
mail, by telephone or through the Internet. To cast your vote by mail, simply
fill out, sign, date and send us the enclosed proxy card(s) in the postage-paid
envelope provided. To vote by telephone or through the Internet, call the
toll-free number or visit the web site indicated on your proxy card(s) and
follow the recorded or online instructions.
Proxy cards that are properly signed, dated and received at or prior to
the Special Meeting will be voted as specified. If you specify a vote for the
Proposals applicable to you, your proxy will be voted as you indicate. If you
simply sign, date and return the proxy card(s), but do not specify a vote for a
Proposal on which you are entitled to vote, your shares will be voted by the
persons specified on the proxy card(s) FOR such Proposal.
Q. If I send my proxy in now as requested, can I change my vote later?
You may revoke your proxy at any time before it is voted by: (1)
sending to the Secretary of the Trust a written revocation, (2) forwarding a
later-dated proxy that is received by the Trust at or prior to the Special
Meeting, or (3) attending the Special Meeting and voting in person. Even if you
plan to attend the Special Meeting, we ask that you return the enclosed proxy.
This will help us ensure that an adequate number of shares are present for the
Special Meeting.
PROPOSAL 1: FOR SHAREHOLDERS OF THE LARGE CAP VALUE FUND ONLY, APPROVAL OF THE
PROPOSED SUB-ADVISORY AGREEMENT BETWEEN DMC AND TCW
Q. What changes are proposed for the Large Cap Value Fund?
The investment affairs of the Large Cap Value Fund are managed by DMC.
DMC has currently divided the Fund's portfolio into two segments. From the
Fund's inception until July 26, 2005, these segments were managed separately by
MFS and Van Kampen using their respective proprietary investment strategies,
subject to the supervision of DMC and the oversight of the Board. As part of its
supervision of MFS and Van Kampen, DMC regularly evaluated various aspects of
their performance. A review of the relative performance and portfolio
characteristics of MFS and Van Kampen described by DMC at the Board's June 16,
2005 meeting (the "June 2005 Board Meeting") revealed that since the Fund's
inception, the segment of the Fund managed by MFS had cumulatively outperformed
Van Kampen's segment, particularly during downturns in the market by losing less
in value during such downturns. Since the Large Cap Value Fund's inception, the
Van Kampen segment's performance also had generally been more volatile than the
MFS segment. Moreover, the style and behavior of the segments managed by MFS and
Van Kampen had been very similar; thus, somewhat reducing the diversification
benefit that the Large Cap Value Fund seeks to derive from employing multiple
sub-advisers who use differing styles and whose portfolio segments are expected
to behave differently. These factors caused DMC to conclude that the Fund's
performance might be enhanced with the introduction of a new sub-adviser.
The choice of TCW to replace Van Kampen followed an extensive search
and rigorous screening process by DMC. Linsco/Private Ledger Corp. ("LPL"), an
investment consultant for DMC, assisted with the process. Each potential
sub-adviser that passed an initial screening was further reviewed to, among
other things, assess that sub-adviser's investment philosophy and process, the
qualifications and suitability of the people making investment decisions, the
organizational structure of the sub-adviser, including the resources dedicated
to the management of portfolios with an investment objective and strategies
similar to the Large Cap Value Fund, and how well its investment style would
complement MFS.
After identifying a relatively small number of candidates that
satisfied the initial criteria, further screening based on specific investment
criteria was conducted. In making its final decision, DMC also conducted due
diligence to seek to ensure that TCW is financially sound and otherwise stable;
has capable and experienced employees in key positions; has good financial
controls; and has a satisfactory compliance program. As a result of this
selection process, DMC identified TCW as its choice for co-managing the Large
Cap Value Fund along with MFS.
At the June 2005 Board Meeting, DMC presented its recommendation to the
Board and discussed the research process and analysis supporting its
recommendation. DMC explained that TCW's management of its proprietary large cap
value fund (the "TCW Fund"), which has a similar investment objective to the
Large Cap Value Fund, had demonstrated a disciplined and proven investment
process that had generated strong-risk adjusted returns over the past three and
five year periods. DMC also explained that, while the TCW Fund is generally more
of an aggressive, concentrated portfolio than the segment previously managed by
Van Kampen, it had delivered upside return with less volatility. Moreover, TCW's
management of the TCW Fund suggested that there would be less overlap in
portfolio security holdings with MFS, the Large Cap Value Fund's other
sub-adviser; thus, providing greater diversification. DMC, with assistance from
LPL, described the compatibility of the investment philosophies and
methodologies of TCW and MFS.
Following DMC's presentation, the Trustees, including a majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act (the
"Independent Trustees"), approved the termination of the Sub-Advisory Agreement
between DMC and Van Kampen (the "Van Kampen Agreement") and, upon the
recommendation of DMC, approved a new sub-advisory agreement between DMC and TCW
(the "Proposed TCW Agreement") appointing TCW as a sub-adviser for the Fund to
co-manage the Fund's portfolio with MFS. The form of the Proposed TCW Agreement
is attached as Exhibit A to this Proxy Statement. TCW's replacement of Van
Kampen as a sub-adviser for the Large Cap Value Fund became effective on July
26, 2005, pursuant to the Interim TCW Agreement (described below).
DMC also recommended that TCW begin providing sub-advisory services to
the Large Cap Value Fund prior to obtaining shareholder approval of the Proposed
TCW Agreement in order to seek the benefits of TCW's advisory services described
above. Therefore, at a special telephonic meeting held on August 2, 2005 (the
"August 2005 Special Meeting"), and as permitted by applicable law, the Board,
including a majority of the Independent Trustees, approved the Interim TCW
Agreement to permit TCW to manage the segment of the Fund's assets previously
managed by Van Kampen (the "managed segment"). As described below in more
detail, the Interim TCW Agreement is substantially similar in form and
provisions to the Van Kampen Agreement, except for the provisions relating to
its term and termination and compliance policies and procedures.
As provided in the Interim TCW Agreement and Proposed TCW Agreement,
DMC will, in its capacity as investment manager for the Large Cap Value Fund,
determine what portion of such Fund's assets should be allocated to TCW. The
percentage of the Large Cap Value Fund's total assets that will be allocated to
TCW may be modified, from time to time, in DMC's sole discretion.
Q. What should I know about TCW?
TCW was founded in 1987 and is an investment adviser registered with
the SEC pursuant to the Investment Advisers Act of 1940, as amended (the
"Advisers Act"). TCW's headquarters are located at 865 South Figueroa Street,
Los Angeles, CA 90017. TCW's investment and professional staff are located at
this address and at 200 Park Avenue, Suite 2200, New York, NY 10166. As of June
30, 2005, TCW had total assets under management of approximately $116 billion,
including its proprietary TCW Galileo family of funds. Societe General Asset
Management ("SGAM"), which is located at 2 Place de la Coupole, 92078, Paris,
France holds an approximately 67% ownership interest in TCW's parent company -
The TCW Group, Inc. SGAM is a wholly owned subsidiary of Societe General, S.A.
located at 29 Boulevard Haussmann, 75009, Paris, France. TCW is not affiliated
with DMC.
Set forth below is a listing of the principal executive officer and
each director of TCW. The positions of the principal executive officer and each
director of TCW constitute their principal occupations. The business address of
each person listed below is the same as TCW's.
Name Title/Position
- ---- --------------
Alvin R. Albe, Jr. Director, Chief Executive Officer and President
Thomas E. Larkin, Jr. Director and Vice Chairman
Marc I. Stern Director and Chairman
TCW currently manages the assets of one other registered investment
company that has an investment objective and strategies similar to that of the
Large Cap Value Fund. The following is the name of such other investment company
and its assets, advisory fees and fee waivers as of June 30, 2005:
NAME OF FUND NET ASSETS ANNUAL ADVISORY FEE FEE WAIVER
- ------------ ---------- ------------------- ----------
TCW Galileo Dividend Focused Fund $741. 5 million 0.75% N/A
Q. How do the material provisions of the Proposed TCW Agreement compare to
the Van Kampen Agreement?
The Van Kampen Agreement was originally approved by the Board,
including a majority of its Independent Trustees, on July 17, 2003, and was
approved by the initial shareholder of the Large Cap Value Fund in connection
with such Fund's organization and became effective on July 31, 2003. The Van
Kampen Agreement had not been submitted to the Board, or Fund shareholders, for
reapproval since that time.
Advisory Services. Under the Proposed TCW Agreement, DMC, as manager,
will retain TCW as a sub-adviser and, subject to DMC's supervision, TCW will
continue to manage the managed segment pursuant to the Interim TCW Agreement,
which is described in greater detail below. The services to be provided to the
Fund by TCW, as sub-adviser, under the Proposed TCW Agreement will be the same
as those previously provided by Van Kampen under the Van Kampen Agreement and
currently provided by TCW under the Interim TCW Agreement.
Under the Van Kampen Agreement, Van Kampen was responsible for the
day-to-day portfolio management of the managed segment and determined from time
to time the securities and other investments that were purchased, retained or
sold with respect to the managed segment. In addition, Van Kampen implemented
such determinations through the placement of orders for the execution of
portfolio transactions with or through broker or dealers as selected by Van
Kampen. Van Kampen provided these services under the Van Kampen Agreement in
accordance with the Large Cap Value Fund's investment objectives, policies and
restrictions, as stated in its current prospectus and statement of additional
information. TCW will have the same contractual obligations and duties under the
Proposed TCW Agreement.
The Van Kampen Agreement required, and the TCW Agreement requires, the
sub-adviser to maintain all books and records with respect to the securities
transactions of the managed segment and to furnish the Board such periodic and
special reports as the Board may request.
Fees. Pursuant to the Investment Advisory Agreement dated July 17, 2003
between the Trust and DMC (the "DMC Advisory Agreement"), DMC receives an annual
advisory fee from the Large Cap Value Fund. This fee is payable to DMC by the
Large Cap Value Fund, based on its average daily net assets, as follows:
0.80% of assets up to $100 million
0.7375% of assets from $100 million to $250 million
0.7125% of assets from $250 million to $500 million
0.6875% of all assets above $500 million
The terms of the DMC Advisory Agreement will not be affected by this Proposal.
The Large Cap Value Fund does not bear any responsibility for the payment of
sub-advisory fees because the sub-advisory fees are paid by DMC out of the fees
it receives under the DMC Advisory Agreement. Therefore, the approval of the
Proposed TCW Agreement will not affect the overall investment advisory fee
payable by the Large Cap Value Fund to DMC. However, the sub-advisory fees under
the Proposed TCW Agreement differ from those under the Van Kampen Agreement. The
annual rate of sub-advisory fees payable to Van Kampen by DMC, based on the
average daily net assets of the managed segment, was as follows:
0.45% of assets up to $100 million
0.425% of assets from $100 million to $250 million
0.40% of assets from $250 million to $500 million
0.35% of all assets above $500 million
Under the Proposed TCW Agreement, the annual rate of sub-advisory fees
payable to TCW by DMC, based on the average daily net assets of the managed
segment, will be as follows:
0.70% of assets up to $25 million
0.50% of assets from $25 million to $100 million
0.35% of assets from $100 to $250 million
0.325% of all assets above $250 million
In addition to the above fees, the Proposed TCW Agreement provides that
TCW will be entitled to compensation in an amount equal to any
shortfall/difference between the amount TCW is paid under the fee schedule for
the Interim TCW Agreement and the amount TCW would have been paid under the fee
schedule for the Proposed TCW Agreement if it had been in effect during such
period. The shortfall/difference will be calculated and paid only for the period
between the effective date of the Interim TCW Agreement and the effective date
of the Proposed TCW Agreement.
Brokerage. The Van Kampen Agreement, subject to the primary objective
of obtaining best execution, permitted Van Kampen to place orders for the
purchase and sale of portfolio securities and other instruments with such
broker-dealers who provide brokerage and research services to DMC, Van Kampen or
the managed segment. Subject to such policies and procedures adopted by the
Board of Trustees, under the Van Kampen Agreement, Van Kampen also was permitted
to cause the Large Cap Value Fund to pay a member of an exchange, broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission another member of an exchange, broker or dealer
would have charged for effecting that transaction, in such instances where Van
Kampen had determined in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member, broker or dealer, viewed in terms of either that
particular transaction, Van Kampen's overall responsibilities with respect to
the Large Cap Value Fund or Van Kampen's other advisory clients for which Van
Kampen exercised investment discretion. The Proposed TCW Agreement contains a
substantially similar provision.
Limitation of Liability. The Van Kampen Agreement provided that
neither Van Kampen nor its affiliates would be liable to DMC, the Trust, the
Large Cap Value Fund or any shareholder of the Trust for any action or omission
in the course of, or connected with, rendering services or for any losses that
could be sustained in the purchase, holding or sale of any security, or
otherwise, in the absence of willful misfeasance, bad faith, gross negligence,
or a reckless disregard of the performance of its duties as sub-adviser to the
Large Cap Value Fund and to DMC. The Proposed TCW Agreement contains a
substantially identical provision.
The Van Kampen Agreement also provided that Van Kampen and DMC would
indemnify each other and their respective affiliates to the fullest extent
permitted by law against any and all loss, damage, judgments, fines, amount paid
in settlement and reasonable expenses, including attorney's fees, incurred by
the party seeking indemnification and its affiliates arising from or in
connection with such Agreement so long as such losses arose out of the other
party's willful misfeasance, bad faith, gross negligence, or reckless disregard
in performing its responsibilities under the Agreement. The Proposed TCW
Agreement contains an identical provision.
Continuance. If shareholders of the Large Cap Value Fund approve the
Proposed TCW Agreement, it will continue until two years from the date of its
execution, unless earlier terminated. The Proposed TCW Agreement may be
continued from year to year thereafter by a majority vote of the Board of the
Trust or by a vote of a majority of all votes attributable to the outstanding
shares of the Large Cap Value Fund, provided that in either case the terms and
the renewal have been approved by the vote of a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Van Kampen Agreement contained an identical provision.
Termination. The Van Kampen Agreement provided that it could be
terminated at any time on 60 days' written notice to the non-terminating party,
without the payment of any penalty. The Van Kampen Agreement also provided that
it would immediately terminate in the event of its assignment.
The Proposed TCW Agreement may be terminated, without the payment of a
penalty, by DMC or by the Trust (by vote of the Board of Trustees or by vote of
a majority of the outstanding voting securities of the Large Cap Value Fund) at
any time on written notice to TCW. TCW may terminate the Proposed TCW Agreement
on 60 days' written notice to DMC and the Trust, without the payment of a
penalty. The Proposed TCW Agreement also provides that it will terminate
automatically in the event of its assignment.
Q. What are the material provisions of the Interim TCW Agreement?
At its August 2005 Special Meeting, the Board, including a majority of
the Independent Trustees, approved the Interim TCW Agreement pursuant to
applicable 1940 Act requirements.
The Interim TCW Agreement became effective on July 26, 2005 after the
termination of the Van Kampen Agreement (the "Interim Effective Date"). Except
for the provisions relating to its term and termination and compliance policies
and procedures, the Interim Agreement is substantially similar to the Van Kampen
Agreement. The Interim TCW Agreement will continue in effect for no greater than
150 days from the Interim Effective Date. The Interim TCW Agreement also
provides that DMC or the Trust (by action of the Board or pursuant to a vote of
a majority of the outstanding voting securities of the Large Cap Value Fund) may
terminate the Interim TCW Agreement at any time, without payment of a penalty,
on written notice to TCW. The Interim TCW Agreement also provides that TCW may
terminate such Agreement at any time upon 60 days' written notice to DMC and the
Trust. The Interim TCW Agreement terminates automatically in the event of its
assignment.
Pursuant to the terms of the Interim TCW Agreement, TCW will receive
monthly a fee based on the average daily net assets of the managed segment as
follows:
0.45% of assets up to $100 million
0.425% of assets from $100 million to $250 million
0.40% of assets from $250 million to $500 million
0.35% of all assets above $500 million
The fee schedule under the Interim TCW Agreement and Van Kampen Agreement are
identical.
Q. What did the Board consider and review in determining to recommend TCW
as a sub-adviser for the Large Cap Value Fund?
At its June 2005 Board Meeting, the Trustees met and conferred with
representatives of DMC and LPL to consider DMC's recommendation to replace Van
Kampen with TCW and its effect on the Large Cap Value Fund. The Board had the
assistance of counsel to the Independent Trustees who provided advice on, among
other things, the Board's fiduciary obligations in considering the Proposed TCW
Agreement. Additionally, at its August 2005 Special Meeting, the Board met with
the DMC and LPL representatives, as well as counsel to the Independent Trustees,
to consider the Interim TCW Agreement (together with the Proposed TCW Agreement,
the "TCW Agreements").
The Trustees reviewed information about TCW, including its personnel,
operations, and financial condition, which had been provided by TCW. The Board
also reviewed material furnished by DMC and LPL including: a memorandum from DMC
reviewing the TCW Agreements and the various services proposed to be rendered by
TCW; research and analysis concerning DMC's proposal of TCW; a description of
TCW's proposed sub-advisory fees under the TCW Agreements; information
concerning TCW's organizational structure and the experience of its investment
management personnel; a "due diligence" report describing various material items
in relation to TCW's personnel, organization and policies; copies of TCW's
compliance policies and procedures and its Code of Ethics; and a copy of the TCW
Agreements.
In considering the approval of the Interim TCW Agreement and the
approval of the Proposed TCW Agreement and its submission to shareholders for
their approval, the Board of Trustees focused on: (i) the nature, extent, and
quality of the services to be provided by TCW; (ii) the investment performance
of the Large Cap Value Fund and the TCW Fund; (iii) the compatibility of TCW's
investment philosophy and methodology with MFS, the other sub-adviser
co-managing the Large Cap Value Fund; and (iv) the fees to be charged by TCW for
the sub-advisory services to be provided with respect to the Large Cap Value
Fund.
The Quality of Services to be Provided. In considering the nature,
extent and quality of the services to be provided by TCW, the Board specifically
considered that the TCW Agreements contain substantially similar provisions to
those in the Van Kampen Agreement except for provisions relating to the term and
termination, compliance policies and procedures and, with respect to the
Proposed TCW Agreement, the fees. The Board reviewed materials provided by TCW
regarding the experience and qualifications of personnel who would be
responsible for managing the managed segment of the Large Cap Value Fund, and
TCW's performance managing the TCW Fund. The Board considered TCW's compliance
policies and procedures.
The Board noted that TCW would co-manage the Large Cap Value Fund
with MFS, the Fund's other sub-adviser. The Board considered the compatibility
of the two sub-advisers' investment philosophies and methodologies. The Board
also noted that the TCW Agreements provide flexibility to DMC to adjust the
amount of the Large Cap Value Fund's assets advised by TCW. Based upon these
considerations, the Board determined that the nature, extent and quality of the
services to be provided by TCW under the TCW Agreements are satisfactory.
Investment Performance. With respect to the investment performance
of the Large Cap Value Fund, as well as the TCW Fund, the Board considered the
Large Cap Value Fund's performance to date relative to its peers and benchmark,
and the performance over several periods of the TCW Fund measured in several
different ways. In addition, management reviewed for the Board how various
portfolio management decisions had affected the Large Cap Value Fund's
performance since inception. Based upon these considerations, the Board
concluded that while satisfied with the Fund's overall level of performance, the
portfolio management services to be provided by TCW under the TCW Agreements
might provide the Fund slightly better downside risk protection than the Large
Cap Value Fund had previously been provided.
The Costs of the Services to be Provided; Economies of Scale. The
Board had been previously provided with information regarding the level of the
advisory fees of the Large Cap Value Fund and overall levels of expenses for the
Fund compared to its peer group of comparable mutual funds. The Board noted that
the fees payable to TCW for the sub-advisory services provided to the Large Cap
Value Fund would be paid out of the fees received by DMC in its role as
investment manager. The materials provided to the Board noted that the
management fee paid by the Large Cap Value Fund to DMC would stay the same. The
Board believed that DMC and its affiliates were not currently realizing any
meaningful profits based on the size of the Large Cap Value Fund and the
reimbursement or waiver of expenses by DMC. The Board noted TCW's fee schedule
for managing similar investment accounts, and were provided with information
about the estimated profits to be realized by TCW from the relationship. The
Board was informed that TCW may receive certain fall-out benefits in connection
with its relationship with the Large Cap Value Fund, such as soft-dollar
arrangements. Based upon these considerations, the Board was able to determine
that the fees under the TCW Agreements are fair and reasonable in relation to
the services being provided to the Large Cap Value Fund.
The Board recognized that economies of scale might be realized as
Fund assets grow, but concluded that at current asset levels, the implementation
of additional fee breakpoints or reductions was not warranted. The Board
intends, however, to monitor future growth in the Large Cap Value Fund with a
view to considering the appropriateness of instituting additional fee
breakpoints or reductions in connection with future investment management
approval deliberations.
Therefore, based on the information provided by DMC and TCW and the
considerations described above, the Board of Trustees determined that the TCW
Agreements should be approved and that the Proposed TCW Agreement should be
submitted to shareholders with the Board's recommendation for approval.
The Board of Trustees recommends that
shareholders of the Large Cap Value Fund
vote FOR Proposal 1.
PROPOSAL 2: FOR SHAREHOLDERS OF THE SMALL CAP VALUE FUND ONLY, APPROVAL OF THE
PROPOSED SUB-ADVISORY AGREEMENT BETWEEN DMC AND KILLEN
Q. What changes are proposed for the Small Cap Value Fund?
The investment affairs of the Small Cap Value Fund are managed by
DMC. Currently, DMC has divided the Small Cap Value Fund's portfolio into two
segments. Since the Small Cap Value Fund's inception, Hotchkis has managed one
segment of the Fund and Delafield Asset Management Division of Reich & Tang
Asset Management, LLC ("Delafield")(5) has managed the other segment, each using
their respective proprietary investment strategies, subject to the supervision
of DMC and the oversight of the Board.
- ------------------
(5) Delafield is located at 600 Fifth Avenue, New York, New York 10020.
Investment advisers such as Hotchkis and Delafield that manage accounts
investing in the small-cap asset class often set limits on the amount of assets
that they will manage. Advisers will set these limits for many reasons,
including, among other things, the reduced ability to find investment
opportunities that are consistent with their small-cap investment style as
portfolio assets grow; to prevent unrestrained asset inflows from affecting
their ability to effectively manage their small-cap portfolios; and the limited
availability of small-cap company stocks as compared to large-cap company
stocks. Hotchkis is one such adviser that has set a limit on the assets that it
is willing to manage in the small-cap value asset class. Earlier this year,
Hotchkis informed DMC that Hotchkis expected to reach its maximum capacity for
managing assets within the Small Cap Value Fund by or about the end of 2005.
Additionally, Delafield has indicated that it will eventually reach its maximum
capacity for managing assets within the Small Cap Value Fund in the coming
years. In order for the Fund to continue to accept new money from investors, DMC
has recommended the addition of Killen to provide the Small Cap Value Fund with
additional small-cap value portfolio management expertise and extra management
capacity for the Fund. Moreover, the addition of Killen should provide a good
complement to the segments managed by Hotchkis and Delafield.
The choice of Killen followed an extensive search and rigorous
screening process by DMC and LPL, DMC's investment consultant. Each potential
sub-adviser that passed an initial screening was further reviewed to, among
other things, assess that sub-adviser's investment philosophy and process, the
qualifications and suitability of the people making investment decisions, the
organizational structure of the sub-adviser, including the resources dedicated
to the management of portfolios with an investment objective and strategies
similar to the Small Cap Value Fund, and how well its investment style would
complement Hotchkis and Delafield.
After identifying a relatively small number of candidates that
satisfied the initial criteria, further screening based on specific investment
criteria was conducted. In making its final decision, DMC also conducted due
diligence to seek to ensure that Killen is financially sound and otherwise
stable; has capable and experienced employees in key positions; has good
financial controls; and has a satisfactory compliance program. As a result of
this selection process, DMC identified Killen as its choice for an additional
co-manager of the Small Cap Value Fund.
At the June 2005 Board Meeting, DMC presented its recommendation to the
Board and discussed the research process and analysis supporting its
recommendation. DMC explained that Killen's proprietary small-cap value fund
(the "Berwyn Fund"), which has a similar investment objective to the Small Cap
Value Fund, had been less volatile than its benchmark index and the majority of
its peers in four of the five past years. Moreover, the Berwyn Fund's
risk-adjusted performance characteristics are complementary to the existing
co-managers. Like Hotchkis and Delafield, Killen would not require that its
sector allocations match the Small Cap Value Fund's benchmark. It was noted that
the lack of sector restrictions is believed to be advantageous because it
enables portfolio managers to invest in individual companies that they believe
have the strongest merit. DMC and LPL also believe that the risks presented by
not following the benchmark's sector allocations should be partially mitigated
by Killen's fundamental research process, which takes place prior to each
investment decision. Killen's smaller overall investment advisory asset base
should allow for sufficient management capacity to accommodate growth in the
Small Cap Value Fund's assets for a reasonable period of time. DMC, with
assistance from LPL, described the compatibility of the investment philosophies
and methodologies of Hotchkis, Delafield and Killen.
Following DMC's presentation, the Trustees, including a majority of the
Independent Trustees, upon the recommendation of DMC, approved a new
sub-advisory agreement between DMC and Killen (the "Proposed Killen Agreement")
appointing Killen as a sub-adviser for the Fund to co-manage the Fund's
portfolio with Hotchkis and Delafield. The form of the Proposed Killen Agreement
is attached as Exhibit B to this Proxy Statement. Subject to shareholder
approval at the Special Meeting, Killen has accepted the appointment.
Shareholders of the Small Cap Value Fund are now being asked to approve the
Proposed Killen Agreement.
As provided in the Proposed Killen Agreement, DMC will, in its capacity
as investment manager for the Small Cap Value Fund, determine what portion of
such Fund's assets should be allocated to Killen. The percentage of the Small
Cap Value Fund's total assets that will be allocated to Killen may be modified,
from time to time, in DMC's sole discretion.
Q. What should I know about Killen?
Killen was founded in 1982 and is an investment adviser registered with
the SEC pursuant to the Advisers Act. Killen's headquarters are located at 1189
Lancaster Avenue, Berwyn, PA 19312. Killen's entire investment and professional
staff are located at this address. Killen is wholly owned by Robert E. Killen.
As of June 30, 2005, Killen had total assets under management of approximately
$458 million, including the Berwyn Fund. Killen is not affiliated with DMC.
Set forth below is a listing of the principal executive officer and
each director of Killen. The positions of the principal executive officer and
each director of Killen constitute their principal occupations. The business
address of each person listed below is the same as Killen's.
