SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY REGISTRANT [X] FILED BY A PARTY OTHER THAN REGISTRANT [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Diversified Investors Portfolios - High-Yield Bond Portfolio
(Name of Registrant as Specified In Its Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No Fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of the filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed: August 3, 2000
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AUSA LIFE INSURANCE COMPANY, INC.
4 Manhattanville Road
Purchase, New York 10577
August 18, 2000
Dear Contract Holder:
On September 20, 2000 at 10:00 a.m. (Eastern time), High-Yield Bond Portfolio
(the "Portfolio") will hold a special meeting of its investors (the "Meeting")
to vote on important proposals relating to the Portfolio. High-Yield Bond
Portfolio is a series of Diversified Investors Portfolios (the "Trust"), which
is a registered investment company. We are sending this notice of the Meeting
to contract holders (the "Contract Holders") of Group Variable Annuity
Contracts issued by AUSA Life Insurance Company, Inc. ("AUSA") with unit
interests in the Diversified Investors Variable Funds High-Yield Bond
Subaccount of The Diversified Investors Variable Funds (the "Subaccount"). All
of the investable assets of the Subaccount are invested in High-Yield Bond
Portfolio. The Meeting will be held at the offices of Diversified Investment
Advisors, Inc., 4 Manhattanville Road, Purchase, New York 10577.
While AUSA is the legal owner of the Subaccount's assets, Contract Holders have
the right to instruct AUSA as to how to vote that portion of the Subaccount's
interest in the Portfolio that corresponds to their unit interests in the
Subaccount. AUSA will vote, in accordance with your instructions, that portion
of the Subaccount's interest in the Portfolio that corresponds to your unit
interests in the Subaccount as of July 26, 2000. By separate mailing you will
obtain instructions from affected contract participants on how to instruct AUSA
to vote the interest corresponding to your units.
VOTING ONLY TAKES A FEW MINUTES - PLEASE RESPOND PROMPTLY.
Please take a few moments to read the enclosed materials and then cast your
vote on the enclosed instruction card in accordance with instructions received
from your contract participant. Items 1 and 2 have been carefully considered by
the Board of Trustees of the Diversified Investors Portfolios, which is
responsible for protecting the interests of the Portfolio's investors. The
Board of Trustees believes that the proposals are fair and reasonable and
recommends that investors vote in favor of the proposals.
You are entitled to provide AUSA with voting instructions for the following
proposals to be voted upon:
ITEM 1. To instruct AUSA to vote to approve a new Investment
Subadvisory Agreement between Diversified Investment
Advisors, Inc. and Eaton Vance Management.
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ITEM 2. To instruct AUSA to authorize the Board of Trustees of
Diversified Investors Portfolios to select and change
investment subadvisers and enter into investment subadvisory
agreements without obtaining the approval of investors.
ITEM 3. To transact such other business as may properly come
before the Special Meeting of Investors and any adjournments
thereof.
The proposals to be considered at the Meeting are discussed in the enclosed
Proxy Statement. You are urged to read the enclosed Proxy Statement prior to
completing your instruction card instructing AUSA how to vote.
AUSA WILL VOTE THAT PORTION OF THE SUBACCOUNT'S INTEREST IN THE PORTFOLIO
CORRESPONDING TO UNIT INTERESTS IN THE SUBACCOUNT FOR WHICH AUSA RECEIVES NO
VOTING INSTRUCTIONS IN THE SAME PROPORTION AS THAT PORTION OF THE SUBACCOUNT'S
INTEReST IN THE PORTFOLIO FOR WHICH IT DOES, IN FACT, RECEIVE VOTING
INSTRUCTIONS.
AUSA is not aware of any matters, other than the specified proposals, to be
acted upon at the Meeting. If any other matters come before the Meeting, AUSA
will vote upon such matters in its discretion. AUSA reserves the right to vote
for the adjournment of the Meeting for the purpose of further solicitation of
voting instructions.
Sincerely,
/s/ Robert F. Colby
--------------------------------------
Robert F. Colby
Vice President and Assistant Secretary
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AUSA LIFE INSURANCE COMPANY, INC.
4 Manhattanville Road
Purchase, New York 10577
August 18, 2000
Dear Participant:
Certain contributions made on your behalf to AUSA Life Insurance Company, Inc.
("AUSA") with respect to the Group Variable Annuity Contract (the "Contract")
issued by AUSA to the holder of the Contract (the "Contract Holder") have been
allocated at your direction to the Diversified Investors Variable Funds
High-Yield Bond Subaccount (the "Subaccount"), a subaccount of The Diversified
Investors Variable Funds, a separate account of AUSA. All of the investable
assets of the Subaccount are invested in High-Yield Bond Portfolio (the
"Portfolio"), a series of Diversified Investors Portfolios (the "Trust"), which
is a registered investment company.
The Portfolio has called a meeting of its investors, including the Subaccount,
to vote on certain matters. AUSA, as the legal owner of all of the assets of
the Subaccount, will vote on such matters in accordance with the instructions
received from contract owners of the Group Variable Annuity Contracts with unit
interests in the Subaccount, including the Contract Holder.
As a participant of record at the close of business on July 26, 2000 (the
"Record Date"), you are entitled to instruct the Contract Holder as to how it
should instruct AUSA to vote on certain proposals to be considered at a Special
Meeting of Investors described in the enclosed Notice of Special Meeting and at
any adjournments thereof (the "Meeting"). The enclosed Proxy Statement and
Notice of Special Meeting are being mailed to you and other participants on or
about August 18, 2000.
The Meeting will be held at the offices of Diversified Investment Advisors,
Inc., 4 Manhattanville Road, Purchase, New York 10577, on September 20, 2000 at
10:00 a.m., Eastern time. You are entitled to provide the Contract Holder (who
in turn will instruct AUSA) with voting instructions for the following
proposals to be voted upon:
ITEM 1. To instruct AUSA to vote to approve a new Investment
Subadvisory Agreement between Diversified Investment
Advisors, Inc. and Eaton Vance Management.
ITEM 2. To instruct AUSA to authorize the Board of Trustees of
Diversified Investors Portfolios to select and change
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investment subadvisers and enter into investment subadvisory
agreements without obtaining the approval of investors.
ITEM 3. To transact such other business as may properly come before
the Special Meeting of Investors and any adjournments
thereof.
The proposals to be considered at the Meeting are discussed in the enclosed
Proxy Statement. You are urged to read the enclosed Proxy Statement prior to
completing your ballot instructing the Contract Holder how to instruct AUSA to
vote.
To instruct the Contract Holder as to how to instruct AUSA to vote, you are
asked to promptly mark your voting instructions on the enclosed ballot, then
sign, date and mail it.
IF A BALLOT IS NOT MARKED TO INDICATE VOTING INSTRUCTIONS BUT IS SIGNED, DATED
AND RETURNED, IT WILL BE TREATED AS AN INSTRUCTION TO VOTE FOR THE PROPOSALS.
AUSA WILL VOTE THAT PORTION OF THE SUBACCOUNT'S INTEREST IN THE PORTFOLIO
CORRESPONDING TO UNIT INTERESTS IN THE SUBACCOUNT FOR WHICH AUSA RECEIVES NO
VOTING INSTRUCTIONS IN THE SAME PROPORTION AS THAT PORTION OF THE SUBACCOUNT'S
INTEReST IN THE PORTFOLIO FOR WHICH IT DOES, IN FACT, RECEIVE VOTING
INSTRUCTIONS.
AUSA is not aware of any matters, other than the specified proposals, to be
acted upon at the Meeting. If any other matters come before the Meeting, AUSA
will vote upon such matters in its discretion. AUSA reserves the right to vote
for the adjournment of the Meeting for the purpose of further solicitation of
voting instructions.
At any time prior to the vote by AUSA of the Subaccount's interest in the
Portfolio, you may revoke your voting instructions by written notice to the
Assistant Secretary of AUSA at 4 Manhattanville Road, Purchase, New York,
10577.
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In addition to solicitation by mail, ballots may be solicited by the Board of
Directors, officers and employees of the Contract Holder without compensation
therefor.
Very truly yours,
AUSA LIFE INSURANCE COMPANY, INC.
By: Robert F. Colby
Title: Vice President and Assistant Secretary
YOUR VOTE IS IMPORTANT. WE WOULD APPRECIATE YOUR PROMPTLY VOTING, SIGNING AND
RETURNING THE ENCLOSED BALLOT, WHICH WILL HELP AVOID THE ADDITIONAL EXPENSES OF
A SECOND SOLICITATION.
