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EXHIBIT d(11)
INVESTMENT SUBADVISORY AGREEMENT
INVESTMENT SUBADVISORY AGREEMENT, dated as of April 20, 2001, by and
between Diversified Investment Advisors, Inc., a Delaware corporation
("Diversified"), and Xxxxxx, Rosenthal, McGlynn, LLC ("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 Mid-Cap Value 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 the Portfolio's 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 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. 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 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 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
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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 Xxxxxx &
Rygel 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.
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.
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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.
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 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 the
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 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. Exclusivity. Subadvisor represents to Diversified that during the
term of this Agreement Subadvisor will not manage any portfolio, 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 are offered to the types of
employee benefit plans referred to in Schedule C and sponsored by competitors of
Diversified in providing services to such types of employee benefit plans
without providing Diversified with 60 days prior written notice. It is
understood that Subadvisor shall not be limited by this section 6 with respect
to any other portfolio that it may offer (such as a portfolio that includes a
significant portion devoted to non-
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U.S. securities or a commingled vehicle that is not sponsored by a provider of
bundled services to the types of employee benefit plans specified on Schedule
C).
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 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 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
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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 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 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 to 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.
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 and Senior Counsel
Xxxxxx, Rosenthal, McGlynn, LLC
By:__________________________________
Xxxxxx-ISA
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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
.0070 OF THE FIRST $25M NET ASSETS
.0040 OF THE NEXT $25M OF NET ASSETS
.0035 OF THE NEXT $50M OF NET ASSETS
.0025 OF THE NEXT $200M OF NET ASSETS
.0020 OF NET ASSETS IN EXCESS OF $300M
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.
Subadvisor agrees that if at anytime during the term of this Subadvisory
Agreement, Subadvisor offers another of its clients a lower fee than that set
forth in this Schedule B for the management of a similarly structured Mid-Cap
Value Portfolio or Mid-Cap Value Fund 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 Subadvisor's other client. It is understood and agreed by
both Subadvisor and Diversified that this final paragraph of Schedule B is
applicable solely to Diversified's Mid-Cap Value Portfolio and not to any other
fund/assets which Subadvisor may manage in the future on Diversified's behalf.
Xxxxxx-ISA
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SCHEDULE C
Target market for 401(a), 403(b) and 457 plans is those plans between $1 and
$250 million.
Xxxxxx-ISA
