SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE SECURITIES
EXCHANGE ACT OF 1934
Check the appropriate box:
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[X] Preliminary Information Statement
[ ] Definitive Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Diversified Investors Portfolios - Value & Income 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 14c-5(g) 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: November 3, 2000
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AUSA LIFE INSURANCE COMPANY, INC.
4 Manhattanville Road
Purchase, New York 10577
November , 2000
Dear Contract Holder:
We are sending the enclosed information statement to contract holders of
Group Variable Annuity Contracts issued by AUSA Life Insurance Company, Inc.
with unit interests in the Diversified Investors Variable Funds Value & Income
Subaccount of The Diversified Investors Variable Funds. The enclosed
information statement describes a new subadviser for Value & Income Portfolio,
the underlying mutual fund in which all of the assets of Diversified Investors
Variable Funds Value & Income Subaccount are invested.
On October 2, 2000, with the approval of the Board of Trustees of Value &
Income Portfolio, Alliance Capital Management L.P. replaced Sanford L.
Bernstein & Co., Inc. as a subadviser of the Portfolio. This replacement
occurred because on that date, Alliance Capital Management L.P. acquired all of
the assets and liabilities of the operating subsidiaries of Sanford C.
Bernstein Inc., the parent company of Sanford C. Bernstein & Co., Inc. As a
result of such transaction, the investment advisory business of Sanford C.
Bernstein & Co., Inc. is now conducted through the Bernstein Investment
Research and Management unit of Alliance Capital Management L.P. The
acquisition transaction resulted in the automatic termination of Sanford C.
Bernstein & Co., Inc.'s subadvisory agreement with Value & Income Portfolio,
for the purposes of the Investment Company Act of 1940, as amended.
Currently, the Portfolio's subadvisers are 1740 Advisers, Inc. and
Alliance Capital Management L.P.
Value & Income Portfolio has obtained exemptive relief from the Securities
and Exchange Commission that permits the Portfolio's Board of Trustees to
approve new subadvisers without investor approval under certain circumstances.
This information statement describes Alliance Capital Management L.P. and the
terms of the Subadvisory Agreement with Alliance Capital Management L.P. This
material is for your information only; it is not a proxy statement and you are
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not being asked to vote. Please call us at (800) 926-0044 if you have any
questions.
Sincerely,
Robert F. Colby
Vice President and Assistant Secretary
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MONY LIFE INSURANCE COMPANY OF NEW YORK
4 Manhattanville Road
Purchase, New York 10577
November , 2000
Dear Contract Holder:
We are sending the enclosed information statement to contract holders of
Group Variable Annuity Contracts issued by MONY Life Insurance Company of New
York with unit interests in the Keynote Value & Income Subaccount of Keynote
Series Account. The enclosed information statement describes a new subadviser
for Value & Income Portfolio, the underlying mutual fund in which all of the
assets of Keynote Value & Income Subaccount are invested.
On October 2, 2000, with the approval of the Board of Trustees of Value &
Income Portfolio, Alliance Capital Management L.P. replaced Sanford C.
Bernstein & Co., Inc. as a subadviser of the Portfolio. This replacement
occurred because on that date, Alliance Capital Management L.P. acquired all of
the assets and liabilities of the operating subsidiaries of Sanford C.
Bernstein Inc., the parent company of Sanford C. Bernstein & Co., Inc. As a
result of such transaction, the investment advisory business of Sanford C.
Bernstein & Co., Inc. is now conducted through the Bernstein Investment
Research and Management unit of Alliance Capital Management L.P. The
acquisition transaction resulted in the automatic termination of Sanford C.
Bernstein & Co., Inc.'s subadvisory agreement with Value & Income Portfolio,
for the purposes of the Investment Company Act of 1940, as amended.
Value & Income Portfolio has obtained exemptive relief from the Securities
and Exchange Commission that permits the Portfolio's Board of Trustees to
approve new subadvisers without investor approval under certain circumstances.
This information statement describes Alliance Capital Management L.P. and the
terms of the Subadvisory Agreement with Alliance Capital Management L.P. This
material is for your information only; it is not a proxy statement and you are
not being asked to vote. Please call us at (800) 926-0044 if you have any
questions.
Currently, the Portfolio's subadvisers are 1740 Advisers, Inc. and
Alliance Capital Management L.P.
Sincerely,
Robert F. Colby
Vice President and Assistant Secretary
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VALUE & INCOME PORTFOLIO
a series of Diversified Investors Portfolios
4 Manhattanville Road
Purchase, New York 10577
November , 2000
Dear Investor:
The enclosed information statement describes a new subadviser for Value &
Income Portfolio. On October 2, 2000, with the approval of the Portfolio's
Board of Trustees, Alliance Capital Management L.P. replaced Sanford C.