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DIVERSIFIED INVESTORS PORTFOLIOS
4 Manhattanville Road
Purchase, New York 10577
August 18, 2000
Dear Investor:
On September 20, 2000 at 10:00 a.m., (Eastern time) we will hold a special
meeting of investors in High-Yield Bond Portfolio to vote on important
proposals relating to the Portfolio. High-Yield Bond Portfolio is a series of
Diversified Investors Portfolios.
VOTING ONLY TAKES A FEW MINUTES - PLEASE RESPOND PROMPTLY.
Please take a few moments to read the enclosed materials and then cast your
vote on the enclosed proxy card. Items 1 and 2 have been carefully considered
by the Board of Trustees of Diversified Investors Portfolios, which is
responsible for protecting your interests as an investor. The Board of Trustees
of Diversified Investors Portfolios believes that the proposals are fair and
reasonable and recommends that you vote in favor of the proposals.
The proposals you will vote on for the Portfolio are summarized below. Complete
information is contained in the enclosed Proxy Statement.
ITEM 1. To approve a new Investment Subadvisory Agreement between
Diversified Investment Advisors, Inc. and Eaton Vance
Management.
ITEM 2. To authorize the Board of Trustees of Diversified Investors
Portfolios to select and change investment subadvisers and
enter into investment subadvisory agreements without
obtaining the approval of investors.
ITEM 3. To transact such other business as may properly come before
the Special Meeting of Investors and any adjournments
thereof.
After you have voted on Items 1 and 2, please be sure to RETURN YOUR SIGNED
PROXY CARD.
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This is your opportunity to voice your opinion on matters affecting the
Portfolio. Your participation is extremely important, no matter how large or
small the beneficial interest you own.
We appreciate your prompt response. Thank you.
Sincerely,
/s/ Robert F. Colby
------------------------
Robert F. Colby
Secretary
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HIGH-YIELD BOND PORTFOLIO
a series of Diversified Investors Portfolios
4 Manhattanville Road
Purchase, New York 10577
Telephone: (914) 697-8000
NOTICE OF SPECIAL MEETING OF INVESTORS
To be held September 20, 2000
A Special Meeting of Investors of HIGH-YIELD BOND PORTFOLIO, a series of
Diversified Investors Portfolios, will be held at the offices of Diversified
Investment Advisors, Inc., 4 Manhattanville Road, Purchase, New York 10577, on
September 20, 2000 at 10:00 a.m., Eastern time, for the following purposes:
ITEM 1. To approve a new Investment Subadvisory Agreement between
Diversified Investment Advisors, Inc. and Eaton Vance
Management.
ITEM 2. To authorize the Board of Trustees of Diversified Investors
Portfolios to select and change investment subadvisers and
enter into investment subadvisory agreements without
obtaining the approval of investors.
ITEM 3. To transact such other business as may properly come before
the Special Meeting of Investors and any adjournments
thereof.
THE BOARD OF TRUSTEES OF DIVERSIFIED INVESTORS PORTFOLIOS RECOMMENDS THAT YOU
VOTE IN FAVOR OF ITEMS 1 AND 2.
Only investors of record on July 26, 2000 will be entitled to vote at the
Special Meeting of Investors and at any adjournments thereof.
Robert F. Colby, Secretary
August 18, 2000
YOUR VOTE IS IMPORTANT. WE WOULD APPRECIATE YOU PROMPTLY VOTING, SIGNING AND
RETURNING THE ENCLOSED PROXY, WHICH WILL HELP AVOID THE ADDITIONAL EXPENSES OF
A SECOND SOLICITATION.
<PAGE>
HIGH-YIELD BOND PORTFOLIO
a series of Diversified Investors Portfolios
4 Manhattanville Road
Purchase, New York 10577
Telephone: (914) 697-8000
PROXY STATEMENT
This Proxy Statement and Notice of Special Meeting with accompanying form of
proxy are being furnished in connection with the solicitation of proxies by the
Board of Trustees of Diversified Investors Portfolios (the "Trust") for use at
a special meeting of investors in High-Yield Bond Portfolio (the "Portfolio"),
a series of the Trust, or any adjournment thereof, to be held at the offices of
Diversified Investment Advisors, Inc., 4 Manhattanville Road, Purchase, New
York 10577, on September 20, 2000, at 10:00 a.m., Eastern time (the "Meeting").
The Meeting is being held for the purposes set forth in the accompanying Notice
of Special Meeting. These materials are being mailed by the Board of Trustees
of the Trust on or about August 18, 2000.
The Portfolio is one of fourteen series of the Trust, which is a registered
investment company organized as a New York trust under a Declaration of Trust
dated as of September 1, 1993. The Portfolio was designated as a separate
series of the Trust on August 17, 1995. The mailing address of the Trust is 4
Manhattanville Road, Purchase, New York 10577.
The Portfolio commenced operations on January 30, 1996. The annual report for
the Portfolio for the period ended December 31, 1999, including audited
financial statements, has previously been sent to investors and is available
upon request without charge by contacting Catherine A. Mohr, Diversified
Investors Portfolios, 4 Manhattanville Road, Purchase, New York 10577 or by
calling the Trust toll-free at (800) 926-0044.
MANNER OF VOTING PROXIES AND VOTE REQUIRED
If the accompanying form of proxy is executed properly and returned, the
beneficial interest represented by it will be voted at the Meeting in
accordance with the instructions on the proxy. If no instructions are
specified, the beneficial interest will be voted for proposed Items 1 and 2. If
the enclosed form of proxy is executed and returned, it may nevertheless be
revoked prior to its exercise by a signed writing delivered at the Meeting or
filed with the Secretary of the Trust.
If sufficient votes to approve the proposed Items 1 and 2 are not received, the
persons named as proxies may propose one or more adjournments of the Meeting to
permit further solicitation of proxies. Any adjournment will require the
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affirmative vote of a majority of those beneficial interests voted at the
Meeting. When voting on a proposed adjournment, the persons named as proxies
will vote all beneficial interests that they are entitled to vote with respect
to Item 1 for the proposed adjournment, unless directed to disapprove Item 1,
in which case such beneficial interests will be voted against the proposed
adjournment. Similarly, the persons named as proxies will vote all beneficial
interests that they are entitled to vote with respect to Item 2 for the
proposed adjournment, unless directed to disapprove Item 2, in which case such
beneficial interests will be voted against the proposed adjournment.
The presence in person or by proxy of the holders of a majority of the
outstanding beneficial interests of the Portfolio entitled to vote is required
to constitute a quorum at the Meeting. For purposes of determining the presence
of a quorum for transacting business at the Meeting, abstentions will be
treated as beneficial interests that are present but which have not been voted.
For this reason, abstentions will have the effect of a "no" vote for purposes
of obtaining the requisite approval of the proposals.
The cost of soliciting proxies in the accompanying form, including the fees of
any proxy soliciting agent, will be borne by the Portfolio. In addition to
solicitation by mail, proxies may be solicited by the Board of Trustees of the
Trust, officers, and regular employees and agents of the Trust without
compensation therefor. Diversified Investment Advisors, Inc. may reimburse
brokerage firms and others for their expenses in forwarding proxy materials to
the beneficial owners and soliciting them to execute the proxies.
The close of business on July 26, 2000 has been fixed as the Record Date for
the determination of investors entitled to notice of and to vote at the
Meeting. $134,219,728 in beneficial interests were outstanding as of the close
of business on the Record Date. Investors of record at the close of business on
the Record Date will be entitled to vote in the proportion that their
beneficial interests bear to the total beneficial interests in the Portfolio.
BACKGROUND
The Portfolio is a master fund within a two-tier, master/feeder mutual fund
structure. Interests in the Portfolio are sold to accredited investors in
private placement transactions which do not involve a public offering under the
Securities Act of 1933, as amended.
Diversified Investment Advisors, Inc., a Delaware corporation (the "Adviser"),
4 Manhattanville Road, Purchase, New York 10577, manages the assets of the
Portfolio pursuant to an Investment Advisory Agreement dated as of August 17,
1995 (the "Advisory Agreement"). The Advisory Agreement was most recently
approved by the Board of Trustees of the Trust, including a majority of the
Trustees who are not "interested persons," as defined in the Investment Company
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Act of 1940, as amended (the "1940 Act"), of any party to such agreement (the
"Independent Trustees") on November 16, 1999. The Advisory Agreement was most
recently submitted to a vote of investors in the Portfolio on August 17, 1995
in connection with its initial approval. Subject to the terms of the Advisory
Agreement, the Adviser is responsible for the management of the Portfolio,
selects and employs, subject to the review and approval of the Board of
Trustees of the Trust, one or more subadvisers to make the day-to-day
investment selections for the Portfolio consistent with the guidelines and
directions set by the Adviser and the Board of Trustees, and reviews the
subadvisers' continued performance. The Adviser may terminate the services of
any subadviser at any time.
