Exhibit d(vii)
HERITAGE SERIES TRUST - VALUE EQUITY FUND
SUBADVISORY AGREEMENT
This Subadvisory Agreement is made as of June 1, 2003, between Heritage
Asset Management, Inc., a Florida corporation (the "Manager"), and Dreman Value
Management, L.L.C. a Delaware corporation (the "Subadviser").
WHEREAS, the Manager has by separate contract agreed to serve as the
investment adviser to the Value Equity Fund (the "Fund"), a series of the
Heritage Series Trust, a Massachusetts business trust registered under the
Investment Company Act of 1940, as amended ("1940 Act"), as an open-end
diversified management investment company consisting of one or more investment
series of shares, each having its own assets and investment policies;
WHEREAS, the Manager's contract with the Fund allows it to delegate
certain investment advisory services to other parties; and
WHEREAS, the Manager desires to retain the Subadviser to perform certain
investment subadvisory services for the Fund, and the Subadviser is willing to
perform such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Services to be Rendered by the Subadviser to the Fund.
(a) INVESTMENT PROGRAM. Subject to the control and supervision of
the Board of Trustees of the Fund and the Manager, the Subadviser
shall, at its expense, on a regular basis furnish to the Fund an
investment program for such portion, if any, of Fund assets that is
allocated to it by the Manager from time to time. With respect to such
assets, the Subadviser will make investment decisions and will place
all brokerage orders for the purchase and sale of portfolio securities.
In the performance of its duties, the Subadviser will act in the best
interests of the Fund and will comply with (i) applicable laws and
regulations, including, but not limited to, the 1940 Act, (ii) the
terms of this Agreement, (iii) the stated investment objective,
policies and restrictions of the Fund, as stated in the then-current
Registration Statement of the Fund, and (iv) such other guidelines as
the Trustees or Manager may establish. The Manager shall be responsible
for providing the Subadviser with the Fund's Declaration of Trust and
all amendments thereto or restatements thereof, the Fund's By-Laws and
amendments thereto, resolutions of the Fund's Board of Trustees
authorizing the appointment of Subadviser and approving this Agreement
and current copies of the materials specified in Subsections (a)(iii)
and (iv) of this Section 1. At such times as may be reasonably
requested by the Board or the Manager, the Subadviser will provide them
with economic and investment analysis and reports, and make available
to the Board any economical, statistical, or investment services
normally available to similar investment company clients of the
Subadviser.
(b) AVAILABILITY OF PERSONNEL. The Subadviser, at its expense,
will make available to the Trustees and the Manager at reasonable times
its portfolio managers and other appropriate personnel in order to
review investment policies of the Fund and to consult with the Trustees
and the Manager regarding the investment affairs of the Fund, including
economic, statistical and investment matters relevant to the
Subadviser's duties hereunder, and will provide periodic reports to the
Manager relating to the portfolio strategies it employs.
(c) SALARIES AND FACILITIES. The Subadviser, at its expense, will
pay for all salaries of its personnel and facilities required for it to
execute its duties under this Agreement.
(d) COMPLIANCE AND OTHER REPORTS. The Subadviser, at its expense,
will promptly provide (1) the Manager with such compliance reports
relating to its duties under this Agreement as may be agreed upon by
such parties from time to time; (2) the Manager with necessary letters,
reports and information in connection with the preparation of
shareholder reports; (3) the Board with such reports and information as
requested from time to time; (4) information required with respect to
regulatory filings; and (5) such other information as reasonably
requested by the Manager or Board from time to time.
(e) VALUATION. The Subadviser, at its expense, will provide the
Fund's custodian with market price information relating to the assets
of the Fund at such times as the parties hereto may agree upon from
time to time.
