N:\SHAREDAT\CORP_ACT\CONTRACT\XXXXXX\KET\XXXX-XXX 8
SUB-ADVISORY AGREEMENT
AGREEMENT made this 7th day of September, 1998, by and
between XXXXXXX XXXXXX INVESTMENTS, INC., a Delaware
corporation (the "Adviser") and DREMAN VALUE MANAGEMENT,
L.L.C., a Delaware limited liability company (the "Sub-
Adviser").
WHEREAS, XXXXXX EQUITY TRUST, a Massachusetts business
trust (the "Fund") is a management investment company
registered under the Investment Company Act of 1940 ("the
Investment Company Act");
WHEREAS, the Fund has retained the Adviser to render to
it investment advisory and management services with regard
to the Fund, including the series known as the
Xxxxxx-Xxxxxx Financial Services Fund (the "Financial
Services Series"), pursuant to an Investment Management
Agreement (the "Management Agreement"); and
WHEREAS, the Adviser desires at this time to retain the
Sub-Adviser to render investment advisory and management
services for the Financial Services Series and the Sub-
Adviser is willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants
hereinafter contained, it is hereby agreed by and between
the parties hereto as follows:
1. Appointment of Sub-Adviser.
(a) The Adviser hereby employs the Sub-Adviser to
manage the investment and reinvestment of the assets of the
Financial Services Series in accordance with the applicable
investment objectives, policies and limitations and subject
to the supervision of the Adviser and the Board of Trustees
of the Fund for the period and upon the terms herein set
forth, and to place orders for the purchase or sale of
portfolio securities for the Financial Services Series
account with brokers or dealers selected by the Sub-Adviser;
and, in connection therewith, the Sub-Adviser is authorized
as the agent of the Financial Services Series to give
instructions to the Custodian and Accounting Agent of the
Fund as to the deliveries of securities and payments of cash
for the account of the Financial Services Series. In
connection with the selection of such brokers or dealers and
the placing of such orders, the Sub-Adviser is directed to
seek for the Financial Services Series best execution of
orders. Subject to such policies as the Board of Trustees
of the Fund determines and subject to satisfying the
requirements of Section 28(e) of the Securities Exchange Act
of 1934, the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty, created by this
Agreement or otherwise, solely by reason of its having
caused the Financial Services Series to pay a broker or
dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that
transaction, if the Sub-Adviser determined in good faith
that such amount of commission was reasonable in relation to
the value of the brokerage and research services provided by
such broker or dealer viewed in terms of either that
particular transaction or the Sub-Adviser's overall
responsibilities with respect to the clients of the Sub-
Adviser as to which the Sub-Adviser exercises investment
discretion. The Adviser recognizes that all research
services and research that the Sub-Adviser receives are
available for all clients of the Sub-Adviser, and that the
Financial Services Series and other clients of the
Sub-Adviser may benefit thereby. The investment of funds
shall be subject to all applicable restrictions of the
Agreement and Declaration of Trust and By-Laws of the Fund
as may from time to time be in force to the extent the same
are provided the Sub-Adviser.
(b) The Sub-Adviser accepts such employment and
agrees during the period of this Agreement to render such
investment management services in accordance with the
applicable investment objectives, policies and limitations
set out in the Fund's prospectus and Statement of Additional
Information, as amended from time to time, to the extent the
same are provided the Sub-Adviser, to furnish related office
facilities and equipment and clerical, bookkeeping and
administrative services for the Financial Services Series,
and to assume the other obligations herein set forth for the
compensation herein provided. The Sub-Adviser shall assume
and pay all of the costs and expenses of performing its
obligations under this Agreement. The Sub-Adviser shall for
all purposes herein provided be deemed to be an independent
contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent
the Fund, the Financial Services Series or the Adviser in
any way or otherwise be deemed an agent of the Fund, the
Financial Services Series or the Adviser.
(c) The Sub-Adviser will keep the Adviser, for
itself and on behalf of the Fund, informed of developments
materially affecting the Fund or the Financial Services
Series and shall, on the Sub-Adviser's own initiative and as
reasonably requested by the Adviser, for itself and on
behalf of the Fund, furnish to the Adviser from time to time
whatever information the Adviser reasonably believes
appropriate for this purpose.