Prior to June 1, 2000, Delaware Investment Advisors ("DIA"), a division of
Delaware Management Company, Inc., a corporation having its principal offices
at One Commerce Square, 2005 Market Street, Philadelphia, Pennsylvania 19103,
served as the investment subadviser of the Portfolio. DIA had served as the
Portfolio's investment subadviser since August 17, 1995 pursuant to an
Investment Subadvisory Agreement between DIA and the Adviser. As subadviser,
DIA was responsible for investing the Portfolio's assets in a manner consistent
with the terms of the Subadvisory Agreement and the investment objectives of
the Portfolio. The DIA Subadvisory Agreement was most recently approved by the
Board of Trustees of Diversified Investors Portfolios, including a majority of
the Independent Trustees, on November 16, 1999. The DIA Subadvisory Agreement
was most recently submitted to a vote of investors in the Portfolio on
August 17, 1995 in connection with its initial approval.
At a regular meeting of the Board of Trustees of Diversified Investors
Portfolios held on May 16, 2000, the Board considered, at the Adviser's
recommendation, replacing DIA as subadviser of the Portfolio with Eaton Vance
Management ("Eaton Vance"). The Board reviewed DIA's investment performance as
subadviser and considered the Adviser's reasons for recommending termination.
The Board then reviewed the Adviser's procedures for selecting new subadvisers.
As discussed in Item 1 below under the heading "Evaluation by the Board of
Trustees," the Board authorized the Adviser to terminate the DIA Subadvisory
Agreement and enter into a new subadvisory agreement with Eaton Vance.
Accordingly, effective June 1, 2000, the DIA Subadvisory Agreement terminated,
and the Adviser entered into a Subadvisory Agreement with Eaton Vance.
In accordance with the requirements of the 1940 Act, the Eaton Vance
Subadvisory Agreement must be approved by the holders of beneficial interests
in the Portfolio. Currently, Eaton Vance is serving as the subadviser to the
Portfolio pursuant to a rule under the 1940 Act that permits the Eaton Vance
Subadvisory Agreement to remain in effect for an interim period while that
approval is sought provided that certain conditions are met. The Subadvisory
Agreement will terminate if it is not approved by the requisite holders of
beneficial interests in the Portfolio by October 28, 2000.
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ITEM 1. TO APPROVE A NEW INVESTMENT SUBADVISORY AGREEMENT
BETWEEN DIVERSIFIED INVESTMENT ADVISORS, INC. AND
EATON VANCE MANAGEMENT.
COMPARISON OF THE SUBADVISORY AGREEMENTS
The principal business terms of the DIA and Eaton Vance Subadvisory Agreements
are similar except for the identity of the service provider, the effective date
and the termination date, and the compensation payable by the Adviser to the
subadviser (fees payable to Eaton Vance are lower), and except as further noted
below.
Under the terms of the DIA Subadvisory Agreement DIA made recommendations to
the Adviser regarding how voting rights pertaining to securities in the
Portfolio were exercised. Under the Eaton Vance Subadvisory Agreement, Eaton
Vance will be responsible for voting all proxies in relation to the securities
held in the Portfolio, and will provide the Portfolio with quarterly reports of
all proxies it voted during the previous quarter.
Finally, both of the DIA and the Eaton Vance Subadvisory Agreements provide
that the subadviser's services will be exclusive with respect to certain funds.
The exclusivity provision in the Eaton Vance Subadvisory Agreement, however, is
more restrictive than the corresponding provision in the DIA Subadvisory
Agreement. It provides that during the term of the Agreement, Eaton Vance will
not manage any similar high yield bond portfolio, any collective trust, openend
investment company registered under the 1940 Act, variable insurance contract
registered under the 1940 Act, or insurance company separate account that is
offered to certain specified types of employee benefit plans and sponsored by
competitors of the Adviser without providing the Adviser with 60 days prior
written notice.
A description of the investment advisory fees to be paid by the Adviser to
Eaton Vance is set forth below under the caption "Investment Advisory Fees."
The Eaton Vance Subadvisory Agreement became effective on June 1, 2000 and, if
approved by the vote of the holders of a "majority of the outstanding voting
securities" (as such term is defined below) of the Portfolio, will continue in
effect through June 1, 2002 and thereafter from year to year, subject to
approval annually in accordance with the 1940 Act. The Subadvisory Agreement
may be terminated at any time without the payment of any penalty by the Board
of Trustees of Diversified Investors Portfolios or by the vote of a "majority
of the outstanding voting securities" of the Portfolio or by the Adviser. The
Subadvisory Agreement may also be terminated by Eaton Vance upon 60 days'
advance written notice to the Adviser. The Subadvisory Agreement will also
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terminate automatically in the event of its "assignment" (as defined in the
1940 Act).
Under the Eaton Vance Subadvisory Agreement, as under the DIA Subadvisory
Agreement, Eaton Vance will furnish continuing portfolio management services to
the Portfolio, subject always to the provisions of the 1940 Act and to the
investment objectives, policies, procedures and restrictions imposed by the
Portfolio's then current Registration Statement under the 1940 Act. Investment
management decisions of Eaton Vance will be made by the following two persons
who serve as coportfolio managers:
LINDA CARTER, Vice President, Portfolio Manager and Senior Fixed
Income Analyst at Eaton Vance. Ms. Carter has 17 years of investment
experience and has held the following positions: Vice President, John
Hancock Advisers; Senior Investment Officer, Allmerica Financial;
Investment Analyst, United Business Services. Ms. Carter has a B.S. from
the University of Massachusetts and a M.S. from Boston College.
MICHAEL W. WEILHEIMER, Director of High Yield Fixed Income, Vice
President and Portfolio Manager at Eaton Vance. Mr. Weilheimer has 13
years of investment experience and has held the following positions:
Senior Analyst, Amroc Investments, L.P.; and Senior Analyst, Cowen &
Company. Mr. Weilheimer has a B.S. from the State University of New York
at Albany and a M.B.A. from the University of Chicago Graduate School of
Business.
Eaton Vance will also provide the Adviser with such investment advice and
reports and data as are requested by the Adviser.
Like the DIA Subadvisory Agreement, the Eaton Vance Subadvisory Agreement
provides that the subadviser shall be responsible only for managing the assets
of the Portfolio in good faith and in accordance with investment guidelines,
and shall have no responsibility whatsoever for, and shall incur no liability
on account of, (i) selection of such investment guidelines, (ii) advice on, or
management of, any other assets for the Adviser, (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, and shall be indemnified by the Adviser for any loss in carrying out
the terms and provisions of the agreement, including reasonable attorney's
fees, indemnification to brokerdealers and futures commission merchants, fines,
taxes, penalties and interest. However, the Adviser shall have no obligation to
indemnify Eaton Vance for any liability, damages or expenses arising out of
Eaton Vance's gross negligence, bad faith, willful malfeasance, or reckless
disregard of its duties under the Subadvisory Agreement.
<PAGE>
As noted above in "Background," Eaton Vance is currently serving as the
subadviser to the Portfolio pursuant to Rule 15a-4 under the 1940 Act. That
rule permits the Eaton Vance Subadvisory Agreement to remain in effect for a
limited period of time while investor approval of the agreement is sought
provided that certain conditions are met. These conditions include that (i) the
agreement shall terminate in 150 days if the requisite investor approval is not
obtained, and (ii) fees paid under the agreement cannot exceed the fees that
would have been paid to DIA under the DIA Subadvisory Agreement. The Eaton
Vance Subadvisory Agreement contains provisions complying with the necessary
conditions.
Investors should refer to Exhibit A attached hereto for the complete terms of
the Eaton Vance Subadvisory Agreement. The description of the Subadvisory
Agreement set forth herein is qualified in its entirety by the provisions of
the Subadvisory Agreement as set forth in such Exhibit.
INVESTMENT ADVISORY FEES
Under the Eaton Vance Subadvisory Agreement, the Adviser (not the Portfolio)
pays the subadviser for its services on the basis of the following annual fee
schedule:
EATON VANCE FEE SCHEDULE
.35%of the first $20 million of net assets managed
.25% of net assets managed over $20 million
.20% of net assets managed over $40 million
.15% of net assets managed in excess of $125 million
Under the Eaton Vance Subadvisory Agreement, net assets are equal to the market
value of the Portfolio. Fees are calculated monthly by multiplying the
arithmetic average of the beginning and ending monthly net assets of the
Portfolio by the fee schedule and dividing by twelve. Fees are paid by the
Adviser quarterly.
