INVESTMENT SUBADVISORY AGREEMENT
INVESTMENT SUBADVISORY AGREEMENT, dated as of April 29, 2004 by and between
Diversified Investment Advisors, Inc., a Delaware corporation ("Diversified")
and Xxxxxxx Xxxxx Asset Management, L.P. ("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 Growth & 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 the Portfolio's Board of Trustees
("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, to the extent required under applicable
law, 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 and instruments
to be purchased or sold or exchanged in seeking to achieve the investment
objective and strategy applicable to the assets; (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 to
sell or dispose of securities in the Subadvisor's sole discretion; (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 in person once
annually, and participate four times per year via telephone conference calls,
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
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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.
The Subadvisor may execute account documentation, agreements, contracts and
other documents requested by brokers, dealers, counterparties and other persons
in connection with its management of the Portfolio.
Diversified will assume the responsibility for the actual voting of any
voting rights. Upon request from Diversified, the Subadvisor shall also inform
Diversified as to how Subadvisor voted proxies, corporate actions and other
matters with respect to other clients of Subadvisor for whom Subadvisor has
voting authority. 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 period, if any,
specified in such notice or until similarly notified that such policy has been
revoked. In any such case, Diversified shall ensure that the Portfolio's
prospectus and statement of additional information (collectively, "Prospectus")
are revised as necessary to reflect such investment policies.
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 brokers or dealers affiliated with Subadvisor,
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 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.
2. TRANSACTIONS WITH AFFILIATES. Diversified hereby agrees and consents
that the Subadvisor and its affiliates are authorized to execute agency cross
transactions (collective "Cross transactions") for the Portfolio, provided such
transactions comply with Rule 206(3)-2 under the Investment Advisers Act of 1940
("Advisers Act"), Rule 17e-1 under the 1940 Act and any other applicable laws or
regulations, or conditions imposed by the Board of Trustees of the Portfolio and
communicated by Diversified to the Subadvisor. Cross transactions are
transactions which may be effected by the Subadvisor or its affiliates acting as
broker for both the Portfolio and the counterparty to the transaction. Cross
transactions enable the Subadvisor to purchase or sell a block of securities for
an account at a set price and possibly avoid an unfavorable price movement that
may be created through entrance into the market with such purchase or sell
order. However, the Diversified should note that the Subadvisor has a
potentially conflicting division of loyalties and responsibilities regarding
both parties to Cross transactions and that the Subadvisor, or any of its
affiliates, if acting as broker; may receive commissions from both parties to
such transactions. The Subadvisor acknowledges that it is prohibited from
recommending any Cross transactions to its advisory clients on both sides of the
transaction and understands that its authority as the Subadvisor to execute
Cross transactions for the Portfolio is terminable at will without penalty,
effective upon receipt by the Subadvisor of written notice from Diversified, and
that the failure to terminate such authorization will result in its
continuation.
In connection with any agency Cross transactions, the Subadvisor will
provide Diversified with a confirming letter describing the details of such
trades, and other reports or information that Diversified may reasonably
request. The Subadvisor will disclose to Diversified the commissions received by
the
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Subadvisor or its affiliates for executing the other side of the transaction.
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.
3. 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.
4. 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.
5. 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.
6. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS. Diversified will
provide the Subadvisor with the statement of investment objective, policies and
restrictions applicable to the Portfolio as contained in the Portfolio's
Prospectus, all amendments or supplements to the Prospectus, and any
instructions adopted by the Board of Trustees supplemental thereto. Diversified
agrees, on an ongoing basis, to notify the Subadvisor in, not specifically
identified to the Subadvisor by Diversified. writing of each change in the
fundamental and non-fundamental investment policies of the Portfolio and will
provide the Subadvisor with such further information applicable thereto as the
Subadvisor may from time to time reasonably request for performance of its
obligations under this Agreement. Diversified retains the right, on written
notice to the Subadvisor, to modify any such objective, policies or restrictions
in accordance with applicable laws, at any time.
7. With respect to any such procedures pertaining to trading with
affiliates of the Portfolio (other than the Subadvisor's affiliates), the
Subadvisor shall not bear any responsibility and shall be released from any
obligation or cost which results from entering into a trade pursuant to the
Portfolio(s) Rule 17a-7, 17e-1 or 10f-3 procedures with any affiliated entity,
other than affiliates of the Subadvisor
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8. 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 as set forth in the Prospectus and in the
investment policy statement, 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, or compliance of any other assets
for Diversified or the Portfolio, (iii) compliance with applicable tax
diversification tests on 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, Subchapter M
of the Internal Revenue Code of 1986, as amended, and other Federal and State
laws and regulations applicable to the Portfolio. 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 direct liability,
damages, or expenses of Diversified arising out of the gross negligence,
malfeasance or wilful misconduct by any of its employees in providing management
under this Agreement.
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.
9. 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 60 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.
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10. 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.
11. SURVIVAL OF COMPENSATION RATES. All rights to compensation under this
Agreement shall survive the termination of this Agreement.
12. 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.
13. APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
14. 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 senior
portfolio management 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 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.