(d) The Sub-Adviser shall provide the Adviser
with such investment portfolio accounting and shall maintain
and provide such detailed records and reports as the Adviser
may from time to time reasonably request, including without
limitation, daily processing of investment transactions and
periodic valuations of investment portfolio positions as
required by the Adviser, monthly reports of the investment
portfolio and all investment transactions and the
preparation of such reports and compilation of such data as
may be required by the Adviser to comply with the
obligations imposed upon it under the Management Agreement.
Sub-Adviser agrees to install in its offices computer
equipment or software, as provided by the Adviser at its
expense, for use by the Sub-Adviser in performing its duties
under this Sub-Advisory Agreement, including inputting on a
daily basis that day's portfolio transactions in the
Financial Services Series.
(e) The Sub-Adviser shall maintain and enforce
adequate security procedures with respect to all materials,
records, documents and data relating to any of its
responsibilities pursuant to this Agreement including all
means for the effecting of securities transactions.
(f) The Sub-Adviser agrees that it will provide
to the Adviser or the Fund promptly upon request reports and
copies of such of its investment records and ledgers with
respect to the Financial Services Series as appropriate to
assist the Adviser and the Fund in monitoring compliance
with the Investment Company Act and the Investment Advisers
Act of 1940 (the "Advisers Act"), as well as other
applicable laws. The Sub-Adviser will furnish the Fund's
Board of Trustees such periodic and special reports with
respect to the Financial Services Series as the Adviser or
the Board of Trustees may reasonably request, including
statistical information with respect to the Financial
Services Series' securities.
(g) In compliance with the requirements of Rule
31a-3 under the Investment Company Act, the Sub-Adviser
hereby agrees that any records that it maintains for the
Fund are the property of the Fund and further agrees to
surrender promptly any such records upon the Fund's or the
Adviser's request, although the Sub-Adviser may, at the
Sub-Adviser's own expense, make and retain copies of such
records. The Sub-Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the Investment
Company Act any records with respect to the Sub-Adviser's
duties hereunder required to be maintained by Rule 31a-1
under the Investment Company Act to the extent that the Sub-
Adviser prepares and maintains such records pursuant to this
Agreement and to preserve the records required by Rule 204-2
under the Advisers Act for the period specified in that
Rule.
(h) The Sub-Adviser agrees that it will
immediately notify the Adviser and the Fund in the event
that the Sub-Adviser: (i) becomes subject to a statutory
disqualification that prevents the Sub-Adviser from serving
as an investment adviser pursuant to this Agreement; or (ii)
is or expects to become the subject of an administrative
proceeding or enforcement action by the United States
Securities and Exchange Commission ("SEC") or other
regulatory authority.
(i) The Sub-Adviser agrees that it will
immediately forward, upon receipt, to the Adviser, for
itself and as agent for the Fund, any correspondence from
the SEC or other regulatory authority that relates to the
Financial Services Series.
(j) The Sub-Adviser acknowledges that it is an
"investment adviser" to the Fund within the meaning of the
Investment Company Act and the Advisers Act.
(k) The Sub-Adviser shall be responsible for
maintaining an appropriate compliance program to ensure that
the services provided by it under this Agreement are
performed in a manner consistent with applicable laws and
the terms of this Agreement. Sub-Adviser agrees to provide
such reports and certifications regarding its compliance
program as the Adviser or the Fund shall reasonably request
from time to time. Furthermore, the Sub-Adviser shall
maintain and enforce a Code of Ethics which in form and
substance is consistent with industry norms as changed from
time to time. Sub-Adviser agrees to allow the Board of
Trustees of the Fund to review its Code of Ethics upon
request. Sub-Adviser agrees to report to the Adviser on a
quarterly basis any violations of the Code of Ethics of
which its senior management becomes aware.