Name Title/Position
- ---- --------------
Robert E. Killen Chief Executive Officer, Chairman and Director
Edward A. Killen Executive Vice President, Secretary and Director
Raymond J. Munsch President, Chief Operating Officer and Director
Killen currently manages the assets of one other registered investment
company that has an investment objective and strategies similar to that of the
Small Cap Value Fund. The following is the name of such other investment company
and its assets, advisory fees and fee waivers as of June 30, 2005:
NAME OF FUND NET ASSETS ANNUAL ADVISORY FEE FEE WAIVER
- ------------ ---------- ------------------- ----------
Berwyn Fund $87.7 million 1.00% N/A
Q. What are the material provisions of the Proposed Killen Agreement?
Advisory Services. Under the Proposed Killen Agreement, DMC, as
manager, will retain Killen as a sub-adviser and, subject to DMC's supervision,
Killen will manage a segment of the Small Cap Value Fund allocated to it by DMC
pursuant to the Proposed Killen Agreement. The services to be provided to the
Small Cap Value Fund by Killen, as sub-adviser, under the Proposed Killen
Agreement are identical to those currently provided by Hotchkis and Delafield
under their respective sub-advisory agreements with DMC (the "Existing Small Cap
Value Agreements").
Under the Proposed Killen Agreement, Killen will be responsible for the
day-to-day portfolio management of the segment of the Small Cap Value Fund
allocated to it by DMC (the "managed segment") and will determine from time to
time the securities and other investments that will be purchased, retained or
sold with respect to the managed segment. In addition, Killen will implement
such determinations through the placement of orders for the execution of
portfolio transactions with or through broker or dealers as selected by Killen.
Killen will provide these services under the Proposed Killen Agreement in
accordance with the Fund's investment objectives, policies and restrictions, as
stated in the Small Cap Value Fund's current prospectus and statement of
additional information. The Proposed Killen Agreement requires Killen to
maintain all books and records with respect to the securities transactions of
the managed segment and to furnish the Board such periodic and special reports
as the Board may request. These responsibilities are the same as those of
Hotchkis and Delafield.
Fees. Pursuant to the DMC Advisory Agreement, DMC receives an annual
advisory fee from the Small Cap Value Fund. This fee is payable to DMC by the
Small Cap Value Fund, based on its average daily net assets, as follows:
1.050% of assets up to $75 million
1.025% of assets from $75 to $150 million
1.000% of assets over $150 million
The terms of the DMC Advisory Agreement are not affected by this Proposal. The
Small Cap Value Fund does not bear any responsibility for the payment of
sub-advisory fees because the sub-advisory fees are paid by DMC out of the fees
it receives under the DMC Advisory Agreement. Therefore, the approval of the
Proposed Killen Agreement will not affect the overall investment advisory fee
payable by the Small Cap Value Fund to DMC. The annual rate of sub-advisory fees
payable to Killen by DMC, based on the average daily net assets of the managed
segment, will be as follows:
0.75% of assets up to $25 million
0.60% of assets from $25 million to $50 million
0.50% of assets over $50 million
Brokerage. The Proposed Killen Agreement, subject to the primary
objective of obtaining best execution, permits Killen to place orders for the
purchase and sale of portfolio securities and other instruments with such
broker-dealers who provide brokerage and research services to DMC, Killen and
the managed segment. Subject to such policies and procedures adopted by the
Board of Trustees, under the Proposed Killen Agreement, Killen will be permitted
to cause the Small Cap Value Fund to pay a member of an exchange, broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission another member of an exchange, broker or dealer
would have charged for effecting that transaction, in such instances where
Killen determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
member, broker or dealer, viewed in terms of either that particular transaction,
Killen's overall responsibilities with respect to the Small Cap Value Fund or
Killen's other advisory clients for which Killen exercises investment
discretion. The Existing Small Cap Value Agreements contain a substantially
similar provision.
Limitation of Liability. The Proposed Killen Agreement provides that
Killen will not be liable to DMC, the Trust, the Small Cap Value Fund or any
shareholder of the Trust for any action or omission in the course of, or
connected with, rendering services or for any losses that may be sustained in
the purchase, holding or sale of any security, or otherwise, in the absence of
willful misfeasance, bad faith, gross negligence, or a reckless disregard of the
performance of its duties as sub-adviser to the Small Cap Value Fund and to DMC.
The Existing Small Cap Value Agreements contain an identical provision.
The Proposed Killen Agreement also provides that Killen and DMC will
indemnify each other and their respective affiliates to the fullest extent
permitted by law against any and all loss, damage, judgments, fines, amount paid
in settlement and reasonable expenses, including attorney's fees, incurred by
the party seeking indemnification and its affiliates arising from or in
connection with such Agreement so long as such losses arise out of the other
party's willful misfeasance, bad faith, gross negligence, or reckless disregard
in performing its responsibilities under such Agreement. The Existing Small Cap
Value Agreements contain an identical provision.
Continuance. If shareholders of the Small Cap Value Fund approve the
Proposed Killen Agreement, it will continue until two years from the date of its
execution, unless earlier terminated. The Proposed Killen Agreement may be
continued from year to year thereafter by a majority vote of the Board of the
Trust or by a vote of a majority of all votes attributable to the outstanding
shares of the Small Cap Value Fund, provided that in either case the terms and
the renewal have been approved by the vote of a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Existing Small Cap Value Agreements contain an identical
provision.
Termination. The Proposed Killen Agreement provides that it may be
terminated, without the payment of a penalty, by DMC or by the Trust (by vote of
the Board of Trustees or by vote of a majority of the outstanding voting
securities of the Small Cap Value Fund) at any time on written notice to Killen.
Killen may terminate the Proposed Killen Agreement on 60 days' written notice to
DMC and the Trust, without the payment of a penalty. The Proposed Killen
Agreement also provides that it will terminate automatically in the event of its
assignment. The Existing Small Cap Value Agreements contain a substantially
similar provision.
Q. What did the Board consider and review in determining to recommend
Killen as a sub-adviser to the Small Cap Value Fund?
At its June 2005 Board Meeting, the Trustees met and conferred with
representatives of DMC and LPL to consider DMC's recommendation to add Killen as
a sub-adviser to the Small Cap Value Fund and the effect of the recommendation
on such Fund. The Board had the assistance of counsel to the Independent
Trustees who provided advice on, among other things, the Board's fiduciary
obligations in considering the Proposed Killen Agreement.
The Board reviewed information about Killen, including its personnel,
operations and financial condition, which had been provided by Killen. The Board
also reviewed material furnished by DMC and LPL, including: a memorandum from
DMC reviewing the Proposed Killen Agreement and the various services proposed to
be rendered by Killen; research and analysis concerning DMC's proposal of
Killen; a description of Killen's proposed sub-advisory fees; information
concerning Killen's organizational structure and the experience of its
investment management personnel; a "due diligence" report describing various
material items in relation to Killen's personnel, organization and policies;
copies of Killen's compliance policies and procedures and its Code of Ethics;
and a copy of the Proposed Killen Agreement. At its August 2005 Special Meeting,
the Board also reviewed Killen's compliance manual.
In considering the approval of the Proposed Killen Agreement and
submission of it to shareholders for their approval, the Board of Trustees
focused on: (i) the nature, extent and quality of the services to be provided by
Killen; (ii) the investment performance of the Small Cap Value Fund and the
Berwyn Fund; (iii) the compatibility of Killen's investment philosophy and
methodology with the other sub-advisers co-managing the Small Cap Value Fund -
Hotchkis and Delafield; and (iv) the fees to be charged by Killen for the
sub-advisory services to be provided with respect to the Small Cap Value Fund.
The Quality of Services to be Provided. In considering the nature,
extent and quality of the services to be provided by Killen, the Board
specifically considered that the Proposed Killen Agreement contains
substantially similar provisions to those in the Existing Small Cap Value
Agreements, except for the provisions relating to, the effective dates,
compliance policies and procedures and the fees. With respect to the Proposed
Killen Agreement, the Board considered DMC's information concerning the benefits
of accommodating additional cash inflows into the Fund and diversifying the
Fund's portfolio management expertise. The Board reviewed materials provided by
Killen regarding the experience and qualifications of personnel who would be
responsible for managing the managed segment, and placed weight on Killen's
performance in managing the Berwyn Fund.
The Board also considered that Killen would co-manage the Small Cap
Value Fund with its existing sub-advisers, Hotchkis and Delafield. The Board
considered the compatibility of the three sub-advisers' investment philosophies
and methodologies. The Board also noted that the Proposed Killen Agreement
provides flexibility to DMC to adjust the amount of the Small Cap Value Fund's
assets advised by Killen. Based upon these considerations, the Board determined
that the nature, extent and quality of the services to be provided by Killen
under the Proposed Killen Agreement are satisfactory.
Investment Performance. With respect to the investment performance
of the Small Cap Value Fund, as well as the Berwyn Fund, the Board looked at the
Funds' performance to date relative to their peers and benchmark, and the
performance over several periods of the Berwyn Fund measured in several
different ways. The Board was satisfied with the Small Cap Value Fund's
performance and that of the Berwyn Fund. The Board considered the effect of
asset growth on the Small Cap Value Fund's future performance if additional
portfolio management expertise was not provided. Based upon these
considerations, the Board determined that the performance of the Berwyn Fund
provided evidence of the high quality of portfolio management services that
should be provided by Killen under the Proposed Killen Agreement.
The Costs of the Services to be Provided; Economies of Scale. The
Board had been previously provided with information regarding the level of the
advisory fees of the Fund and overall levels of expenses for the Small Cap Value
Fund compared to its peer group of comparable mutual funds. The Board noted that
the fees payable to Killen for the sub-advisory services to be provided by it
would be paid out of the fee received by DMC in its role as investment manager.
The materials provided to the Board noted that the management fee paid by the
Small Cap Value Fund to DMC would stay the same. The Board believed that DMC and
its affiliates were not currently realizing any meaningful profits based on the
size of the Small Cap Value Fund and the reimbursement or waiver of expenses by
DMC. The Board noted Killen's fee schedule for managing similar investment
accounts, and were provided with information about the estimated profits to be
realized by Killen from the relationship. The Board was informed that Killen may
receive certain fall-out benefits in connection with its relationship with the
Small Cap Value Fund, such as soft-dollar arrangements. Based on these
considerations, the Board was able to determine that the fees under the Proposed
Killen Agreement are fair and reasonable in relation to the services to be
provided to the Small Cap Value Fund.
The Board recognized that economies of scale might be realized as
the Small Cap Value Fund's assets grow, but concluded that at current asset
levels, the implementation of additional fee breakpoints or reductions was not
warranted. The Board intends, however, to monitor future growth in the Small Cap
Value Fund with a view to considering the appropriateness of instituting
additional fee breakpoints or reductions in connection with future investment
management approval deliberations.
Therefore, based on the information provided by DMC and Killen, and
the considerations described above, the Board of Trustees determined that the
Proposed Killen Agreement should be submitted to shareholders with its
recommendation for approval.
The Board of Trustees recommends that
shareholders of the Small Cap Value Fund
vote FOR Proposal 2.
PROPOSAL 3: FOR SHAREHOLDERS OF THE INTERNATIONAL FUND ONLY, APPROVAL OF THE
PROPOSED SUB-ADVISORY AGREEMENT BETWEEN DMC AND ALLIANCE
Q. What changes are proposed for the International Fund?
The investment affairs of the International Fund are managed by DMC.
Currently, DMC has divided that Fund's portfolio into two segments. Since the
International Fund's inception, these segments have been managed separately by
Marsico and Mondrian using their respective proprietary investment strategies,
subject to the supervision of DMC and the oversight of the Board. However, in a
letter dated June 15, 2005, Marsico informed DMC that effective on or about
September 30, 2005, it would resign as one of the International Fund's
sub-advisers. Thus, Marsico's resignation would leave the International Fund
with only one sub-adviser. Consequently, the addition of Alliance would allow
the International Fund to maintain the dual portfolio management structure it
has used since its inception.
The choice of Alliance followed an extensive search and rigorous
screening process by DMC and LPL, DMC's investment consultant. Each potential
sub-adviser that passed an initial screening was further reviewed to assess that
sub-adviser's investment philosophy and process, the qualifications and
suitability of the people making investment decisions, the organizational
structure of the sub-adviser, including the resources dedicated to the
management of portfolios with an investment objective and strategies similar to
the International Fund, and how well its investment style would complement
Mondrian's.
After identifying a relatively small number of candidates that
satisfied the initial criteria, further screening based on specific investment
criteria was conducted. In making its final decision, DMC also conducted due
diligence to seek to ensure that Alliance is financially sound and otherwise
stable; has capable and experienced employees in key positions; has good
financial controls; and has a satisfactory compliance program. As a result of
this selection process, DMC identified Alliance as its choice for co-manager of
the International Fund.
At the Board's September 15, 2005 Meeting (the "September 2005 Board
Meeting"), DMC presented its recommendation to the Board and discussed the
research process and analysis supporting its recommendation. It was explained
that Alliance maintains an impressive investment process, utilizing both
quantitative and fundamental analysis. DMC pointed out the successful
performance record of Alliance's [proprietary international fund] that has a
similar investment objective to the International Fund (the "Alliance Fund").
DMC, with assistance from LPL, described the compatibility of the investment
philosophies and methodologies of Alliance and Mondrian.] Moreover, it was noted
that Alliance's versatile approach and relative value emphasis could benefit the
International Fund's performance during periods when growth or blend styles are
outperforming.
Following DMC's presentation, the Trustees, including a majority of the
Independent Trustees, upon the recommendation of DMC, approved a new
sub-advisory agreement between DMC and Alliance (the "Proposed Alliance
Agreement"), and the appointment of Alliance to replace Marsico as a sub-adviser
for the International Fund. The form of the Proposed Alliance Agreement is
attached as Exhibit C to this Proxy Statement.
Because Marsico's resignation was effective prior to the Special
Meeting at which the International Fund's shareholders will vote on the Proposed
Alliance Agreement, the Board also approved the Interim Alliance Agreement and
the appointment of Alliance on an interim basis to begin managing the Fund prior
to the Special Meeting. This interim appointment allows for the provision of
uninterrupted sub-advisory services to the segment of the International Fund
formerly managed by Marsico (the "managed segment"). The Board's appointment of
Alliance as a sub-adviser for the International Fund under the Interim Alliance
Agreement became effective on September 29, 2005. Pursuant to the terms of the
Interim Alliance Agreement, Alliance will provide sub-advisory services at no
cost to the International Fund until the Proposed Alliance Agreement has been
approved by such Fund's shareholders.
As provided in the Interim Alliance Agreement and the Proposed Alliance
Agreement, DMC will, in its capacity as investment manager for the International
Fund, determine what portion of the Fund's assets should be allocated to
Alliance. The percentage of the International Fund's total assets that will be
allocated to Alliance may be modified, from time to time, in DMC's sole
discretion.
Q. What should I know about Alliance?
Alliance was founded in 1962 and is an investment adviser registered
with the SEC pursuant to the Advisers Act. Alliance's headquarters are located
at 1345 Avenue of the Americas, New York, NY 10105. Alliance's investment and
professional staff are located at this address as well as others throughout the
United States and the world. As of June 30, 2005, Alliance managed over $515
billion in assets for clients world-wide, including its proprietary
AllianceBernstein Family of Funds.
AXA Financial, Inc. which is located at 1290 Avenue of the Americas,
New York, NY 10104 and Alliance Capital Management Holding L.P. ("Alliance
Holding"), 1345 Avenue of the Americas, New York, NY 10105 hold ownership
interests of approximately 61% and 32%, respectively, in Alliance as of June 30,
2005. AXA Financial, Inc. is a wholly owned subsidiary of AXA S.A. ("AXA").
AXA's headquarters are located at 25, Avenue Matignon, 75008, Paris, France.
Alliance Holding is a publicly traded limited partnership. Alliance and Alliance
Holding are managed and controlled by their sole general partner, Alliance
Capital Management Corporation, which is an indirect wholly owned subsidiary of
AXA ("ACMC") and which is located at 1290 Avenue of the Americas, New York, NY
10104. Due to a stock cross-holding agreement with AXA, BNP Paribas, which is
located at 16, Boulevard Des Italiens, Paris, France, 75008, is an indirect
parent of Alliance.
Set forth below is a listing of the principal executive officer and the
sole general partner of Alliance.
Name Title/Position
- ---- --------------
Lewis A. Sanders Director, Chairman and Chief Executive Officer
Alliance Capital Management General Partner
Corporation
Mr. Sanders's principal occupation is Chairman of the Board and Chief
Executive Officer of ACMC. His business address is the same as ACMC's.
Alliance currently manages the assets of one other registered
investment company that has an investment objective and strategies similar to
that of the International Fund. The following is the name of such other
investment companies and its assets, advisory fee and fee waiver as of June 30,
2005:
ANNUAL
NAME OF FUND NET ASSETS ADVISORY FEE FEE WAIVER
- ------------ ---------- ------------ ----------
AllianceBernstein [_________] [___] [___]
International Value Fund
Alliance is not affiliated with DMC. Mr. Rudell, a Trustee of the
Trust, previously had an interest in 376 shares of AXA and 195 shares of BNP
Paribas; however, as of the date of this Proxy Statement, he no longer had any
such interests in AXA and BNP Paribas.
Q. What are the provisions of the Proposed Alliance Agreement?
The Sub-Advisory Agreement between DMC and Marsico (the "Marsico
Agreement") was originally approved by the Board, including a majority of its
Independent Trustees, on July 17, 2003, and was approved by the initial
shareholder of the International Fund in connection with its organization and
became effective on July 31, 2003. The Marsico Agreement was recently renewed by
the Board at its June 2005 Board Meeting for a period until the earlier of the
effectiveness of Marsico's resignation or until Board approval of, and the
completion of an orderly transition of the managed segment to, a replacement
sub-adviser.
Advisory Services. Under the Proposed Alliance Agreement, DMC, as
manager, will retain Alliance as a sub-adviser, and, subject to DMC's
supervision, Alliance will continue to manage the managed segment as it is
currently being managed by Alliance pursuant to the Interim Alliance Agreement.
The services to be provided to the International Fund by Alliance, as
sub-adviser, under the Proposed Alliance Agreement will be identical to those
previously provided by Marsico under the Marsico Agreement and currently
provided by Alliance under the Interim Alliance Agreement.
Under the Marsico Agreement, Marsico was responsible for the day-to-day
portfolio management of the managed segment and determined from time to time the
securities and other investments that were purchased, retained or sold with
respect to the managed segment. In addition, Marsico implemented such
determinations through the placement of orders for the execution of portfolio
transactions with or through broker or dealers as selected by Marsico. Marsico
provided these services under the Marsico Agreement in accordance with the
International Fund's investment objectives, policies and restrictions, as stated
in its current prospectus and statement of additional information. Alliance will
have the same contractual obligations and duties under the Proposed Alliance
Agreement.
The Marsico Agreement required, and the Proposed Alliance Agreement
requires, that the sub-adviser maintains all books and records with respect to
the securities transactions of the managed segment and to furnish the Board such
periodic and special reports as the Board may request.
Fees. Pursuant to the DMC Advisory Agreement, DMC receives an annual
advisory fee from the International Fund. This fee is payable to DMC by the
International Fund, based on its average daily net assets, as follows:
0.8750% of assets up to $50 million
0.8000% of assets from $50 to 100 million
0.7800% of assets from $100 to 300 million
0.7650% of assets from $300 to 400 million
0.7300% of assets over $400 million
The terms of the DMC Advisory Agreement will not be affected by this Proposal.
The International Fund does not bear any responsibility for the payment of
sub-advisory fees because the sub-advisory fees are paid by DMC out of the fees
it receives under the DMC Advisory Agreement. Therefore, the approval of the
Proposed Alliance Agreement will not affect the overall investment advisory fee
payable by the International Fund to DMC. However, the sub-advisory fees under
the Proposed Alliance Agreement differ from those under the Marsico Agreement.
The annual rate of sub-advisory fees payable to Marsico by DMC, based on the
average daily net assets of the managed segment, was as follows:
0.50% of assets up to $300 million
0.45% of assets from $300 million to $400
0.40% of all assets above $400 million
Under the Proposed Alliance Agreement, the annual rate of sub-advisory fees
payable to Alliance by DMC, based on the average daily net assets of the managed
segment, will be as follows:
0.70% of assets up to $25 million
0.45% of assets from $25 million to $50 million
0.34% of assets from $50 million to $250 million
0.33% of all assets above $250 million
Brokerage. The Marsico Agreement, subject to the primary objective of
obtaining best execution, permitted Marsico to place orders for the purchase and
sale of portfolio securities and other instruments with such broker-dealers who
provide brokerage and research services to DMC, Marsico and the managed segment.
Subject to such policies and procedures adopted by the Board of Trustees, under
the Marsico Agreement, Marsico was permitted to cause the International Fund to
pay a member of an exchange, broker or dealer an amount of commission for
effecting a securities transaction in excess of the amount of commission another
member of an exchange, broker or dealer would have charged for effecting that
transaction, in such instances where Marsico had determined in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such member, broker or dealer,
viewed in terms of either that particular transaction, Marsico's overall
responsibilities with respect to the International Fund, or Marsico's other
advisory clients for which Marsico exercised investment discretion. The Proposed
Alliance Agreement contains a substantially similar provision.
Limitation of Liability. The Marsico Agreement provided that neither
Marsico nor its affiliates would be liable to DMC, the Trust, the International
Fund or any shareholder of the Trust for any action or omission in the course
of, or connected with, rendering services or for any losses that may be
sustained in the purchase, holding or sale of any security, or otherwise, in the
absence of willful misfeasance, bad faith, gross negligence, or a reckless
disregard of the performance of its duties as sub-adviser to the International
Fund and to DMC. The Proposed Alliance Agreement contains an identical
provision.
The Marsico Agreement also provided that Marsico and DMC would
indemnify each other and their respective affiliates to the fullest extent
permitted by law against any and all loss, damage, judgments, fines, amount paid
in settlement and reasonable expenses, including attorney's fees, incurred by
the party seeking indemnification and its affiliates arising from or in
connection with such Agreement so long as such losses arose out of the other
party's willful misfeasance, bad faith, gross negligence, or reckless disregard
in performing its responsibilities under the Agreement. The Proposed Alliance
Agreement contains an identical provision.
Continuance. If shareholders of the International Fund approve the
Proposed Alliance Agreement, it will continue until two years from the date of
its execution, unless earlier terminated. The Proposed Alliance Agreement may be
continued from year to year thereafter by a majority vote of the Board of the
Trust or by a vote of a majority of all votes attributable to the outstanding
shares of the International Fund, provided that in either case the terms and the
renewal have been approved by the vote of a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Marsico Agreement contained an identical provision.
Termination. The Marsico Agreement provided that it could be
terminated, without the payment of a penalty, by DMC or by the Trust (by vote of
the Board of Trustees or by vote of a majority of the outstanding voting
securities of the International Fund) at any time on written notice to Marsico;
and that Marsico could terminate the Proposed Alliance Agreement, without
payment of any penalty, on 60 days' written notice to DMC and the Trust. The
Marsico Agreement also provided that it would automatically terminate in the
event of its assignment. The Proposed Alliance Agreement contains identical
provisions.
Q. What are the material provisions of the Interim Alliance Agreement?
As previously mentioned, the Board, including a majority of its
Independent Trustees, approved the Interim Alliance Agreement with respect to
the International Fund at its September 2005 Board Meeting. The Interim Alliance
Agreement became effective on September 29, 2005. Except for the provisions
relating to the effective dates, termination, compliance policies and procedures
and the fees, the Interim Alliance Agreement is substantially identical to the
Marsico Agreement. Except for the provisions relating to its term and fees, the
Interim Alliance Agreement is identical to the Proposed Alliance Agreement.
Under the terms of the Interim Alliance Agreement, Alliance has agreed
to provide sub-advisory services at no cost to the managed segment until the
Proposed Alliance Agreement is approved by shareholders. During the period that
Alliance is providing its services to the managed segment under the Interim
Alliance Agreement, DMC intends on waiving a portion of its management fee equal
to the amount that would have been paid to Marsico for managing the managed
segment under the Marsico Agreement.
Q. What did the Board consider and review in determining to recommend
Alliance as a sub-adviser to the International Fund?
At the September 2005 Board Meeting, the Trustees met and conferred
with representatives of DMC and LPL to consider DMC's recommendation to retain
Alliance as a sub-adviser to the International Fund, replacing Marsico, and its
effect on such Fund. The Board had the assistance of counsel to the Independent
Trustees who provided advice on, among other things, the Board's fiduciary
obligations in considering the Proposed Allliance Agreement and the Interim
Alliance Agreement (together, the "Alliance Agreements").
The Board reviewed information about Alliance, including its personnel,
operations and financial condition, which had been provided by Alliance. The
Board also reviewed material furnished by DMC and LPL, including: a memorandum
from DMC reviewing the Alliance Agreements and the various services proposed to
be rendered by Alliance; research and analysis concerning DMC's proposal of
Alliance; a description of Alliance's proposed sub-advisory fees under the
Proposed Alliance Agreement; information concerning Alliance's organizational
structure and the experience of its investment management personnel; a "due
diligence" report describing various material items in relation to Alliance's
personnel, organization and policies; copies of Alliance's compliance policies
and procedures and its Code of Ethics; and a copy of each of the Alliance
Agreements.
In considering the approval of the Interim Alliance Agreement, and the
approval of the Proposed Alliance Agreement and submission of it to shareholders
for their approval, the Board of Trustees focused on: (i) the nature, extent and
quality of the services to be provided by Alliance; (ii) the investment
performance of the International Fund and the Alliance Fund; and (iii) the
compatibility of Alliance's investment philosophy and methodology with the
International Fund's other sub-adviser, Mondrian; and (iv) the fees to be
charged by Alliance for the sub-advisory services to be provided with respect to
the International Fund.
The Quality of Services to be Provided. In considering the nature,
extent and quality of the services to be provided by Alliance, the Board
specifically considered that the Alliance Agreements contain substantially
similar provisions to those in the Marsico Agreement except for the provisions
relating to the effective date, compliance policies and procedures and the fees.
The Board reviewed materials provided by Alliance regarding the experience and
qualifications of personnel who will be responsible for managing the managed
segment, and placed weight on Alliance's performance in managing the Alliance
Fund.
The Board also considered that Alliance would co-manage the
International Fund with another sub-adviser, Mondrian. The Board considered the
compatibility of the two sub-advisers' investment philosophies and
methodologies. The Board also noted the Alliance Agreements provide DMC with the
flexibility to adjust the amount of the International Fund's assets advised by
Alliance. Based upon these considerations, the Board determined that the nature,
extent and quality of the services to be provided by Alliance under the Alliance
Agreements are satisfactory.
Investment Performance. With respect to the investment performance
of the International Fund, as well as the Alliance Fund, the Board reviewed the
International Fund's performance to date relative to its peers and benchmark,
and the performance over several periods of the Alliance Fund measured in
several different ways. The Board was satisfied with the performance of the
Alliance Fund. The Board also considered the desirability of adding a
sub-adviser to complement Mondrian's investment style. Based upon these
considerations, the Board determined that Alliance's performance managing the
Alliance Fund provides evidence of the high quality of portfolio management
services expected to be provided by Alliance to the managed segment under the
Alliance Agreements.
