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Exhibit D(2)
INVESTMENT SUB-ADVISORY AGREEMENT
THIS AGREEMENT is dated this _____ day of _____________________, 2001
by and between NORTHWESTERN MUTUAL INVESTMENT SERVICES, LLC (the "Advisor") and
CAPITAL GUARDIAN TRUST COMPANY (the "Sub-Advisor").
WHEREAS, the Advisor serves as investment advisor to Northwestern
Mutual Series Fund, Inc. Domestic Equity Portfolio (the "Fund") for which The
Chase Manhattan Bank acts as custodian ("the Custodian"); and
WHEREAS, Northwestern Mutual Series Fund, Inc. is an open-end
diversified management investment company of the series type, registered under
the Investment Company Act of 1940; and
WHEREAS, the Fund is represented by a separate class of capital stock
of Northwestern Mutual Series Fund, Inc.; and
WHEREAS, the Advisor desires to retain the Sub-Advisor to provide
certain investment advisory services to the Fund as the Advisor and the
Sub-Advisor mutually agree upon from time to time.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants contained herein, the Advisor and the Sub-Advisor hereby
agree as follows:
I. APPOINTMENT AS INVESTMENT SUB-ADVISOR
Through approval by the Fund's Board of [Directors/Trustees], the Sub-Advisor
has been appointed as an investment sub-advisor for the Fund, and as such the
Sub-Advisor will establish and maintain a discretionary investment advisory
account (the "Account") consisting of securities, funds or other assets
contributed, or liabilities allocated, (i) as the Advisor shall initially
designate for the purposes of opening this Account, (ii) as the Advisor may from
time to time designate in writing to Sub-Advisor and (iii) as the Advisor may
substitute pursuant to this Agreement.
The Sub-Advisor shall invest and reinvest the assets of the Account at such
times and in such securities as are believed to be in the best interest of the
Fund, and in accordance with (i) the applicable provisions of the Investment
Company Act of 1940 (the "1940 Act") and section 817(h) of the Internal Revenue
Code of 1986, as amended, to the extent that they may be reasonably contemplated
as the Sub-Adviser's duty, for the duration of this Agreement; and (ii) the
applicable provisions of the Fund's governing instruments, including its
Declaration, Bylaws, Registration Statement, Statement of Additional
Information, Prospectus or otherwise stated investment objectives, policies and
restrictions adopted on behalf of the Fund by the Fund's Board of Directors (the
"Board") from time to time and communicated to the Sub-Advisor in writing
(collectively, the "Fund's Governing Instruments").
The Sub-Advisor shall have full authority to act in regard to the Account, and
shall have authority to act for the custodian of the Fund or its successor (the
"Custodian"), for the purpose of placing orders to effect for the Account any
purchase, sale, exchange, or liquidation of assets allocated to the Account.
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II. REPORTS AND RECORDS
The Sub-Advisor shall furnish the Custodian and the Advisor in a timely manner
with monthly appraisals of the Account valued as of the last business day of the
month, a summary of purchases and sales and such other reports as shall be
agreed upon from time to time.
The Sub-Advisor shall promptly, upon their reasonable request, make available to
the Advisor and/or the Fund's Board, all investment records and ledgers
maintained by the Sub-Advisor relating to the Fund, in order to assist the
Advisor and the Board with their compliance with respect to the Fund's
securities transactions as required by the 1940 Act and the Investment Advisers
Act of 1940 (the "Advisers Act'), as well as other applicable laws.
In compliance with the requirements of Rule 31a-3 of the 1940 Act, the
Sub-Advisor hereby agrees that all books and records which it maintains for the
Fund are the Fund's property. The Sub-Advisor further agrees, that upon the
reasonable request of the Advisor or the Fund, the Sub-Advisor will promptly
relinquish such records. The Sub-Advisor will preserve the records required to
be maintained by (i) Rule 31a-1 of the 1940 Act for the period of time
prescribed by Rule 31a-2 of the 1940 Act, and (ii) Rule 204-2 of the Advisers
Act for the periods of time prescribed by the Advisers Act.
III. COMPENSATION
For services hereunder, the Sub-Advisor shall be compensated in accordance with
the Fee Schedule attached hereto and incorporated herein. The Advisor hereby
agrees to provide, or will direct the Custodian to provide, the Sub-Advisor with
the daily average net assets on a monthly basis.
