AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 17, 1996
Registration No. 33-507
1940 Act File No. 811-4419
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 25 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 26 [X]
(Check appropriate box or boxes.)
WRL SERIES FUND, INC.
------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
201 HIGHLAND AVENUE, LARGO, FLORIDA 33770-2597
--------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (813) 585-6565
THOMAS E. PIERPAN BOX 5068
-------------------------------------
CLEARWATER, FLORIDA 34618-5068
-------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement becomes effective.
It is proposed that this filing will become effective (check appropriate
box):
[ ]immediately upon filing pursuant to paragraph (b) of Rule 485.
[ ]on _____, pursuant to paragraph (b) of Rule 485.
[ ]60 days after filing pursuant to paragraph (a) of Rule 485.
[ ]on DATE, pursuant to paragraph (a) of Rule 485
[X]75 days after filing pursuant to paragraph (a) (2) of Rule 485
[ ]on DATE, pursuant to paragraph (a) (2) of Rule 485
[ ]this post-effective amendment designatres a new effective date for a
previously filed post-effective amendment
Registrant has registered an indefinite number of shares under the Securities
Act of 1933 pursuant to Rule 24f-2(a) under the Investment Company Act of 1940
and filed a Rule 24f-2 Notice on February 28, 1996, for the fiscal year ended
December 31, 1995.
<PAGE>
WRL SERIES FUND, INC.
CROSS REFERENCE SHEET
FORM N-1A LOCATION IN
ITEM NUMBER PROSPECTUS
- ----------- ----------
PART A.
- -------
Item 1. Cover Page .................................... Cover Page
Item 2. Synopsis ...................................... Not Applicable
Item 3. Condensed Financial Information ............... Financial Highlights
Item 4. General Description of Registrant ............. Other Information -
The Fund and Its
Shares
Item 5. Management of the Fund ........................ Management of the
Fund
Item 5.A. Management's Discussion of Fund Performance ... Not Applicable
Item 6. Capital Stock and other Securities ............ Other Information -
The Fund and Its
Shares
Item 7. Purchase of Securities Being Offered .......... Other Information -
Purchase and
Redemption of
Shares; Valuation of
Shares
Item 8. Redemption or Repurchase ...................... Other Information -
Purchase and
Redemption of Shares
Item 9. Pending Legal Proceedings ..................... Not Applicable
PART B. LOCATION IN
- ------- STATEMENT OF
ADDITIONAL
INFORMATION
-----------
Item 10. Cover Page .................................... Cover Page
Item 11. Table of Contents ............................. Table of Contents
Item 12. General Information and History ............... Not Applicable
i
<PAGE>
WRL SERIES FUND, INC.
CROSS REFERENCE SHEET (CONTINUED)
LOCATION IN
STATEMENT OF
FORM N-1A ADDITIONAL
ITEM NUMBER INFORMATION
- ----------- -----------
Item 13. Investment Objectives and Policies ............ Investment Objectives
and Policies
Item 14. Management of the Registrant .................. Management of the Fund
Item 15. Control Persons and Principal
Holders of Securities ......................... Purchase and
Redemption of Shares
Item 16. Investment Advisory and Other
Services ...................................... Management of the
Fund
Item 17. Brokerage Allocation and Portfolio Transactions
Other Practices ............................... and Brokerage
Item 18. Capital Stock and Other Securities ............ Capital Stock of the
Fund
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered ...................... Purchase and
Redemption of Shares
Item 20. Tax Status .................................... Taxes
Item 21. Underwriter ................................... Management of the
Fund - The Investment
Adviser - Distribution
Agreement
Item 22. Calculations of Yield Quotations of Calculation of
Performance Data .............................. Performance Related
Information
Item 23. Financial Statements .......................... Financial Statements
(incorporated by
reference)
ii
<PAGE>
WRL SERIES FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
CROSS REFERENCE SHEET
FORM N-1A LOCATION IN
ITEM NUMBER PROSPECTUS
- ----------- ----------
PART A.
- -------
Item 1. Cover Page .................................... Cover Page
Item 2. Synopsis ...................................... Not Applicable
Item 3. Condensed Financial Information ............... Not Applicable
Item 4. General Description of Registrant ............. The International
Equity Portfolio and
the Fund; The Fund and
its Shares
Item 5. Management of the Fund ........................ Management of the Fund
Item 5.A. Management's Discussion of Fund Performance ... Not Applicable
Item 6. Capital Stock and other Securities ............ The Fund and Its
Shares
Item 7. Purchase of Securities Being Offered .......... Purchase and
Redemption of Shares;
Valuation of Shares
Item 8. Redemption or Repurchase ...................... Purchase and
Redemption of Shares
Item 9. Pending Legal Proceedings ..................... Not Applicable
PART B. LOCATION IN STATEMENT
- ------- ---------------------
OF ADDITIONAL
INFORMATION
-----------
Item 10. Cover Page .................................... Cover Page
Item 11. Table of Contents ............................. Table of Contents
Item 12. General Information and History ............... Not Applicable
iii
<PAGE>
WRL SERIES FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
CROSS REFERENCE SHEET (CONTINUED)
LOCATION IN STATEMENT
FORM N-1A OF ADDITIONAL
ITEM NUMBER INFORMATION
- ----------- -----------
Item 13. Investment Objective and Policies ............. Investment Objectives
and Policies
Item 14. Management of the Registrant .................. Management of the Fund
Item 15. Control Persons and Principal
Holders of Securities ......................... Purchase and
Redemption of Shares
Item 16. Investment Advisory and Other
Services ...................................... Management of the Fund
Item 17. Brokerage Allocation and Portfolio Transactions
Other Practices ............................... and Brokerage
Item 18. Capital Stock and Other Securities ............ Capital Stock of the
Fund
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered ...................... Purchase and
Redemption of Shares
Item 20. Tax Status .................................... Taxes
Item 21. Underwriter ................................... Management of the Fund
- Restructuring
Item 22. Calculations of Yield Quotations of Calculation of
Performance Data .............................. Performance Related
Information
Item 23. Financial Statements .......................... Not Applicable
iv
<PAGE>
PROSPECTUS
WRL SERIES FUND, INC.
201 Highland Avenue
Largo, Florida 33770-2597
Telephone: (800) 851-9777
(813) 585-6565
WRL Series Fund, Inc. (the "Fund") is a diversified, open-end management
investment company consisting of twenty-two separate series or investment
portfolios. The Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). This Prospectus pertains to sixteen of the Portfolios
of the Fund: Aggressive Growth Portfolio, Emerging Growth Portfolio,
International Equity Portfolio, Meridian/INVESCO Global Sector Portfolio, Global
Portfolio, Growth Portfolio, C.A.S.E. Growth Portfolio, U.S. Equity Portfolio,
Value Equity Portfolio, Tactical Asset Allocation Portfolio, Equity-Income
Portfolio, Utility Portfolio, Balanced Portfolio, Bond Portfolio,
Short-to-Intermediate Government Portfolio and Money Market Portfolio (the
"Portfolios"). For a brief description of these Portfolios, see "Portfolios At A
Glance" on page ____.
Shares of the Fund's Portfolios are currently sold only to separate accounts
(the "Separate Accounts") of Western Reserve Life Assurance Co. of Ohio ("WRL"),
PFL Life Insurance Company ("PFL"), and AUSA Life Insurance Company, Inc.
("AUSA") (WRL, PFL, and AUSA together, the "Life Companies") to fund the
benefits under certain individual flexible premium variable life insurance
policies (the "Policies") and individual and group variable annuity contracts
(the "Annuity Contracts"). The Life Companies are affiliates. The Separate
Accounts, which may or may not be registered with the Securities and Exchange
Commission (the "SEC"), invest in shares of one or more of the Portfolios in
accordance with the allocation instructions received from holders of the
Policies and the Annuity Contracts (collectively, the "Policyholders"). Such
allocation rights are further described in the prospectuses or disclosure
documents for the Policies and the Annuity Contracts. A particular Portfolio of
the Fund may not be available under the Policy or Annuity Contract you have
chosen or may not be available in your state due to certain state insurance law
considerations. The prospectus or disclosure document for the particular Policy
or Annuity Contract you have chosen will indicate the Portfolios which are
generally available under the applicable Policy or Annuity Contract and should
be read in conjunction with this Prospectus.
This Prospectus sets forth concisely the information about the Portfolios that
prospective investors ought to know before investing. Investors should read this
Prospectus and retain it for future reference.
Additional information about the Fund and the Portfolios has been filed with the
SEC and is available upon request without charge by calling or writing the Fund.
The Statement of Additional Information (the "SAI") pertaining to the Portfolios
bear the same date as this Prospectus and are incorporated by reference into
this Prospectus in their entirety.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, A BANK OR OTHER FINANCIAL INSTITUTION, AND THE SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISK,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS MUST BE ACCOMPANIED BY THE CURRENT PROSPECTUS OR DISCLOSURE
DOCUMENT FOR THE APPLICABLE VARIABLE ANNUITY CONTRACT OR FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE POLICY. ALL PROSPECTUSES SHOULD BE READ AND RETAINED FOR
FUTURE REFERENCE.
AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
Prospectus Dated January 1, 1997
<PAGE>
WRL SERIES FUND, INC.
201 Highland Avenue
Largo, Florida 33770-2597
Telephone (813) 585-6565
(800) 851-9777
FINANCIAL HIGHLIGHTS........................................................
PORTFOLIOS AT A GLANCE......................................................
PERFORMANCE INFORMATION.....................................................
THE PORTFOLIOS IN DETAIL....................................................
MANAGEMENT OF THE FUND......................................................
OTHER INFORMATION...........................................................
DISTRIBUTIONS AND TAXES.....................................................
i
<PAGE>
FINANCIAL HIGHLIGHTS
The information in the tables below is taken from each Portfolio's audited
financial statements, which have been incorporated by reference into the SAI.
(The information for the period 1/1/96 - 6/30/96 is the unaudited.) The tables
provide information for one share of capital stock outstanding during the
respective Portfolio's fiscal periods ended on December 31 of each year. Expense
and income ratios and portfolio turnover rates have been annualized for periods
of less than one year. Total returns for periods of less than one year are not
annualized. A Fund Annual Report contains additional performance information for
each Portfolio. A copy of the Annual Report may be obtained without charge upon
request.
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
PERIOD FROM YEAR ENDED DECEMBER 31, PERIOD FROM
1/1/96 TO ------------------------------------------------------------------------------- 10/2/86 TO
6/30/96 1995 1994 1993 1992 1991 1990 1989 1988 1987 12/31/86
----------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $31.66 $23.81 $26.25 $25.83 $26.26 $17.48 $17.85 $12.97 $11.14 $10.14 $10.00
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income .18 .26 .22 .28 .36 .27 .30 .19 .31 .21 .00
Net Gains (Losses) on
Securities (both
realized and
unrealized)........ 4.65 10.97 (2.41) .79 .52 10.75 (.33) 6.29 1.83 1.00 .14
--------- ---------- -------- -------- -------- -------- -------- ------- ------- ------- ------
Total Income (Loss)
From Investment
Operations....... 4.83 11.23 (2.19) 1.07 .88 11.02 (.03) 6.48 2.14 1.21 .14
---------- -------- -------- -------- -------- -------- ------- ------- ------- ------
LESS DISTRIBUTIONS
Dividends (from net
investment income)... (.06) (.24) (.22) (.28) (.36) (.27) (.30) (.19) (.31) (.21) .00
Distributions (from
capital gains)....... .00 (3.14) .00 (.37) (.95) (1.97) (.04) (1.41) .00 .00 .00
--------- ---------- -------- -------- -------- -------- -------- ------- ------- ------- ------
Distributions in
excess of capital
gains................ .00 .00 (.03) .00 .00 .00 .00 .00 .00 .00 .00
--------- ---------- -------- -------- -------- -------- -------- ------- ------- ------- ------
Total Distributions.... (.06) (3.38) (.25) (.65) (1.31) (2.24) (.34) (1.60) (.31) (.21) .00
--------- ---------- -------- -------- -------- -------- -------- ------- ------- ------- ------
Net Asset Value,
End of Period.......... $36.43 $31.66 $23.81 $26.25 $25.83 $26.26 $17.48 $17.85 $12.97 $11.14 $10.14
========= ========== ======== ======== ======== ======== ======== ======= ======= ======= ======
Total Return*............ 15.25% 47.12% (8.31%) 3.97% 2.35% 59.79% (.22%) 47.04% 18.62% 10.90% 5.84%
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of
Period (000 omitted)... $1,436,24 $1,195,174 $814,383 $934,810 $711,422 $393,511 $129,057 $74,680 $28,497 $15,815 $716
Ratio of Expenses to
Average Net Assets**... .82% .86% .84% .87% .86% .90% 1.00% 1.00% 1.00% 1.00% .19%
Ratio of Net Investment
Income to Average
Net Assets............. 1.06% .90% .88% 1.07% 1.44% 1.21% 2.06% 1.18% 2.50% 1.84% .03%
Ratio of Commission
paid to number
of shares.............. 4.44% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Portfolio Turnover Rate.. 19.58% 130.48% 107.33% 77.91% 77.70% 7.27% 157.01% 123.80% 76.27% 222.13% 8.55%
<FN>
* THE TOTAL RETURN SHOWN FOR 1986 IS FOR THE THREE MONTH PERIOD ENDED DECEMBER
31, 1986, AND IS NOT ANNUALIZED. THE TOTAL RETURN OF THE PORTFOLIO REFLECTS
THE ADVISORY FEE AND ALL OTHER PORTFOLIO EXPENSES AND INCLUDES REINVESTMENT
OF DIVIDENDS AND CAPITAL GAINS; IT DOES NOT REFLECT THE CHARGES AGAINST THE
CORRESPONDING SUB-ACCOUNTS OR THE CHARGES AND DEDUCTIONS UNDER THE APPLICABLE
POLICY OR ANNUITY CONTRACT.