The Costs of the Services to be Provided; Economies of Scale. The
Board had been previously provided with information regarding the level of the
advisory fees of the International Fund and overall levels of expenses for such
Fund compared to its peer group of comparable investment companies. The Board
noted that the fees payable to Alliance for the sub-advisory services provided
by it would be paid out of the fee received by DMC in its role as investment
manager. The materials provided to the Board noted that the management fee paid
by the International Fund to DMC would stay the same. The Board believed that
DMC and its affiliates were not currently realizing any meaningful profits based
on the size of the International Fund and the reimbursement or waiver of
expenses by DMC. The Board considered the fees to be paid to Alliance under the
Proposed Alliance Agreement. The Board also noted that Alliance would be
providing its advisory services to the International Fund at no cost under the
Interim Alliance Agreement. The Board made particular note of fees paid by other
similar accounts advised by Alliance. Information about Alliance's estimated
profitability from its proposed relationship with the International Fund was not
available because it had not begun to provide services to the Fund. The Board
was informed that Alliance may receive certain fall-out benefits in connection
with its relationship with the International Fund, such as soft-dollar
arrangements. Based upon these considerations, the Board was able to determine
that the fees under the Proposed Alliance Agreement are fair and reasonable in
relation to the services being provided to the International Fund.
The Board recognized that economies of scale might be realized as
Fund assets grow, but concluded that at current asset levels, the implementation
of additional fee breakpoints or reductions was not warranted. The Board had
previously stated its intention, however, to monitor future growth in the
International Fund with a view to considering the appropriateness of instituting
additional fee breakpoints or reductions in connection with future investment
management agreement approval deliberations.
Therefore, based on the information provided by DMC and Alliance and
the considerations described above, the Board of Trustees determined that the
Alliance Agreements should be approved and that the Proposed Alliance Agreement
should be submitted to shareholders with the Board's recommendation for
approval.
The Board of Trustees recommends that
shareholders of the International Fund
vote FOR Proposal 3.
PROPOSAL 4: FOR SHAREHOLDERS OF THE FIXED INCOME FUND ONLY, APPROVAL OF THE
PROPOSED SUB-ADVISORY AGREEMENT BETWEEN DMC AND AAMI
Q. What changes are proposed for the Fixed Income Fund?
The investment affairs of the Fixed Income Fund are managed by DMC.
Currently, DMC directly manages one portion of the Fixed Income Fund and has
allocated the other portion (the "Sub-Advised Portion") to the DIMA Fixed Income
Group. On July 7, 2005, Deutsche, the ultimate parent of DIMA, entered into
a Sale and Purchase Agreement with Aberdeen (the "Acquisition") to sell parts of
its United Kingdom and Philadelphia-based asset management businesses (the
"Target Businesses"), which include the DIMA Fixed Income Group. The Acquisition
is conditioned, among other things, on Deutsche and Aberdeen obtaining the
necessary regulatory and shareholder approvals. If the Acquisition is
consummated, the Target Businesses, including the DIMA Fixed Income Group, will
become a part of Aberdeen.
The purchase price for the Acquisition is subject to a number of
adjustments depending upon, among other things, the level of assets under
management by the Target Businesses that transfer to Aberdeen. The initial cash
consideration, however, is expected to be (pound)200 million and the total
adjusted consideration is not expected to exceed (pound)245 million, plus
payment on a pound for pound basis for the book value of the Target Businesses
and assets at the closing of the Acquisition, in excess of (pound)35 million.
The Acquisition will be effected by the transfer of certain assets and legal
entities from Deutsche to Aberdeen, and Aberdeen taking on employees from
Deutsche, including the DIMA Fixed Income Group. It is anticipated that the
Acquisition will be completed on or about November 30, 2005.
Upon the closing of the Acquisition, the DIMA Fixed Income Group, which
currently manages the Sub-Advised Portion of the Fixed Income Fund, will become
employees of AAMI. Therefore, in order for the DIMA Fixed Income Group to
continue to provide day-to-day management of the Sub-Advised Portion of the
Fixed Income Fund, as recommended by DMC, DMC will need to enter into a new
sub-advisory agreement with AAMI (the "Proposed AAMI Agreement"). The Proposed
AAMI Agreement must be approved by the Fixed Income Fund's shareholders.
At the September 2005 Board Meeting, the Trustees met to review and
consider the Acquisition, its impact on the Trust and the Fixed Income Fund, and
DMC's recommendation that the Trust retain AAMI to manage the Sub-Advised
Portion of the Fixed Income Fund. Accordingly, the Board reviewed information
provided by DMC and AAMI. Based upon such information and the recommendation of
DMC, the Board approved the Proposed AAMI Agreement appointing AAMI as a
sub-adviser for the Fixed Income Fund to manage a portion of its portfolio. The
form of the Proposed AAMI Agreement is attached as Exhibit D. Shareholders of
the Fixed Income Fund are now being asked to approve the Proposed AAMI
Agreement.
Additionally, pursuant to the requirements of Rule 15a-4 under the 1940
Act, the Board also approved an interim advisory agreement between DMC and AAMI
at its September 2005 Board Meeting (the "Interim AAMI Agreement") in event the
Acquisition is completed before shareholders of the Fixed Income Fund vote on
the Proposed AAMI Agreement. The Board took this action because, under
applicable law, the completion of the Acquisition may be deemed to automatically
terminate the existing Sub-Advisory Agreement between DMC and DIMA (the "DIMA
Agreement"), under which the DIMA Fixed Income Group currently manages the
Sub-Advised Portion of the Fixed Income Fund. Accordingly, if the Acquisition is
completed before shareholders of the Fixed Income Fund vote on the Proposed AAMI
Agreement, the DIMA Agreement may be effectively terminated, preventing the DIMA
Fixed Income Group from managing the Sub-Advised Portion. Consequently, in the
event the Acquisition is completed before shareholders of the Fixed Income Fund
vote on the Proposed AAMI Agreement, the Interim AAMI Agreement will ensure that
uninterrupted sub-advisory services are provided by AAMI for the Sub-Advised
Portion of the Fixed Income Fund until shareholders vote on the Proposed AAMI
Agreement. However, applicable law requires that the Interim AAMI Agreement
terminate no later than 150 days after it becomes effective.
As provided in the Interim AAMI Agreement and the Proposed AAMI
Agreement, DMC will, in its capacity as investment manager for the Fixed Income
Fund, determine what portion of such Fund's assets should be allocated to AAMI.
The percentage of the Fixed Income Fund's total assets that will be allocated to
AAMI may be modified, from time to time, in DMC's sole discretion.
Q. What should I know about AAMI?
AAMI was incorporated in 1994 and is an investment adviser registered
with the SEC pursuant to the Advisers Act. Its headquarters are located at 300
SE 2nd Street, Fort Lauderdale, FL 33301. It is anticipated that AAMI will move
its headquarters to the DIMA Fixed Income Group's current offices, which are
located at 1735 Market Street, Philadelphia, PA 19103, following the closing of
the Acquisition. AAMI is a direct, wholly owned subsidiary of Aberdeen, whose
principal place of business is 10 Queen's Terrace, Aberdeen, Scotland. As of
June 30, 2005, AAMI had total assets under management of approximately $1.5
billion.
Set forth below is a listing of the principal executive officers and
each director of AAMI.
Name Title/Position
- ---- --------------
Martin Gilbert Director and President*
Beverley Hendry Director and Chief Executive Officer**
Susan Mullin Director***
Andrew Smith Director***
Timothy Sullivan Director***
* Mr. Gilbert's principal occupation is chief executive officer of
Aberdeen and his principal address is the same as Aberdeen's.
** Mr. Hendry's principal occupation is managing director of AAMI and his
principal address is the same as AAMI's.
*** The principal occupations of Messrs. Smith and Sullivan and Ms. Mullin
are as directors of Finance and Administration, Product Development and Investor
Relations, and Institutional Business Development - Americas, respectively, of
AAMI and their principal address is 1114 Avenue of the Americas, 34th Floor, New
York, NY 10036.
AAMI does not currently manage the assets of any other investment
companies that have an investment objective and strategies similar to that of
the Fixed Income Fund.
Neither AAMI nor DIMA are affiliated with DMC. Mr. Rudell, a Trustee of
the Trust, previously had an interest in 59 shares of Deutsche; however, as of
the date of this Proxy Statement, he no longer had any such interests.
Q. How do the material provisions of the Proposed AAMI Agreement compare
to the DIMA Agreement?
The DIMA Agreement was originally approved by the Board, including a
majority of its Independent Trustees, on July 17, 2003, and was approved by the
initial shareholder of the Fixed Income Fund in connection with its organization
and became effective on July 29, 2003. The DIMA Agreement was most recently
reapproved by the Board at its June 2005 Board Meeting prior to the expiration
of its initial term.
Advisory Services. Under the Proposed AAMI Agreement, DMC, as manager,
will retain AAMI as a sub-adviser, and, subject to DMC's supervision, AAMI will
manage the Sub-Advised Portion allocated to it by DMC pursuant to the Proposed
AAMI Agreement. The services to be provided to the Fixed Income Fund by AAMI, as
sub-adviser, under the Proposed AAMI Agreement will be substantially identical
to those currently provided by DIMA under the DIMA Agreement.
Under the DIMA Agreement, DIMA is responsible for the day-to-day
portfolio management of the Sub-Advised Portion and determines from time to time
the securities and other investments that are purchased, retained or sold with
respect to the Sub-Advised Portion. In addition, DIMA implements such
determinations through the placement of orders for the execution of portfolio
transactions with or through broker or dealers as selected by DIMA. DIMA
provides these services under the DIMA Agreement in accordance with the Fixed
Income Fund's investment objectives, policies and restrictions, as stated in its
current prospectus and statement of additional information. AAMI will have the
same contractual obligations and duties under the Proposed AAMI Agreement.
Both the DIMA and Proposed AAMI Agreements require the sub-adviser to
maintain all books and records with respect to the securities transactions of
the managed segment and to furnish the Board such periodic and special reports
as the Board may request.
Fees. Pursuant to the DMC Advisory Agreement, DMC receives an annual
advisory fee from the Fixed Income Fund. This fee is payable to DMC by the Fixed
Income Fund, based on its average daily net assets, as follows:
0.70% of assets up to $25 million
0.65% of assets from $25 million to $100 million
0.60% of assets over $100 million
The terms of the DMC Advisory Agreement will not be affected by this Proposal.
The Fixed Income Fund does not bear any responsibility for the payment of
sub-advisory fees because the sub-advisory fees are paid by DMC out of the fees
it receives under the DMC Advisory Agreement. Therefore, the approval of the
Proposed AAMI Agreement will not affect the overall investment advisory fee
payable by the Fixed Income Fund to DMC. The annual rate of sub-advisory fees
payable to DIMA by DMC under the DIMA Agreement, based on the average daily net
assets of the Sub-Advised Portion, is as follows:
0.35% of assets up to $25 million
0.30% of assets from $25 million to $100 million
0.25% of all assets above $100 million
Under the Proposed AAMI Agreement, the annual rate of sub-advisory fees
payable to AAMI by DMC, based on the average daily net assets of the Sub-Advised
Portion, will be as follows:
0.375% of assets up to $25 million
0.300% of assets from $25 million to $100 million
0.200% of assets from $100 million to $500 million
0.175% of all assets above $500 million
Brokerage. The DIMA Agreement permits DIMA, subject to the primary
objective of obtaining best execution, to place orders for the purchase and sale
of portfolio securities and other instruments with such broker-dealers who
provide brokerage and research services to DMC, DIMA and the Sub-Advised
Portion. Subject to such policies and procedures adopted by the Board of
Trustees, under the DIMA Agreement, DIMA is permitted to cause the Fixed Income
Fund to pay a member of an exchange, broker or dealer an amount of commission
for effecting a securities transaction in excess of the amount of commission
another member of an exchange, broker or dealer would have charged for effecting
that transaction, in such instances where DIMA has determined in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such member, broker or dealer,
viewed in terms of either that particular transaction, DIMA's overall
responsibilities with respect to the Fixed Income Fund or DIMA's other advisory
clients for which DIMA exercises investment discretion. The Proposed AAMI
Agreement contains a substantially similar provision.
Limitation of Liability. The DIMA Agreement provides that DIMA will
not be liable to DMC, the Trust, the Fixed Income Fund or any shareholder of the
Trust for any action or omission in the course of, or connected with, rendering
services or for any losses that may be sustained in the purchase, holding or
sale of any security, or otherwise, in the absence of willful misfeasance, bad
faith, gross negligence, or a reckless disregard of the performance of its
duties as sub-adviser to the Fixed Income Fund and to DMC. The Proposed AAMI
Agreement contains an identical provision.
The DIMA Agreement also provides that DIMA and DMC will indemnify
each other and their respective affiliates to the fullest extent permitted by
law against any and all loss, damage, judgments, fines, amount paid in
settlement and reasonable expenses, including attorney's fees, incurred by the
party seeking indemnification and its affiliates arising from or in connection
with the DIMA Agreement so long as such losses arise out of the other party's
willful misfeasance, bad faith, gross negligence, or reckless disregard in
performing its responsibilities under the Agreement. The Proposed AAMI Agreement
contains an identical provision.
Continuance. If shareholders of the Fixed Income Fund approve the
Proposed AAMI Agreement, it will continue until two years from the date of its
execution, unless earlier terminated. The Proposed AAMI Agreement may be
continued from year to year thereafter by a majority vote of the Board of the
Trust or by a vote of a majority of all votes attributable to the outstanding
shares of the Fixed Income Fund, provided that in either case the terms and the
renewal have been approved by the vote of a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The DIMA Agreement contains an identical provision.
Termination. The DIMA Agreement provides that it may be terminated
by DMC or the Trust at any time, without the payment of a penalty, on written
notice to DIMA of DMC's or the Trust's intention to do so (in the case of the
Trust pursuant to action by the Board or pursuant to the vote of the majority of
the outstanding voting securities of the Fixed Income Fund). In addition, DIMA
may terminate such Agreement at any time, without the payment of any penalty, on
60 days' written notice to DMC and the Trust of its intention to do so. The DIMA
Agreement also provides that it will terminate automatically in the event of its
assignment.
The Proposed AAMI Agreement provides that it may be terminated by
DMC or the Trust at any time, without the payment of a penalty, on 10 days'
written notice to AAMI of DMC's or the Trust's intention to do so (in the case
of the Trust pursuant to action by the Board or pursuant to the vote of the
majority of the outstanding voting securities of the Fixed Income Fund). In
addition, AAMI may terminate such Agreement at any time, without the payment of
any penalty, on 60 days' written notice to DMC and the Trust of its intention to
do so. The Proposed AAMI Agreement also provides that it will terminate
automatically in the event of its assignment.
Q. What are the material provisions of the Interim AAMI Agreement?
As discussed above, the Board, including a majority of the Independent
Trustees, approved the Interim AAMI Agreement at its September 2005 Board
Meeting pursuant to the requirements of Rule 15a-4 under the 1940 Act. The
Interim AAMI Agreement is identical in form and terms to the DIMA Agreement,
except for certain additional provisions that are permitted or required by
applicable law. The term and effective date of the Interim AAMI Agreement differ
from the DIMA Agreement. If needed, the Interim AAMI Agreement would become
effective upon the closing of the Acquisition (the "Interim Effective Date"),
and would terminate upon the earlier of 150 days from the Interim Effective Date
or upon shareholder approval of the Proposed AAMI Agreement. The Interim AAMI
Agreement also provides that DMC, the Board, or a majority of the "outstanding
voting securities" of the Fixed Income Fund, as that term is defined in the 1940
Act, may terminate the Interim AAMI Agreement on 10 days' written notice to
AAMI. The Interim AAMI Agreement also terminates immediately in the event of its
assignment.
Pursuant to the terms of the Interim AAMI Agreement, the management
fees payable by DMC to AAMI during this interim period would be identical to
that which would have been payable to DIMA under the DIMA Agreement.
In accordance with the provisions of Rule 15a-4 under the 1940 Act, the
compensation to be paid to AAMI under the Interim AAMI Agreement will be held in
an interest-bearing escrow account. The costs, if any, of maintaining such
escrow account would not be borne by the Trust. The Interim AAMI Agreement also
provides that, if shareholders of the Fixed Income Fund approve the Proposed
AAMI Agreement with AAMI no later than 150 days from the Interim Effective Date,
AAMI will be entitled to all of the compensation held in the escrow account
(including interest earned). If the Proposed AAMI Agreement is not approved by
shareholders, the Interim AAMI Agreement provides that AAMI will be entitled to
be paid, out of the escrow account, the lesser of (i) the total amount held in
the escrow account (plus interest earned on that amount); or (ii) any costs
incurred by AAMI in performing its duties under the Interim AAMI Agreement prior
to its termination (plus interest earned on the amount while in the escrow
account). Such amount would be released to AAMI, as appropriate, from the escrow
account. Any excess monies held in the escrow account would be returned to DMC.
Q. What did the Board consider and review in determining to recommend AAMI
as a sub-adviser to the Fixed Income Fund?
At its September 2005 Board Meeting, the Trustees met and conferred
with representatives of DMC and LPL to consider DMC's recommendation to retain
AAMI (including the DIMA Fixed Income Group), as part of AAMI, as a sub-adviser
to the Fixed Income Fund, and its effects on the Fund. The Board had the
assistance of counsel to the Independent Trustees who provided advice on, among
other things, the Board's fiduciary obligations in considering the Proposed AAMI
Agreement and the Interim AAMI Agreement (together, the "AAMI Agreements").
The Board reviewed information about AAMI, including its personnel,
operations and financial condition, which had been provided by AAMI. The Board
also reviewed material furnished by DMC, including: a memorandum from DMC
reviewing the AAMI Agreements and the various services proposed to be rendered
by AAMI; a description of AAMI's proposed sub-advisory fees; information
concerning AAMI's organizational structure and the experience of its investment
management personnel; a "due diligence" report describing various material items
in relation to AAMI's personnel, organization and policies; copies of AAMI's
compliance policies and procedures and its Code of Ethics; and copies of the
AAMI Agreements.
In considering the approval of the Interim AAMI Agreement, and the
approval of the Proposed AAMI Agreement and its submission to shareholders for
their approval, the Board of Trustees focused on: (i) the nature, extent and
quality of the services to be provided by AAMI through the DIMA Fixed Income
Group; (ii) the investment performance of the DIMA Fixed Income Group; (iii) the
benefits of maintaining the consistency of the Sub-Advised Portion's portfolio
management team; and (iv) the fees to be charged for the sub-advisory services
to be provided by the DIMA Fixed Income Group as part of AAMI with respect to
the Fixed Income Fund.
The Quality of Services to be Provided. In considering the nature,
extent and quality of the services to be provided by the DIMA Fixed Income Group
as a part of AAMI, the Board specifically considered that the AAMI Agreements
contain substantially similar provisions to those in the DIMA Agreement except
those relating to effective date and compliance policies and procedures. The
Board also considered the benefits of providing consistency of portfolio
management. The Board reviewed materials provided by AAMI regarding its
experience and the qualifications of its personnel, and placed weight on AAMI's
representation that there are no planned changes with respect to the DIMA Fixed
Income Group personnel responsible for security selection and portfolio
management of the Sub-Advised Portion of the Fixed Income Fund after the
completion of the Acquisition. The Board also gave weight to its discussion with
DMC and LPL concerning the autonomy to be provided to the DIMA Fixed Income
Group by AAMI after the completion of the Acquisition.
The Board noted that the DIMA Fixed Income Group, as part of AAMI,
would continue to co-manage the Fund with DMC and considered the past
compatibility of the investment philosophies and methodologies of the DIMA Fixed
Income Group and DMC. The Board also noted that the AAMI Agreements provide DMC
with the flexibility to adjust the amount of the Fixed Income Fund's assets to
be advised by AAMI. Based upon these considerations, the Board determined that
the nature, extent and quality of the services to be provided by AAMI under the
AAMI Agreements are satisfactory.
Investment Performance. With respect to the investment performance
of the Fixed Income Fund, the Board looked at the Fund's performance to date
relative to its peers and benchmark. The Board again placed weight on AAMI's
representation that there are no planned changes with respect to the DIMA Fixed
Income Group personnel currently responsible for security selection and
portfolio management of the Sub-Advised Portion after the completion of the
Acquisition. Based upon these considerations, the Board determined that the
performance of the Fixed Income Fund provides evidence of the high quality of
portfolio management services expected to be provided by the DIMA Fixed Income
Group under the AAMI Agreements.
The Costs of the Services to be Provided; Economies of Scale. The
Board noted that the fees payable to AAMI for the investment sub-advisory
services provided by it to the Fixed Income Fund would be paid out of the fee
received by DMC in its role as investment manager. The Board also noted that the
materials provided to them regarding the Acquisition stated that the management
fee paid by the Fixed Income Fund to DMC would stay the same. The Board believed
that DMC and its affiliates were not currently realizing any meaningful profits
based on the size of the Fixed Income Fund and the reimbursement or waiver of
expenses by DMC. The Board considered the fees to be paid to AAMI under the AAMI
Agreements, and noted those currently paid under the DIMA Agreement. Information
about AAMI's estimated profitability from its proposed relationship with the
Fixed Income Fund was not available because it had not begun to provide services
to the Fund. The Board was informed that AAMI may receive certain fall-out
benefits in connection with its relationship with the Fixed Income Fund. Based
upon these considerations, the Board was able to determine that the fees under
the AAMI Agreements are fair and reasonable in relation to the services being
provided to the Fixed Income Fund.
The Board recognized that economies of scale might be realized as
the Fixed Income Fund's assets grow, but concluded that at current asset levels,
the implementation of additional fee breakpoints or reductions by DMC was not
warranted. The Board had previously stated its intention, however, to monitor
future growth in the Fixed Income Fund with a view to considering the
appropriateness of instituting additional fee breakpoints or reductions in
connection with future investment management agreement approval deliberations.
Therefore, based on the information provided by DMC and AAMI, and
the considerations described above, the Board of Trustees determined that the
AAMI Agreements should be approved and that the Proposed AAMI Agreement should
be submitted to shareholders with the Board's recommendation for approval.
The Board of Trustees recommends that
shareholders of the Fixed Income Fund
vote FOR Proposal 4.
ADDITIONAL INFORMATION ABOUT DMC AND THE TRUST'S OTHER SERVICE PROVIDERS
Investment Manager. DMC is registered as an investment adviser with the
SEC pursuant to the Advisers Act, and, together with its predecessors, has been
managing funds within the Delaware Investments family since 1938. DMC is a
series of Delaware Management Business Trust ("DMBT'). DMC and DMBT are located
at 2005 Market Street, Philadelphia, Pennsylvania 19103. As of June 30, 2005,
DMC was managing approximately $[__] billion in assets in various open-end and
closed-end investment company accounts. Other affiliates of DMC were managing
additional institutional and separate account assets in the amount of $[__]
billion as of that date.
DMC is an indirect, wholly owned subsidiary of Lincoln National
Corporation, also known as Lincoln Financial Group, a publicly held corporation.
Lincoln National Corporation, with headquarters currently at 1500 Market Street,
Suite 3900, Centre Square Tower, Philadelphia, Pennsylvania 19102, is a
diversified organization involved in many aspects of the financial services
industry, including insurance and investment management.
The Trustee, the Managing Directors and the principal executive officer
of DMC and their principal occupations (that are positions with DMC) are as
follows: Jude T. Driscoll is the President and Chief Executive Officer of DMC;
See Y. Quek, Executive Vice President, Managing Director-Fixed Income; Patrick
P. Coyne, Executive Vice President, Managing Director, Chief Investment
Officer-Equities; and John B. Fields, Senior Vice President/Trustee. The address
of each of the principal executive officer, the Managing Directors and the
Trustee of DMC is 2005 Market Street, Philadelphia, PA 19103.
The following officers of DMC are also officers of the Trust: John C.E.
Campbell serves as Executive Vice President - Global Marketing and Client
Services of DMC and Chairman and Trustee of the Trust; Richelle S. Maestro
serves as Executive Vice President, General Counsel and Secretary to DMC and the
Trust; and Joseph H. Hastings serves as Executive Vice President, Interim Chief
Financial Officer, Treasurer and Controller of DMC and Executive Vice President
and Chief Financial Officer of the Trust.
Administrators and Principal Underwriters. The Funds receive
administrative services from DMC, the investment manager, and from Delaware
Service Company, Inc. ("DSC"), which acts as Shareholder Servicing, Dividend
Disbursing, Accounting Services and Transfer Agent. DSC is located at 2005
Market Street, Philadelphia, PA 19103. For the fiscal year ended March 31, 2005,
DSC received $[________] from the Funds for such services. Shareholder approval
of the Proposals will not affect the administrative services provided by DMC and
DSC.
The Funds' principal underwriter is Delaware Distributors, L.P.
("DDLP"), 2005 Market Street, Philadelphia, PA 19103. DDLP may receive fees from
the Funds under distribution plans in connection with the sale and distribution
of certain classes of shares of the Funds. For the fiscal year ended March 31,
2005, DDLP received $[_____], $[______], $[______] and $[______] from the Large
Cap Value Fund, Small Cap Value Fund, International Fund and Fixed Income Fund,
respectively, under such plans.
VOTING REQUIREMENTS
Q. How do I vote my shares?
You may vote your shares by attending the Special Meeting in person, by
mail, by telephone or through the Internet. To cast your vote by mail, simply
fill out, sign, date and send us the enclosed proxy card(s) in the postage-paid
envelope provided. To vote by telephone or through the Internet, call the
toll-free number or visit the web site indicated on your proxy card(s) and
follow the recorded or online instructions.
Q. How many votes are necessary to approve each Proposal?
Provided that 33 1/3% of the outstanding shares of a Fund are present
in person or represented by proxy and entitled to vote at the Special Meeting
(i.e., a quorum is present), the approval of the Proposal on behalf of that Fund
requires the affirmative vote of the lesser of: (i) a majority of the votes
attributable to the outstanding shares of that Fund, or (ii) 67% or more of the
votes attributable to the shares represented at the Special Meeting at which the
holders of more than 50% of the votes attributable to the outstanding shares of
a Fund are represented in person or by proxy. Each shareholder will be entitled
to one vote for each dollar of net asset value per share, and a proportionate
fractional vote for any fractional dollar value, held in that Fund on the Record
Date. If sufficient votes to approve a Proposal are not received by the date of
the Special Meeting, the Special Meeting may be adjourned to permit further
solicitations of proxies for that Proposal. The holders of a majority of the
votes attributable to the shares of a Fund entitled to vote at the Special
Meeting and present in person or by proxy (whether or not sufficient to
constitute a quorum) may adjourn the Special Meeting with respect to the
Proposal relating to such Fund. The Special Meeting may also be adjourned by the
chairperson of the Special Meeting.
Abstentions will be included for purposes of determining whether a
quorum is present at the Special Meeting, but will be treated as votes against a
Proposal for purposes of determining whether the matters to be voted upon at the
Special Meeting have been approved. Broker non-votes will be included for
purposes of determining whether a quorum is present at the Special Meeting, but
will be treated as votes against a Proposal for purposes of determining whether
the matters to be voted upon at the Special Meeting have been approved. Broker
non-votes are proxies from brokers or nominees indicating that such persons have
not received voting instructions from the beneficial owner or other person
entitled to vote shares on a particular matter with respect to which the brokers
or nominees do not have discretionary power to vote.