(f) EXECUTING PORTFOLIO TRANSACTIONS. The Subadviser will place
all orders pursuant to its investment determinations for the Fund
either directly with the issuer or through broker-dealers selected by
Subadviser. In the selection of broker-dealers and the placement of
orders for the purchase and sale of portfolio investments for the Fund,
the Subadviser shall use its best efforts to obtain for the Fund the
most favorable price and execution available, except to the extent it
may be permitted to pay higher brokerage commissions for brokerage and
research services as described below. In using its best efforts to
obtain the most favorable price and execution available, the
Subadviser, bearing in mind the Fund's best interests at all times,
shall consider all factors it deems relevant, including by way of
illustration, price, the size of the transaction, the nature of the
market for the security, the amount of the commission and dealer's
spread or xxxx-up, the timing of the transaction taking into account
market prices and trends, the reputation, experience and financial
stability of the broker-dealer involved, the general execution and
operational facilities of the broker-dealer and the quality of service
rendered by the broker-dealer in other transactions. Subject to such
policies, which will be communicated to the Subadviser, as the Board of
Trustees may determine, the Subadviser 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-dealer that provides brokerage and research services to the
Subadviser an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker-dealer
would have charged for effecting that transaction if the Subadviser
determines 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-dealer, viewed in terms of either that
particular transaction or the Subadviser's overall responsibilities
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with respect to the Fund and to other clients of the Subadviser as to
which the Subadviser exercises investment discretion. The Fund agrees
that any entity or person associated with the Manager or the Subadviser
that is a member of a national securities exchange is authorized to
effect any transaction on such exchange for the account of the Fund
that is permitted by Section 11(a) of the Securities Exchange Act of
1934, as amended, and the Fund consents to the retention of
compensation for such transactions.
(g) EXPENSES. The Subadviser shall not be obligated to pay any
expenses of or for the Fund not expressly assumed by the Subadviser
pursuant to this Agreement.
2. BOOKS AND RECORDS. Pursuant to Rule 31a-3 under the 1940 Act, the
Subadviser agrees that: (a) all records it maintains for the Fund are the
property of the Fund; (b) it will surrender promptly to the Fund or the Manager
any such records upon the Fund's or Manager's request; (c) it will maintain for
the Fund the records that the Fund is required to maintain pursuant to Rule
31a-1 insofar as such records relate to the investment affairs of the Fund; and
(d) it will preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records it maintains for the Fund. Notwithstanding subsection (b) above, the
Subadvisor may maintain copies of such records to comply with its recordkeeping
obligations.
3. OTHER AGREEMENTS. The Subadviser and persons controlled by or under
common control with the Subadviser have and may have advisory, management
service or other agreements with other organizations and persons, and may have
other interests and businesses. Nothing in this Agreement is intended to
preclude such other business relationships.
4. COMPENSATION. The Manager will pay to the Subadviser as compensation
for the Subadviser's services rendered pursuant to this Agreement a subadvisory
fee as set forth in Schedule A, which schedule can be modified from time to
time, subject to the appropriate approvals required by the 1940 Act. Such fees
shall be paid by the Manager (and not by the Fund). Such fees shall be payable
for each month within 15 business days after the end of such month. If the
Subadviser shall serve for less than the whole of a month, the compensation as
specified shall be prorated.
5. AMENDMENT OF AGREEMENT. This Agreement shall not be materially amended
unless such amendment is approved by the vote, cast in person at a meeting
called for the purpose of voting on such approval, of a majority of the members
of the Board of Trustees who are not interested persons of the Fund, the Manager
or the Subadviser (the "Independent Trustees") and, to the extent required by
the 1940 Act, by the affirmative vote of a majority of the outstanding shares of
the Fund. The Subadviser agrees to notify the Manager of any anticipated change
in control of the Subadviser as soon as such change is reasonably anticipated
and, in any event, prior to such change.
6. Duration and Termination of the Agreement. This Agreement shall become
effective upon its execution; provided, however, that this Agreement shall not
become effective unless it has first been approved by a vote of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
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approval. This Agreement shall remain in full force and effect continuously
thereafter, except as follows:
(a) By vote of a majority of the (i) Independent Trustees, or (ii)
outstanding voting shares of the Fund, the Fund may at any time
terminate this Agreement, without the payment of any penalty, by
providing not more than 60 days' written notice delivered or mailed by
registered mail, postage prepaid, to the Manager and the Subadviser.
(b) This Agreement will terminate automatically, without the
payment of any penalty, unless within two years after its initial
effectiveness and at least annually thereafter, the continuance of the
Agreement is specifically approved by (i) the Board of Trustees or the
shareholders of the Fund by the affirmative vote of a majority of the
outstanding shares of the Fund, and (ii) a majority of the Independent
Trustees, by vote cast in person at a meeting called for the purpose of
voting on such approval. If the continuance of this Agreement is
submitted to the shareholders of the Fund for their approval and such
shareholders fail to approve such continuance as provided herein, the
Subadviser may continue to serve hereunder in a manner consistent with
the 1940 Act and the rules thereunder.
(c) The Manager may at any time terminate this Agreement, without
the payment of any penalty, by not less than 60 days' written notice
delivered or mailed by registered mail, postage prepaid, to the
Subadviser, and the Subadviser may at any time, without the payment of
any penalty, terminate this Agreement by not less than 90 days' written
notice delivered or mailed by registered mail, postage prepaid, to the
Manager.