Bernstein & Co., Inc. as a subadviser of the Portfolio. This replacement
occurred because on that date, Alliance Capital Management L.P. acquired all of
the assets and liabilities of the operating subsidiaries of Sanford C.
Bernstein Inc., the parent company of Sanford C. Bernstein & Co., Inc. As a
result of such transaction, the investment advisory business of Sanford C.
Bernstein & Co., Inc. is now conducted through the Bernstein Investment
Research and Management unit of Alliance Capital Management L.P. The
acquisition transaction resulted in the automatic termination of Sanford C.
Bernstein & Co., Inc.'s subadvisory agreement with Value & Income Portfolio,
for the purposes of the Investment Company Act of 1940, as amended.
Value & Income Portfolio has obtained exemptive relief from the Securities
and Exchange Commission that permits the Portfolio's Board of Trustees to
approve new subadvisers without investor approval under certain circumstances.
This information statement describes Alliance Capital Management L.P. and the
terms of the Subadvisory Agreement with Alliance Capital Management L.P. This
material is for your information only; it is not a proxy statement and you are
not being asked to vote. Please call us at (800) 926-0044 if you have any
questions.
Currently, the Portfolio's subadvisers are 1740 Advisers, Inc. and
Alliance Capital Management L.P.
Sincerely,
Robert F. Colby
Secretary
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VALUE & INCOME PORTFOLIO
a series of Diversified Investors Portfolios
4 Manhattanville Road
Purchase, New York 10577
Telephone: (914) 697-8000
INFORMATION STATEMENT
This Information Statement is being provided to investors in Value & Income
Portfolio (the "Portfolio") by the Portfolio's Board of Trustees in lieu of a
proxy statement pursuant to the terms of an exemptive order that the Portfolio
has received from the Securities and Exchange Commission. The exemptive order
permits the Portfolio's manager, under certain circumstances, to hire new
subadvisers with the approval of the Portfolio's Board of Trustees, but without
obtaining investor approval. Pursuant to the exemptive order, however, the
Portfolio has agreed to provide certain information about the new subadviser to
its investors. Accordingly, Portfolio investors are not being asked to vote on
the hiring of the new subadviser, but are encouraged to review this Information
Statement.
WE ARE NOT ASKING FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
The Portfolio is a series of Diversified Investors Portfolios (the "Trust"),
which is a registered investment company organized as a New York trust under a
Declaration of Trust dated as of April 23, 1993. The Portfolio was designated
as a separate series of the Trust on April 23, 1993 and commenced operations on
July 1, 1994. The Portfolio's mailing address is 4 Manhattanville Road,
Purchase, New York 10577.
The annual report for the Portfolio for the period ended December 31, 1999,
including audited financial statements, and the semi-annual report for the
period ended June 30, 2000 have previously been sent to investors and are
available upon request without charge by contacting Catherine A. Mohr,
Diversified Investors Portfolios, 4 Manhattanville Road, Purchase, New York
10577 or by calling toll-free, (800) 926-0044.
This Information Statement is being mailed on or about November , 2000.
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BACKGROUND
The Portfolio is a master fund in a two-tier, master/feeder mutual fund
structure. Currently, 14 feeder funds invest all of their investable assets in
the Portfolio. The Portfolio, in turn, invests directly in securities.
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 January 3,
1994 (the "Advisory Agreement"). The Advisory Agreement was most recently
approved by the Board of Trustees of the Portfolio, including a majority of the
Trustees who are not "interested persons," as defined in the Investment Company
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 January 3, 1994
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 Portfolio, 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. Currently, the Portfolio has four subadvisers.
FORMER SUBADVISER
Prior to October 2, 2000, Sanford C. Bernstein & Co., Inc. ("Sanford
Bernstein"), a corporation having its principal offices at 767 Fifth Avenue,
New York, New York 10153-0185, served as one of the investment subadvisers of
the Portfolio pursuant to an Investment Subadvisory Agreement between Sanford
Bernstein and the Adviser. As subadviser, Sanford Bernstein was responsible for
investing that portion of the Portfolio's assets allocated to Sanford Bernstein
by the Adviser in a manner consistent with the terms of the Investment
Subadvisory Agreement and the investment objective of the Portfolio. The
Sanford Bernstein Subadvisory Agreement was most recently approved by the Board
of Trustees of the Portfolio, including a majority of the Independent Trustees,
on April 5, 2000. The Sanford Bernstein Subadvisory Agreement was most recently
submitted to a vote of investors in the Portfolio on August 15, 2000 in
connection with its initial approval.
Sanford Bernstein informed the Adviser that its parent corporation intended to
enter into a transaction (the "Transaction") with Alliance Capital Management
L.P. ("Alliance") that would constitute an assignment of the Sanford Bernstein
Subadvisory Agreement and, as a result, the automatic termination of that
Subadvisory Agreement as required by applicable law. Sanford Bernstein informed
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the Adviser that the Transaction was scheduled to close in the third or fourth
quarter of 2000, and requested that a new subadvisory agreement between the
Adviser and Alliance, be approved. The Adviser furnished this information to
the Board of Trustees of the Trust. The Transaction is described below in Item
1 under the heading "The Transaction."
