1
Exhibit D(3)
INVESTMENT SUBADVISORY AGREEMENT
BETWEEN
_______________________________
AND
X. XXXX PRICE ASSOCIATES, INC.
This INVESTMENT SUB-ADVISORY AGREEMENT, is dated as of _____________,
2001, by and between Northwestern Mutual Investment Services, LLC (the
"ADVISER"), a limited liability company organized and existing under the laws of
the State of Wisconsin, and X. Xxxx Price Associates, Inc. (the "SUBADVISER"), a
corporation organized and existing under the laws of the State of Maryland.
WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated as of the _____ day of ___________, 200_ ("ADVISORY AGREEMENT") with
Northwestern Mutual Series Fund, Inc. ("COMPANY"), which is engaged in business
as an open-end investment company registered under the Investment Company Act of
1940, as amended ("1940 Act"); and
WHEREAS, the Company is authorized to issue shares of the Small-Cap
Value Portfolio ("FUND"), a separate series of the Company;
WHEREAS, the Subadviser is engaged principally in the business of
rendering investment supervisory services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended ("ADVISERS ACT");
and
WHEREAS, the Adviser desires to retain the Subadviser to act as
Subadviser to furnish certain investment advisory services to the Adviser and
the Fund and the Subadviser 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. APPOINTMENT. Adviser hereby appoints the Subadviser as its
investment Subadviser with respect to the Fund for the period and on the terms
set forth in this Agreement. The Subadviser accepts such appointment and agrees
to render the services herein set forth, for the compensation herein provided.
2. DUTIES OF THE SUBADVISER.
A. INVESTMENT SUBADVISORY SERVICES. Subject to the supervision of the Company's
Board of Directors ("BOARD") and the Adviser, the Subadviser shall act as the
investment Subadviser and will establish and maintain a discretionary investment
advisory account (the "ACCOUNT")
2
consisting of all or a portion of the Fund's securities, funds or other assets
contributed, or liabilities allocated, (i) as the Adviser shall initially
designate for the purposes of opening this Account, (ii) as the Adviser may from
time to time designate in writing to Subadviser and (iii) as the Adviser may
substitute pursuant to this Agreement. The Subadviser shall supervise and direct
the investments of the Account in accordance with the Fund's investment
objectives, policies, and restrictions as provided in the Fund's Prospectus and
Statement of Additional Information, as currently in effect and as amended or
supplemented from time to time (hereinafter referred to as the "PROSPECTUS"),
and such other limitations as the Fund may impose by notice in writing to the
Subadviser. The Subadviser shall obtain and evaluate such information relating
to the economy, industries, businesses, securities markets, and securities as it
may deem necessary or useful in the discharge of its obligations hereunder and
shall formulate and implement a continuing program for the management of the
assets and resources of the Account in a manner consistent with the Fund's
investment objective(s), policies, and restrictions. In furtherance of this
duty, the Subadviser, on behalf of the Fund, is authorized, in its discretion
and without prior consultation with the Fund or the Adviser, to:
(1) buy, sell, exchange, convert, lend, and otherwise trade in
any stocks, bonds, and other securities or assets;
(2) place orders and negotiate the commissions for the
execution of transactions in securities or other assets with or through
such brokers, dealers, underwriters or issuers as the Subadviser may
select;
(3) vote proxies, exercise conversion or subscription rights,
and respond to tender offers and other consent solicitations with
respect to the issuers of securities in which Account assets may be
invested provided such materials have been forwarded to the Subadviser
in a timely fashion by the Fund's custodian;
(4) maintain all or part of the Account's uninvested assets in
short-term income producing instruments for such periods of time as
shall be deemed reasonable and prudent by the Subadviser, including,
but not limited to, investments in Reserve Investment Fund or
Government Reserve Investment Fund which are internal money market
funds available for use only by clients of the Subadviser for
short-term investments;
(5) instruct the Fund custodian to deliver for cash received,
securities or other cash and/or securities instruments sold, exchanged,
redeemed or otherwise disposed of from the Fund, and to pay cash for
securities or other cash and/or securities instruments delivered to the
custodian and/or credited to the Fund upon acquisition of the same for
the Fund; and
(6) generally, perform any other act necessary to enable the
Subadviser to carry out its obligations under this Agreement.
