INVESTMENT SUBADVISORY AGREEMENT
INVESTMENT SUBADVISORY AGREEMENT, dated as of May 3, 2004 by and between
Diversified Investment Advisors, Inc., a Delaware corporation ("Diversified")
and Xxxxxxx+Xxxxxxx+Xxxxx, XX ("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 Subadviser 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
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(ix) render regular reports to the Portfolio's officers and Directors concerning
the Subadvisor's discharge of the foregoing responsibilities.
The Subadvisor shall also make recommendations to Diversified as to the
manner in which voting rights, rights to consent to corporate action 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 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 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.
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
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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.
The Subadvisor may apply to Diversified at any time for instructions and
may consult counsel for Diversified or its own counsel with respect to any
matter arising in connection with the duties of the Subadvisor. Also, the
Subadvisor shall be protected in acting upon advice of Diversified and/or
Diversified's counsel and upon any document which Subadvisor reasonably believes
to be genuine and to have been signed by the proper person or persons.
6. 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
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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.
7. 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.
8. SURVIVAL OF COMPENSATION RATES. All rights to compensation under this
Agreement shall survive the termination of this Agreement.
9. 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.
10. APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
11. 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 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.
12. USE OF NAME. Subadvisor and Diversified hereby agree that each party may
use the name of the other party in its marketing or advertising materials.
Subadvisor and Diversified agree to allow the other party 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
XXXXXXX+XXXXXXX+XXXXX, XX
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. 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
IF THE PORTFOLIO IS LESS THAN $100M:
0.55% OF THE FIRST $50M OF NET ASSETS
0.35% OF THE NEXT $50M OF NET ASSETS
-- OR --
IF THE PORTFOLIO IS EQUAL TO OR GREATER THAN $100M
0.30% OF THE FIRST $250M OF NET ASSETS
0.20% OF THE NEXT $250M OF NET ASSETS
0.15% OF NET ASSETS IN EXCESS OF $500M
Net assets are equal to the market value of the Portfolio. Fees will be
calculated by multiplying the arithmetic average of the beginning and ending
monthly net assets by the fee schedule and dividing by twelve. The fee will be
paid quarterly.
Subadvisor agrees that if at any time during the term of this Subadvisory
Agreement, Subadvisor offers another of its clients (other than a client that is
an affiliated person of Subadvisor) a lower fee than that set forth in this
Schedule B for the management of a growth & income portfolio with the same
investment mandate and of the same size then Diversified will also be charged
the lower rate. Diversified will benefit from the lower rate from the first day
that it is in effect for Subadvisor's other client. It is understood and agreed
by both Subadvisor and Diversified that this paragraph is applicable solely to
Diversified's Growth & Income Portfolio and not to any other fund/assets which
Subadvisor now manages or may manage in the future on Diversified's behalf.