At a regular meeting of the Board of Trustees of the Portfolio held on August
15, 2000, the Board considered, at the Adviser's recommendation, the approval
of Alliance as a subadviser of the Portfolio. The Board reviewed Sanford
Bernstein's investment performance as subadviser and considered the anticipated
effects of the Transaction. As discussed below under the heading "Evaluation by
the Board of Trustees," the Board approved a new subadvisory agreement with
Alliance. Accordingly, effective upon the closing of the Transaction on October
2, 2000 the Sanford Bernstein Subadvisory Agreement terminated and the Adviser
entered into a Subadvisory Agreement with Alliance.
THE TRANSACTION
The principal terms of the Transaction, as described by Sanford Bernstein, are
as follows: on June 20, 2000, Sanford C. Bernstein Inc. ("Bernstein"), the
parent company of Sanford Bernstein, Alliance and certain of their affiliates
entered into an acquisition agreement pursuant to which all of the assets and
liabilities of the operating subsidiaries of Bernstein, including Sanford
Bernstein, were acquired by Alliance. The Transaction closed on October 2,
2000. The investment management business formerly conducted by Sanford
Bernstein is now conducted by Alliance through its Bernstein Investment
Research and Management unit. Bernstein and Alliance expect that all key
investment professionals involved in managing the Portfolio will remain the
same.
The consummation of the Transaction on October 2, 2000 constituted an
"assignment" of all Sanford Bernstein's investment advisory agreements for
purposes of the 1940 Act. Under the 1940 Act, such an assignment resulted in
the automatic termination of all such agreements, including the Sanford
Bernstein Subadvisory Agreement.
COMPARISON OF THE SUBADVISORY AGREEMENTS
The terms of the Alliance Subadvisory Agreement are similar to those of the
Sanford Bernstein Subadvisory Agreement. The material differences between the
Alliance Subadvisory Agreement and the Sanford Bernstein Subadvisory Agreement
are the identity of the service provider, the effective date and termination
date.
A description of the investment advisory fees to be paid by the Adviser to
Alliance appears below under the caption "Investment Advisory Fees."
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The Alliance Subadvisory Agreement became effective on October 2, 2000 and will
continue in effect through October 2, 2002 and thereafter from year to year,
subject to approval annually in accordance with the 1940 Act. The Alliance
Subadvisory Agreement may be terminated at any time without the payment of any
penalty by the Board of Trustees of the Portfolio or by the vote of a "majority
of the outstanding voting securities" of the Portfolio or by the Adviser. The
Alliance Subadvisory Agreement may also be terminated by Alliance upon 90 days'
advance written notice to the Adviser. The Alliance Subadvisory Agreement will
also terminate automatically in the event of its "assignment" (as defined in
the 1940 Act).
Under the Alliance Subadvisory Agreement, as under the Sanford Bernstein
Subadvisory Agreement, Alliance will furnish continuing portfolio management
services to the Portfolio with respect to the assets of the Portfolio allocated
to it, subject always to the provisions of the 1940 Act and to the investment
objective, policies, procedures and restrictions imposed by the Portfolio's
then current Registration Statement under the 1940 Act. Investment management
decisions of Alliance for the Portfolio will be made by committee and not by
managers individually. Alliance will also provide the Adviser with such
investment advice and reports and data as are requested by the Adviser.
Like the Sanford Bernstein Subadvisory Agreement, the Alliance Subadvisory
Agreement provides that the subadviser is responsible only for managing the
assets of the Portfolio allocated to it in good faith and in accordance with
investment guidelines, and has no responsibility whatsoever for, and shall
incur no liability on account of, (i) selection or establishment 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 Subadvisory Agreement, including reasonable attorney's fees,
indemnification to brokers and future commission merchants, fines, taxes,
penalties and interest. Alliance, however, is liable for any liability,
damages, or expenses of the Adviser arising out of the negligence, malfeasance
or violation of applicable law by it or any of its employees in providing
management under the Subadvisory Agreement, and, in such cases, the
indemnification by the Adviser referred to above shall be inapplicable.
The Alliance Subadvisory Agreement, like the Sanford Bernstein Subadvisory
Agreement, states that Alliance may place orders with brokers or dealers that
sell shares of the Portfolio or that sell shares of any other fund for which
Alliance provides investment advisory services, to the extent that the placing
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of such orders is in compliance with the rules of the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc.
