EXHIBIT 5(iii)
FORM OF SUB-ADVISORY AGREEMENT ON BEHALF OF THE
MONEY MARKET PORTFOLIO OF THE FUND
SUB-ADVISORY AGREEMENT
BETWEEN
WRL INVESTMENT MANAGEMENT, INC.
AND
X. X. XXXXXX INVESTMENT MANAGEMENT INC.
SUB-ADVISORY AGREEMENT, made as of the 1st day of January, 1997,
between WRL Investment Management, Inc. ("Investment Adviser"), a corporation
organized and existing under the laws of the State of Florida and X. X. Xxxxxx
Investment Management Inc. ("Sub-Adviser"), a corporation organized and existing
under the laws of the State of Delaware.
WHEREAS, the Investment Adviser has entered into an Investment Advisory
Agreement dated as of the 1st day of January, 1997 ("Advisory Agreement") with
the WRL Series Fund, Inc. ("Fund"), a Maryland corporation which is engaged in
business as an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of the Money Market
Portfolio ("Portfolio"), a separate series of the Fund;
WHEREAS, the Sub-Adviser is engaged principally in the business of
rendering investment advisory services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended ("Advisers Act");
and
WHEREAS, the Investment Adviser desires to retain the Sub-Adviser as
sub-adviser to furnish certain investment advisory services to the Investment
Adviser with respect to the Portfolio and the Sub-Adviser is willing to furnish
such services;
NOW, THEREFORE, in consideration of the premises and mutual promises
herein set forth, the parties hereto agree as follows:
1. INVESTMENT DESCRIPTION: APPOINTMENT.
The Investment Adviser desires to employ the capital of the Portfolio
by investing and reinvesting in investments of the kind and in accordance with
the limitations specified in the Fund's Articles of Incorporation, as amended to
date (the "Charter Document"), and in the prospectus (the "Prospectus") and the
statement of additional information (the "Statement") for the Fund filed with
the Securities and Exchange Commission as part of the Fund's Registration
Statement on Form N-1A, as amended or supplemented from time to time, and in
such manner and to such extent as from time to time may be approved by the
Fund's Board of Directors. Copies of the Prospectus, the Statement and the
Charter Document, each as currently in effect, have been delivered to the
Sub-Adviser. The Investment Adviser agrees, on an ongoing basis, to provide to
the Sub-Adviser as promptly as practicable, copies of all amendments and
supplements to the Prospectus and Statement and amendments to the Charter
Document. The Advisory Agreement provides that the Investment Adviser may engage
a Sub-Adviser to perform the services contemplated hereunder. The Investment
Adviser desires to engage and hereby appoints the Sub-Adviser to act as
investment sub-adviser to the Portfolio. The Sub-Adviser accepts the appointment
and agrees to furnish the services described herein for the compensation set
forth below.
2. SERVICES AS INVESTMENT SUB-ADVISER, GUIDELINES AND ADVICE.
Subject to the supervision of the Investment Adviser and the Board of
Directors of the Fund, the Sub-Adviser will (a) manage the Portfolio's assets in
accordance with the Portfolio's investment objective(s) and policies stated in
the Prospectus, the Statement and the Charter Document, but subject to
Guidelines (as such term is defined below); (b) make investment decisions for
the Portfolio; (c) place purchase and sale orders for portfolio transactions for
the Portfolio; and (d) employ professional portfolio managers and securities
analysts to provide research services to the Portfolio; (e) furnish statistical
and analytical information and reports as may reasonably be required by the
Investment Adviser from time to time, and, in providing these services, conduct
a continual program of investment, evaluation and, if appropriate, sale and
reinvestment of the Portfolio's assets; (f) cause its officers to attend
meetings of the Fund's Board of Directors and furnish oral or written reports,
as the Investment
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Adviser may reasonably require, in order to keep the Investment Adviser and its
officers and the Directors of the Fund and appropriate officers of the Fund
fully informed as to the condition of the investment securities of the
Portfolio, the investment recommendations of the Sub-Adviser, and the investment
considerations which have given rise to those recommendations.