2. Compensation.
For the services and facilities described herein,
the Adviser will pay to the Sub-Adviser, 15 days after the
end of each calendar month, the unpaid balance of a fee
equal to 1/12 of .240 of 1 percent of the average daily net
assets as defined below of the Financial Services Series for
such month; provided that, for any calendar month during
which the average of such values exceeds $250,000,000, the
fee payable for that month based on the portion of the
average of such values in excess of $250,000,000 shall be
1/12 of .230 of 1 percent of such portion; provided that,
for any calendar month during which the average of such
values exceeds $1,000,000,000, the fee payable for that
month based on the portion of the average of such values in
excess of $1,000,000,000 shall be 1/12 of .224 of 1 percent
of such portion; provided that, for any calendar month
during which the average of such values exceeds
$2,500,000,000, the fee payable for that month based on the
portion of the average of such values in excess of
$2,500,000,000 shall be 1/12 of .218 of 1 percent of such
portion; provided that, for any calendar month during which
the average of such values exceeds $5,000,000,000, the fee
payable for that month based on the portion of the average
of such values in excess of $5,000,000,000 shall be 1/12
of .208 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values
exceeds $7,500,000,000, the fee payable for that month based
on the portion of the average of such values in excess of
$7,500,000,000 shall be 1/12 of .205 of 1 percent of such
portion; provided that, for any calendar month during which
the average of such values exceeds $10,000,000,000, the fee
payable for that month based on the portion of the average
of such values in excess of $10,000,000,000 shall be 1/12
of .202 of 1 percent of such portion; and provided that, for
any calendar month during which the average of such values
exceeds $12,500,000,000, the fee payable for that month
based on the portion of the average of such values in excess
of $12,500,000,000 shall be 1/12 of .198 of 1 percent of
such portion.
For the month and year in which this Agreement
becomes effective or terminates, there shall be an
appropriate proration on the basis of the number of days
that the Agreement is in effect during the month and year,
respectively.
3. Net Asset Value. The net asset value for the
Financial Services Series shall be calculated as the Board
of Trustees of the Fund may determine from time to time in
accordance with the provisions of the Investment Company
Act. On each day when net asset value is not calculated,
the net asset value of the Financial Services Series shall
be deemed to be the net asset value as of the close of
business on the last day on which such calculation was made
for the purpose of the foregoing computations.
4. Duration and Termination.
(a) This Agreement shall become effective with
respect to the Financial Services Series on the date hereof
and shall remain in full force until February 1, 2003,
unless sooner terminated or not annually approved as
hereinafter provided. Notwithstanding the foregoing, this
Agreement shall continue in force through February 1, 2003,
and from year to year thereafter, only as long as such
continuance is specifically approved at least annually and
in the manner required by the Investment Company Act and the
rules and regulations thereunder, with the first annual
renewal to be coincident with the next renewal of the
Management Agreement.
(b) This Agreement shall automatically
terminate in the event of its assignment or in the event of
the termination of the Management Agreement. In addition,
Adviser has the right to terminate this Agreement upon
immediate notice if the Sub-Adviser becomes statutorily
disqualified from performing its duties under this Agreement
or otherwise is legally prohibited from operating as an
investment adviser.
(c) This Agreement may be terminated at any
time, without the payment by the Fund of any penalty, by the
Board of Trustees of the Fund, or by vote of a majority of
the outstanding voting securities of the Financial Services
Series, or by the Adviser. The Fund may effect termination
of this Agreement by action of the Board of Trustees of the
Fund or by vote of a majority of the outstanding voting
securities of the Financial Services Series on sixty (60)
days written notice to the Adviser and the Sub-Adviser. The
Adviser may effect termination of this Agreement on sixty
(60) days written notice to the Sub-Adviser.
(d) Sub-Adviser may not terminate this Agreement
prior to the third anniversary of the original Sub-Advisory
Agreement dated March 2, 1998. Sub-Adviser may terminate
this Agreement effective on or after the third anniversary
of the Agreement dated March 2, 1998 upon ninety (90) days
written notice to the Adviser.
(e) The terms "assignment" and "vote of a
majority of the outstanding voting securities" shall have
the meanings set forth in the Investment Company Act and the
rules and regulations thereunder.