Q. What other matters will be voted upon at the Special Meeting?
The Board of Trustees of the Trust does not intend to bring any matters
before the Special Meeting other than those described in this Proxy Statement.
The Board of Trustees also is not aware of any other matters to be brought
before the Special Meeting by others. If any other matter legally comes before
the Special Meeting, proxies for which discretion has been granted will be voted
in accordance with the views of management.
Q. Who is entitled to vote?
Only shareholders of record of the Funds at the close of business on
the Record Date will be entitled to vote at the Special Meeting. The following
chart describes the number of outstanding shares and net asset value per share
for each class of each Fund as of the Record Date:
NUMBER OF SHARES
OUTSTANDING NET ASSET VALUE PER SHARE
FUND/SHARE CLASS ON RECORD DATE ON RECORD DATE
- ---------------- -------------- --------------
Optimum Large Cap Value Fund
Class A 3,385,637.26 $11.18
Class B 819,515.99 $11.10
Class C 11,706,805.68 $11.10
Institutional 19,890,337.60 $11.21
Optimum Small Cap Value Fund
Class A 843,712.60 $12.85
Class B 167,985.99 $12.68
Class C 2,523,972.10 $12.67
Institutional 3,150,762.29 $12.94
Optimum International Fund
Class A 1,264,145.60 $12.43
Class B 317,222.68 $12.25
Class C 4,360,833.82 $12.26
Institutional 5,425,202.53 $12.51
Optimum Fixed Income Fund
Class A 4,693,379.03 $9.04
Class B 990,845.96 $9.04
Class C 17,802,036.02 $9.04
Institutional 26,361,097.04 $9.04
Q. What other solicitations will be made?
This proxy solicitation is being made by the Trust's Board for use at
the Special Meeting. In addition to solicitation by mail, solicitations also may
be made by advertisement, telephone, facsimile transmission or other electronic
media, or personal contacts. Officers and employees of the Trust, without extra
pay, may also conduct solicitations by telephone, facsimile and personal
interviews. The Trust will request broker-dealer firms, custodians, nominees and
fiduciaries to forward proxy materials to the beneficial owners of the shares of
record. The Trust may reimburse broker-dealer firms, custodians, nominees and
fiduciaries for their reasonable expenses incurred in connection with such proxy
solicitation.
The Trust has engaged Georgeson Shareholder Communications, Inc.
("Georgeson") to solicit proxies from brokers, banks, other institutional
holders and individual shareholders at an anticipated cost of approximately
$60,000 to $170,000, including out of pocket expenses, a portion of which will
be borne by the Trust. Fees and expenses may be greater depending on the effort
necessary to obtain shareholder votes. The Trust has also agreed to indemnify
Georgeson against certain liabilities and expenses, including liabilities under
the federal securities laws. The Trust expects that the solicitations will be
primarily by mail, but also may include telephone, telecopy or oral
solicitations. As the Special Meeting date approaches, certain shareholders of a
Fund may receive a telephone call from a representative of Georgeson if their
votes have not yet been received. Proxies that are obtained telephonically will
be recorded in accordance with the procedures described below. These procedures
are designed to ensure that both the identity of the shareholder casting the
vote and the voting instructions are accurately determined.
In all cases where a telephonic proxy is solicited, the Georgeson
representative is required to ask for each shareholder's full name and address,
or the zip code or employer identification number, and to confirm that the
shareholder has received the proxy materials in the mail. If the shareholder is
a corporation or other entity, the Georgeson representative is required to ask
for the person's title and confirmation that the person is authorized to direct
the voting of the shares. If the information solicited agrees with the
information provided to Georgeson, then the Georgeson representative has the
responsibility to explain the process, read the Proposals listed on the proxy
card and ask for the shareholder's instructions on each Proposal. Although the
Georgeson representative is permitted to answer questions about the process, he
or she is not permitted to recommend to the shareholder how to vote, other than
to read any recommendation set forth in this Proxy Statement. Georgeson will
record the shareholder's instructions on the card. Within 72 hours, the
shareholder will be sent a letter or mailgram to confirm his or her vote and
asking the shareholder to call Georgeson immediately if his or her instructions
are not correctly reflected in the confirmation.
PRINCIPAL SHAREHOLDERS
On the Record Date, the officers and Trustees of the Trust, as a group,
owned less than 1% of the outstanding voting shares of each Fund.
To the best of the Trust's knowledge, as of the Record Date, no person
owned beneficially or of record more than 5% of the outstanding shares of any
class of any of the Funds.
SHAREHOLDER REPORTS
The Trust's most recent annual report to shareholders, dated March 31,
2005, was previously mailed to shareholders. A copy of this report is available
upon request by calling or writing the Trust at the telephone number and address
shown on the top of the Notice of Special Meeting of Shareholders.
SHAREHOLDER PROPOSALS
The Funds are not required, and do not intend, to hold regular annual
shareholders' meetings. Shareholders wishing to submit proposals for
consideration for inclusion in a proxy statement for the next shareholders'
meeting should send their written proposals to the Funds' officers, c/o of
Delaware Investments, 2005 Market Street, Philadelphia, PA 19103, so that they
are received within a reasonable time before any such meeting. No business other
than the matters described above is expected to come before the Special Meeting,
but should any other matter requiring a vote of shareholders arise, including
the adjournment or postponement of the Special Meeting, the persons name on the
enclosed proxy card(s) will vote on such matters in accordance with the views of
the Trust's management.
EXHIBIT A
SUB-ADVISORY AGREEMENT
AGREEMENT made by and between DELAWARE MANAGEMENT COMPANY, A SERIES OF
DELAWARE MANAGEMENT BUSINESS TRUST (the "Investment Manager") and TCW INVESTMENT
MANAGEMENT COMPANY (the "Sub-Adviser").
WITNESSETH:
WHEREAS, OPTIMUM FUND TRUST (the "Trust") is an investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), and is organized as a statutory trust under the laws of the State of
Delaware; and
WHEREAS, OPTIMUM LARGE CAP VALUE FUND (the "Fund") is a series of the
Trust; and
WHEREAS, the Investment Manager and the Trust, on behalf of the Fund,
have entered into an agreement (the "Investment Management Agreement") whereby
the Investment Manager will provide investment advisory services to the Trust
with respect to the Fund; and
WHEREAS, the Investment Manager has the authority under the Investment
Management Agreement to retain one or more sub-advisers to assist the Investment
Manager in providing investment advisory services to the Trust with respect to
the Fund; and
WHEREAS, the Investment Manager and the Sub-Adviser are registered
investment advisers under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), and engage in the business of providing investment advisory
services; and
WHEREAS, the Board of Trustees (the "Board" or the "Trustees") of the
Trust and the Investment Manager desire that the Investment Manager retain the
Sub-Adviser to render investment advisory and other services with respect to
that portion of the Fund as the Investment Manager shall from time to time
allocate to the Sub-Adviser (the "Managed Portion") in the manner, for the
period, and on the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. (a) The Sub-Adviser will supervise and direct the investments of the
assets of the Managed Portion of each Fund listed on Schedule A attached hereto
in accordance with the Fund's investment objectives, policies, and restrictions
as provided in the Fund's Prospectus and Statement of Additional Information, as
currently in effect and as the same may be hereafter modified, amended and/or
supplemented from time to time (hereinafter referred to as the "PROSPECTUS AND
SAI"), and such other limitations as the Fund may impose by notice in writing to
the Sub-Adviser, subject always to the supervision and control of the Investment
Manager and the Board.
(b) As part of the services it will provide hereunder, the
Sub-Adviser is authorized and directed, in its discretion and without prior
consultation with the Fund or the Investment Manager to:
(i) obtain and evaluate information relating to investment
recommendations, asset allocation advice, industries, businesses, securities
markets, research, economic analysis, and other investment services with respect
to the securities that are included in the Managed Portion or that are under
consideration for inclusion in the Managed Portion and invest the Managed
Portion in accordance with the Investment Manager's and the Board's written
direction as more fully set forth herein and as otherwise directed;
A-1
(ii) regularly make decisions as to what securities to
purchase and sell on behalf of the Fund with respect to the Managed Portion,
effect the purchase and sale of such investments in furtherance of the Fund's
objectives and policies, and furnish the Board with such information and reports
regarding the Sub-Adviser's activities in the performance of its duties and
obligations under this Agreement as the Investment Manager deems appropriate or
as the Board may reasonably request, including such reports, information, and
certifications as the officers of the Trust may reasonably require in order to
comply with applicable federal and state laws and regulations and Trust policies
and procedures;
(iii) provide any and all material composite or other
performance information, records and supporting documentation about accounts or
funds the Sub-Adviser manages, if appropriate, that are relevant to the Managed
Portion and that have investment objectives, policies, and strategies
substantially similar to those employed by the Sub-Adviser in managing the
Managed Portion that may be reasonably necessary, under applicable laws, to
allow the Fund or its agent to present information concerning the Sub-Adviser's
prior performance in the Fund's Prospectus and SAI, and any permissible reports
and materials prepared by the Fund or its agent;
(iv) provide information as reasonably requested by the
Investment Manager or the Board to assist them or their delegate in the
determination of the fair value of certain portfolio securities when market
quotations are not readily available for the purpose of calculating the Fund's
net asset value in accordance with procedures and methods established by the
Board;
(v) vote proxies, exercise conversion or subscription rights,
and respond to tender offers and other consent solicitations ("CORPORATE
ACTIONS") with respect to the issuers of securities in which Fund assets may be
invested, provided materials relating to such Corporate Actions have been
forwarded to the Sub-Adviser in a timely fashion by the Fund's custodian or
otherwise known to the Sub-Adviser, and to submit reports regarding such
Corporate Actions, including a copy of any policies regarding such Corporate
Actions, in a form reasonably satisfactory to the Investment Manager and the
Fund in order to comply with any applicable federal or state reporting
requirements;
(vi) provide performance and other information as reasonably
requested by the Investment Manager or the Board to assist them or their
delegate in conducting ongoing due diligence and performance monitoring; and
(vii) except as the Investment Manager and the Sub-Adviser may
agree in writing from time to time, maintain all accounts, books, and records
with respect to the Managed Portion as are required of an investment adviser of
a registered investment company pursuant to the 1940 Act and the Advisers Act
and the rules thereunder. The Sub-Adviser shall furnish to the Investment
Manager copies of all such accounts, books, and records as the Investment
Manager may reasonably request. The Sub-Adviser agrees that such accounts,
books, and records are the property of the Trust, and will be surrendered to the
Trust promptly upon request, with the understanding that the Sub-Adviser may
retain its own copy of all records.
(c) The Sub-Adviser shall not consult with any other sub-adviser of
the Fund or of any fund that is an "affiliated person" of the Fund concerning
transactions for the Fund in securities or other assets. In no instance will any
portfolio securities of the Fund be purchased from, or sold to, the Investment
Manager, the Sub-Adviser, the Trust's principal underwriter, or any affiliated
persons of the Trust, the Investment Manager, the Sub-Adviser or the Trust's
principal underwriter, acting as principal in the transaction, except to the
extent permitted by the Securities and Exchange Commission (the "SEC") and the
1940 Act, including Rule 17a-7 thereunder. The Sub-Adviser acknowledges that the
Investment Manager and the Trust may rely on Rule 17a-7, Rule 17a-10, Rule
10f-3, Rule 12d3-1 and Rule 17e-1 under the 1940 Act.
(d) In furnishing services hereunder, the Sub-Adviser shall be
subject to, and shall perform in accordance with, the provisions of the
following that apply to the Sub-Adviser's activities in regards to the Fund: (i)
the Trust's Agreement and Declaration of Trust, as the same may be hereafter
modified, amended, and/or supplemented from time to time; (ii) the Trust's
By-Laws, as the same may be hereafter modified, amended, and/or supplemented
from time to time; (iii) the Fund's Prospectus and SAI; (iv) the 1940 Act and
the Advisers Act and the rules under each and all other federal and state
securities laws or regulations applicable to the Trust and the Fund; (v) the
A-2
Trust's compliance policies and procedures adopted from time to time by the
Board for compliance by the Trust with the Federal Securities Laws (as that term
is defined in Rule 38a-1(e)(1) under the 1940 Act) (together, the "Trust
Compliance Procedures") and any other Trust policies and procedures adopted from
time to time by the Board; and (vi) the written instructions of the Investment
Manager. The Investment Manager agrees to provide the Sub-Adviser with current
copies of the Trust's and the Fund's documents mentioned above and all changes
made to such documents.
(e) In order to assist the Trust and the Trust's chief compliance
officer (the "Trust CCO") and the Investment Manager and the Investment
Manager's Chief Compliance Officer (the "IM CCO") in satisfying the requirements
contained in Rule 38a-1 under the 1940 Act and Rule 206(4)-7 under the Adviser
Act, respectively, the Sub-Adviser shall provide to the Trust CCO and/or IM CCO:
(i) direct access to the Sub-Adviser's chief compliance officer (the
"Sub-Adviser CCO") and its officers and employees, as reasonably requested by
the Trust CCO and/or IM CCO; (ii) quarterly reports confirming that the
Sub-Adviser has complied with the Trust Compliance Procedures that apply to the
Sub-Adviser in managing the Managed Portion; and (iii) quarterly certifications
with respect to Material Compliance Matters (as that term is defined in Rule
38a-1(e)(2) under the 1940 Act) related to the Sub-Adviser's management of the
Managed Portion.
The Sub-Adviser shall promptly provide the Trust CCO and IM CCO with
copies and summaries of: (i) the Sub-Adviser's policies and procedures for
compliance by the Sub-Adviser with the Federal Securities Laws and to prevent
violation of the Advisers Act (together, the "Sub-Adviser Compliance
Procedures"); and (ii) any material changes to the Sub-Adviser Compliance
Procedures. The Sub-Adviser shall cooperate fully with the Trust CCO and IM CCO
so as to facilitate the Trust CCO's and IM CCO's performance of their respective
responsibilities under Rule 38a-1 and Rule 206(4)-7, including to review,
evaluate and report to the Board on the operation of the Sub-Adviser Compliance
Procedures, and shall promptly report to the Trust CCO and IM CCO any Material
Compliance Matter arising under the Sub-Adviser Compliance Procedures involving
the Managed Portion. The Sub-Adviser shall allow the Trust CCO and/or the IM
CCO, as reasonably requested from time to time, access to examine and review the
Sub-Adviser's Compliance Procedures and the Sub-Adviser's adherence thereto. The
Sub-Adviser shall provide to the Trust CCO and IM CCO: (i) quarterly reports
confirming the Sub-Adviser's compliance with the Sub-Adviser Compliance
Procedures in managing the Managed Portion; and (ii) certifications that there
were no Material Compliance Matters involving the Sub-Adviser that arose under
the Sub-Adviser Compliance Procedures that affected the Managed Portion. At
least annually, the Sub-Adviser shall provide a certification to the Trust CCO
and IM CCO to the effect that the Sub-Adviser has in place and has implemented
policies and procedures that are reasonably designed to ensure compliance by the
Sub-Adviser with the Federal Securities Laws, including the conduct and results
of our annual review for adequacy and effectiveness.
(f) The Sub-Adviser shall assist the Fund in the preparation of the
Trust's registration statement, the Prospectus and SAI, shareholder reports and
other regulatory filings, or any amendment or supplement thereto (collectively,
"Regulatory Filings"), and shall provide the Fund with disclosure for use in the
Fund's Regulatory Filings, including, without limitation, disclosure related to
the Sub-Adviser's investment management personnel, portfolio manager
compensation, investment management strategies and techniques, and proxy voting
policies. The Sub-Adviser shall provide such certifications regarding the Fund
as the Trust's officers may reasonably request for purposes of the preparation
of any Regulatory Filings.
(g) The Sub-Adviser hereby agrees during the period hereinafter set
forth to render the services and assume the obligations herein set forth for the
compensation herein provided. The Sub-Adviser shall for all purposes herein be
deemed to be an independent contractor, and shall, unless otherwise expressly
provided and authorized, have no authority to act for or represent the Trust in
any way, or in any way be deemed an agent of the Trust.
2. (a) Under the terms of the Investment Management Agreement, the
Trust shall conduct its own business and affairs and shall bear the expenses and
salaries necessary and incidental thereto including, but not in limitation of
the foregoing, the costs incurred in: the maintenance of its existence as a
statutory trust organized under the laws of the State of Delaware; the
maintenance of its own books, records, and procedures; dealing with its own
shareholders; the payment of dividends; transfer of shares, including issuance
and repurchase of shares; preparation of share certificates, if any; reports and
notices to shareholders; calling and holding of shareholders' meetings;
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miscellaneous office expenses; brokerage commissions; custodian fees; legal and
accounting fees; taxes; and federal and state registration fees.
(b) Directors, officers and employees of the Sub-Adviser may be
directors, officers and employees of other funds that have employed the
Sub-Adviser as sub-adviser or investment manager. Directors, officers and
employees of the Sub-Adviser who are Trustees, officers and/or employees of the
Trust, shall not receive any compensation from the Trust for acting in such dual
capacity.
(c) In the conduct of the respective business of the parties hereto
and in the performance of this Agreement, the Trust, the Investment Manager, and
the Sub-Adviser may share facilities common to each, which may include legal and
accounting personnel, with appropriate proration of expenses between and among
them.
3. (a) The Sub-Adviser will select brokers and dealers to effect all
Fund transactions subject to the conditions set forth herein. The Sub-Adviser
will place all necessary orders with brokers, dealers, or issuers, and will
negotiate brokerage commissions, if applicable. The Sub-Adviser is directed at
all times to seek to execute transactions for the Managed Portion (i) in
accordance with any written policies, practices or procedures that may be
established by the Board or the Investment Manager from time to time, and (ii)
as described in the Fund's Prospectus and SAI. In placing any orders for the
purchase or sale of investments for the Fund, with respect to the Managed
Portion, the Sub-Adviser shall use its best efforts to obtain for the Managed
Portion "best execution," considering all of the circumstances, and shall
maintain records adequate to demonstrate compliance with this requirement.
(b) Subject to the appropriate policies and procedures approved by
the Board, the Sub-Adviser may, to the extent authorized by Section 28(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), cause the
Managed Portion to pay a broker or dealer that provides brokerage or research
services to the Investment Manager, the Sub-Adviser and the Managed Portion an
amount of commission for effecting a Fund transaction 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 amount of
commission is reasonable in relation to the value of such brokerage or research
services provided viewed in terms of that particular transaction or the
Sub-Adviser's overall responsibilities to the Fund or its other advisory clients
for which the Investment Manager or the Sub-Adviser exercises investment
discretion. To the extent authorized by Section 28(e) and the Board, the
Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of such action.
Subject to seeking best execution and compliance with applicable federal and
state securities laws and regulations, the Board or the Investment Manager may
direct the Sub-Adviser to effect transactions in Fund securities through
broker-dealers in a manner that will help generate resources to pay the cost of
certain expenses that the Trust is required to pay or for which the Trust is
required to arrange payment.
(c) Any entity or person associated with the Investment Manager or
the Sub-Adviser that is a member of a national securities exchange is authorized
to effect any transaction on such exchange for the account of the Fund to the
extent and as permitted by Section 11(a)(1)(H) of the Exchange Act.
4. As compensation for the services to be rendered to the Trust for the
benefit of the Fund by the Sub-Adviser under the provisions of this Agreement,
the Investment Manager shall pay to the Sub-Adviser a fee as provided in
Schedule A attached hereto.
5. The services to be rendered by the Sub-Adviser to the Trust for the
benefit of the Fund under the provisions of this Agreement are not to be deemed
to be exclusive, and the Sub-Adviser shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby.
6. (a) Subject to the limitation set forth in Paragraph 5, the
Sub-Adviser, its directors, officers, employees, agents, and shareholders may
engage in other businesses, may render investment advisory services to other
investment companies, or to any other corporation, association, firm or
individual, and may render underwriting services to the Trust or to any other
investment company, corporation, association, firm or individual.
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(b) Neither the Investment Manager, the Trust nor the Fund shall use
the Sub-Adviser's actual or fictitious name(s), mark, derivative and/or logo (or
that of any affiliate of the Sub-Adviser, other than that of the Fund, the
Trust, or any affiliate of the Investment Manager that is an affiliate of the
Sub-Adviser solely by reason of the Sub-Adviser's provision of services pursuant
to this Agreement) or otherwise refer to the Sub-Adviser in any materials
distributed to third parties, including the Fund's shareholders, without prior
review and written approval by the Sub-Adviser, which may not be unreasonably
withheld or delayed. Upon termination of this Agreement, the Investment Manager,
the Trust and the Fund, shall, to the extent applicable and as soon as is
reasonably possible, cease to use the Sub-Adviser's actual or fictitious
name(s), mark, derivative and/or logo.
(c) The Sub-Adviser shall not use the Investment Manager's name (or
that of any affiliate of the Investment Manager) or otherwise refer to the
Investment Manager in any materials distributed to third parties, including the
Fund's shareholders, without prior review and written approval by the Investment
Manager, which may not be unreasonably withheld or delayed. Upon termination of
this Agreement, the Sub-Adviser, shall, to the extent applicable and as soon as
is reasonably possible, cease to use the actual or fictitious name(s), mark,
derivative and/or logo of the Investment Manager, the Trust and the Fund.
7. (a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard in the performance of its duties as
Sub-Adviser to the Trust on behalf of the Fund, the Sub-Adviser shall not be
liable to the Trust, the Fund, the Investment Manager or any shareholder of the
Trust for any action 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, or otherwise. The Sub-Adviser makes no
representation or warranty, express or implied, that any level of performance or
investment results will be achieved by the Managed Portion or the Fund, or that
the Managed Portion or the Fund will perform comparably with any standard or
index, including other clients of Sub-Adviser, whether public or private.
(b) The Investment Manager shall indemnify the Sub-Adviser and its
affiliates and its or their controlling persons, officers, directors, employees,
agents, legal representatives and persons controlled by it (which shall not
include the Trust or the Fund) (collectively, "Sub-Adviser Related Persons") to
the fullest extent permitted by law against any and all loss, damage, judgments,
fines, amounts paid in settlement and reasonable expenses, including attorneys'
fees, (collectively "Losses") incurred by the Sub-Adviser or Sub-Adviser Related
Persons arising from or in connection with this Agreement or the performance by
the Sub-Adviser or Sub-Adviser Related Persons of its or their duties hereunder
so long as such Losses arise out of the Investment Manager's willful
misfeasance, bad faith, gross negligence, or reckless disregard in performing
its responsibilities hereunder, including, without limitation, such Losses
arising under any applicable law or that may be based upon any untrue statement
of a material fact contained in the Trust's Registration Statement, or any
amendment thereof or any supplement thereto, or the omission to state therein a
material fact that was known or that should have been known and was required to
be stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reasonable reliance upon
information furnished to the Investment Manager or the Trust by the Sub-Adviser
or a Sub-Adviser Related Person specifically for inclusion in the Registration
Statement or any amendment thereof or supplement thereto, except to the extent
any such Losses referred to in this paragraph (b) result from willful
misfeasance, bad faith, gross negligence or reckless disregard on the part of
the Sub-Adviser or a Sub-Adviser Related Person in the performance of any of its
duties under, or in connection with, this Agreement.
(c) The Sub-Adviser shall indemnify the Investment Manager and its
affiliates and its or their controlling persons, officers, directors, employees,
agents, legal representatives and persons controlled by it (collectively,
"Investment Manager Related Persons") to the fullest extent permitted by law
against any and all Losses incurred by the Investment Manager or Investment
Manager Related Persons arising from or in connection with this Agreement or the
performance by the Investment Manager or Investment Manager Related Persons of
its or their duties hereunder so long as such Losses arise out of the
Sub-Adviser's willful misfeasance, bad faith, gross negligence, or reckless
disregard in performing its responsibilities hereunder, including, without
limitation, such Losses arising under any applicable law or that may be based
upon any untrue statement of a material fact contained in the Trust's
Registration Statement, or any amendment thereof or any supplement thereto, or
the omission to state therein a material fact that was known or that should have
been known and was required to be stated therein or necessary to make the
statements therein not misleading, if such statement or omission was made in
reasonable reliance upon information furnished to the Investment Manager or the
Trust by the Sub-Adviser or a Sub-Adviser Related Person specifically for
inclusion in the Registration Statement or any amendment thereof or supplement
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thereto, except to the extent any such Losses referred to in this paragraph (c)
result from willful misfeasance, bad faith, gross negligence or reckless
disregard on the part of the Investment Manager or an Investment Manager Related
Person in the performance of any of its duties under, or in connection with,
this Agreement.
8. (a) This Agreement shall be executed and become effective as of the
date written below; provided, however, that this Agreement shall not become
effective with respect to the Fund unless it has first been approved in the
manner required by the 1940 Act and the rules thereunder or in accordance with
exemptive or other relief granted by the SEC or its staff. This Agreement shall
continue in effect for a period of two (2) years and may be renewed thereafter
only so long as such renewal and continuance is specifically approved at least
annually by the Board or by the vote of a majority of the outstanding voting
securities of the Fund and only if the terms and the renewal hereof have been
approved by the vote of a majority of those Trustees of the Trust who are not
parties hereto or "interested persons" of the Trust, the Fund, or any party
hereto, cast in person at a meeting called for the purpose of voting on such
approval.
(b) No amendment to this Agreement shall be effective unless
approved in the manner required by the 1940 Act and the rules thereunder or in
accordance with exemptive or other relief granted by the SEC or its staff.
(c) This Agreement may be terminated by the Investment Manager or
the Trust at any time, without the payment of a penalty, on written notice to
the Sub-Adviser of the Investment Manager's or the Trust's intention to do so,
in the case of the Trust pursuant to action by the Board or pursuant to the vote
of a majority of the outstanding voting securities of the Fund. The Sub-Adviser
may terminate this Agreement at any time, without the payment of a penalty, on
sixty (60) days' written notice to the Investment Manager and the Trust of its
intention to do so. Upon termination of this Agreement, the obligations of all
the parties hereunder shall cease and terminate as of the date of such
termination, except for (i) any obligation to respond for a breach of this
Agreement committed prior to such termination, (ii) the obligation of the
Investment Manager to pay to the Sub-Adviser the fee provided in Paragraph 4
hereof, prorated to the date of termination, and (iii) any indemnification
obligation provided in Paragraph 7 hereof. This Agreement shall automatically
terminate in the event of its assignment. This Agreement shall automatically
terminate upon the termination of the Investment Management Agreement.
9. Any information and advice furnished by any party to this Agreement
to the other party or parties, including material non-public information with
respect to the Fund (which includes the portfolio holdings of the Fund), shall
be treated as confidential and shall not be disclosed to third parties without
the consent of the other party hereto except as required by law, rule or
regulation. Notwithstanding the foregoing, information shall not be subject to
such confidentiality obligations if it:
(i) is already known to the receiving party at the time it is
obtained;
(ii) is or becomes publicly known or available through no wrongful
act of the receiving party;
(iii) is rightfully received from a third party who, to the best of
the receiving party's knowledge, is not under a duty of
confidentiality;
(iv) is released by the protected party to a third party without
restriction;
(v) is required to be disclosed by the receiving party pursuant to
a requirement of a court order, subpoena, governmental or
regulatory agency or law (provided the receiving party will
provide the other party written notice of such requirement, to
the extent such notice is permitted);
(vi) is relevant to the defense of any claim or cause of action
asserted against the receiving party; or
(vii) has been or is independently developed or obtained by the
receiving party.