The Investment Adviser agrees on an on-going basis to provide or cause
to be provided to the Sub-Adviser guidelines, to be revised as provided below
(the "Guidelines"), setting forth limitations, by dollar amount or percentage of
net assets, on the types of securities in which the Portfolio is permitted to
invest or investment activities in which the Portfolio is permitted to engage.
Among other matters, the Guidelines shall set forth clearly the limitations
imposed upon the Portfolio as a result of relevant diversification requirements
under state and federal law pertaining to insurance products, including, without
limitation, the provisions of Section 817(h) of the Internal Revenue Code of
1986, as amended (the "Code"). The Guidelines shall remain in effect until 12:00
p.m. on the third business day following actual receipt by the Sub-Adviser of a
written notice, denominated clearly as such, setting forth revised Guidelines.
The Investment Adviser agrees to cause to be delivered to a person designated in
writing for such purpose by the Sub-Adviser each day, by 1:00 p.m., New York
time, a written report dated the date of its delivery (the "Report") with
respect to the Portfolio's compliance for its current fiscal year with the
short-three test set forth in Section 851(b)(3) of the Code (the "short-three
test"). The Report shall include in chart form the Portfolio's gross income
(within the meaning of Section 851 of the Code) from the beginning of the
current fiscal year to the date of the Report and its cumulative income and
gains described in Section 851(b)(3) of the Code for such period. If the Report
is not timely delivered, the Sub-Adviser shall be permitted to rely on the most
recent Report delivered to it. The Investment Adviser agrees that the
Sub-Adviser may rely on the Guidelines and the Report without independent
verification of their accuracy.
3. BROKERAGE.
In selecting brokers or dealers to execute transactions on behalf of
the Fund, the Sub-Adviser will seek the best overall terms available. In
assessing the best overall terms available for any transaction, the Sub-Adviser
will consider factors it deems relevant, including, without limitation, the
breadth of the market in the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of the commission, if
any, for the specific transaction and on a continuing basis. In selecting
brokers or dealers to execute a particular transaction, and in evaluating the
best overall terms available, the Sub-Adviser is authorized to consider the
brokerage and research services (within the meaning of Section 28(e) of the
Securities Exchange Act of 1934, as amended) provided to the Portfolio and/or
other accounts over which the Sub-Adviser or its affiliates exercise investment
discretion.
4. STANDARD OF CARE.
The Sub-Adviser shall exercise its best judgment in rendering the
services described in paragraph 2 and 3 above. The Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Portfolio in connection with matters to which this Agreement relates, except
a loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement (each such act or omission shall be
referred to as "Disqualifying Conduct"). The Sub-Adviser shall not be deemed to
have engaged in Disqualifying Conduct if it complies with the Guidelines and
acts in reliance on the Report, and the Sub-Adviser's failure to act in
accordance therewith shall not constitute evidence that it engaged in
Disqualifying Conduct.
5. COMPENSATION.
In consideration of the services rendered pursuant to this Agreement,
the Investment Adviser will pay the Sub-Adviser on the first business day of
each month a fee for the previous month at the annual rate of 0.15% of the
Portfolio's average daily net assets. The fee for the period from the date of
its initial public sale of the Portfolio's shares to the end of the month during
which such sale shall have been commenced shall be prorated according to the
proportion that such period bears to the full monthly period. Upon termination
of this Agreement before the end of a month, the fee for such part of that month
shall be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purposes of determining fees payable to the Sub-Adviser, the
value of the Portfolio's net assets shall be computed at the times and in the
manner specified in the Prospectus and/or the Statement.
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6. EXPENSES.
