SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement.
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to ss.240.14a-12.
MARSHALL FUNDS, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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(1) Title of each class of securities to which transaction applies: ________
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was determined):
________________________________________________________________________
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statement number, or the Form or Schedule and the date of its filing.
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(4) Date Filed: ____________________________________________________________
MARSHALL INTERNATIONAL STOCK FUND
A Series of
MARSHALL FUNDS, INC.
1000 North Water Street
Milwaukee, WI 53202
July 15, 2005
Dear Shareholder:
The Board of Directors of Marshall Funds, Inc. has called a special meeting
of shareholders of the Marshall International Stock Fund (the "Fund") to be held
on August 15, 2005 to obtain shareholder approval of:
(1) a new subadvisory agreement between the Fund's investment adviser, M&I
Investment Management Corp. (the "Adviser"), and BPI Global Asset
Management LLC ("BPI"), the Fund's current subadviser, with respect to
the management of half of the Fund's portfolio;
(2) a new subadvisory agreement between the Adviser and Acadian Asset
Management, Inc. ("Acadian"), with respect to the management of half of
the Fund's portfolio; and
(3) a "manager of managers" structure for the Fund which would permit the
Adviser to hire and replace subadvisers and to modify subadvisory
agreements without shareholder approval.
The Board of Directors has unanimously approved these proposals and recommends
that shareholders vote in favor of each proposal.
As discussed in more detail in the enclosed proxy statement, the previous
subadvisory agreement with BPI terminated on May 31, 2005 due to a change of
ownership and restructuring of BPI. In order to avoid disruption of the Fund's
investment management program, the Board of Directors approved an interim
subadvisory agreement with BPI pending shareholder approval of a new subadvisory
agreement at the special meeting. The Board of Directors has also approved a new
subadvisory agreement with Acadian. The Board of Directors believes that BPI and
Acadian have complementary investment styles and that the Fund will benefit from
the engagement of an additional subadviser.
Because the special meeting has been called to obtain shareholder approval
of the new subadvisory agreements, the Board of Directors has deemed it
advisable to recommend that shareholders approve a "manager of managers"
structure for the Fund at the same time. This proxy statement provides more
information about these proposals and the two subadvisers.
Please review and consider each of these proposals carefully. Whether or
not you plan to attend the special meeting, please sign and return the enclosed
proxy card in the postage prepaid envelope provided. You also may vote by
toll-free telephone or by internet according to the instructions noted on the
enclosed proxy card.
Thank you for investing in the Fund and for your continuing support.
Sincerely,
/s/ John M. Blaser
John M. Blaser
President
MARSHALL FUNDS, INC.
MARSHALL INTERNATIONAL STOCK FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Notice is hereby given that a special meeting of shareholders of the
Marshall International Stock Fund (the "Fund"), a series of Marshall Funds,
Inc., will be held at 1:00 p.m., local time, on August 15, 2005, at the offices
of the Marshall Funds, 1000 North Water Street, 13th Floor, Milwaukee, Wisconsin
53202. The meeting is being held to consider and vote on the following proposals
as well as any other business that may properly come before the meeting or any
adjournment thereof:
1. Approval of a new subadvisory agreement between M&I Investment Management
Corp., the Fund's investment adviser (the "Adviser"), and BPI Global
Asset Management LLC.
2. Approval of a new subadvisory agreement between the Adviser and Acadian
Asset Management, Inc.
3. Approval of a proposal to permit the Adviser to hire and replace
subadvisers or to modify subadvisory agreements without shareholder
approval.
Each shareholder of the Fund of record at the close of business on June 22,
2005 is entitled to notice of and to vote at the special meeting and any
adjournment thereof.
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY CARD PROMPTLY OR
PROXY VOTE BY TOLL-FREE TELEPHONE OR INTERNET
IN ACCORDANCE WITH THE INSTRUCTIONS NOTED
ON THE ENCLOSED PROXY CARD.
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As a shareholder of the Fund, you are asked to attend the special meeting
either in person or by proxy. If you are unable to attend the special meeting in
person, we urge you to vote by proxy. You can do this in one of three ways: by
(1) completing, signing, dating and promptly returning the enclosed proxy card
in the enclosed postage prepaid envelope, (2) calling a toll-free telephone
number or (3) using the internet. Your prompt voting by proxy will help assure a
quorum at the special meeting and avoid additional expenses to the Fund
associated with further solicitation. Voting by proxy will not prevent you from
voting your shares in person at the special meeting. You may revoke your proxy
before it is exercised at the special meeting by submitting to the Secretary of
Marshall Funds, Inc. a written notice of revocation or a subsequently signed
proxy card. A prior proxy can also be revoked by proxy voting again through the
website or toll-free number noted on the enclosed proxy card.
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By order of the Board of Directors,
Daniel L. Kaminski
Secretary
Milwaukee, Wisconsin
July 15, 2005
MARSHALL FUNDS, INC.
MARSHALL INTERNATIONAL STOCK FUND
1000 North Water Street
Milwaukee, WI 53202
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PROXY STATEMENT
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Introduction. We are furnishing this proxy statement to shareholders of the
Marshall International Stock Fund (the "Fund"), a series of Marshall Funds, Inc.
(the "Corporation"), in connection with the solicitation of proxies by the Board
of Directors of the Fund for a special meeting of shareholders to be held on
August 15, 2005. The purpose of the meeting is to seek shareholder approval of
new subadvisory agreements between M&I Investment Management Corp. (the
"Adviser") and BPI Global Asset Management LLC ("BPI") and Acadian Asset
Management, Inc. ("Acadian"), respectively, as well as to seek shareholder
approval of a proposal that would permit the Adviser to hire and replace
subadvisers and to modify subadvisory agreements without shareholder approval.
This proxy statement, notice of the special meeting and proxy card are first
being furnished to shareholders on or about July 15, 2005.
Record Date/Shareholders Entitled to Vote. Shareholders of record of the
Fund at the close of business on June 22, 2005, the record date, are entitled to
vote at the meeting and any adjournments thereof and will be entitled to one
vote per full share (and a fractional vote per fractional share) for each share
owned on the record date.
PROPOSAL 1: APPROVAL OF PROPOSED SUBADVISORY
AGREEMENT BETWEEN THE ADVISER AND BPI.
The Adviser is the investment adviser to the Fund pursuant to an investment
advisory contract with the Corporation dated October 1, 1992, as amended on
August 1, 1994 to add the Fund (the "Advisory Agreement"). Under the terms of
the Advisory Agreement, the Adviser may employ other parties to assist it in
carrying out its responsibilities, at its own cost and expense. Since 1999, BPI
has been the sole subadviser to the Fund, subject to the supervision of the
Adviser, and BPI currently manages the Fund's portfolio pursuant to an interim
subadvisory agreement dated May 31, 2005 (the "Interim Agreement"). The Interim
Agreement became effective upon the change of control of BPI described below.
Prior Subadvisory Agreement. Prior to May 31, 2005, BPI provided
subadvisory services to the Fund under a subadvisory agreement dated March 29,
1999, as amended, between BPI and the Adviser (the "Prior BPI Agreement"). The
Interim Agreement is similar in all material respects to the Prior BPI
Agreement.
The Prior BPI Agreement was most recently continued by the Board of Directors of
the Fund, including all directors who were not "interested persons" of the Fund
within the meaning of the Investment Company Act of 1940, as amended (the "1940
Act") (the "Independent Directors"), on July 27, 2004. Shareholders of the Fund
approved the Prior BPI Agreement on April 30, 1999 in connection with the
initial engagement of BPI.
Under the terms of the Prior BPI Agreement, BPI acted as the investment
subadviser for the Fund with responsibility for all investment decisions on
behalf of the Fund's portfolio, including the purchase, retention and
disposition of securities. The Prior BPI Agreement authorized BPI to select the
brokers or dealers to execute the purchases and sales of securities of the Fund
and directed BPI to use its best efforts to obtain the most favorable price and
execution available. The Prior BPI Agreement provided that it could be
terminated by the Corporation, the Adviser or BPI on 60 days' written notice and
that it would terminate automatically in the event of its assignment or in the
event of termination of the Advisory Agreement. As compensation for its
services, the Adviser paid BPI a fee at the annual rate of 0.40% of the average
daily net assets of the Fund's portfolio managed by BPI. For the Fund's last
fiscal year ended August 31, 2004, BPI received $1,654,014 from the Adviser for
its subadvisory services to the Fund.
Change in Control. As required by the 1940 Act, the Prior BPI Agreement
provided for automatic termination upon its assignment. In January 2005, BPI
announced its proposed merger with Trilogy Advisors, LLC ("Trilogy"). The merger
took place on May 31, 2005 upon the closing of a series of transactions pursuant
to which:
o The ownership stake in BPI held by BPI's former majority owner, CI Fund
Management, Inc. ("CI") was acquired by principals of BPI.
o BPI converted from a Delaware limited liability partnership to a Delaware
limited liability company, the sole member of which is Trilogy Global
Advisors, LLC ("Trilogy Global").
o Shareholders of BPI and Trilogy each acquired a 50% ownership interest in
Trilogy Global.
The principals of BPI and Trilogy proposed the merger in order to combine two
firms with similar investment philosophies and a former shared financial
partner, CI. For purposes of the 1940 Act, the merger of BPI and Trilogy in that
manner constituted a change of control of BPI and therefore caused the
assignment of the Prior BPI Agreement, which resulted in its automatic
termination.
Interim Subadvisory Agreement. Rule 15a-4 under the 1940 Act permits a
mutual fund to be advised under a short-term contract until shareholders can
vote on a new contract. Accordingly, the Board of Directors, including the
Independent
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Directors, approved the Interim Agreement on January 25, 2005. The Interim
Agreement permits BPI to manage the Fund under substantially the same terms and
conditions as the Prior BPI Agreement, with the exception of additional terms
required by Rule 15a-4 under the 1940 Act.
The Interim Agreement became effective on May 31, 2005 (the "Effective
Date") and continues in effect until the earlier to occur of (1) the effective
date of a new subadvisory agreement with BPI that has been approved by
shareholders of the Fund or (2) the 151st day following the Effective Date. The
Interim Agreement may be terminated by the Board of Directors of the Fund, by
the shareholders of the Fund or by the Adviser, upon 10 days' notice, and
terminates automatically in the event of its assignment or upon termination of
the Advisory Agreement.
Compensation earned by BPI under the Interim Agreement is being held in an
interest-bearing escrow account with the Fund's custodian. If the Fund's
shareholders approve a new subadvisory agreement within the 150-day period, then
the amount in the escrow account (including interest earned) will be paid to
BPI. However, if shareholders do not approve a new subadvisory agreement with
BPI within the 150-day period, then BPI will be paid, out of the escrow account,
the lesser of any costs incurred by BPI in performing the Interim Agreement
(plus interest earned on that amount while in escrow) or the total amount in the
escrow account (plus interest earned).
New BPI Agreement. On June 21, 2005, the Board approved a new subadvisory
agreement with BPI (the "New BPI Agreement") and recommended that it be
submitted to shareholders.
Terms of the New BPI Agreement. Shareholders are being asked to approve the
New BPI Agreement, which is the same in all material respects to the Interim
Agreement and the Prior BPI Agreement except for the term of the agreement. The
following discussion of the New BPI Agreement is qualified in its entirety by
reference to the form of the New BPI Agreement set forth in Appendix A.
As under both the Prior BPI Agreement and the Interim Agreement, the New
BPI Agreement provides that BPI agrees to act as investment subadviser for the
portion of the Fund's portfolio designated by the Adviser to be managed by BPI
(the "BPI Portfolio") with sole responsibility for making all investment
decisions for the BPI Portfolio subject to supervision and review of the Adviser
and the Directors of the Corporation. BPI is responsible for complying with the
Fund's investment objectives, policies and restrictions and for placing orders
for the purchase and sale of securities at the most favorable price and
execution available. Like the previous agreements, the New BPI Agreement
provides that BPI shall pay all expenses it incurs in connection with the
performance of its services under the agreement. BPI is authorized to pay a
broker or dealer a commission in excess of the amount of commission another
broker or dealer may have charged for effecting the same
3
transaction if BPI determines in good faith that the commission amount is
reasonable in relation to the value of brokerage and research services provided
by the broker or dealer.
