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INVESTMENT SUBADVISORY AGREEMENT
INVESTMENT SUBADVISORY AGREEMENT, dated as of October 1, 2000 by and
between Diversified Investment Advisors, Inc., a Delaware corporation
("Diversified") and Alliance Capital Management L.P., a Delaware limited
partnership ("Subadvisor").
WITNESSETH:
WHEREAS, Diversified is an investment advisor registered under the
Investment Advisers Act of 1940 and has been retained to provide investment
advisory services to the Value & Income Portfolio ("Portfolio"), a series of
Diversified Investors Portfolios, a diversified open-end management investment
company registered under the Investment Company Act of 1940 ("1940 Act");
WHEREAS, Diversified desires to retain the Subadvisor to furnish it with
portfolio investment advisory services in connection with Diversified's
investment advisory activities on behalf of the Portfolio, and the Subadvisor is
willing to furnish such services to Diversified;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of the Subadvisor. In accordance with and subject to the
Investment Advisory Agreement between the Portfolio and Diversified, attached
hereto as Schedule A (the "Advisory Agreement"), Diversified hereby appoints the
Subadvisor to perform the portfolio investment advisory services described
herein for the investment and reinvestment of such amount of the Portfolio's
assets as is determined from time to time by Diversified, subject to the control
and direction of Diversified and the Diversified Investors Portfolios' Board of
Trustees, for the period and on the terms hereinafter set forth.
The Subadvisor shall provide Diversified with such investment advice and
supervision as the latter may from time to time consider necessary for the
proper supervision of the Portfolio's assets. The Subadvisor shall furnish
continuously an investment program and shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of the Portfolio shall be held uninvested, subject always to the provisions of
the 1940 Act and to the Portfolio's then-current Registration Statement on Form
N-1A.
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In particular, the Subadvisor shall, without limiting the foregoing: (i)
continuously review, supervise and implement the investment program of the
Portfolio; (ii) monitor regularly the relevant securities for the Portfolio to
determine if adjustments are warranted and, if so, to make such adjustments;
(iii) determine, in the Subadvisor's discretion, the securities to be purchased
or sold or exchanged in order to keep the Portfolio in balance with its
designated investment strategy; (iv) determine, in the Subadvisor's discretion,
whether to exercise warrants or other rights with respect to the Portfolio's
securities; (v) determine, in the Subadvisor's discretion, whether the merit of
an investment has been substantially impaired by extraordinary events or
financial conditions, thereby warranting the removal of such securities from
the Portfolio; (vi) as promptly as practicable after the end of each calendar
month, furnish a report showing: (a) all transactions during such month, (b)
all assets of the Portfolio on the last day of such month, rates of return, and
(c) such other information relating to the Portfolio as Diversified may
reasonably request; (vii) meet at least four times per year with Diversified
and with such other persons as may be designated on reasonable notice and at
reasonable locations, at the request of Diversified, to discuss general
economic conditions, performance, investment strategy, and other matters
relating to the Portfolio; (viii) provide the Portfolio with records concerning
the Subadvisor's activities which the Portfolio is required by law to maintain;
and (ix) render regular reports to the Portfolio's officers and Directors
concerning the Subadvisor's discharge of the foregoing responsibilities.
The Subadvisor shall review all proxy solicitation materials and be
responsible for voting all proxies in relation to the securities held in the
Portfolio. Diversified shall direct the Portfolio's custodian to forward all
proxies and similar materials relating to the Portfolio's securities upon
receipt to the Subadvisor c/o The Proxy Department at the Xxxxxxxxx Division of
Alliance Capital Management L.P., Gateway Building, Xxx Xxxxx Xxxxxxxxx Xxxxxx,
Xxxxx Xxxxxx, Xxx Xxxx 00000, affording the Subadvisor reasonable time in which
to determine how to vote such proxies. The Subadvisor shall provide the
Portfolio with Quarterly reports of all proxies voted by the Subadvisor.
Should the Board of Trustees at any time make any definite determination
as to investment policy with respect to the Portfolio and notify the Subadvisor
thereof in writing, the Subadvisor shall be bound by such determination for the
period, if any, specified in such notice or until similarly notified that such
policy has been revoked. The initial Statement of Investment Policy and
Guidelines is attached hereto as Appendix I.