A-6
The Sub-Adviser shall not disclose any "nonpublic personal information" (as such
term is defined in Regulation S-P, including any amendments thereto) pertaining
to the customers of the Trust or a client of the Investment Manager to any third
party or use such information other than for the purpose of providing the
services contemplated by this Agreement.
10. The Sub-Adviser represents, warrants and agrees that:
(a) The Sub-Adviser: (i) is registered as an investment adviser
under the Advisers Act and will continue to be so registered for so long as this
Agreement remains in effect; (ii) is not prohibited by the 1940 Act, the
Advisers Act or other law, regulation or order from performing the services
contemplated by this Agreement; (iii) to the best of its knowledge, has met and
will seek to continue to meet for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; and (v) will promptly notify the Investment Manager of the occurrence
of any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise. The Sub-Adviser will also promptly notify the Fund and the Investment
Manager if it is served or otherwise receives notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Fund, provided,
however, that routine regulatory examinations shall not be required to be
reported by this provision.
(b) The Sub-Adviser has adopted policies and procedures and a
written code of ethics complying with the requirements of Rule 17j-1 under the
1940 Act and Rule 204A-1 under the Advisers Act, and will provide the Investment
Manager and the Board with copies of such policies and procedures and code of
ethics, together with evidence of its adoption. In accordance with the
requirements of Rule 17j-1, the Sub-Adviser shall certify to the Investment
Manager that the Sub-Adviser has complied in all material respects with the
requirements of Rule 17j-1 during the previous year and that there has been no
material violation of the Sub-Adviser's code of ethics relating to the services
the Sub-Adviser performs under this Agreement or, if such a material violation
has occurred, that appropriate action was taken in response to such violation.
Upon the written request of the Investment Manager, the Sub-Adviser shall
provide to the Investment Manager, its employees or its agents all information
required by Rule 17j-1(c)(1) relating to the approval by the Fund's Board of
Trustees of the Sub-Adviser's code of ethics relating to the services the
Sub-Adviser performs under this Agreement.
(c) The Sub-Adviser has provided the Trust and the Investment
Manager with a copy of its Form ADV at least forty-eight (48) hours prior to
execution of this Agreement, which as of the date of this Agreement is its Form
ADV as most recently filed with the SEC and promptly will furnish a copy of all
amendments to the Trust and the Investment Manager at least annually. Such
amendments shall reflect all changes in the Sub-Adviser's organizational
structure, professional staff or other significant developments affecting the
Sub-Adviser, as required by the Advisers Act.
(d) The Sub-Adviser will notify the Trust and the Investment Manager
of any assignment of this Agreement or change of control of the Sub-Adviser, as
applicable, and any changes in the key personnel who are the portfolio
manager(s) of the Managed Portion prior to or promptly after such change. The
Sub-Adviser agrees to bear all reasonable expenses of the Fund, if any, arising
out of an assignment or change in control of the Sub-Adviser. In the event that
there is a proposed change in control of the Sub-Adviser that would act to
terminate this Agreement, and if a vote of shareholders to approve continuation
of this Agreement is at that time deemed by counsel to the Trust to be required
by the 1940 Act or any rule or regulation thereunder, the Sub-Adviser agrees to
assume all reasonable costs associated with soliciting shareholders of the Fund
to approve continuation of this Agreement. Such expenses include the costs of
preparation and mailing of a proxy statement, and of soliciting proxies. In the
event that such proposed change in control of the Sub-Adviser shall occur
following either: (i) receipt by the Investment Manager and the Trust of an
exemptive order issued by the SEC with respect to the appointment of
sub-advisers absent shareholder approval, or (ii) the adoption of proposed Rule
15a-5 under the 1940 Act, the Sub-Adviser agrees to assume all reasonable costs
and expenses (including the costs of mailing) associated with the preparation of
a statement, required by the exemptive order or Rule 15a-5, containing all
information that would be included in a proxy statement (an "Information
Statement"). In addition, if the Sub-Adviser shall resign, the Sub-Adviser
A-7
agrees to assume all reasonable costs and expenses (including the costs of
mailing) associated with the preparation of a proxy statement and soliciting
materials or an Information Statement, as applicable.
(e) The Sub-Adviser agrees to maintain an appropriate level of
errors and omissions or professional liability insurance coverage.
(f) The Sub-Adviser has implemented policies and procedures that
will prevent the disclosure by the Sub-Adviser, its employees or agents of the
Fund's portfolio holdings to any person or entity other than the Investment
Manager, the Trust's custodian, or other persons expressly designated by the
Investment Manager.
11. This Agreement shall extend to and bind the successors of the
parties hereto.
12. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13. All written notices, requests or other communications to any party
hereunder shall be given to the following addresses and telecopy numbers, or
such other address and telecopy number communicated to the other parties from
time to time:
If to the Sub-Adviser: Ron Redell
865 South Figueroa Street,
Suite 1800 Los Angeles, CA
90017;
with a copy to General Counsel
at same address
If to the Fund: John C.E. Campbell
2005 Market Street
Philadelphia, PA 19103;
with a copy to General Counsel
at same address
If to the Investment Manager: Jude Driscoll
2005 Market Street
Philadelphia, PA 19103;
with a copy to General Counsel
at same address
14. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities," "interested person," "affiliated person,"
and "assignment" shall have the meanings given them in the 1940 Act.
A-8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers and duly attested as of the _____ day
of __________, 2005.
TCW INVESTMENT DELAWARE MANAGEMENT COMPANY,
MANAGEMENT COMPANY A SERIES OF DELAWARE MANAGEMENT
BUSINESS TRUST
By: _____________________________ By: _____________________________
Name: Name:
Title: Title:
Attest:__________________________ Attest:__________________________
Agreed to and accepted as of the day and year first above written:
OPTIMUM FUND TRUST
ON BEHALF OF OPTIMUM LARGE CAP
VALUE FUND
By:_______________________________
Attest:___________________________
A-9
SCHEDULE A
TO
SUB-ADVISORY AGREEMENT
______________
FEE SCHEDULE
______________
The compensation payable to Sub-Adviser for its services to Paragraph 4 of the
Sub-Advisory Agreement shall be calculated and paid as follows in regards to
Optimum Large Cap Value Fund:
The total fee will be the sum of the following percentages (on an annual basis)
of the total assets within the Managed Portion(s) sub-advised by Sub-Adviser:
0.70% (70 basis points) of the first $25 million within the Managed Portion(s)
0.50% (50 basis points) of the next $75 million within the Managed Portion(s)
0.35% (35 basis points) of the next $150 million within the Managed Portion(s)
0.325% (32.5 basis points) of all assets above $250 million within the Managed
Portion(s)
The fee shall be payable on the Managed Portion's average daily net assets
monthly to the Sub-Adviser on or before the tenth (10th) day of the next
succeeding calendar month. If this Agreement becomes effective or terminates
before the end of any month, the investment management fee for the period from
the effective date to the end of such month or from the beginning of such month
to the date of termination, as the case may be, shall be prorated according to
the proration which such period bears to the full month in which such
effectiveness or termination occurs. Each month, the Investment Manager will
provide the Sub-Adviser with a worksheet accompanying payment of the
sub-advisory fee that sets forth the computation of such sub-advisory fee. In
addition to the above fees, the Sub-Adviser shall be entitled to compensation in
an amount equal to any shortfall/difference between the amount Sub-Adviser was
paid under the fee schedule for the Interim Sub-Advisory Agreement between
Investment Manager and Sub-Adviser and the amount Sub-Adviser would have been
paid under the fee schedule above if it had been in effect during such period.
The shortfall/difference will be calculated and paid only for the period between
the effective date of the Interim Sub-Advisory Agreement and the effective date
of this Sub-Advisory Agreement.
A-10
EXHIBIT B
SUB-ADVISORY AGREEMENT
AGREEMENT made by and between DELAWARE MANAGEMENT COMPANY, A SERIES OF
DELAWARE MANAGEMENT BUSINESS TRUST (the "Investment Manager") and THE KILLEN
GROUP, INC. (the "Sub-Adviser").
WITNESSETH:
WHEREAS, OPTIMUM FUND TRUST (the "Trust") is an investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), and is organized as a statutory trust under the laws of the State of
Delaware; and
WHEREAS, OPTIMUM SMALL CAP VALUE FUND (the "Fund") is a series of the
Trust; and
WHEREAS, the Investment Manager and the Trust, on behalf of the Fund,
have entered into an agreement (the "Investment Management Agreement") whereby
the Investment Manager will provide investment advisory services to the Trust
with respect to the Fund; and
WHEREAS, the Investment Manager has the authority under the Investment
Management Agreement to retain one or more sub-advisers to assist the Investment
Manager in providing investment advisory services to the Trust with respect to
the Fund; and
WHEREAS, the Investment Manager and the Sub-Adviser are registered
investment advisers under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), and engage in the business of providing investment advisory
services; and
WHEREAS, the Board of Trustees (the "Board" or the "Trustees") of the
Trust and the Investment Manager desire that the Investment Manager retain the
Sub-Adviser to render investment advisory and other services with respect to
that portion of the Fund as the Investment Manager shall from time to time
allocate to the Sub-Adviser (the "Managed Portion") in the manner, for the
period, and on the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. (a) The Sub-Adviser will supervise and direct the investments of the
assets of the Managed Portion of each Fund listed on Schedule A attached hereto
in accordance with the Fund's investment objectives, policies, and restrictions
as provided in the Fund's Prospectus and Statement of Additional Information, as
currently in effect and as the same may be hereafter modified, amended and/or
supplemented from time to time (hereinafter referred to as the "PROSPECTUS AND
SAI"), and such other limitations as the Fund may impose by notice in writing to
the Sub-Adviser, subject always to the supervision and control of the Investment
Manager and the Board.
(b) As part of the services it will provide hereunder, the
Sub-Adviser is authorized and directed, in its discretion and without prior
consultation with the Fund or the Investment Manager to:
(i) obtain and evaluate information relating to investment
recommendations, asset allocation advice, industries, businesses, securities
markets, research, economic analysis, and other investment services with respect
to the securities that are included in the Managed Portion or that are under
consideration for inclusion in the Managed Portion and invest the Managed
Portion in accordance with the Investment Manager's and the Board's written
direction as more fully set forth herein and as otherwise directed;
B-1
(ii) regularly make decisions as to what securities to
purchase and sell on behalf of the Fund with respect to the Managed Portion,
effect the purchase and sale of such investments in furtherance of the Fund's
objectives and policies, and furnish the Board with such information and reports
regarding the Sub-Adviser's activities in the performance of its duties and
obligations under this Agreement as the Investment Manager deems appropriate or
as the Board may reasonably request, including such reports, information, and
certifications as the officers of the Trust may reasonably require in order to
comply with applicable federal and state laws and regulations and Trust policies
and procedures;
(iii) provide any and all material composite or other
performance information, records and supporting documentation about accounts or
funds the Sub-Adviser manages, if appropriate, that are relevant to the Managed
Portion and that have investment objectives, policies, and strategies
substantially similar to those employed by the Sub-Adviser in managing the
Managed Portion that may be reasonably necessary, under applicable laws, to
allow the Fund or its agent to present information concerning the Sub-Adviser's
prior performance in the Fund's Prospectus and SAI, and any permissible reports
and materials prepared by the Fund or its agent;
(iv) provide information as reasonably requested by the
Investment Manager or the Board to assist them or their delegate in the
determination of the fair value of certain portfolio securities when market
quotations are not readily available for the purpose of calculating the Fund's
net asset value in accordance with procedures and methods established by the
Board;
(v) vote proxies, exercise conversion or subscription rights,
and respond to tender offers and other consent solicitations ("CORPORATE
ACTIONS") with respect to the issuers of securities in which Fund assets may be
invested, provided materials relating to such Corporate Actions have been
forwarded to the Sub-Adviser in a timely fashion by the Fund's custodian or
otherwise known to the Sub-Adviser, and to submit reports regarding such
Corporate Actions, including a copy of any policies regarding such Corporate
Actions, in a form reasonably satisfactory to the Investment Manager and the
Fund in order to comply with any applicable federal or state reporting
requirements;
(vi) provide performance and other information as reasonably
requested by the Investment Manager or the Board to assist them or their
delegate in conducting ongoing due diligence and performance monitoring; and
(vii) except as the Investment Manager and the Sub-Adviser may
agree in writing from time to time, maintain all accounts, books, and records
with respect to the Managed Portion as are required of an investment adviser of
a registered investment company pursuant to the 1940 Act and the Advisers Act
and the rules thereunder. The Sub-Adviser shall furnish to the Investment
Manager copies of all such accounts, books, and records as the Investment
Manager may reasonably request. The Sub-Adviser agrees that such accounts,
books, and records are the property of the Trust, and will be surrendered to the
Trust promptly upon request, with the understanding that the Sub-Adviser may
retain its own copy of all records.
(c) The Sub-Adviser shall not consult with any other sub-adviser of
the Fund or of any fund that is an "affiliated person" of the Fund concerning
transactions for the Fund in securities or other assets. In no instance will any
portfolio securities of the Fund be purchased from, or sold to, the Investment
Manager, the Sub-Adviser, the Trust's principal underwriter, or any affiliated
persons of the Trust, the Investment Manager, the Sub-Adviser or the Trust's
principal underwriter, acting as principal in the transaction, except to the
extent permitted by the Securities and Exchange Commission (the "SEC") and the
1940 Act, including Rule 17a-7 thereunder. The Sub-Adviser acknowledges that the
Investment Manager and the Trust may rely on Rule 17a-7, Rule 17a-10, Rule
10f-3, Rule 12d3-1 and Rule 17e-1 under the 1940 Act.
(d) In furnishing services hereunder, the Sub-Adviser shall be
subject to, and shall perform in accordance with, the following: (i) the Trust's
Agreement and Declaration of Trust, as the same may be hereafter modified,
amended, and/or supplemented from time to time; (ii) the Trust's By-Laws, as the
same may be hereafter modified, amended, and/or supplemented from time to time;
(iii) the Fund's Prospectus and SAI; (iv) the 1940 Act and the Advisers Act and
the rules under each and all other federal and state securities laws or
regulations applicable to the Trust and the Fund; (v) the Trust's compliance
policies and procedures adopted from time to time by the Board for compliance by
B-2
the Trust with the Federal Securities Laws (as that term is defined in Rule
38a-1(e)(1) under the 1940 Act) (together, the "Trust Compliance Procedures")
and any other Trust policies and procedures adopted from time to time by the
Board; and (vi) the written instructions of the Investment Manager. The
Investment Manager agrees to provide the Sub-Adviser with current copies of the
Trust's and the Fund's documents mentioned above and all changes made to such
documents.
(e) In order to assist the Trust and the Trust's chief compliance
officer (the "Trust CCO") and the Investment Manager and the Investment
Manager's Chief Compliance Officer (the "IM CCO") in satisfying the requirements
contained in Rule 38a-1 under the 1940 Act and Rule 206(4)-7 under the Adviser
Act, respectively, the Sub-Adviser shall provide to the Trust CCO and/or IM CCO:
(i) direct access to the Sub-Adviser's chief compliance officer (the
"Sub-Adviser CCO") and its officers and employees, as reasonably requested by
the Trust CCO and/or IM CCO; (ii) quarterly reports confirming that the
Sub-Adviser has complied with the Trust Compliance Procedures in managing the
Managed Portion; and (iii) quarterly certifications with respect to Material
Compliance Matters (as that term is defined in Rule 38a-1(e)(2) under the 1940
Act) related to the Sub-Adviser's management of the Managed Portion.
The Sub-Adviser shall promptly provide the Trust CCO and IM CCO with
copies and summaries of: (i) the Sub-Adviser's policies and procedures for
compliance by the Sub-Adviser with the Federal Securities Laws and to prevent
violation of the Advisers Act (together, the "Sub-Adviser Compliance
Procedures"); and (ii) any material changes to the Sub-Adviser Compliance
Procedures. The Sub-Adviser shall cooperate fully with the Trust CCO and IM CCO
so as to facilitate the Trust CCO's and IM CCO's performance of their respective
responsibilities under Rule 38a-1 and Rule 206(4)-7, including to review,
evaluate and report to the Board on the operation of the Sub-Adviser Compliance
Procedures, and shall promptly report to the Trust CCO and IM CCO any Material
Compliance Matter arising under the Sub-Adviser Compliance Procedures involving
the Managed Portion. The Sub-Adviser shall allow the Trust CCO and/or the IM
CCO, as reasonably requested from time to time, access to examine and review the
Sub-Adviser's Compliance Procedures and the Sub-Adviser's adherence thereto. The
Sub-Adviser shall provide to the Trust CCO and IM CCO: (i) quarterly reports
confirming the Sub-Adviser's compliance with the Sub-Adviser Compliance
Procedures in managing the Managed Portion; and (ii) certifications that there
were no Material Compliance Matters involving the Sub-Adviser that arose under
the Sub-Adviser Compliance Procedures that affected the Managed Portion. At
least annually, the Sub-Adviser shall provide a certification to the Trust CCO
and IM CCO to the effect that the Sub-Adviser has in place and has implemented
policies and procedures that are reasonably designed to ensure compliance by the
Sub-Adviser with the Federal Securities Laws, including the conduct and results
of our annual review for adequacy and effectiveness.
(f) The Sub-Adviser shall assist the Fund in the preparation of the
Trust's registration statement, the Prospectus and SAI, shareholder reports and
other regulatory filings, or any amendment or supplement thereto (collectively,
"Regulatory Filings"), and shall provide the Fund with disclosure for use in the
Fund's Regulatory Filings, including, without limitation, disclosure related to
the Sub-Adviser's investment management personnel, portfolio manager
compensation, investment management strategies and techniques, and proxy voting
policies. The Sub-Adviser shall provide such certifications regarding the Fund
as the Trust's officers may reasonably request for purposes of the preparation
of any Regulatory Filings.
(g) The Sub-Adviser hereby agrees during the period hereinafter set
forth to render the services and assume the obligations herein set forth for the
compensation herein provided. The Sub-Adviser shall for all purposes herein be
deemed to be an independent contractor, and shall, unless otherwise expressly
provided and authorized, have no authority to act for or represent the Trust in
any way, or in any way be deemed an agent of the Trust.
2. (a) Under the terms of the Investment Management Agreement, the
Trust shall conduct its own business and affairs and shall bear the expenses and
salaries necessary and incidental thereto including, but not in limitation of
the foregoing, the costs incurred in: the maintenance of its existence as a
statutory trust organized under the laws of the State of Delaware; the
maintenance of its own books, records, and procedures; dealing with its own
shareholders; the payment of dividends; transfer of shares, including issuance
and repurchase of shares; preparation of share certificates, if any; reports and
notices to shareholders; calling and holding of shareholders' meetings;
miscellaneous office expenses; brokerage commissions; custodian fees; legal and
accounting fees; taxes; and federal and state registration fees.
B-3
(b) Directors, officers and employees of the Sub-Adviser may be
directors, officers and employees of other funds that have employed the
Sub-Adviser as sub-adviser or investment manager. Directors, officers and
employees of the Sub-Adviser who are Trustees, officers and/or employees of the
Trust, shall not receive any compensation from the Trust for acting in such dual
capacity.
(c) In the conduct of the respective business of the parties hereto
and in the performance of this Agreement, the Trust, the Investment Manager, and
the Sub-Adviser may share facilities common to each, which may include legal and
accounting personnel, with appropriate proration of expenses between and among
them.
3. (a) The Sub-Adviser will select brokers and dealers to effect all
Fund transactions subject to the conditions set forth herein. The Sub-Adviser
will place all necessary orders with brokers, dealers, or issuers, and will
negotiate brokerage commissions, if applicable. The Sub-Adviser is directed at
all times to seek to execute transactions for the Managed Portion (i) in
accordance with any written policies, practices or procedures that may be
established by the Board or the Investment Manager from time to time, and (ii)
as described in the Fund's Prospectus and SAI. In placing any orders for the
purchase or sale of investments for the Fund, with respect to the Managed
Portion, the Sub-Adviser shall use its best efforts to obtain for the Managed
Portion "best execution," considering all of the circumstances, and shall
maintain records adequate to demonstrate compliance with this requirement.
(b) Subject to the appropriate policies and procedures approved by
the Board, the Sub-Adviser may, to the extent authorized by Section 28(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), cause the
Managed Portion to pay a broker or dealer that provides brokerage or research
services to the Investment Manager, the Sub-Adviser and the Managed Portion an
amount of commission for effecting a Fund transaction 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 amount of
commission is reasonable in relation to the value of such brokerage or research
services provided viewed in terms of that particular transaction or the
Sub-Adviser's overall responsibilities to the Fund or its other advisory clients
for which the Investment Manager or the Sub-Adviser exercises investment
discretion. To the extent authorized by Section 28(e) and the Board, the
Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of such action.
Subject to seeking best execution and compliance with applicable federal and
state securities laws and regulations, the Board or the Investment Manager may
direct the Sub-Adviser to effect transactions in Fund securities through
broker-dealers in a manner that will help generate resources to pay the cost of
certain expenses that the Trust is required to pay or for which the Trust is
required to arrange payment.
(c) Any entity or person associated with the Investment Manager or
the Sub-Adviser that is a member of a national securities exchange is authorized
to effect any transaction on such exchange for the account of the Fund to the
extent and as permitted by Section 11(a)(1)(H) of the Exchange Act.
4. As compensation for the services to be rendered to the Trust for the
benefit of the Fund by the Sub-Adviser under the provisions of this Agreement,
the Investment Manager shall pay to the Sub-Adviser a fee as provided in
Schedule A attached hereto.
5. The services to be rendered by the Sub-Adviser to the Trust for the
benefit of the Fund under the provisions of this Agreement are not to be deemed
to be exclusive, and the Sub-Adviser shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby.
6. (a) Subject to the limitation set forth in Paragraph 5, the
Sub-Adviser, its directors, officers, employees, agents, and shareholders may
engage in other businesses, may render investment advisory services to other
investment companies, or to any other corporation, association, firm or
individual, and may render underwriting services to the Trust or to any other
investment company, corporation, association, firm or individual.
(b) Neither the Investment Manager, the Trust nor the Fund shall use
the Sub-Adviser's actual or fictitious name(s), mark, derivative and/or logo (or
that of any affiliate of the Sub-Adviser, other than that of the Fund, the
Trust, or any affiliate of the Investment Manager that is an affiliate of the
Sub-Adviser solely by reason of the Sub-Adviser's provision of services pursuant
B-4
to this Agreement) or otherwise refer to the Sub-Adviser in any materials
distributed to third parties, including the Fund's shareholders, without prior
review and written approval by the Sub-Adviser, which may not be unreasonably
withheld or delayed. Upon termination of this Agreement, the Investment Manager,
the Trust and the Fund, shall, to the extent applicable and as soon as is
reasonably possible, cease to use the Sub-Adviser's actual or fictitious
name(s), mark, derivative and/or logo.
(c) The Sub-Adviser shall not use the Investment Manager's name (or
that of any affiliate of the Investment Manager) or otherwise refer to the
Investment Manager in any materials distributed to third parties, including the
Fund's shareholders, without prior review and written approval by the Investment
Manager, which may not be unreasonably withheld or delayed. Upon termination of
this Agreement, the Sub-Adviser, shall, to the extent applicable and as soon as
is reasonably possible, cease to use the actual or fictitious name(s), mark,
derivative and/or logo of the Investment Manager, the Trust and the Fund.
7. (a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard in the performance of its duties as
Sub-Adviser to the Trust on behalf of the Fund, the Sub-Adviser shall not be
liable to the Trust, the Fund, the Investment Manager or any shareholder of the
Trust for any action 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, or otherwise. The Sub-Adviser makes no
representation or warranty, express or implied, that any level of performance or
investment results will be achieved by the Managed Portion or the Fund, or that
the Managed Portion or the Fund will perform comparably with any standard or
index, including other clients of Sub-Adviser, whether public or private.
(b) The Investment Manager shall indemnify the Sub-Adviser and its
affiliates and its or their controlling persons, officers, directors, employees,
agents, legal representatives and persons controlled by it (which shall not
include the Trust or the Fund) (collectively, "Sub-Adviser Related Persons") to
the fullest extent permitted by law against any and all loss, damage, judgments,
fines, amounts paid in settlement and reasonable expenses, including attorneys'
fees, (collectively "Losses") incurred by the Sub-Adviser or Sub-Adviser Related
Persons arising from or in connection with this Agreement or the performance by
the Sub-Adviser or Sub-Adviser Related Persons of its or their duties hereunder
so long as such Losses arise out of the Investment Manager's willful
misfeasance, bad faith, gross negligence, or reckless disregard in performing
its responsibilities hereunder, including, without limitation, such Losses
arising under any applicable law or that may be based upon any untrue statement
of a material fact contained in the Trust's Registration Statement, or any
amendment thereof or any supplement thereto, or the omission to state therein a
material fact that was known or that should have been known and was required to
be stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reasonable reliance upon
information furnished to the Investment Manager or the Trust by the Sub-Adviser
or a Sub-Adviser Related Person specifically for inclusion in the Registration
Statement or any amendment thereof or supplement thereto, except to the extent
any such Losses referred to in this paragraph (b) result from willful
misfeasance, bad faith, gross negligence or reckless disregard on the part of
the Sub-Adviser or a Sub-Adviser Related Person in the performance of any of its
duties under, or in connection with, this Agreement.
(c) The Sub-Adviser shall indemnify the Investment Manager and its
affiliates and its or their controlling persons, officers, directors, employees,
agents, legal representatives and persons controlled by it (collectively,
"Investment Manager Related Persons") to the fullest extent permitted by law
against any and all Losses incurred by the Investment Manager or Investment
Manager Related Persons arising from or in connection with this Agreement or the
performance by the Investment Manager or Investment Manager Related Persons of
its or their duties hereunder so long as such Losses arise out of the
Sub-Adviser's willful misfeasance, bad faith, gross negligence, or reckless
disregard in performing its responsibilities hereunder, including, without
limitation, such Losses arising under any applicable law or that may be based
upon any untrue statement of a material fact contained in the Trust's
Registration Statement, or any amendment thereof or any supplement thereto, or
the omission to state therein a material fact that was known or that should have
been known and was required to be stated therein or necessary to make the
statements therein not misleading, if such statement or omission was made in
reasonable reliance upon information furnished to the Investment Manager or the
Trust by the Sub-Adviser or a Sub-Adviser Related Person specifically for
inclusion in the Registration Statement or any amendment thereof or supplement
thereto, except to the extent any such Losses referred to in this paragraph (c)
result from willful misfeasance, bad faith, gross negligence or reckless
disregard on the part of the Investment Manager or an Investment Manager Related
Person in the performance of any of its duties under, or in connection with,
this Agreement.