IV. PROXY VOTING
The Sub-Advisor shall, through any of its officers or employees, vote proxies as
the Sub-Advisor believes is in the best interest of the Fund, and as of the
record date for voting such proxies. The Advisor shall take all actions
necessary to effect delivery of the proxy solicitations to the Sub-Advisor in a
timely manner, including, but not limited to, effecting delivery of any proxy
solicitation received by a third party who may hold securities on behalf of the
Fund, and shall verify, or shall cause such third party to verify, at such time,
that the number of shares of an issuer's securities indicated in a proxy
solicitation equals the number of shares of such issuer's securities held by or
for the benefit of the Fund and held in the Account as of the record date for
voting the proxies.
V. RESPONSIBILITY FOR DIVERSIFICATION
Unless the Sub-Advisor has sole investment authority over all assets of the
Fund, the Sub-Advisor shall have no responsibility for the manner in which the
Fund assets, considered in the aggregate, shall be diversified; provided,
however, that, the Sub-Advisor shall diversify the assets of the Account to the
extent necessary to minimize the risk of large losses.
VI. OTHER SERVICES
The Sub-Advisor shall, on invitation, attend meetings with representatives of
the Advisor and/or the
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Fund to discuss the position of the Account and the immediate investment
outlook, or shall submit its views in writing as the Advisor may reasonably
suggest from time to time.
VII. REPRESENTATIONS AND WARRANTIES
By entering into this Agreement, the Sub-Advisor represents and warrants that:
(i) it is a state-chartered trust company, authorized by the California
Department of Financial Institutions to carry on a trust banking business;
(ii) it has full power and authority to enter into this Agreement, and
that the undersigned has full power and authority to execute this Agreement on
the Sub-Advisor's behalf;
(iii) it is a "bank" under Section 202(a)(2) of the Advisers Act,
however, due to services the Sub-Advisor provides to registered investment
companies, the Sub-Advisor is registered as an Investment Advisor under the Act
and has therefore provided the Company with a current copy of Part II of its
Form ADV (the "Sub-Advisor's ADV"); and
(iv) it has adopted and maintains a written code of ethics complying
with the requirements of Rule 17j-1 of the 1940 Act, and will provide the
Advisor and/or the Fund, upon reasonable request, with copies of such code of
ethics as amended from time to time.
By entering into this Agreement, the Advisor represents and warrants that:
(i) it is registered as an investment adviser under the Advisers Act
and will continue to be so registered for as long as this Agreement remains in
effect, or else will immediately notify the Sub-Advisor of the occurrence of any
event that would disqualify the Advisor from serving as an investment advisor to
the Fund or any investment company pursuant to Section 9(a) of the 1940 Act or
otherwise;
(ii) it is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement, that it is duly
authorized and empowered by the Fund to enter into this Agreement, and that the
undersigned has full power and authority to execute this Agreement on the
Advisor's behalf; and
(iii) all securities, funds and other assets which at any time
constitute the Account are the sole property of the Fund and are free from any
charge or encumbrance; and
(iv) it has received a copy of the Sub-Advisor's ADV. To the extent
that the Advisor has received the Sub-Advisor's ADV within 48 hours of the date
of this Agreement, and upon its review the Advisor decides to terminate this
Agreement, the Company may do so within 5 (five) business days without penalty.
VIII. EXECUTION OF PURCHASES AND SALES
Unless otherwise specified in writing to the Sub-Advisor by the Advisor or the
Fund, all orders for the purchase and sale of securities for the Account shall
be placed in such markets and through such brokers as in the Sub-Advisor's best
judgment shall offer the most favorable execution of each
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transaction. The Sub-Advisor undertakes to use all reasonable care and diligence
in its choice of brokers and, in the event that any broker fails on the due
date, or within such reasonable period as the Sub-Advisor may decide, to deliver
any necessary documents or, as the case may be, to pay any amount due, the
Sub-Advisor will, on request, endeavor to pursue on behalf of the Fund all
appropriate legal remedies against such broker to recover such documents or
amount due or compensation in lieu thereof. The costs and expenses properly
incurred by the Sub-Advisor in connection with the pursuit of such remedies
shall be debited to the Account.
IX. CUSTODY OF ASSETS
Nothing contained herein shall be deemed to authorize the Sub-Advisor to take or
receive physical possession of any of the assets of the Account, it being
intended that sole responsibility for safekeeping thereof (in such investments
as the Sub-Advisor may direct) and the consummation of all purchases, sales,
deliveries and investments made pursuant to the Sub-Advisor's direction shall
rest upon the Custodian. The Sub-Advisor shall have no liability with respect to
the custody arrangements or the acts, conduct or omissions of the Custodian.