5. Representations and Warranties. The Sub-Adviser
hereby represents and warrants as follows:
(a) The Sub-Adviser is registered with the SEC as
an investment adviser under the Advisers Act, and such
registration is current, complete and in full compliance
with all material applicable provisions of the Advisers Act
and the rules and regulations thereunder;
(b) The Sub-Adviser has all requisite authority
to enter into, execute, deliver and perform the
Sub-Adviser's obligations under this Agreement;
(c) The Sub-Adviser's performance of its
obligations under this Agreement does not conflict with any
law, regulation or order to which the Sub-Adviser is
subject; and
(d) The Sub-Adviser has reviewed the portion of
(i) the registration statement filed with the SEC, as
amended from time to time for the Fund ("Registration
Statement"), and (ii) the Fund's prospectus and supplements
thereto, in each case in the form received from the Adviser
with respect to the disclosure about the Sub-Adviser and the
Financial Services Series of which the Sub-Adviser has
knowledge (the "Sub-Adviser and Financial Services
Information") and except as advised in writing to the
Adviser such Registration Statement, prospectus and any
supplement contain, as of its date, no untrue statement of
any material fact of which Sub-Adviser has knowledge and do
not omit any statement of a material fact of which
Sub-Adviser has knowledge which was required to be stated
therein or necessary to make the statements contained
therein not misleading.
6. Covenants. The Sub-Adviser hereby covenants and
agrees that, so long as this Agreement shall remain in
effect:
(a) The Sub-Adviser shall maintain the
Sub-Adviser's registration as an investment adviser under
the Advisers Act, and such registration shall at all times
remain current, complete and in full compliance with all
material applicable provisions of the Advisers Act and the
rules and regulations thereunder;
(b) The Sub-Adviser's performance of its
obligations under this Agreement shall not conflict with any
law, regulation or order to which the Sub-Adviser is then
subject;
(c) The Sub-Adviser shall at all times comply in
all material respects with the Advisers Act and the
Investment Company Act, and all rules and regulations
thereunder, and all other applicable laws and regulations,
and the Registration Statement, prospectus and any
supplement and with any applicable procedures adopted by the
Fund's Board of Trustees, provided that such procedures are
substantially similar to those applicable to similar funds
for which the Board of Trustees of the Fund is responsible
and that such procedures are identified in writing to the
Sub-Adviser;
(d) The Sub-Adviser shall promptly notify Adviser
and the Fund upon the occurrence of any event that might
disqualify or prevent the Sub-Adviser from performing its
duties under this Agreement. The Sub-Adviser further agrees
to notify Adviser of any changes that would cause the
Registration Statement or prospectus for the Fund to contain
any untrue statement of a material fact or to omit to state
a material fact which is required to be stated therein or is
necessary to make the statements contained therein not
misleading, in each case relating to Sub-Adviser and
Financial Services Information; and
(e) For the entire time this Agreement is in
effect and for a period of two years thereafter, the Sub-
Adviser shall maintain a claims made bond issued by a
reputable fidelity insurance company against larceny and
embezzlement, covering each officer and employee of Sub-
Adviser, at a minimum level of $2 million which provide
coverage for acts or alleged acts which occurred during the
period of this Agreement.
7. Use of Names.
(a) The Sub-Adviser acknowledges and agrees
that the names Xxxxxx, Zurich and Xxxxxxx, and abbreviations
or logos associated with those names, are the valuable
property of Adviser and its affiliates; that the Fund,
Adviser and their affiliates have the right to use such
names, abbreviations and logos; and that the Sub-Adviser
shall use the names Zurich, Xxxxxx and Xxxxxxx, and
associated abbreviations and logos, only in connection with
the Sub-Adviser's performance of its duties hereunder.
Further, in any communication with the public and in any
marketing communications of any sort, Sub-Adviser agrees to
obtain prior written approval from Adviser before using or
referring to Xxxxxx Value Fund, Kemper, Scudder, Zurich
or Xxxxxx-Xxxxxx Financial Services Fund or any
abbreviations or logos associated with those names; provided
that nothing herein shall be deemed to prohibit the
Sub-Adviser from referring to the performance of the
Xxxxxx-Xxxxxx Financial Services Fund in the Sub-Adviser's
marketing material as long as such marketing material does
not constitute "sales literature" or "advertising" for the
Financial Services Series, as those terms are used in the
rules, regulations and guidelines of the SEC and the
National Association of Securities Dealers, Inc.