** RATIO IS NOT ANNUALIZED AND IS NET OF ADVISORY FEE WAIVER FOR THE PERIODS
ENDED DECEMBER 31, 1986, 1987, 1988 AND 1989, FOR WHICH PERIODS THE
ANNUALIZED RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD HAVE BEEN 6.76%,
1.90%, 1.49% AND 1.13%, RESPECTIVELY, ABSENT THE ADVISORY FEE WAIVER BY
WESTERN RESERVE LIFE.
</FN>
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
BOND PORTFOLIO
PERIOD FROM YEAR ENDED DECEMBER 31, PERIOD FROM
1/1/96 TO ------------------------------------------------------------------------------- 10/2/86 TO
6/30/96 1995 1994 1993 1992 1991 1990 1989 1988 1987 12/31/86
----------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $11.35 $9.80 $11.24 $11.18 $11.18 $9.91 $10.07 $9.29 $9.22 $10.28 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income. .33 .69 .63 .72 .75 .86 .79 .75 .90 .25 .13
Net Gains (Losses) on
Securities (both
realized and
unrealized)......... (.82) 1.55 (1.44) .95 .32 1.30 (.16) .78 .07 (.89) .15
------ ------- ------ ------- ------- ------- ------- ------ ----- ----- ------
Total Income (Loss)
From Investment
Operations........ (.49) 2.24 (.81) 1.67 1.07 2.16 .63 1.53 .97 (.64) .28
------ ------- ------ ------- ------- ------- ------- ------ ----- ----- ------
LESS DISTRIBUTIONS
Dividends (from net
investment income).... (.29) (.69) (.63) (.72) (.75) (.86) (.79) (.75) (.90) (.38) .00
Distributions (from
capital gains)........ .00 .00 .00 (.89) (.32) (.03) .00 .00 .00 .04 .00
------ ------- ------ ------- ------- ------- ------- ------ ----- ----- ------
Total Distributions. (.29) (.69) (.63) (1.61) (1.07) (.89) (.79) (.75) (.90) (.42) .00
------ ------- ------ ------- ------- ------- ------- ------ ----- ----- ------
Net Asset Value,
End of Period........... $10.57 $11.35 $9.80 $11.24 $11.18 $11.18 $9.91 $10.07 $9.29 $9.22 $10.28
====== ======= ====== ======= ======= ======= ======= ====== ===== ===== ======
Total Return*............. (4.18%) 22.99% (6.94%) 13.38% 6.79% 18.85% 6.21% 14.65% 7.73% (5.66%) 11.49%
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of
Period(000 omitted)..... $91,650 $96,972 $71,064 $90,715 $56,820 $22,291 $10,143 $7,025 $3,372 $1,400 $127
Ratio of Expenses to
Average Net Assets**.... .55% .61% .59% .64% .70% .70% .69% .70% .70% .86% .12%
Ratio of Net Investment
Income to Average
Net Assets.............. 5.99% 6.45% 5.94% 5.94% 6.49% 8.02% 8.82% 8.60% 8.96% 7.17% 1.51%
Ratio of Commission paid
to number of shares..... N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Portfolio Turnover Rate... 54.89% 120.54% 131.73% 149.02% 80.73% 33.47% 18.09% 23.26% 21.54% 134.76% 123.68%
</TABLE>
<TABLE>
<CAPTION>
GLOBAL PORTFOLIO
PERIOD FROM YEAR ENDED DECEMBER 31, PERIOD FROM
1/1/96 TO -------------------------------- 12/3/92 TO
6/30/96 1995 1994 1993 12/31/92
----------- -------- -------- ------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..... $15.52 $13.12 $13.62 $10.16 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)......... .09 .10 .10 .04 (.02)
Net Gains on Securities (both
realized and unrealized)........... 3.05 2.91 .10 3.72 .18
-------- -------- -------- ------- ------
Total Income From Investment
Operations...................... 3.14 3.01 .20 3.76 .16
-------- -------- -------- ------- ------
LESS DISTRIBUTIONS
Dividends (from net investment income) (.02) .00 (.10) (.04) .00
Dividends in excess of net investment
income............................. .00 .00 (.01) .00 .00
Distributions (from capital gains).... .00 (.61) (.56) (.26) .00
Distributions in excess of capital
gains.............................. .00 (.00) (.03) .00 .00
-------- -------- -------- ------- ------
Total Distributions................ (.02) (.61) (.70) (.30) .00
-------- -------- -------- ------- ------
Net Asset Value, End of Period........... $18.64 $15.52 $13.12 $13.62 $10.16
======== ======== ======== ======= ======
Total Return***.......................... 20.28% 23.06% .25% 35.05% 1.62%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000 omitted).. $445,040 $289,506 $261,778 $99,094 $508
Ratio of Expenses to Average
Net Assets****......................... .91% .99% 1.01% 1.09% 2.48%
Ratio of Net Investment Income to
Average Net Assets..................... 1.04% .75% .73% .30% (2.23%)
Ratio of Commission paid
to number of shares.................... 1.86% N/A N/A N/A N/A
Portfolio Turnover Rate.................. 45.45% 130.60% 192.06% 79.93% .00%
<FN>
* THE TOTAL RETURN SHOWN FOR 1986 IS FOR THE THREE MONTH PERIOD ENDED
DECEMBER 31, 1986 AND IS NOT ANNUALIZED. THE TOTAL RETURN OF THE PORTFOLIO
REFLECTS THE ADVISORY FEE AND ALL OTHER PORTFOLIO EXPENSES AND INCLUDES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS; IT DOES NOT REFLECT THE
CHARGES AGAINST THE CORRESPONDING SUB-ACCOUNTS OR THE CHARGES AND
DEDUCTIONS UNDER THE APPLICABLE POLICY OR ANNUITY CONTRACT.
** RATIO IS NOT ANNUALIZED AND IS NET OF ADVISORY FEE WAIVER FOR THE PERIODS
ENDED DECEMBER 31, 1986, 1987,1988, 1989 AND 1991, FOR WHICH PERIODS THE
ANNUALIZED RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD HAVE BEEN 6.37%
2.12%, 1.07%, 0.82% AND 0.82%, RESPECTIVELY, ABSENT THE ADVISORY FEE WAIVER
BY WESTERN RESERVE LIFE.
*** THE TOTAL RETURN SHOWN FOR 1992 IS FOR THE PERIOD FROM DECEMBER 3, 1992
THROUGH DECEMBER 31, 1992, AND IS NOT ANNUALIZED. THE TOTAL RETURN OF THE
PORTFOLIO REFLECTS THE ADVISORY FEE AND ALL OTHER PORTFOLIO EXPENSES AND
INCLUDES REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS; IT DOES NOT REFLECT
THE CHARGES AGAINST THE CORRESPONDING SUB-ACCOUNTS OR THE CHARGES AND
DEDUCTIONS UNDER THE APPLICABLE POLICY OR ANNUITY CONTRACT.
**** RATIO IS ANNUALIZED FOR THE PERIOD ENDED DECEMBER 31, 1992.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
PERIOD FROM YEAR ENDED DECEMBER 31, PERIOD FROM
1/1/96 TO ---------------------------------------------------------------------- 10/2/86 TO
6/30/96 1995 1994 1993 1992 1991 1990 1989 1988 1987 12/31/86
----------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income............ .02 .05 .04 .02 .03 .05 .07 .07 .05 .04 .01
Net Gains on
Securities (both
realized and
unrealized)....... .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00
------- ------- ------- ------- ------- ------- ------- ------ ------ ----- -----
Total Income From
Investment
Operations...... .02 .05 .04 .02 .03 .05 .07 .07 .05 .04 .01
------- ------- ------- ------- ------- ------- ------- ------ ------ ----- -----
LESS DISTRIBUTIONS
Dividends (from net
investment income).. (.02) (.05) (.04) (.02) (.03) (.05) (.07) (.07) (.05) (.04) (.01)
Distributions (from
capital gains)...... .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00
------- ------- ------- ------- ------- ------- ------- ------ ------ ----- -----
Total
Distributions... (.02) (.05) (.04) (.02) .(03) (.05) (.07) (.07) (.05) (.04) (.01)
------- ------- ------- ------- ------- ------- ------- ------ ------ ----- -----
Net Asset Value,
End of Period......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======= ======= ======= ====== ====== ===== =====
Total Return*........... 2.49% 5.40% 3.44% 2.45% 3.03% 5.25% 7.09% 8.09% 5.77% 4.56% 1.14%
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of
Period (000 omitted).. $97,959 $80,544 $93,081 $45,782 $45,600 $33,695 $24,931 $6,233 $5,114 $582 $101
Ratio of Expenses to
Average Net Assets**.. .53% .56% .60% .66% .70% .70% .66% .70% .70% .89% .12%
Ratio of Net Investment
Income to Average
Net Assets............ 5.04% 5.30% 3.59% 2.41% 2.99% 5.07% 7.09% 7.82% 6.26% 4.83% 1.14%
Ratio of Commission paid
to number of shares... N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Portfolio Turnover Rate. N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
SHORT-TO-INTERMEDIATE GOVERNMENT PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED DECEMBER 31, PERIOD FROM
1/1/96 TO -------------------------------- 12/3/92 TO
6/30/96 1995 1994 1993 12/31/92
----------- -------- -------- ------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period...... $10.42 $9.72 $10.30 $10.02 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss).......... .28 .60 .50 .36 .02
Net Gains (Losses) on Securities
(both realized and unrealized)...... (.29) .70 (.58) .29 .02
------- ------- ------- ------- ------
Total Income (Loss) From
Investment Operations........... (.01) 1.30 (.08) .65 .04
------- ------- ------- ------- ------
LESS DISTRIBUTIONS
Dividends (from net investment income). (.17) (.60) (.50) (.35) (.02)
Distributions (from capital gains)..... .00 .00 .00 (.02) .00
------- ------- ------- ------- ------
Total Distributions................. (.17) (.60) (.50) (.37) (.02)
------- ------- ------- ------- ------
Net Asset Value, End of Period............ $10.24 $10.42 $9.72 $10.30 $10.02
======= ======= ======= ======= ======
Total Return***........................... (.12%) 13.54% (.43%) 4.58% .45%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000 omitted)... $24,836 $23,588 $20,356 $24,864 $2,509
Ratio of Expenses to Average
Net Assets****.......................... .69% .78% 0.81% 1.00% 1.00%
Ratio of Net Investment Income to
Average Net Assets...................... 5.46% 5.84% 4.95% 3.44% 3.24%
Ratio of Commission paid
to number of shares..................... N/A N/A N/A N/A N/A
Portfolio Turnover Rate................... 26.87% 51.82% 93.70% 28.64% .00%
<FN>
* THE TOTAL RETURN SHOWN FOR 1986 IS FOR THE THREE MONTH PERIOD ENDED
DECEMBER 31, 1986 AND IS NOT ANNUALIZED. THE TOTAL RETURN OF THE PORTFOLIO
REFLECTS THE ADVISORY FEE AND ALL OTHER PORTFOLIO EXPENSES AND INCLUDES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS; IT DOES NOT REFLECT THE
CHARGES AGAINST THE CORRESPONDING SUB-ACCOUNTS OR THE CHARGES AND
DEDUCTIONS UNDER THE APPLICABLE POLICY OR ANNUITY CONTRACT.
** RATIO IS NOT ANNUALIZED AND IS NET OF ADVISORY FEE WAIVER FOR THE PERIODS
ENDED DECEMBER 31, 1986, 1987, 1988, AND 1989, FOR WHICH PERIODS THE
ANNUALIZED RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD HAVE BEEN 6.33%,
1.63%, 1.16% AND 0.84%, RESPECTIVELY, ABSENT THE ADVISORY FEE WAIVER BY
WESTERN RESERVE LIFE.
*** THE TOTAL RETURN SHOWN FOR 1992 IS FOR THE PERIOD FROM DECEMBER 3, 1992
THROUGH DECEMBER 31, 1992, AND IS NOT ANNUALIZED. THE TOTAL RETURN OF THE
PORTFOLIO REFLECTS THE ADVISORY FEE AND ALL OTHER PORTFOLIO EXPENSES AND
INCLUDES REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS; IT DOES NOT REFLECT
THE CHARGES AGAINST THE CORRESPONDING SUB-ACCOUNTS OR THE CHARGES AND
DEDUCTIONS UNDER THE APPLICABLE POLICY OR ANNUITY CONTRACT.
