INVESTMENT SUBADVISORY AGREEMENT
INVESTMENT SUBADVISORY AGREEMENT, dated as of March 30, 2005 by and between
Diversified Investment Advisors, Inc., a Delaware corporation ("Diversified")
and LSV Asset Management ("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 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 discretionary portfolio investment advisory services described
herein for the investment and reinvestment of such amount of the Portfolio's
assets ("Assets"), subject to the control and direction of Diversified and the
Diversified Investors Portfolios' Board of Trustees, for the period and on the
terms hereinafter set forth.
The Subadvisor shall provide Diversified with such investment advice and
supervision as the latter may from time to time consider necessary for the
proper supervision of the Assets. The Subadvisor shall furnish an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged, 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) 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; (vi) 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; (vii) 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
(viii) render regular reports to the Portfolio's officers and Directors
concerning the Subadvisor's discharge of the foregoing responsibilities.
Subadvisor will send Diversified an inventory of the investments of the
Portfolio as soon as reasonably possible after the end of each monthly or
quarterly period. This report will also contain investment results. The
calculation of investment results will commence on the earlier of (a) the last
business day of the month following the month in which the funds are received or
(b) the last business day of the month in which the Assets have been structured
by Subadvisor in accordance with Diversified's investment guidelines and
objectives. Copies of confirmations of transactions executed will be sent
promptly to Diversified's custodian. Subadvisor does not assume responsibility
for the accuracy of information furnished by Diversified or any other party.
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.
The Subadvisor shall take, on behalf of the Assets, all actions which it
deems necessary to implement the investment policies determined as provided
above with respect to the Assets, and in particular to place all orders for the
purchase or sale of securities for the Portfolio's account with brokers or
dealers selected by it, and to that end the Subadvisor is authorized as an agent
of the Portfolio to give instructions to the custodian of the Portfolio as to
deliveries of securities and payments of cash for the account of the Portfolio.
Subject to the primary objective of obtaining the best available prices and
execution, the Subadvisor may place orders for the purchase and sale of
portfolio securities with such broker/dealers who provide research and brokerage
services
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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 LSV Asset Management is
investment advisor (but not a Subadvisor) shall only receive orders for the
purchase or sale of portfolio securities to the extent that the placing of such
orders is in compliance with the Rules of the Securities and Exchange Commission
and the National Association of Securities Dealers, Inc.
Notwithstanding the provisions of the previous paragraph and subject to
such policies and procedures as may be adopted by the Board of Trustees and
officers of the Portfolio, the Subadvisor may pay a member of an exchange,
broker or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another member of an exchange, broker or
dealer would have charged for effecting that transaction, in such instances
where the Subadvisor has determined in good faith that such amount of commission
was reasonable in relation to the value of the brokerage and research services
provided by such member, broker or dealer, viewed in terms of either that
particular transaction or the Subadvisor's overall responsibilities with respect
to the Portfolio and to other funds and clients for which the Subadvisor
exercises investment discretion.
Diversified authorizes Subadvisor to combine orders for the Portfolio with
orders for other clients of Subadvisor. Under this procedure, purchases or sales
of a particular security for the Portfolio may be combined with purchases or
sales of the same security for other clients on the same day. In such cases, the
price shown on the confirmation of the Portfolio's purchase or sale will be the
average execution price on all of the purchases and sales so aggregated that
day.
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
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of shareholder meetings; expenses of litigation and other extraordinary or
non-recurring events and expenses relating to the issuance, registration and
qualification of shares of the Portfolio.
3. Compensation of the Subadvisor. For the services to be rendered,
Diversified shall pay to the Subadvisor an investment advisory fee computed in
accordance with the terms of Schedule B herewith attached. If the Subadvisor
serves for less than the whole of any period specified, its compensation shall
be prorated.
