INVESTMENT SUBADVISORY AGREEMENT
INVESTMENT SUBADVISORY AGREEMENT, dated as of September 15, 2003 by and
between Diversified Investment Advisors, Inc., a Delaware corporation
("Diversified") and Xxxxxxxx Capital Management, a division of Xxxxxxxx, Inc.
("Subadvisor").
WITNESSETH:
WHEREAS, Diversified has been organized to operate as an investment
advisor registered under the Investment Advisers Act of 1940 and has been
retained to provide investment advisory services to the Intermediate Government
Bond 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 ("Assets"), 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 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.
In particular, the Subadvisor shall, without limiting the foregoing:
(i) continuously review, supervise and implement the investment program for the
Assets; (ii) monitor regularly the relevant securities for the Assets 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 Assets in balance with the designated
investment strategy; (iv) determine, in the Subadvisor's discretion, whether to
exercise warrants or other rights with respect to the Assets; (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 Assets; (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 on the last day of such
month, rates of return, and (c) such other information relating to the Assets 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 Assets; (viii) provide the Portfolio, as reasonably requested by
Diversified, with records concerning the Subadvisor's activities which the
Portfolio is required by law to maintain with respect to the Assets; and (ix)
render regular reports to the Portfolio's officers and Directors concerning the
Subadvisor's discharge of the foregoing responsibilities.
Subadvisor will send Diversified an inventory of the investments of the
Portfolio as soon as reasonably possible after the end of each monthly or
quarterly period. This report will also contain investment results. The
calculation of investment results will commence on the earlier of (a) the last
business day of the month following the month in which the funds are received or
(b) the last business day of the month in which the Assets have been structured
in accordance with Diversified's investment guidelines and objectives. Copies of
confirmations of transactions executed will be sent promptly to Diversified's
custodian. Subadvisor does not assume responsibility for the accuracy of
information furnished by Diversified or any other party.
Decisions on proxy voting rights, rights to consent to corporate action
and any other rights pertaining to the securities comprising the Portfolio will
be made and exercised by the Subadvisor unless reserved to Diversified.
Should the Board of Trustees at any time establish an investment policy
with respect to the Assets 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.
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The Subadvisor shall take, on behalf of the Assets, all actions which
it deems necessary to implement the investment policies determined as provided
above with respect to the Assets, and in particular to place all orders for the
purchase or sale of securities for the Portfolio's account with brokers or
dealers selected by it, and to that end the Subadvisor is authorized as an agent
of the Portfolio to give instructions to the custodian of the Portfolio as to
deliveries of securities and payments of cash for the 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 research and brokerage
services to the Portfolio within the meaning of Section 28(e) of the Securities
Exchange Act of 1934, 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 Xxxxxxxx Capital
Management 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 clients for which the Subadvisor
exercises investment discretion.
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
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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 Portfolio's 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.
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 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 of the Portfolio 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. Diversified
agrees that requirements imposed by the 1940 Act, Subchapter M, or any other
applicable laws, that are outside Subadvisor's control include compliance with
any percentage limitations applicable to the Portfolio's assets that would
require knowledge of the Portfolio's holdings other than the Assets subject to
this Agreement. Subadvisor 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 the
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gross 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.
Diversified shall appoint a custodian to take and have possession of
the Assets of the Portfolio. Subadvisor shall not be custodian. Subadvisor shall
have no obligation or liabilities with respect to the custodial arrangements.
The Subadvisor 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. 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" with respect to this Agreement or of
the Subadvisor or Diversified at an in person 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.
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
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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.
7. 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 with respect to the
Assets and will be made available promptly to the Portfolio on request.
8. Survival of Compensation Rates. All rights to compensation
under this Agreement shall survive the termination of this Agreement.
9. 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 6 hereof.
10. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
11. Change of Management and Pending Litigation. Subadvisor
represents to Diversified that it will disclose to Diversified promptly after it
has knowledge of any change or variation in its management structure or
personnel or any significant change or variation in its management style or
investment philosophy that is material to this Agreement. In addition,
Subadvisor represents to Diversified that it will similarly disclose to
Diversified, promptly after it has knowledge, the existence of any pending legal
action being brought against it whether in the form of a lawsuit which has the
potential to impact the Subadvisor's ability to provide services 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 to any third party.
12. Communications. Instructions with respect to securities
transactions may be given orally and, where deemed necessary, may be confirmed
in writing as soon as practicable.
Notices required to be given under this Agreement shall be sent by
certified mail and shall be deemed effective when received; and, as to the
custodian, at such address as it may specify to Subadvisor in writing, or at
such other address as a party to receive notice may specify in a notice given in
accordance with this provision. Subadvisor may rely on any notice from any
person reasonably believed to be genuine and authorized. Diversified will, upon
inception of this Agreement and from time-to-time as needed, provide Subadvisor
with a list of authorized
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signatures for those persons from whom the Subadvisor may accept direction.
13. Disclosure Statement - Form ADV. Diversified hereby
acknowledges receipt simultaneously with the execution of this Agreement of the
currently effective Form ADV Part II for the purpose of disclosure about
services, fees, and other matters of importance related to a decision of
becoming a client of the Subadvisor. Accordingly, Diversified shall have the
option to terminate this Agreement without penalty within five business days
after that date of execution, provided, however, that any investment action
taken by Subadvisor with respect to the Portfolio prior to the effective date of
such termination shall be at Diversified's risk.
14. 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.
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: _________________________________
Xxxx X. Xxxxxx
Vice President & Senior Counsel
Xxxxxxxx Capital Management
By: _________________________________
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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
10 BASIS POINTS OF TOTAL NET ASSETS
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 be
paid quarterly.
Xxxxxxxx Capital Management agrees that if at anytime during the term of this
Subadvisory Agreement, Stephens offers another of its clients (other than a
client that is an affiliated person of Xxxxxxxx) a lower fee than that set forth
in this Schedule B for the management of a similarly structured Intermediate
Government Bond Portfolio then Diversified will also be charged the lower rate.
Diversified will benefit from the lower rate from the first day that it is in
effect for Xxxxxxxx'x other client.