The Subadvisor shall take, on behalf of the Portfolio, all actions which
it deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
Portfolio securities for the Portfolio's account with brokers or dealers
selected by it, and to that end the Subadvisor is authorized as the agent of
the Portfolio to give instructions to the custodian of the Portfolio as to
deliveries of securities and payments of cash for the
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account of the Portfolio. Subject to the primary objective of obtaining the
best available prices and execution, the Subadvisor may place orders for the
purchase and sale of portfolio securities with such broker/dealers who provide
statistical, factual and financial information and services to the Portfolio,
to the Subadvisor, or to any other fund or account for which the Subadvisor
provides investment advisory services and may place such orders with
broker/dealers who sell shares of the Portfolio or who sell shares of any other
fund for which the Subadvisor provides investment advisory services.
Broker/dealers who sell shares of the funds of which Subadvisor is investment
advisor shall only receive orders for the purchase or sale of portfolio
securities to the extent that the placing of such orders is in compliance with
the Rules of the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc.
Notwithstanding the provisions of the previous paragraph and subject to
such policies and procedures as may be adopted by the Board of Trustees and
officers of the Portfolio, the Subadvisor may pay a member of an exchange,
broker or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another member of an exchange, broker or
dealer would have charged for effecting that transaction, in such instances
where the Subadvisor has 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 member, broker or dealer, viewed in terms of either
that particular transaction or the Subadvisor's overall responsibilities with
respect to the Portfolio and to other funds and separate accounts for which the
Subadvisor exercises investment discretion.
In addition to selecting brokers or dealers to execute transactions for
the Portfolio, the Subadvisor may, subject to its duty to seek the best
available price and execution, utilize its affiliate Xxxxxxx X. Xxxxxxxxx &
Co., LLC ("SCB LLC") to act as a broker for the Portfolio from time to time at
rates not exceeding the usual and customary broker's commission. All
transactions executed by SCB LLC for the Portfolio shall be effected in
accordance with Section 11(a) of the Securities Exchange Act of 1934, as
amended, and Rule 11a2-2(T) thereunder. Under Federal law, the Subadvisor must
obtain the Board of Trustees' and Diversified's consent to permit SCB LLC to
effect agency cross transactions for the Portfolio, which consent is hereby
granted. The Subadvisor represents, warrants and covenants that all agency
cross transactions for the Portfolio will be effected by SCB LLC strictly in
accordance with Rule 206(3)-2 under the Investment Advisers Act of 1940, as
amended. An agency cross transaction is where SCB LLC purchases or sells
securities from or to a non-managed account on behalf of a client's account
managed by Subadvisor. Pursuant to this consent, SCB LLC will only effect an
agency cross transaction for the Portfolio with a non-managed account. In an
agency cross transaction, SCB LLC receives commissions from both sides of the
trade and there is a potentially conflicting division of loyalties and
responsibilities. However, as both sides to the trade want to execute the
transaction at the best price without moving the market price in either
direction, the Subadvisor believes that an agency cross
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transaction will aid both sides to the trade in obtaining the best price for
the trade. The Board of Trustees or Diversified may revoke this consent by
written notice to the Subadvisor at any time.
2. Allocation of Charges and Expenses. The Subadvisor shall furnish at its
own expense all necessary services, facilities and personnel in connection with
its responsibilities under Section 1 above. It is understood that the Portfolio
will pay all of its own expenses and liabilities including, without limitation,
compensation and out-of-pocket expenses of Trustees not affiliated with the
Subadvisor or Diversified; governmental fees; interest charges; taxes;
membership dues; fees and expenses of independent auditors, of legal counsel and
of any transfer agent, administrator, distributor, shareholder servicing agents,
registrar or dividend disbursing agent of the Portfolio; expenses of
distributing and redeeming shares and servicing shareholder accounts; expenses
of preparing, printing and mailing prospectuses, shareholder reports, notices,
proxy statements and reports to governmental officers and commissions and to
shareholders of the Portfolio; expenses connected with the execution, recording
and settlement of Portfolio security transactions; insurance premiums; fees and
expenses of the custodian for all services to the Portfolio, including
safekeeping of funds and securities and maintaining required books and accounts;
expenses of calculating the net asset value of shares of the Portfolio; expenses
of shareholder meetings; expenses of litigation and other extraordinary or
non-recurring events and expenses relating to the issuance, registration and
qualification of shares of the Portfolio.
