Exhibit d(37)
INVESTMENT SUBADVISORY AGREEMENT
INVESTMENT SUBADVISORY AGREEMENT, dated as of December 15, 2006
("Agreement") by and between Diversified Investment Advisors, Inc., a Delaware
corporation ("Diversified") and Perimeter Capital Partners LLC, a Delaware
limited liability company ("Subadvisor").
WITNESSETH:
WHEREAS, Diversified has been organized to operate as an investment advisor
registered under the Investment Advisers Act of 1940, as amended (the "Advisers
Act") and has been retained to provide investment advisory services to the
Small-Cap Growth 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 the Portfolio's Board of Trustees
and communicated to the Subadvisor in writing ("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. Subadvisor's
responsibility for providing investment advice to the Portfolio is limited to
that discrete portion of the Portfolio represented by the Assets and Subadvisor
is prohibited from directly or indirectly consulting with any other subadviser
for a portion of the Portfolio's assets concerning Portfolio transactions in
securities or other assets.
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 Trustees concerning the
Subadvisor's discharge of the foregoing responsibilities.
Upon request, the Subadvisor shall also make recommendations to Diversified
as to the manner in which voting rights, rights to consent to corporate actions
and any other rights pertaining to the securities comprising the Assets shall be
exercised. Diversified, however, will assume the responsibility for the actual
voting of any voting rights.
Upon request, the Subadvisor shall provide assistance regarding the fair
value of securities held by the Portfolio for which market quotations are not
readily available, which assistance may include participation of appropriate
representatives at pricing committee meetings.
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 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 the 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 (the "SEC")
and the NASD.
On occasions when Subadvisor deems the purchase or sale of a security to be
in the best interest of the Portfolio as well as other clients of Subadvisor,
Subadvisor, to the extent permitted by applicable laws and regulations, may, but
shall be under no obligation to, aggregate the securities to be sold or
purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by Subadvisor in the manner Subadvisor considers to be the most
equitable and consistent with its fiduciary obligations to the Portfolio and to
such other clients.
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
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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.
(a) 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.
(b) If, at any time from and after the execution date of this Agreement,
the Subadvisor enters into an agreement with any other client to provide
investment management services comparable to those provided under this
Agreement, and if such agreement requires the payment of fees that are in any
respect lower than the fee established in this Agreement, the Subadvisor agrees
that the fee required under this Agreement shall be reduced to the level
specified in the agreement with such other client. Principal variables which
shall be utilized to determine whether the services are comparable include, but
are not limited to, size of account, restrictions on the account, aggressiveness
of investment objectives and discretionary character of the account. Such
reduction in fees shall be effective as of the effective date of the agreement
with such other client. Subadvisor agrees to provide Diversified with timely
written notice of any event or occurrence that would require a reduction in fees
provided under this Agreement. The Subadvisor represents and warrants that the
fees provided under this Agreement do not exceed those currently charged to
other clients.
4. Covenants and Representations of the Subadvisor.
(a) 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.
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(b) The Subadvisor 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 and its directors and officers.
(c) The Subadvisor represents and warrants that, it has adopted and
implemented, and throughout the term of this Agreement shall maintain in effect
and implement, policies and procedures reasonably designed to prevent, detect
and correct violations by the Subadviser and its supervised persons, and, to the
extent the activities of the Subadvisor in respect to the Portfolio could affect
the Portfolio, by the Portfolio, of "federal securities laws" (as defined in
Rule 38a-1 under the 1940 Act), and that the Subadvisor has provided the
Portfolio with true and complete copies of its policies and procedures and
related information requested by the Portfolio.
5. Representations of Diversified. Diversified hereby acknowledges receipt
of the Subadvisor's Form ADV, Part II (which also includes its privacy policy)
at least 48 hours prior to the effective date of this Agreement pursuant to Rule
204-3 under the Advisers Act. The Subadvisor annually shall deliver, or offer in
writing to deliver, upon written request of Diversified and without charge, Form
ADV, Part II.
6. 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, (v) administration
of the plans and trusts investing through the Portfolio, or (vi) overall
Portfolio compliance with requirements of the 1940 Act and Subchapter M of the
Internal Revenue Code of 1986, relating to 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. (vii) The Subadvisor shall not
be responsible for any loss incurred by reason of any act or omission of any
custodian, including but not limited to any loss arising from, on account of or
in connection with any custodian failing to timely notify the Subadvisor of any
corporate action or similar transaction. (viii) The Subadvisor shall not be
responsible for any loss incurred by reason of any act or omission of any broker
or dealer; provided, however, that the Subadvisor will make reasonable efforts
to require that brokers and dealers selected by the Subadvisor perform their
obligations with respect to Diversified. 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 willful malfeasance, bad faith, gross negligence, or violation of
applicable law or reckless disregard of the duties owed
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pursuant to this Agreement 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.