4. Covenants and Representations of the Subadvisor. The Subadvisor agrees
that it will not deal with itself, or with the Trustees of the Portfolio or with
Diversified, or the Portfolio's principal underwriter or distributor as
principals in making purchases or sales of securities or other property for the
account of the Portfolio, except as permitted by the 1940 Act, and will comply
with all other provisions of the Declaration of Trust and any current
Registration Statement on Form N-1A of the Portfolio relative to the Subadvisor,
Advisor and its Trustees and officers.
5. Limits on Duties. The Subadvisor shall be responsible only for managing
the Assets in good faith and in accordance with the investment objectives,
fundamental policies and restrictions, and shall have no responsibility
whatsoever for, and shall incur no liability on account of (i) diversification,
selection or establishment of such investment objectives, fundamental policies
and restrictions (ii) advice on, or management of, any other assets for
Diversified or the Portfolio, (iii) filing of any tax or information returns or
forms, withholding or paying any taxes, or seeking any exemption or refund,
(iv) registration of the Portfolio with any government or agency, or
(v) administration of the plans and trusts investing through the Portfolio, or
(vi) overall Portfolio compliance with the requirements of the 1940 Act, which
requirements are outside of the Subadvisor's control, and Subchapter M of the
Internal Revenue Code of 1986, as amended. Diversified agrees that requirements
imposed by the 1940 Act, Subchapter M, or any other applicable laws, that are
outside Subadvisor's control include compliance with any percentage limitations
applicable to the Portfolio's assets that would require knowledge of the
Portfolio's holdings other than the Assets subject to this Agreement. Subadvisor
shall be indemnified and held harmless by Diversified for any loss in carrying
out the terms and provisions of this Agreement, including reasonable attorney's
fees, indemnification to the Portfolio, or any shareholder thereof and, brokers
and commission merchants, fines, taxes, penalties and interest. Subadvisor,
however, shall be liable for any liability, damages, or expenses of Diversified
arising out of the gross negligence, malfeasance or violation of applicable law
by any of its employees in providing management under this Agreement; and, in
such cases, the indemnification by Diversified, referred to above, shall be
inapplicable.
Diversified shall appoint a custodian to take and have possession of the
Assets of the Portfolio. Subadvisor shall not be custodian. Subadvisor shall
have no obligation or liabilities with respect to the custodial arrangements.
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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.
Subadvisor shall not be responsible for voting proxies related to securities
held by the Portfolio. Subadvisor will not advise Diversified or the Portfolio
or act for Diversified or the Portfolio in any legal proceedings, including
bankruptcies, involving securities held or previously held by the Portfolio or
the issuers of those securities.
6. Duration, Termination and Amendments of this Agreement. This Agreement
shall become effective as of the day and year first above written and shall
govern the relations between the parties hereto thereafter, and, unless
terminated earlier as provided below, shall remain in force for two years, on
which date it will terminate unless its continuance thereafter is specifically
approved at least annually (a) by the vote of a majority of the Trustees of the
Portfolio who are not "interested persons" with respect to this Agreement or of
the Subadvisor or Diversified at an in person meeting specifically called for
the purpose of voting on such approval, and (b) by the Board of Trustees of the
Portfolio or by vote of a majority of the outstanding voting securities of the
Portfolio. However, if the shareholders of the Portfolio fail to approve the
Agreement as provided herein, the Subadvisor may continue to serve hereunder in
the manner and to the extent permitted by the Investment Company Act of 1940 and
Rules thereunder.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees, or by the vote of a majority of the outstanding voting
securities of the Portfolio, or by Diversified. The Subadvisor may terminate the
Agreement only upon giving 90 days' advance written notice to Diversified. This
Agreement shall automatically terminate in the event of its assignment.
This Agreement may be amended only if such amendment is approved by the
vote of a majority of the outstanding voting securities of the Portfolio and by
vote of a majority of the Board of Trustees of the Portfolio who are not parties
to this Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval.