**** RATIO IS ANNUALIZED AND IS NET OF ADVISORY FEE WAIVER FOR YEARS 1993 AND
1992, FOR WHICH PERIODS THE ANNUALIZED RATIO OF EXPENSES TO AVERAGE NET
ASSETS WOULD HAVE BEEN 1.02% AND 1.41%, RESPECTIVELY, ABSENT THE ADVISORY
FEE WAIVER BY WESTERN RESERVE LIFE.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
PERIOD FROM YEAR ENDED PERIOD FROM
1/1/96 TO DECEMBER 31, 3/1/94 TO
6/30/96 1995 12/31/94
----------- ------------ -----------
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period........................ $10.63 $9.24 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income...................... .18 .44 .34
Net Gains (Losses) on
Securities (both realized
and unrealized)........................... .19 1.38 (.76)
------- ------- -------
Total Income (Loss) From
Investment Operations................... .37 1.82 (.42)
------- ------- -------
LESS DISTRIBUTIONS
Dividends (from net
investment income)........................ (.07) (.43) (.34)
Distributions (from capital gains)......... .00 .00 .00
------- ------- -------
Total Distributions........................ .07 (.43) (.34)
------- ------- -------
Net Asset Value, End of Period............... $10.93 $10.63 $ 9.24
======= ======= =======
Total Return*................................ 3.35% 19.80% (5.73%)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000 omitted).............................. $39,654 $31,114 $19,422
Ratio of Expenses to Average Net Assets**.... .87% .97% 1.00%
Ratio of Net Investment Income
to Average Net Assets...................... 3.11% 4.38% 4.27%
Ratio of Commission paid
to number of shares........................ .21% N/A N/A
Portfolio Turnover Rate...................... 47.40% 98.55% 57.73%
</TABLE>
<TABLE>
<CAPTION>
EMERGING GROWTH PORTFOLIO
PERIOD FROM YEAR ENDED DECEMBER 31, PERIOD FROM
1/1/96 TO ----------------------- 12/3/92 TO
6/30/96 1995 1994 12/31/92
----------- -------- -------- -----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period............................. $16.25 $11.55 $12.47 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income
(Loss)............................. .00 .01 .01 (.04)
Net Gains (Losses) on
Securities (both realized
and unrealized).................... 2.93 5.42 (.92) 2.51
-------- -------- -------- --------
Total Income (Loss) From
Investment Operations............. 2.93 5.43 (.91) 2.47
-------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends (from net investment
income)............................ .00 .00 (.01) .00
Distributions (from capital gains)... .00 (.73) .00 .00
-------- -------- -------- --------
Total Distributions.................. .00 (.73) (.01) .00
Net Asset Value, End of Period.......... $19.18 $16.25 $11.55 $12.47
======== ======== ======== ========
Total Return***......................... 18.09% 46.79% (7.36%) 24.71%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000 omitted). $387,576 $288,519 $182,650 $102,472
Ratio of Expenses to Average
Net Assets****........................ .83% .91% .92% 1.00%
Ratio of Net Investment Income
to Average Net Assets................ (.14%) .03% .06% (.30%)
Ratio of Commission paid
to number of shares................... 5.77% N/A N/A N/A
Portfolio Turnover Rate................. 40.39% 124.13% 72.62% 12.79%
<FN>
* THE TOTAL RETURN SHOWN FOR 1994 IS FOR THE TEN MONTH PERIOD ENDED DECEMBER
31, 1994, AND IS NOT ANNUALIZED. THE TOTAL RETURN OF THE PORTFOLIO REFLECTS
THE ADVISORY FEE AND ALL OTHER PORTFOLIO EXPENSES AND INCLUDES REINVESTMENT
OF DIVIDENDS AND CAPITAL GAINS; IT DOES NOT REFLECT THE CHARGES AGAINST THE
CORRESPONDING SUB-ACCOUNTS OR THE CHARGES AND DEDUCTIONS UNDER THE
APPLICABLE POLICY OR ANNUITY CONTRACT.
** RATIO IS ANNUALIZED AND IS NET OF ADVISORY FEE WAIVER FOR THE PERIOD ENDED
DECEMBER 31, 1994, FOR WHICH PERIOD THE ANNUALIZED RATIO OF EXPENSES TO
AVERAGE NET ASSETS WOULD HAVE BEEN 1.34% ABSENT THE ADVISORY FEE WAIVER BY
WESTERN RESERVE LIFE.
*** THE TOTAL RETURN SHOWN FOR 1993 IS FOR THE TEN MONTH PERIOD ENDED DECEMBER
31, 1993, AND IS NOT ANNUALIZED. THE TOTAL RETURN OF THE PORTFOLIO REFLECTS
THE ADVISORY FEE AND ALL OTHER PORTFOLIO EXPENSES AND INCLUDES REINVESTMENT
OF DIVIDENDS AND CAPITAL GAINS; IT DOES NOT REFLECT THE CHARGES AGAINST THE
CORRESPONDING SUB-ACCOUNTS OR THE CHARGES AND DEDUCTIONS UNDER THE
APPLICABLE POLICY OR ANNUITY CONTRACT.
**** RATIO IS ANNUALIZED AND IS NET OF ADVISORY FEE WAIVER FOR THE PERIOD ENDED
DECEMBER 31, 1993, FOR WHICH PERIOD THE ANNUALIZED RATIO OF EXPENSES TO
AVERAGE NET ASSETS WOULD HAVE BEEN 1.16% ABSENT THE ADVISORY FEE WAIVER BY
WRL.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
EQUITY-INCOME PORTFOLIO
PERIOD FROM YEAR ENDED DECEMBER 31, PERIOD FROM
1/1/96 TO ----------------------- 12/3/92 TO
6/30/96 1995 1994 12/31/92
----------- -------- -------- -----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period...................... $12.86 $10.90 $11.23 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income......... .18 .37 .31 .19
Net Gains or (Losses) on
Securities (both realized
and unrealized)............. .71 2.33 (.33) 1.33
-------- -------- -------- -------
Total Income (Loss) From
Investment Operations...... .89 2.70 (.02) 1.52
-------- -------- -------- -------
LESS DISTRIBUTIONS
Dividends (from net
investment income).......... (.09) (.37) (.31) (.19)
Distributions (from capital
gains)...................... .00 (.37) .00 (.10)
-------- -------- -------- -------
Total Distributions........... (.09) (.74) (.31) (.29)
-------- -------- -------- -------
Net Asset Value, End of Period... $13.66 $12.86 $10.90 $11.23
======== ======== ======== =======
Total Return*.................... 6.91% 24.66% (.53%) 13.49%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000 omitted).................. $302,736 $256,806 $183,867 $90,560
Ratio of Expenses to Average
Net Assets**................... .83% .87% .89% 1.00%
Ratio of Net Investment Income
to Average Net Assets.......... 2.73% 3.07% 2.78% 1.70%
Ratio of Commission paid
to number of shares............ 5.68% N/A N/A N/A
Portfolio Turnover Rate.......... 19.24% 52.59% 53.50% 27.41%
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
PERIOD FROM YEAR PERIOD FROM
1/1/96 TO ENDED 3/1/94 TO
6/30/96 12/31/95 12/31/94
----------- ------------ -----------
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period............ $13.25 $9.86 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (Loss)... (.01) (.06) .02
Net Gains (Losses) on
Securities (both realized
and unrealized)............... .77 3.96 (.14)
-------- -------- -------
Total Income (Loss) From
Investment Operations....... .76 3.90 (.12)
-------- -------- -------
LESS DISTRIBUTIONS
Dividends (from net
investment income............ .00 .00 (.02)
Distributions (from
capital gains)............... .00 (.51) .00
-------- -------- -------
Total Distributions............ .00 (.51) (.02)
-------- -------- -------
Net Asset Value, End of Period... $14.01 $13.25 $9.86
======== ======== =======
Total Return***.................. 5.74% 38.02% (1.26%)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000 omitted).................. $188,998 $158,534 $38,826
Ratio of Expenses to Average
Net Assets****................. .84% 1.07% 1.00%
Ratio of Net Investment Income
to Average Net Assets.......... (.11%) (.48%) 0.20%
Ratio of Commission paid
to number of shares............ 7.20% N/A N/A
Portfolio Turnover Rate.......... 49.72% 108.04% 89.73%
<FN>
- ------------
* THE TOTAL RETURN SHOWN FOR 1993 IS FOR THE TEN MONTH PERIOD ENDED DECEMBER
31, 1993, AND IS NOT ANNUALIZED. THE TOTAL RETURN OF THE PORTFOLIO REFLECTS
THE ADVISORY FEE AND ALL OTHER PORTFOLIO EXPENSES AND INCLUDES REINVESTMENT
OF DIVIDENDS AND CAPITAL GAINS; IT DOES NOT REFLECT THE CHARGES AGAINST THE
CORRESPONDING SUB-ACCOUNTS OR THE CHARGES AND DEDUCTIONS UNDER THE
APPLICABLE POLICY OR ANNUITY CONTRACT.
** RATIO IS ANNUALIZED AND IS NET OF ADVISORY FEE WAIVER FOR THE PERIOD ENDED
DECEMBER 31, 1993, FOR WHICH PERIOD THE ANNUALIZED RATIO OF EXPENSES TO
AVERAGE NET ASSETS WOULD HAVE BEEN 1.12% ABSENT THE ADVISORY FEE WAIVER BY
WESTERN RESERVE LIFE (SEE NOTE 2 TO THE FINANCIAL STATEMENTS).
*** THE TOTAL RETURN SHOWN FOR 1994 IS FOR THE TEN MONTH PERIOD ENDED DECEMBER
31, 1994, AND IS NOT ANNUALIZED. THE TOTAL RETURN OF THE PORTFOLIO REFLECTS
THE ADVISORY FEE AND ALL OTHER PORTFOLIO EXPENSES AND INCLUDES REINVESTMENT
OF DIVIDENDS AND CAPITAL GAINS; IT DOES NOT REFLECT THE CHARGES AGAINST THE
CORRESPONDING SUB-ACCOUNTS OR THE CHARGES AND DEDUCTIONS UNDER THE
APPLICABLE POLICY OR ANNUITY CONTRACT.
**** RATIO IS ANNUALIZED AND NET OF ADVISORY FEE WAIVER FOR THE PERIOD ENDED
DECEMBER 31, 1994, FOR WHICH PERIOD THE ANNUALIZED RATIO OF EXPENSES TO
AVERAGE NET ASSETS WOULD HAVE BEEN 1.18% ABSENT THE ADVISORY FEE WAIVER BY
WESTERN RESERVE LIFE.
</FN>
</TABLE>
5
<PAGE>
TACTICAL ASSET ALLOCATION PORTFOLIO
PERIOD FROM PERIOD FROM
1/1/96 TO 1/3/95 TO
6/30/96 12/31/95
----------- -----------
Net Asset Value, Beginning of Period............ $11.49 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................ .18 .41
Net Gains (Losses) on Securities
(both realized and unrealized)............. .38 1.93
-------- --------
Total Income From Investment Operations.... .56 2.34
-------- --------
LESS DISTRIBUTIONS
Dividends (from net investment income)....... (.07) (.41)
Distributions (from capital gains)........... .00 (.44)
-------- --------
Total Distributions........................ (.07) (.85)
-------- --------
Net Asset Value, End of Period.................. $11.98 $11.49
======== ========
Total Return*................................... 4.81% 20.09%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000 omitted)......... $186,157 $120,531
Ratio of Expenses to Average Net Assets......... .83% .93%
Ratio of Net Investment Income
to Average Net Assets......................... 3.01% 3.76%
Ratio of Commission paid
to number of shares........................... 4.83% N/A
Portfolio Turnover Rate......................... 20.57% 38.68%
UTILITY PORTFOLIO
PERIOD FROM YEAR ENDED PERIOD FROM
1/1/96 TO DECEMBER 31, 3/1/94 TO
6/30/96 1995 12/31/94
----------- ------------ -----------
Net Asset Value,
Beginning of Period............ $11.12 $ 9.30 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.......... .18 .46 .43
Net Gains (Losses) on
Securities (both realized
and unrealized)............... .33 1.93 (.70)
------- ------- -------
Total Income (Loss) From
Investment Operations....... .51 2.39 (.27)
------- ------- -------
LESS DISTRIBUTIONS
Dividends (from net
investment income)............ (.08) (.46) (.43)
Distributions (from
capital gains)................ .00 (.11) .00
------- ------- -------
Total Distributions............ (.08) (.57) (.43)
------- ------- -------
Net Asset Value, End of Period... $11.55 $11.12 $9.30
======= ======= =======
Total Return**................... 4.47% 25.25% (4.58%)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000 omitted).................. $31,375 $24,607 $10,482
Ratio of Expenses to Average
Net Assets***.................. .88% 1.00% 1.00%
Ratio of Net Investment Income
to Average Net Assets.......... 3.19% 4.56% 5.36%
Ratio of Commission paid
to number of shares............ 4.83% N/A N/A
Portfolio Turnover Rate.......... 41.38% 78.34% 36.13%
* THE TOTAL RETURN SHOWN FOR 1995 IS FOR THE PERIOD FROM JANUARY 3, 1995 TO
DECEMBER 31, 1995, AND IS NOT ANNUALIZED. THE TOTAL RETURN OF THE PORTFOLIO
REFLECTS THE ADVISORY FEE AND ALL OTHER PORTFOLIO EXPENSES AND INCLUDES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS; IT DOES NOT REFLECT THE
CHARGES AGAINST THE CORRESPONDING SUB-ACCOUNTS OR THE CHARGES AND
DEDUCTIONS UNDER THE APPLICABLE POLICY OR ANNUITY CONTRACT.
** THE TOTAL RETURN SHOWN FOR 1994 IS FOR THE TEN MONTH PERIOD ENDED DECEMBER
31, 1994, AND IS NOT ANNUALIZED. THE TOTAL RETURN OF THE PORTFOLIO REFLECTS
THE ADVISORY FEE AND ALL OTHER PORTFOLIO EXPENSES AND INCLUDES REINVESTMENT
OF DIVIDENDS AND CAPITAL GAINS; IT DOES NOT REFLECT THE CHARGES AGAINST THE
CORRESPONDING SUB-ACCOUNTS OR THE CHARGES AND DEDUCTIONS UNDER THE
APPLICABLE POLICY OR ANNUITY CONTRACT.
*** RATIO IS ANNUALIZED AND NET OF ADVISORY FEE WAIVER FOR THE PERIODS ENDED
DECEMBER 31, 1994 AND 1995, FOR WHICH PERIODS THE ANNUALIZED RATIO OF
EXPENSES TO AVERAGE NET ASSETS WOULD HAVE BEEN 1.90% AND 1.08%,
RESPECTIVELY, ABSENT THE ADVISORY FEE WAIVER BY WESTERN RESERVE LIFE.