The Alliance Subadvisory Agreement, like the Sanford Bernstein Subadvisory
Agreement, further provides that Alliance may, with the consent of the
Portfolio's Board of Trustees and the Adviser, subject to its duty to seek the
best available price and execution, use an affiliate to act as a broker for the
Portfolio from time to time at rates not exceeding the usual and customary
broker's commission. In the agreement, Alliance represents, warrants and
covenants that these transactions will be effected by it in accordance with the
Securities Exchange Act of 1934, as amended, and the Investment Advisers Act of
1940, as amended, and the rules promulgated thereunder. The Portfolio's Board
of Trustees or the Adviser may revoke consent for these types of transactions
by written notice to Alliance at any time.
Shareholders should refer to Exhibit A attached hereto for the complete terms
of the Alliance Subadvisory Agreement. The description of the Alliance
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 Alliance Subadvisory Agreement, the Adviser (not the Portfolio) pays
Alliance for its services on the basis of the following annual fee schedule:
Fee Schedule for Alliance
0.27% of the first $300 million of net assets
of the Portfolio allocated to Alliance
0.16% of net assets of the Portfolio allocated
to Alliance in excess of $300 million
but less than $1 billion
0.13% of net assets of the Portfolio allocated
to Alliance in excess of $1 billion
Under the Alliance Subadvisory Agreement, as under the Sanford Bernstein
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 in the Portfolio allocated to
Alliance by the fee schedule and dividing by twelve. Fees are paid by the
Adviser quarterly.
Under the Sanford Bernstein Subadvisory Agreement, the Adviser (not the
Portfolio) paid Sanford Bernstein for its services based on the same fee
schedule as is set forth above for Alliance.
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Fees payable to Sanford Bernstein for services provided pursuant to the Sanford
Bernstein Subadvisory Agreement for the period from January 1, 1999 to December
31, 1999, had the Sanford Bernstein Subadivsory Agreement been in effect during
that period, would have been $998,360. Because the fee schedules under the
Sanford Bernstein and Alliance Subadvisory Agreements are identical, the same
amount of fees would have been payable to Alliance for services provided
pursuant to the Alliance Subadvisory Agreement for the period from January 1,
1999 to December 31, 1999, had the Alliance Subadvisory Agreement been in
effect for such period.
As of December 31, 1999, the Portfolio had net assets of $1,414,634,230.
Neither Sanford Bernstein nor any affiliated person of Sanford Bernstein, 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
material payments by the Adviser or the Portfolio to Sanford Bernstein, any
affiliated person of Sanford Bernstein, or any affiliated person of any such
affiliated person, during the fiscal year of the Portfolio ended December 31,
1999. In addition, for the 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, Sanford Bernstein, Alliance or the distributor of the Portfolio.
INFORMATION REGARDING ALLIANCE
Alliance is a Delaware limited partnership having an office at 1345 Avenue of
the Americas, New York, New York 10105.
At October 2, 2000, Alliance Capital Management Holding L.P. ("Alliance
Holding") owned approximately 30% of the units of limited partnership interests
in Alliance. AXA Financial Inc. owns approximately 2% of the outstanding
Alliance Holding limited partnership units and approximately 52% of the
outstanding Alliance units, amounting to an approximate 53% economic interest
in Alliance. AXA, which has operations in approximately 60 countries, holds a
60% interest in AXA Financial, Inc.
Alliance Capital Management Corporation ("ACMC") is the general partner of
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Alliance and Alliance Holding and makes all decisions relating to the
management of Alliance and Alliance Holding. ACMC has agreed that it will
conduct no business other than managing Alliance and Alliance Holding, although
it may make certain investments for its own account.
MANAGEMENT AND GOVERNANCE. Listed below are the names, positions and principal
occupations of the principal executive officers and the directors of Alliance,
as of October 2, 2000. The principal business address of each individual, as it
relates to his or her duties at Alliance, is the same as that of Alliance
unless otherwise noted.
NAME POSITION(S) WITH ALLIANCE AND PRINCIPAL
OCCUPATION IF DIFFERENT FROM POSITION(S)
WITH ALLIANCE
Dave H. Williams Chairman of the Board
Bruce W. Calvert Vice Chairman and Chief Executive Officer and
Director of ACMC
John D. Carifa President and Chief Operating Officer and
Director of ACMC
Alfred Harrison Vice Chairman and Director of ACMC
601 Second Avenue
South, Suite 5000
Minneapolis, MN 55402
David R. Brewer, Jr. Senior Vice President and General Counsel and
Secretary of ACMC
Robert H. Joseph, Jr. Senior Vice President and Chief Financial
Officer of ACMC
Luis Javier Bastida Director, ACMC; Head of Global Asset
Management and Private Banking and a
member of the Executive Committee of Banco
Bilbao Vizcaya, Argentina S.A.
Donald H. Brydon Director, ACMC; Chairman and Chief
Executive Officer of AXA Investment
Managers, S.A.