Both the Prior and the New BPI Agreements permit the Adviser to designate
all or a portion of the Fund's portfolio to be managed by BPI. Since its
engagement in 1999, BPI has managed the Fund's entire portfolio. As described
more fully under Proposal 2, assuming shareholder approval of the new
subadvisory agreements with both BPI and Acadian, the Fund's portfolio will be
co-managed by BPI and Acadian upon effectiveness of those agreements. Because
the Fund is proposed to be managed by two subadvisers, the New BPI Agreement
provides for the initial allocation of approximately 50% of the Fund's
investable assets to the BPI Portfolio and provides that normally 50% of
subsequent daily cash flows to and from the Fund will be added to or subtracted
from the BPI Portfolio. In addition, the New BPI Agreement provides that the
Adviser has the right to re-allocate the Fund's assets between the BPI Portfolio
and the Acadian Portfolio if the Adviser deems such reallocation appropriate.
As payment for its services, the Adviser would pay BPI a fee at the annual
rate of 0.40% of the BPI Portfolio's average daily net assets. Under the Prior
BPI Agreement, the Adviser paid BPI at the same rate. Due to the proposed
engagement of a second subadviser to co-manage the Fund upon effectiveness of
the New BPI Agreement, the New BPI Agreement provides that BPI's fee will be
based on the portion of the Fund's portfolio (approximately 50%) to be managed
by BPI. Consequently, although the subadvisory fee rate is the same under the
Prior BPI and New BPI Agreements, to the extent the assets managed by BPI
decrease, BPI will receive less compensation due to the allocation to BPI of
less than the entire Fund portfolio. The Adviser and not the Fund pays all the
fees payable to BPI.
Under the Prior and the New BPI Agreements, BPI will not be subject to any
liability to the Adviser, the Corporation or to any Fund shareholder in the
absence of willful misfeasance, bad faith or gross negligence. The New BPI
Agreement will become effective on or about September 1, 2005 assuming approval
by shareholders at the special meeting. Unless sooner terminated, it shall
remain in effect for an initial period of one year and thereafter will continue
in effect from year to year if such continuance is approved at least annually by
the Directors or Fund shareholders in the manner required by the 1940 Act. The
agreement will terminate automatically in the event of its assignment or upon
termination of the Advisory Agreement and may be terminated by the Board of
Directors, the Fund or the Adviser upon not less than 30 days' notice or by BPI
upon not less than 60 days' notice. Under the Prior BPI Agreement, the notice
period was 60 days for all parties.
Due to regulatory requirements that have been enacted since the effective
date of the Prior BPI Agreement, the New BPI Agreement contains additional
provisions relating to compliance with those requirements. Those provisions
include BPI's
4
obligation to (i) adopt proxy voting procedures and provide proxy voting
records, (ii) adopt a compliance program as required by the Advisers Act and
(iii) assist the Corporation with compliance with the Sarbanes-Oxley Act and the
Fund's compliance program under the 1940 Act, such as certifications in support
of the Corporation's reports filed with the SEC.
If the shareholders of the Fund do not approve the New BPI Agreement, the
Interim Agreement will continue in effect for the remainder of the 150 day
period (unless terminated sooner), and the Directors will consider possible
alternative arrangements.
Board Consideration of New BPI Agreement. At meetings held on January 25,
2005 and June 21, 2005, the Directors, including all of the Independent
Directors, discussed the merger between BPI and Trilogy, the Interim Agreement
and the New BPI Agreement. In evaluating the New BPI Agreement, the Board
reviewed materials furnished by the Adviser and BPI relevant to its decision,
such as BPI's registration statement on Form ADV, Code of Ethics, financial
information, information regarding BPI's operations, personnel and compliance
program, and comparative fee and expense information provided by an independent
third party. The Board of Directors (including the Independent Directors)
unanimously approved the New BPI Agreement on June 21, 2005 subject to
shareholder approval at the special meeting.
In the course of their consideration of the New BPI Agreement, the
Independent Directors received and reviewed a substantial amount of information
provided by BPI, and they met in executive session and were advised by their
independent legal counsel. In approving the agreement, the Directors considered
the following factors and made the following conclusions:
o Nature, extent and quality of the services to be provided. The Board
determined that, despite BPI's merger with Trilogy, there will be no
material change in BPI's investment strategy as a "growth" manager and
there will be no change in the investment personnel who will handle the
day-to-day management responsibilities for the BPI Portfolio. The Board
believes that the Fund should continue to use BPI as one of its
subadvisers because of BPI's expertise in the area of international
investing, the quality of its organization and its investment strategy.
The Board also determined that, as a result of the merger with Trilogy,
the resources available to BPI and BPI's ability to provide services to
the Fund have been strengthened.
o Investment performance of the Fund and BPI. The Board noted that the
Fund's performance for the five year period ended December 31, 2004 was
better than the median performance of comparable funds but was below the
median for the one-, three- and ten-year periods. The Board concluded that
the growth investment style pursued by BPI had been out of favor during
5
recent periods but that BPI had the capability to manage the Fund well,
especially if the assets of the Fund were divided between BPI and Acadian.
o Proposed fees. The Board took into account the fact that the rate of
compensation payable by the Adviser to BPI under the New BPI Agreement is
the same as that under the Prior BPI Agreement. In evaluating the fee, the
Board also considered that the subadvisory fee is paid by the Adviser and
that therefore the overall advisory fee paid by the Fund is not directly
affected by the subadvisory fee.
o Costs and profitability. The Board did not consider the costs of services
provided to the Fund in the past and the profits realized by BPI under the
Prior BPI Agreement because it did not view these factors as relevant
given that the subadvisory fee is paid by the Adviser.
o Economies of scale. The Board considered whether there may be economies of
scale in the management of the Fund if the assets of the Fund were to
increase significantly. However, it concluded that the assets of the Fund
were not likely to increase in the foreseeable future to such an extent
that there would be meaningful economies of scale realized in the
management of the Fund.
o Benefits to BPI. The Board considered information presented regarding any
benefits to BPI or its affiliates from serving as subadviser (in addition
to the subadvisory fee). BPI provided information to the Board regarding
its policies for the use of soft dollar commissions. The Board concluded
that, although BPI would benefit from the receipt of research products and
services to be acquired through commissions paid on portfolio transactions
of the Fund, the Fund would benefit from BPI's receipt of those products
and services as well as research products and services acquired through
commissions paid by other clients of BPI. The Board also concluded that
success of the Fund could attract other business to BPI and that the
success of BPI could enhance BPI's ability to serve the Fund.
Board Recommendation. Based on its review of the foregoing, the Board
believes that the terms and conditions of the New BPI Agreement are fair to, and
in the best interests of, the Fund and its shareholders. Accordingly, the Board
recommends that the shareholders of the Fund vote to approve the New BPI
Agreement.
Information about BPI. BPI is an affiliate of Trilogy Advisors, LLC
("Trilogy") and is located at 1900 Summit Tower Blvd., Suite 450, Orlando FL
32810. BPI provides portfolio management services for individuals, investment
companies, corporations, trusts, pension and profit-sharing plans and other
institutions. Information about the principal executive officers and managing
members of BPI is set forth in the following table.
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Name Positions with BPI Address
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Robert Beckwitt Managing Director 1114 Avenue of the Americas, 28th Floor
and Manager New York, NY 10036
Ryan R. Burrow Managing Partner 1900 Summit Tower Blvd., Suite 450
and Manager Orlando, FL 32810
Greg Gigliotti Managing Partner 1114 Avenue of the Americas, 28th Floor
New York, NY 10036
Carol Holley Chief Operating Officer 1114 Avenue of the Americas, 28th Floor
New York, NY 10036
Daniel R. Jaworski Managing Director 1900 Summit Tower Blvd., Suite 450
and Manager Orlando, FL 32810
Thomas Masi Managing Director 1114 Avenue of the Americas, 28th Floor
New York, NY 10036
James McGovern Manager 36 Toronto Street, Suite 750
Toronto, ON M5C 2C5 Canada
John Myklusch Chief Financial Officer 1114 Avenue of the Americas, 28th Floor
New York, NY 10036
Robert Prindiville Manager 31 Marker Way
Vero Beach, FL 32963
Pablo Salas-Schoofield Managing Director 1900 Summit Tower Blvd., Suite 450
Orlando, FL 32810
William Sterling Chief Executive Officer 1114 Avenue of the Americas, 28th Floor
and Manager New York, NY 10036
Charles E. Sweeney Chief Compliance Officer 1900 Summit Tower Blvd., Suite 450
Orlando, FL 32810
As a result of the change of control described above, Trilogy Global Advisors,
LLC ("Trilogy Global") is the sole member of BPI. Trilogy Global is controlled
by senior management of BPI and Trilogy.
BPI Investment Philosophy. BPI uses a "bottom-up" approach to international
investing within overall portfolio management guidelines. BPI identifies
companies of any size within industry groups that have historically been
successful and have a competitive advantage as evidenced by above-average profit
margins, high returns on equity, low leverage and adequate cash flow. BPI then
seeks to identify quality companies with attractive returns on equity,
shareholder-oriented management and a strong capital structure.
Portfolio Manager. The BPI Portfolio is proposed to be managed by Daniel R.
Jaworski, founder, Managing Director and Manager of BPI. Mr. Jaworski currently
manages the Fund's portfolio under the Interim Agreement. Prior to founding BPI
in March 1997, Mr. Jaworski was a portfolio manager at Lazard Freres & Co. LLC
from June 1993 to December 1994, and was a portfolio manager at STI Capital
Management from January 1995 to March 1997. Mr. Jaworski received a B.A.
7
degree in Economics and Computer Science from Concordia College and an M.B.A.
degree in Finance from the University of Minnesota. He is a Chartered Financial
Analyst.
PROPOSAL 2: APPROVAL OF PROPOSED SUBADVISORY
AGREEMENT WITH ACADIAN
On June 21, 2005, the Directors, including the Independent Directors,
unanimously approved a new subadvisory agreement between the Adviser and Acadian
(the "Acadian Agreement"), pursuant to which Acadian would manage the portion of
the Fund's portfolio designated by the Adviser to be managed by Acadian (the
"Acadian Portfolio") subject to shareholder approval at the special meeting. The
Adviser recommended the addition of Acadian as a subadviser to the Fund after
evaluating a number of subadviser candidates, including analysis of each firm's
investment process, strategy and long-term performance records. The Adviser's
recommendation to retain Acadian as a subadviser was based on the Adviser's
belief that Acadian, which follows a value-based international investment
strategy, would be appropriately suited to manage the portion of the Fund's
portfolio not managed by BPI, which follows a growth-based international
investment strategy. The Adviser believes that the Fund will benefit from the
addition of Acadian as an additional manager due to the diversification of
investment styles across subadvisers and the potential for improved performance.
Terms of the New Subadvisory Agreement with Acadian. Shareholders are being
asked to approve the Acadian Agreement. The following discussion of the Acadian
Agreement is qualified in its entirety by reference to the form of the agreement
set forth in Appendix B.
The Acadian Agreement is substantially similar to the New BPI Agreement
except for the name of the subadviser. Under the agreement, Acadian agrees to
act as investment subadviser for the Acadian Portfolio, with sole responsibility
for making all investment decisions for the Acadian Portfolio, subject to the
supervision and review of the Board of Directors and the Adviser. Acadian is
responsible for complying with the Fund's investment objectives, policies and
restrictions and for placing orders for the purchase and sale of securities at
the most favorable price and execution available. Acadian is authorized to pay a
broker or dealer a commission in excess of the amount of commission another
broker or dealer may have charged for effecting the same transaction if Acadian
determines in good faith that the commission amount is reasonable in relation to
the value of brokerage and research services provided by the broker or dealer.