The Eaton Vance Subadvisory Agreement provides that if at any time during the
term of the Subadvisory Agreement, Eaton Vance charges another of its clients a
lower fee than that set forth above for the management of a similarly
structured high yield bond fund, then the Adviser will also be charged the
lower rate by Eaton Vance. The Adviser will benefit from the lower rate from
the first day that it is in effect for the other client.
Under the DIA Subadvisory Agreement, the Adviser (not the Portfolio) paid DIA
for its services on the basis of the following annual fee schedule:
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DIA FEE SCHEDULE
.40% of the first $20 million of net assets managed
.30% of the nets assets managed over $20 million
.20% of net assets managed in excess of $40 million
Under the DIA Subadvisory Agreement, net assets were equal to the market value
of the Portfolio. Fees were calculated monthly by multiplying the arithmetic
average of the beginning and ending monthly net assets of the Portfolio by the
fee schedule and dividing by twelve. Fees were paid by the Adviser quarterly
with a minimum annual fee of $20,000.
Approval of the Eaton Vance Subadvisory Agreement, by itself, would have no
effect upon the amount of advisory fees paid by the Portfolio to the Adviser.
The Adviser, not the Portfolio, pays investment advisory fees to Eaton Vance as
subadviser to the Portfolio.
Fees payable to DIA for services provided pursuant to the DIA Subadvisory
Agreement for the period from January 1, 1999 to December 31, 1999 were
$291,674. Neither DIA nor any affiliated person of DIA, nor any affiliated
person of any such affiliated person, received any other fees from the Adviser
or from the Portfolio for services provided to the Portfolio during the fiscal
year of the Portfolio ended December 31, 1999. There were no other material
payments by the Adviser or the Portfolio to DIA, any affiliated person of DIA
or any affiliated person of any such affiliated person, during the fiscal year
of the Portfolio ended December 31, 1999.
Fees that would have been payable to Eaton Vance for services provided pursuant
to the Eaton Vance Subadvisory Agreement for the period from January 1, 1999 to
December 31, 1999, had the Eaton Vance Subadvisory Agreement been in effect for
such period are $263,669. The aggregate of these fees represents a 9.60%
decrease from the amount of fees that would have been payable to DIA for such
period under the DIA Subadvisory Agreement. As noted above, the Adviser, not
the Portfolio, pays the subadviser for its services. As a result, any decrease
in the amount of fees payable under the Easton Vance Subadvisory Agreement from
the fees payable under the DIA Subadvisory Agreement will not be passed along
to investors in the Portfolio.
For the Portfolio's fiscal year ended December 31, 1999, no commissions were
paid to any broker (i) that is an affiliated person of the Portfolio, (ii) that
is an affiliated person of any affiliated person of the Portfolio, or (iii) an
affiliated person of which is an affiliated person of the Portfolio, the
Adviser, DIA, Eaton Vance or the distributor of the Portfolio.
<PAGE>
INFORMATION REGARDING EATON VANCE
Eaton Vance is a Massachusetts business trust, having its principal
offices at 255 State Street, Boston, Massachusetts 02109. Eaton Vance
Corp., which has its nonvoting common stock publicly traded on the New
York Stock Exchange, owns all of the outstanding shares of Eaton
Vance. Eaton Vance, Inc., a wholly owned subsidiary of Eaton Vance
Corp., is the sole trustee of Eaton Vance. All of the outstanding
voting common stock of Eaton Vance Corp. is held in a voting trust
which expires on October 30, 2000. The trustees of the voting trust
and owners of the voting trust receipts issued by the voting trust are
Alan R. Dynner, William M. Steul, Wharton P. Whitaker, James B. Hawkes,
Duncan W. Richardson, Thomas J. Fetter, Thomas E. Faust, Jr., Jeffrey
P. Beale, Scott H. Page, Payson F. Swaffield and William W. Weilheimer,
all of whom are officers of Eaton Vance. James B. Hawkes is the
President of Eaton Vance, Eaton Vance Corp. and Eaton Vance, Inc. Mr.
Hawkes' principal business address is the same as that of Eaton
Vance.
No officer or director of the Fund currently is an officer or employee of Eaton
Vance. No officer or Trustee of Diversified Investors Portfolios has any other
material direct or indirect interest in Eaton Vance or any other person
controlling, controlled by or under common control with Eaton Vance. Since
January 1, 1999, none of the Trustees of the Diversified Investors Portfolios
has had any material interest, direct or indirect, in any material
transactions, or in any material proposed transactions, to which Eaton Vance
was or is to be a party.
MANAGEMENT ACTIVITIES. Eaton Vance's total assets under management as of June
30, 2000 totaled approximately $46 billion.
Eaton Vance acts as investment manager for registered investment companies with
investment objectives similar to the Fund's investment objective of providing a
high level of current income. As of June 30, 2000, Eaton Vance managed
approximately $2.7 billion of high yield accounts (including the Portfolio).
The name of each such fund, together with information concerning the fund's net
assets and the fees paid to Eaton Vance for its services, are set forth in
Exhibit B.
THE EVALUATION BY THE BOARD OF TRUSTEES
The Board of Trustees of the Trust authorized the Adviser to terminate the DIA
Subadvisory Agreement and approved the Eaton Vance Subadvisory Agreement at a
meeting held on May 16, 2000.
Before authorizing the Adviser to terminate the DIA Subadvisory Agreement, the
Board of Trustees of the Trust reviewed with the Adviser its recommendations
that the manner in which the Portfolio's assets were invested be broadened and
<PAGE>
that the services of DIA as subadviser of the Portfolio be terminated. The
Adviser reported that DIA had employed a conservative approach in managing the
Portfolio. Under this approach, DIA had limited the Portfolio's investments to
cash-pay only bonds and had not invested in other strong performing segments of
the high yield market such as zero coupon bonds, payment-in-kind bonds and
other high yield securities. As a result, DIA's investment performance had been
poor on a relative basis. The Adviser recommended that management
responsibilities of the Portfolio be transferred to a subadviser who would
place a greater emphasis on the broad high yield bond universe in order to
enhance the Portfolio's yield and return characteristics. The Adviser
considered several investment managers as potential replacements for DIA before
ultimately recommending Eaton Vance to the Board of Trustees.
The Board of Trustees reviewed the Adviser's procedures for selecting a new
subadviser. The Trustees considered information with respect to Eaton Vance and
whether the Eaton Vance Subadvisory Agreement was in the best interests of the
Portfolio and its holders of beneficial interests. The Trustees considered the
nature and quality of services expected to be provided by Eaton Vance and
reviewed and discussed information regarding the subadviser's fees and
performance. In evaluating the subadviser's ability to provide services to the
Portfolio, the Trustees considered information as to the subadviser's business
organization, financial resources, personnel and other matters. The Trustees
compared the investment performance of certain high yield bond accounts advised
by Eaton Vance having investment objectives similar to the Portfolio against
various benchmarks and to the investment performance of the Portfolio's assets
as managed by DIA.
Based upon its review and the representations made to it, the Board of
Trustees, including the Independent Trustees, concluded that (a) the Portfolio
as managed by DIA did not take full advantage of the broad high yield
securities market, (b) Eaton Vance had adequate resources and expertise to
provide advisory services to the Portfolio, (c) the terms of the Eaton Vance
Subadvisory Agreement are reasonable, fair and in the best interests of the
Portfolio and its holders of beneficial interests, and (d) the fees provided in
the Eaton Vance Subadvisory Agreement are fair and reasonable in light of the
usual and customary charges made for services of the same nature and quality.
Accordingly, after consideration of the above factors, and such other factors
and information as it deemed relevant, the Board of Trustees, including the
Independent Trustees, authorized the Adviser to terminate the DIA Subadvisory
Agreement, approved the Eaton Vance Subadvisory Agreement and voted to
recommend the approval of the Eaton Vance Subadvisory Agreement by the holders
of beneficial interests in the Portfolio.
<PAGE>
REQUIRED VOTE
Approval of the Eaton Vance Subadvisory Agreement will require the approval of
"a majority of the outstanding voting securities" (as defined below) of the
Portfolio present in person or represented by proxy at a meeting of the holders
of the beneficial interests in the Portfolio. Under the 1940 Act, a "majority
of the outstanding voting securities" of an issuer means the affirmative vote
by the lesser of (a) 67% or more of the issuer's voting securities present at a
meeting if the holders of more than 50% of the issuer's outstanding voting
securities are present in person or represented by proxy or (b) more than 50%
of the issuer's outstanding voting securities (a "1940 Act Majority").