The terms "specifically approved at least annually", "vote of a majority of
the outstanding voting securities", "assignment", "affiliated person", and
"interested persons", when used in this Agreement, shall have the respective
meanings specified 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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7. Disclosure/Compliance Obligations. Subadviser agrees that, during the
term of this Agreement, Subadvisor, to the extent that it will not be in breach
of any other client agreements, shall disclose to Diversified the identity of
any other commingled investment fund product managed by the Subadviser in a
substantially similar manner to the strategy employed under this Agreement. In
addition, Subadviser agrees to provide Diversified with all written compliance
policies and procedures of the Subadviser (and all updates thereto) and
otherwise comply with all reasonable requests by Diversified to ensure
compliance with all applicable securities and other laws.
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 with respect to the Assets and will be
made available 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
parties with respect to investment advisory services to be provided to the
Portfolio by the Subadvisor and may not be amended except in a writing signed by
the parties hereto and approved in accordance with Section 6 hereof.
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 change or variation in its management structure or personnel or any
significant change or variation in its management style or investment philosophy
that is material to this Agreement. In addition, Subadvisor represents to
Diversified that it will similarly disclose to Diversified, promptly after it
has knowledge, the existence of any pending legal action being brought against
it whether in the form of a lawsuit which has the potential to impact the
Subadvisor's ability to provide services or a non-routine investigation by any
federal or state governmental agency.
Diversified represents to Subadvisor that any information received by
Diversified pursuant to this section will be kept strictly confidential and will
not be disclosed to any third party.
13. Communications. Instructions with respect to securities transactions
may be given orally and, where deemed necessary, may be confirmed in writing as
soon as practicable.
Notices required to be given under this Agreement shall be sent by
certified mail
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and shall be deemed effective when received; and, as to the custodian, at such
address as it may specify to Subadvisor in writing, or at such other address as
a party to receive notice may specify in a notice given in accordance with this
provision. Subadvisor may rely on any notice from any person reasonably believed
to be genuine and authorized. Diversified will, upon inception of this Agreement
and from time-to-time as needed, provide Subadvisor with a list of authorized
signatures for those persons from whom the Subadvisor may accept direction.
14. Disclosure Statement - Form ADV. Diversified hereby acknowledges
receipt simultaneously with the execution of this Agreement of the currently
effective Form ADV Part II for the purpose of disclosure about services, fees,
and other matters of importance related to a decision of becoming a client of
the Subadvisor. Accordingly, Diversified shall have the option to terminate this
Agreement without penalty within five business days after that date of
execution, provided, however, that any investment action taken by Subadvisor
with respect to the Portfolio prior to the effective date of such termination
shall be at Diversified's risk.
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15. 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.
Diversified agrees that Subadvisor may include Diversified's name in
Subadvisor's list of clients used in Subadvisor's marketing materials.
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
LSV Asset Management
By:
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SCHEDULE B
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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
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50 basis points of the first $100M of net assets
40 basis points of the next $100M of net assets
35 basis points of the next $600M of net assets
33 basis points of any amount in excess of $800M of net assets
In determining the basis point fee applicable to the Portfolio, the combined net
assets of the Portfolio and the portion of the Mid-Cap Value Portfolio managed
by LSV will be applied to the above fee schedule. The resulting basis points
will be the "Average Basis Points". The net assets of the Portfolio and the
portion of the Mid-Cap Value Portfolio managed by LSV will be the arithmetic
average of the beginning and ending monthly net assets. The fee for the
Portfolio will be determined each month by applying 1/12th of the Average Basis
Points to the net assets of the Portfolio. The fee will be paid quarterly in
arrears.
LSV Asset Management agrees that if at anytime during the term of this
Subadvisory Agreement, LSV offers another of its clients (other than a client
that is an affiliated person of LSV) a lower fee than that set forth in this
Schedule B for the management of a similarly structured Mid-Cap Value Portfolio
then Diversified will also be charged the lower rate. Diversified will benefit
from the lower rate from the first day that it is in effect for LSV's other
client. The foregoing shall not include Subadvisor's fee arrangements:
(a) negotiated prior to the execution of this Agreement; (b) with clients with
investments in more than one of Subadvisor's products; (c) with clients with a
greater level of assets invested with Subadvisor; and (d) with clients whose
fees are based on investment performance.