6
<PAGE>
C.A.S.E. GROWTH PORTFOLIO
PERIOD FROM PERIOD FROM
1/1/96 TO 5/1/95 TO
6/30/96 12/31/95
----------- -----------
Net Asset Value, Beginning of Period............ $11.66 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................ .05 .12
Net Gains (Losses) on Securities
(both realized and unrealized)............. .74 2.49
------ ------
Total Income (Loss) From
Investment Operations..................... .79 2.61
------ ------
LESS DISTRIBUTIONS
Dividends (from net investment income)....... .00 (.12)
Distributions (from net realized gains)...... .00 (.83)
------ ------
Total Distributions........................ .00 (.95)
------ ------
Net Asset Value, End of Period.................. $12.45 $11.66
====== ======
Total Return*................................... 6.77% 20.65%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000 omitted)......... $7,347 $2,578
Ratio of Expenses to Average Net Assets**....... 1.65% 1.00%
Ratio of Net Investment Income
to Average Net Assets......................... .79% 1.02%
Ratio of Commission paid
to number of shares........................... 6.03% N/A
Portfolio Turnover Rate......................... 90.07% 121.62%
MERIDIAN/INVESCO GLOBAL SECTOR PORTFOLIO
PERIOD FROM
5/1/96* TO
8/31/96
-----------
Net Asset Value, Beginning of Period............ $10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................ .03
Net Gains (Losses) on Securities
(both realized and unrealized)............. (.05)
------
Total Income (Loss) From
Investment Operations..................... (.02)
------
LESS DISTRIBUTIONS
Dividends (from net investment income)....... .00
Distributions (from net realized gains)...... .00
------
Total Distributions........................ $ .00
------
Net Asset Value, End of Period.................. $ 9.98
======
Total Return***................................. (.16%)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000 omitted)......... $1,872
Ratio of Expenses to Average Net Assets......... 2.55%
Ratio of Net Investment Income
to Average Net Assets......................... 1.55%
Ratio of Commission paid
to number of shares........................... 6.28%
Portfolio Turnover Rate......................... 3.25%
* THE TOTAL RETURN SHOWN FOR 1995 IS FOR THE EIGHT MONTH PERIOD ENDED
DECEMBER 31, 1995, AND IS NOT ANNUALIZED. THE TOTAL RETURN OF THE PORTFOLIO
REFLECTS THE ADVISORY FEE AND ALL OTHER PORTFOLIO EXPENSES AND INCLUDES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS; IT DOES NOT REFLECT THE
CHARGES AGAINST THE CORRESPONDING SUB-ACCOUNTS OR THE CHARGES AND
DEDUCTIONS UNDER THE APPLICABLE POLICY OR ANNUITY CONTRACT.
** RATIO IS ANNUALIZED AND NET OF ADVISORY FEE WAIVER FOR THE PERIOD ENDED
DECEMBER 31, 1995, FOR WHICH PERIOD THE ANNUALIZED RATIO OF EXPENSES TO
AVERAGE NET ASSETS WOULD HAVE BEEN 4.15% ABSENT THE ADVISORY FEE WAIVER BY
WESTERN RESERVE LIFE.
*** THE INCEPTION OF THIS PORTFOLIO WAS MAY 1, 1996. THE TOTAL RETURN IS NOT
ANNUALIZED.
7
<PAGE>
VALUE EQUITY PORTFOLIO
PERIOD FROM
5/1/96* TO
8/31/96
-----------
Net Asset Value, Beginning of Period............ $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................ .03
Net Gains (Losses) on Securities
(both realized and unrealized)............. .04
-------
Total Income (Loss) From
Investment Operations..................... .07
-------
LESS DISTRIBUTIONS
Dividends (from net investment income)....... .00
Distributions (from net realized gains)...... .00
-------
Total Distributions........................ $ .00
-------
Net Asset Value, End of Period.................. $ 10.07
=======
Total Return*................................... .77%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000 omitted)......... $ 3,286
Ratio of Expenses to Average Net Assets......... 1.56%
Ratio of Net Investment Income
to Average Net Assets......................... 1.32%
Ratio of Commission paid
to number of shares........................... 8.00%
Portfolio Turnover Rate......................... 0.00%
* THE INCEPTION OF THIS PORTFOLIO WAS MAY 1, 1996. THE TOTAL RETURN IS NOT
ANNUALIZED.
PORTFOLIOS AT A GLANCE
The Fund consists of twenty-two portfolios. This Prospectus provides information
on sixteen portfolios of the Fund. WRL Investment Management, Inc. ("WRL
Management") serves as the Fund's investment adviser ("Investment Adviser"), and
contracts on behalf of each Portfolio with an investment sub-adviser
("Sub-Adviser") to provide investment advisory assistance and portfolio
management advice for each Portfolio. See "Management of the Fund", p. ___. Each
portfolio has its own distinct investment objective and policies which are
summarized below:
/diamond/ AGGRESSIVE GROWTH PORTFOLIO
OBJECTIVE: Seeks long-term capital appreciation.
INVESTMENT POLICY: The Aggressive Growth Portfolio invests primarily in a
diversified, actively managed portfolio of equity securities, such as common
stock or preferred stocks, or securities convertible into or exchangeable for
equity securities, including warrants and rights.
INVESTOR PROFILE: For the investor who aggressively seeks capital growth, and
who can tolerate substantial volatility in the value of an investment.
SUB-ADVISER: Fred Alger Management, Inc.
/diamond/ EMERGING GROWTH PORTFOLIO
OBJECTIVE: Seeks capital appreciation by investing primarily in common stocks of
small and medium-sized companies.
INVESTMENT POLICY: The Emerging Growth Portfolio invests primarily in common
stocks of small and medium-sized companies. Under normal conditions, at least
65% of the Portfolio's total assets will be invested in common stocks of small
and medium-sized companies, both domestic and foreign, in the early stages of
their life cycle, believed to have the potential to become major enterprises.
INVESTOR PROFILE: For the investor seeking greater opportunities for growth of
capital and willing to accept certain special risks.
SUB-ADVISER: Van Kampen American Capital Asset Management, Inc.
/diamond/ INTERNATIONAL EQUITY PORTFOLIO
OBJECTIVE: Seeks long-term growth of capital.
INVESTMENT POLICY: The International Equity Portfolio invests primarily in the
common stock of foreign issuers traded on overseas exchanges and in foreign
over-the-counter ("OTC") markets.
8
<PAGE>
INVESTOR PROFILE: For the investor who seeks long-term growth of capital through
investments in foreign securities. The investor should also be able to tolerate
the significant risk factors associated with foreign investing.
CO-SUB-ADVISERS: Scottish Equitable Investment Management Limited and GE
Investment Management Incorporated.
/diamond/ MERIDIAN/INVESCO GLOBAL SECTOR PORTFOLIO
OBJECTIVE: Seeks growth of capital.
INVESTMENT POLICY: The Meridian/INVESCO Global Sector Portfolio follows an asset
allocation strategy that shifts among a wide range of asset categories and
within them, market sectors. The Portfolio will invest primarily in the
following asset categories: equity securities of domestic and foreign issuers,
including common stocks, preferred stocks, convertible securities and warrants;
debt securities of domestic and foreign issuers, including mortgage-related and
other asset-backed securities and securities rated below investment grade; real
estate investment trusts ("REITs"); equity securities of companies involved in
the exploration, mining, processing, or dealing or investing in gold; gold
bullion; and domestic money market instruments.
INVESTOR PROFILE: For the investor who seeks long-term capital appreciation and
protection of buying power who, at the same time, can tolerate an increased
exposure to risk. The Portfolio is geared towards investors willing to
concentrate in industries and countries that offer an opportunity for greater
capital appreciation and are willing to take the additional risks associated
with sector investing and asset rotation.
CO-SUB-ADVISERS: Meridian Investment Management Corporation and INVESCO Global
Asset Management Limited
/diamond/ GLOBAL PORTFOLIO
OBJECTIVE: Seeks long-term growth of capital in a manner consistent with
preservation of capital.
INVESTMENT POLICY: The Global Portfolio invests primarily in common stocks of
foreign and domestic issuers.
INVESTOR PROFILE: For the investor who wants capital growth without being
limited to investments in U.S. securities. The investor should also be able to
tolerate the significant risk factors associated with foreign investing.
SUB-ADVISER: Janus Capital Corporation
/diamond/ GROWTH PORTFOLIO
OBJECTIVE: Seeks long-term growth of capital.
INVESTMENT POLICY: The Growth Portfolio invests primarily in common stocks
listed on a national securities exchange or traded on NASDAQ, which the
Portfolio's Sub-Adviser believes have a good potential for capital growth.
INVESTOR PROFILE: For the investor who wants capital growth in a broadly
diversified stock portfolio, and who can tolerate significant fluctuations in
value.
SUB-ADVISER: Janus Capital Corporation
/diamond/ C.A.S.E. GROWTH PORTFOLIO
OBJECTIVE: Seeks capital growth through investments in common stocks of small to
medium-sized companies.
INVESTMENT POLICY: The C.A.S.E. Growth Portfolio will primarily invest in
smaller, less well-established companies, with limited product lines and
financial resources. The Portfolio, however, seeks to invest in such companies
with above-market growth characteristics in several investment classifications
including sales, earnings, returns and institutional support.
INVESTOR PROFILE: For the investor who seeks growth in excess of the Standard &
Poor's Index of 500 Common Stocks (the "S&P 500") on a quarterly basis, but
wants a diversified portfolio that seeks to have investments in companies that
have below-market risk characteristics. The investor should be comfortable with
the price fluctuations of a stock portfolio.
SUB-ADVISER: C.A.S.E. Management, Inc.
/diamond/ U.S. EQUITY PORTFOLIO
OBJECTIVE: Seeks long-term growth of capital.
INVESTMENT POLICY: The U.S. Equity Portfolio invests primarily in equity
securities of U.S. companies. Under normal conditions, the Portfolio will invest
at least 65% of its assets in equity securities, consisting of common stocks and
preferred stocks, and securities convertible into common stocks, consisting of
convertible bonds, convertible debentures, convertible notes, convertible
preferred stocks and warrants or rights issued by U.S. companies.
INVESTOR PROFILE: For the investor seeking growth from a broadly diversified
portfolio consisting of both "value" and "growth" equities, which the
Portfolio's Sub-Adviser believes will have characteristics similar to the S&P
500
9
<PAGE>
and the potential to outperform the S&P 500 on a total return basis. The
investor should be comfortable with the price fluctuations of a stock portfolio.
SUB-ADVISER: GE Investment Management Incorporated
/diamond/ VALUE EQUITY PORTFOLIO
OBJECTIVE: Seeks to achieve maximum, consistent total return with minimum risk
to principal.
INVESTMENT POLICY: The Value Equity Portfolio invests primarily in common stocks
with above-average statistical value which, in the Sub-Adviser's opinion, are in
fundamentally attractive industries and are undervalued at the time of purchase.
INVESTOR PROFILE: For the investor who seeks both capital preservation and
long-term capital appreciation.
SUB-ADVISER: NWQ Investment Management Company, Inc.
/diamond/ TACTICAL ASSET ALLOCATION PORTFOLIO
OBJECTIVE: Seeks preservation of capital and competitive investment returns.
INVESTMENT POLICY: The Tactical Asset Allocation Portfolio invests primarily in
stocks, U.S. Treasury bonds, notes and bills, and money market funds.
INVESTOR PROFILE: For the investor who wants a combination of capital growth and
income, and who is comfortable with the risks associated with an actively traded
portfolio which shifts assets between equity and debt.
SUB-ADVISER: Dean Investment Associates
/diamond/ EQUITY-INCOME PORTFOLIO
OBJECTIVE: Seeks to provide current income, long-term growth of income and
capital appreciation.
INVESTMENT POLICY: The Equity-Income Portfolio invests primarily in a blend of
equity and fixed-income securities, including common stocks, income producing
securities convertible into common stock, and fixed-income securities.
INVESTOR PROFILE: For the investor who wants current income with the prospect of
income growth, plus the prospect of capital growth. The investor should be
comfortable with the price fluctuations of a stock portfolio.
SUB-ADVISER: Luther King Capital Management Corporation
/diamond/ UTILITY PORTFOLIO
OBJECTIVE: Seeks to achieve high current income and moderate capital
appreciation.
INVESTMENT POLICY: The Utility Portfolio invests primarily in a diversified
portfolio of equity and debt securities of utility companies that produce,
transmit, or distribute gas and electric energy as well as those companies that
provide communications facilities.
INVESTOR PROFILE: For the investor who seeks high current income and moderate
capital appreciation and is willing to accept certain special risks associated
with investments in utility companies.
SUB-ADVISER: Federated Investment Counseling
/diamond/ BALANCED PORTFOLIO
OBJECTIVE: Seeks preservation of capital, reduced volatility, and superior
long-term risk-adjusted returns.
INVESTMENT POLICY: The Balanced Portfolio invests primarily in common stock,
convertible securities and fixed-income securities.
INVESTOR PROFILE: For the investor who wants capital growth and income from the
same investment, but who also wants an investment which has the prospect of
sustaining its interim principal value through maintaining a balance between
equity and debt. The Portfolio is not designed for investors who desire a
consistent level of income.
SUB-ADVISER: AEGON USA Investment Management, Inc.
/diamond/ BOND PORTFOLIO
OBJECTIVE: Seeks the highest possible current income within the confines of the
primary goal of insuring the protection of capital by investing in debt
securities issued by the U.S. Government and its agencies and in medium to
high-quality corporate debt securities.
INVESTMENT POLICY: The Bond Portfolio invests at least 65% of assets in debt
securities issued by the U.S. Government and its agencies and in medium to
high-quality corporate debt securities.
INVESTOR PROFILE: For the investor seeking current income consistent with
preservation of capital, and who can tolerate the fluctuation in the principal
associated with changes in interest rates.
SUB-ADVISER: Janus Capital Corporation
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/diamond/ SHORT-TO-INTERMEDIATE GOVERNMENT PORTFOLIO
OBJECTIVE: Seeks as high a level of current income as is consistent with
preservation of capital.
INVESTMENT POLICY: The Short-to-Intermediate Government Portfolio seeks to
achieve its objective by investing primarily in U.S. Government securities. At
least 65% of the Portfolio's total assets will be invested in U.S. Government
securities, including repurchase agreements with respect to U.S. Government
securities.
INVESTOR PROFILE: For the investor seeking current income consistent with
preservation of capital, and who can tolerate the fluctuation in the principal
associated with changes in interest rates.
SUB-ADVISER: AEGON USA Investment Management, Inc.
/diamond/ MONEY MARKET PORTFOLIO
OBJECTIVE: Seeks to obtain maximum current income consistent with preservation
of principal and maintenance of liquidity.