In the event that the Eaton Vance Subadvisory Agreement does not receive the
requisite investor approval, the Adviser would negotiate a new investment
subadvisory agreement with a different advisory organization or make other
appropriate arrangements, in either event subject to approval in accordance
with the 1940 Act.
THE BOARD OF TRUSTEES OF THE TRUST RECOMMENDS THAT INVESTORS IN THE PORTFOLIO
VOTE FOR APPROVAL OF THE EATON VANCE SUBADVISORY AGREEMENT.
ITEM 2. TO AUTHORIZE THE BOARD OF TRUSTEES OF DIVERSIFIED INVESTORS
PORTFOLIOS TO SELECT AND CHANGE INVESTMENT SUBADVISERS AND
ENTER INTO INVESTMENT SUBADVISORY AGREEMENTS WITHOUT OBTAINING
THE APPROVAL OF INVESTORS.
As discussed above, the Adviser selects and employs one or more subadvisers to
make the day-to-day investment selections for the Portfolio, and reviews the
subadvisers' continued performance. See "Background." The Adviser may terminate
the services of any subadviser at any time; however, retaining the services of
a new subadviser, currently requires Portfolio investor approval.
The 1940 Act requires that all contracts pursuant to which persons serve as
investment advisers to investment companies be approved by investors. This
requirement currently applies to the appointment of any new or replacement
subadviser to the Portfolio. However, the Trust has received exemptive relief
from the Securities and Exchange Commission from these investor vote
requirements. If this proposed Item 2 is approved by the Portfolio's investors,
the Board of Trustees of the Trust would be able, without further investor
approval, to appoint additional or replacement subadvisers so long as certain
requirements are complied with. The Trustees would not, however, be able to
replace the Adviser as investment adviser without complying with the 1940 Act
and applicable regulations governing investor approval of advisory contracts.
<PAGE>
This Item 2 is intended to facilitate the efficient supervision and management
of the subadvisers by the Adviser and the Trustees of the Trust. The Adviser
continuously monitors the performance of the subadvisers and may from time to
time recommend that the Board of Trustees of the Trust replace a subadviser or
appoint additional subadvisers, or approve a subadvisor following a change of
control, depending on the Adviser's assessment of which subadviser or
combination of subadvisers it believes will optimize the Portfolio's chances of
achieving its investment objective. If the Portfolio's investors approve this
proposed Item 2, the Portfolio would no longer be required to call an investor
meeting each time a new or replacement subadviser is appointed, and investors
would not be asked to vote thereon.
Investor meetings entail substantial costs which could diminish the benefits of
the current subadvisory arrangements. These costs must be weighed against the
benefits of investor scrutiny of proposed contracts with additional or
replacement subadvisers. However, even in the absence of investor approval, any
proposal to add or replace subadvisers would receive careful review. First, the
Adviser would assess the Portfolio's needs and, if it believed additional or
replacement subadvisers could benefit the Portfolio, would search for available
investment subadvisers. Second, any recommendations made by the Adviser would
have to be approved by a majority of the Trustees of the Trust, including a
majority of the Independent Trustees. In selecting any new or replacement
subadvisers, the Trustees are required to determine that an investment
management agreement with the subadviser is reasonable, fair and in the best
interests of a fund and its investors, and that the fees provided in the
agreement are fair and reasonable in light of the usual and customary charges
made by others for services of the same nature and quality. Finally, any
further appointments of additional or replacement subadvisers would have to
comply with the conditions contained in the Securities and Exchange Commission
exemptive order, which include that the Portfolio furnish to its investors
certain information about the additional or replacement subadvisers.
The Trustees of the Trust believe that the proposed authority for the Board of
Trustees to select and change investment subadvisers and enter into investment
subadvisory agreements without obtaining the approval of Portfolio investors is
in the best interests of the investors in the Portfolio.
REQUIRED VOTE
Authorizing the Board of Trustees of the Trust to select and change investment
subadvisers and enter into investment subadvisory agreements without obtaining
the approval of Portfolio investors will require the approval of a 1940 Act
majority of the outstanding voting securities of the Portfolio, present in
person or represented by proxy at a meeting of investors in the Portfolio.
<PAGE>
THE BOARD OF TRUSTEES OF THE TRUST RECOMMENDS THAT THE INVESTORS IN THE
PORTFOLIO VOTE FOR AUTHORIZING THE TRUSTEES OF THE TRUST TO SELECT AND CHANGE
INVESTMENT SUBADVISERS AND ENTER INTO INVESTMENT SUBADVISORY AGREEMENTS WITHOUT
OBTAINING THE APPROVAL OF INVESTORS.
ITEM 3. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
SPECIAL MEETING OF INVESTORS AND ANY ADJOURNMENTS THEREOF.
Management of the Trust knows of no other business to be presented at the
Meeting. If any additional matters should be properly presented, it is intended
that the enclosed proxy (if not limited to the contrary) will be voted in
accordance with the judgment of the persons named in such proxy.
ADDITIONAL INFORMATION
The Portfolio's exclusive placement agent is Diversified Investors Securities
Corp., 4 Manhattanville Road, Purchase, New York 10577. The Portfolio's
Administrator and Transfer Agent is Diversified Investment Advisors, Inc., 4
Manhattanville Road, Purchase, New York 10577.
As of the Record Date, no Trustees or officers of the Trust owned beneficially
or had the right to vote any outstanding interests in the Portfolio.
As of the Record Date, the following persons owned of record or had the right
to vote 5% or more of the outstanding beneficial interests in the Portfolio:
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address of Amount and Nature of Percent of
Record Owner Record Ownership Beneficial Interest
AUSA Life Insurance $30,478,743 22.72%
Company, Inc.
4 Manhattanville Road
Purchase, NY 10577
Diversified Investment Advisors $45,271,920 33.75%
Collective Trust
4 Manhattanville Road
Purchase, NY 10577
Diversified Investors $51,154,527 38.14%
Funds Group
4 Manhattanville Road
Purchase, NY 10577
</TABLE>
The Trust is a New York trust and as such is not required to hold annual
meetings of investors, although special meetings may be called for the
Portfolio, or for the Trust as a whole, for purposes such as electing Trustees
or removing Trustees, changing fundamental policies, or approving an advisory
contract. Investor proposals to be presented at any subsequent meeting of
investors must be received by the Trust at the Trust's office within a
reasonable time before the proxy solicitation is made.
YOU ARE URGED TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Trustees,
/s/ Robert F. Colby
----------------------------
Robert F. Colby, Secretary
August 18, 2000
<PAGE>
INSTRUCTION CARD INSTRUCTION CARD
HIGH-YIELD BOND PORTFOLIO
A SERIES OF DIVERSIFIED INVESTORS PORTFOLIOS
INSTRUCTIONS FOR A SPECIAL MEETING
OF INVESTORS TO BE HELD SEPTEMBER 20, 2000
The undersigned owner of a Group Variable Annuity Contract (the
"Contract") issued by AUSA Life Insurance Company, Inc. ("AUSA") with unit
interests in The Diversified Investors Variable Funds High-Yield Bond
Subaccount (the "Subaccount"), a subaccount of The Diversified Investors
Variable Funds (the "Diversified Account"), revoking all Proxies heretofore
given, hereby instructs AUSA to vote on behalf of the undersigned that portion
of the Subaccount's interest in the High-Yield Bond Portfolio corresponding to
the undersigned's unit interests in the Subaccount at the Special Meeting of
Investors of High-Yield Bond Portfolio to be held at the offices of Diversified
Investment Advisors, Inc., 4 Manhattanville Road, Purchase, New York 10577 on
September 20, 2000, at 10:00 a.m., Eastern time, and at any adjournment
thereof, as follows:
INSTRUCTIONS SOLICITED ON BEHALF OF THE SUBACCOUNT.
THE BOARD OF TRUSTEES OF DIVERSIFIED INVESTORS PORTFOLIOS RECOMMENDS A VOTE FOR
THE FOLLOWING PROPOSALS.
1. To instruct AUSA to vote to approve a new Investment Subadvisory
Agreement between Diversified Investment Advisors, Inc. and Eaton
Vance Management.
____FOR ____AGAINST ____ABSTAIN
2. To instruct AUSA to authorize the Board of Trustees of Diversified
Investors Portfolios to select and change investment subadvisers and
enter into investment subadvisory agreements without obtaining the
approval of investors.