Henri de Castries Director, ACMC; Vice Chairman of AXA
Management Board
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Kevin C. Dolan Director, ACMC; Senior Executive Vice
President, for AXA Investment Managers, S.A.
on a global basis
Denis Duverne Director, ACMC; Group Executive Vice
President - Finance, Control and Strategy of
AXA
Herve Hatt Director, ACMC; Senior Vice President - Asset
Management Activities and Group Strategic
Planning of AXA
Michael Hegarty Director, ACMC; Senior Vice Chairman, Chief
Operating Officer and Director of AXA
Financial
Roger Hertog Vice Chairman and Director of ACMC
767 Fifth Avenue
New York, NY 10153
Benjamin D. Holloway Director, ACMC; Consultant to The
Continental Companies
W. Edwin Jarmain Director, ACMC; President of Jarmain Group
Inc.
Edward D. Miller Director, ACMC; President, Chief Executive
Officer and Director of AXA Financial
Peter D. Noris Director, ACMC; Executive Vice President and
Chief Investment Officer of AXA Financial
Lewis A. Sanders Vice Chairman, Chief Investment Officer and
767 Fifth Avenue Director of ACMC
New York, NY 10153
Frank Savage Director, ACMC; Chairman of Alliance Capital
Management International, a division of
Alliance
Peter J. Tobin Director, ACMC; Dean of the Peter J. Tobin
College of Business Administration of St.
John's University
Stanley B. Tulin Director, ACMC; Vice Chairman and Chief
Financial Officer of AXA Financial
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Reba W. Williams Director, ACMC; Director of Special Projects of
ACMC
Robert B. Zoellick Director, ACMC; Resident Fellow and Member of the
Board of the German Marshall Fund of the United
States; Research Scholar at the Belfer Center at
Harvard University; Senior International Advisor at
Goldman Sachs & Co.
No officer or director of the Portfolio currently is an officer or employee of
Alliance. No officer or Trustee of the Portfolio has any other material direct
or indirect interest in Alliance or any other person controlling, controlled by
or under common control with Alliance. Since January 1, 1999, none of the
Trustees of the Portfolio has had any material interest, direct or indirect, in
any material transactions, or in any material proposed transactions, to which
Alliance was or is to be a party.
MANAGEMENT ACTIVITIES. Alliance is a leading global investment
management firm best known for its growth style of equity investing. Assets
under management of Alliance as of October 2, 2000 totaled $474 billion.
Alliance manages retirement assets for many of the largest public and private
employee benefit plans (including 38 of the U.S. Fortune 100 companies), for
public employee retirement funds in 35 out of 50 states, and the foundations,
endowments, banks and insurance companies worldwide. Alliance is also one of
America's largest mutual fund sponsors.
Alliance does not act as investment manager for any registered investment
companies with investment objectives similar to the Portfolio
EVALUATION BY THE BOARD OF TRUSTEES
At a meeting held on August 15, 2000, following presentations by the Adviser
and consideration of the factors discussed below, the Board of Trustees of the
Portfolio, including all of the Independent Trustees, approved the Alliance
Subadvisory Agreement. In connection with this approval, the Trustees
considered among other information presented that there were no expected
changes in the key investment professionals involved in managing the Portfolio
or in the nature or quality of portfolio management services and that no
changes in day-to-day operations and responsibilities after the Transaction
were anticipated.
As part of their deliberations, the Trustees took into account, among other
factors, the nature and quality of the services provided and the results
achieved by Sanford Bernstein in the past, the high degree of continuity of
services anticipated to be provided by Alliance, and the anticipated
organizational and financial capability of Alliance following the Transaction.
In this regard, the Trustees took into account the financial strength of
Alliance, and the commitment of Alliance to the financial services industry.
The Trustees also considered the additional resources that were likely to be
available to the combined firm following the Transaction. The Trustees based
their determinations in part on discussions with the Adviser at the meeting.
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Based upon its review and the representations made to it, the Board of
Trustees, including all of the Independent Trustees, concluded that (a)
Alliance had adequate resources and expertise to provide advisory services to
the Portfolio, (b) the scope and quality of the services to be provided to the
Portfolio by Alliance would be at least equivalent to the scope and quality of
the services provided to the Portfolio by Sanford Bernstein, (c) the terms of
the Alliance Subadvisory Agreement did not differ in any material respect from
the terms of the Sanford Bernstein Subadvisory Agreement and were reasonable,
fair and in the best interests of the Portfolio and its holders of beneficial
interests, and (d) the fees provided in the Alliance Subadvisory Agreement were
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 all of the Independent Trustees,
approved the Alliance Subadvisory Agreement.
ADDITIONAL INFORMATION
The Portfolio's 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.
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
shareholders must be received by the Trust at the Trust's office within a
reasonable time before the proxy solicitation is made.