INVESTMENT POLICY: The Money Market Portfolio maintains a dollar-weighted
average portfolio maturity of not more than 90 days by investing in U.S.
dollar-denominated securities which have effective maturities of not more than
13 months and present minimal credit risks.
INVESTOR PROFILE: For the investor seeking current income, preservation of
capital and maintenance of liquidity.
SUB-ADVISER: J.P. Morgan Investment Management Inc.
PERFORMANCE INFORMATION
The Fund may include quotations of a Portfolio's total return or yield in
connection with the total return for the appropriate Separate Account, in
advertisements, sales literature or reports to Policyholders or to prospective
investors. Total return and yield quotations for a Portfolio reflect only the
performance of a hypothetical investment in the Portfolio during the particular
time period shown as calculated based on the historical performance of the
Portfolio during that period. SUCH QUOTATIONS DO NOT IN ANY WAY INDICATE OR
PROJECT FUTURE PERFORMANCE. Quotations of total return and yield will not
reflect charges or deductions against the Separate Accounts or charges and
deductions against the Policies or the Annuity Contracts. Where relevant, the
prospectuses for the Policies and the Annuity Contracts contain performance
information which show total return and yield for the Separate Accounts,
Policies or Annuity Contracts.
/diamond/ TOTAL RETURN
Total return refers to the average annual percentage change in value of an
investment in a Portfolio held for a stated period of time as of a stated ending
date. When a Portfolio has been in operation for the stated period, the total
return for such period will be provided if performance information is quoted.
Total return quotations are expressed as average annual compound rates of return
for each of the periods quoted. They also reflect the deduction of a
proportionate share of a Portfolio's investment advisory fees and expenses, and
assume that all dividends and capital gains distributions during the period are
reinvested in the Portfolio when made.
/diamond/ YIELD
Yield quotations for the Bond Portfolio and the Short-to-Intermediate Government
Portfolio refer to the income generated by a hypothetical investment in a
Portfolio over a specified thirty-day period expressed as a percentage rate of
return for that period. The yield is calculated by dividing the net investment
income per share for the period by the price per share on the last day of that
period.
The Money Market Portfolio yield quotation refers to the income generated by a
hypothetical investment in the Money Market Portfolio over a specified seven-day
period if that level of income were generated for 52 consecutive weeks and
expressed as an annual percentage rate of return. The quotation of compound
effective yield for the Money Market Portfolio refers to the same calculation
adjusted to reflect the compounding effect of earnings on reinvested dividends.
/diamond/ PERFORMANCE SHOWN IN ADVERTISING
The Portfolios may disclose in advertisements, sales literature and reports to
Policyholders or to prospective investors, total returns for a Portfolio for
periods in addition to those required to be presented. They may also disclose
other nonstandardized data, such as
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cumulative total returns, actual year-by-year returns, or any combination
thereof.
/diamond/ PERFORMANCE RANKINGS AND COMPARISONS TO STANDARD INDEXES
Performance of the Portfolios may also be compared to: (1) indexes, such as the
S&P 500, the Dow Jones Industrial Average or other widely recognized indexes;
(2) other mutual funds whose performance is reported by all or any of Lipper
Analytical Services, Inc., ("Lipper"), Variable Annuity Research & Data Service
("VARDS") and Morningstar, Inc. ("Morningstar"), or as reported by other
services, companies, individuals or other industry or financial publications of
general interest, such as FORBES, MONEY, THE WALL STREET JOURNAL, BUSINESS WEEK,
BARRON'S, KIPLINGER'S PERSONAL FINANCE AND FORTUNE, which rank and/or rate
mutual funds by overall performance or other criteria; and (3) the Consumer
Price Index. Lipper, VARDS and Morningstar are widely quoted independent
research firms which rank mutual funds according to overall performance,
investment objective, and assets. Unmanaged indexes, such as the S&P 500, may
assume the reinvestment of dividends but usually do not reflect any "deduction"
for the expenses associated with operating and managing a fund. In connection
with a ranking, a Portfolio will also provide information in sales literature,
advertisements, and reports with respect to the ranking, including the
particular category of fund to which it relates, the number of funds in the
category, the period and criteria on which the ranking is based, and the effect
of any fee waivers and/or expense reimbursements.
(See the SAI for more information about the Portfolios' performance.)
THE PORTFOLIOS IN DETAIL
This section takes a closer look at each Portfolio's policies and
techniques, and the securities in which the Portfolios invest. PLEASE CAREFULLY
REVIEW THE "OTHER INVESTMENT POLICIES AND RESTRICTIONS" AND "PORTFOLIO
SECURITIES AND RISK FACTORS" SECTIONS OF THIS PROSPECTUS FOR A DISCUSSION OF THE
INVESTMENTS OF THE PORTFOLIOS AND THE RISKS ASSOCIATED WITH THOSE INVESTMENTS.
You should carefully consider your goals, time horizon and risk tolerance before
choosing a Portfolio.
Each Portfolio's investment objective and, unless otherwise noted,
investment policies and techniques, may be changed by the Board of Directors of
the Fund (the "Fund's Board") without Policyholder or Policyholder approval. A
change in the investment objective or policies of a Portfolio may result in that
Portfolio having an investment objective or policies different from that which a
Policyholder deemed appropriate at the time of investment. You will be notified
of any such change so that you may determine whether that Portfolio remains an
appropriate investment for your Policy or Annuity Contract. More information
about each Portfolio's investment techniques and restrictions is set forth in
the Fund's Statement of Additional Information, which is available without
charge upon request.
PORTFOLIO POLICIES AND TECHNIQUES
/diamond/ AGGRESSIVE GROWTH PORTFOLIO
The Aggressive Growth Portfolio seeks to achieve its investment objective by
investing in a diversified, actively managed portfolio of equity securities,
such as common or preferred stocks, or securities convertible into or
exchangeable for equity securities, including warrants and rights. The Portfolio
may engage in leveraging and options and futures transactions, which are deemed
to be speculative and which may increase fluctuations in the Portfolio's net
asset value.
Except during temporary defensive periods, the Portfolio invests at least 85% of
its net assets in equity securities of companies of any size. The Portfolio will
generally invest in companies whose securities are traded on domestic stock
exchanges or in the OTC market. These companies may still be in the
developmental stage, may be older companies that appear to be entering a new
stage of growth progress (owing to factors such as management changes or
development of new technology, products or markets), or may be companies
providing products or services with a high unit volume growth rate.
To afford the Portfolio the flexibility to take advantage of new opportunities
for investment in accordance with its investment objective, the Portfolio may
hold up to 15% of its net assets in money market instruments and repurchase
agreements and in excess of that amount (up to 100% of its assets) during
temporary defensive periods. This amount may be higher than that maintained by
other funds with similar investment
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objectives. The Portfolio will only invest in convertible debt securities rated
in one of the three highest rating categories by any NRSRO. (See the SAI for
further information on such ratings.)
The Portfolio may also borrow money for the purchase of additional securities
(leverage). The Portfolio may borrow only from banks and may not borrow in
excess of one-third of the market value of its assets, less liabilities other
than such borrowing. Funds that leverage through borrowing, which is a
speculative technique, offer an opportunity for greater capital appreciation,
but at the same time increase exposure to capital risk.
The Portfolio may purchase put and call options and sell (write) covered call
and put options on securities and securities indexes to increase gain and to
hedge against the risk of unfavorable price movements, and it may enter into
futures contracts on securities indexes and purchase and sell call and put
options on these futures contracts.
The Portfolio may also invest in short sales; restricted and illiquid (up to 15%
of net assets) securities (including those issued under Rule 144A); U.S.
Government securities; foreign bank obligations; variable rate master demand
notes; and repurchase agreements.
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/diamond/ EMERGING GROWTH PORTFOLIO
The Emerging Growth Portfolio seeks to achieve its investment objective by
investing primarily in common stocks of small and medium-sized companies. Under
normal conditions, at least 65% of the Portfolio's total assets will be invested
in common stocks of small and medium-sized companies, both domestic and foreign,
in the early stages of their life cycle, that the Sub-Adviser believes have the
potential to become major enterprises. Investments in such companies may offer
greater opportunities for growth of capital than larger, more established
companies, but also involve certain special risks. Emerging growth companies
often have limited product lines, markets, or financial resources, and they may
be dependent upon one or a few key people for management. The securities of such
companies may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general.
The Portfolio does not limit its investments to any single group or type of
security. The Portfolio does not intend to invest more than 5% of its net assets
in unseasoned companies or special situations involving new management, special
products and techniques, unusual developments, mergers or liquidations.
Investments in unseasoned companies and special situations often involve much
greater risks than are inherent in ordinary investments, because securities of
such companies may be more than likely to experience unexpected fluctuations in
price.
The Portfolio's primary approach is to seek what the Sub-Adviser believes to be
unusually attractive growth investments on an individual company basis. The
Portfolio may invest in securities that have above average volatility of price
movement. The Portfolio attempts to reduce overall exposure to risk from
declines in securities prices by spreading its investments over many different
companies in a variety of industries.
While the Portfolio invests primarily in common stocks, it may invest to a
limited extent in other securities such as preferred stocks, convertible
securities, warrants (up to 5% of assets), illiquid securities (up to 15% of its
net assets), repurchase agreements, restricted securities (up to 5% of assets)
and up to 20% of its total assets in securities of foreign issuers, including
American Depositary Receipts ("ADRs").
The Portfolio expects to utilize options on securities, futures contracts and
options thereon in several different ways, depending upon the status of the
Portfolio's investment portfolio and the Sub-Adviser's expectations concerning
the securities markets.
In times of stable or rising stock prices, the Portfolio generally seeks to
obtain maximum exposure to the stock market, I.E., to be "fully invested." Even
when the Portfolio is fully invested, the Sub-Adviser believes that prudent
management may require that at least a small portfolio of assets be available as
cash to honor redemption requests and for other short term needs. The Portfolio
may also have cash on hand that has not yet been invested. The portion of the
Portfolio's assets that is invested in cash equivalents does not fluctuate with
stock market prices, so that, in times of rising market prices, the Portfolio
may underperform the market in proportion to the amount of cash equivalents in
its portfolio. By purchasing stock index futures contracts, stock index call
options, or call options on stock index futures contracts, however, the
Portfolio can "equitize" the cash portion of its assets and obtain equivalent
performance to investing 100% of its assets in equity securities.
Although the Portfolio's assets will be invested primarily in equity securities
at most times, the Portfolio's assets may be invested up to 100% in U.S.
Government securities, high-grade commercial paper, cash, high-quality money
market instruments, corporate bonds and debentures, preferred stocks or
certificates of deposit of commercial banks, when, in the opinion of the
Sub-Adviser, a temporary defensive position is warranted, or
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so that the Portfolio may receive a return on its idle cash.
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/diamond/ INTERNATIONAL EQUITY PORTFOLIO
The International Equity Portfolio seeks to achieve its investment objective by
investing primarily in the common stock of foreign issuers traded on overseas
exchanges and in foreign OTC markets. While the Portfolio will primarily invest
in common stock, the Portfolio may also invest in preferred stocks convertible
securities, warrants or rights, or fixed-income instruments when the
Co-Sub-Advisers deem appropriate.
Daily cash inflows attributable to shares purchased by the Separate Accounts
will be divided equally each day between the two Co-Sub-Advisers, and each
portion will thereafter be managed separately by each Co-Sub-Adviser. [It is
anticipated that each Co-Sub-Adviser may purchase securities for the Portfolio
with its allocation of daily cash inflows which are different from the
securities purchased by the other Co-Sub-Adviser with its respective
allocation.] In return, each Co-Sub-Adviser will receive compensation, paid
monthly, equal to 50% of the investment management fees received by the
Investment Adviser with respect to the amount of Portfolio assets managed by
each Co-Sub-Adviser during such period, and, until at least December 31, 1997,
less 50% of the amount of any excess expenses paid by the Investment Adviser on
behalf of the Portfolio pursuant to an expense limitation (see "Management of
the Fund - Investment Adviser," p. __).
The Portfolio will seek to be invested in a minimum of 50 stocks of issuers from
approximately 15-25 countries, based on (i) the country in which an issuer is
organized; (ii) the country from which an issuer derives at least 50% of its
revenues or profits; or (iii) the principal trading market for the issuer's
securities. Under normal circumstances, the Portfolio will not be invested in
issuers of fewer than twelve countries other than the U.S. at any time. (For
this purpose, ADRs, European Depositary Receipts ("EDRs"), and Global Depositary
Receipts ("GDRs") will be considered to be issued by the issuer of the
securities underlying the receipt.) Typically, the Portfolio will be invested
broadly, not only in the larger stock markets of the United Kingdom, Continental
Europe, Japan and the Far East, but also, to a lesser extent, in the smaller
stock markets of Asia, Europe and Latin America.
At any time, overseas economies may not be moving in the same direction and will
be subject to substantially different fiscal and monetary policies. These
provide situations the Portfolio will aim to exploit. The Portfolio will aim to
add value through both active country allocation and stock selection in
international equity markets.
In selecting investments on behalf of the Portfolio, GEIM seeks companies that
are expected to grow faster than relevant markets and whose securities are
available at a price that does not fully reflect the potential growth of those
companies. GEIM typically focuses on companies that possess one or more of a
variety of characteristics, including strong earnings growth relative to
price-to-earnings and price-to-cash earnings ratios, low price-to-book value,
strong cash flow, presence in an industry experiencing strong growth and high
quality management.
Under normal circumstances, the Portfolio will seek to invest as described
above, and may for cash management purposes and to meet operating expenses,
invest a portion of its total assets in cash and/or money market instruments as
described under "Portfolio Securities and Risk Factors" below, pending
investment in accordance with its investment objective and policies. During
periods when a Co-Sub-Adviser believes there are unstable market, economic,
political or currency conditions abroad, the portfolio may assume a temporary
defensive posture and (i) restrict the securities markets in which its assets
will be invested and/or invest all or a significant portion of its assets in
securities of the types described above issued by companies incorporated in
and/or having their principal activities in the United States, or (ii) without
limitation, hold cash and/or invest in such money market instruments. To the
extent that it holds cash or invests in money market instruments, the Portfolio
may not achieve its investment objective of long-term growth of capital.