B-5
8. (a) This Agreement shall be executed and become effective as of the
date written below; provided, however, that this Agreement shall not become
effective with respect to the Fund unless it has first been approved in the
manner required by the 1940 Act and the rules thereunder or in accordance with
exemptive or other relief granted by the SEC or its staff. This Agreement shall
continue in effect for a period of two (2) years and may be renewed thereafter
only so long as such renewal and continuance is specifically approved at least
annually by the Board or by the vote of a majority of the outstanding voting
securities of the Fund and only if the terms and the renewal hereof have been
approved by the vote of a majority of those Trustees of the Trust who are not
parties hereto or "interested persons" of the Trust, the Fund, or any party
hereto, cast in person at a meeting called for the purpose of voting on such
approval.
(b) No amendment to this Agreement shall be effective unless
approved in the manner required by the 1940 Act and the rules thereunder or in
accordance with exemptive or other relief granted by the SEC or its staff.
(c) This Agreement may be terminated by the Investment Manager or
the Trust at any time, without the payment of a penalty, on written notice to
the Sub-Adviser of the Investment Manager's or the Trust's intention to do so,
in the case of the Trust pursuant to action by the Board or pursuant to the vote
of a majority of the outstanding voting securities of the Fund. The Sub-Adviser
may terminate this Agreement at any time, without the payment of a penalty, on
sixty (60) days' written notice to the Investment Manager and the Trust of its
intention to do so. Upon termination of this Agreement, the obligations of all
the parties hereunder shall cease and terminate as of the date of such
termination, except for (i) any obligation to respond for a breach of this
Agreement committed prior to such termination, (ii) the obligation of the
Investment Manager to pay to the Sub-Adviser the fee provided in Paragraph 4
hereof, prorated to the date of termination, and (iii) any indemnification
obligation provided in Paragraph 7 hereof. This Agreement shall automatically
terminate in the event of its assignment. This Agreement shall automatically
terminate upon the termination of the Investment Management Agreement.
9. Any information and advice furnished by any party to this Agreement
to the other party or parties, including material non-public information with
respect to the Fund (which includes the portfolio holdings of the Fund), shall
be treated as confidential and shall not be disclosed to third parties without
the consent of the other party hereto except as required by law, rule or
regulation. Notwithstanding the foregoing, information shall not be subject to
such confidentiality obligations if it:
(viii) is already known to the receiving party at the time it is
obtained;
(ix) is or becomes publicly known or available through no wrongful
act of the receiving party;
(x) is rightfully received from a third party who, to the best of
the receiving party's knowledge, is not under a duty of
confidentiality;
(xi) is released by the protected party to a third party without
restriction;
(xii) is required to be disclosed by the receiving party pursuant
to a requirement of a court order, subpoena, governmental or
regulatory agency or law (provided the receiving party will
provide the other party written notice of such requirement,
to the extent such notice is permitted);
(xiii) is relevant to the defense of any claim or cause of action
asserted against the receiving party; or
(xiv) has been or is independently developed or obtained by the
receiving party.
The Sub-Adviser shall not disclose any "nonpublic personal information" (as such
term is defined in Regulation S-P, including any amendments thereto) pertaining
to the customers of the Trust or a client of the Investment Manager to any third
party or use such information other than for the purpose of providing the
services contemplated by this Agreement.
B-6
10. The Sub-Adviser represents, warrants and agrees that:
(a) The Sub-Adviser: (i) is registered as an investment adviser
under the Advisers Act and will continue to be so registered for so long as this
Agreement remains in effect; (ii) is not prohibited by the 1940 Act, the
Advisers Act or other law, regulation or order from performing the services
contemplated by this Agreement; (iii) to the best of its knowledge, has met and
will seek to continue to meet for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; and (v) will promptly notify the Investment Manager of the occurrence
of any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise. The Sub-Adviser will also promptly notify the Fund and the Investment
Manager if it is served or otherwise receives notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Fund, provided,
however, that routine regulatory examinations shall not be required to be
reported by this provision.
(b) The Sub-Adviser has adopted policies and procedures and a
written code of ethics complying with the requirements of Rule 17j-1 under the
1940 Act and Rule 204A-1 under the Advisers Act, and will provide the Investment
Manager and the Board with copies of such policies and procedures and code of
ethics, together with evidence of its adoption. In accordance with the
requirements of Rule 17j-1, the Sub-Adviser shall certify to the Investment
Manager that the Sub-Adviser has complied in all material respects with the
requirements of Rule 17j-1 during the previous year and that there has been no
material violation of the Sub-Adviser's code of ethics relating to the services
the Sub-Adviser performs under this Agreement or, if such a material violation
has occurred, that appropriate action was taken in response to such violation.
Upon the written request of the Investment Manager, the Sub-Adviser shall
provide to the Investment Manager, its employees or its agents all information
required by Rule 17j-1(c)(1) relating to the approval by the Fund's Board of
Trustees of the Sub-Adviser's code of ethics relating to the services the
Sub-Adviser performs under this Agreement.
(c) The Sub-Adviser has provided the Trust and the Investment
Manager with a copy of its Form ADV at least forty-eight (48) hours prior to
execution of this Agreement, which as of the date of this Agreement is its Form
ADV as most recently filed with the SEC and promptly will furnish a copy of all
amendments to the Trust and the Investment Manager at least annually. Such
amendments shall reflect all changes in the Sub-Adviser's organizational
structure, professional staff or other significant developments affecting the
Sub-Adviser, as required by the Advisers Act.
(d) The Sub-Adviser will notify the Trust and the Investment Manager
of any assignment of this Agreement or change of control of the Sub-Adviser, as
applicable, and any changes in the key personnel who are the portfolio
manager(s) of the Managed Portion prior to or promptly after such change. The
Sub-Adviser agrees to bear all reasonable expenses of the Fund, if any, arising
out of an assignment or change in control of the Sub-Adviser. In the event that
there is a proposed change in control of the Sub-Adviser that would act to
terminate this Agreement, and if a vote of shareholders to approve continuation
of this Agreement is at that time deemed by counsel to the Trust to be required
by the 1940 Act or any rule or regulation thereunder, the Sub-Adviser agrees to
assume all reasonable costs associated with soliciting shareholders of the Fund
to approve continuation of this Agreement. Such expenses include the costs of
preparation and mailing of a proxy statement, and of soliciting proxies. In the
event that such proposed change in control of the Sub-Adviser shall occur
following either: (i) receipt by the Investment Manager and the Trust of an
exemptive order issued by the SEC with respect to the appointment of
sub-advisers absent shareholder approval, or (ii) the adoption of proposed Rule
15a-5 under the 1940 Act, the Sub-Adviser agrees to assume all reasonable costs
and expenses (including the costs of mailing) associated with the preparation of
a statement, required by the exemptive order or Rule 15a-5, containing all
information that would be included in a proxy statement (an "Information
Statement"). In addition, if the Sub-Adviser shall resign, the Sub-Adviser
agrees to assume all reasonable costs and expenses (including the costs of
mailing) associated with the preparation of a proxy statement and soliciting
materials or an Information Statement, as applicable.
(e) The Sub-Adviser agrees to maintain an appropriate level of
errors and omissions or professional liability insurance coverage.
B-7
(f) The Sub-Adviser has implemented policies and procedures that
will prevent the disclosure by the Sub-Adviser, its employees or agents of the
Fund's portfolio holdings to any person or entity other than the Investment
Manager, the Trust's custodian, or other persons expressly designated by the
Investment Manager.
11. This Agreement shall extend to and bind the successors of the
parties hereto.
12. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13. All written notices, requests or other communications to any party
hereunder shall be given to the following addresses and telecopy numbers, or
such other address and telecopy number communicated to the other parties from
time to time:
If to the Sub-Adviser: Raymond J. Munsch
President, COO
The Killen Group, Inc.
1189 Lancaster Avenue
Berwyn, PA 19312-1298
If to the Fund: John C.E. Campbell
2005 Market Street
Philadelphia, PA 19103;
with a copy to General Counsel
at same address
If to the Investment Manager: Jude Driscoll
2005 Market Street
Philadelphia, PA 19103;
with a copy to General Counsel
at same address
14. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities," "interested person," "affiliated person,"
and "assignment" shall have the meanings given them in the 1940 Act.
B-8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their duly authorized officers and duly attested as of the _____
day of __________, 2005.
THE KILLEN GROUP, INC. DELAWARE MANAGEMENT COMPANY,
A SERIES OF DELAWARE MANAGEMENT
BUSINESS TRUST
By: ______________________________ By:____________________________
Name: Name:
Title: Title:
Attest:___________________________ Attest:________________________
Agreed to and accepted as of the day and year first above written:
OPTIMUM FUND TRUST
ON BEHALF OF OPTIMUM SMALL CAP
VALUE FUND
By: ___________________________
Attest: _______________________
SCHEDULE A
TO
SUB-ADVISORY AGREEMENT
______________
FEE SCHEDULE
______________
The compensation payable to Sub-Adviser for its services to Paragraph 4 of the
Sub-Advisory Agreement shall be calculated and paid as follows in regards to
Optimum Small Cap Value Fund:
The total fee will be the sum of the following percentages (on an annual basis)
of the total assets within the Managed Portion(s) sub-advised by Sub-Adviser:
0.75% (75 basis points) of the first $25 million within the Managed Portion(s)
0.60% (60 basis points) of the next $25 million within the Managed Portion(s)
0.50% (50 basis points) of all assets above $50 million within the Managed
Portion(s)
The fee shall be payable on the Managed Portion's average daily net assets
monthly to the Sub-Adviser on or before the tenth (10th) day of the next
succeeding calendar month. If this Agreement becomes effective or terminates
before the end of any month, the investment management fee for the period from
the effective date to the end of such month or from the beginning of such month
to the date of termination, as the case may be, shall be prorated according to
the proration which such period bears to the full month in which such
effectiveness or termination occurs. Each month, the Investment Manager will
provide the Sub-Adviser with a worksheet accompanying payment of the
sub-advisory fee that sets forth the computation of such sub-advisory fee.
B-10
EXHIBIT C
SUB-ADVISORY AGREEMENT
AGREEMENT made by and between DELAWARE MANAGEMENT COMPANY, A SERIES OF
DELAWARE MANAGEMENT BUSINESS TRUST (the "Investment Manager") and ALLIANCE
CAPITAL MANAGEMENT L.P. (the "Sub-Adviser").
WITNESSETH:
WHEREAS, OPTIMUM FUND TRUST (the "Trust") is an investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), and is organized as a statutory trust under the laws of the State of
Delaware; and
WHEREAS, OPTIMUM INTERNATIONAL FUND (the "Fund") is a series of the
Trust; and
WHEREAS, the Investment Manager and the Trust, on behalf of the Fund,
have entered into an agreement (the "Investment Management Agreement") whereby
the Investment Manager will provide investment advisory services to the Trust
with respect to the Fund; and
WHEREAS, the Investment Manager has the authority under the Investment
Management Agreement to retain one or more sub-advisers to assist the Investment
Manager in providing investment advisory services to the Trust with respect to
the Fund; and
WHEREAS, the Investment Manager and the Sub-Adviser are registered
investment advisers under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), and engage in the business of providing investment advisory
services; and
WHEREAS, the Board of Trustees (the "Board" or the "Trustees") of the
Trust and the Investment Manager desire that the Investment Manager retain the
Sub-Adviser to render investment advisory and other services with respect to
that portion of the Fund as the Investment Manager shall from time to time
allocate to the Sub-Adviser (the "Managed Portion") in the manner, for the
period, and on the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. (a) The Sub-Adviser will supervise and direct the investments of the
assets of the Managed Portion of each Fund listed on Schedule A attached hereto
in accordance with the Fund's investment objectives, policies, and restrictions
as provided in the Fund's Prospectus and Statement of Additional Information, as
currently in effect and as the same may be hereafter modified, amended and/or
supplemented from time to time (hereinafter referred to as the "PROSPECTUS AND
SAI"), and such other limitations as the Fund may impose by notice in writing to
the Sub-Adviser, subject always to the supervision and control of the Investment
Manager and the Board.
(b) As part of the services it will provide hereunder, the
Sub-Adviser is authorized and directed, in its discretion and without prior
consultation with the Fund or the Investment Manager to:
(i) obtain and evaluate information relating to investment
recommendations, asset allocation advice, industries, businesses, securities
markets, research, economic analysis, and other investment services with respect
to the securities that are included in the Managed Portion or that are under
consideration for inclusion in the Managed Portion and invest the Managed
Portion in accordance with the Investment Manager's and the Board's written
direction as more fully set forth herein and as otherwise directed;
C-1
(ii) regularly make decisions as to what securities to
purchase and sell on behalf of the Fund with respect to the Managed Portion,
effect the purchase and sale of such investments in furtherance of the Fund's
objectives and policies, and furnish the Board with such information and reports
regarding the Sub-Adviser's activities in the performance of its duties and
obligations under this Agreement as the Investment Manager deems appropriate or
as the Board may reasonably request, including such reports, information, and
certifications as the officers of the Trust may reasonably require in order to
comply with applicable federal and state laws and regulations and Trust policies
and procedures;
(iii) provide any and all material composite or other
performance information, records and supporting documentation about accounts or
funds the Sub-Adviser manages, if appropriate, that are relevant to the Managed
Portion and that have investment objectives, policies, and strategies
substantially similar to those employed by the Sub-Adviser in managing the
Managed Portion that may be reasonably necessary, under applicable laws, to
allow the Fund or its agent to present information concerning the Sub-Adviser's
prior performance in the Fund's Prospectus and SAI, and any permissible reports
and materials prepared by the Fund or its agent;
(iv) provide information as reasonably requested by the
Investment Manager or the Board to assist them or their delegate in the
determination of the fair value of certain portfolio securities when market
quotations are not readily available for the purpose of calculating the Fund's
net asset value in accordance with procedures and methods established by the
Board;
(v) vote proxies, exercise conversion or subscription rights,
and respond to tender offers and other consent solicitations ("CORPORATE
ACTIONS") with respect to the issuers of securities in which Fund assets may be
invested, provided materials relating to such Corporate Actions have been
forwarded to the Sub-Adviser in a timely fashion by the Fund's custodian or
otherwise known to the Sub-Adviser, and to submit reports regarding such
Corporate Actions, including a copy of any policies regarding such Corporate
Actions, in a form reasonably satisfactory to the Investment Manager and the
Fund in order to comply with any applicable federal or state reporting
requirements;
(vi) provide performance and other information as reasonably
requested by the Investment Manager or the Board to assist them or their
delegate in conducting ongoing due diligence and performance monitoring; and
(vii) except as the Investment Manager and the Sub-Adviser may
agree in writing from time to time, maintain all accounts, books, and records
with respect to the Managed Portion as are required of an investment adviser of
a registered investment company pursuant to the 1940 Act and the Advisers Act
and the rules thereunder. The Sub-Adviser shall furnish to the Investment
Manager copies of all such accounts, books, and records as the Investment
Manager may reasonably request. The Sub-Adviser agrees that such accounts,
books, and records are the property of the Trust, and will be surrendered to the
Trust promptly upon request, with the understanding that the Sub-Adviser may
retain its own copy of all records.
(c) The Sub-Adviser shall not consult with any other sub-adviser of
the Fund or of any fund that is an "affiliated person" of the Fund concerning
transactions for the Fund in securities or other assets. In no instance will any
portfolio securities of the Fund be purchased from, or sold to, the Investment
Manager, the Sub-Adviser, the Trust's principal underwriter, or any affiliated
persons of the Trust, the Investment Manager, the Sub-Adviser or the Trust's
principal underwriter, acting as principal in the transaction, except to the
extent permitted by the Securities and Exchange Commission (the "SEC") and the
1940 Act, including Rule 17a-7 thereunder. The Sub-Adviser acknowledges that the
Investment Manager and the Trust may rely on Rule 17a-7, Rule 17a-10, Rule
10f-3, Rule 12d3-1 and Rule 17e-1 under the 1940 Act.
(d) In furnishing services hereunder, the Sub-Adviser shall be
subject to, and shall perform in accordance with, the following: (i) the Trust's
Agreement and Declaration of Trust, as the same may be hereafter modified,
amended, and/or supplemented from time to time; (ii) the Trust's By-Laws, as the
same may be hereafter modified, amended, and/or supplemented from time to time;
(iii) the Fund's Prospectus and SAI; (iv) the 1940 Act and the Advisers Act and
the rules under each and all other federal and state securities laws or
regulations applicable to the Trust and the Fund; (v) the Trust's compliance
policies and procedures adopted from time to time by the Board for compliance by
C-2
the Trust with the Federal Securities Laws (as that term is defined in Rule
38a-1(e)(1) under the 1940 Act) (together, the "Trust Compliance Procedures")
and any other Trust policies and procedures adopted from time to time by the
Board; and (vi) the written instructions of the Investment Manager. The
Investment Manager agrees to provide the Sub-Adviser with current copies of the
Trust's and the Fund's documents mentioned above and all changes made to such
documents.
(e) In order to assist the Trust and the Trust's chief compliance
officer (the "Trust CCO") and the Investment Manager and the Investment
Manager's Chief Compliance Officer (the "IM CCO") in satisfying the requirements
contained in Rule 38a-1 under the 1940 Act and Rule 206(4)-7 under the Adviser
Act, respectively, the Sub-Adviser shall provide to the Trust CCO and/or IM CCO:
(i) direct access to the Sub-Adviser's chief compliance officer (the
"Sub-Adviser CCO") and its officers and employees, as reasonably requested by
the Trust CCO and/or IM CCO; (ii) quarterly reports confirming that the
Sub-Adviser has complied with the Trust Compliance Procedures in managing the
Managed Portion; and (iii) quarterly certifications with respect to Material
Compliance Matters (as that term is defined in Rule 38a-1(e)(2) under the 1940
Act) related to the Sub-Adviser's management of the Managed Portion.
The Sub-Adviser shall promptly provide the Trust CCO and IM CCO with
copies and summaries of: (i) the Sub-Adviser's policies and procedures for
compliance by the Sub-Adviser with the Federal Securities Laws and to prevent
violation of the Advisers Act (together, the "Sub-Adviser Compliance
Procedures"); and (ii) any material changes to the Sub-Adviser Compliance
Procedures. The Sub-Adviser shall cooperate fully with the Trust CCO and IM CCO
so as to facilitate the Trust CCO's and IM CCO's performance of their respective
responsibilities under Rule 38a-1 and Rule 206(4)-7, including to review,
evaluate and report to the Board on the operation of the Sub-Adviser Compliance
Procedures, and shall promptly report to the Trust CCO and IM CCO any Material
Compliance Matter arising under the Sub-Adviser Compliance Procedures involving
the Managed Portion. The Sub-Adviser shall allow the Trust CCO and/or the IM
CCO, as reasonably requested from time to time, access to examine and review the
Sub-Adviser's Compliance Procedures and the Sub-Adviser's adherence thereto. The
Sub-Adviser shall provide to the Trust CCO and IM CCO: (i) quarterly reports
confirming the Sub-Adviser's compliance with the Sub-Adviser Compliance
Procedures in managing the Managed Portion; and (ii) certifications that there
were no Material Compliance Matters involving the Sub-Adviser that arose under
the Sub-Adviser Compliance Procedures that affected the Managed Portion. At
least annually, the Sub-Adviser shall provide a certification to the Trust CCO
and IM CCO to the effect that the Sub-Adviser has in place and has implemented
policies and procedures that are reasonably designed to ensure compliance by the
Sub-Adviser with the Federal Securities Laws, including the conduct and results
of our annual review for adequacy and effectiveness.
(f) The Sub-Adviser shall assist the Fund in the preparation of the
Trust's registration statement, the Prospectus and SAI, shareholder reports and
other regulatory filings, or any amendment or supplement thereto (collectively,
"Regulatory Filings"), and shall provide the Fund with disclosure for use in the
Fund's Regulatory Filings, including, without limitation, disclosure related to
the Sub-Adviser's investment management personnel, portfolio manager
compensation, investment management strategies and techniques, and proxy voting
policies. The Sub-Adviser shall provide such certifications regarding the Fund
as the Trust's officers may reasonably request for purposes of the preparation
of any Regulatory Filings.
(g) The Sub-Adviser hereby agrees during the period hereinafter set
forth to render the services and assume the obligations herein set forth for the
compensation herein provided. The Sub-Adviser shall for all purposes herein be
deemed to be an independent contractor, and shall, unless otherwise expressly
provided and authorized, have no authority to act for or represent the Trust in
any way, or in any way be deemed an agent of the Trust.
2. (a) Under the terms of the Investment Management Agreement, the
Trust shall conduct its own business and affairs and shall bear the expenses and
salaries necessary and incidental thereto including, but not in limitation of
the foregoing, the costs incurred in: the maintenance of its existence as a
statutory trust organized under the laws of the State of Delaware; the
maintenance of its own books, records, and procedures; dealing with its own
shareholders; the payment of dividends; transfer of shares, including issuance
and repurchase of shares; preparation of share certificates, if any; reports and
notices to shareholders; calling and holding of shareholders' meetings;
miscellaneous office expenses; brokerage commissions; custodian fees; legal and
accounting fees; taxes; and federal and state registration fees.
C-3
(b) Directors, officers and employees of the Sub-Adviser may be
directors, officers and employees of other funds that have employed the
Sub-Adviser as sub-adviser or investment manager. Directors, officers and
employees of the Sub-Adviser who are Trustees, officers and/or employees of the
Trust, shall not receive any compensation from the Trust for acting in such dual
capacity.
(c) In the conduct of the respective business of the parties hereto
and in the performance of this Agreement, the Trust, the Investment Manager, and
the Sub-Adviser may share facilities common to each, which may include legal and
accounting personnel, with appropriate proration of expenses between and among
them.
3. (a) The Sub-Adviser will select brokers and dealers to effect all
Fund transactions subject to the conditions set forth herein. The Sub-Adviser
will place all necessary orders with brokers, dealers, or issuers, and will
negotiate brokerage commissions, if applicable. The Sub-Adviser is directed at
all times to seek to execute transactions for the Managed Portion (i) in
accordance with any written policies, practices or procedures that may be
established by the Board or the Investment Manager from time to time, and (ii)
as described in the Fund's Prospectus and SAI. In placing any orders for the
purchase or sale of investments for the Fund, with respect to the Managed
Portion, the Sub-Adviser shall use its best efforts to obtain for the Managed
Portion "best execution," considering all of the circumstances, and shall
maintain records adequate to demonstrate compliance with this requirement.
(b) Subject to the appropriate policies and procedures approved by
the Board, the Sub-Adviser may, to the extent authorized by Section 28(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), cause the
Managed Portion to pay a broker or dealer that provides brokerage or research
services to the Investment Manager, the Sub-Adviser and the Managed Portion an
amount of commission for effecting a Fund transaction 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 amount of
commission is reasonable in relation to the value of such brokerage or research
services provided viewed in terms of that particular transaction or the
Sub-Adviser's overall responsibilities to the Fund or its other advisory clients
for which the Investment Manager or the Sub-Adviser exercises investment
discretion. To the extent authorized by Section 28(e) and the Board, the
Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of such action.
Subject to seeking best execution and compliance with applicable federal and
state securities laws and regulations, the Board or the Investment Manager may
direct the Sub-Adviser to effect transactions in Fund securities through
broker-dealers in a manner that will help generate resources to pay the cost of
certain expenses that the Trust is required to pay or for which the Trust is
required to arrange payment.
(c) Any entity or person associated with the Investment Manager or
the Sub-Adviser that is a member of a national securities exchange is authorized
to effect any transaction on such exchange for the account of the Fund to the
extent and as permitted by Section 11(a)(1)(H) of the Exchange Act.
4. As compensation for the services to be rendered to the Trust for the
benefit of the Fund by the Sub-Adviser under the provisions of this Agreement,
the Investment Manager shall pay to the Sub-Adviser a fee as provided in
Schedule A attached hereto.
5. The services to be rendered by the Sub-Adviser to the Trust for the
benefit of the Fund under the provisions of this Agreement are not to be deemed
to be exclusive, and the Sub-Adviser shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby.
6. (a) Subject to the limitation set forth in Paragraph 5, the
Sub-Adviser, its directors, officers, employees, agents, and shareholders may
engage in other businesses, may render investment advisory services to other
investment companies, or to any other corporation, association, firm or
individual, and may render underwriting services to the Trust or to any other
investment company, corporation, association, firm or individual.
(b) Neither the Investment Manager, the Trust nor the Fund shall use
the Sub-Adviser's actual or fictitious name(s), mark, derivative and/or logo (or
that of any affiliate of the Sub-Adviser, other than that of the Fund, the
Trust, or any affiliate of the Investment Manager that is an affiliate of the
Sub-Adviser solely by reason of the Sub-Adviser's provision of services pursuant
C-4
to this Agreement) or otherwise refer to the Sub-Adviser in any materials
distributed to third parties, including the Fund's shareholders, without prior
review and written approval by the Sub-Adviser, which may not be unreasonably
withheld or delayed. Upon termination of this Agreement, the Investment Manager,
the Trust and the Fund, shall, to the extent applicable and as soon as is
reasonably possible, cease to use the Sub-Adviser's actual or fictitious
name(s), mark, derivative and/or logo.
(c) The Sub-Adviser shall not use the Investment Manager's name (or
that of any affiliate of the Investment Manager) or otherwise refer to the
Investment Manager in any materials distributed to third parties, including the
Fund's shareholders, without prior review and written approval by the Investment
Manager, which may not be unreasonably withheld or delayed. Upon termination of
this Agreement, the Sub-Adviser, shall, to the extent applicable and as soon as
is reasonably possible, cease to use the actual or fictitious name(s), mark,
derivative and/or logo of the Investment Manager, the Trust and the Fund.
7. (a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard in the performance of its duties as
Sub-Adviser to the Trust on behalf of the Fund, the Sub-Adviser shall not be
liable to the Trust, the Fund, the Investment Manager or any shareholder of the
Trust for any action 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, or otherwise. The Sub-Adviser makes no
representation or warranty, express or implied, that any level of performance or
investment results will be achieved by the Managed Portion or the Fund, or that
the Managed Portion or the Fund will perform comparably with any standard or
index, including other clients of Sub-Adviser, whether public or private.
(b) The Investment Manager shall indemnify the Sub-Adviser and its
affiliates and its or their controlling persons, officers, directors, employees,
agents, legal representatives and persons controlled by it (which shall not
include the Trust or the Fund) (collectively, "Sub-Adviser Related Persons") to
the fullest extent permitted by law against any and all loss, damage, judgments,
fines, amounts paid in settlement and reasonable expenses, including attorneys'
fees, (collectively "Losses") incurred by the Sub-Adviser or Sub-Adviser Related
Persons arising from or in connection with this Agreement or the performance by
the Sub-Adviser or Sub-Adviser Related Persons of its or their duties hereunder
so long as such Losses arise out of the Investment Manager's willful
misfeasance, bad faith, gross negligence, or reckless disregard in performing
its responsibilities hereunder, including, without limitation, such Losses
arising under any applicable law or that may be based upon any untrue statement
of a material fact contained in the Trust's Registration Statement, or any
amendment thereof or any supplement thereto, or the omission to state therein a
material fact that was known or that should have been known and was required to
be stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reasonable reliance upon
information furnished to the Investment Manager or the Trust by the Sub-Adviser
or a Sub-Adviser Related Person specifically for inclusion in the Registration
Statement or any amendment thereof or supplement thereto, except to the extent
any such Losses referred to in this paragraph (b) result from willful
misfeasance, bad faith, gross negligence or reckless disregard on the part of
the Sub-Adviser or a Sub-Adviser Related Person in the performance of any of its
duties under, or in connection with, this Agreement.