15. Diversified and the Subadvisor agree that the Subadvisor shall have no
responsibility or liability arising out of any non-compliance by Diversified
with anti-money laundering regulations. Diversified certifies that the
Portfolio's distributor has implemented an anti-money laundering program and a
customer identification program that each comply with the requirements of
applicable law, including the Bank Secrecy Act and U.S.A. PATRIOT Act of 2001
and the regulations promulgated thereunder, and that Diversified will perform
the requirements of such programs with respect to the investors in the Trust.
Diversified and Subadvisor hereby certify that they have policies and procedures
designed to detect and deter disruptive trading practices, including "market
timing", and Diversified and Subadvisor agree that they will continue to enforce
and abide by such policies and procedures, as amended from time to time, and
comply with all existing and future laws relating to such matters or to the
purchase and sale of interests in the Portfolio generally.
16. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF DIVERSIFIED. Diversified
represents, warrants and agrees that:
a. Diversified has been duly authorized by the Board of Trustees of the
Fund to delegate to the Subadvisor the provision of investment services to the
Portfolio as contemplated hereby.
b. Diversified is currently in compliance and shall continue to comply
with the requirements imposed upon Diversified by applicable law and
regulations.
c. Diversified is registered as an "investment adviser" under the
Investment Advisers Act of 1940 ("Advisers Act") and will continue to be so
registered for so long as this Agreement remains in effect.
d. The Portfolio and Diversified acknowledge and agree that the
Subadvisor shall have no supervisory responsibilities with respect
to any anti-money laundering program or efforts on behalf of the
Portfolio or the Assets.
e. Diversified has the authority to enter into and perform the services
contemplated by this Agreement and will promptly notify the
Subadvisor of the occurrence of any event that would disqualify it
from serving as an investment adviser of any investment company
pursuant to Section 9(a) of the 1940 Act or otherwise.
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f. Diversified represents and warrants that the Portfolio is duly
registered as an open-end investment company under the 1940 Act and
shall promptly notify the Subadvisor if the Portfolio is no longer
so registered or covered by an applicable exemption from
registration.
g. Diversified acknowledges that it has been provided with a copy of
Subadvisor's Form ADV and has reviewed the Form ADV to its
satisfaction, including, but not limited to, information about
Subadvisor's other business activities and potential conflicts of
interest.
17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE SUBADVISOR. The
Subadvisor represents, warrants and agrees that:
a. The Subadvisor is registered as an "investment adviser" under the
Advisers Act and has the authority to enter into and perform the
services contemplated by this Agreement.
b. The Subadvisor will, promptly after filing with the Securities and
Exchange Commission an amendment to its Form ADV that materially
impacts the Subadvisor's policies, procedures or personnel related
to its duties hereunder, furnish a copy of such amendment to
Diversified.
c. The Subadvisor will promptly notify Diversified of the occurrence of
any event that would disqualify the Subadvisor from serving as an
investment adviser of an investment company pursuant to Section 9 of
the 1940 Act or otherwise. The Subadvisor will also immediately
notify Diversified if it is served or otherwise receives notice of
any action, suit, proceeding, inquire or investigation, at law or in
equity, before or by any court, public board or body, involving the
affairs of the Portfolio.
18. NOTICE. Any notice under this Agreement shall be given in writing
addressed and delivered or mailed, postage prepaid, to the other parties to this
Agreement at the following addresses: Xxxxxxx Xxxxx Asset Management, L.P., 00
Xxx Xxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx XxXxxxxx, and a
copy to their General Counsel, Xxxxxxx, Xxxxx & Co., 00 Xxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000; and Diversified Investment Advisors, Inc., 0 Xxxxxxxxxxxxxx
Xxxx, Xxxxxxxx, Xxx Xxxx 00000, Attention: CFA Xxxxxxx X. Xxxxx.
19. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
20. Diversified and Subadvisor agree that without the prior written consent
of the other party, it will not: (i) use the name of the other party, or the
name of any affiliate, managing director, employee of the other party, or any
trade name, trademark, trade device, service xxxx, symbol, logo or any
abbreviation, contraction or simulation of the other party or its affiliates in
advertising, publicity, or otherwise in connection with the investment advisory
services; or (ii) represent (directly or indirectly) that any product or any
service provided by the party has been approved or endorsed by the other.
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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:
--------------------------------------
Name:
Title:
XXXXXXX SACHS ASSET MANAGEMENT
By:
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Name: Xxxxx XxXxxxxx
Title: Managing Director
SCHEDULE B
The Subadvisor shall be compensated for its services under this Agreement on the
basis of the below-described annual fee schedule. For purposes of applying this
decremental fee schedule, any other assets managed by Subadvisor for Diversified
will be combined with the assets of this Portfolio to determine the applicable
basis points charge. The fee schedule shall only be amended by agreement between
the parties.
FEE SCHEDULE
.14% OF THE FIRST $500M OF NET ASSETS
.12% OF THE NEXT $1B OF NET ASSETS
.10% OF NET ASSETS IN EXCESS OF $1.5B
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.
SCHEDULE C
Target market for 401(a), 403(b) and 457 plans is those plans with assets
between $1 and $250 million.