B. FURTHER DUTIES OF SUBADVISER. In all matters relating to
the performance of this Agreement, the Subadviser shall act in conformity with
the Company's Articles of Incorporation, By-Laws, and currently effective
Registration Statement (as defined below) and with the written instructions and
directions of the Board and the Adviser, and shall manage the Account to comply
3
with the requirements of the 1940 Act, the Advisers Act, the rules thereunder,
and all other applicable federal and state laws and regulations. The Subadviser
shall not be responsible for compliance with such requirements with respect to
any portion of the Fund's assets not allocated to the Account.
3. COMPENSATION. For the services provided and the expenses assumed by
the Subadviser pursuant to this Agreement, the Subadviser shall receive a
monthly investment management fee as set forth in Schedule A, attached hereto
and incorporated herein by reference. The management fee shall be payable
monthly to the Subadviser on or before the 5th day of the next succeeding
calendar month and shall be accompanied by a worksheet which shows the basis for
the fee calculation. If this Agreement becomes effective or terminates before
the end of any month, the investment management fee for the period from the
effective date to the end of such month or from the beginning of such month to
the date of termination, as the case may be, shall be prorated according to the
proration which such period bears to the full month in which such effectiveness
or termination occurs.
4. DUTIES OF THE ADVISER.
A. The Adviser shall continue to have responsibility for all
services to be provided to the Fund pursuant to the Advisory Agreement and shall
oversee and review the Subadviser's performance of its duties under this
Agreement.
B. The Adviser has furnished the Subadviser with copies of
each of the following documents and will furnish to the Subadviser at its
principal office all future amendments and supplements to such documents, if
any, as soon as practicable after such documents become available:
(1) The Articles of Incorporation of the Company, as filed
with the State of Maryland, as in effect on the date hereof and as
amended from time to time ("ARTICLES");
(2) The By-Laws of the Company as in effect on the date hereof
and as amended from time to time ("BY-LAWS");
(3) Certified resolutions of the Board of the Company
authorizing the appointment of the Adviser and the Subadviser and
approving the form of the Advisory Agreement and this Agreement;
(4) The Company's Registration Statement under the 1940 Act
and the Securities Act of 1933, as amended, on Form N-1A, as filed with
the Securities and Exchange Commission ("SEC") relating to the Fund and
its shares and all amendments thereto ("REGISTRATION STATEMENT");
(5) The Notification of Registration of the Company under the
1940 Act on Form N-8A as filed with the SEC and any amendments thereto;
(6) The Fund's Prospectus (as defined above); and
4
(7) A certified copy of any financial statement or report
prepared for the Fund by certified or independent public accountants,
and copies of any financial statements or reports made by the Fund to
its shareholders or to any governmental body or securities exchange.
The Adviser shall furnish the Subadviser with any further documents, materials
or information that the Subadviser may reasonably request to enable it to
perform its duties pursuant to this Agreement.
C. During the term of this Agreement, the Adviser shall
furnish to the Subadviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to shareholders of the Fund or the public, which refer
to the Subadviser or its clients in any way, at a reasonable time prior to the
use thereof, and the Adviser shall not use any such materials if the Subadviser
reasonably objects in writing five business days (or such other time as may be
mutually agreed) after receipt thereof. The Adviser shall ensure that materials
prepared by employees or agents of the Adviser or its affiliates that refer to
the Subadviser or its clients in any way are consistent with those materials
previously approved by the Subadviser as referenced in the preceding sentence.
5. BROKERAGE.
A. The Subadviser agrees that, in placing orders with
broker-dealers for the purchase or sale of portfolio securities, it shall
attempt to obtain quality execution at favorable security prices; provided that,
on behalf of the Fund, the Subadviser may, in its discretion, agree to pay a
broker-dealer that furnishes brokerage or research services as such services are
defined under Section 28(e) of the Securities Exchange Act of 1934, as amended
("1934 ACT"), a higher commission than that which might have been charged by
another broker-dealer for effecting the same transactions, if the Subadviser
determines in good faith that such commission is reasonable in relation to the
brokerage and research services provided by the broker-dealer, viewed in terms
of either that particular transaction or the overall responsibilities of the
Subadviser with respect to the accounts as to which it exercises investment
discretion (as such term is defined under Section 3(a)(35) of the 1934 Act). In
no instance will portfolio securities be purchased from or sold to the
Subadviser, or any affiliated person thereof, except in accordance with the
federal securities laws and the rules and regulations thereunder.