The Portfolio may purchase and sell financial futures contracts, stock index
futures contracts, and foreign currency futures contracts and related options,
forward foreign currency contracts, and interest rate swaps, caps and floors for
hedging purposes only and not for speculation, subject to certain limitations.
The Portfolio may invest in convertible securities; stock index futures
contracts, including indexes on specific securities, as a hedge against changes
in the market value of common stocks; interest rate future contracts as a hedge
against changes in interest rates; and illiquid securities (up to 15% of net
assets).
/diamond/ MERIDIAN/INVESCO GLOBAL SECTOR PORTFOLIO
The Meridian/INVESCO Global Sector Portfolio seeks to achieve its investment
objective by following an asset
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allocation strategy that shifts among a wide range of asset categories and
within them, market sectors. The Portfolio will invest in the following asset
categories: equity securities of domestic and foreign issuers, including common
stocks, preferred stocks, convertible securities and warrants; debt securities
of domestic and foreign issuers, including mortgage-related and other
asset-backed securities and securities rated below investment grade;
exchange-traded or OTC REITs; equity securities of companies involved in the
exploration, mining, processing, or dealing or investing in gold ("gold
stocks"); gold bullion; and domestic money market instruments. Meridian
Investment Management Corporation ("Meridian") (one of the Co-Sub-Advisers)
determines the allocation of the Portfolio's assets among the asset categories
described above, based on proprietary quantitative research.
Under normal circumstances, the Portfolio will invest at least 65% of its total
assets in securities of issuers domiciled in at least three countries, one of
which may be the U.S., although the Co-Sub-Advisers expect the Portfolio's
investments to be allocated among a larger number of countries. The percentage
of the Portfolio's assets invested in securities of U.S. issuers normally will
be higher than that invested in securities of issuers domiciled in any other
single country. However, it is possible that at times the Portfolio may have 65%
or more (but not more than 80%) of its total assets invested in foreign
securities.
The Portfolio is not required to maintain a portion of its assets in each of the
permitted asset categories. The Portfolio, however, under normal circumstances,
will maintain a minimum of 20% of its total assets in equity securities and 10%
in debt securities. The Portfolio may, however, invest up to 100% of its total
assets in equity securities and up to 70% in debt securities. For temporary
defensive purposes, during times of unusual market conditions, the Portfolio may
invest 100% of its assets in short-term securities. (See the SAI for a detailed
description of these instruments.)
The Portfolio will not invest more than 20% of its total assets in gold stocks.
The Portfolio will not invest more than 25% of its total assets in the
securities of any single country, other than the U.S.
Market sectors within the asset categories include the industry, country or bond
markets available for investment. After asset allocations and relative portfolio
weightings of such allocations have been designated by Meridian, INVESCO Global
Asset Management Limited ("INVESCO) (the Portfolio's other Co-Sub-Adviser) will
select the specific securities within each asset allocation category and the
market sector in which the Portfolio will invest.
The Portfolio's investment in stocks, bonds and cash securities may vary from
time to time, depending upon Meridian's assessment of business, economic and
market conditions. If Meridian's assessment determines these conditions to be
abnormal, the Portfolio may depart from its basic investment objective and
assume a temporary defensive position, with up to 100% of its assets invested in
U.S. Government and agency securities, investment grade corporate bonds or cash
securities such as domestic certificates of deposit and bankers' acceptances,
repurchase agreements and commercial paper. (See the SAI for a description of
these securities.)
The Portfolio reserves the right to hold equity, debt and cash securities, in
whatever proportion is deemed desirable, at any time for defensive purposes.
While the Portfolio is in a defensive position, the opportunity to achieve
capital growth will be limited; however, the ability to maintain a defensive
position enables the Portfolio to seek to avoid capital losses during market
downturns. Under normal market conditions, the Portfolio does not expect to have
a substantial portion of its assets invested in cash securities.
In selecting equity securities (common stocks and, to a lesser degree, preferred
stocks and securities convertible into common stocks, such as rights, warrants
and convertible debt securities) in which the Portfolio invests, INVESCO
attempts to identify companies that have demonstrated or, in INVESCO's opinion,
are likely to demonstrate in the future, strong earnings growth relative to
other companies in the same industry or country. The dividend payment records of
companies are also considered. Equity securities may be issued by either
established, well-capitalized companies or newly-formed, small-cap companies,
and may trade on regional or national stock exchanges or in the OTC market.
Most of the debt securities (corporate bonds, commercial paper, debt securities
issued by the U.S. Government, its agencies and instrumentalities, or foreign
governments, asset-backed securities and zero coupon bonds) in which the
Portfolio may invest must be rated in the four highest grades as determined by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation
("S&P"). However, the Portfolio may also invest up to 15% of its total assets in
debt securities rated below these four levels (commonly referred to as "junk
bonds"). In no event will the Portfolio ever invest in a debt security rated
below Caa by Moody's or CCC by S&P. (See Appendix A for a description of debt
securities ratings.)
In order to hedge its portfolio, the Portfolio may purchase and write options on
securities (including index options and options on foreign securities), and may
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invest in futures contracts for the purchase or sale of debt securities and
instruments based on financial indices (collectively, "futures contracts"),
options on futures contracts and interest rate swaps and swap-related products.
As a hedge against fluctuations in foreign exchange rates, pending the
settlement of transactions in foreign securities or during the time the
Portfolio holds foreign securities, the Portfolio may enter into forward foreign
currency contracts.
Investments made by the Portfolio in short-term securities may include
repurchase agreements. The Portfolio may enter into repurchase agreements with
respect to debt instruments eligible for investment by the Portfolio.
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/diamond/ GLOBAL PORTFOLIO
The Global Portfolio seeks to achieve its investment objective by investing in
companies on a worldwide basis, regardless of country of organization or place
of principal business activity, as well as domestic and foreign governments,
government agencies and other governmental entities. Realization of income is
not a significant investment consideration and any income realized on the
Portfolio's investments will, therefore, be incidental to the Portfolio's
objective.
The Portfolio's assets will normally be invested in securities of issuers from
at least five different countries, including the United States. The Portfolio
may, on a temporary basis, invest all of its assets in less than five, or even a
single country. When recommending allocations of the Portfolio's investments
among regions and countries, the Portfolio's Sub-Adviser considers various
factors such as prospects for relative economic growth among countries, regions
or geographic areas; expected levels of inflation; government policies
influencing business conditions; and the outlook for currency relationships.
Although it is the policy of the Portfolio to purchase and hold securities for
long-term capital growth in a manner consistent with preservation of capital,
changes in the Portfolio will generally be made when the Sub-Adviser believes
they are advisable, typically either as a result of a security having reached a
price objective or by reason of developments not foreseen at the time of the
security's purchase.
Because the sale of a security ordinarily will be made without reference to the
length of time the security has been held, a significant number of short-term
transactions may result. The rate of portfolio turnover will not be a limiting
factor when changes are deemed to be appropriate. However, certain tax rules may
restrict the Portfolio's ability to sell securities in some circumstances when a
security has been held for an insufficient length of time. Increased portfolio
turnover necessarily results in correspondingly higher brokerage costs for the
Portfolio. These are ultimately borne by the Policyholders.
The Sub-Adviser seeks to reduce the risks associated with these considerations
through diversification and active professional management.
The Portfolio seeks to invest substantially all of its assets in common stocks
when the Sub-Adviser believes that the relevant market environment favors
profitable investing in equity securities. Common stock investments are selected
from industries and companies that the Sub-Adviser believes are experiencing
favorable demand for their products and services, and which operate in a
favorable competitive environment and regulatory climate.
Although the assets of the Portfolio are ordinarily invested in common stocks at
most times, the Portfolio may increase its cash position (up to 100% of assets)
when the Sub-Adviser is unable to locate investment opportunities with desirable
risk/reward characteristics. The Portfolio may invest in Government securities,
corporate bonds and debentures, bank obligations, high-grade commercial paper,
preferred stocks, certificates of deposits or other securities of U.S. issuers.
These investments will be made when the Sub-Adviser perceives an opportunity for
capital growth from such securities, or to enable the Portfolio to receive a
competitive return on its uninvested cash.
The Portfolio's investments in debt securities will be made in securities of
U.S. and foreign companies, the U.S. Government, foreign governments, and U.S.
and foreign governmental agencies and instrumentalities and other government
entities. The Portfolio may invest up to 15% of its net assets in illiquid
securities.
The Portfolio may also invest in futures contracts, related options repurchase
and reverse repurchase agreements, forward foreign currency contracts and other
derivative instruments, up to 5% in high-yield bonds, and when issued securities
(up to 20% of its assets).
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/diamond/ GROWTH PORTFOLIO
The Growth Portfolio seeks to achieve its investment objective by investing
substantially all of its assets in common stocks when the Sub-Adviser believes
that the
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relevant market environment favors profitable investing in those securities.
Common stock investments are selected in industries and companies which the
Sub-Adviser believes are experiencing favorable demand for their products and
services, and which operate in a favorable competitive environment and
regulatory climate. The Sub-Adviser's analysis and selection process focuses on
stocks issued by companies with earnings growth potential. In particular, the
Portfolio intends to buy stocks with earnings growth potential that may not be
recognized by the market. Securities are selected solely for their growth
potential; investment income is not a consideration.
Although the Portfolio's assets will be invested primarily in common stocks at
most times, the Portfolio may increase its cash position when the Sub-Adviser is
unable to locate investment opportunities with desirable risk/reward
characteristics, in such case, the Portfolio may invest in Government
securities, high-grade commercial paper, corporate bonds and debentures,
warrants, preferred stocks or certificates of deposit of commercial banks or
other debt securities.
The Portfolio may also invest in repurchase and reverse repurchase agreements,
illiquid securities (up to 15% of its net assets), futures contracts, related
options forward foreign currency contracts, and other derivatives, and
when-issued securities (up to 20% of its assets). The Portfolio may also invest
up to 25% of its net assets in foreign securities and up to 5% in high-yield
bonds.
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/diamond/ C.A.S.E. GROWTH PORTFOLIO
The C.A.S.E. Growth Portfolio seeks to achieve its investment objective through
investments in small to medium-sized companies. For these purposes, the
Sub-Adviser considers "small cap" stocks to be stocks issued by companies with
market capitalization of between $50 million and $500 million. The Sub-Adviser
considers "mid-capitalization" stocks to be stocks issued by companies with
market capitalization of between $350 million and $3 billion. (Companies with
market capitalization from $350 million to $500 million may be classified by the
Sub-Adviser as either small cap or medium cap, depending upon the Sub-Adviser's
evaluation of the liquidity of trading in the company's stock.)
This Portfolio will generally invest in smaller, less well-established
companies, with limited product lines and financial resources. The Portfolio
seeks, however, to invest in such companies with above-market growth
characteristics in several investment classifications including sales, earnings,
returns and institutional support. Income derived is incidental to the
Portfolio's investment objective.
The Portfolio seeks to invest substantially all if its assets in common stocks
when the Sub-Adviser believes that the relevant market environment favors
profitable investing in those securities. Common stock investments are selected
from industries and companies that the Sub-Adviser believes are experiencing
favorable demand for their products and services, and which operate in a
favorable competitive environment and regulatory climate.
The Portfolio invests in common stocks traded on recognized securities exchanges
and in the OTC market. The Portfolio generally intends to invest in medium to
small sized companies which exhibit sustainable above-market characteristics in
sales, earnings, rates of return, insider and institutional buying. The
Sub-Adviser intends to be aggressive in its efforts to increase Policyholders'
capital by investing primarily in companies which are likely to benefit from the
comparatively strong conditional and fundamental circumstances uncovered by the
Sub-Adviser's analysis.
The Portfolio will invest in securities of companies that appear to be
under-valued from several vantage points and which, in the opinion of the
Sub-Adviser, demonstrate the characteristics for significant future growth. As a
result of these investment policies, the market price of many of the securities
purchased by the Portfolio may fluctuate widely; and any income received by the
Portfolio from these securities will be incidental. Investors should be aware
that whenever the securities markets become volatile, secondary growth
securities such as those in which the Portfolio will invest have historically
become even more so. The Sub-Adviser, nonetheless, believes that small to middle
capitalization securities in emerging markets often have sales and earnings
growth rates which exceed more developed companies. Such growth rates may in
turn be reflected in more rapid share price appreciation.
Although it is the policy of the Portfolio to purchase and hold securities for
long-term capital growth, changes in the Portfolio will generally be made
whenever the Sub-Adviser believes they are advisable. Because investment changes
ordinarily will be made without reference to the length of time a security has
been held, a significant number of short-term transactions may result. The rate
of portfolio turnover will not be a limiting factor when changes are deemed to
be appropriate. However, certain tax rules may restrict the Portfolio's ability
to sell securities in some circumstances when the security has been held for an
insufficient length of time.
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Although the assets of the Portfolio are ordinarily invested in common stocks at
most times, the Portfolio may increase its cash position when the Sub-Adviser is
unable to locate investment opportunities with desirable risk/reward
characteristics.
The Portfolio's investments in debt securities will be made in securities of
U.S. and foreign companies, the U.S. Government, foreign governments, and U.S.
and foreign governmental agencies and instrumentalities and other governmental
entities.
Subject to certain limitations, the Portfolio may engage in hedging strategies
involving futures contracts and related options, forward currency contracts, and
interest rate swaps, caps and floors.
The Portfolio may engage in hedging strategies to attempt to reduce the overall
length of investment risk that normally would be expected to be associated with
the Portfolio's securities, and to attempt to protect the Portfolio against
market movements that might adversely affect the value of the Portfolio's
securities or the price of securities that the Portfolio is considering
purchasing. There can be no assurance, however, that the use of these
instruments by the Portfolio will assist it in achieving its investment
objective.
The Portfolio may invest in repurchase and reverse repurchase agreements,
illiquid securities (up to 15% of its net assets), when-issued securities and
"special situations."