The Advisor shall instruct the Custodian to furnish such information about the
Fund and its assets as the Sub-Advisor may from time to time reasonably request
in connection with the performance of its duties under this Agreement. The
Advisor acknowledges that the Sub-Advisor will be relying on the Custodian's
identification of any assets contributed, or liabilities allocated, from time to
time to the Account, as well as their availability for sale as applicable. The
Sub-Advisor may reasonably rely without further inquiry upon any information
furnished to it by the Custodian hereunder, and the Sub-Advisor will not be
responsible for any errors or omissions arising from any inaccuracies in such
information.
X. NON-EXCLUSIVE CONTRACT
The Sub-Advisor acts as adviser to other clients and may give advice, and take
action, with respect to any such client which may differ from the advice given,
or the timing or nature of action taken, with respect to the Account. The
Advisor acknowledges that:
(i) the Sub-Advisor shall have no obligation to purchase or sell for
the Account, or to recommend for purchase or sale by the Account, any security
which the Sub-Advisor, its principals, affiliates or employees may purchase or
sell for themselves or for any other clients;
(ii) there may be occasions when portfolio transactions are executed as
part of concurrent authorizations by the Sub-Advisor and its affiliates to
purchase or sell the same security for other client accounts served by the
Sub-Advisor and its affiliates. Although such concurrent authorizations
potentially could be either advantageous or disadvantageous to the Sub-Advisor's
client accounts, they are effected only when the Sub-Advisor believes that to do
so is in the interest of its respective client accounts. When such concurrent
authorizations occur, the executions will be allocated in an equitable manner
amongst each of the Sub-Advisor's and its affiliates' client accounts; and
(iii) transactions in a specific security may not be accomplished for
all the Sub-Advisor's or its affiliates' client accounts at the same time or at
the same price.
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XI. NOTICES
All notices and other communications hereunder shall be in writing (including
telex or similar writing) and shall be deemed given if delivered in person or by
messenger, cable, telegram or telex or facsimile transmission or by a reputable
overnight delivery service which provides evidence of receipt to the parties at
the following addresses or telex or facsimile transmission numbers (or at such
other address or number for a party as shall be specified by like notice):
(a) if to the Sub-Advisor, to:
Capital Guardian Trust Company
000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile transmission number: (000) 000-0000
Attention: Treasurer
(b) if to the Advisor, to:
Northwestern Mutual Investment Services LLC
c/o Northwestern Mutual Life Company
000 X. Xxxxxxxxx Xxx.
Xxxxxxxxx, XX 00000
Facsimile transmission number: ( )
Attention: Sr. Vice President, Public Markets
Each such notice or other communication shall be effective (i) if given by telex
or facsimile transmission, when such telex or facsimile is transmitted to the
number specified in this section and the appropriate answer back or confirmation
is received, and (ii) if given by any other means, when delivered at the address
specified in this section.
XII. EFFECTIVE PERIOD OF AGREEMENT AND AMENDMENTS
This Agreement shall become effective on the date first written above and shall
continue thereafter for successive annual periods, providing such continuance is
specifically approved at least annually by (i) Northwestern Mutual Series Fund's
board of directors or (ii) a vote of the "majority" (as defined in the 0000 Xxx)
of the Fund's outstanding voting securities, provided that in either event the
continuance also is approved by a majority of Northwestern Mutual Series Fund's
board of directors who are not "interested persons" (as defined in the 0000 Xxx)
of any party to this agreement, by vote cast in person at a meeting called for
the purpose of voting on such approval. . Any amendment to this Agreement shall
be written and signed by both parties to this Agreement. The Sub-Advisor may be
terminated at any time by the Advisor, by the board of directors of Northwestern
Mutual Series Fund, or by the holders of a majority of the Fund's shares, by
written notice, subject to the Account's obligation to fulfill all transactions
authorized prior to such termination, and the Sub-Advisor may terminate the
Agreement upon thirty days' written notice to the Advisor. There shall be no
penalty for such termination, and the fee for the final period shall be adjusted
proportionately.
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Any provision of this Agreement which is subsequently found to be prohibited or
unenforceable shall be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof.