(b) Adviser acknowledges that "Dreman" is
distinctive in connection with investment advisory and
related services provided by the Sub-Adviser, the "Dreman"
name is a property right of the Sub-Adviser, and the
"Dreman" name as used in the name of the Financial Services
Series is understood to be used by the Fund upon the
conditions hereinafter set forth; provided that the Fund may
use such name only so long as the Sub-Adviser shall be
retained as the investment sub-adviser of the Financial
Services Series pursuant to the terms of this Agreement.
(c) Adviser acknowledges that the Fund and
its agents may use the "Dreman" name in the name of the
Financial Services Series for the period set forth herein in
a manner not inconsistent with the interests of the
Sub-Adviser and that the rights of the Fund and its agents
in the "Dreman" name are limited to their use as a component
of the Financial Services Series name and in connection with
accurately describing the activities of the Financial
Services Series, including use with marketing and other
promotional and informational material relating to the
Financial Services Series. In the event that the
Sub-Adviser shall cease to be the investment sub-adviser of
the Financial Services Series, then the Fund at its own or
the Adviser's expense, upon the Sub-Adviser's written
request: (i) shall cease to use the Sub-Adviser's name as
part of the name of the Financial Services Series or for any
other commercial purpose (other than the right to refer to
the Financial Services Series' former name in the Fund's
Registration Statement, proxy materials and other Fund
documents to the extent required by law and, for a
reasonable period the use of the name in informing others of
the name change); and (ii) shall use its best efforts to
cause the Fund's officers and directors to take any and all
actions which may be necessary or desirable to effect the
foregoing and to reconvey to the Sub-Adviser all rights
which the Fund may have to such name. Adviser agrees to
take any and all reasonable actions as may be necessary or
desirable to effect the foregoing and Sub-Adviser agrees to
allow the Fund and its agents a reasonable time to
effectuate the foregoing.
(d) The Sub-Adviser hereby agrees and consents to
the use of the Sub-Adviser's name upon the foregoing terms
and conditions.
8. Standard of Care. Except as may otherwise be
required by law, and except as may be set forth in paragraph
9, the Sub-Adviser shall not be liable for any error of
judgment or of law or for any loss suffered by the Fund, the
Financial Services Series or the Adviser in connection with
the matters to which this Agreement relates, except loss
resulting from willful misfeasance, bad faith or gross
negligence on the part of the Sub-Adviser in the performance
of its obligations and duties or by reason of its reckless
disregard of its obligations and duties under this
Agreement.
9. Indemnifications.
(a) The Sub-Adviser agrees to indemnify and hold
harmless Adviser and the Fund against any losses, expenses,
claims, damages or liabilities (or actions or proceedings in
respect thereof), to which Adviser or the Fund may become
subject arising out of or based on the breach or alleged
breach by the Sub-Adviser of any provisions of this
Agreement or any wrongful action or alleged wrongful action
by the Sub-Adviser; provided, however, that the Sub-Adviser
shall not be liable under this paragraph in respect of any
loss, expense, claim, damage or liability to the extent that
a court having jurisdiction shall have determined by a final
judgment, or independent counsel agreed upon by the Sub-
Adviser and the Adviser or the Fund, as the case may be,
shall have concluded in a written opinion, that such loss,
expense, claim, damage or liability resulted primarily from
the Adviser's or the Fund's willful misfeasance, bad faith
or gross negligence or by reason of the reckless disregard
by the Adviser or the Fund of its duties. The foregoing
indemnification shall be in addition to any rights that the
Adviser or the Fund may have at common law or otherwise.
The Sub-Adviser's agreements in this paragraph shall, upon
the same terms and conditions, extend to and inure to the
benefit of each person who may be deemed to control the
Adviser or the Fund, be controlled by the Adviser or the
Fund, or be under common control with the Adviser or the
Fund and their affiliates, trustees, officers, employees and
agents. The Sub-Adviser's agreement in this paragraph shall
also extend to any of the Fund's, Financial Services
Series', and Adviser's successors or the successors of the
aforementioned affiliates, trustees, officers, employees or
agents.