By Order of the Board of Trustees,
Robert F. Colby, Secretary
November , 2000
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EXHIBIT A
INVESTMENT SUBADVISORY AGREEMENT
INVESTMENT SUBADVISORY AGREEMENT, dated as of October 1, 2000 by and
between Diversified Investment Advisors, Inc., a Delaware corporation
("Diversified") and Alliance Capital Management L.P., a Delaware limited
partnership ("Subadvisor").
WITNESSETH:
WHEREAS, Diversified is an investment advisor registered under the
Investment Advisers Act of 1940 and has been retained to provide investment
advisory services to the Value & Income 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 such amount of the Portfolio's
assets as is determined from time to time by Diversified, subject to the
control and direction of Diversified and the Diversified Investors Portfolios'
Board of Trustees, for the period and on the terms hereinafter set forth.
The Subadvisor shall provide Diversified with such investment advice and
supervision as the latter may from time to time consider necessary for the
proper supervision of the 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
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the 1940 Act and to the Portfolio's thencurrent Registration Statement on Form
N-1A.
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 by law to 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 The Proxy Department at the Bernstein Division of
Alliance Capital Management L.P., Gateway Building, One North Lexington Avenue,
White Plains, New York 10601, 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
<PAGE>
policy has been revoked. The initial Statement of Investment Policy and
Guidelines is attached hereto as Appendix I.
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
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 the Subadvisor is investment advisor shall only receive orders
for the purchase or sale of portfolio securities to the extent that the placing
of such orders is in compliance with the Rules of the Securities and Exchange
Commission and the 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.
In addition to selecting brokers or dealers to execute transactions for
the Portfolio, the Subadvisor may, subject to its duty to seek the best
available price and execution, utilize its affiliate Sanford C. Bernstein &
Co., LLC ("SCB LLC") to act as a broker for the Portfolio from time to time at
rates not exceeding the usual and customary broker's commission. All
transactions executed by SCB LLC for the Portfolio shall be effected in
accordance with Section 11(a) of the Securities Exchange Act of 1934, as
<PAGE>
amended, and Rule 11a22(T) thereunder. Under Federal law, the Subadvisor must
obtain the Board of Trustees' and Diversified's consent to permit SCB LLC to
effect agency cross transactions for the Portfolio, which consent is hereby
granted. The Subadvisor represents, warrants and covenants that all agency
cross transactions for the Portfolio will be effected by SCB LLC strictly in
accordance with Rule 206(3)2 under the Investment Advisers Act of 1940, as
amended. An agency cross transaction is where SCB LLC purchases or sells
securities from or to a nonmanaged account on behalf of a client's account
managed by Subadvisor. Pursuant to this consent, SCB LLC will only effect an
agency cross transaction for the Portfolio with a nonmanaged account. In an
agency cross transaction, SCB LLC receives commissions from both sides of the
trade and there is a potentially conflicting division of loyalties and
responsibilities. However, as both sides to the trade want to execute the
transaction at the best price without moving the market price in either
direction, the Subadvisor believes that an agency cross transaction will aid
both sides to the trade in obtaining the best price for the trade. The Board of
Trustees or Diverisifed may revoke this consent by written notice to the
Subadvisor at any time.
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
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
<PAGE>
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, and will comply with all
other provisions of the Declaration of Trust and any current Registration
Statement on Form N1 A of the Portfolio relative to the Subadvisor, Advisor and
its Trustees and officers. The Subadvisor will notify Diversified of any change
in the membership of the general partners of the Subadvisor within a reasonable
time after such change.
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,
fines, taxes, penalties and interest. Subadvisor, however, shall be liable for
any liability, damages, or expenses of Diversified arising out of the
negligence, malfeasance or violation of applicable law by any of its employees
in providing management under this Agreement; and, in such cases, the
indemnification by Diversified, referred to above, shall be inapplicable.
The Subadvisor may apply to Diversified at any time for instructions and
may consult counsel for Diversified or its own counsel with respect to any
matter arising in connection with the duties of the Subadvisor. Also, the
Subadvisor shall be protected in acting upon advice of Diversified and/or
Diversified's counsel and upon any document which Subadvisor reasonably
believes to be genuine and to have been signed by the proper person or persons.
<PAGE>
6. Exclusivity. Subadvisor represents to Diversified that during the term
of this Agreement, Subadvisor will not manage any portfolio, of substantially
similar size and managed in accordance with the same investment strategy and
substantially similar investment guidelines as the Portfolio, for 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
engages Subadvisor's services on or after the date of this Agreement and are
offered to the types of employee benefit plans referred to in Schedule C and
sponsored by competitors of Diversified which have been identified to
Subadvisor in writing by Diversified, in providing services to such types of
employee benefit plans without providing Diversified with 60 days prior written
notice or, if 60 days' prior notice is not possible due to circumstances beyond
the control of Subadvisor, the best possible prior notice which may reasonably
be provided by Subadvisor under the circumstances resulting in the engagement
of Subadvisor's services for which notice is required under this Section 6.