The Portfolio may invest up to 25% of its net assets in the securities of
foreign issuers and obligors. Investments may be made in both domestic and
foreign companies. If appropriate and available, the Sub-Adviser may purchase
foreign securities through ADRs, EDRs, GDRs and other types of receipts of
shares evidencing ownership of the underlying foreign securities.
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/diamond/ U.S. EQUITY PORTFOLIO
The U.S. Equity Portfolio seeks to achieve its investment objective through
investment primarily in equity securities of U.S. companies. In pursuing its
objective, the Portfolio, under normal conditions, invests at least 65% of its
assets in equity securities, including common stocks and preferred stocks, and
securities convertible into common stocks, including convertible bonds,
convertible debentures, convertible notes, convertible preferred stocks and
warrants or rights issued by U.S. companies. In managing the assets of the
Portfolio, the Sub-Adviser uses a combination of "value-oriented" and
"growth-oriented" investing. Value-oriented investing involves seeking
securities that may have low price-to-earnings ratios, or high yields, or that
sell for less than intrinsic value as determined by the Sub-Adviser, or that
appear attractive on a dividend discount model. These securities generally are
sold from the Portfolio's portfolio when their prices approach targeted levels.
Growth-oriented investing generally involves buying securities with above
average earnings growth rates at reasonable prices. The Portfolio holds these
securities until the Sub-Adviser determines that their growth prospects diminish
or that they have become overvalued when compared with alternative investments.
In investing on behalf of the Portfolio, the Sub-Adviser seeks to produce a
portfolio that it believes will have similar characteristics to the S&P 500, by
virtue of blending investments in both "value" and "growth" securities. Since
the Portfolio's strategy seeks to combine the basic elements of companies
comprising the S&P 500, but is designed to select investments deemed to be the
most attractive within each category, the Sub-Adviser believes that the strategy
should be capable of outperforming the U.S. equity market as reflected by the
S&P 500 on a total return basis.
The equity securities issued by U.S. companies in which the Portfolio invests
typically are traded on U.S. securities exchanges; those U.S. equity securities
held by the Portfolio that are not exchange-traded are non-publicly traded or
traded in the U.S. OTC market. Up to 15% of the Portfolio's assets may be
invested in foreign securities.
The Portfolio also may invest in certain equity-indexed securities and
securities of foreign issuers in the form of depositary receipts.
The Portfolio may, under normal market conditions, invest up to 35% of its
assets in notes, bonds and debentures issued by corporate or governmental
entities when the Sub-Adviser determines that investing in these kinds of debt
securities is consistent with the Portfolio's investment objective of long-term
growth of capital. The Sub-Adviser believes that such a determination could be
made, for example, upon the Portfolio's investing in the debt securities of a
company whose securities the Sub-Adviser anticipates will increase in value as a
result of a development particularly or uniquely applicable to the company, such
as a liquidation, reorganization, recapitalization or merger, material
litigation, technological breakthrough or new management or management policies.
In addition, the Sub-Adviser believes such a determination could be made with
respect to an investment by the Portfolio in debt instruments issued by a
governmental entity upon the Sub-Adviser's concluding that the value of the
instruments will increase as a result of improvements or
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changes in public finances, monetary policies, external accounts, financial
markets, exchange rate policies or labor conditions of the country in which the
governmental entity is located.
During normal market conditions, a portion of the Portfolio's total assets may
be held in cash and/or invested in money market instruments of the types
described below under "Portfolio Securities and Risk Factors" for cash
management purposes, pending investment in accordance with the Portfolio's
investment objective and policies and to meet operating expenses. During periods
in which the Sub-Adviser believes that investment opportunities in the U.S.
equity markets are diminished (due to either fundamental changes in those
markets or an anticipated general decline in the value of U.S. equity
securities), the Portfolio may for temporary defensive purposes hold cash and/or
invest in the same types of money market instruments without limitation.
Included among the money market instruments in which the Portfolio may invest
are repurchase agreements. To the extent that it holds cash or invests in money
market instruments, the Portfolio may not achieve its investment objective of
long-term growth of capital.
The Portfolio's investments in debt securities are limited to those that are
rated investment grade, except that up to 5% of the Portfolio's assets may be
invested in securities rated lower than investment grade. A security is
considered investment grade if it is rated at the time of purchase within the
four highest grades assigned by S&P or by Moody's or has received an equivalent
rating from an NRSRO or, if unrated, is deemed by the Sub-Adviser to be of
comparable quality. (See Appendix A for a description of debt securities
ratings.)
The Portfolio, in addition to investing as described above, may hold the
following types of instruments: non-publicly traded securities, illiquid
securities, and securities that are not registered under the Securities Act of
1933, as amended (the "1933 Act"), but that can be sold to "qualified
institutional buyers" in accordance with Rule 144A under the 1933 Act (each, a
"Rule 144A Security" and collectively, "Rule 144A Securities"). In addition, the
Portfolio may engage in the following types of investment techniques and
strategies: purchasing put and call options on securities, writing put and call
options on securities, purchasing put and call options on securities indexes,
entering into interest rate, financial and stock or bond index futures contracts
or related options that are traded on a U.S. or foreign exchange or board of
trade or in the over-the-counter market, engaging in forward currency
transactions, purchasing and writing put and call options on foreign currencies,
entering into securities transactions on a when-issued or delayed-delivery basis
and lending portfolio securities.
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/diamond/ VALUE EQUITY PORTFOLIO
The Value Equity Portfolio seeks to achieve its investment objective by
investing at least 65% of its total assets in common stocks with above-average
statistical value which, in the Sub-Adviser's opinion, are in fundamentally
attractive industries and are undervalued at the time of purchase. The
Sub-Adviser will seek to identify stocks of above-average statistical value by
using statistical measures to screen for below-average price-to-earnings and
price-to-book ratios, above-average dividend yields and strong financial
stability.
The Portfolio may also invest in other equity-related securities consisting of
convertible bonds, convertible preferred stocks, rights and warrants.
The Sub-Adviser will begin the process of evaluating potential common stock and
equity-related securities investments by screening a universe of 1,100
companies, primarily of medium to large capitalization. For these purposes, the
Sub-Adviser considers medium capitalization stocks to be stocks issued by
companies with market capitalization of between $500 million and $3 billion, and
large capitalization stocks to be those stocks issued by companies with market
capitalization in excess of $3 billion. Investments in companies with market
capitalization under $500 million (considered to be small capitalization stocks
by the Sub-Adviser) will be limited to 10% of the Portfolio's total assets.
The process used by the Sub-Adviser to identify promising under-valued companies
within this universe of companies may be differentiated from those of other
value-oriented investment managers in the following ways: the use of normalized
earnings to value cyclical companies; a focus on quality of earnings; investment
in relative value; and concentration in industries/sectors having strong
long-term fundamentals.
As a part of multi-disciplined approach to capturing value, the Sub-Adviser
first seeks to identify market sectors early in their cycle of fundamental
improvement, investor recognition and market exploitation. Industry fundamentals
used in this decision making process are business trend analysis (to analyze
industry and company fundamentals for the impact of changing worldwide product
demand/supply), direction of inflation and interest rates, and
expansion/contraction of business cycles. The Sub-Adviser utilizes in-house
capabilities, in addition to independent resources, for economic, industry and
securities research.
Following this initial phase, approximately 200 companies, that the Sub-Adviser
believes have above-average statistical value and are in a sector identified as
having positive fundamentals on a long-term basis, will be actively followed by
the Sub-Adviser. Company visits
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and interviews with management augment fundamental research in seeking to
identify the potential value in these investments. The Portfolio will be
concentrated in those industries with positive fundamentals and likewise will
minimize risk by avoiding industries with deteriorating long-term fundamentals.
The Sub-Adviser anticipates that the majority of the investments in the
Portfolio will be in U.S.-based companies. However, from time to time,
securities of foreign based companies may be purchased, in accordance with the
selection process outlined above. The Portfolio presently intends to limit its
investment in foreign securities and ADRs to up to 20% of its total assets.
In seeking to meet its investment objective, the Portfolio may invest in any
type of security whose investment characteristics are consistent with the
Portfolio's investment policies and techniques. Some of the other securities the
Portfolio may invest in are repurchase agreements (up to 25% of its total
assets); certificates of deposit and certain bankers' acceptance and other
securities; when-issued, delayed settlement or forward delivery securities;
short-term investments; illiquid securities (up to 15% of its net assets) and
Rule 144A securities; and non-investment grade convertible bonds and preferred
stock (up to 10% of its assets).
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/diamond/ TACTICAL ASSET ALLOCATION PORTFOLIO
The Tactical Asset Allocation Portfolio seeks to achieve its investment
objective by investing primarily in stocks, U.S. Treasury bonds, notes and
bills, and money market funds. The Portfolio will seek to achieve income yield
in excess of the dividend income yield of the S&P 500. The Portfolio seeks to
invest its assets primarily in income producing common or preferred stock, while
the remainder of the Portfolio will ordinarily be invested in debt obligations,
typically some of which will be convertible into common stock.
The principles by which the Sub-Adviser makes its stock selection are based on
value investing - combining safety of principal with above average returns. A
company is attractive if it is reasonably priced and the Sub-Adviser believes it
will perform better than the current expectations for earning/cash flow over the
next several years.
The Sub-Adviser's focus is on primarily high quality, liquid, large
capitalization stocks. The selection process starts with a "bottom-up" screening
of the market to identify stocks that are statistically undervalued, based on
financial characteristics such as Price to Cash Flow, Price to Sales, Price to
Earnings, Dividend Yield, and Return on Equity relative to the stock's
historical norms. The Sub-Adviser believes that investors' expectations and the
company's operating performance ultimately determine which statistically
"undervalued" stocks make good investments. Finally, undervalued stocks, by
definition, are out of favor with most investors. Therefore, the analysis of the
Sub-Adviser includes a thorough fundamental and technical evaluation of stocks
to determine their likely prospects for positive investment performance. The
Sub-Adviser's goal is to choose stocks which the market has undervalued based on
"overreaction" to perceived risks.
A stock's fundamentals dominate the selection process. However, technical
analysis is used to improve the timeliness of the Sub-Adviser's trading
decisions.
The Sub-Adviser utilizes a series of linear statistical models that attempt to
forecast total stock market returns for both short (12 to 18 months) and long
(36 to 60 months) run time periods. These time series models assist the
Sub-Adviser in comparing the risks and rewards of holding stocks versus treasury
notes and money market funds, and assist the Sub-Adviser in determining when to
"tactically" adjust the asset allocation through a gradual shifting of assets
among stocks, U.S. Treasury bonds and notes, and money market funds. A
combination of fundamental, technical, subjective and monetary variables are
used in the forecasting models.
The Portfolio may invest up to 25% of its total assets in equity securities of
foreign issuers. It is anticipated that most of the Portfolio's investments in
securities of foreign issuers will be ADRs. The Portfolio may also invest in
American Depositary Shares ("ADSs").
The Portfolio may also invest in U.S. Government securities, corporate bonds and
debentures, high-grade commercial paper (rated Prime-1 by Moody's or A-1 by
S&P), preferred stocks, certificates of deposit or other securities of U.S.
issuers when the Sub-Adviser perceives attractive opportunities from such
securities, or so that the Portfolio may receive a competitive return on its
uninvested cash. The Portfolio may only invest in debt securities of U.S.
issuers. Corporate debt securities in which the Portfolio may invest will have a
rating within the four highest grades as determined by Moody's or S&P. In the
event that ratings decline after the Portfolio's investment in securities, the
Sub-Adviser will consider all such factors as it deems relevant to the
advisability of retaining such securities. (See Appendix A for a description of
debt securities ratings.)
The Portfolio may invest up to 10% of its total assets in money market funds,
within limits imposed by the 1940 Act upon investment by the Portfolio in other
investment companies. If the forecasting models predict a decline in the stock
market, the Sub-Adviser will reduce equity
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exposure which will increase the Portfolio's cash position, including investment
in money market funds.
The Portfolio may also invest in zero coupon bonds, "strips" and convertible
securities.
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/diamond/ EQUITY-INCOME PORTFOLIO
The Equity-Income Portfolio seeks to achieve its investment objective by
investing primarily in a blend of equity and fixed-income securities, including
common stocks, income producing securities convertible into common stock, and
fixed-income securities. The Portfolio will primarily invest in equity and debt
securities of companies with established operating histories and strong
fundamental characteristics. The Portfolio seeks to achieve an income yield in
excess of the dividend income yield of the S&P 500 primarily by utilizing both
equity and fixed-income securities.
In selecting equity and fixed-income securities for the Portfolio, the
Sub-Adviser typically seeks companies which exhibit strong fundamental
characteristics and considers fundamental factors such as balance sheet quality,
cash flow generation, earnings and dividend growth record and outlook, and
profitability levels. The Sub-Adviser presently intends to consider these and
other fundamental characteristics in determining attractive investment
opportunities in equity and fixed-income investment securities. However, the
Sub-Adviser may select securities based on factors other than those described
above.
For example, some securities may be purchased at an apparent discount to their
appropriate value, anticipating that they will increase to that value over time.
The Sub-Adviser's objective in investing in such undervalued companies is to
purchase shares of these companies at a discount to net asset value and have the
investment accrue to that value over time. The Portfolio does not presently
intend to invest more than 20% of its total assets in equity securities which do
not pay a dividend. It is anticipated that a majority of the equity securities
in which the Portfolio invests will be listed on a national securities exchange
or traded on NASDAQ or in the U.S. OTCs.
The Portfolio may increase its cash position when the Sub-Adviser determines
that investment opportunities with desirable risk/reward characteristics are
unavailable.
