1
EX-99.B5(d)
SUB-ADVISORY AGREEMENT
AGREEMENT made this _____ day of __________, 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, INVESTORS FUND SERIES, 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 Portfolio (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
2
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
2
3
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
3
4
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
4
5
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 May 1, 2003, unless
sooner terminated or not annually approved as hereinafter
provided. Notwithstanding the foregoing, this Agreement
5
6
shall continue in force through May 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 date of this Agreement.
Sub-Adviser may terminate this Agreement effective on or
after the third anniversary of the date of this Agreement
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;
6
7
(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
7
8
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 Investors Fund, Kemper, Scudder, Zurich or Xxxxxx-Xxxxxx
Financial Services Portfolio 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
Portfolio 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
8
9
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,
9
10
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
10
11
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
11
12
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.
12
13
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
INVESTORS FUND SERIES
By:
---------------------------------
Title:
------------------------------
13
14
EX-99.B5(d)
SUB-ADVISORY AGREEMENT
AGREEMENT made this _____ day of __________, 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, INVESTORS FUND SERIES, 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
High Return Equity Portfolio (the "High Return 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 High Return 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
High Return 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 High Return 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 High Return 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 High Return 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 High Return
Series best execution of orders. Subject to such policies as
the Board of Trustees of the Fund determines and subject to
15
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 High Return 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 High Return 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 High Return 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 High Return Series or the Adviser in any way or
otherwise be deemed an agent of the Fund, the High Return
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 High Return 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.
2
16
(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 High Return 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 High Return 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 High
Return Series as the Adviser or the Board of Trustees may
reasonably request, including statistical information with
respect to the High Return 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.
3
17
(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 High Return
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 High Return 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
4
18
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
High Return 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 High Return 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 High Return Series on the date hereof and
shall remain in full force until May 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
5
19
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 High Return 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 High Return 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 date of this Agreement.
Sub-Adviser may terminate this Agreement effective on or
after the third anniversary of the date of this Agreement
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
6
20
(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 High Return
Series of which the Sub-Adviser has knowledge (the
"Sub-Adviser and High Return 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
7
21
necessary to make the statements contained therein not
misleading, in each case relating to Sub-Adviser and High
Return 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 Investors Fund Series, Kemper, Scudder, Zurich
or Xxxxxx-Xxxxxx High Return Equity Portfolio 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 High Return Equity Portfolio in the
Sub-Adviser's marketing material as long as such marketing
material does not constitute "sales literature" or
"advertising" for the High Return 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 High Return 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 High Return 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 High
8
22
Return 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 High Return
Series name and in connection with accurately describing the
activities of the High Return Series, including use with
marketing and other promotional and informational material
relating to the High Return Series. In the event that the
Sub-Adviser shall cease to be the investment sub-adviser of
the High Return 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 High Return Series or for any other commercial
purpose (other than the right to refer to the High Return
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
High Return 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
9
23
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, High Return 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
10
24
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.
11
25
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
INVESTORS FUND SERIES
By:
---------------------------------
Title:
------------------------------
12