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
the manner and to the extent permitted by the Investment Company Act of 1940
and Rules thereunder.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees, or by the vote of a majority of the outstanding voting
securities of the Portfolio, or by Diversified. The Subadvisor may terminate
the Agreement only upon giving 90 days' advance written notice to Diversified.
This Agreement shall automatically terminate in the event of its assignment.
Except as otherwise provided by applicable law, 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
<PAGE>
Board of Trustees of the Portfolio who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval.
The terms "specifically approved at least annually", "vote of a majority
of the outstanding voting securities", "assignment", "affiliated person", and
"interested persons", when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
8. Certain Records. Any records to be maintained and preserved pursuant to
the provisions of Rule 31a-1 and Rule 31a-2 adopted under the 1940 Act which are
prepared or maintained by the Subadvisor 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 shall survive the termination of this Agreement.
10. Entire Agreement. This Agreement states the entire agreement of the
parties with respect to investment advisory services to be provided to the
Portfolio by the Subadvisor and may not be amended except in a writing signed
by the parties hereto and approved In accordance with Section 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
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 any third party.
<PAGE>
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.
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/ John F. Hughes
------------------------------
John F. Hughes
Vice President
Alliance Capital Management L.P.
By:_______________________________
Alliance Capital Management
Corporation, its General Partner
<PAGE>
SCHEDULE A
(TO EXHIBIT A)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of January 3, 1994 by and between the Equity Income
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 1940; 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
<PAGE>
of independent auditors, of legal counsel and of any transfer agent,
administrator, distributor, shareholder servicing agents, registrar or dividend
disbursing agent of the Portfolio; expenses of distributing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing prospectuses, shareholder reports, notices, proxy statements and
reports to governmental officers and commissions and to shareholders of the
Portfolio; expenses connected with the execution, recording and settlement of
Portfolio security transactions; insurance premiums; fees and expenses of the
custodian for all services to the Portfolio, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of calculating
the net asset value of shares of the Portfolio; expenses of shareholder
meetings; expenses of litigation and other extraordinary or 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
<PAGE>
research services a commission for effecting a securities transaction for the
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 brokerdealers 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
<PAGE>
include compliance with all reasonable requests of the Portfolio for
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;
<PAGE>
(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,
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 .45% 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 N1A 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 31a3 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
<PAGE>
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.
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.
<PAGE>
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
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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
Attest: Diversified Investors Portfolios
_______________________________ By:______________________________
Tom Schlossberg
Chairman and President
Attest: Diversified Investment Advisors, Inc.
_______________________________ By:______________________________
Gerald L Katz
Vice President and CFO
<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
.27% of the first $300M net assets
.16% of net assets in excess of $300M and up to $1B
.13% of net assets in excess of $1B
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 will be paid quarterly.
<PAGE>
SCHEDULE C
(TO EXHIBIT A)
Target market for 401(a), 403(b) and 457 plans is those plans between $1 and
$250 million.
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Appendix 1
STATEMENT OF INVESTMENT POLICY AND GUIDELINES
FOR
THE VALUE & INCOME PORTFOLIO
MANAGED BY
ALLIANCE CAPITAL MANAGEMENT L.P.
TABLE OF CONTENTS
I. PURPOSE
II. OBJECTIVES
III. INVESTMENT GUIDELINES
IV. PERFORMANCE EVALUATION
V. COMMUNICATION
VI. OTHER
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STATEMENT OF INVESTMENT POLICY AND GUIDELINES
FOR
THE VALUE & INCOME PORTFOLIO
MANAGED BY
ALLIANCE CAPITAL MANAGEMENT L.P.
I. PURPOSE
The purpose of this Statement of Investment Policy and Guidelines is to
communicate the Value & Income Portfolio investment objectives, guidelines and
performance evaluation standards adopted by Diversified Investment Advisors and
its subadvisor Sanford C. Bernstein.
This statement is intended to (1) help the subadvisor understand Diversified's
investment goals (2) identify portfolio management activities to be employed by
the subadviser to achieve those goals, and (3) supply Diversified with a tool
to monitor and evaluate the operations and performance of the fund.
II. OBJECTIVES AND CONSTRAINTS
The primary objectives of the fund are:
o To provide capital appreciation.
o To outperform the Russell 1000 Value Index over full market cycles.
o To achieve midsecond quartile or better performance among a group of
peer funds as defined by recognized reporting services and consulting
organizations (e.g., Lipper, Frank Russell, Callan).
The secondary objective of the fund is to provide dividend income. Under normal
conditions, the portfolio will invest at least 15% of its assets in
dividendpaying equity securities
The primary constraint of the fund is:
o To manage the portfolio without excessive risk relative to the Russell
1000 Value Index, or peer funds, as measured by annualized standard
deviation over 3-5 year periods.