The Acadian Agreement provides that Acadian shall pay all expenses it incurs in
connection with the performance of its services under the agreement.
The Acadian Agreement provides for the initial allocation of approximately
50% of the Fund's investable assets to the Acadian Portfolio and provides that
8
normally 50% of subsequent daily cash flows to and from the Fund will be added
to or subtracted from the Acadian Portfolio. In addition, the agreement provides
that the Adviser has the right to re-allocate the Fund's assets between the
Acadian Portfolio and the BPI Portfolio if the Adviser deems such allocation
appropriate. As payment for its services, the Adviser will pay Acadian a fee at
the annual rate of 0.55% of the average daily net assets of the Acadian
Portfolio up to $100 million in net assets, and 0.40% of the average daily net
assets above $100 million.
Under the agreement, Acadian will not be subject to any liability to the
Adviser, the Corporation or to any Fund shareholder in the absence of willful
misfeasance, bad faith or gross negligence. The Acadian Agreement will become
effective on or about September 1, 2005 assuming approval by shareholders at the
special meeting. Unless sooner terminated, it shall remain in effect for an
initial period of one year and thereafter will continue in effect from year to
year if such continuance is approved at least annually by the Directors or Fund
shareholders in the manner required by the 1940 Act. The agreement will
terminate automatically in the event of its assignment or upon termination of
the Advisory Agreement and may be terminated by the Board of Directors, the Fund
or the Adviser upon not less than 30 days' notice or by Acadian upon not less
than 60 days' notice.
The agreement requires Acadian to comply with various regulatory
requirements, including to (i) adopt proxy voting procedures and provide proxy
voting records, (ii) adopt a compliance program as required by the Advisers Act
and (iii) assist the Corporation with compliance with the Sarbanes-Oxley Act and
the Fund's compliance program under the 1940 Act, such as certifications in
support of the Corporation's reports filed with the SEC.
If the shareholders of the Fund do not approve the Acadian Agreement,
Acadian will not be engaged as a subadviser to the Fund and the Board will
consider possible alternative arrangements, including retaining BPI as the sole
subadviser or proposing another subadviser to co-manage the Fund.
Board Consideration of the Acadian Agreement. At meetings held on April 25,
2005 and June 21, 2005, the Directors discussed the proposed engagement of
Acadian and the Acadian Agreement. Based on its review of the Adviser's
recommendation to retain Acadian, the Board determined that Acadian should be
engaged to manage a portion of the assets of the Fund's portfolio. In evaluating
the Acadian Agreement, the Board reviewed materials furnished by the Adviser and
Acadian relevant to its decision, such as Acadian's registration statement on
Form ADV, Code of Ethics, financial information, information regarding Acadian's
operations, personnel and compliance program, and comparative fee and expense
information based on information provided by an independent third party. At the
April meeting, representatives from Acadian were present and discussed Acadian's
background, organization, performance history and investment philosophy.
9
In the course of their consideration of the Acadian Agreement, the
Independent Directors received and reviewed a substantial amount of information
provided by Acadian, and they met in executive session and were advised by their
independent legal counsel. In approving the agreement, the Directors considered
the following factors and made the following conclusions:
o Nature, extent and quality of the services to be provided. The Board
determined that the Fund should retain Acadian as one of its subadvisers
because the Fund is likely to benefit from Acadian's value based
investment strategy. The Board met with members of senior management of
Acadian, and the Adviser and Acadian presented information regarding the
proposed portfolio management teams, financial condition, investment
strategies, trading policies and compliance procedures and personnel.
o Investment performance of the Fund and Acadian. The Board noted that
Acadian's composite performance for its non-U.S. all-cap strategy for each
of the past five years was better than that of the MSCI EAFE index. The
Board concluded that Acadian's investment process appeared to be very
effective and that it would be in the best interest of the Fund and its
shareholders for Acadian to manage a portion of the Fund's assets.
o Proposed fees. The Board noted that the rate of compensation payable by
the Adviser to Acadian under the agreement on the first $100 million of
assets in the Acadian Portfolio is greater than the rate of compensation
to be paid to BPI under the New BPI Agreement. The Board determined that
this fee structure was appropriate given its view of Acadian's
capabilities and the analytical tools Acadian is expected to provide to
the Fund. In evaluating the fee, the Board also considered that the
subadvisory fee is paid by the Adviser and that therefore the overall
advisory fee paid by the Fund is not directly affected by the subadvisory
fee.
o Costs and profitability. Acadian did not provide any specific information
regarding the costs of services to be provided or the profits it might
realize, because, as Acadian had not yet served as a subadviser to the
Fund, there was no profitability record for the Fund.
o Economies of scale. The Board considered whether there may be economies of
scale in the management of the Fund if the assets of the Fund were to
increase significantly. However, it concluded that the assets of the Fund
were not likely to increase in the foreseeable future to such an extent
that there would be meaningful economies of scale realized in the
management of the Fund.
o Benefits to Acadian. The Board considered information presented regarding
any benefits to Acadian or its affiliates from serving as subadviser (in
addition to the subadvisory fee). Acadian provided information to the
Board
10
regarding its policies for the use of soft dollar commissions. The Board
concluded that, although Acadian would benefit from the receipt of
research products and services to be acquired through commissions paid on
portfolio transactions of the Fund, the Fund would benefit from Acadian's
receipt of those products and services as well as research products and
services acquired through commissions paid by other clients of Acadian.
The Board also concluded that success of the Fund could attract other
business to Acadian and that the success of Acadian could enhance
Acadian's ability to serve the Fund.
o Other factors. The Board determined that use of a blended growth and value
strategy across subadvisers offered an opportunity for improved
performance given the cyclical nature of international investing.
Board Recommendation. Based on its review of the foregoing, the Board
believes that the terms and conditions of the Acadian Agreement are fair to, and
in the best interests of, the Fund and its shareholders. Accordingly, the Board
recommends that the shareholders of the Fund vote to approve the Acadian
Agreement.
Information About Acadian. Acadian is a Massachusetts corporation located
at One Post Office Square, Boston, MA 02109. Acadian has provided investment
management services since 1986. Acadian is a wholly owned subsidiary of Old
Mutual Asset Managers (US) LLC, a Delaware limited liability company and a
wholly owned subsidiary of Old Mutual (US) Holdings Inc., a Delaware holding
company, both located at 200 Clarendon Street, Boston, MA 02116. Old Mutual (US)
Holdings Inc. is owned by OM Group (UK) Limited, a wholly owned subsidiary of
Old Mutual plc, a financial services group based in the United Kingdom, both
located at Old Mutual Place, 2 Lambeth Hill, London EC4V 4GG, England.
Information about the principal executive officers and directors of Acadian
is set forth in the following table. The address of each person listed is One
Post Office Square, Boston, MA 02109.
Name Positions with Acadian
- ---- ----------------------
Gary L. Bergstrom Chairman and Treasurer
Ronald D. Frashure President and Director
Churchill G. Franklin Executive Vice President and Director
John R. Chisolm Executive Vice President and Director
Scott P. Dias Chief Compliance Officer
Mark J. Minichello Chief Financial Officer
Scott F. Powers is also a control person of Acadian by virtue of his position as
the Chief Executive Officer of Old Mutual (US) Holdings, 200 Clarendon Street,
Boston, MA 02116.
11
Acadian currently serves as the subadviser to seven other mutual funds that
follow emerging, global or non-US investment strategies and are thus similar to
the Fund. The following table describes these relationships as of May 31, 2005.
Other Funds Assets Under
Managed by Acadian Management Fee* Management
- ------------------ --------------- ------------
Acadian Emerging Markets 1% $ 619,000,000
Portfolio
Vanguard Global Equity Fund 0.24% on first $1.0 billion of the fund's $1,900,000,000***
average month-end net assets 0.20% on next
$1.5 billion 0.16% on next $1.5 billion
0.10% on assets over $4 billion**
ING International SmallCap Fund 0.55% on first $140 million of the fund's $ 326,000,000
average daily net assets, 0.46% on the next
$860 million and 0.425% thereafter
Old Mutual Asset Allocation 0.45% $ 6,000,000
Moderate Growth Portfolio
Old Mutual Asset Allocation 0.45% $ 4,000,000
Growth Portfolio
Old Mutual Asset Allocation 0.45% $ 1,000,000
Conservative Portfolio
Old Mutual Asset Allocation 0.45% $ 4,000,000
Balanced Portfolio
- ----------------
* Annual rate expressed as a percentage of each fund's average daily net
assets.
** Fee is subject to a monthly performance fee adjustment.
*** Total fund assets: Acadian subadvises this fund with another subadviser.
Acadian Investment Philosophy. Acadian's investment philosophy is based on
its belief that markets are inefficient, creating discrepancies between a
stock's intrinsic value and its market price. Acadian believes that stocks
should be evaluated not simply by how cheap they look on fundamental measures
(such as price/book or price/earnings) but that additional factors should be
used to target attractively valued companies that also have positive earnings
and price characteristics. Acadian's objective is to find securities with
unrecognized value, as well as improving earnings prospects to help unlock that
value. Acadian implements this philosophy using an automated process by which
they evaluate over 20,000 stocks each day.
Portfolio Managers. Brian K. Wolahan and Charles H. Wang are proposed to
serve as co-portfolio managers for the Acadian Portfolio. Mr. Wolahan is
co-director of research and a senior portfolio manager at Acadian. He received
his undergraduate degree from Lehigh University and an M.S. degree in Management
from MIT. Before joining Acadian in 1990, he worked in the Systems Planning
12
Group at Bank of New England and as a Senior Systems Analyst at Mars
Incorporated. He is a Chartered Financial Analyst.
Mr. Wang is a senior portfolio manager and co-director of research at
Acadian. Prior to joining Acadian in 2000, he worked as a senior quantitative
equity analyst for a number of investment firms, including Putnam Investments.
Mr. Wang has a Ph.D. from Yale's School of Management, a B.S. in mathematics
from Beijing University and an M.S. from the University of Massachusetts.
PROPOSAL 3: APPROVAL OF PROPOSAL TO PERMIT THE FUND'S
INVESTMENT ADVISER TO HIRE AND REPLACE
SUBADVISERS OR TO MODIFY SUBADVISORY
AGREEMENTS WITHOUT SHAREHOLDER APPROVAL.
Under Section 15(a) of the 1940 Act, an investment adviser to a mutual fund
cannot select subadvisers and enter into a subadvisory agreement without
obtaining shareholder approval. Shareholders must also approve any material
amendments to an existing subadvisory agreement between an adviser and a
subadviser. Accordingly, the Board of Directors has called the special meeting
to seek shareholder approval of the new subadvisory agreements with BPI and
Acadian described in Proposals 1 and 2. Similarly, a shareholder vote would be
required in the future should the Fund's Board of Directors and the Adviser
determine that it is in the best interests of the Fund to employ a subadviser
other than the Fund's current subadviser or subadvisers.
If the Fund applies for and receives an exemption from the requirements
under Section 15(a) of the 1940 Act from the SEC (an "SEC Order"), the Fund
would not be required to seek shareholder approval of proposed changes in
subadvisers or subadvisory agreements. In 2003 the SEC proposed a new rule, Rule
15a-5 under the 1940 Act ("Rule 15a-5"), that would permit one or more advisers
to act as subadvisers to a mutual fund without shareholder approval. If adopted,
the proposed rule would eliminate the need for a fund to obtain an SEC Order
before its investment adviser may retain, terminate or amend subadvisory
arrangements without shareholder approval, commonly known as a "manager of
managers" structure. The SEC believes that proposed Rule 15a-5 would benefit
shareholders by allowing funds to terminate poorly performing subadvisers and
hire new subadvisers without shareholder approval, which would eliminate the
need for funds to hold a shareholder meeting or obtain an SEC Order, either of
which can be costly and time consuming. Rule 15a-5, as proposed, would require
that the subadvisers retained to manage a fund be unaffiliated with the
investment adviser, directors and officers of the investment adviser and the
fund.