3. Compensation of the Subadvisor. For the services to be rendered,
Diversified shall pay to the Subadvisor an investment advisory fee computed in
accordance with the terms of Schedule B herewith attached. If the Subadvisor
serves for less than the whole of any period specified, its compensation shall
be prorated.
4. Covenants and Representations of the Subadvisor. The Subadvisor agrees
that it will not deal with itself, or with the Trustees of the Portfolio or
with Diversified, or the principal underwriter or distributor as principals in
making purchases or sales of securities or other property for the account of
the Portfolio, except as permitted by the 1940 Act, and will comply with all
other provisions of the Declaration of Trust and any current Registration
Statement on Form N-1A of the Portfolio relative to the Subadvisor, Advisor
and its Trustees and officers. The Subadvisor will notify Diversified of any
change in the membership of the general partners of the Subadvisor within a
reasonable time after such change.
5. Limits on Duties. The Subadvisor shall be responsible only for managing
the assets in good faith and in accordance with the investment objectives,
fundamental policies and restrictions, and shall have no responsibility
whatsoever for, and shall incur no liability on account of (i) diversification,
selection or establishment of such investment objectives, fundamental policies
and restrictions (ii) advice on, or
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management of, any other assets for Diversified or the Portfolio, (iii) filing
of any tax or information returns or forms, withholding or paying any taxes, or
seeking any exemption or refund, (iv) registration with any government or
agency, or (v) administration of the plans and trusts investing through the
Portfolio, or (vi) overall Portfolio compliance with the requirements of the
1940 Act, which requirements are outside of the Subadvisor's control, and
Subchapter M of the Internal Revenue Code of 1986, as amended, and shall be
indemnified and held harmless by Diversified for any loss in carrying out the
terms and provisions of this Agreement, including reasonable attorney's fees,
indemnification to the Portfolio, or any shareholder thereof and, brokers and
commission merchants, fines, taxes, penalties and interest. Subadvisor,
however, shall be liable for any liability, damages, or expenses of Diversified
arising out of negligence, malfeasance or violation of applicable law by any of
its employees in providing management under this Agreement; and, in such cases,
the indemnification by Diversified, referred to above, shall be inapplicable.
The Subadviser may apply to Diversified at any time for instructions and
may consult counsel for Diversified or its own counsel with respect to any
matter arising in connection with the duties of the Subadvisor. Also, the
Subadvisor shall be protected in acting upon advice of Diversified and/or
Diversified's counsel and upon any document which Subadvisor reasonably
believes to be genuine and to have been signed by the proper person or persons.
6. Exclusivity. Subadvisor represents to Diversified that during the
term of this Agreement, Subadvisor will not manage any portfolio, of
substantially similar size and managed in accordance with the same investment
strategy and substantially similar investment guidelines as the Portfolio, for
any collective trust, open-end investment company registered under the
Investment Company Act of 1940, Variable Insurance Contract registered under
the Investment Company Act of 1940, or insurance company separate account that
engages Subadvisor's services on or after the date of this Agreement and are
offered to the types of employee benefit plans referred to in Schedule C and
sponsored by competitors of Diversified which have been identified to
Subadvisor in writing by Diversified, in providing services to such types of
employee benefit plans without providing Diversified with 60 days prior written
notice or, if 60 days' prior notice is not possible due to circumstances beyond
the control of Subadvisor, the best possible prior notice which may reasonably
be provided by Subadvisor under the circumstances resulting in the engagement
of Subadvisor's services for which notice is required under this Section 6.
