EX-99.B5(b)
INVESTMENT SUB-ADVISORY AGREEMENT
Xxxxx Street Funds Growth and Income Stock Fund
_______ __, 1997
X.X. Xxxxxx Investment Management Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Xxxxx Street Funds, Inc. a Maryland corporation ("MSF") on behalf of the Growth
and Income Stock Fund, a series of shares of MSF represented by a separate class
of capital stock of MSF, and Northwestern Mutual Investment Services, Inc., a
Wisconsin corporation (the "Adviser"), hereby agree with X.X. Xxxxxx Investment
Management Inc., a Delaware corporation (the "Sub-Adviser"), as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT. MSF desires to employ the
capital of the Growth and Income Stock Fund (the "Fund") by investing and
reinvesting in investments of the kind and in accordance with the limitations
applicable to the Fund specified in its Articles of Incorporation, as amended to
date (the "Charter Document"), and in the prospectus (the "Prospectus") and the
statement of additional information (the "Statement") filed with the Securities
and Exchange Commission as part of MSF's Registration Statement on Form N-lA, as
amended from time to time, and in such manner and to such extent as from time to
time may be approved by MSF's Board. Copies of the Prospectus, the Statement
and the Charter Document, each as currently in effect, have been delivered to
the Sub-Adviser. The 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 the Statement and amendments to the Charter Document
relating to the Fund. The Adviser desires to engage and hereby appoints the
Sub-Adviser to act as investment sub-adviser to the Fund. 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 MSF's Board and of the Adviser, the Sub-Adviser will (a)
manage the Fund's assets in accordance with the Fund's investment objectives and
policies as stated in the Prospectus, the Statement and the Charter Document,
but subject to the Guidelines (as such term is defined below); (b) make
investment decisions for the Fund; (c) place purchase and
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sale orders for portfolio transactions for the Fund; and (d) employ professional
portfolio managers and securities analysts to provide research services to the
Fund. In providing these services, the Sub-Adviser will conduct a continual
program of investment, evaluation and, if appropriate, sale and reinvestment of
the Fund's assets.
The 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 Fund is permitted to invest or
investment activities in which the Fund is permitted to engage. Among other
matters, the Guidelines shall set forth clearly the limitations imposed upon the
Fund as a result of relevant diversification requirements under state and
federal law. 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
Adviser agrees to cause to be delivered to a person designated in writing for
such purpose by the Sub-Adviser on the first business day of each week, a
written report dated the date of its delivery (the "Report") with respect to the
Fund'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 Fund's gross income (within the meaning of
Section 851 of the Code) from the beginning of the current fiscal year to the
end of the previous week 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. MSF and the Adviser agree 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 price of 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 Fund and/or other accounts over which the
Sub-Adviser or its affiliates exercise investment discretion.
4. INFORMATION PROVIDED TO MSF. The Sub-Adviser will keep MSF and the
Adviser informed of developments materially affecting the Fund, and will, on its
own initiative, furnish MSF and the Adviser from time to time with whatever
information the Sub-Adviser believes is appropriate for this purpose.
5. STANDARD OF CARE. The Sub-Adviser shall exercise its best judgment in
rendering the services described in paragraphs 2, 3 and 4 above. The
Sub-Adviser shall not be
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liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the 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.
6. COMPENSATION. In consideration of the services rendered pursuant to
this Agreement, the Adviser will pay the Sub-Adviser during the first ten days
of each month a fee for the previous month at the annual rate of forty-five
one-hundredths of one per cent on the first $100 million of the average daily
net assets of the Fund, forty one-hundredths of one per cent of the next $100
million of such assets, thirty-five one-hundredths of one per cent of the next
$200 million of such assets and thirty one-hundredths of one per cent of such
assets which exceed $400 million. For the purpose of determining the applicable
fee percentage rate (fee band), the fee schedule shall first be applied to the
value of the assets of the Growth and Income Stock Portfolio of Northwestern
Mutual Series Fund, Inc. (the "Portfolio") and then to the value of the assets
of the Fund at the marginal rate that would apply to additions to the Portfolio.