If Rule 15a-5 is adopted, the Adviser will comply with the conditions of
the rule prior to engaging, terminating or modifying subadvisory agreements
without shareholder approval. If Rule 15a-5 is not adopted in the near future,
the Fund
13
expects to seek an SEC Order. In either case, the Fund must obtain shareholder
approval before it may implement the manager of managers structure. Because a
special meeting has been called for purposes of obtaining shareholder approval
of the BPI Agreement and the Acadian Agreement, the Board of Directors of the
Fund deemed it advisable to recommend that shareholders approve the manager of
managers arrangement at the same time, to avoid the time and expense of holding
another shareholder meeting in the future. There can be no assurance that the
Fund will obtain an SEC Order or that the SEC will adopt Rule 15a-5 permitting
the manager of managers structure described above.
Even if the Fund's shareholders approve this proposal, any engagement or
termination of a subadviser or any change in a subadvisory agreement will
require approval of the Board of Directors of the Fund, including the
Independent Directors. The manager of managers structure would not permit the
Adviser to increase the investment advisory fees paid by the Fund without
shareholder approval. The Adviser will retain only unaffiliated subadvisers to
manage the Fund and will comply with any other conditions required by Rule 15a-5
or the SEC Order, as applicable. The Board of Directors believes that the Fund
will benefit from a manager of managers structure because it will allow the
Adviser to retain and/or replace subadvisers without the delay and cost
associated with holding a shareholder meeting and soliciting proxies.
Board Recommendation. The Board recommends that the shareholders of the
Fund vote to approve the proposal to permit the Adviser to hire and replace
subadvisers or modify subadvisory agreements without shareholder approval.
OTHER MATTERS
The Board knows of no other matters that may come before the special
meeting, other than the proposals as set forth above. If any matter properly
comes before the special meeting, the persons named as proxies will vote on the
same in their discretion.
OTHER INFORMATION
Required Vote. Approval of each proposal requires the affirmative vote of a
"majority of the outstanding voting securities" of the Fund. Under the 1940 Act,
a "majority of the outstanding voting securities" means the affirmative vote of
the lesser of (a) 67% or more of the shares of the Fund present at the meeting
in person or by proxy if the holders of more than 50% of the outstanding shares
are present at the meeting or represented by proxy, or (b) more than 50% of the
Fund's outstanding shares.
Shares Outstanding. As of the record date, 34,128,864.85 shares of the Fund
were outstanding and entitled to vote at the special meeting.
14
Share Ownership Information. As of June 22, 2005, the officers and
directors of the Corporation, as a group, owned less than 1% of the Fund's
outstanding shares.
As of June 22, 2005, the following shareholders owned of record or are
known by the Corporation to own of record or beneficially more than 5% of any
class of the Fund's outstanding shares:
Name and Address Class of Shares Number of Shares Percent of Class
- ---------------- --------------- ---------------- ----------------
Mitra & Co.* Class A 31,166.78 7.56%
Marshall & Ilsley Trust Operations
P.O. Box 2977
Milwaukee, WI 53201-2977
Vallee* Class Y 7,418,168.30 46.50%
Marshall & Ilsley Trust Operations
P.O. Box 2977
Milwaukee, WI 53201-2977
Mitra & Co.* Class Y 7,351,732.85 46.08%
Marshall & Ilsley Trust Operations
P.O. Box 2977
Milwaukee, WI 53201-2977
Mitra & Co.* Class I 9,836,626.34 55.38%
Marshall & Ilsley Trust Operations
P.O. Box 2977
Milwaukee, WI 53201-2977
Nationwide Trust Co. Class I 4,565,935.26 25.71%
98 San Jacinto Blvd., Suite 1100
Austin, TX 78701-4255
The Northern Trust Class I 1,717,818.86 9.67%
P.O. Box 92994
Chicago, IL 60675-2994
- ----------------
* The Corporation believes that this entity, the holder of record of these
shares, is not the beneficial owner of such shares.
The Corporation believes that Marshall & Ilsley Trust Company N.A. ("M&I
Trust"), as fiduciary, owned a controlling interest in the Fund as of the record
date. Shareholders with a controlling interest could affect the outcome of
voting at the special meeting. Marshall & Ilsley Corporation is the parent
company of the Adviser and M&I Trust.
Proxies. Whether you expect to be personally present at the special meeting
or not, we encourage you to vote by proxy. You can do this in one of three ways.
You may complete, date, sign and return the accompanying proxy card using the
enclosed postage prepaid envelope; you may vote by calling 1-800-690-6903; or
you may vote by internet in accordance with the instructions noted on the
enclosed proxy card. Your shares will be voted as you instruct. If no choice is
indicated, your shares will be voted FOR each proposal and in the discretion of
the persons named as
15
proxies on such other matters that may properly come before the special meeting.
Any shareholder giving a proxy may revoke it before it is exercised at the
special meeting by submitting to the Secretary of the Corporation a written
notice of revocation or a subsequently signed proxy card, or by attending the
special meeting and voting in person. A prior proxy can also be revoked through
the website or toll-free telephone number listed on the enclosed proxy card. If
not so revoked, the shares represented by the proxy will be cast at the special
meeting and any adjournments thereof. Attendance by a shareholder at the special
meeting does not, in itself, revoke a proxy.
Quorum. A quorum must be present at the meeting for the transaction of
business. The holders of record of one-third of the Fund's shares outstanding at
the close of business on the record date present at the meeting in person or by
proxy will constitute a quorum. Abstentions and broker non-votes (votes from
brokers or nominees indicating that they have not received instructions from
beneficial owners on an item for which the broker or nominee does not have
discretionary power), if any, are counted toward a quorum but do not represent
votes cast for any proposal. In the event that a quorum is not present at the
meeting, or in the event that a quorum is present but sufficient votes to
approve a proposal are not received, the persons named as proxies may propose
one or more adjournments of the meeting to a later date to permit further
solicitation of votes. Any such adjournment will require the affirmative vote of
a majority of shares voting on the adjournment. A shareholder vote may be taken
for a proposal in this proxy statement prior to any adjournment if sufficient
votes have been received for approval. When voting on a proposed adjournment,
the persons named as proxies will vote all proxies that they are entitled to
vote FOR approval of any proposal in favor of adjournment and will vote all
proxies required to be voted AGAINST any such proposal against adjournment.
Method and Cost of Proxy Solicitation. Proxies will be solicited by the
Corporation primarily by mail. The solicitation may also include telephone,
facsimile, internet or oral communication by certain officers or employees of
the Corporation, the Adviser, M&I Trust (the Fund's administrator) or Boston
Financial Data Services, Inc. (the Fund's transfer agent) who will not be paid
for these services. Any telephonic solicitations will follow procedures designed
to ensure accuracy and prevent fraud, including requiring identifying
shareholder information and recording the shareholder's instruction. BPI and/or
the Adviser will bear the costs of the special meeting, including legal costs
and the costs of the solicitation of proxies, if any. BPI and/or the Adviser
will reimburse brokers and other nominees for their reasonable expenses in
communicating with persons for whom they hold shares of the Fund.
Copies of the Fund's most recent annual and semi-annual reports are
available without charge upon request to the Fund at 1000 North Water Street,
16
Milwaukee, WI 53202, on the Fund's website at www.marshallfunds.com, or by
calling Marshall Funds Investor Services, toll-free, at 1-800-580-FUND.
SERVICE PROVIDERS
M&I Investment Management Corp., 1000 North Water Street, Milwaukee,
Wisconsin 53202, serves as investment adviser to the Fund. M&I Trust, 1000 North
Water Street, Milwaukee, Wisconsin 53202, an affiliate of the Adviser, serves as
shareholder services agent, securities lending agent, sub-transfer agent and
administrator to the Fund. BPI Global Asset Management LLC, 1900 Summit Tower
Boulevard, Orlando, Florida 32810, serves as subadviser to the Fund. The
sub-administrator to the Fund is UMB Fund Services, Inc. ("UMB"). Grand
Distribution Services, LLC, an affiliate of UMB, serves as distributor to the
Fund. The Fund's transfer agent is Boston Financial Data Services, Inc., 2
Heritage Drive, Quincy, Massachusetts 02171. Investors Bank & Trust Company, 200
Clarendon Street, Boston, Massachusetts 02117, is custodian for the Fund.
FUTURE MEETINGS; SHAREHOLDER PROPOSALS
The Corporation is generally not required to hold annual meetings of
shareholders and the Corporation generally does not hold a meeting of
shareholders in any year unless certain specified shareholder actions such as
election of directors or approval of a new advisory agreement are required to be
taken under the 1940 Act or the Corporation's Articles of Incorporation and
By-Laws. By observing this policy, the Corporation seeks to avoid the expenses
customarily incurred in the preparation of proxy material and the holding of
shareholder meetings.
A shareholder desiring to submit a proposal intended to be presented at any
meeting of shareholders of the Corporation hereafter called should send the
proposal to the Secretary of the Corporation at the Corporation's principal
offices. The mere submission of a proposal by a shareholder does not guarantee
that such proposal will be included in the proxy statement because certain rules
under the Federal securities laws must be complied with before inclusion of the
proposal is required. Also, the submission does not mean that the proposal will
be presented at the meeting. For a shareholder proposal to be considered at a
shareholder meeting, it must be a proper matter for consideration under
Wisconsin law.
By Order of the Board of Directors,
Daniel L. Kaminski
Secretary
Milwaukee, Wisconsin
July 15, 2005
17
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APPENDIX A
SUBADVISORY AGREEMENT
AGREEMENT made as of the day of , 2005 by and between M&I
Investment Management Corp., an investment adviser registered under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), organized
under the laws of Wisconsin and having its principal place of business in
Milwaukee, Wisconsin (the "Adviser"), and BPI Global Asset Management LLC, a
limited liability company organized under the laws of Delaware and an investment
adviser registered under the Advisers Act (the "Subadviser").
WITNESSETH
WHEREAS, Marshall Funds, Inc. (the "Corporation") is an open-end,
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), with thirteen (13) portfolios including the
Marshall International Stock Fund (the "Fund"); and
WHEREAS, pursuant to authority granted the Adviser by the Corporation's
Directors and pursuant to the provisions of the Investment Advisory Contract
dated October 1, 1992 between the Adviser and the Corporation with respect to
the Fund (the "Advisory Contract"), the Adviser has selected the Subadviser to
act as a sub-investment adviser of the Fund and to provide certain other
services, as more fully set forth below, and to perform such services under the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
it is agreed as follows:
1. The Subadviser's Services.
(a) Within the framework of the fundamental policies, investment
objectives, and investment restrictions of the Fund, and subject to the
supervision and review of the Adviser and of the Directors of the
Corporation, the Subadviser shall have the sole and exclusive
responsibility for the making of all investment decisions for that
portion of the Fund's portfolio as designated by the Adviser (the
"Portfolio"), including the purchase, retention and disposition of
securities, in accordance with the Fund's investment objectives,
policies and restrictions as stated in the Corporation's Registration
Statement, including the Prospectus and Statement of Additional
Information (such Registration Statement, as currently in effect and as
amended or supplemented from time to time, collectively called the
"Prospectus") and subject to the following understandings:
(i) The Subadviser shall supervise the Portfolio's investments and
determine from time to time what securities will be purchased,
A-1
retained, sold or loaned by the Portfolio, and what portion of
the assets will be invested or held uninvested as cash.