7. Disclosure. Subadvisor agrees that, during the term of this Agreement,
Subadvisor shall disclose to Diversified the identity of any other commingled
investment fund product managed by the Subadvisor in a substantially similar
manner to the strategy employed under this Agreement if, to the best knowledge
of the Subadvisor, such commingled investment fund is sold in retirement plan
marketplaces in competition with the Portfolio.
8. Compliance Obligations. The Subadvisor shall promptly provide to the
Portfolio's compliance personnel the following documents:
(a) copies of all SEC examination correspondence, including correspondence
regarding books and records examinations and "sweep" examinations, issued during
the term of this Agreement, in which the SEC identified any concerns, issues or
matters (such correspondence is commonly referred to as a "deficiency letter")
relating to any aspect of the Subadvisor's investment advisory business and the
Subadvisor's responses thereto;
(b) a report of any material violations of the Subadvisor's compliance
program or any "material compliance matters" (as such term is defined in Rule
38a-1 under the 0000 Xxx) that have occurred with respect to the Subadvisor's
compliance program;
(c) a report of any material changes to the policies and procedures that
compose the Subadvisor's compliance program; and
(d) a copy of the Subadvisor's chief compliance officer's report regarding
the annual review of the Subadvisor's compliance program as required by Rule
206(4)-7 under the Advisers Act.
The Subadvisor agrees to cooperate with periodic reviews by the Portfolio's
compliance personnel of the Subadvisor's compliance program and the operation
and implementation of the compliance program. The Subadvisor agrees to provide
reasonable access, during normal business hours, to the Subadvisor's facilities
for the purpose of conducting pre-arranged on-site compliance related due
diligence meetings with personnel of the Subadviser. The Subadvisor agrees to
provide the Portfolio's compliance personnel such
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additional information and certifications in respect of the Subadvisor's
compliance policies and procedures and related matters as the Portfolio's
compliance personnel may reasonably request.
9. Confidentiality. Each party agrees that it will treat confidentially all
information provided by the other party regarding such other party's business
and operations. All confidential information provided by a party hereto shall
not be disclosed to any unaffiliated third party without the prior consent of
the providing party except as necessary to perform services under this
Agreement, or during a regular examination or audit of the party. The foregoing
shall not apply to any information that is public when provided or thereafter
becomes public without fault of any party or which is required or requested to
be disclosed by any regulatory authority with jurisdiction, by judicial or
administrative process or otherwise by applicable law or regulation.
10. 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.
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 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 and, if required under
applicable law, the vote of a majority of the outstanding voting securities of
the Portfolio.
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 SEC
under said Act.
11. 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
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prepared or maintained by the Subadvisor with respect to the Assets will be made
available promptly to the Portfolio on request.
12. Survival of Compensation Rates. All rights to compensation under this
Agreement shall survive the termination of this Agreement.
13. 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 10 hereof.
Should any part of this Agreement be held 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.
14. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
Where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is altered by a rule, regulation or order of the
SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
15. Provision of Certain Information by Subadvisor. Subadvisor shall
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 that is
material to this Agreement. In addition, Subadvisor shall disclose to
Diversified, promptly after it has knowledge, the existence of any material
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. The
Subadvisor shall provide all information reasonably requested of it by the Board
of Trustees of the Portfolio in accordance with Section 15(c) of the 1940 Act.
Diversified represents to Subadvisor that any information received by
Diversified pursuant to this section will be kept confidential in accordance
with the provisions of Section 9.
16. Use of Name. Subadvisor hereby agrees that Diversified may use the
Subadvisor's name in its marketing or advertising materials. Diversified agrees,
upon request, to allow the Subadvisor to examine and approve any such materials
prior to use.
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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:
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Xxxxxx X. Xxxxx
Senior Vice President &
General Counsel
Perimeter Capital Partners LLC
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.
FEE SCHEDULE
.0080 OF THE FIRST $10 MILLION OF NET ASSETS
.0064 OF NEXT $40 MILLION OF NET ASSETS
.0048 OF NET ASSETS IN EXCESS OF $50 MILLION
Net assets are equal to the market value of the portion of the Portfolio
allocated to the Subadvisor. Fees will be calculated by multiplying the
arithmetic average of the beginning and ending monthly net assets for each
calendar month by the fee schedule and dividing by twelve. The fee for each
calendar quarter will be paid quarterly in arrears.