The Sub-Adviser will bear all of its expenses in connection with the
performance of its services under this Agreement. All other expenses to be
incurred in the operation of the Portfolio will be borne by the Fund or the
Investment Adviser, as appropriate, except to the extent specifically assumed by
the Sub-Adviser. The expenses to be borne by the Fund or the Investment Adviser,
as appropriate, include, without limitation, the following: organizational
costs, taxes, interest, brokerage fees and commissions, Directors' fees,
Securities and Exchange Commission filing fees, if any, advisory fees, charges
of custodians, transfer and dividend disbursing agents' fees, certain insurance
premiums, industry association fees, outside auditing and legal expenses, costs
of independent pricing services, costs of maintaining existence, costs
attributable to investor services (including, without limitation, telephone and
personnel expenses), costs of preparing and printing prospectuses and statements
of additional information for regulatory purposes and for distribution to
existing stockholders, costs of stockholders' reports and meetings, and
extraordinary expenses.
7. SERVICES TO OTHER COMPANIES OR ACCOUNTS.
The Investment Adviser understands that the Sub-Adviser now acts, will
continue to act and may act in the future as investment adviser to fiduciary and
other managed accounts and as investment adviser to other investment companies,
and the Investment Adviser has no objection to the Sub-Adviser so acting,
provided that, whenever the Portfolio and one or more other accounts or
investment companies advised by the Sub-Adviser have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a methodology believed to be equitable to each entity. The
Sub-Adviser agrees to allocate similarly opportunities to sell securities. The
Investment Adviser recognizes that, in some cases, this procedure may limit the
size of the position that may be acquired or sold for the Portfolio. The
Investment Adviser understands that the persons employed by the Sub-Adviser to
assist in the performance of the Sub-Adviser's duties hereunder will not devote
their full time to such service and nothing contained herein shall be deemed to
limit or restrict the right of the Sub-Adviser or any affiliate of the
Sub-Adviser to engage in and devote time and attention to other business or to
render services of whatever kind or nature.
8. BOOKS AND RECORDS.
In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Sub-Adviser hereby agrees that all records which it maintains for the
Portfolio are the property of the Fund and further agrees to surrender promptly
to the Fund copies of any of such records upon the Fund's or the Investment
Adviser's request. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records relating to its
activities hereunder required to be maintained by Rule 31a-1 under the 1940 Act
and to preserve the records relating to its activities hereunder required by
Rule 204-2 under the Advisers Act, for the period specified in said Rule.
9. TERM OF AGREEMENT.
This Agreement shall become effective upon the date first above
written, provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of those Directors of the Fund who are
not parties to this Agreement or "interested persons" (as defined in the 0000
Xxx) of any such party, cast in person at a meeting called for the purposes of
voting on such approval, and (ii) by vote of a majority of the Portfolio's
outstanding voting securities. Unless sooner terminated as provided herein, this
Agreement shall continue in effect for two years from its effective date.
Thereafter, this Agreement shall continue in effect from year to year, provided
such continuance is specifically approved at least annually by (i) the Fund's
Board or (ii) a vote of a "majority" (as defined in the 0000 Xxx) of the
Portfolio's outstanding voting securities, provided that in either event the
continuance is approved by a majority of the Fund's Board who are not interested
persons of any party to this Agreement by vote cast in person at a meeting
called for the purpose of voting such approval. This Agreement is terminable,
without penalty, on 60 days' written notice, by the Investment Adviser, by the
Fund's Board, by vote of holders of a majority of the Portfolio's shares or by
the Sub-Adviser, and will terminate five business days after the Sub-Adviser
receives written notice of the termination of the advisory agreement between the
Fund and the Investment Adviser. This Agreement also will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
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10. INDEMNIFICATION.