(ii) In performance of its duties and obligations under this
Agreement, the Subadviser shall act in conformity with the
Corporation's Articles of Incorporation and By-Laws; the Fund's
Prospectus, policies and procedures; and with the instructions
and directions received in writing from the Adviser or the
Directors of the Corporation and will conform to and comply with
the requirements of the 1940 Act, the Internal Revenue Code of
1986, as amended (including the requirements for qualification as
a regulated investment company) and all other applicable federal
and state laws and regulations.
(iii) As of the date of this Agreement approximately 50% of the Fund's
investable assets will be allocated to the Portfolio, and on each
business day during the term of this Agreement the same
percentage of the net cash derived from purchases, or required
for redemptions, of Fund shares will normally be added to or
withdrawn from the Portfolio; provided, however, that the Adviser
has the right at any time to reallocate the portion of the Fund's
assets allocated to the Portfolio pursuant to this Agreement if
the Adviser deems such reallocation appropriate.
(b) The Subadviser shall not be responsible for the provision of
administrative, bookkeeping or accounting services to the Fund, except
as otherwise provided herein or as may be necessary for the Subadviser
to supply to the Adviser, the Corporation or its Directors the
information required to be supplied under this Agreement.
The Subadviser shall maintain separate books and detailed records of
all matters pertaining to the Fund and the Portfolio (the "Fund's Books
and Records"), including without limitation a daily ledger of such
assets and liabilities relating thereto and brokerage and other records
of all securities transactions. The Fund's Books and Records shall be
available by overnight delivery of copies or for telecopying without
delay to the Adviser during any day that the Fund is open for business
upon reasonable notice to the Subadviser.
(c) The Subadviser shall determine the securities to be purchased or sold
by the Fund in respect of the Portfolio and will place orders with or
through such persons, brokers or dealers to carry out the policy with
respect to brokerage as set forth in the Fund's Prospectus or as the
Directors may direct from time to time. Subject to the provisions of
the following paragraph, the Subadviser will take reasonable steps to
assure that
A-2
Portfolio transactions are effected at the best price and execution
available, as such phrase is used in the Fund's Prospectus.
In using reasonable efforts to obtain for the Fund the most favorable
price and execution available, the Subadviser, bearing in mind the
Fund's best interests at all times, shall consider all factors it deems
relevant, including by way of illustration, price, the size of the
transaction, the nature of the market for the security, the amount of
the commission, the timing of the transaction taking into account
market prices and trends, the reputation, experience and financial
stability of the broker or dealer involved and the quality of service
rendered by the broker or dealer in other transactions. Subject to such
policies as the Directors of the Corporation may determine, the
Subadviser is specifically authorized to allocate brokerage business to
firms that provide such services or facilities and to cause the Fund to
pay a member of a securities exchange or any other securities 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, if
the Subadviser determines in good faith that such amount of commission
is reasonable in relation to the value of the brokerage and research
services (as such services are defined in Section 28(e) of the
Securities Exchange Act of 1934, as amended) provided by such member,
broker, or dealer, viewed in terms either of that particular
transaction or the Subadviser's overall responsibilities with respect
to the accounts as to which it exercises investment discretion.
Brokerage or research services so provided may be used for the benefit
of any or all of the Subadviser's clients.
Consistent with the foregoing paragraph, nothing in this agreement is
intended to inhibit the Subadviser's selection of broker-dealers used
to execute trades for the Fund, including trades placed with
broker-dealers who provide investment research services to the
Subadviser. Such research services may include, but are not limited to,
advice provided either directly or through publications or writings,
including electronic publications, telephone contacts and personal
meetings with security analysts, economists and corporate and industry
spokespersons, and analyses and reports concerning issues, industries,
securities economic factors and trends, accounting and tax law
interpretations and political developments. Research so provided is in
addition to and not in lieu of the services required to be performed by
the Subadviser.
It is understood that the Subadviser may have advisory, management,
service or other contracts with other individuals or entities, and may
have other interests and businesses. When a security proposed to be
purchased
A-3
or sold for the Fund is also to be purchased or sold for other accounts
managed by the Subadviser at the same time, the Subadviser may
aggregate such orders and shall allocate such purchases or sales on a
pro-rata, rotating or other equitable basis so as to avoid any one
account being systematically preferred over any other account.
The Subadviser will advise the Adviser and, if instructed by the
Adviser, the Fund's custodian or sub-custodians on a prompt basis each
day by electronic telecommunication of each confirmed purchase and sale
of a Portfolio security specifying the name of the issuer, the full
description of the security including its class, and amount or number
of shares of the security purchased or sold, the market price,
commission, government charges and gross or net price, trade date,
settlement date and identity of the clearing broker. Under no
circumstances may the Subadviser or any affiliates of the Subadviser
act as a principal in a securities transaction with the Fund or any
other investment company managed by the Adviser unless (i) permitted by
an exemptive provision, rule or order under the 1940 Act, and (ii) upon
obtaining prior approval of the securities transaction from the
Adviser. Any such transactions shall be reported quarterly to the
Corporation's Directors.
(d) From time to time as the Adviser or the Directors of the Corporation
may reasonably request, the Subadviser shall furnish the Adviser and to
each of the Corporation's Directors reports of Portfolio transactions
and reports on securities held in the Portfolio, all in such detail as
the Adviser or the Directors may reasonably request. The Subadviser
will also inform the Adviser and the Corporation's Directors of
material changes in investment strategy or tactics or in key personnel.
It shall be the duty of the Subadviser to furnish to the Corporation's
Directors such information as may reasonably be necessary in order for
such Directors to evaluate this Agreement or any proposed amendments
hereto for the purpose of casting a vote pursuant to Section 8 or 9
hereof.
(e) The Subadviser shall use its good faith judgment in a manner which it
reasonably believes best serves the interests of the Fund's
shareholders to vote or abstain from voting all proxies solicited by or
with respect to the issuers of securities in the Portfolio. The
Subadviser's obligations in the previous sentence are contingent upon
its timely receipt of such proxy solicitation materials, which the
Adviser shall cause to be forwarded to the Subadviser. The Subadviser
further agrees that it will provide the Board of Directors of the
Corporation, as the Board may reasonably request, with a written report
of the proxies voted during the most recent 12-month period or such
other period as the Board may designate, in a format that shall comply
with the 1940 Act. Upon reasonable request, the Subadviser shall
A-4
provide the Adviser with all proxy voting records relating to the
Portfolio, including but not limited to those required by Form N-PX.
Upon request of the Adviser, the Subadviser will also provide an annual
certification, in a form reasonably acceptable to Adviser, attesting to
the accuracy and completeness of such proxy voting records.
(f) As reasonably requested by the Corporation on behalf of the
Corporation's officers and in accordance with the scope of the
Subadviser's obligations and responsibilities contained in this
Agreement, the Subadviser shall provide reasonable assistance to the
Corporation in connection with the Corporation's compliance with the
Sarbanes-Oxley Act and the rules and regulations promulgated by the SEC
thereunder, and Rule 38a-1 of the 1940 Act. Such assistance shall
include, but not be limited to, (i) certifying periodically, upon the
reasonable request of the Corporation, that it is in compliance with
all applicable "federal securities laws," as required by Rule
38a-1(e)(1) under the 1940 Act, and Rule 206(4)-7 under the Advisers
Act; (ii) facilitating and cooperating with third-party audits arranged
by the Corporation to evaluate the effectiveness of its compliance
controls; (iii) providing the Corporation's chief compliance officer
with direct access to its compliance personnel; (iv) providing the
Corporation's chief compliance officer with periodic reports; and (v)
promptly providing special reports to the Corporation's chief
compliance officer in the event of compliance problems. Further, the
Subadviser is aware that: (i) the president (principal executive
officer) and treasurer (principal financial officer) of the Corporation
(collectively, the "Certifying Officers") are required to certify the
Corporation's periodic reports on Form N-CSR and Form N-Q pursuant to
Rule 30a-2 under the 1940 Act; and (ii) the Certifying Officers must
rely upon certain matters of fact generated by the Subadviser of which
they do not have firsthand knowledge. Consequently, the Subadviser has
in place and has observed procedures and controls that are reasonably
designed to ensure the adequacy of the services provided to the
Corporation under this Agreement and the accuracy of the information
prepared by it and which is included in the Corporation's periodic
reports, and shall provide certifications to the Corporation to be
relied upon by the Certifying Officers in certifying the Corporation's
periodic reports on Form N-CSR and Form N-Q (and such other periodic
reports that may require certification in the future), in a form
satisfactory to the Corporation.
2. Allocation of Charges and Expenses. The Subadviser will bear its own
costs of providing services hereunder. Other than as specifically indicated
herein, the Subadviser shall not be responsible for the Corporation's or the
Adviser's expenses, including, without limitation the expenses of organizing the
Corporation and continuing its existence; fees and expenses of Directors and
officers of the
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Corporation; fees for investment advisory services and administrative personnel
and services; expenses incurred in the distribution of its shares ("Shares"),
including expenses of administrative support services, fees and expenses of
preparing and printing its Registration Statements under the Securities Act of
1933, as amended, and the 1940 Act, and any amendments thereto; expenses of
registering and qualifying the Corporation, the Fund and Shares of the Fund
under federal and state laws and regulation; expenses of preparing, printing and
distributing prospectuses (and any amendments thereto) to shareholders; interest
expense; taxes, fees and commissions of every kind; expenses of issue (including
cost of Share certificate), purchase, repurchase and redemption of Shares
including expenses attributable to a program of periodic issue, charges and
expenses of custodians, transfer agents, dividend disbursing agents, shareholder
servicing agents and registrars, printing and mailing costs, auditing,
accounting and legal expenses; reports to shareholders and governmental officers
and commissions; expenses of meetings of Directors and shareholders and proxy
solicitations therefore; insurance expenses; association membership dues and
such nonrecurring items as may arise, including all losses and liabilities
incurred in administrating the Corporation and the Fund. The Corporation or the
Adviser, as the case may be, shall reimburse the Subadviser for any such
expenses or other expenses of the Fund or the Adviser, as may be reasonably
incurred by such Subadviser on behalf of the Fund or the Adviser. The Subadviser
shall keep and supply to the Corporation and the Adviser adequate records of all
such expenses.
3. Information Supplied by the Adviser. The Adviser shall provide the
Subadviser with the Corporation's Articles of Incorporation and By-Laws, the
Fund's most current Prospectus and Statement of Additional Information, and the
Corporation's Code of Ethics and instructions, policies and directions of the
Directors of the Corporation pertaining to the Adviser and the Fund, as in
effect from time to time; and the Subadviser shall have no responsibility for
actions taken in reliance on any such documents. The Adviser shall promptly
furnish to the Subadviser copies of all material amendments or supplements to
the foregoing documents.
4. Representations of the Subadviser. The Subadviser represents, warrants,
and agrees as follows:
(a) The Subadviser: (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 or
the Advisers Act from performing the services contemplated by this
Agreement; (iii) has met, and will 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 organization, necessary to be met in order to
perform the
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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 Adviser of the occurrence of any event
that would disqualify the Subadviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940
Act or otherwise.
(b) The Subadviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and, if it has not
already done so, will provide the Adviser and the Corporation with a
copy of such code of ethics. On at least an annual basis, the
Subadviser will comply with the reporting requirements of Rule 17j-1,
which may include (i) certifying to the Adviser that the Subadviser and
its access persons have complied with the Subadviser's code of ethics
with respect to the Portfolio, and (ii) identifying any material
violations which have occurred with respect to the Portfolio. Upon
reasonable notice from and the reasonable request of the Adviser, the
Subadviser shall permit the Adviser, its employees and its agents to
examine the reports required to be made by the Subadviser pursuant to
Rule 17j-1 and all other records relevant to the Subadviser's code of
ethics. The Adviser shall be responsible for any travel costs it incurs
in connection with on-site inspections of the Subadviser.