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III. INVESTMENT GUIDELINES
A) Permissible securities:
In addition to legal requirements specified in the Diversified prospectus to
conform to SEC requirements:
o Money market instruments, including U.S. Treasury bills, Federal funds,
repurchase agreements, commercial paper, bankers' acceptances,
certificates of deposit.
o At least 75% of the fund should be invested in common stocks of large
size U.S. companies, defined as those with market caps at least 300% of
the average cap of the S&P MidCap 400 Index (Lipper definition).
o Any security residing in the Russell 1000 Value Index. Conflicts with
Lipper and Russell positions will be resolved using Russell standards.
o Preferred stocks of large size U.S. companies.
o Convertible bonds and convertible preferred stocks.
o ADR's up to 10% of portfolio holdings.
B) Prohibited Securities, and Limitations and Restrictions on Permissible
Investments:
For typical market conditions the following restrictions apply:
o No more than 8% of the assets of the portfolio (at market) may be
invested in the securities of any one issuer (other than U.S.
government securities).
o No more than 25% of the assets of the portfolio (at market) may be
invested in securities of issuers in any one industry.
o No more than 5% of the voting securities of any one issuer may be
acquired.
o Nonpublic illiquid securities may not exceed 15% of the portfolio
under normal market conditions.
o The portfolio may not borrow funds except for temporary or emergency
purposes.
o The portfolio may not purchase or sell real estate.
C) Leverage:
o The portfolio may not be leveraged beyond shortterm (e.g., one to two
weeks) marginal cash overdraft borrowing (e.g., 15% of the portfolio)
resulting from temporary cash management.
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D) Derivatives
o Derivatives may not be used for speculative purposes.
o Exchange traded stock index futures can be used for hedging purposes
either to securitize cash inflows or to immunize securities for
redemption requests.
o Exchange traded covered call options may be utilized up to the extent
of the individual security holding as part of the sales strategy, but
should not exceed 20% of the portfolio
o No uncovered call writing is permitted
E) Capitalization Guidelines
o Portfolio weighed average market capitalization should not deviate by
more than 40% from the Russell 1000 Value weighted average market cap.
o See permissible securities section A above
F) Sector Weights
o Sector weights should remain within +/ 15% of the Russell 1000 Value
sector weight.
G) Dividend Yield
o Portfolio yield should be at least equal to 85% of the Russell 1000
Value Index
H) Risk Controls
o Tracking error versus the Russell 1000 Value Index should average
approximately 4% over 3-5 year periods.
o Individual stock positions +/- 200 basis points relative to the stock's
weight in the Russell 1000 Value Index
I) Cash Management
o Typical cash balances will be maintained in a range of 05% under normal
circumstances.
o Cash balances will not be less than zero except during temporary
overdraft positions to efficiently manage shortterm cash requirements
during periods of unusual market conditions (e.g., one to seven
business days)
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IV. PERFORMANCE EVALUATION
o The performance benchmark for the fund will be the Russell 1000 Value
Index. It is expected that the fund will outperform the benchmark by
approximately 180 basis points on average over 35 year periods, gross
of fees.
o Additionally, it is expected that the fund will be in the midsecond
quartile of peer universes (specify Lipper, Russell, Callan or
Morningstar), or better, over full market cycles.
o The foregoing performance objectives are to be accomplished without
taking excessive risk. Specifically, the tracking error versus the
Russell 1000 Value Index is expected to average approximately 4% on an
annualized basis over 3-5 year periods.
V. COMMUNICATION
In addition to monthly and periodic communications to meet legal and regulatory
compliance requirements:
o Monthly conference calls to explain to designated Diversified
analysts: the current portfolio position, recent trades and their
rationale, market outlook for the fund, and expected portfolio actions
o Quarterly portfolio manager writeups covering material similar to
monthly conference calls, but also including material specified by
Diversified's communications department.
o Annually meetings between interested parties to reaffirm or change the
Investment Policy Statement. Biannual visits by Diversified personnel
at the subadvisor site to update due diligence.
o As needed on an ad hoc basis to explain major market moves between
other communications.
o Immediate notification regarding subadvisor change in ownership, change
in personnel involved in management of the account, conflicts of
interest, pending lawsuits or government investigations, change in
investment philosophy or discipline, or large absolute changes in
assets under management.
VI. OTHER
o Explanation of best execution trading practices, including soft dollar
arrangements
o Evidence of disaster recovery plan, including Y2K, and EURO
conversion plans
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o Cooperation with audits (Diversified's internal or outside auditors,
Diversified client auditors; or regulators).
Signed: __________________________________ Date:____________
Alliance Capital Management L.P.
Signed: __________________________________ Date:____________
(Diversified Investment Advisors)