____FOR ____AGAINST ____ABSTAIN
THE UNIT INTERESTS REPRESENTED HEREBY WILL BE VOTED AS INDICATED OR
VOTED TO INSTRUCT AUSA TO VOTE FOR ANY PROPOSAL FOR WHICH NO CHOICE IS
INDICATED.
<PAGE>
THE PROXIES ARE AUTHORIZED IN THEIR DISCRETION TO VOTE UPON SUCH OTHER MATTERS
AS MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
Date:_______________
-----------------------------------
Signature of Contract Holder
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS CARD
When signing as attorney, executor, administrator, trustee, guardian or as
custodian for a minor, please sign your name and give your full title as such.
If signing on behalf of a corporation, please sign the full corporate name and
your name and indicate your title. If you are a partner signing for a
partnership, please sign the partnership name and your name. Joint owners
should each sign this instruction card.
<PAGE>
BALLOT BALLOT
HIGH-YIELD BOND PORTFOLIO
A SERIES OF DIVERSIFIED INVESTORS PORTFOLIOS
INSTRUCTIONS FOR A SPECIAL MEETING
OF INVESTORS TO BE HELD SEPTEMBER 20, 2000
The undersigned, a participant in a Group Variable Annuity Contract (the
"Contract") issued by AUSA Life Insurance Company, Inc. ("AUSA"), hereby
instructs the holder of the Contract (the "Contract Holder") to instruct AUSA
to vote on behalf of the undersigned that portion of the unit interests in The
Diversified Investors Variable Funds High-Yield Bond Subaccount (the
"Subaccount"), a subaccount of the Diversified Investors Variable Funds (the
"Diversified Account"), that are attributable to the undersigned's
participation in the Contract and that the Contract Holder is entitled to
instruct AUSA to vote at the Special Meeting of Investors of High-Yield Bond
Portfolio to be held at 4 Manhattanville Road, Purchase, New York 10577 on
September 20, 2000, at 10:00 a.m., Eastern time, and at any adjournment
thereof, as follows:
INSTRUCTIONS SOLICITED ON BEHALF OF THE CONTRACT HOLDER.
THE BOARD OF TRUSTEES OF DIVERSIFIED INVESTORS PORTFOLIOS RECOMMENDS A VOTE FOR
THE FOLLOWING PROPOSALS.
1. To instruct AUSA to vote to approve a new Investment Subadvisory
Agreement between Diversified Investment Advisors, Inc. and Eaton
Vance Management.
____FOR ____AGAINST ____ABSTAIN
2. To instruct AUSA to authorize the Board of Trustees of Diversified
Investors Portfolios to select and change investment subadvisers and
enter into investment subadvisory agreements without obtaining the
approval of investors.
____FOR ____AGAINST ____ABSTAIN
THE UNIT INTERESTS ATTRIBUTABLE TO THE UNDERSIGNED'S PARTICIPATION IN THE
CONTRACT WILL BE VOTED AS INDICATED OR VOTED TO INSTRUCT AUSA TO VOTE FOR ANY
PROPOSALS FOR WHICH NO CHOICE IS INDICATED.
<PAGE>
THE CONTRACT HOLDER IS INSTRUCTED IN ITS DISCRETION TO VOTE UPON SUCH OTHER
MATTERS AS MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
Date:_______________
-----------------------------------
Signature
-----------------------------------
Signature of joint owner, if any
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS CARD
When signing as attorney, executor, administrator, trustee, guardian or as
custodian for a minor, please sign your name and give your full title as such.
If signing on behalf of a corporation, please sign the full corporate name and
your name and indicate your title. If you are a partner signing for a
partnership, please sign the partnership name and your name. Joint owners
should each sign this ballot.
<PAGE>
PROXY CARD PROXY CARD
HIGH-YIELD BOND PORTFOLIO
A SERIES OF DIVERSIFIED INVESTORS PORTFOLIOS
A PROXY FOR A SPECIAL MEETING
OF INVESTORS TO BE HELD SEPTEMBER 20, 2000
The undersigned, revoking all Proxies heretofore given, hereby appoints
each of Tom A. Schlossberg, Robert F. Colby and Gerald L. Katz, or any of them,
as Proxies of the undersigned with full power of substitution, to vote on
behalf of all of the undersigned's beneficial interests in High-Yield Bond
Portfolio (the "Portfolio"), a series of Diversified Investors Portfolios,
which the undersigned is entitled to vote at the Special Meeting of Investors
of the Portfolio to be held at the offices of Diversified Investment Advisors,
Inc., 4 Manhattanville Road, Purchase, New York 10577 on September 20, 2000, at
10:00 a.m., Eastern time, and at any adjournment thereof, as fully as the
undersigned would be entitled to vote if personally present, as follows:
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE TRUST.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS.
1. To approve a new Investment Subadvisory Agreement between
Diversified Investment Advisors, Inc. and Eaton Vance Management.
____FOR ____AGAINST ____ABSTAIN
2. To authorize the Board of Trustees of Diversified Investors Portfolios to
select and change investment subadvisers and enter into investment
subadvisory agreements without obtaining the approval of investors.
____FOR ____AGAINST ____ABSTAIN
THE BENEFICIAL INTERESTS REPRESENTED HEREBY WILL BE VOTED AS INDICATED OR FOR
ANY PROPOSALS FOR WHICH NO CHOICE IS INDICATED.
<PAGE>
THE PROXIES ARE AUTHORIZED IN THEIR DISCRETION TO VOTE UPON SUCH OTHER MATTERS
AS MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
Date:_______________
-----------------------------------
Signature
-----------------------------------
Signature of joint owner, if any
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS CARD
When signing as attorney, executor, administrator, trustee, guardian or as
custodian for a minor, please sign your name and give your full title as such.
If signing on behalf of a corporation, please sign the full corporate name and
your name and indicate your title. If you are a partner signing for a
partnership, please sign the partnership name and your name. Joint owners
should each sign this proxy.
<PAGE>
Exhibit A
INVESTMENT SUBADVISORY AGREEMENT
INVESTMENT SUBADVISORY AGREEMENT, dated as of June 1, 2000 by and
between Diversified Investment Advisors, Inc., a Delaware corporation
("Diversified") and Eaton Vance 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 HighYield Bond
Portfolio ("Portfolio"), a series of Diversified Investors Portfolios, a
diversified openend 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 the Portfolio's assets, subject
to the control and written 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 Portfolio's 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 thencurrent Prospectus and Statement of
Additional Information ("SAI").
<PAGE>
In particular, the Subadvisor shall, without limiting the foregoing: (i)
continuously review, supervise and implement the investment program of the
Portfolio; (ii) monitor regularly the relevant securities for the Portfolio 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 Portfolio in balance with its
designated investment strategy; (iv) determine, in the Subadvisor's discretion,
whether to exercise warrants or other rights with respect to the Portfolio's
securities; (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 Portfolio; (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 of the Portfolio on the last day of such month, rates of return, and
(c) such other information relating to the Portfolio 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 Portfolio; (viii) provide the Portfolio with records concerning
the Subadvisor's activities which the Portfolio is required to by law maintain;
and (ix) render regular reports to the Portfolio's officers and Directors
concerning the Subadvisor's discharge of the foregoing responsibilities.
The Subadvisor shall review all proxy solicitation materials and be
responsible for voting all proxies in relation to the securities held in the
Portfolio. Diversified shall direct the Portfolio's custodian to forward all
proxies and similar materials relating to the Portfolio's securities upon
receipt to the Subadvisor c/o Ms. Elizabeth Boveroux, The Eaton Vance Building,
255 State Street, Boston, MA 02109, affording the Subadvisor reasonable time in
which to determine how to vote such proxies. The Subadvisor shall provide the
Portfolio with quarterly reports of all proxies voted by the Subadvisor.
Should the Board of Trustees at any time make any definite determination
as to investment policy with respect to the Portfolio 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 Portfolio, all actions which
it deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
<PAGE>
Portfolio securities for the Portfolio's account with brokers or dealers
selected by it, and to that end the Subadvisor is authorized as the 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 statistical, factual
and financial information and services to the Portfolio, 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 Eaton Vance Management 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 separate
accounts for which the Subadvisor exercises investment discretion. Further,
notwithstanding the prior paragraphs of Section 1, the Subadvisor shall have
the ability to place orders consistent with its disclosure in its current Form
ADV as filed with the Securities and Exchange Commission.
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 outofpocket, 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
<PAGE>
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 nonrecurring 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 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, will not take a long or
short position in the shares of the Portfolio except as permitted by the
Articles, and will comply with all other provisions of the Articles and ByLaws
and any current Prospectus 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 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, and 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,
<PAGE>
fines, taxes, penalties and interest; provided, however, that Diversified shall
not be required to indemnify Subadvisor for any such liability, damages, or
expenses arising out of Subadvisor's gross negligence, bad faith, willful
malfeasance, or reckless disregard of its duties 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.