(c) The Sub-Adviser shall indemnify the Investment Manager and its
affiliates and its or their controlling persons, officers, directors, employees,
agents, legal representatives and persons controlled by it (collectively,
"Investment Manager Related Persons") to the fullest extent permitted by law
against any and all Losses incurred by the Investment Manager or Investment
Manager Related Persons arising from or in connection with this Agreement or the
performance by the Investment Manager or Investment Manager Related Persons of
its or their duties hereunder so long as such Losses arise out of the
Sub-Adviser's willful misfeasance, bad faith, gross negligence, or reckless
disregard in performing its responsibilities hereunder, including, without
limitation, such Losses arising under any applicable law or that may be based
upon any untrue statement of a material fact contained in the Trust's
Registration Statement, or any amendment thereof or any supplement thereto, or
the omission to state therein a material fact that was known or that should have
been known and was required to be stated therein or necessary to make the
statements therein not misleading, if such statement or omission was made in
reasonable reliance upon information furnished to the Investment Manager or the
Trust by the Sub-Adviser or a Sub-Adviser Related Person specifically for
inclusion in the Registration Statement or any amendment thereof or supplement
thereto, except to the extent any such Losses referred to in this paragraph (c)
result from willful misfeasance, bad faith, gross negligence or reckless
disregard on the part of the Investment Manager or an Investment Manager Related
Person in the performance of any of its duties under, or in connection with,
this Agreement.
C-5
8. (a) This Agreement shall be executed and become effective as of the
date written below; provided, however, that this Agreement shall not become
effective with respect to the Fund unless it has first been approved in the
manner required by the 1940 Act and the rules thereunder or in accordance with
exemptive or other relief granted by the SEC or its staff. This Agreement shall
continue in effect for a period of two (2) years and may be renewed thereafter
only so long as such renewal and continuance is specifically approved at least
annually by the Board or by the vote of a majority of the outstanding voting
securities of the Fund and only if the terms and the renewal hereof have been
approved by the vote of a majority of those Trustees of the Trust who are not
parties hereto or "interested persons" of the Trust, the Fund, or any party
hereto, cast in person at a meeting called for the purpose of voting on such
approval.
(b) No amendment to this Agreement shall be effective unless
approved in the manner required by the 1940 Act and the rules thereunder or in
accordance with exemptive or other relief granted by the SEC or its staff.
(c) This Agreement may be terminated by the Investment Manager or
the Trust at any time, without the payment of a penalty, on written notice to
the Sub-Adviser of the Investment Manager's or the Trust's intention to do so,
in the case of the Trust pursuant to action by the Board or pursuant to the vote
of a majority of the outstanding voting securities of the Fund. The Sub-Adviser
may terminate this Agreement at any time, without the payment of a penalty, on
sixty (60) days' written notice to the Investment Manager and the Trust of its
intention to do so. Upon termination of this Agreement, the obligations of all
the parties hereunder shall cease and terminate as of the date of such
termination, except for (i) any obligation to respond for a breach of this
Agreement committed prior to such termination, (ii) the obligation of the
Investment Manager to pay to the Sub-Adviser the fee provided in Paragraph 4
hereof, prorated to the date of termination, and (iii) any indemnification
obligation provided in Paragraph 7 hereof. This Agreement shall automatically
terminate in the event of its assignment. This Agreement shall automatically
terminate upon the termination of the Investment Management Agreement.
9. Any information and advice furnished by any party to this Agreement
to the other party or parties, including material non-public information with
respect to the Fund (which includes the portfolio holdings of the Fund), shall
be treated as confidential and shall not be disclosed to third parties without
the consent of the other party hereto except as required by law, rule or
regulation. Notwithstanding the foregoing, information shall not be subject to
such confidentiality obligations if it:
(xv) is already known to the receiving party at the time it is
obtained;
(xvi) is or becomes publicly known or available through no
wrongful act of the receiving party;
(xvii) is rightfully received from a third party who, to the best
of the receiving party's knowledge, is not under a duty of
confidentiality;
(xviii) is released by the protected party to a third party without
restriction;
(xix) is required to be disclosed by the receiving party pursuant
to a requirement of a court order, subpoena, governmental or
regulatory agency or law (provided the receiving party will
provide the other party written notice of such requirement,
to the extent such notice is permitted);
(xx) is relevant to the defense of any claim or cause of action
asserted against the receiving party; or
(xxi) has been or is independently developed or obtained by the
receiving party.
The Sub-Adviser shall not disclose any "nonpublic personal information" (as such
term is defined in Regulation S-P, including any amendments thereto) pertaining
to the customers of the Trust or a client of the Investment Manager to any third
party or use such information other than for the purpose of providing the
services contemplated by this Agreement.
C-6
10. The Sub-Adviser represents, warrants and agrees that:
(a) The Sub-Adviser: (i) is registered as an investment adviser
under the Advisers Act and will continue to be so registered for so long as this
Agreement remains in effect; (ii) is not prohibited by the 1940 Act, the
Advisers Act or other law, regulation or order from performing the services
contemplated by this Agreement; (iii) to the best of its knowledge, has met and
will seek to continue to meet for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; and (v) will promptly notify the Investment Manager of the occurrence
of any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise. The Sub-Adviser will also promptly notify the Fund and the Investment
Manager if it is served or otherwise receives notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Fund, provided,
however, that routine regulatory examinations shall not be required to be
reported by this provision.
(b) The Sub-Adviser has adopted policies and procedures and a
written code of ethics complying with the requirements of Rule 17j-1 under the
1940 Act and Rule 204A-1 under the Advisers Act, and will provide the Investment
Manager and the Board with copies of such policies and procedures and code of
ethics, together with evidence of its adoption. In accordance with the
requirements of Rule 17j-1, the Sub-Adviser shall certify to the Investment
Manager that the Sub-Adviser has complied in all material respects with the
requirements of Rule 17j-1 during the previous year and that there has been no
material violation of the Sub-Adviser's code of ethics relating to the services
the Sub-Adviser performs under this Agreement or, if such a material violation
has occurred, that appropriate action was taken in response to such violation.
Upon the written request of the Investment Manager, the Sub-Adviser shall
provide to the Investment Manager, its employees or its agents all information
required by Rule 17j-1(c)(1) relating to the approval by the Fund's Board of
Trustees of the Sub-Adviser's code of ethics relating to the services the
Sub-Adviser performs under this Agreement.
(c) The Sub-Adviser has provided the Trust and the Investment
Manager with a copy of its Form ADV at least forty-eight (48) hours prior to
execution of this Agreement, which as of the date of this Agreement is its Form
ADV as most recently filed with the SEC and promptly will furnish a copy of all
amendments to the Trust and the Investment Manager at least annually. Such
amendments shall reflect all changes in the Sub-Adviser's organizational
structure, professional staff or other significant developments affecting the
Sub-Adviser, as required by the Advisers Act.
(d) The Sub-Adviser will notify the Trust and the Investment Manager
of any assignment of this Agreement or change of control of the Sub-Adviser, as
applicable, and any changes in the key personnel who are the portfolio
manager(s) of the Managed Portion prior to or promptly after such change. The
Sub-Adviser agrees to bear all reasonable expenses of the Fund, if any, arising
out of an assignment or change in control of the Sub-Adviser. In the event that
there is a proposed change in control of the Sub-Adviser that would act to
terminate this Agreement, and if a vote of shareholders to approve continuation
of this Agreement is at that time deemed by counsel to the Trust to be required
by the 1940 Act or any rule or regulation thereunder, the Sub-Adviser agrees to
assume all reasonable costs associated with soliciting shareholders of the Fund
to approve continuation of this Agreement. Such expenses include the costs of
preparation and mailing of a proxy statement, and of soliciting proxies. In the
event that such proposed change in control of the Sub-Adviser shall occur
following either: (i) receipt by the Investment Manager and the Trust of an
exemptive order issued by the SEC with respect to the appointment of
sub-advisers absent shareholder approval, or (ii) the adoption of proposed Rule
15a-5 under the 1940 Act, the Sub-Adviser agrees to assume all reasonable costs
and expenses (including the costs of mailing) associated with the preparation of
a statement, required by the exemptive order or Rule 15a-5, containing all
information that would be included in a proxy statement (an "Information
Statement"). In addition, if the Sub-Adviser shall resign, the Sub-Adviser
agrees to assume all reasonable costs and expenses (including the costs of
mailing) associated with the preparation of a proxy statement and soliciting
materials or an Information Statement, as applicable.
(e) The Sub-Adviser agrees to maintain an appropriate level of
errors and omissions or professional liability insurance coverage.
C-7
(f) The Sub-Adviser has implemented policies and procedures that
will prevent the disclosure by the Sub-Adviser, its employees or agents of the
Fund's portfolio holdings to any person or entity other than the Investment
Manager, the Trust's custodian, or other persons expressly designated by the
Investment Manager.
11. This Agreement shall extend to and bind the successors of the
parties hereto.
12. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13. All written notices, requests or other communications to any party
hereunder shall be given to the following addresses and telecopy numbers, or
such other address and telecopy number communicated to the other parties from
time to time:
If to the Sub-Adviser: Steve Scanlon
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
with a copy to Chief Compliance
Officer at same address
If to the Fund: John C.E. Campbell
2005 Market Street
Philadelphia, PA 19103;
with a copy to General Counsel at
same address
If to the Investment Manager: Jude Driscoll
2005 Market Street
Philadelphia, PA 19103;
with a copy to General Counsel at
same address
14. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities," "interested person," "affiliated person,"
and "assignment" shall have the meanings given them in the 1940 Act.
C-8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers and duly attested as of the _____ day
of __________, 2005.
ALLIANCE CAPITAL MANAGEMENT L.P. DELAWARE MANAGEMENT COMPANY,
A SERIES OF DELAWARE MANAGEMENT
BY: ALLIANCE CAPITAL MANAGEMENT BUSINESS TRUST
CORPORATION, ITS GENERAL PARTNER
By: ______________________________ By:____________________________
Name: Louis T. Mangan Name:
Title: Assistant Secretary Title:
Attest: _____________________________ Attest:________________________
Agreed to and accepted as of the day and year first above written:
OPTIMUM FUND TRUST
ON BEHALF OF
By: ___________________________
Attest:________________________
C-9
SCHEDULE A
TO
SUB-ADVISORY AGREEMENT
______________
FEE SCHEDULE
______________
The compensation payable to Sub-Adviser for its services to Paragraph 4 of the
Sub-Advisory Agreement shall be calculated and paid as follows in regards to the
Optimum International Fund:
The total fee will be the sum of the following percentages (on an annual basis)
of the total assets within the Managed Portion(s) sub-advised by Sub-Adviser:
0.70% (70 basis points) of the first $25 million within the Managed Portion(s)
0.45% (45 basis points) of the next $25 million within the Managed Portion(s)
0.34% (34 basis points) of the next $200 million within the Managed Portion(s)
0.33% (33 basis points) of all assets above $250 million within the Managed
Portion(s)
The fee shall be payable on the Managed Portion's average daily net assets
monthly to the Sub-Adviser on or before the tenth (10th) day of the next
succeeding calendar month. If this Agreement becomes effective or terminates
before the end of any month, the investment management fee for the period from
the effective date to the end of such month or from the beginning of such month
to the date of termination, as the case may be, shall be prorated according to
the proration which such period bears to the full month in which such
effectiveness or termination occurs. Each month, the Investment Manager will
provide the Sub-Adviser with a worksheet accompanying payment of the
sub-advisory fee that sets forth the computation of such sub-advisory fee.
C-10
EXHIBIT D
SUB-ADVISORY AGREEMENT
AGREEMENT made by and between DELAWARE MANAGEMENT COMPANY, A SERIES OF
DELAWARE MANAGEMENT BUSINESS TRUST (the "Investment Manager") and ABERDEEN ASSET
MANAGEMENT INC. (the "Sub-Adviser").
WITNESSETH:
WHEREAS, OPTIMUM FUND TRUST (the "Trust") is an investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), and is organized as a statutory trust under the laws of the State of
Delaware; and
WHEREAS, OPTIMUM FIXED INCOME FUND (the "Fund") is a series of the
Trust; and
WHEREAS, the Investment Manager and the Trust, on behalf of the Fund,
have entered into an agreement (the "Investment Management Agreement") whereby
the Investment Manager will provide investment advisory services to the Trust
with respect to the Fund; and
WHEREAS, the Investment Manager has the authority under the Investment
Management Agreement to retain one or more sub-advisers to assist the Investment
Manager in providing investment advisory services to the Trust with respect to
the Fund; and
WHEREAS, the Investment Manager and the Sub-Adviser are registered
investment advisers under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), and engage in the business of providing investment advisory
services; and
WHEREAS, the Board of Trustees (the "Board" or the "Trustees") of the
Trust and the Investment Manager desire that the Investment Manager retain the
Sub-Adviser to render investment advisory and other services with respect to
that portion of the Fund as the Investment Manager shall from time to time
allocate to the Sub-Adviser (the "Managed Portion") in the manner, for the
period, and on the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. (a) The Sub-Adviser will supervise and direct the investments of the
assets of the Managed Portion of the Fund in accordance with the Fund's
investment objectives, policies, and restrictions as provided in the Fund's
Prospectus and Statement of Additional Information, as currently in effect and
as the same may be hereafter modified, amended and/or supplemented from time to
time (hereinafter referred to as the "PROSPECTUS AND SAI"), and such other
limitations as the Fund may impose by notice in writing to the Sub-Adviser,
subject always to the supervision and control of the Investment Manager and the
Board.
(b) As part of the services it will provide hereunder, the
Sub-Adviser is authorized and directed, in its discretion and without prior
consultation with the Fund or the Investment Manager to:
(i) obtain and evaluate information relating to investment
recommendations, asset allocation advice, industries, businesses, securities
markets, research, economic analysis, and other investment services with respect
to the securities that are included in the Managed Portion or that are under
consideration for inclusion in the Managed Portion and invest the Managed
Portion in accordance with the Investment Manager's and the Board's written
direction as more fully set forth herein and as otherwise directed;
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(ii) regularly make decisions as to what securities to
purchase and sell on behalf of the Fund with respect to the Managed Portion,
effect the purchase and sale of such investments in furtherance of the Fund's
objectives and policies, and furnish the Board with such information and reports
regarding the Sub-Adviser's activities in the performance of its duties and
obligations under this Agreement as the Investment Manager deems appropriate or
as the Board may reasonably request, including such reports, information, and
certifications as the officers of the Trust may reasonably require in order to
comply with applicable federal and state laws and regulations and Trust
Compliance Procedures (as defined below);
(iii) provide any and all material composite or other
performance information, records and supporting documentation about accounts or
funds the Sub-Adviser manages, if appropriate, that are relevant to the Managed
Portion and that have investment objectives, policies, and strategies
substantially similar to those employed by the Sub-Adviser in managing the
Managed Portion that may be reasonably necessary, under applicable laws, to
allow the Fund or its agent to present information concerning the Sub-Adviser's
prior performance in the Fund's Prospectus and SAI, and any permissible reports
and materials prepared by the Fund or its agent;
(iv) provide information as reasonably requested by the
Investment Manager or the Board to assist them or their delegate in the
determination of the fair value of certain portfolio securities when market
quotations are not readily available for the purpose of calculating the Fund's
net asset value in accordance with procedures and methods established by the
Board;
(v) vote proxies, exercise conversion or subscription rights,
and respond to tender offers and other consent solicitations ("CORPORATE
ACTIONS") with respect to the issuers of securities in which Fund assets may be
invested, provided materials relating to such Corporate Actions have been
forwarded to the Sub-Adviser in a timely fashion by the Fund's custodian or
otherwise known to the Sub-Adviser, and to submit reports regarding such
Corporate Actions, including a copy of any policies regarding such Corporate
Actions, in a form reasonably satisfactory to the Investment Manager and the
Fund in order to comply with any applicable federal or state reporting
requirements;
(vi) provide performance and other information as reasonably
requested by the Investment Manager or the Board to assist them or their
delegate in conducting ongoing due diligence and performance monitoring; and
(vii) except as the Investment Manager and the Sub-Adviser may
agree in writing from time to time, maintain all accounts, books, and records
with respect to the Managed Portion as are required of an investment adviser of
a registered investment company pursuant to the 1940 Act and the Advisers Act
and the rules thereunder. The Sub-Adviser shall furnish to the Investment
Manager copies of all such accounts, books, and records as the Investment
Manager may reasonably request. The Sub-Adviser agrees that such accounts,
books, and records are the property of the Trust, and will be surrendered to the
Trust promptly upon request, with the understanding that the Sub-Adviser may
retain its own copy of all records.
(c) The Sub-Adviser shall not consult with any other sub-adviser of
the Fund or of any fund that is an "affiliated person" of the Fund concerning
transactions for the Fund in securities or other assets. In no instance will any
portfolio securities of the Fund be purchased from, or sold to, the Investment
Manager, the Sub-Adviser, the Trust's principal underwriter, or any affiliated
persons of the Trust, the Investment Manager, the Sub-Adviser or the Trust's
principal underwriter, acting as principal in the transaction, except to the
extent permitted by the Securities and Exchange Commission (the "SEC"), the
staff of the SEC, the 1940 Act, and the rules thereunder, including, without
limitation, Rule 17a-7. The Sub-Adviser acknowledges that the Investment Manager
and the Trust may rely on Rule 17a-7, Rule 17a-10, Rule 10f-3, Rule 12d3-1 and
Rule 17e-1 under the 1940 Act.
(d) In furnishing services hereunder, the Sub-Adviser shall be
subject to, and shall perform in accordance with, the following: (i) the Trust's
Agreement and Declaration of Trust, as the same may be hereafter modified,
amended, and/or supplemented from time to time; (ii) the Trust's By-Laws, as the
same may be hereafter modified, amended, and/or supplemented from time to time;
(iii) the Fund's Prospectus and SAI; (iv) the 1940 Act and the Advisers Act and
the rules under each and all other federal and state securities laws or
regulations applicable to the Trust and the Fund; (v) the Trust's compliance
policies and procedures adopted from time to time by the Board for compliance by
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the Trust with the Federal Securities Laws (as that term is defined in Rule
38a-1(e)(1) under the 1940 Act) and any other Trust policies and procedures
adopted from time to time by the Board (together, the "Trust Compliance
Procedures"); and (vi) the written instructions of the Investment Manager;
provided, however, that the Sub-Adviser shall only be subject to, and shall only
be required to perform in accordance with, any amendments or modifications to
such Trust Compliance Procedures after such amendments or modifications have
been provided to the Sub-Adviser in writing. The Investment Manager agrees to
provide the Sub-Adviser with current copies of the Trust's and the Fund's
documents mentioned above and all changes made to such documents.
(e) In order to assist the Trust and the Trust's chief compliance
officer (the "Trust CCO") and the Investment Manager and the Investment
Manager's Chief Compliance Officer (the "IM CCO") in satisfying the requirements
contained in Rule 38a-1 under the 1940 Act and Rule 206(4)-7 under the Advisers
Act, respectively, the Sub-Adviser shall provide to the Trust CCO and/or IM CCO:
(i) direct access to the Sub-Adviser's chief compliance officer (the
"Sub-Adviser CCO") and the Sub-Adviser's officers and employees, as reasonably
requested by the Trust CCO and/or IM CCO; (ii) quarterly reports confirming that
the Sub-Adviser has complied with the Trust Compliance Procedures in managing
the Managed Portion; and (iii) quarterly certifications with respect to Material
Compliance Matters (as that term is defined in Rule 38a-1(e)(2) under the 1940
Act) related to the Sub-Adviser's management of the Managed Portion.
The Sub-Adviser shall promptly provide the Trust CCO and IM CCO with
copies and summaries of: (i) the Sub-Adviser's policies and procedures for
compliance by the Sub-Adviser with the Federal Securities Laws and to prevent
violation of the Advisers Act (together, the "Sub-Adviser Compliance
Procedures"); and (ii) any material changes to the Sub-Adviser Compliance
Procedures. The Sub-Adviser shall cooperate fully with the Trust CCO and IM CCO
so as to facilitate the Trust CCO's and IM CCO's performance of their respective
responsibilities under Rule 38a-1 and Rule 206(4)-7, including to review,
evaluate and report to the Board on the operation of the Sub-Adviser Compliance
Procedures, and shall promptly report to the Trust CCO and IM CCO any Material
Compliance Matter arising under the Sub-Adviser Compliance Procedures involving
the Managed Portion. The Sub-Adviser shall allow the Trust CCO and/or the IM
CCO, as reasonably requested from time to time, access during regular business
hours to examine and review the Sub-Adviser's Compliance Procedures and the
Sub-Adviser's adherence thereto. The Sub-Adviser shall provide to the Trust CCO
and IM CCO: (i) quarterly reports confirming the Sub-Adviser's compliance with
the Sub-Adviser Compliance Procedures in managing the Managed Portion; and (ii)
certifications that there were no Material Compliance Matters involving the
Sub-Adviser that arose under the Sub-Adviser Compliance Procedures that affected
the Managed Portion. At least annually, the Sub-Adviser shall provide a
certification to the Trust CCO and IM CCO to the effect that the Sub-Adviser has
in place and has implemented policies and procedures that are reasonably
designed to ensure compliance by the Sub-Adviser with the Federal Securities
Laws, and that the Sub-Adviser has reviewed the adequacy of its policies and
procedures established pursuant to Rule 206(4)-7 and the effectiveness of their
implementation.
(f) The Sub-Adviser shall assist the Fund in the preparation of the
Trust's registration statement, the Prospectus and SAI, shareholder reports and
other regulatory filings, or any amendment or supplement thereto as each relates
to the Fund or the Sub-Adviser (collectively, "Regulatory Filings"), and shall
provide the Fund with disclosure for use in the Fund's Regulatory Filings,
including, without limitation, disclosure related to the Sub-Adviser's
investment management personnel, portfolio manager compensation, investment
management strategies and techniques, and proxy voting policies. The Sub-Adviser
shall provide such certifications regarding the Fund as the Trust's officers may
reasonably request for purposes of the preparation of any Regulatory Filings.
(g) The Sub-Adviser hereby agrees during the period hereinafter set
forth to render the services and assume the obligations herein set forth for the
compensation herein provided. The Sub-Adviser shall for all purposes herein be
deemed to be an independent contractor, and shall, unless otherwise expressly
provided and authorized, have no authority to act for or represent the Trust in
any way, or in any way be deemed an agent of the Trust.
2. (a) Under the terms of the Investment Management Agreement, the
Trust shall conduct its own business and affairs and shall bear the expenses and
salaries necessary and incidental thereto including, but not in limitation of
the foregoing, the costs incurred in: the maintenance of its existence as a
statutory trust organized under the laws of the State of Delaware; the
maintenance of its own books, records, and procedures; dealing with its own
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shareholders; the payment of dividends; transfer of shares, including issuance
and repurchase of shares; preparation of share certificates, if any; reports and
notices to shareholders; calling and holding of shareholders' meetings;
miscellaneous office expenses; brokerage commissions; custodian fees; legal and
accounting fees; taxes; and federal and state registration fees.
(b) Directors, officers and employees of the Sub-Adviser may be
directors, officers and employees of other funds that have employed the
Sub-Adviser as sub-adviser or investment manager. Directors, officers and
employees of the Sub-Adviser who are Trustees, officers and/or employees of the
Trust, shall not receive any compensation from the Trust for acting in such dual
capacity.
(c) In the conduct of the respective business of the parties hereto
and in the performance of this Agreement, the Trust, the Investment Manager, and
the Sub-Adviser may share facilities common to each, which may include legal and
accounting personnel, with appropriate proration of expenses between and among
them.
3. (a) The Sub-Adviser will select brokers and dealers to effect all
Fund transactions subject to the conditions set forth herein. The Sub-Adviser
will place all necessary orders with brokers, dealers, or issuers, and will
negotiate brokerage commissions, if applicable. The Sub-Adviser is directed at
all times to seek to execute transactions for the Managed Portion (i) in
accordance with any written policies, practices or procedures that may be
established by the Board or the Investment Manager from time to time, and (ii)
as described in the Fund's Prospectus and SAI. In placing any orders for the
purchase or sale of investments for the Fund, with respect to the Managed
Portion, the Sub-Adviser shall use its best efforts to obtain for the Managed
Portion "best execution," considering all of the circumstances, and shall
maintain records adequate to demonstrate compliance with this requirement.
(b) Subject to the appropriate policies and procedures approved by
the Board, the Sub-Adviser may, to the extent authorized by Section 28(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), cause the
Managed Portion to pay a broker or dealer that provides brokerage or research
services to the Investment Manager, the Sub-Adviser and the Managed Portion an
amount of commission for effecting a Fund transaction 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 amount of
commission is reasonable in relation to the value of such brokerage or research
services provided viewed in terms of that particular transaction or the
Sub-Adviser's overall responsibilities to the Fund or its other advisory clients
for which the Investment Manager or the Sub-Adviser exercises investment
discretion. To the extent authorized by Section 28(e) and the Board, the
Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of such action.
Subject to seeking best execution and compliance with applicable federal and
state securities laws and regulations, the Board or the Investment Manager may
direct the Sub-Adviser to effect transactions in Fund securities through
broker-dealers in a manner that will help generate resources to pay the cost of
certain expenses that the Trust is required to pay or for which the Trust is
required to arrange payment.
(c) Any entity or person associated with the Investment Manager or
the Sub-Adviser that is a member of a national securities exchange is authorized
to effect any transaction on such exchange for the account of the Fund to the
extent and as permitted by Section 11(a)(1)(H) of the Exchange Act.
4. As compensation for the services to be rendered to the Trust for the
benefit of the Fund by the Sub-Adviser under the provisions of this Agreement,
the Investment Manager shall pay to the Sub-Adviser a fee as provided in
Schedule A attached hereto.
5. The services to be rendered by the Sub-Adviser to the Trust for the
benefit of the Fund under the provisions of this Agreement are not to be deemed
to be exclusive, and the Sub-Adviser shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby.
6. (a) Subject to the limitation set forth in Paragraph 5, the
Sub-Adviser, its directors, officers, employees, agents, and shareholders may
engage in other businesses, may render investment advisory services to other
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investment companies, or to any other corporation, association, firm or
individual, and may render underwriting services to the Trust or to any other
investment company, corporation, association, firm or individual.