(b) The Adviser agrees to indemnify and hold
harmless the Sub-Adviser against any losses, expenses,
claims, damages or liabilities (or actions or proceedings in
respect thereof), to which the Sub-Adviser may become
subject arising out of or based on the breach or alleged
breach by the Adviser of any provisions of this Agreement or
the Management Agreement, or any wrongful action or alleged
wrongful action by the Adviser or its affiliates in the
distribution of the Fund's shares, or any wrongful action or
alleged wrongful action by the Fund other than wrongful
action or alleged wrongful action that was caused by the
breach by Sub-Adviser of the provisions of this Agreement;
provided, however, that the Adviser shall not be liable
under this paragraph in respect of any loss, expense, claim,
damage or liability to the extent that a court having
jurisdiction shall have determined by a final judgment, or
independent counsel agreed upon by the Adviser and the
Sub-Adviser shall have concluded in a written opinion, that
such loss, expense, claim, damage or liability resulted
primarily from the Sub-Adviser's willful misfeasance, bad
faith or gross negligence or by reason of the reckless
disregard by the Sub-Adviser of its duties. The foregoing
indemnification shall be in addition to any rights that the
Sub-Adviser may have at common law or otherwise. The
Adviser's agreements in this paragraph shall, upon the same
terms and conditions, extend to and inure to the benefit of
each person who may be deemed to control the Sub-Adviser, be
controlled by the Sub-Adviser or be under common control
with the Sub-Adviser and to each of the Sub-Adviser's and
each such person's respective affiliates, trustees,
officers, employees and agents. The Adviser's agreements in
this paragraph shall also extend to any of the Sub-Adviser's
successors or the successors of the aforementioned
affiliates, trustees, officers, employees or agents.
(c) Promptly after receipt by a party indemnified
under paragraphs 9(a) and 9(b) above of notice of the
commencement of any action, proceeding, or investigation for
which indemnification will be sought, such indemnified party
shall promptly notify the indemnifying party in writing; but
the omission so to notify the indemnifying party shall not
relieve it from any liability which it may otherwise have to
any indemnified party unless such omission results in actual
material prejudice to the indemnifying party. In case any
action or proceeding shall be brought against any
indemnified party, and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party
shall be entitled to participate in and, individually or
jointly with any other indemnifying party, to assume the
defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the
defense of any action or proceeding, the indemnifying party
shall not be liable to the indemnified party for any legal
or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof other than
reasonable costs of investigation. If the indemnifying
party does not elect to assume the defense of any action or
proceeding, the indemnifying party on a monthly basis shall
reimburse the indemnified party for the reasonable legal
fees and other costs of defense thereof. Regardless of
whether or not the indemnifying party shall have assumed the
defense of any action or proceeding, the indemnified party
shall not settle or compromise the action or proceeding
without the prior written consent of the indemnifying party,
which shall not be unreasonably withheld.
10. Survival. If any provision of this Agreement
shall be held or made invalid by a court decision, statute,
rule or otherwise, the remainder shall not be thereby
affected.
11. Notices. Any notice under this Agreement shall be
in writing, addressed and delivered or mailed, postage
prepaid, to the other party at such address as such other
party may designate for the receipt of such notice.
12. Governing Law. This Agreement shall be construed
in accordance with applicable federal law and the laws of
the State of New York.
13. Miscellaneous.
(a) The captions in this Agreement are included
for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect
their construction or effect.
(b) Terms not defined herein shall have the
meaning set forth in the Fund's prospectus.
(c) 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.
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have
caused this Agreement to be executed as of the day and year
first above written.
XXXXXXX XXXXXX INVESTMENTS, INC.
By:________________________________
Title:_____________________________
DREMAN VALUE MANAGEMENT, L.L.C.
By:_________________________________
Title:______________________________
FOR THE PURPOSE OF ACCEPTING ITS
OBLIGATIONS UNDER SECTION 7 HEREIN
ONLY
XXXXXX EQUITY TRUST
By:_________________________________
Title:______________________________