6. Exclusivity. Subadvisor represents to Diversified that during the term
of this Agreement Subadvisor will not manage any similar High Yield Bond
Portfolio, any collective trust, openend investment company registered under
the Investment Company Act of 1940, Variable Insurance Contract registered
under the Investment Company Act of 1940, or insurance company separate account
that are offered to the types of employee benefit plans in the target markets
referred to in Schedule C and sponsored by competitors of Diversified in
providing services to such types of employee benefit plans without providing
Diversified with 60 days prior written notice. It is understood that Subadvisor
shall not be limited by this section 6 with respect to any other portfolio that
it may offer (such as a small, medium or large capitalization specific
portfolio, a portfolio that includes a significant portion devoted to nonU.S.
securities or a commingled vehicle that is not sponsored by a provider of
bundled services to the types of employee benefit plans specified on Schedule
C). The parties acknowledge that Eaton Vance is not currently a competitor of
Diversified.
7. 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" 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
<PAGE>
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 Fund 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.
8. Certain Records. Any records to be maintained and preserved pursuant
to the provisions of Rule 31a1 and Rule 31a2 adopted under the 1940 Act which
are prepared or maintained by the Subadvisor on behalf of the Portfolio are the
property of the Portfolio and will be surrendered promptly to the Portfolio on
request.
9. Survival of Compensation Rates. All rights to compensation under this
Agreement which have accrued prior to any termination of this Agreement shall
survive such termination.
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 7 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
<PAGE>
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. In addition, Subadvisor represents to Diversified that
it will similarly disclose to Diversified, promptly after it has knowledge, the
existence of any pending material legal action being brought against it whether
in the form of a lawsuit or a nonroutine 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. 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.
14. Override Provisions. Notwithstanding any other provision of this
Agreement, (i) prior to this Agreement being approved by a vote of a majority
of the Portfolio's outstanding voting securities in accordance with the 1940
Act, in no event shall compensation paid to the Subadvisor hereunder exceed the
amount permitted by Rule 15a4 under the 1940 Act, and (ii) if this Agreement is
not approved by a vote of a majority of the Portfolio's outstanding voting
securities in accordance with the 1940 Act no later than 150 days after the
date of this Agreement, this Agreement shall immediately terminate.
15. Liability of Eaton Vance. Diversified acknowledges that the
Subadvisor is organized as a Massachusetts business trust and, therefore, none
of its trustees, officers or shareholders are personally liable for any of its
obligations. Diversified agrees to seek satisfaction of any obligations of
Subadvisor solely from the assets of the Subadvisor.
<PAGE>
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/ Robert F. Colby
-----------------------------------
Robert F. Colby
Vice President and General Counsel
Eaton Vance Management
By: /s/ A. Walker Martin
-----------------------------------
A. Walker Martin
Vice President
<PAGE>
SCHEDULE A
(to Exhibit A)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of August 17, 1995 by and between the HighYield Bond
Portfolio, a series of Diversified Investors Portfolios (herein called the
"Portfolio"), and Diversified Investment Advisors, Inc. a Delaware corporation
(herein called "Diversified;)
WHEREAS, the Portfolio is registered as a diversified, openend, management
investment company under the Investment Company Act of 1940 (the "1940 Act");
and
WHEREAS, Diversified has been organized to operate as an investment advisor
registered under the Investment Advisers Act of 194.0; and
WHEREAS, the Portfolio desires to retain Diversified to render investment
advisory services, and Diversified is willing to so render such services on the
terms hereinafter set forth;
NOW, THEREFORE, this Agreement
WITNESSETH:
In consideration of the promises and mutual covenants herein contained, it
is agreed between the parties hereto as follows:
1. The Portfolio hereby appoints Diversified to act as investment advisor
to the Portfolio for the period and on the terms set forth in this Agreement.
Diversified accepts such appointment and agrees to render the services herein
set forth for the compensation herein provided.
2. (a) Diversified shall, at its expense, (i) employ subadvisors or
associate with itself such entities as it believes appropriate to assist it in
performing its obligations under this Agreement and (ii) provide all services,
equipment and facilities necessary to perform its obligations under this
Agreement.
(b) The Portfolio shall be responsible for all of its expenses and
liabilities, including, but not limited to: compensation and outofpocket
expenses of Trustees not affiliated with any subadvisor or Diversified;
governmental fees; interest charges; taxes; membership dues; fees and expenses
of independent auditors, of legal counsel and of any transfer agent,
<PAGE>
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 nonrecurring events
and expenses relating to the issuance, registration and qualification of shares
of the Portfolio.
3. (a) Subject to the general supervision of the Board of Trustees of the
Portfolio, Diversified shall formulate and provide an appropriate investment
program on a continuous basis in connection with the management of the
Portfolio, including research, analysis, advice, statistical and economic data
and information and judgments of both a macroeconomic and microeconomic
character.
Diversified will determine the securities to be purchased, sold, lent,
exchanged or otherwise disposed of or acquired by the Portfolio in accordance
with predetermined guidelines as set forth from time to time in the Portfolio's
thencurrent prospectus and Statement of Additional Information ("SAI") and will
place orders pursuant to its determinations either directly with the issuer or
with any broker or dealer who deals in such securities. In placing orders with
brokers and dealers, Diversified will use its reasonable best efforts to obtain
the best net price and the most favorable execution of its orders, after taking
into account all factors it deems relevant, including the breadth of the market
in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. Consistent with this obligation, Diversified may, to the extent
permitted by law, purchase and sell Portfolio securities to and from brokers
and dealers who provide brokerage and research services (within the meaning of
Section 28(e) of the Securities Exchange Act of 1934) to or for the benefit of
the Portfolio and/or other accounts over which Diversified or any of its
affiliates exercises investment discretion.
Subject to the review of the Portfolio's Board of Trustees from time to
time with respect to the extent and continuation of the policy, Diversified is
authorized to pay to a broker or dealer who provides such brokerage and
research services a commission for effecting a securities transaction for the
<PAGE>
Portfolio which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if Diversified
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the overall
responsibilities of Diversified with respect to the accounts as to which it
exercises investment discretion.
In placing orders with brokers and/or dealers, Diversified intends to
seek best price and execution for purchases and sales and may effect
transactions through itself and its affiliates on a securities exchange
provided that the commissions paid by the Portfolio are "reasonable and fair"
compared to commissions received by other broker dealers having comparable
execution capability in connection with comparable transactions involving
similar securities and provided that the transactions in connection with which
such commissions are paid are effected pursuant to procedures established by
the Board of the Trustees of the Portfolio. All transactions are effected
pursuant to written authorizations from the Portfolio conforming to the
requirements of Section 11(a) of the Securities Exchange Act of 1934 and Rule
11a22(T) thereunder. Pursuant to such authorizations, an affiliated
brokerdealer may transmit, clear and settle transactions for the Portfolio that
are executed on a securities exchange provided that it arranges for
unaffiliated brokers to execute such transactions.
Diversified shall determine from time to time the manner in which voting
rights, rights to consent to corporate action and any other rights pertaining
to the Portfolio's securities shall be exercised, provided, however, that
should the Board of Trustees at any time make any definite determination as to
investment policy and notify Diversified thereof in writing, Diversified shall
be bound by such determination for the period, if any, specified in such notice
or until similarly notified that such determination has been revoked.
Diversified will determine what portion of securities owned by the Portfolio
shall be invested in securities described by the policies of the Portfolio and
what portion, if any, should be held uninvested. Diversified will determine
whether and to what extent to employ various investment techniques available to
the Portfolio. In effecting transactions with respect to securities or other
property for the account of the Portfolio, Diversified may deal with itself and
its affiliates, with the Trustees of the Portfolio or with other entities to
the extent such actions are permitted by the 1940 Act.
(b) Diversified also shall provide to the Portfolio administrative
assistance in connection with the operation of the Portfolio, which shall
include compliance with all reasonable requests of the Portfolio for
<PAGE>
information, including information required in connection with the Portfolio's
filings with the Securities and Exchange Commission and state securities
commissions.
(c) As manager of the assets of the Portfolio, Diversified shall
make investments for the account of the Portfolio in accordance with
Diversified's best judgment and within the Portfolio's investment objectives,
guidelines, and restrictions, the 1940 Act and the provisions of the Internal
Revenue Code of 1986 relating to regulated investment companies subject to
policy decisions adopted by the Board of Trustees.