XIII. LIMITATION ON LIABILITY/INDEMNIFICATION
The Sub-Advisor shall not be liable to the Adviser, the Fund, any shareholder of
the Fund or any other person for any act or omission in rendering services under
this Agreement, or for losses sustained in connection with the matters to which
this Agreement relates, so long as there has been no willful misconduct, bad
faith, gross negligence or reckless disregard of obligations on the part of the
Sub-Adviser.
The Sub-Advisor shall indemnify and hold harmless the Advisor, its affiliated
companies, and their respective officers, directors, employees and affiliated
persons and controlling persons from any and all losses, claims, damages, or
liabilities (including reasonable attorney's fees and related costs and
expenses), to the extent caused by the willful misconduct, bad faith, gross
negligence, or reckless disregard of its obligations hereunder.
The Advisor shall indemnify and hold harmless the Sub-Advisor, its affiliated
companies, and their respective directors, officers, employees and affiliated
persons and controlling persons (collectively, the "Indemnified Sub-Advisor
Parties") against any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and related costs and expenses) to which any of the
Indemnified Sub-Advisor Parties may become subject in connection with the
matters to which this Agreement relates, including without limitations claims,
etc. under federal or state securities laws or under any other statute, at
common law or otherwise, provided that no indemnity is required by the Advisor
for any matter which requires the Sub-Advisor to provide an indemnity under the
previous paragraph.
XIV. NON-ASSIGNABILITY
As defined under the 1940 Act, this Agreement is not to be assigned by either
party without the prior written approval of the other. Upon such assignment,
this Agreement will be immediately terminated.
XV. USE OF NAME
The Advisor acknowledges and agrees that the names "Capital Guardian Trust
Company," "Capital Guardian," and any of the other names of the Sub-Advisor or
the Sub-Advisor's affiliates (including but not limited to the name "American
Funds Group"), and any derivative or logo or trade or service xxxx thereof
(collectively, the "Names and Trademarks"), are the valuable property of the
Sub-Advisor and the Sub-Advisor's affiliates. The Advisor shall not have the
right to use the Names and Trademarks without the prior, express, written
consent of the Sub-Advisor, which such consent shall not be unreasonably
withheld for the period of time of which this Agreement is in effect.
Immediately, upon the termination of this Agreement, the Advisor shall cease to
use such Names and Trademarks.
The Advisor agrees that it will review with the Sub-Advisor any advertisement,
sales literature or
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notice prior to its use or publication that makes reference to the Names and/or
Trademarks, so that the Sub-Advisor may review the context in which the Names
and/or Trademarks are being referred to, it being agreed that the Sub-Advisor
shall have no responsibility to ensure the adequacy of the form or content of
such materials for the purposes of the 1940 Act or other applicable laws or
regulations. If the Advisor or the Fund makes any unauthorized use of, or
reference to, the Names or the Trademarks the Advisor acknowledges that the
Sub-Advisor shall suffer irreparable harm for which monetary damages may not be
completely adequate, and therefore the Sub-Advisor may also be entitled to
injunctive relief.
XVI. FORCE MAJEURE
The Sub-Advisor shall not be liable for any failure, delay or interruption in
the performance of its obligations hereunder if such failure, delay or
interruption results from the occurrence of any acts, events or circumstances
beyond the Sub-Advisor's reasonable control, and the Sub-Advisor shall have no
responsibility of any kind for any loss or damage thereby incurred or suffered
by the Advisor or the Fund. In such case, the terms of the Agreement shall
continue in full force and effect and the Sub-Advisor's obligations shall be
performed or carried out as soon as legally and practicably possible after the
cessation of such acts, events or circumstances.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
NORTHWESTERN MUTUAL INVESTMENT SERVICES LLC
By:
-------------------------------------
Name:
Title:
CAPITAL GUARDIAN TRUST COMPANY
By:
-------------------------------------
Xxxxxxx X. Xxxxx
Vice President
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Capital Guardian Trust Company U.S. Equity - Separate Account
Fee Schedule Sub-Advisory Services
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Minimum Annual Fee (based upon an account size of $100 million) ... $375,000
Incremental Annual Fee Rate
Base Fee Calculated on Total Assets as a Percentage of Market Value
------------------------------------ -------------------------------
On the first $25 million .55 of 1%
$25 million to $50 million .40 of 1%
Over $50 million .275 of 1%
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Fees will be calculated daily and are based on the market or appraised value of
the account at the close of each day.
FEE AGGREGATION POLICIES
Fee aggregation will apply to all accounts managed by Capital Group companies,
except for: emerging markets equity investments, investments in funds with
internally charged fees, and other accounts determined by Capital Guardian Trust
Company ("Eligible Accounts"). In order to achieve the benefit of fee
aggregation, the combined actual fees must exceed the combined total of the
minimum fee applicable to each of the client's Eligible Accounts.