(b) Neither the Investment Manager, the Trust nor the Fund shall use
the Sub-Adviser's actual or fictitious name(s), mark, derivative and/or logo (or
that of any affiliate of the Sub-Adviser, other than that of the Fund, the
Trust, or any affiliate of the Investment Manager that is an affiliate of the
Sub-Adviser solely by reason of the Sub-Adviser's provision of services pursuant
to this Agreement) or otherwise refer to the Sub-Adviser in any materials
distributed to third parties, including the Fund's shareholders, without prior
review and written approval by the Sub-Adviser, which may not be unreasonably
withheld or delayed. Upon termination of this Agreement, the Investment Manager,
the Trust and the Fund, shall, to the extent applicable and as soon as is
reasonably possible, cease to use the Sub-Adviser's actual or fictitious
name(s), mark, derivative and/or logo.
(c) The Sub-Adviser shall not use the Investment Manager's name (or
that of any affiliate of the Investment Manager) or otherwise refer to the
Investment Manager in any materials distributed to third parties, including the
Fund's shareholders, without prior review and written approval by the Investment
Manager, which may not be unreasonably withheld or delayed. Upon termination of
this Agreement, the Sub-Adviser, shall, to the extent applicable and as soon as
is reasonably possible, cease to use the actual or fictitious name(s), mark,
derivative and/or logo of the Investment Manager, the Trust and the Fund.
7. (a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard in the performance of its duties as
Sub-Adviser to the Trust on behalf of the Fund, the Sub-Adviser shall not be
liable to the Trust, the Fund, the Investment Manager or any shareholder of the
Trust for any action 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, or otherwise. The Sub-Adviser makes no
representation or warranty, express or implied, that any level of performance or
investment results will be achieved by the Managed Portion or the Fund, or that
the Managed Portion or the Fund will perform comparably with any standard or
index, including other clients of Sub-Adviser, whether public or private.
(b) The Investment Manager shall indemnify the Sub-Adviser and its
affiliates and its or their controlling persons, officers, directors, employees,
agents, legal representatives and persons controlled by it (which shall not
include the Trust or the Fund) (collectively, "Sub-Adviser Related Persons") to
the fullest extent permitted by law against any and all loss, damage, judgments,
fines, amounts paid in settlement and reasonable expenses, including attorneys'
fees, (collectively "Losses") incurred by the Sub-Adviser or Sub-Adviser Related
Persons arising from or in connection with this Agreement or the performance by
the Sub-Adviser or Sub-Adviser Related Persons of its or their duties hereunder
so long as such Losses arise out of the Investment Manager's willful
misfeasance, bad faith, gross negligence, or reckless disregard in performing
its responsibilities hereunder, including, without limitation, such Losses
arising under any applicable law or that may be based upon any untrue statement
of a material fact contained in the Trust's Registration Statement, or any
amendment thereof or any supplement thereto, or the omission to state therein a
material fact that was known or that should have been known and was required to
be stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reasonable reliance upon
information furnished to the Investment Manager or the Trust by the Sub-Adviser
or a Sub-Adviser Related Person specifically for inclusion in the Registration
Statement or any amendment thereof or supplement thereto, except to the extent
any such Losses referred to in this paragraph (b) result from willful
misfeasance, bad faith, gross negligence or reckless disregard on the part of
the Sub-Adviser or a Sub-Adviser Related Person in the performance of any of its
duties under, or in connection with, this Agreement.
(c) The Sub-Adviser shall indemnify the Investment Manager and its
affiliates and its or their controlling persons, officers, directors, employees,
agents, legal representatives and persons controlled by it (collectively,
"Investment Manager Related Persons") to the fullest extent permitted by law
against any and all Losses incurred by the Investment Manager or Investment
Manager Related Persons arising from or in connection with this Agreement or the
performance by the Investment Manager or Investment Manager Related Persons of
its or their duties hereunder so long as such Losses arise out of the
Sub-Adviser's willful misfeasance, bad faith, gross negligence, or reckless
disregard in performing its responsibilities hereunder, including, without
limitation, such Losses arising under any applicable law or that may be based
upon any untrue statement of a material fact contained in the Trust's
Registration Statement, or any amendment thereof or any supplement thereto, or
the omission to state therein a material fact that was known or that should have
been known and was required to be stated therein or necessary to make the
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statements therein not misleading, if such statement or omission was made in
reasonable reliance upon information furnished to the Investment Manager or the
Trust by the Sub-Adviser or a Sub-Adviser Related Person specifically for
inclusion in the Registration Statement or any amendment thereof or supplement
thereto, except to the extent any such Losses referred to in this paragraph (c)
result from willful misfeasance, bad faith, gross negligence or reckless
disregard on the part of the Investment Manager or an Investment Manager Related
Person in the performance of any of its duties under, or in connection with,
this Agreement.
8. (a) This Agreement shall be executed and become effective as of
___________, 2005; provided, however, that this Agreement shall not become
effective with respect to the Fund unless it has first been approved in the
manner required by the 1940 Act and the rules thereunder or in accordance with
exemptive or other relief granted by the SEC or its staff. This Agreement shall
continue in effect for a period of two (2) years and may be renewed thereafter
only so long as such renewal and continuance is specifically approved at least
annually by the Board or by the vote of a majority of the outstanding voting
securities of the Fund and only if the terms and the renewal hereof have been
approved by the vote of a majority of those Trustees of the Trust who are not
parties hereto or "interested persons" of the Trust, the Fund, or any party
hereto, cast in person at a meeting called for the purpose of voting on such
approval.
(b) No amendment to this Agreement shall be effective unless
approved in the manner required by the 1940 Act and the rules thereunder or in
accordance with exemptive or other relief granted by the SEC or its staff.
(c) This Agreement may be terminated by the Investment Manager or
the Trust at any time, without the payment of a penalty, on ten (10) days'
written notice to the Sub-Adviser of the Investment Manager's or the Trust's
intention to do so, in the case of the Trust pursuant to action by the Board or
pursuant to the vote of a majority of the outstanding voting securities of the
Fund. The Sub-Adviser may terminate this Agreement at any time, without the
payment of a penalty, on sixty (60) days' written notice to the Investment
Manager and the Trust of its intention to do so. Upon termination of this
Agreement, the obligations of all the parties hereunder shall cease and
terminate as of the date of such termination, except for (i) any obligation to
respond for a breach of this Agreement committed prior to such termination, (ii)
the obligation of the Investment Manager to pay to the Sub-Adviser the fee
provided in Paragraph 4 hereof, prorated to the date of termination, and (iii)
any indemnification obligation provided in Paragraph 7 hereof. This Agreement
shall automatically terminate in the event of its assignment. This Agreement
shall automatically terminate upon the termination of the Investment Management
Agreement.
9. Any information and advice furnished by any party to this Agreement
to the other party or parties, including material non-public information with
respect to the Fund (which includes the portfolio holdings of the Fund), shall
be treated as confidential and shall not be disclosed to third parties without
the consent of the other party hereto except as required by law, rule or
regulation. Notwithstanding the foregoing, information shall not be subject to
such confidentiality obligations if it:
(xxii) is already known to the receiving party at the time it is
obtained;
(xxiii) is or becomes publicly known or available through no
wrongful act of the receiving party;
(xxiv) is rightfully received from a third party who, to the best
of the receiving party's knowledge, is not under a duty of
confidentiality;
(xxv) is released by the protected party to a third party without
restriction;
(xxvi) is required to be disclosed by the receiving party pursuant
to a requirement of a court order, subpoena, governmental
or regulatory agency or law (provided the receiving party
will provide the other party written notice of such
requirement, to the extent such notice is permitted);
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(xxvii) is relevant to the defense of any claim or cause of action
asserted against the receiving party; or
(xxviii) has been or is independently developed or obtained by the
receiving party; or
(xxix) is reasonably required to be disclosed in order to satisfy
statutory or regulatory requirements relating to services
provided hereunder such as to a service provider to the
Trust (e.g., the Trust's independent accountants or legal
representative); provided, however that in the event of
such disclosure the protected party will be promptly
notified.
The Sub-Adviser shall not disclose any "nonpublic personal information" (as such
term is defined in Regulation S-P, including any amendments thereto) pertaining
to the customers of the Trust or a client of the Investment Manager to any third
party or use such information other than for the purpose of providing the
services contemplated by this Agreement.
10. The Sub-Adviser represents, warrants and agrees that:
(a) The Sub-Adviser: (i) is registered as an investment
adviser under the Advisers Act and will continue to be so registered for so long
as this Agreement remains in effect; (ii) is not prohibited by the 1940 Act, the
Advisers Act or other law, regulation or order from performing the services
contemplated by this Agreement; (iii) to the best of its knowledge, has met and
will seek to continue to meet for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; and (v) will promptly notify the Investment Manager of the occurrence
of any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise. The Sub-Adviser will also promptly notify the Fund and the Investment
Manager if it is served or otherwise receives notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Fund, provided,
however, that routine regulatory examinations shall not be required to be
reported by this provision.
(b) The Sub-Adviser has adopted policies and procedures and a
written code of ethics complying with the requirements of Rule 17j-1 under the
1940 Act and Rule 204A-1 under the Advisers Act, and will provide the Investment
Manager and the Board with copies of such policies and procedures and code of
ethics, together with evidence of its adoption. In accordance with the
requirements of Rule 17j-1, the Sub-Adviser shall certify to the Investment
Manager that the Sub-Adviser has complied in all material respects with the
requirements of Rule 17j-1 during the previous year and that there has been no
material violation of the Sub-Adviser's code of ethics relating to the services
the Sub-Adviser performs under this Agreement or, if such a material violation
has occurred, that appropriate action was taken in response to such violation.
Upon the written request of the Investment Manager, the Sub-Adviser shall
provide to the Investment Manager, its employees or its agents all information
required by Rule 17j-1(c)(1) relating to the approval by the Fund's Board of
Trustees of the Sub-Adviser's code of ethics relating to the services the
Sub-Adviser performs under this Agreement.
(c) The Sub-Adviser has provided the Trust and the Investment
Manager with a copy of its Form ADV at least forty-eight (48) hours prior to
execution of this Agreement, which as of the date of this Agreement is its Form
ADV as most recently filed with the SEC and promptly will furnish a copy of all
amendments to the Trust and the Investment Manager at least annually. Such
amendments shall reflect all changes in the Sub-Adviser's organizational
structure, professional staff or other significant developments affecting the
Sub-Adviser, as required by the Advisers Act.
(d) The Sub-Adviser will notify the Trust and the Investment
Manager of any assignment of this Agreement or change of control of the
Sub-Adviser, as applicable, and any changes in the key personnel who are the
portfolio manager(s) of the Managed Portion prior to or promptly after such
change. The Sub-Adviser agrees to bear all reasonable expenses of the Fund, if
any, arising out of an assignment or change in control of the Sub-Adviser. In
the event that there is a proposed change in control of the Sub-Adviser that
would act to terminate this Agreement, and if a vote of shareholders to approve
continuation of this Agreement is at that time deemed by counsel to the Trust to
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be required by the 1940 Act or any rule or regulation thereunder, the
Sub-Adviser agrees to assume all reasonable costs associated with soliciting
shareholders of the Fund to approve continuation of this Agreement. Such
expenses include the costs of preparation and mailing of a proxy statement, and
of soliciting proxies. In the event that such proposed change in control of the
Sub-Adviser shall occur following either: (i) receipt by the Investment Manager
and the Trust of an exemptive order issued by the SEC with respect to the
appointment of sub-advisers absent shareholder approval, or (ii) the adoption of
proposed Rule 15a-5 under the 1940 Act, the Sub-Adviser agrees to assume all
reasonable costs and expenses (including the costs of mailing) associated with
the preparation of a statement, required by the exemptive order or Rule 15a-5,
containing all information that would be included in a proxy statement (an
"Information Statement").
(e) The Sub-Adviser agrees to maintain an appropriate level of
errors and omissions or professional liability insurance coverage.
(f) The Sub-Adviser has implemented policies and procedures
that are reasonably designed to prevent the disclosure by the Sub-Adviser, its
employees or agents of the Fund's portfolio holdings to any person or entity
other than the Investment Manager, the Trust's custodian, or other persons
expressly designated by the Investment Manager.
11. This Agreement shall extend to and bind the successors of the
parties hereto.
12. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13. All written notices, requests or other communications to any party
hereunder shall be given to the following addresses and telecopy numbers, or
such other address and telecopy number communicated to the other parties from
time to time:
If to the Sub-Adviser: THROUGH NOVEMBER 30, 2005 (SUBJECT TO CHANGE)
Mr. Christian Pittard
Aberdeen Asset Management
Inc. 1114 Avenue of the
Americas, 34th Floor
New York, NY 10036
STARTING DECEMBER 1, 2005 (SUBJECT TO CHANGE)
Mr. Christian Pittard
Chief Executive Officer
Aberdeen Asset Management Inc.
1735 Market Street
Philadelphia, PA 19103
If to the Fund: John C.E. Campbell
2005 Market Street
Philadelphia, PA 19103;
with a copy to General Counsel
at same address
If to the Investment Manager: Jude Driscoll
2005 Market Street
Philadelphia, PA 19103;
with a copy to General Counsel
at same address
14. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities," "interested person," "affiliated person,"
and "assignment" shall have the meanings given them in the 1940 Act.
D-8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers and duly attested as of the _____ day
of __________, 2005.
ABERDEEN ASSET MANAGEMENT INC. DELAWARE MANAGEMENT COMPANY,
A SERIES OF DELAWARE MANAGEMENT
BUSINESS TRUST
By: _________________________________ By:_____________________________
Name: Christian Pittard Name:
Title: [Chief Executive Officer] Title:
Attest: Attest:
Agreed to and accepted as of the day and year first above written:
OPTIMUM FUND TRUST
ON BEHALF OF OPTIMUM FIXED
INCOME FUND
By:_____________________________
Attest:_________________________
D-9
SCHEDULE A
TO
SUB-ADVISORY AGREEMENT
______________
FEE SCHEDULE
______________
The compensation payable to Sub-Adviser for its services pursuant to Paragraph 4
of the Sub-Advisory Agreement shall be calculated and accrued daily and paid
monthly at the annual rate of:
0.375% (37.5 basis points) of the first $25 million of average daily net
assets in the Managed Portion
0.30% (30 basis points) of the next $75 million of average daily net
assets in the Managed Portion
0.20% (20 basis points) of the next $400 million of average daily net
assets in the Managed Portion
0.175% (17.5 basis points) of all assets above $500 million of average
daily net assets in the Managed Portion
The fee shall be payable monthly to the Sub-Adviser on or before the tenth
(10th) day of the next succeeding calendar month. If this Agreement becomes
effective or terminates before the end of any month, the fee for the period from
the effective date to the end of such month or from the beginning of such month
to the date of termination, as the case may be, shall be prorated according to
the proration which such period bears to the full month in which such
effectiveness or termination occurs. Each month, the Investment Manager will
provide the Sub-Adviser with a worksheet accompanying payment of the
sub-advisory fee that sets forth the computation of such sub-advisory fee.
D-10
OPTIMUM LARGE CAP VALUE FUND
Proxy for a Joint Special Meeting of Shareholders--November 17, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
The undersigned hereby appoints Michael P. Bishof, John C.E. Campbell and Joseph
H. Hastings, or any of them, each with the right of substitution, proxies of the
undersigned at the Joint Special Meeting of Shareholders (the "Special Meeting")
of the fund named above (the "Fund"), a series of the Trust (as defined in the
proxy statement) to be held at the offices of Delaware Investments located at
Two Commerce Square, 2001 Market Street, 2nd Floor Auditorium, Philadelphia,
Pennsylvania 19103, on Thursday, November 17, 2005 at 4:00 p.m. (E.S.T.), or at
any postponement or adjournments thereof, with all the powers which the
undersigned would possess if personally present, and instructs them to vote upon
any matters which may properly be acted upon at this Special Meeting and
specifically as indicated on the reverse side of this form. Please refer to the
proxy statement for a discussion of these matters.
BY SIGNING AND DATING THIS CARD, YOU AUTHORIZE THE PROXIES TO VOTE ON THE
PROPOSAL DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT AS MARKED, OR IF NOT
MARKED, TO VOTE "FOR" THE PROPOSAL, AND TO USE THEIR DISCRETION TO VOTE ANY
OTHER MATTER THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING, OR AT ANY
POSTPONEMENT OR ADJOURNMENT THEREOF. PLEASE COMPLETE AND MAIL THIS CARD AT ONCE
IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR ENTER YOUR VOTING INSTRUCTIONS AT
1-800-XXX-XXXX OR WWW.PROXYVOTE.COM.
PLEASE VOTE BY CHECKING THE APPROPRIATE BOX BELOW:
THIS PROXY CARD IS ONLY VALID WHEN SIGNED AND DATED. TO SECURE THE LARGEST
POSSIBLE REPRESENTATION AND AVOID THE ADDITIONAL EXPENSE TO THE FUND OF
FURTHER SOLICITATION, PLEASE DATE AND SIGN NAME OR NAMES BELOW AS PRINTED
ON THIS CARD TO AUTHORIZE THE VOTING OF YOUR SHARES AS INDICATED. WHERE
SHARES ARE REGISTERED WITH JOINT OWNERS, ALL JOINT OWNERS SHOULD SIGN.
PERSONS SIGNING AS EXECUTOR, ADMINISTRATOR, TRUSTEE OR OTHER REPRESENTATIVE
SHOULD GIVE FULL TITLE AS SUCH.
Date _____________________ , 2005
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Signature(s) (Joint Owners) (PLEASE SIGN WITHIN BOX)
1. TO APPROVE A NEW SUB-ADVISORY AGREEMENT BETWEEN DELAWARE FOR AGAINST ABSTAIN
MANAGEMENT COMPANY, A SERIES OF DELAWARE MANAGEMENT
BUSINESS TRUST ("DELAWARE") AND THE FUND'S INVESTMENT |_| |_| |_|
MANAGER, AND TCW INVESTMENT MANAGEMENT COMPANY ("TCW"),
UNDER WHICH TCW WOULD SERVE AS ONE OF TWO SUB-ADVISERS TO
SUCH FUND.
OPTIMUM SMALL CAP VALUE FUND
Proxy for Joint Special Meeting of Shareholders--November 17, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
The undersigned hereby appoints Michael P. Bishof, John C.E. Campbell and Joseph
H. Hastings, or any of them, each with the right of substitution, proxies of the
undersigned at the Joint Special Meeting of Shareholders (the "Special Meeting")
of the fund named above (the "Fund"), a series of the Trust (as defined in the
proxy statement) to be held at the offices of Delaware Investments located at
Two Commerce Square, 2001 Market Street, 2nd Floor Auditorium, Philadelphia,
Pennsylvania 19103, on Thursday, November 17, 2005 at 4:00 p.m. (E.S.T.), or at
any postponement or adjournments thereof, with all the powers which the
undersigned would possess if personally present, and instructs them to vote upon
any matters which may properly be acted upon at this Special Meeting and
specifically as indicated on the reverse side of this form. Please refer to the
proxy statement for a discussion of these matters.
BY SIGNING AND DATING THIS CARD, YOU AUTHORIZE THE PROXIES TO VOTE ON THE
PROPOSAL DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT AS MARKED, OR IF NOT
MARKED, TO VOTE "FOR" THE PROPOSAL, AND TO USE THEIR DISCRETION TO VOTE ANY
OTHER MATTER THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING, OR AT ANY
POSTPONEMENT OR ADJOURNMENT THEREOF. PLEASE COMPLETE AND MAIL THIS CARD AT ONCE
IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR ENTER YOUR VOTING INSTRUCTIONS AT
1-800-XXX-XXXX OR WWW.PROXYVOTE.COM.
PLEASE VOTE BY CHECKING THE APPROPRIATE BOX BELOW:
THIS PROXY CARD IS ONLY VALID WHEN SIGNED AND DATED. TO SECURE THE LARGEST
POSSIBLE REPRESENTATION AND AVOID THE ADDITIONAL EXPENSE TO THE FUND OF
FURTHER SOLICITATION, PLEASE DATE AND SIGN NAME OR NAMES BELOW AS PRINTED
ON THIS CARD TO AUTHORIZE THE VOTING OF YOUR SHARES AS INDICATED. WHERE
SHARES ARE REGISTERED WITH JOINT OWNERS, ALL JOINT OWNERS SHOULD SIGN.
PERSONS SIGNING AS EXECUTOR, ADMINISTRATOR, TRUSTEE OR OTHER REPRESENTATIVE
SHOULD GIVE FULL TITLE AS SUCH.
Date_______________________, 2005
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Signature(s) (Joint Owners) (PLEASE SIGN WITHIN BOX)
1. TO APPROVE A NEW SUB-ADVISORY AGREEMENT BETWEEN DELAWARE FOR AGAINST ABSTAIN
MANAGEMENT COMPANY, A SERIES OF DELAWARE MANAGEMENT
BUSINESS TRUST AND THE FUND'S INVESTMENT MANAGER, AND THE |_| |_| |_|
KILLEN GROUP, INC. ("KILLEN") UNDER WHICH KILLEN WOULD
SERVE AS ONE OF THREE SUB-ADVISERS TO SUCH FUND.
OPTIMUM INTERNATIONAL FUND
Proxy for Joint Special Meeting of Shareholders--November 17, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
The undersigned hereby appoints Michael P. Bishof, John C.E. Campbell and Joseph
H. Hastings, or any of them, each with the right of substitution, proxies of the
undersigned at the Joint Special Meeting of Shareholders (the "Special Meeting")
of the fund named above (the "Fund"), a series of the Trust (as defined in the
proxy statement) to be held at the offices of Delaware Investments located at
Two Commerce Square, 2001 Market Street, 2nd Floor Auditorium, Philadelphia,
Pennsylvania 19103, on Thursday, November 17, 2005 at 4:00 p.m. (E.S.T.), or at
any postponement or adjournments thereof, with all the powers which the
undersigned would possess if personally present, and instructs them to vote upon
any matters which may properly be acted upon at this Special Meeting and
specifically as indicated on the reverse side of this form. Please refer to the
proxy statement for a discussion of these matters.
BY SIGNING AND DATING THIS CARD, YOU AUTHORIZE THE PROXIES TO VOTE ON THE
PROPOSAL DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT AS MARKED, OR IF NOT
MARKED, TO VOTE "FOR" THE PROPOSAL, AND TO USE THEIR DISCRETION TO VOTE ANY
OTHER MATTER THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING, OR AT ANY
POSTPONEMENT OR ADJOURNMENT THEREOF. PLEASE COMPLETE AND MAIL THIS CARD AT ONCE
IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR ENTER YOUR VOTING INSTRUCTIONS AT
1-800-XXX-XXXX OR WWW.PROXYVOTE.COM.
PLEASE VOTE BY CHECKING THE APPROPRIATE BOX BELOW:
THIS PROXY CARD IS ONLY VALID WHEN SIGNED AND DATED. TO SECURE THE LARGEST
POSSIBLE REPRESENTATION AND AVOID THE ADDITIONAL EXPENSE TO THE FUND OF
FURTHER SOLICITATION, PLEASE DATE AND SIGN NAME OR NAMES BELOW AS PRINTED
ON THIS CARD TO AUTHORIZE THE VOTING OF YOUR SHARES AS INDICATED. WHERE
SHARES ARE REGISTERED WITH JOINT OWNERS, ALL JOINT OWNERS SHOULD SIGN.
PERSONS SIGNING AS EXECUTOR, ADMINISTRATOR, TRUSTEE OR OTHER REPRESENTATIVE
SHOULD GIVE FULL TITLE AS SUCH.
Date_______________________, 2005
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Signature(s) (Joint Owners) (PLEASE SIGN WITHIN BOX)
1. TO APPROVE A NEW SUB-ADVISORY AGREEMENT BETWEEN DELAWARE FOR AGAINST ABSTAIN
MANAGEMENT COMPANY, A SERIES OF DELAWARE MANAGEMENT
BUSINESS TRUST AND THE FUND'S INVESTMENT MANAGER, AND |_| |_| |_|
ALLIANCE CAPITAL MANAGEMENT L.P. ("ALLIANCE"), UNDER WHICH
ALLIANCE WOULD SERVE AS ONE OF TWO SUB-ADVISERS TO SUCH
FUND.
OPTIMUM FIXED INCOME FUND
Proxy for Joint Special Meeting of Shareholders--November 17, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
The undersigned hereby appoints Michael P. Bishof, John C.E. Campbell and Joseph
H. Hastings or any of them, each with the right of substitution, proxies of the
undersigned at the Joint Special Meeting of Shareholders ("Special Meeting") of
the fund named above (the "Fund"), a series of the Trust (as defined in the
proxy statement) to be held at the offices of Delaware Investments located at
Two Commerce Square, 2001 Market Street, 2nd Floor Auditorium, Philadelphia,
Pennsylvania 19103, on Thursday, November 17, 2005 at 4:00 p.m. (E.S.T.), or at
any postponement or adjournments thereof, with all the powers which the
undersigned would possess if personally present, and instructs them to vote upon
any matters which may properly be acted upon at this Special Meeting and
specifically as indicated on the reverse side of this form. Please refer to the
proxy statement for a discussion of these matters.
BY SIGNING AND DATING THIS CARD, YOU AUTHORIZE THE PROXIES TO VOTE ON THE
PROPOSAL DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT AS MARKED, OR IF NOT
MARKED, TO VOTE "FOR" THE PROPOSAL, AND TO USE THEIR DISCRETION TO VOTE ANY
OTHER MATTER THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING, OR AT ANY
POSTPONEMENT OR ADJOURNMENT THEREOF. PLEASE COMPLETE AND MAIL THIS CARD AT ONCE
IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR ENTER YOUR VOTING INSTRUCTIONS AT
1-800-XXX-XXXX OR WWW.PROXYVOTE.COM.
PLEASE VOTE BY CHECKING THE APPROPRIATE BOX BELOW:
THIS PROXY CARD IS ONLY VALID WHEN SIGNED AND DATED. TO SECURE THE LARGEST
POSSIBLE REPRESENTATION AND AVOID THE ADDITIONAL EXPENSE TO THE FUND OF
FURTHER SOLICITATION, PLEASE DATE AND SIGN NAME OR NAMES BELOW AS PRINTED
ON THIS CARD TO AUTHORIZE THE VOTING OF YOUR SHARES AS INDICATED. WHERE
SHARES ARE REGISTERED WITH JOINT OWNERS, ALL JOINT OWNERS SHOULD SIGN.
PERSONS SIGNING AS EXECUTOR, ADMINISTRATOR, TRUSTEE OR OTHER REPRESENTATIVE
SHOULD GIVE FULL TITLE AS SUCH.
Date ______________________, 2005
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Signature(s) (Joint Owners) (PLEASE SIGN WITHIN BOX)
1. TO APPROVE A NEW SUB-ADVISORY AGREEMENT BETWEEN DELAWARE FOR AGAINST ABSTAIN
MANAGEMENT COMPANY, A SERIES OF DELAWARE MANAGEMENT
BUSINESS TRUST AND THE FUND'S INVESTMENT MANAGER, AND |_| |_| |_|
ABERDEEN INVESTMENT MANAGEMENT INC. ("AAMI") UNDER WHICH
AAMI WOULD SERVE AS THE FUND'S SUB-ADVISER.