(c) The Subadviser has adopted and implemented written policies and
procedures, as required by Rule 206(4)-7 under the Advisers Act, which
are reasonably designed to prevent violations of federal securities
laws by the Subadviser, its employees, officers and agents. Upon
reasonable notice to and reasonable request, the Subadviser shall
provide the Adviser with access to the records relating to such
policies and procedures as they relate to the Portfolio. The Adviser
shall be responsible for any travel costs it incurs in connection with
on-site inspections of the Subadviser. The Subadviser will also
provide, at the reasonable request of the Adviser, periodic
certifications, in a form reasonably acceptable to the Adviser,
attesting to such written policies and procedures.
(d) The Subadviser has adopted written proxy voting procedures that shall
comply with the requirements of the 1940 Act and the Advisers Act.
5. Subadviser's Compensation. The Adviser shall pay to the Subadviser, as
compensation for the Subadviser's services hereunder, 0.40% per annum of the
Portfolio's average daily net assets. Such fee shall be computed daily and paid
monthly in arrears. The method of determining net assets of the Portfolio for
purposes hereof shall be the same as the method of determining net assets for
purposes of establishing the offering and redemption price of Fund shares as
described in the Fund's Prospectus. If this Agreement shall be effective for
only a
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portion of a month, the aforesaid fee shall be prorated for the portion of such
month during which this contract is in effect.
6. Independent Contractor. In the performance of its duties hereunder, the
Subadviser is and shall be an independent contractor and unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Corporation in any way or otherwise be
deemed to be an agent of the Corporation or of the Adviser.
7. Sales Literature. The Adviser and Subadviser acknowledge that all sales
literature for investment companies (such as the Corporation) are subject to
strict regulatory oversight. The Subadviser agrees to submit any proposed sales
literature for the Corporation (or any Fund) or for itself or its affiliates
which mentions the Corporation (or any Fund) to the Corporation's distributor
for review and filing with the appropriate regulatory authorities prior to the
public release of any such sales literature, provided, however, that nothing
herein shall be construed so as to create any obligation or duty on the part of
the Subadviser to produce sales literature for the Corporation (or any Fund).
Further, the Adviser agrees to submit to the Subadviser any and all sales
literature referencing Subadviser by name or any affiliate of Subadviser for
review and approval prior to filing or public release.
8. Amendments. The terms of this Agreement shall not be changed unless
such change is approved by the affirmative vote of a majority of Directors of
the Corporation voting in person, including a majority of the Directors who are
not interested persons of the Corporation, the Adviser or the Subadviser, at a
meeting called for the purpose of voting on such change and, if required under
the 1940 Act, the change is also approved at a meeting by the affirmative vote
of a majority of the outstanding voting securities of the Fund.
9. Duration and Termination.
(a) Duration. This Agreement shall become effective as of the date first
written above and shall continue in effect until August 31, 2006 and
thereafter for successive periods of one year, subject in both cases to
the provisions for termination and all of the other terms and
conditions hereof and provided in the latter case that such
continuation is specifically approved at least annually by (i) the
affirmative vote of a majority of the Board of Directors of the
Corporation voting in person, including a majority of the Directors who
are not interested persons of the Corporation, the Adviser or the
Subadviser, at a meeting called for that purpose, or (ii) the
affirmative vote of a majority of the outstanding voting securities of
the Fund. If the continuance of this Agreement is submitted to the
shareholders of the Fund for their approval and such shareholders fail
to approve such continuance as provided herein, the Subadviser may
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nonetheless continue to serve hereunder as to the Fund in a manner
consistent with the 1940 Act and the rules and regulations thereunder.
(b) Termination. Notwithstanding anything to the contrary provided herein,
this Agreement may be terminated at any time, without payment of any
penalty, by the affirmative vote of a majority of the Board of
Directors of the Corporation, or by the affirmative vote of a majority
of the outstanding voting securities of the Fund or by the Adviser, in
each case upon not more than 60 nor less than 30 calendar days' written
notice to the Subadviser. The Subadviser may terminate this Agreement
at any time, without payment of any penalty, upon not less than 60
calendar days' written notice to the Adviser. This Agreement shall also
terminate automatically in the event of its assignment by either party
(as defined in Section 2(a)(4) of the 1940 Act) and upon the
termination of the Advisory Contract.
In the event of termination of this Agreement for any reason, the
Subadviser shall, immediately upon notice of termination or on such
later date as may be specified in such notice, cease all activity on
behalf of the Fund and with respect to any of its assets, except as
expressly directed by the Adviser. In addition, the Subadviser shall
deliver the Fund's Books and Records to the Adviser by such means and
in accordance with such schedule as the Adviser shall direct and shall
otherwise cooperate, as reasonably directed by the Adviser, in the
transition of portfolio assets management to any successors of the
Subadviser, including the Adviser. The Subadviser may retain copies of
any record required to meet any record retention obligation imposed by
law or regulation.
10. Certain Definitions. For the purposes of this Agreement:
(a) "Affirmative vote of a majority of the outstanding voting securities of
the Fund" means the affirmative vote, at an annual or special meeting
of shareholders of the Fund, duly called and held, of (i) 67% or more
of the shares of the Fund present (in person or by proxy) and entitled
to vote at such meeting, if the holders of more than 50% of the
outstanding shares of the Fund entitled to vote at such meeting are
present (in person or by proxy), or (ii) more than 50% of the
outstanding shares of the Fund entitled to vote at such meeting,
whichever is less.
(b) "Interested persons" and "Assignment" shall have their respective
meanings as set forth in the 1940 Act, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission
under said Act.
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11. Standard of Care, Liability and Indemnification.
(a) The Subadviser shall exercise its best judgment in rendering the
services provided by it under this Agreement. In the absence of willful
misfeasance, bad faith or gross negligence on the part of the
Subadviser, or of reckless disregard of its obligations and duties
hereunder, the Subadviser shall not be subject to any liability to the
Adviser or the Corporation, to any shareholder of the Fund, or to any
person, firm or organization, for any act or omission in the course of,
or connected with the rendering of services by Subadviser. Nothing
herein, however, shall derogate from the Subadviser's obligations under
federal and state securities laws.
(b) The Subadviser shall indemnify and hold the Adviser harmless from and
against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liabilities arising out of or attributable to
any action or failure or omission to act by the Subadviser as a result
of the Subadviser's willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties hereunder.
(c) The Adviser shall indemnify and hold the Subadviser harmless from and
against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liabilities arising out of or attributable to
any action or failure or omission to act by the Adviser as a result of
the Adviser's willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties hereunder.
12. Confidentiality. In accordance with SEC Regulation S-P, the Adviser and
the Subadviser acknowledge that the Fund may disclose shareholder nonpublic
personal information ("NPI") to the Subadviser solely in furtherance of
fulfilling the Subadviser's contractual obligations under this Agreement in the
ordinary course of business to support the Fund and its shareholders. The
Subadviser agrees to be bound to use and redisclose such NPI only for the
limited purposes of processing and servicing transactions; for specified law
enforcement and miscellaneous legally permitted purposes; and as a Fund service
provider or in connection with joint marketing arrangements solely at the
direction and discretion of the Fund, each in accordance with the limited
exceptions set forth in 17 CFR [sec][sec] 248.13, 248.14 and 248.15,
respectively. The Subadviser further represents and warrants that, in accordance
with 17 CFR [sec] 248.30, it has implemented safeguards by adopting policies and
procedures reasonably designed to insure the security and confidentiality of
records and NPI of Fund shareholders; protect against any anticipated threats or
hazards to the security or integrity of Fund shareholder records and NPI; and
protect against unauthorized access to or use of such Fund shareholder records
or NPI that could result in substantial harm or inconvenience to any Fund
shareholder. The Subadviser agrees to maintain the confidentiality of any NPI it
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receives from the Fund in connection with this Agreement or any joint marketing
arrangement beyond the termination date of this Agreement.
13. Jurisdiction. This Agreement shall be governed by and construed to be
consistent with the Advisory Contract and in accordance with substantive laws of
the State of Wisconsin without giving regard to the conflict of law principles
thereof and in accordance with the 1940 Act. In the case of any conflict between
state law and the 1940 Act, the 1940 Act shall control.
14. Counterparts. 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.
15. Miscellaneous.
(a) The Subadviser agrees to notify the Adviser of any material changes in
its ownership within a reasonable time prior to such changes.
(b) The Adviser acknowledges having received, not less than 48 hours prior
to entering into this Agreement, and reviewed the Subadviser's most
recent Form ADV.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
signed on behalf by their duly authorized officers as the date first above
written.
M&I INVESTMENT MANAGEMENT CORP.
By:
- -------------------------------- -------------------------------------------
ATTEST: Name:
Daniel L. Kaminski, Secretary Title:
BPI GLOBAL ASSET MANAGEMENT LLC
By:
- -------------------------------- -------------------------------------------
ATTEST: Secretary Name:
Title:
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APPENDIX B
SUBADVISORY AGREEMENT
AGREEMENT made as of the day of , 2005 by and between M&I Investment
Management Corp., an investment adviser registered under the Investment Advisers
Act of 1940, as amended (the "Advisers Act"), organized under the laws of
Wisconsin and having its principal place of business in Milwaukee, Wisconsin
(the "Adviser"), and Acadian Asset Management, Inc., a corporation organized
under the laws of Massachusetts and an investment adviser registered under the
Advisers Act (the "Subadviser").
WITNESSETH
WHEREAS, Marshall Funds, Inc. (the "Corporation") is an open-end,
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), with thirteen (13) portfolios including the
Marshall International Stock Fund (the "Fund"); and
WHEREAS, pursuant to authority granted the Adviser by the Corporation's
Directors and pursuant to the provisions of the Investment Advisory Contract
dated October 1, 1992 between the Adviser and the Corporation with respect to
the Fund (the "Advisory Contract"), the Adviser has selected the Subadviser to
act as a sub-investment adviser of the Fund and to provide certain other
services, as more fully set forth below, and to perform such services under the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
it is agreed as follows:
1. The Subadviser's Services.
(a) Within the framework of the fundamental policies, investment
objectives, and investment restrictions of the Fund, and subject to the
supervision and review of the Adviser and of the Directors of the
Corporation, the Subadviser shall have the sole and exclusive
responsibility for the making of all investment decisions for that
portion of the Fund's portfolio as designated by the Adviser (the
"Portfolio"), including the purchase, retention and disposition of
securities, in accordance with the Fund's investment objectives,
policies and restrictions as stated in the Corporation's Registration
Statement, including the Prospectus and Statement of Additional
Information (such Registration Statement, as currently in effect and as
amended or supplemented from time to time, collectively called the
"Prospectus") and subject to the following understandings:
(i) The Subadviser shall supervise the Portfolio's investments and
determine from time to time what securities will be purchased,
B-1
retained, sold or loaned by the Portfolio, and what portion of
the assets will be invested or held uninvested as cash.
(ii) In performance of its duties and obligations under this
Agreement, the Subadviser shall act in conformity with the
Corporation's Articles of Incorporation and By-Laws; the Fund's
Prospectus, policies and procedures; and with the instructions
and directions received in writing from the Adviser or the
Directors of the Corporation and will conform to and comply with
the requirements of the 1940 Act, the Internal Revenue Code of
1986, as amended (including the requirements for qualification as
a regulated investment company) and all other applicable federal
and state laws and regulations.
(iii) As of the date of this Agreement approximately 50% of the Fund's
investable assets will be allocated to the Portfolio, and on each
business day during the term of this Agreement the same
percentage of the net cash derived from purchases, or required
for redemptions, of Fund shares will normally be added to or
withdrawn from the Portfolio; provided, however, that the Adviser
has the right at any time to reallocate the portion of the Fund's
assets allocated to the Portfolio pursuant to this Agreement if
the Adviser deems such reallocation appropriate.
(b) The Subadviser shall not be responsible for the provision of
administrative, bookkeeping or accounting services to the Fund, except
as otherwise provided herein or as may be necessary for the Subadviser
to supply to the Adviser, the Corporation or its Directors the
information required to be supplied under this Agreement.