(d) This Agreement automatically and immediately shall terminate,
without the payment of any penalty, in the event of its assignment or
if the Investment Advisory Agreement between the Manager and the Fund
shall terminate for any reason.
(e) Any notice of termination served on the Subadviser by the
Manager shall be without prejudice to the obligation of the Subadviser
to complete transactions already initiated or acted upon with respect
to the Fund. Upon termination without reasonable notice by the Manager,
the Subadviser will be paid certain previously agreed upon expenses the
Subadviser necessarily incurs in terminating the Agreement.
Upon termination of this Agreement, the duties of the Manager delegated to
the Subadviser under this Agreement automatically shall revert to the Manager.
7. NOTIFICATION OF THE MANAGER. The Subadviser promptly shall notify the
Manager in writing of the occurrence of any of the following events:
(a) the Subadviser shall fail to be registered as an investment
adviser under the Investment Advisers Act of 1940, as amended,;
(b) the Subadviser shall have been served or otherwise have notice
of any action, suit, proceeding, inquiry or investigation, at law or in
equity, before or by any court, public board or body, involving the
affairs of the Fund; or
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(c) any other occurrence that reasonably could have a material
adverse impact on the ability of the Subadviser to provide the services
provided for under this Agreement.
8. DEFINITIONS. For the purposes of this Agreement, the terms "vote of a
majority of the outstanding shares," "affiliated person," "control," "interested
person" and "assignment" shall have their respective meanings as defined in the
1940 Act and the rules thereunder subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission ("SEC") under said Act; and
references to annual approvals by the Board of Trustees shall be construed in a
manner consistent with the 1940 Act and the rules thereunder.
9. LIABILITY OF THE SUBADVISER. In the absence of its bad faith,
negligence or reckless disregard of its obligations and duties hereunder, the
Subadviser shall not be subject to any liability to the Manager, the Fund or
their directors, Trustees, officers or shareholders, for any act or omission in
the course of, or connected with, rendering services hereunder. However, the
Subadviser shall indemnify and hold harmless such parties from any and all
claims, losses, expenses, obligations and liabilities (including reasonable
attorneys fees) which arise or result from the Subadviser's bad faith,
negligence or reckless disregard of its duties hereunder.
10. LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any obligations of the Fund
under this Agreement are not binding upon the Trustees or the Shareholders
individually but are binding only upon the assets and property of the Fund.
11. GOVERNING LAW; WAIVER OF JURY TRIAL. This Agreement shall be construed
in accordance with the laws of the State of Florida, without giving effect to
the conflicts of laws principles thereof, and in accordance with the 1940 Act.
To the extent that the applicable laws of the State of Florida conflict with the
applicable provisions of the 1940 Act, the latter shall control. The parties
hereby waive their right to a jury trial.
12 SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors.
13. MISCELLANEOUS. 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. Where the
effect of a requirement of the 1940 Act reflected in any provision of this
Agreement is made less restrictive by a rule, or order of the SEC, whether of
special or general application, such provision shall be deemed to incorporate
the effect of such rule, or order.
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IN WITNESS WHEREOF, Heritage Asset Management, Inc. and Dreman Value
Management, L.L.C. have each caused this instrument to be signed in duplicate on
its behalf by its duly authorized representative, all as of the day and year
first above written.
Attest: HERITAGE ASSET MANAGEMENT, INC.
By: By: /s/ X.X. Xxxxx
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Name: X.X. Xxxxx
Title: Executive Vice President and
Chief Operating Officer
Attest: DREMAN VALUE MANAGEMENT, L.L.C.
By: By:
-------------------------- -------------------------------
Name:
Title:
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SCHEDULE A
TO THE
HERITAGE SERIES TRUST - VALUE EQUITY FUND
SUBADVISORY AGREEMENT
BETWEEN
HERITAGE ASSET MANAGEMENT, INC.
AND
DREMAN VALUE MANAGEMENT, L.L.C.
As compensation pursuant to section 4 of the Subadvisory Agreement between
Heritage Asset Management, Inc. (the "Manager") and Dreman Value Management,
L.L.C. (the "Subadviser"), the Manager shall pay the Subadviser a subadvisory
fee, computed and paid monthly, at the following percentage rates of the average
daily net assets under management by the Subadviser:
For the Heritage Series Trust - Value Equity Fund: 0.375% on first $50 million
0.35% thereafter
Dated: June 1, 2003