For additional Eligible Accounts with the same investment objectives and
guidelines, all assets for these Eligible Accounts will be aggregated for fee
calculation purposes.
For additional Eligible Accounts with different investment objectives and
guidelines:
Each account will be charged on the first $10 million at the initial
breakpoint rate for the appropriate mandate. Any incremental assets over
$10 million will be aggregated and charged at the incremental rate for the
appropriate mandate.
Assets invested in commingled funds will be aggregated and charged at the
incremental rate for the appropriate mandate.
The first additional account within a new country will be charged on the
first $25 million at the initial breakpoint rate for the appropriate
mandate. Any incremental assets over $25 million will be aggregated and
charged at the incremental rate for the appropriate mandate.
For fee aggregation purposes, Eligible Accounts will be aggregated in the
following order: balanced, equity-developed markets, convertible,
fixed-income-high yield, fixed-income-emerging markets, and
fixed-income-developed markets.
Unless otherwise requested, the benefit from fee aggregation for clients with
multiple accounts will be calculated by comparing total aggregated fees to total
unaggregated fees for all Eligible Accounts. The resulting percentage discount
will be applied to each Eligible Account's unaggregated fees. If all Eligible
Accounts are not denominated in the same currency, the local currency assets of
each Eligible Account and the related fees calculated on an unaggregated basis
will be converted to a
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designated base currency using the applicable foreign exchange rate. The total
of such fees will be compared to the Eligible Accounts' total aggregated fees.
The resulting percentage discount will then be applied to each Eligible
Account's unaggregated fee as determined in the applicable currency.
FEE DISCOUNTS AND ELIMINATION OF FEE BREAKPOINTS
The following fee discount will be applied based upon the total aggregated fees:
Clients between $1.25 million to $4 million 5% discount
Clients between $4 million to $8 million 7.5% discount
Clients between $8 million to $12 million 10% discount
Clients over $12 million 12.5% discount
For this purpose, aggregated fees will include all fees from separate accounts,
commingled funds, and funds with internally charged fees managed by Capital
Group companies, except for investments in American Funds' mutual funds. The
resulting fee discount percentage will be applied to each account's fees
(excluding fees related to investments in funds with internally charged fees).
For clients whose total aggregated fees (before discounts) exceed $3 million,
fee breakpoints will be eliminated and each account will be charged at the
lowest marginal fee rate applicable to the account's fee schedule.
To determine the applicable fee discount level and breakpoint elimination
threshold, the total aggregated fees for the quarter will be annualized. For
this purpose, all local currency fees will be converted to a designated base
currency.
Fees related to investments in funds with internally charged fees will be
estimated by multiplying the quarter end value of the investment (adjusted on a
prorated basis for any contributions or withdrawals during the quarter) by the
fund's effective fee. For this purpose, the effective fee will be based on the
value of the fund's quarter end assets and the fund's current fee schedule.
Applicable discount levels and the elimination of fee breakpoints will be
effective beginning with the first quarter a discount threshold is exceeded and
will remain in effect unless the total fees fall below the discount threshold
due to a significant withdrawal of assets. A decline in the market alone will
not cause the reinstatement of a lower discount level or fee breakpoints.
VALUATION
For the purpose of the fee calculation, the market value of the securities of
the account shall be determined as of the close of business on the last business
day of each calendar month as follows:
(a) listed securities shall be valued at readily available market quotations
which may be the "composite price or such other market quotations
representing the fair market value on the valuation day, or if no sale, at
the last reported bid price on a national securities exchange; and
(b) unlisted securities shall be valued at readily available market quotations
which may be the
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"composite price" or a quote obtained from a market maker. Shares or units
held of any collective, commingled or common trust fund shall be valued at
the unit value of the fund coinciding with, or first preceding the
valuation day of the account; and
(c) all fixed-income securities shall be valued at a price obtained from a
recognized bond pricing service, or a quote obtained from a market-maker;
and
(d) if a price cannot be obtained for a security or the above obtained price is
not representative of the security's fair value, such security shall be
valued at the fair value at which it is expected that it may be resold, as
determined in good faith by the Manager; and
(e) assets or liabilities expressed in currencies other than the account's base
currency will be translated into the account's base currency at the
exchange rate prevailing at the time of valuation.