The Subadviser shall maintain separate books and detailed records of
all matters pertaining to the Fund and the Portfolio (the "Fund's Books
and Records"), including without limitation a daily ledger of such
assets and liabilities relating thereto and brokerage and other records
of all securities transactions. The Fund's Books and Records shall be
available by overnight delivery of copies or for telecopying without
delay to the Adviser during any day that the Fund is open for business
upon reasonable notice to the Subadviser.
(c) The Subadviser shall determine the securities to be purchased or sold
by the Fund in respect of the Portfolio and will place orders with or
through such persons, brokers or dealers to carry out the policy with
respect to brokerage as set forth in the Fund's Prospectus or as the
Directors may direct from time to time. Subject to the provisions of
the following paragraph, the Subadviser will take reasonable steps to
assure that
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Portfolio transactions are effected at the best price and execution
available, as such phrase is used in the Fund's Prospectus.
In using reasonable efforts to obtain for the Fund the most favorable
price and execution available, the Subadviser, bearing in mind the
Fund's best interests at all times, shall consider all factors it deems
relevant, including by way of illustration, price, the size of the
transaction, the nature of the market for the security, the amount of
the commission, the timing of the transaction taking into account
market prices and trends, the reputation, experience and financial
stability of the broker or dealer involved and the quality of service
rendered by the broker or dealer in other transactions. Subject to such
policies as the Directors of the Corporation may determine, the
Subadviser is specifically authorized to allocate brokerage business to
firms that provide such services or facilities and to cause the Fund to
pay a member of a securities exchange or any other securities 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, if
the Subadviser determines in good faith that such amount of commission
is reasonable in relation to the value of the brokerage and research
services (as such services are defined in Section 28(e) of the
Securities Exchange Act of 1934, as amended) provided by such member,
broker, or dealer, viewed in terms either of that particular
transaction or the Subadviser's overall responsibilities with respect
to the accounts as to which it exercises investment discretion.
Brokerage or research services so provided may be used for the benefit
of any or all of the Subadviser's clients.
Consistent with the foregoing paragraph, nothing in this agreement is
intended to inhibit the Subadviser's selection of broker-dealers used
to execute trades for the Fund, including trades placed with
broker-dealers who provide investment research services to the
Subadviser. Such research services may include, but are not limited to,
advice provided either directly or through publications or writings,
including electronic publications, telephone contacts and personal
meetings with security analysts, economists and corporate and industry
spokespersons, and analyses and reports concerning issues, industries,
securities economic factors and trends, accounting and tax law
interpretations and political developments. Research so provided is in
addition to and not in lieu of the services required to be performed by
the Subadviser.
It is understood that the Subadviser may have advisory, management,
service or other contracts with other individuals or entities, and may
have other interests and businesses. When a security proposed to be
purchased
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or sold for the Fund is also to be purchased or sold for other accounts
managed by the Subadviser at the same time, the Subadviser may
aggregate such orders and shall allocate such purchases or sales on a
pro-rata, rotating or other equitable basis so as to avoid any one
account being systematically preferred over any other account.
The Subadviser will advise the Adviser and, if instructed by the
Adviser, the Fund's custodian or sub-custodians on a prompt basis each
day by electronic telecommunication of each confirmed purchase and sale
of a Portfolio security specifying the name of the issuer, the full
description of the security including its class, and amount or number
of shares of the security purchased or sold, the market price,
commission, government charges and gross or net price, trade date,
settlement date and identity of the clearing broker. Under no
circumstances may the Subadviser or any affiliates of the Subadviser
act as a principal in a securities transaction with the Fund or any
other investment company managed by the Adviser unless (i) permitted by
an exemptive provision, rule or order under the 1940 Act, and (ii) upon
obtaining prior approval of the securities transaction from the
Adviser. Any such transactions shall be reported quarterly to the
Corporation's Directors.
(d) From time to time as the Adviser or the Directors of the Corporation
may reasonably request, the Subadviser shall furnish the Adviser and to
each of the Corporation's Directors reports of Portfolio transactions
and reports on securities held in the Portfolio, all in such detail as
the Adviser or the Directors may reasonably request. The Subadviser
will also inform the Adviser and the Corporation's Directors of
material changes in investment strategy or tactics or in key personnel.
It shall be the duty of the Subadviser to furnish to the Corporation's
Directors such information as may reasonably be necessary in order for
such Directors to evaluate this Agreement or any proposed amendments
hereto for the purpose of casting a vote pursuant to Section 8 or 9
hereof.
(e) The Subadviser shall use its good faith judgment in a manner which it
reasonably believes best serves the interests of the Fund's
shareholders to vote or abstain from voting all proxies solicited by or
with respect to the issuers of securities in the Portfolio. The
Subadviser's obligations in the previous sentence are contingent upon
its timely receipt of such proxy solicitation materials, which the
Adviser shall cause to be forwarded to the Subadviser. The Subadviser
further agrees that it will provide the Board of Directors of the
Corporation, as the Board may reasonably request, with a written report
of the proxies voted during the most recent 12-month period or such
other period as the Board may designate, in a format that shall comply
with the 1940 Act. Upon reasonable request, the Subadviser shall
B-4
provide the Adviser with all proxy voting records relating to the
Portfolio, including but not limited to those required by Form N-PX.
Upon request of the Adviser, the Subadviser will also provide an annual
certification, in a form reasonably acceptable to Adviser, attesting to
the accuracy and completeness of such proxy voting records.
(f) As reasonably requested by the Corporation on behalf of the
Corporation's officers and in accordance with the scope of the
Subadviser's obligations and responsibilities contained in this
Agreement, the Subadviser shall provide reasonable assistance to the
Corporation in connection with the Corporation's compliance with the
Sarbanes-Oxley Act and the rules and regulations promulgated by the SEC
thereunder, and Rule 38a-1 of the 1940 Act. Such assistance shall
include, but not be limited to, (i) certifying periodically, upon the
reasonable request of the Corporation, that it is in compliance with
all applicable "federal securities laws," as required by Rule
38a-1(e)(1) under the 1940 Act, and Rule 206(4)-7 under the Advisers
Act; (ii) facilitating and cooperating with third-party audits arranged
by the Corporation to evaluate the effectiveness of its compliance
controls; (iii) providing the Corporation's chief compliance officer
with direct access to its compliance personnel; (iv) providing the
Corporation's chief compliance officer with periodic reports; and (v)
promptly providing special reports to the Corporation's chief
compliance officer in the event of compliance problems. Further, the
Subadviser is aware that: (i) the president (principal executive
officer) and treasurer (principal financial officer) of the Corporation
(collectively, the "Certifying Officers") are required to certify the
Corporation's periodic reports on Form N-CSR and Form N-Q pursuant to
Rule 30a-2 under the 1940 Act; and (ii) the Certifying Officers must
rely upon certain matters of fact generated by the Subadviser of which
they do not have firsthand knowledge. Consequently, the Subadviser has
in place and has observed procedures and controls that are reasonably
designed to ensure the adequacy of the services provided to the
Corporation under this Agreement and the accuracy of the information
prepared by it and which is included in the Corporation's periodic
reports, and shall provide certifications to the Corporation to be
relied upon by the Certifying Officers in certifying the Corporation's
periodic reports on Form N-CSR and Form N-Q (and such other periodic
reports that may require certification in the future), in a form
satisfactory to the Corporation.
2. Allocation of Charges and Expenses. The Subadviser will bear its own
costs of providing services hereunder. Other than as specifically indicated
herein, the Subadviser shall not be responsible for the Corporation's or the
Adviser's expenses, including, without limitation the expenses of organizing the
Corporation and continuing its existence; fees and expenses of Directors and
officers of the
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Corporation; fees for investment advisory services and administrative personnel
and services; expenses incurred in the distribution of its shares ("Shares"),
including expenses of administrative support services, fees and expenses of
preparing and printing its Registration Statements under the Securities Act of
1933, as amended, and the 1940 Act, and any amendments thereto; expenses of
registering and qualifying the Corporation, the Fund and Shares of the Fund
under federal and state laws and regulation; expenses of preparing, printing and
distributing prospectuses (and any amendments thereto) to shareholders; interest
expense; taxes, fees and commissions of every kind; expenses of issue (including
cost of Share certificate), purchase, repurchase and redemption of Shares
including expenses attributable to a program of periodic issue, charges and
expenses of custodians, transfer agents, dividend disbursing agents, shareholder
servicing agents and registrars, printing and mailing costs, auditing,
accounting and legal expenses; reports to shareholders and governmental officers
and commissions; expenses of meetings of Directors and shareholders and proxy
solicitations therefore; insurance expenses; association membership dues and
such nonrecurring items as may arise, including all losses and liabilities
incurred in administrating the Corporation and the Fund. The Corporation or the
Adviser, as the case may be, shall reimburse the Subadviser for any such
expenses or other expenses of the Fund or the Adviser, as may be reasonably
incurred by such Subadviser on behalf of the Fund or the Adviser. The Subadviser
shall keep and supply to the Corporation and the Adviser adequate records of all
such expenses.
3. Information Supplied by the Adviser. The Adviser shall provide the
Subadviser with the Corporation's Articles of Incorporation and By-Laws, the
Fund's most current Prospectus and Statement of Additional Information, and the
Corporation's Code of Ethics and instructions, policies and directions of the
Directors of the Corporation pertaining to the Adviser and the Fund, as in
effect from time to time; and the Subadviser shall have no responsibility for
actions taken in reliance on any such documents. The Adviser shall promptly
furnish to the Subadviser copies of all material amendments or supplements to
the foregoing documents.
4. Representations of the Subadviser. The Subadviser represents, warrants,
and agrees as follows:
(a) The Subadviser: (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 or
the Advisers Act from performing the services contemplated by this
Agreement; (iii) has met, and will 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 organization, necessary to be met in order to
perform the
B-6
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 Adviser of the occurrence of any event
that would disqualify the Subadviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940
Act or otherwise.
(b) The Subadviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and, if it has not
already done so, will provide the Adviser and the Corporation with a
copy of such code of ethics. On at least an annual basis, the
Subadviser will comply with the reporting requirements of Rule 17j-1,
which may include (i) certifying to the Adviser that the Subadviser and
its access persons have complied with the Subadviser's code of ethics
with respect to the Portfolio, and (ii) identifying any material
violations which have occurred with respect to the Portfolio. Upon
reasonable notice from and the reasonable request of the Adviser, the
Subadviser shall permit the Adviser, its employees and its agents to
examine the reports required to be made by the Subadviser pursuant to
Rule 17j-1 and all other records relevant to the Subadviser's code of
ethics. The Adviser shall be responsible for any travel costs it incurs
in connection with on-site inspections of the Subadviser.
(c) The Subadviser has adopted and implemented written policies and
procedures, as required by Rule 206(4)-7 under the Advisers Act, which
are reasonably designed to prevent violations of federal securities
laws by the Subadviser, its employees, officers and agents. Upon
reasonable notice to and reasonable request, the Subadviser shall
provide the Adviser with access to the records relating to such
policies and procedures as they relate to the Portfolio. The Adviser
shall be responsible for any travel costs it incurs in connection with
on-site inspections of the Subadviser. The Subadviser will also
provide, at the reasonable request of the Adviser, periodic
certifications, in a form reasonably acceptable to the Adviser,
attesting to such written policies and procedures.
(d) The Subadviser has adopted written proxy voting procedures that shall
comply with the requirements of the 1940 Act and the Advisers Act.
5. Subadviser's Compensation. The Adviser shall pay to the Subadviser, as
compensation for the Subadviser's services hereunder, 0.55% per annum of the
Portfolio's average daily net assets when the Portfolio has net assets of
$100,000,000 or less. When the Portfolio's net assets exceed $100,000,000, the
Adviser shall pay the Subadviser 0.40% per annum of the Portfolio's average
daily net assets. Such fee shall be computed daily and paid monthly in arrears.
