1
Exhibit 99.B5(e)
SUB-ADVISORY AGREEMENT
(Form 1 Series)
AGREEMENT made this 1st day of December, 1996, by and between ZURICH
XXXXXX INVESTMENTS, INC., a Delaware corporation (the "Adviser") and ZURICH
INVESTMENT MANAGEMENT LIMITED, an English corporation (the "Sub-Adviser").
WHEREAS, XXXXXX TARGET EQUITY FUND, a Massachusetts business trust (the
"Fund") is a management investment company registered under the Investment
Company Act of 1940;
WHEREAS, the Fund is authorized to issue Shares in separate series with
each representing the interests in a separate portfolio of securities and other
assets;
WHEREAS, the Fund has retained the Adviser to render to it investment
advisory and management services with regard to the series of the Fund known
as the Xxxxxx Worldwide 2004 Fund (the "initial 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 with respect to that portion
of the portfolio of the Fund's initial series allocated to the Sub-Adviser by
the Adviser for management, including services related to foreign securities,
foreign currency transactions and related investments, 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. The Adviser hereby employs the Sub-Adviser to manage the investment
and reinvestment of the assets of the initial series of the Fund allocated by
the Adviser in its sole discretion to the Sub-Adviser for management, including
services related to foreign securities, foreign currency transactions and
related investments, 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 Fund's account with brokers or dealers selected by the Sub-Adviser; and, in
connection therewith, the Sub-Adviser is authorized as the agent of the Fund to
give instructions to the Custodian of the Fund as to the deliveries of
securities and
2
payments of cash for the account of the Fund. 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 Fund 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 Fund 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 Fund 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.
The Sub-Adviser accepts such employment and agrees during such period to
render such investment management services, to furnish related office
facilities and equipment and clerical, bookkeeping and administrative services
for the Fund, to permit any of its officers or employees to serve without
compensation as trustees or officers of the Fund if elected to such positions
and to assume the obligations herein set forth for the compensation herein
provided. 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 or the
Adviser in any way or otherwise be deemed an agent of the Fund or the Adviser.
It is understood and agreed that the Sub-Adviser, by separate agreements with
the Fund, may also serve the Fund in other capacities.
The Sub-Adviser will keep the Fund and the Adviser informed of
developments materially affecting the Fund and shall, on the Sub-Adviser's own
initiative and as reasonably requested by the Adviser or the Fund, furnish to
the Fund and the Adviser from time to time whatever information the Adviser
reasonably believes appropriate for this purpose.
The Sub-Adviser agrees that, in the performance of the duties required
of it by this Agreement, it will comply with the
-2-
3
Investment Advisers Act of 1940 and the Investment Company Act of 1940,
and all rules and regulations thereunder, and all applicable laws and
regulations and with any applicable procedures adopted by the Fund's Board of
Trustees and identified in writing to the Sub-Adviser.
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 cash positions,
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 Management Agreement.
The Sub-Adviser shall provide adequate security with respect to all
materials, records, documents and data relating to any of its responsibilities
pursuant to this Agreement including any means for the effecting of securities
transactions.
The Sub-Adviser agrees that it will make available to the Adviser and
the Fund promptly upon their request copies of all of its investment records
and ledgers with respect to the Fund to assist the Adviser and the Fund in
monitoring compliance with the Investment Company Act of 1940 and the
Investment Advisers Act of 1940, 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 portfolio of each series subject to this Agreement
as the Adviser or the Board of Trustees may reasonably request.
In compliance with the requirements of Rule 31a-3 under the Investment
Company Act of 1940, 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 to the Fund copies of any such records upon the Fund's
request. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the Investment Company Act of 1940 any records
with respect to the Sub-Adviser's duties hereunder required to be maintained by
Rule 31a-1 under the such 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 Investment Advisers Act of 1940 for the period
specified in that Rule.
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
-3-
4
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, the Investment Management Regulatory Organization
("IMRO") or other regulatory authority.
The Sub-Adviser represents that it is an investment adviser registered
under the Investment Advisers Act of 1940 and other applicable laws and it is
regulated by IMRO and will treat the Fund as a Non-Private Customer as defined
by IMRO. The Sub-Adviser agrees to maintain the completeness and accuracy of
its registration on Form ADV in accordance with all legal requirements relating
to that Form. The Sub-Adviser acknowledges that it is an "investment adviser"
to the Fund within the meaning of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940.