(d) Diversified shall furnish to the Board of Trustees periodic
reports on the investment performance of the Portfolio and on the performance
of its obligations under this Agreement and shall supply such additional
reports and information as the Portfolio's officers or Board of Trustees shall
reasonably request.
(e) On occasions when Diversified deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other
customers, Diversified, to the extent permitted by applicable law, may
aggregate the securities to be so sold or purchased in order to obtain the best
execution or lower brokerage commissions, if any. Diversified may also on
occasion purchase or sell a particular security for one or more customers in
different amounts. On either occasion, and to the extent permitted by
applicable law and regulations, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction, will be made by
Diversified in the manner it considers to be the most equitable and consistent
with its fiduciary obligations to the Portfolio and to such other customers.
(f) Diversified shall also provide the Portfolio with the following
services as may be required:
(i) providing office space, equipment and clerical personnel necessary
for maintaining the organization of the Portfolio and for
performing administrative and management functions;
(ii) supervising the overall administration of the Portfolio, including
negotiation of contracts and fees with and the monitoring of
performance and billings of the Portfolio's transfer agent,
custodian and other independent contractors or agents;
(iii) preparing and, if applicable, filing all documents required for
compliance by the Portfolio with applicable laws and regulations,
including registration statements, registration fee filings,
<PAGE>
semiannual and annual reports to investors, proxy statements and
tax returns;
(iv) preparation of agendas and supporting documents for and minutes of
meeting of Trustees, committees of Trustees and investors; and
(v) maintaining books and records of the Portfolio.
4. Diversified shall give the Portfolio the benefit of Diversified's best
judgment and efforts in rendering services under this Agreement. As an
inducement to Diversified's undertaking to render these services, the Portfolio
agrees that Diversified shall not be liable under this Agreement for any
mistake in judgment or in any other event whatsoever provided that nothing in
this Agreement shall be deemed to protect or purport to protect Diversified
against any liability to the Portfolio or its investors to which Diversified
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Adviser's duties under this Agreement or
by reason of the Adviser's reckless disregard, of its obligations and duties
hereunder.
5. In consideration of the services to be rendered by Diversified under
this Agreement, the Portfolio shall pay Diversified a fee accrued daily and
paid monthly at an annual rate equal to .55% of the Portfolio's average daily
net assets. If the fees payable to Diversified pursuant to this paragraph 5
begin to accrue before the end of any month or if this Agreement terminates
before the end of any month, the fees for the period from that date to the end
of that month or from the beginning of that month to the date of termination,
as the case may be, shall be prorated according to the proportion which the
period bears to the full month in which the effectiveness or termination
occurs. For purposes of calculating the monthly fees, the value of the net
assets of the Portfolio shall be computed in the manner specified in its
Regulation Statement on Form N-1A for the computation of net asset value. For
purposes of this Agreement, a "business day" is any day the New York Stock
Exchange is open for trading.
In compliance with the requirements of Rule 31a-3 under the 1940 Act,
Diversified hereby agrees that all records which it maintains for the Portfolio
are property of the Portfolio and further agrees to surrender promptly to the
Portfolio any such records upon the Portfolio's request. Diversified further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
any such records required to be maintained by Rule 31a-1 under the 1940 Act.
<PAGE>
6. This Agreement shall be effective as to the Portfolio as of the date
the Portfolio commences investment operations after this Agreement shall have
been approved by the Board of Trustees of the Portfolio and the investor(s) in
the Portfolio in the manner contemplated by Section 15 of the 1940 Act and,
unless sooner terminated as provided herein, shall continue until the second
anniversary of the date hereof. Thereafter, if not terminated, this Agreement
shall continue in effect as to the Portfolio for successive periods of 12
months each, provided such continuance is specifically approved at least
annually by the vote of a majority of those members 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 either (a) by the vote of a majority of the full Board of
Trustees or (b) by vote of a majority of the outstanding voting securities of
the Portfolio; provided, however, that this Agreement may be terminated by the
Portfolio at any time, without the payment of any penalty, by the Board of
Trustees of the Portfolio or by vote of a majority of the outstanding voting
securities of the Portfolio on 60 days' written notice to Diversified, or by
Diversified as to the Portfolio at any time, without payment of any penalty, on
90 days' written notice to the Portfolio. This Agreement will immediately
terminate in the event of its assignment. (As used in this Agreement, the terms
"majority of the outstanding voting securities", "interested person" and
"assignment" shall have the same meanings as such terms have in the 1940 Act
and the rule and regulatory constructions thereunder.)
7. Except to the extent necessary to perform Diversified's obligations
under this Agreement, nothing herein shall be deemed to limit or restrict the
right of Diversified, or any affiliate of Diversified, or any employee of
Diversified, to engage in any other business or devote time and attention to
the management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other trust,
corporation, firm, individual or association.
8. The investment management services of Diversified to the Portfolio
under this Agreement are not to be deemed exclusive as to Diversified and
Diversified will be free to render similar services to others.
Each party agrees to perform such further acts and execute such further
documents as are necessary to effectuate the purposes hereof.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge, or, termination is
sought and no material amendment of this Agreement shall be effective until
<PAGE>
approved by vote of the holders of a majority of the outstanding voting
securities of the Portfolio.
This Agreement embodies the entire agreement and understanding between
the parties hereto and supersedes all prior agreements and understandings
relating to the subject matter hereof. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
Should any part of this Agreement be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding and shall inure to the
benefit of the parties hereto and their respective successors, to the extent
permitted by law.
9. This Agreement shall be construed in accordance with the laws of the
State of New York provided that nothing herein shall be construed in a manner
inconsistent with the requirements of 1940 Act.
<PAGE>
SCHEDULE B
(to Exhibit A)
The Subadvisor shall be compensated for its services under this Agreement on
the basis of the belowdescribed annual fee schedule. The fee schedule shall
only be amended by agreement between the parties.
Fee Schedule
.35% of first $20 million of net assets of the Portfolio
.25% of next $20 million of net assets of the Portfolio
.20% of next $85 million of net assets of the Portfolio
.15 % of net assets in excess of $125 million of the Portfolio
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
accrue monthly and be paid quarterly.
Eaton Vance agrees that if at anytime during the term of this Subadvisory
Agreement, Eaton Vance offers another of its clients a lower fee than that set
forth in this Schedule B for the management of a similarly structured High
Yield Bond 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 Eaton Vance's other client. It is understood and agreed by both
Eaton Vance and Diversified that this paragraph is applicable solely to
Diversified's HighYield Bond Portfolio and not to any other fund/assets which
Eaton Vance now manages or may manage in the future on Diversified's behalf.
<PAGE>
SCHEDULE C
(to Exhibit A)
Target market for 401(a), 403(b) and 457 plans is those plans, with assets
between $1 and $250 million.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT B
SIMILAR INVESTMENT COMPANIES FOR WHICH EATON VANCE
(OR AN AFFILIATE) SERVES AS INVESTMENT ADVISER:
<S> <C> <C> <C> <C> <C>
-------------------------- --------------- ------------------------------------------------------------ ----------------
FUND NAME NET ASSETS ANNUAL RATE OF COMPENSATION FEE WAIVERS OR
REDUCTIONS
-------------------------- --------------- ------------------------------------------------------------ ----------------
-------------------------- --------------- ------------------------------------------------------------ ----------------
High Income Portfolio $1,200,000,000* Daily Net Assets Annual Asset Daily Income None
Rate Rate
-------------------------- --------------- ---------------------- ---------------- -------------------- ----------------
up to $500 million 0.300% 3.00%
-------------------------- --------------- ---------------------- ---------------- -------------------- ----------------
$500 million but less
than $1 billion 0.275% 2.75%
-------------------------- --------------- ---------------------- ---------------- -------------------- ----------------
$1 billion but less
than $1.5 billion 0.250% 2.50%
-------------------------- --------------- ---------------------- ---------------- -------------------- ----------------
$1.5 billion but less
than $2 billion 0.225% 2.25%
-------------------------- --------------- ---------------------- ---------------- -------------------- ----------------
$2 billion but less
than $3 billion 0.200% 2.00%
-------------------------- --------------- ---------------------- ---------------- -------------------- ----------------
$3 billion and over 0.175% 1.75%
-------------------------- --------------- ------------------------------------------------------------ ----------------
-------------------------- --------------- ------------------------------------------------------------ ----------------
Eaton Vance Income Fund $586,000,000* 5/96 of 1% (equivalent to 0.625% annually) of average None
of Boston daily net assets)
-------------------------- --------------- ------------------------------------------------------------ ----------------
</TABLE>
* As of June 30, 2000.