B. On occasions when the Subadviser deems the purchase or sale
of a security to be in the best interest of the Fund as well as other clients of
the Subadviser, the Subadviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be purchased or sold to attempt to obtain a more favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner the Subadviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund and to its other clients.
6. OWNERSHIP OF RECORDS. The Subadviser shall maintain all books and
records required to be maintained by the Subadviser pursuant to the 1940 Act and
the rules and regulations promulgated thereunder with respect to transactions on
behalf of the Fund. In compliance with the requirements of Rule 31a-3 under the
1940 Act, the Subadviser hereby agrees (i) that all records that
5
it maintains for the Fund are the property of the Company, (ii) to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act any records that it
maintains for the Company and that are required to be maintained by Rule 31a-1
under the 1940 Act, and (iii) agrees to surrender promptly to the Company any
records that it maintains for the Company upon request by the Company; provided,
however, the Subadviser may retain copies of such records.
7. REPORTS. The Subadviser shall furnish to the Board or the Adviser,
or both, as appropriate, such information, reports, evaluations, analyses and
opinions as the Subadviser and the Board or the Adviser, as appropriate, may
mutually agree upon from time to time.
8. SERVICES TO OTHERS CLIENTS. Nothing contained in this Agreement
shall limit or restrict (i) the freedom of the Subadviser, or any affiliated
person thereof, to render investment management and corporate administrative
services to other investment companies, to act as investment manager or
investment counselor to other persons, firms, or corporations, or to engage in
any other business activities, or (ii) the right of any director, officer, or
employee of the Subadviser, who may also be a director, officer, or employee of
the Company, to engage in any other business or to devote his or her time and
attention in part to the management or other aspects of any other business,
whether of a similar nature or a dissimilar nature.
9. SUBADVISER'S USE OF THE SERVICES OF OTHERS. The Subadviser may (at
its cost except as contemplated by Paragraph 5 of this Agreement) employ,
retain, or otherwise avail itself of the services or facilities of other persons
or organizations for the purpose of providing the Subadviser or the Company or
Fund, as appropriate, with such statistical and other factual information, such
advice regarding economic factors and trends, such advice as to occasional
transactions in specific securities, or such other information, advice, or
assistance as the Subadviser may deem necessary, appropriate, or convenient for
the discharge of its obligations hereunder or otherwise helpful to the Company
or the Fund, as appropriate, or in the discharge of Subadviser's overall
responsibilities with respect to the other accounts that it serves as investment
manager or counselor.
10. LIMITATION OF LIABILITY OF THE SUBADVISER. Neither the Subadviser
nor any of its officers, directors, or employees, nor any person performing
executive, administrative, trading, or other functions for the Company, the Fund
(at the direction or request of the Subadviser) or the Subadviser in connection
with the Subadviser's discharge of its obligations undertaken or reasonably
assumed with respect to this Agreement, shall be liable for (i) any error of
judgment or mistake of law or for any loss suffered by the Company or Fund or
(ii) any error of fact or mistake of law contained in any report or data
provided by the Subadviser, except for any error, mistake or loss resulting from
willful misfeasance, bad faith, or gross negligence in the performance of its or
his duties on behalf of the Company or Fund or from reckless disregard by the
Subadviser or any such person of the duties of the Subadviser pursuant to this
Agreement.
11. REPRESENTATIONS OF SUBADVISER. The Subadviser represents,
warrants, and agrees as follows:
A. The Subadviser: (i) is registered as an investment adviser
under the Advisers Act and will continue to be so registered for so long as this
Agreement remains in effect; (ii) is not prohibited by the 1940 Act or the
Advisers Act from performing the services contemplated by this
6
Agreement; (iii) has met, and will continue to meet for so long as this
Agreement remains in effect, any other applicable federal or state requirements,
or the applicable requirements of any regulatory or industry self-regulatory
agency, necessary to be met in order to perform the services contemplated by
this Agreement; (iv) has the authority to enter into and perform the services
contemplated by this Agreement; and (v) will immediately notify the Adviser of
the occurrence of any event that would disqualify the Subadviser from serving as
an investment adviser of an investment company pursuant to Section 9(a) of the
1940 Act or otherwise.
B. The Subadviser has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the 1940 Act and, if it has
not already done so, will provide the Adviser and the Company with a copy of
such code of ethics, together with evidence of its adoption.