The Sub-Adviser shall be responsible 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. Furthermore, the Sub-Adviser shall maintain and
enforce a Code of Ethics that is in form and substance satisfactory to the
Adviser. 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.
2. In the event that there are, from time to time, one or more
additional series of the Fund with respect to which the Adviser desires to
retain the Sub-Adviser to render investment advisory and management
services hereunder, the Adviser shall notify the Sub-Adviser in writing. If
the Sub-Adviser is willing to render such services, it shall notify the Adviser
in writing whereupon such additional series shall become subject to this
Agreement.
3. For the services and facilities described in Section 1, the Adviser
will pay to the Sub-Adviser, at the end of each calendar month, a sub-advisory
fee computed at an annual rate of that portion of the average daily net assets
of the initial series of the Fund that is allocated by the Adviser to the
Sub-Adviser for management as specified below:
Series Annual Rate
------ -----------
Xxxxxx Worldwide 2004 Fund .35%
-4-
5
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.
4. The services of the Sub-Adviser under this Agreement are not to be
deemed exclusive, and the Sub-Adviser shall be free to render similar services
or other services to others so long as its services hereunder are not impaired
thereby.
5. The Sub-Adviser shall arrange, if desired by the Fund, for officers
or employees of the Sub-Adviser to serve, without compensation from the Fund, as
trustees, officers or agents of the Fund if duly elected or appointed to such
positions and subject to their individual consent and to any limitations
imposed by law.
6. The net asset value for each series of the Fund subject to this
Agreement 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 of 1940. On each day when net asset value is not
calculated, the net asset value of a series shall be deemed to be the net
asset value of such series as of the close of business on the last day on
which such calculation was made for the purpose of the foregoing computations.
7. Subject to applicable statutes and regulations, it is understood
that certain trustees, officers or agents of the Fund are or may be
interested in the Sub-Adviser as officers, directors, agents, shareholders or
otherwise, and that the officers, directors, shareholders and agents of the
Sub-Adviser may be interested in the Fund otherwise than as a trustee, officer
or agent.
8. The Sub-Adviser shall not be liable for any error of judgment or of
law or for any loss suffered by the Fund 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. This Agreement shall become effective with respect to the initial
series of the Fund on the date hereof and shall remain in full force until
April 1, 1998, unless sooner terminated as hereinafter provided. This Agreement
shall continue in force from year to year thereafter with respect to each such
series, but only as long as such continuance is specifically approved for each
series at least annually in the manner required by the Investment Company Act
of 1940 and the
-5-
6
rules and regulations thereunder; provided, however, that if the continuation
of this Agreement is not approved for a series, the Sub-Adviser may
continue to serve in such capacity for such series in the manner and to the
extent permitted by the Investment Company Act of 1940 and the rules and
regulations thereunder.
This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Management Agreement
and may be terminated at any time with respect to any series subject to this
Agreement without the payment of any penalty by the Adviser or by the
Sub-Adviser on sixty (60) days written notice to the other party. The Fund may
effect termination with respect to any such series without payment of any
penalty by action of the Board of Trustees or by vote of a majority of the
outstanding voting securities of such series on sixty (60) days written notice
to the Adviser and the Sub-Adviser.
This Agreement may be terminated with respect to any series at any time
without the payment of any penalty by the Board of Trustees of the Fund, by vote
of a majority of the outstanding voting securities of such series or by the
Adviser in the event that it shall have been established by a court of
competent jurisdiction that the Sub-Adviser or any officer or director of the
Sub-Adviser has taken any action which results in a breach of the covenants of
the Sub-Adviser set forth herein.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the Investment Company Act of
1940 and the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of the
Sub-Adviser to receive payments on any unpaid balance of the compensation
described in Section 3 earned prior to such termination.
10. 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. 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. This Agreement shall be construed in accordance with applicable
federal law and the laws of the State of Illinois.
13. This Agreement is the entire contract between the parties relating
to the subject matter hereof and supersedes all
-6-
7
prior agreements between the parties relating to the subject matter hereof.
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.
ZURICH XXXXXX INVESTMENTS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
Title: Senior Vice President
-----------------------------
ZURICH INVESTMENT MANAGEMENT LIMITED
By: /s/ Xxxxxx X. Xxxxx
---------------------------------
Title: Managing Director
------------------------------
-7-