The Investment Adviser agrees to indemnify and hold harmless the
Sub-Adviser and each person who controls or is associated with the Sub-Adviser
within the meaning of such terms under the federal securities laws and any
officer, trustee, director, employee or agent of the foregoing, against any and
all losses, claims, damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in connection
therewith) under any statute or regulation, at common law or otherwise, insofar
as such losses, claims, damages or liabilities:
(1) arise out of or are based upon (i) any untrue statement
or alleged untrue statement of any material fact contained
in the variable annuity contracts and variable life
insurance policies (both contracts and policies,
collectively referred to as "Contracts") for which the
Portfolio serves as an underlying investment option, (ii)
any untrue statement or alleged untrue statement of any
material fact contained in the Prospectuses or Statements
for the Contracts, (iii) any sales literature for the
Contracts, (or any amendment or supplement to any of the
foregoing), or (iv) the statement or omission to state or
the alleged statement or alleged omission to state in the
Prospectuses or Statements for the Contracts a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made; provided, that this
provision shall not apply if such statement or omission or
such alleged statement or alleged omission was made in
reliance upon and in conformity with information furnished
to the Investment Adviser by the Sub-Adviser for use in the
Contracts, or the Prospectuses or the Statements for the
Contracts, or sales literature (or any amendment or
supplement), or otherwise for use in connection with the
sales of the Contracts or Portfolio shares; or
(2) arise out of or as a result of statements or
representations by or on behalf of the Sub-Adviser (other
than statements or representations contained in the
Contracts, the Prospectuses or Statements, or sales
literature for the Contracts not supplied by the Sub-Adviser
or persons under its control) or wrongful conduct of the
Investment Adviser or persons under its control with respect
to the sales or distribution of the Contracts or Portfolio
shares; or
(3) arise out of or are based upon (i) any untrue statement
or alleged untrue statement of any material fact contained
in the Prospectus or Statement for the Portfolio (or any
amendment thereof or supplement thereto), (ii) any sales
literature for the Portfolio or (iii) the omission or
alleged omission to state in the Prospectus or Statement for
the Portfolio a material fact required to be stated therein
or necessary to make the statements therein not misleading
in light of the circumstances in which they were made;
provided, that this provision shall not apply if such
statement or omission or such alleged statement or alleged
omission was made in reliance upon and in conformity with
information furnished to the Investment Adviser by the
Sub-Adviser for use with the Prospectus, Statement or sales
literature for the Portfolio and the Contracts; or
(4) arise out of any third-party claims or proceedings
relating to the performance by or obligations of the
Sub-Adviser in the performance of its duties hereunder,
except to the extent any such claims arise out of any
material breach by the Sub-Adviser of this Agreement.
This indemnification will be in addition to any liability which the Investment
Adviser may otherwise have, but does not supersede the standard of care owed by
the Sub-Adviser to the Investment Adviser as described in Section 4 above.
11. DISCLOSURE.
The Investment Adviser represents and warrants that neither the Fund
nor the Investment Adviser shall, without the prior written consent of the
Sub-Adviser, make representations regarding or reference to the Sub-Adviser or
any affiliates in any disclosure document, advertisement, sales literature or
other promotional materials.
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12. MISCELLANEOUS.
All notices provided for by this Agreement shall be in writing and
shall be deemed given when received, against appropriate receipt, by Xxxxx
Xxxxxxx at 000 Xxxxx Xxxxxx, Xxx Xxxx XX 00000 in the case of the Sub-Adviser,
General Counsel at X.X. Xxx 0000, Xxxxxxxxxx, XX 00000 in the case of the
Investment Adviser, or such other person as a party shall designate by notice to
the other parties. 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. This Agreement constitutes the entire agreement among the
parties hereto and supersedes any prior agreement among the parties relating to
the subject matter hereof. The paragraph headings of this Agreement are for
convenience of reference and do not constitute a part hereof. This Agreement
shall be governed in accordance with the internal laws of the State of New York,
without giving effect to principles of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized signatories as of the date and year first
above written.
Attest: WRL INVESTMENT MANAGEMENT, INC.
____________________________ By: __________________________
Assistant Secretary Name: Xxxxxxx X. Xxxx
Title: President and Treasurer
Attest: X. X. XXXXXX INVESTMENT MANAGEMENT INC.
____________________________ By __________________________
Name: Xxxxx Xxxxxxx
Title: Vice President
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