The method of determining net assets of the Portfolio for purposes hereof shall
be the
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same as the method of determining net assets for purposes of establishing the
offering and redemption price of Fund shares as described in the Fund's
Prospectus. If this Agreement shall be effective for only a portion of a month,
the aforesaid fee shall be prorated for the portion of such month during which
this contract is in effect.
6. Independent Contractor. In the performance of its duties hereunder, the
Subadviser is and shall be an independent contractor and unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Corporation in any way or otherwise be
deemed to be an agent of the Corporation or of the Adviser.
7. Sales Literature. The Adviser and Subadviser acknowledge that all sales
literature for investment companies (such as the Corporation) are subject to
strict regulatory oversight. The Subadviser agrees to submit any proposed sales
literature for the Corporation (or any Fund) or for itself or its affiliates
which mentions the Corporation (or any Fund) to the Corporation's distributor
for review and filing with the appropriate regulatory authorities prior to the
public release of any such sales literature, provided, however, that nothing
herein shall be construed so as to create any obligation or duty on the part of
the Subadviser to produce sales literature for the Corporation (or any Fund).
Further, the Adviser agrees to submit to the Subadviser any and all sales
literature referencing Subadviser by name or any affiliate of Subadviser for
review and approval prior to filing or public release.
8. Amendments. The terms of this Agreement shall not be changed unless
such change is approved by the affirmative vote of a majority of Directors of
the Corporation voting in person, including a majority of the Directors who are
not interested persons of the Corporation, the Adviser or the Subadviser, at a
meeting called for the purpose of voting on such change and, if required under
the 1940 Act, the change is also approved at a meeting by the affirmative vote
of a majority of the outstanding voting securities of the Fund.
9. Duration and Termination.
(a) Duration. This Agreement shall become effective as of the date first
written above and shall continue in effect until August 31, 2006 and
thereafter for successive periods of one year, subject in both cases to
the provisions for termination and all of the other terms and
conditions hereof and provided in the latter case that such
continuation is specifically approved at least annually by (i) the
affirmative vote of a majority of the Board of Directors of the
Corporation voting in person, including a majority of the Directors who
are not interested persons of the Corporation, the Adviser or the
Subadviser, at a meeting called for that purpose, or (ii) the
affirmative vote of a majority of the outstanding voting securities of
the Fund. If the continuance of this Agreement is submitted to
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the shareholders of the Fund for their approval and such shareholders
fail to approve such continuance as provided herein, the Subadviser may
nonetheless continue to serve hereunder as to the Fund in a manner
consistent with the 1940 Act and the rules and regulations thereunder.
(b) Termination. Notwithstanding anything to the contrary provided herein,
this Agreement may be terminated at any time, without payment of any
penalty, by the affirmative vote of a majority of the Board of
Directors of the Corporation, or by the affirmative vote of a majority
of the outstanding voting securities of the Fund or by the Adviser, in
each case upon not more than 60 nor less than 30 calendar days' written
notice to the Subadviser. The Subadviser may terminate this Agreement
at any time, without payment of any penalty, upon not less than 60
calendar days' written notice to the Adviser. This Agreement shall also
terminate automatically in the event of its assignment by either party
(as defined in Section 2(a)(4) of the 1940 Act) and upon the
termination of the Advisory Contract.
In the event of termination of this Agreement for any reason, the
Subadviser shall, immediately upon notice of termination or on such
later date as may be specified in such notice, cease all activity on
behalf of the Fund and with respect to any of its assets, except as
expressly directed by the Adviser. In addition, the Subadviser shall
deliver the Fund's Books and Records to the Adviser by such means and
in accordance with such schedule as the Adviser shall direct and shall
otherwise cooperate, as reasonably directed by the Adviser, in the
transition of portfolio assets management to any successors of the
Subadviser, including the Adviser. The Subadviser may retain copies of
any record required to meet any record retention obligation imposed by
law or regulation.
10. Certain Definitions. For the purposes of this Agreement:
(a) "Affirmative vote of a majority of the outstanding voting securities of
the Fund" means the affirmative vote, at an annual or special meeting
of shareholders of the Fund, duly called and held, of (i) 67% or more
of the shares of the Fund present (in person or by proxy) and entitled
to vote at such meeting, if the holders of more than 50% of the
outstanding shares of the Fund entitled to vote at such meeting are
present (in person or by proxy), or (ii) more than 50% of the
outstanding shares of the Fund entitled to vote at such meeting,
whichever is less.
(b) "Interested persons" and "Assignment" shall have their respective
meanings as set forth in the 1940 Act, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission
under said Act.
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11. Standard of Care, Liability and Indemnification.
(a) The Subadviser shall exercise its best judgment in rendering the
services provided by it under this Agreement. In the absence of willful
misfeasance, bad faith or gross negligence on the part of the
Subadviser, or of reckless disregard of its obligations and duties
hereunder, the Subadviser shall not be subject to any liability to the
Adviser or the Corporation, to any shareholder of the Fund, or to any
person, firm or organization, for any act or omission in the course of,
or connected with the rendering of services by Subadviser. Nothing
herein, however, shall derogate from the Subadviser's obligations under
federal and state securities laws.
(b) The Subadviser shall indemnify and hold the Adviser harmless from and
against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liabilities arising out of or attributable to
any action or failure or omission to act by the Subadviser as a result
of the Subadviser's willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties hereunder.
(c) The Adviser shall indemnify and hold the Subadviser harmless from and
against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liabilities arising out of or attributable to
any action or failure or omission to act by the Adviser as a result of
the Adviser's willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties hereunder.
12. Confidentiality. In accordance with SEC Regulation S-P, the Adviser and
the Subadviser acknowledge that the Fund may disclose shareholder nonpublic
personal information ("NPI") to the Subadviser solely in furtherance of
fulfilling the Subadviser's contractual obligations under this Agreement in the
ordinary course of business to support the Fund and its shareholders. The
Subadviser agrees to be bound to use and redisclose such NPI only for the
limited purposes of processing and servicing transactions; for specified law
enforcement and miscellaneous legally permitted purposes; and as a Fund service
provider or in connection with joint marketing arrangements solely at the
direction and discretion of the Fund, each in accordance with the limited
exceptions set forth in 17 CFR [sec][sec] 248.13, 248.14 and 248.15,
respectively. The Subadviser further represents and warrants that, in accordance
with 17 CFR [sec] 248.30, it has implemented safeguards by adopting policies and
procedures reasonably designed to insure the security and confidentiality of
records and NPI of Fund shareholders; protect against any anticipated threats or
hazards to the security or integrity of Fund shareholder records and NPI; and
protect against unauthorized access to or use of such Fund shareholder records
or NPI that could result in substantial harm or inconvenience to any Fund
shareholder. The Subadviser agrees to maintain the confidentiality of any NPI it
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receives from the Fund in connection with this Agreement or any joint marketing
arrangement beyond the termination date of this Agreement.
13. Jurisdiction. This Agreement shall be governed by and construed to be
consistent with the Advisory Contract and in accordance with substantive laws of
the State of Wisconsin without giving regard to the conflict of law principles
thereof and in accordance with the 1940 Act. In the case of any conflict between
state law and the 1940 Act, the 1940 Act shall control.
14. Counterparts. 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.
15. Miscellaneous.
(a) The Subadviser agrees to notify the Adviser of any material changes in
its ownership within a reasonable time prior to such changes.
(b) The Adviser acknowledges having received, not less than 48 hours prior
to entering into this Agreement, and reviewed the Subadviser's most
recent Form ADV.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
signed on behalf by their duly authorized officers as the date first above
written.
M&I INVESTMENT MANAGEMENT CORP.
By:
- -------------------------------- -------------------------------------------
ATTEST: Name:
Daniel L. Kaminski, Secretary Title:
ACADIAN ASSET MANAGEMENT, INC.
By:
- -------------------------------- -------------------------------------------
ATTEST: Secretary Name:
Title:
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THREE EASY WAYS TO VOTE YOUR PROXY
MAIL: Vote, sign, date and return your proxy by mail.
TELEPHONE: Call 1-800-690-6903 and follow the simple instructions.
INTERNET: Go to www.proxyweb.com and follow the on-line directions.
If you vote by telephone or internet, do not mail your proxy.
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MARSHALL FUNDS, INC.
999 999 999 999 99 <-- MARSHALL INTERNATIONAL STOCK FUND
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Marshall International Stock Fund, a series of
Marshall Funds, Inc., a Wisconsin corporation (the "Corporation"), hereby
appoints John M. Blaser and Joseph P. Bree, or either of them, as proxies for
the undersigned, with full power of substitution in each of them, to attend the
special meeting of shareholders of the Fund (the "Meeting") to be held at 1000
North Water Street, 13th Floor, Milwaukee, WI 53202 on August 15, 2005, at 1:00
p.m., local time, and any adjournment thereof, to cast on behalf of the
undersigned all votes that the undersigned is entitled to cast at the Meeting
and otherwise to represent the undersigned at the Meeting with all powers
possessed by the undersigned if personally present at the Meeting. The
undersigned hereby acknowledges receipt of the Notice of the Special Meeting of
Shareholders and of the accompanying Proxy Statement and revokes any proxy
heretofore given with respect to the Meeting.
The votes entitled to be cast by the undersigned will be cast as instructed on
the reverse. If this proxy is executed but no instruction is given, the votes
entitled to be cast by the undersigned will be cast "FOR" all proposals as
described in the Proxy Statement and in the discretion of the proxy holder on
any other matter that may properly come before the Meeting or any adjournment
thereof.
[DOWN ARROW]
DATE: ________________________, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) (Title(s), if applicable) (Please sign in box)
NOTE: Please sign exactly as your name appears on the records of the Corporation
and date. If joint owners, each holder should sign this proxy. When signing as
attorney, executor, administrator, trustee, guardian or officer of a corporation
or other entity or in another representative capacity, please give your full
title. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
[DOWN ARROW] [DOWN ARROW] Marshall IS - R
[DOWN ARROW] Please fill in box as shown using black or blue DOWN ARROW]
ink or number 2 pencil. (X)
PLEASE DO NOT USE FINE POINT PENS.
FOR AGAINST ABSTAIN
1. Approval of a new subadvisory agreement between M&I Investment Management Corp., ( ) ( ) ( )
the Fund's investment adviser (the "Adviser") and BPI Global Asset Management, LLC.
2. Approval of a new subadvisory agreement between the Adviser and Acadian Asset ( ) ( ) ( )
Management, Inc.
3. Approval of a proposal to permit the Adviser to hire and replace subadvisers ( ) ( ) ( )
or to modify subadvisory agreements without shareholder approval.
4. To vote and otherwise represent the above-signed shareholder(s) on any other
matter that may properly come before the Meeting or any adjournment thereof
in the discretion of the proxy holder.
WE NEED YOUR VOTE BEFORE AUGUST 15, 2005
- --------------------------------------------------------------------------------
Your vote is important. If you are unable to attend the Meeting in person, we
urge you to authorize the proxies to cast your votes, which is commonly known as
proxy voting. You can do this in one of three ways: by (1) completing, signing,
dating and promptly returning this proxy card using the enclosed postage prepaid
envelope, (2) calling a toll-free telephone number at 1-800-690-6903 or (3)
voting on a website at www.proxyweb.com. Your prompt voting by proxy will help
assure a quorum at the Meeting. Voting by proxy will not prevent you from
personally casting your votes at the Meeting. You may revoke your proxy before
it is exercised at the Meeting by submitting to the Secretary of the Corporation
a written notice of revocation or a subsequently signed proxy card, or by
attending the Meeting and voting in person. A prior proxy can also be revoked
through the website or toll-free telephone number noted herein.
- --------------------------------------------------------------------------------
PLEASE SIGN AND DATE ON THE REVERSE SIDE.
[DOWN ARROW] Marshall IS - R [DOWN ARROW]