INVESTMENT SUBADVISORY AGREEMENT
INVESTMENT SUBADVISORY AGREEMENT, dated as of December 13, 2005
("Agreement") by and between Diversified Investment Advisors, Inc., a Delaware
corporation ("Diversified") and Trusco Capital Management, Inc., a Georgia
corporation ("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 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 reasonably 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.
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.
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 future 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 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, including affiliates of Subadvisor in accordance with
applicable law, 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 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 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 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 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
and its directors and officers.
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 Investment Advisers Act of 1940. 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 reckless disregard of the duties owed 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.
Nothing herein shall constitute a waiver of any rights of Diversified under
federal securities laws.
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/Compliance Obligations/Confidentiality. Subadvisor agrees
that, during the term of this Agreement, Subadvisor shall disclose to
Diversified the identity of any other registered 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. In addition, Subadvisor agrees
to provide Diversified with all written compliance policies and procedures of
the Subadvisor (and all updates thereto) and otherwise comply with all
reasonable requests by Diversified to ensure compliance with all applicable
securities and other laws.
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.
8. 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
Securities and Exchange Commission under said Act.
9. 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 will be made
available promptly to the Portfolio on request.
10. Survival of Compensation Rates. All rights to compensation under this
Agreement shall survive the termination of this Agreement.
11. 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 8 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. Subject to Section 8 above, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors.
12. 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
Commission, whether of special or general application, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
13. 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 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 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.
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 7.
14. 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.
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/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
Senior Vice President &
General Counsel
Trusco Capital Management, Inc.
By: /s/ Xxxx X. Xxxxxxxxx III
------------------------------------
Executive Vice President
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.