C. The Subadviser has provided the Adviser and the Company
with a copy of its Form ADV as most recently filed with the SEC and will,
promptly after filing any amendment to its Form ADV with the SEC, furnish a copy
of such amendment to the Adviser.
12. 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 Company 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 (ii) by vote of a majority of the Fund'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, with respect to the Fund,
subject to the termination provisions and all other terms and conditions hereof,
so long as such continuation shall be specifically approved at least annually
(a) by either the Board, or by vote of a majority of the outstanding voting
securities of the Fund; (b) in either event, by the vote, cast in person at a
meeting called for the purpose of voting on such approval, of a majority of the
directors of the Company who are not parties to this Agreement or interested
persons of any such party; and (c) the Subadviser shall not have notified the
Company, in writing, at least 60 days prior to such approval that it does not
desire such continuation. The Subadviser shall furnish to the Company, promptly
upon its request, such information as may reasonably be necessary to evaluate
the terms of this Agreement or any extension, renewal, or amendment hereof.
13. TERMINATION OF AGREEMENT. Notwithstanding the foregoing, this
Agreement may be terminated at any time, without the payment of any penalty, by
vote of the Board or by a vote of a majority of the outstanding voting
securities of the Fund on at least 60 days' prior written notice to the
Subadviser. This Agreement may also be terminated by the Adviser: (i) on at
least 60 days' prior written notice to the Subadviser, without the payment of
any penalty; (ii) upon material breach by the Subadviser of any of the
representations and warranties set forth in Paragraph 11 of this Agreement, if
such breach shall not have been cured within a 20-day period after notice of
such breach; or (iii) if the Subadviser becomes unable to discharge its duties
and obligations under this Agreement. The Subadviser may terminate this
Agreement at any time, without the payment of any penalty, on at least 60 days'
prior notice to the Adviser. This Agreement shall terminate automatically in the
event of its assignment or upon termination of the Advisory Agreement.
7
14. AMENDMENT OF AGREEMENT. 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 a majority of the Fund's
outstanding voting securities.
15. MISCELLANEOUS.
A. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Maryland without giving effect to the
conflicts of laws principles thereof and the 1940 Act. To the extent that the
applicable laws of the State of Maryland conflict with the applicable provisions
of the 1940 Act, the latter shall control.
B. CAPTIONS. The captions contained 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.
C. ENTIRE AGREEMENT. This Agreement represents the entire
agreement and understanding of the parties hereto and shall supersede any prior
agreements between the parties relating to the subject matter hereof, and all
such prior agreements shall be deemed terminated upon the effectiveness of this
Agreement.
D. INTERPRETATION. Nothing herein contained shall be deemed to
require the Company to take any action contrary to its Articles or By-Laws, or
any applicable statutory or regulatory requirement to which it is subject or by
which it is bound, or to relieve or deprive the Board of its responsibility for
and control of the conduct of the affairs of the Fund.
E. DEFINITIONS. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations, or orders of the SEC validly issued pursuant to the Act.
As used in this Agreement, the terms "majority of the outstanding voting
securities," "affiliated person," "interested person," "assignment," broker,"
"investment adviser," "net assets," "sale," "sell," and "security" shall have
the same meaning as such terms have in the 1940 Act, subject to such exemption
as may be granted by the SEC by any rule, regulation, or order. Where the effect
of a requirement of the federal securities laws reflected in any provision of
this Agreement is made less restrictive by a rule, regulation, or order of the
SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation, or order.
8
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.
NORTHWESTERN MUTUAL
INVESTMENT SERVICES, LLC
Attest:
By:
-------------------------------- --------------------------------
X. XXXX PRICE ASSOCIATES, INC
Attest:
By:
-------------------------------- --------------------------------
9
SCHEDULE A
FEE SCHEDULE
Small-Cap Value Portfolio .60% of average daily net assets of
the Account