The fee for the period from the date the initial sale of the Fund's shares
commences 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 any 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 purpose of
determining fees payable to the Sub-Adviser, the value of the Fund's net assets
shall be computed at the times and in the manner specified in the Prospectus
and/or the Statement.
7. 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 Fund will be borne by MSF or the Adviser,
except to the extent specifically assumed by the Sub-Adviser. The expenses to
be borne by MSF or the Adviser in the operation of the Fund include, without
limitation, the following: organizational costs, taxes, interest, brokerage fees
and commissions, Directors' fees, Securities and Exchange Commission fees and
state Blue Sky qualification fees, 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 any extraordinary
expenses.
8. SERVICES TO OTHER COMPANIES OR ACCOUNTS. MSF 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
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companies, and MSF has no objection to the Sub-Adviser so acting, provided that
whenever the Fund 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. MSF recognizes that, in some cases,
this procedure may limit the size of the position that may be acquired or sold
for the Fund. In addition, MSF 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.
9. BOOKS AND RECORDS. In compliance with the requirements of Rule 3la-3
under the Investment Company Act of 1940, as amended (the "Act"), the
Sub-Adviser hereby agrees that all records which it maintains for the Fund are
the property of MSF and further agrees to surrender promptly to MSF copies of
any of such records upon MSF's or the Adviser's request. The Sub-Adviser
further agrees to preserve for the periods prescribed by Rule 3la-2 under the
Act the records relating to its activities hereunder required to be maintained
by Rule 3la-1 under the Act and to preserve the records relating to its
activities hereunder required by Rule 204-2 under the Investment Advisers Act of
1940, as amended, for the period specified in said Rule.
10. TERM OF AGREEMENT. This Agreement shall become effective as of _____
__, 1997 and shall continue until ______ __, 1999, and thereafter shall
continue automatically for successive annual periods ending on ______ __ of each
year, provided such continuance is specifically approved at least annually by
(i) MSF's Board or (ii) a vote of a "majority" (as defined in the Act) of the
Fund's outstanding voting securities, provided that in either event the
continuance also is approved by a majority of MSF's Board who are not
"interested persons" (as defined in the Act) of any party to this Agreement, by
vote cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable, without penalty, on 60 days' written
notice, by the Adviser, by MSF's Board, by vote of holders of a majority of the
Fund'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 MSF and the Adviser. This Agreement also will terminate
automatically in the event of its assignment (as defined in the Act).
11. INDEMNIFICATION. The Adviser agrees to indemnify and hold harmless
the Sub-Adviser from and against any and all claims, losses, liabilities or
damages (including reasonable attorneys' fees and other related expenses),
howsoever arising, from or in connection with this Agreement or the performance
by the Sub-Adviser of its duties hereunder; provided, however, that nothing
contained herein shall require that the Sub-Adviser be indemnified for
Disqualifying Conduct.
12. DISCLOSURE. Neither MSF nor the Adviser shall, without the prior
written consent of the Sub-Adviser, make representations regarding or reference
to the Sub-Adviser or
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any affiliates in any disclosure document, advertisement, sales literature or
other promotional materials, except as this requirement may be waived by the
Sub-Adviser from time to time.
13. MISCELLANEOUS. All notices provided for by this Agreement shall be in
writing and shall be deemed given when received, against appropriate receipt, by
Mr. Xxxxx Xxxx, X.X. Xxxxxx Investment Management, 000 0xx Xxxxxx, Xxx Xxxx, XX
00000 in the case of the Sub-Adviser, Vice President and Treasurer, The
Northwestern Mutual Life Insurance Company, 000 Xxxx Xxxxxxxxx Xxxxxx,
Xxxxxxxxx, XX 00000, in the case of the Adviser, and MSF's Secretary in the
Case of the Fund, 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 conflict of laws.
If the foregoing accurately sets forth our agreement, kindly indicate your
acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
XXXXX STREET FUNDS, INC.
By: __________________________________
Name:
Title:
NORTHWESTERN MUTUAL INVESTMENT
SERVICES, INC.
By: __________________________________
Name:
Title:
Accepted:
X.X. XXXXXX INVESTMENT MANAGEMENT INC.
By: _____________________________________
Name:
Title:
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