7. Duration, Termination and Amendments of this Agreement. This
Agreement shall become effective as of the day and year first above written and
shall govern the relations between the parties hereto thereafter, and, unless
terminated earlier as provided below, shall remain in force for two years, on
which date it will terminate unless its continuance thereafter is specifically
approved at least annually (a) by the vote of a majority of the Trustees of the
Portfolio who are not "interested persons" to this Agreement or of the
Subadvisor or Diversified at an in person
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meeting specifically called for the purpose of voting on such approval, and (b)
by the Board of Trustees of the Portfolio or by vote of a majority of the
outstanding voting securities of the Portfolio. However, if the shareholders of
the Portfolio fail to approve the Agreement as provided herein, the Subadvisor
may continue to serve hereunder in the manner and to the extent permitted by the
Investment Company Act of 1940 and Rules thereunder.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees, or by the vote of a majority of the outstanding voting
securities of the Portfolio, or by Diversified. The Subadvisor may terminate the
Agreement only upon giving 90 days' advance written notice to Diversified. This
Agreement shall automatically terminate in the event of its assignment.
Except as otherwise provided by applicable law, this Agreement may be
amended only if such amendment is approved by the vote of a majority of the
outstanding voting securities of the Portfolio and by vote of a majority of the
Board of Trustees of the Portfolio who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval.
The terms "specifically approved at least annually", "vote of a majority of
the outstanding voting securities", "assignment", "affiliated person", and
"interested persons", when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
8. Certain Records. Any records to be maintained and preserved pursuant
to the provisions of Rule 31a-1 and Rule 31a-2 adopted under the 1940 Act
which are prepared or maintained by the Subadvisor on behalf of the Portfolio
are the property of the Portfolio and will be surrendered promptly to the
Portfolio on request.
9. Survival of Compensation Rates. All rights to compensation under
this Agreement shall survive the termination of this Agreement.
10. Entire Agreement. This Agreement states the entire agreement of the
parties with respect to investment advisory services to be provided to the
Portfolio by the Subadvisor and may not be amended except in a writing signed
by the parties hereto and approved in accordance with Section 7 hereof.
11. Applicable Law. This agreement shall be governed by, and construed
in accordance with, the laws of the State of New York.
12. Change of Management and Pending Litigation. Subadvisor represents
to Diversified that it will disclose to Diversified promptly after it has
knowledge of
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any significant change or variation in its management structure or personnel or
any significant change or variation in its management style or investment
philosophy. In addition, Subadvisor represents to Diversified that it will
similarly disclose to Diversified, promptly after it has knowledge, the
existence of any pending material legal action being brought against it whether
in the form of a lawsuit or a non-routine investigation by any federal or state
governmental agency.
Diversified represents to Subadvisor that any information received by
Diversified pursuant to this section will be kept strictly confidential and
will not be disclosed any third party.
13. Use of Name. Subadvisor hereby agrees that Diversified may use the
Subadvisor's name in its marketing or advertising materials. Diversified agrees
to allow the Subadvisor to examine and approve any such materials prior to use.
14. Override Provisions. Notwithstanding any other provision of this
Agreement, (i) prior to this Agreement being approved by a vote of a majority
of the Portfolio's outstanding voting securities in accordance with the 1940
Act, in no event shall compensation paid to the Subadvisor hereunder exceed the
amount permitted by Rule 15a-4 under the 1940 Act, and (ii) if this Agreement
is not approved by a vote of a majority of the Portfolio's outstanding voting
securities in accordance with the 1940 Act no later than 150 days after the
date of this Agreement, this Agreement shall immediately terminate.
IN WITNESS WHEREOF, the parties thereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
Diversified Investment Advisors, Inc.
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Vice President
Alliance Capital Management L.P.
By: /s/ [illegible]
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Alliance Capital Management
Corporation, its General Partner
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SCHEDULE B
The Subadvisor shall be compensated for its services under this Agreement on
the basis of the below-described annual fee schedule. The fee schedule shall
only be amended by agreement between the parties.
FEE SCHEDULE
.27% OF THE FIRST $300M NET ASSETS
.16% OF NET ASSETS IN EXCESS OF $300M AND UP TO $1B
.13% OF NET ASSETS IN EXCESS OF $1B
Net assets are equal to the market value of the Portfolio. Fees will be
calculated by multiplying the arithmetic average of the beginning and ending
monthly net assets by the fee schedule and dividing by twelve. The fee will
accrue monthly and will be paid quarterly.