The Portfolio may invest up to 10% of its total assets in foreign securities not
publicly traded in the United States. In addition, the Portfolio may invest in
ADRs. The Portfolio may also invest in U.S. and foreign government securities,
corporate bonds and debentures, high-grade commercial paper (rated Prime-1 by
Moody's or A-1 by S&P), preferred stocks, certificates of deposit or other
securities of U.S. issuers when the Sub-Adviser perceives attractive
opportunities from such securities, or so that the Portfolio may receive a
competitive return on its uninvested cash. The Portfolio may invest in debt
securities of U.S. and foreign issuers. The Portfolio may invest up to 15% of
its net assets in illiquid securities.
Corporate debt securities in which the Portfolio invests will generally have a
rating within the four highest grades as determined by Moody's or S&P. (See
Appendix A for a description of debt securities ratings.)
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/diamond/ UTILITY PORTFOLIO
The Utility Portfolio seeks to achieve its investment objective by investing at
least 65% of its assets in a professionally managed and diversified portfolio of
equity and debt securities of utility companies that produce, transmit, or
distribute gas and electric energy as well as those companies that provide
communications facilities such as telephone and telegraph companies.
The Portfolio's investment approach is based on the conviction that over the
long-term, the economy will continue to expand and develop and that this
economic growth will be reflected in the growth of the revenues and earnings of
such companies.
The common stocks of utility companies are selected by the Portfolio's
Sub-Adviser on the basis of traditional research techniques, including
assessment of earnings and dividend growth prospects and of the risk and
volatility of the company's industry. However, other factors, such as product
position, market share, or profitability will also be considered by the
Sub-Adviser. While the Portfolio invests primarily in common stocks of utility
companies, to a limited extent, it may invest in other securities of utility
companies such as preferred stocks, corporate bonds, notes and warrants.
Because of the Portfolio's investment concentration, there exist certain risks
associated with the utility industry of which investors should be aware. These
include difficulty in earning adequate returns on investment despite frequent
rate increases, restriction on operation and increased costs and delays due to
government regulations, building or construction delays, environmental
regulations, difficulty of the capital markets in absorbing utility debt and
equity securities, and difficulties in obtaining fuel at reasonable prices.
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The Portfolio presently intends to invest up to 15% of its total assets in the
securities of foreign issuers which are freely traded on U.S. securities
exchanges or in the OTC market in the form of ADRs. The Portfolio intends to
limit its investment in foreign securities to 15% of its total assets. Foreign
securities may be from developed and developing countries.
The Portfolio intends to invest in restricted and illiquid securities. However,
the Portfolio will limit investments in illiquid securities (up to 15% of its
net assets), including certain restricted securities not determined by the
Fund's Board to be liquid, non-negotiable time deposits, and repurchase
agreements providing for settlement in more than seven days after notice.
The Portfolio may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
The Portfolio may also invest temporarily in cash, cash items, and short-term
instruments, including notes and commercial paper, for liquidity and during
times of unusual market conditions for defensive purposes (up to 100% of its
assets).
The Portfolio may purchase securities on a when-issued or delayed delivery
basis. The Portfolio intends to limit its purchases of securities on a
when-issued or delayed delivery basis to no more than 10% of the value of its
total assets.
The Portfolio may purchase put options on its portfolio securities. These
options will be used as a hedge to attempt to protect securities which the
Portfolio holds against decreases in value. The Portfolio will only purchase
puts which are traded on a recognized exchange.
The Portfolio may also write call options on all or any portion of its portfolio
to generate income for the Portfolio. The Portfolio will write call options on
securities either held in its portfolio or for which it has the right to obtain
without payment of further consideration or for which it has segregated cash in
the amount of any additional consideration. The call options which the Portfolio
writes must be listed on a recognized options exchange. Although the Portfolio
reserves the right to write covered call options on its entire portfolio, it
will not write such options on more than 25% of its total assets unless a higher
limit is authorized by the Fund's Board.
The Portfolio may purchase and sell financial futures contracts to hedge all or
a portion of its portfolio of long-term debt securities against changes in
interest rates.
The Portfolio may also write call options and purchase put options on financial
futures contracts as a hedge to attempt to protect securities in its portfolio
against decreases in value. The Portfolio may not purchase or sell futures or
related options if, immediately thereafter, the sum of the amount of margin
deposits on the Portfolio's existing futures positions and premiums paid for
related options would exceed 5% of the market value of the Portfolio's total
assets.
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/diamond/ BALANCED PORTFOLIO
The Balanced Portfolio seeks to achieve its investment objective by investing
primarily in common stock, convertible securities and fixed-income securities.
The Portfolio may also invest in preferred stocks and interests in REITs. A
minimum of 25% of the Portfolio's assets will always be invested in
non-convertible fixed-income securities.
In seeking current income and growth opportunities, the Portfolio will primarily
select companies with established operating histories and potential for dividend
growth. The Portfolio will seek to achieve income yield in excess of the
dividend income yield of the S&P 500.
The Portfolio does not presently intend to invest more than 20% of its total
assets in equity securities which do not pay a dividend. It is anticipated that
almost all of the equity securities in which the Portfolio invests will be
listed on a national securities exchange or on NASDAQ or will be traded in the
U.S. OTC markets.
The Portfolio seeks to invest its assets primarily in income-producing common or
preferred stock when the Sub-Adviser believes that the relevant market
environment favors profitable investing in those securities.
In selecting equity securities and securities convertible into equity securities
for the Portfolio, the Sub-Adviser typically seeks companies which exhibit
strong fundamental characteristics such as balance sheet quality, cash flow
generation, earnings and dividend growth record and outlook, and profitability
levels. The Sub-Adviser presently intends to consider these and other
fundamental characteristics in determining attractive investment opportunities.
However, the Sub-Adviser may select securities based on factors other than those
described above.
The remainder of the Portfolio will ordinarily be invested in debt obligations,
typically some of which will be convertible into common stock. However, the
Portfolio may increase its cash position when the Sub-Adviser determines that
investment opportunities with desirable risk/reward characteristics are
unavailable.
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The Portfolio may invest up to 25% of its total assets in securities of foreign
issuers. It is anticipated that most of the Portfolio's investments in
securities of foreign issuers will be ADRs.
The Portfolio may invest in Government securities, corporate bonds and
debentures, high-grade commercial paper (rated Prime-1 by Moody's or A-1 by
S&P), preferred stocks, certificates of deposit or other securities of U.S.
issuers when the Sub-Adviser perceives attractive opportunities from such
securities, or to enable the Portfolio to receive a competitive return on its
uninvested cash. The Portfolio may invest in debt securities of U.S. and foreign
issuers.
Corporate debt securities in which the Portfolio invests will generally have a
rating within the four highest grades as determined by Moody's or S&P. The
Portfolio will not invest in rated securities that, at the time of investment,
are rated below "B" by Moody's or "B" by S&P ("b" in the case of Moody's
preferred stock ratings). If the securities are unrated, the Portfolio will not
invest if they are judged by the Sub-Adviser not to possess investment qualities
at least equivalent to a "B" or "b" rating. (See Appendix A for a description of
debt securities ratings.)
In the event that ratings decline after the Portfolio's investment in such
securities, the Sub-Adviser will consider all factors as it deems relevant to
the advisability of retaining such securities.
The Portfolio may also invest in zero coupon bonds, "strips", illiquid
securities (up to 15% of its net assets) and convertible securities.
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/diamond/ BOND PORTFOLIO
The Bond Portfolio seeks to achieve its investment objective by investing at
least 65%, and usually a higher percentage, of its assets in debt securities
issued by the U.S. Government and its agencies and instrumentalities and in
other medium to high-quality debt securities.
Generally, the Portfolio will invest in debt securities that have a rating
within the three highest grades as determined by Moody's or S&P. The Portfolio
may, however, invest in debt securities within the fourth highest grade as
determined by Moody's or S&P, if the Sub-Adviser determines such investments
meet the Portfolio's investment objective. (See Appendix A for a description of
debt securities ratings.)
An increase in interest rates tends to reduce the market value of fixed income
investments, and a decline in interest rates tends to increase their value. The
Portfolio's performance is, accordingly, quite sensitive to market interest rate
fluctuations. To take advantage of differences in securities prices and yields,
or fluctuations in interest rates, consistent with its investment objective, the
Portfolio may trade for short-term profits.
The Portfolio may invest in repurchase and reverse repurchase agreements,
illiquid securities (up to 15% of its net assets) when-issued securities (up to
20% of its assets), futures contracts, related options and other derivatives,
zero coupon bonds up to 5% in high-yield bonds, "strips", pay-in-kind and step
coupon securities and, up to 25% of its net assets in foreign securities. The
Portfolio does not intend to invest more than 10% of its assets in zero coupon
bonds or "strips".
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/diamond/ SHORT-TO-INTERMEDIATE GOVERNMENT PORTFOLIO
The Short-to-Intermediate Government Portfolio seeks to achieve its investment
objective by investing primarily in U.S. Government securities and certain other
securities as described below. Under normal conditions, at least 65% of the
Portfolio's total assets will be invested in U.S. Government securities,
including repurchase agreements with respect to U.S. Government securities. The
Portfolio will not enter into a repurchase agreement or reverse repurchase
agreement which would cause more than 15% of its net assets to be subject to
repurchase or reverse repurchase agreements not terminable within seven days,
together with other illiquid investments. The Portfolio itself, and its share
price and yield, are not guaranteed by the U.S. Government.
The Portfolio seeks to manage share price stability by investing in obligations
with short or intermediate maturities that are not as sensitive to interest rate
changes as obligations with longer maturities. In selecting securities for the
Portfolio, the Portfolio's Sub-Adviser attempts to maintain the Portfolio's
overall sensitivity to interest rates in a range similar to the average for
short-term to intermediate-term Government bonds with an aggregate average
dollar-weighted remaining maturity of one to seven years. The Portfolio's
dollar-weighted average maturity may be longer than seven years from time to
time, but will not exceed ten years under normal operating conditions. The
Portfolio may hold individual securities with maturities of more than ten years
as long as its average maturity remains within this range.
The Portfolio may also invest in debt securities of all types, E.G., bonds,
debentures, notes, equipment lease and trust certificates, mortgage-backed
securities, asset-
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backed securities (rated at least "A" by S&P or Moody's), taxable municipal
bonds, bond warrants, obligations issued or guaranteed by supranational issuers
or collateralized mortgage obligations ("CMOs") assembled for sale to investors
by governmental agencies ("mortgage securities"). The Portfolio may also invest
in commercial paper (rated Prime-1 by Moody's or A-1 by S&P).
Corporate debt securities in which the Portfolio invests will generally have a
rating within the three highest grades as determined by Moody's or S&P. The
Portfolio may, however, invest in debt securities within the fourth highest
grade as determined by Moody's or S&P, if the Sub-Adviser determines the debt
securities' ratings are supported by an internal credit review that the
Sub-Adviser will conduct in each such instance. (See Appendix A for a
description of debt securities ratings.)
The Portfolio may invest a portion of its assets in very short-term instruments
with remaining maturities of one year or less, including U.S. Treasury bills and
repurchase agreements. When it is believed that market conditions warrant a
temporary defensive position, the Portfolio may invest up to 100% of its assets
in these instruments.
The Portfolio may invest up to 15% of its net assets in illiquid securities. The
Portfolio may also invest up to 10% of its total assets in foreign securities.
/diamond//diamond//diamond//diamond//diamond/
/diamond/ MONEY MARKET PORTFOLIO
The Money Market Portfolio seeks to maintain a constant net asset value of $1.00
per share, although there can be no assurance that this will be achieved.
The Portfolio seeks to achieve its investment objective by maintaining a
dollar-weighted average portfolio maturity of not more than 90 days through
investment in U.S. dollar-denominated securities which have effective maturities
of not more than 13 months and which, in accordance with guidelines adopted by
the Fund's Board, are determined to present minimal credit risks. (See the SAI
for a more detailed description of these instruments.) Such instruments may
include:
1. Obligations issued or guaranteed by the U.S. Government and backed by the
full faith and credit of the United States. These securities include U.S.
Treasury securities, obligations of the Government National Mortgage
Association, the Farmers Home Administration and the Export-Import Bank.
The Portfolio may also invest in obligations issued or guaranteed by U.S.
Government agencies or instrumentalities where the Portfolio must look
principally to the issuing or guaranteeing agency for ultimate repayment.
Some examples of agencies or instrumentalities issuing these obligations
are the Federal Farm Credit System, the Federal Home Loan Banks and the
Federal National Mortgage Association.
2. Domestic and certain foreign bank obligations including time deposits,
certificates of deposit, bankers' acceptances and other bank obligations.
The Portfolio may invest in high quality U.S. dollar-denominated
obligations of (i) banks, savings and loan associations and savings banks
which have more than $2 billion in total assets and are organized under
U.S. Federal or state law, (ii) foreign branches of these banks or of
foreign banks of equivalent size (Euros), and (iii) U.S. branches or
subsidiaries of foreign banks of equivalent size (Yankees). The Portfolio
may also invest in obligations of international banking institutions
designated or supported by national governments to promote economic
reconstruction, development or trade between nations (E.G., the European
Investment Bank, the Inter-American Development Bank, or the World Bank).
These obligations may be supported by appropriated but unpaid commitments
of their member countries, and there is no assurance these commitments
will be undertaken or met in the future.
3. Asset-backed securities.
4. Commercial paper, including variable amount master demand notes and
corporate bonds issued by U.S. corporations. The Portfolio may also invest
in bonds and commercial paper of foreign issuers if the obligation is U.S.
dollar-denominated and is not subject to foreign withholding tax.
5. Repurchase and reverse repurchase agreements.
The Portfolio will limit its investment to securities that present minimum
credit risks, as determined by guidelines adopted by the Fund's Board. In
addition, the Portfolio will limit its investment in the securities of any one
issuer to 5% of its total assets, measured at the time of purchase. (U.S.
Government securities and securities that benefit from certain types of credit
enhancement arrangements are not included in this limitation.) The Portfolio may
invest up to 25% of its total assets in securities of a single issuer if the
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securities will not be held for more than three business days.
Also, the Portfolio will not purchase any security (other than a U.S. Government
security) unless (i) it (or a comparable security of the same issuer) is rated
with the highest rating assigned to short-term debt securities by at least two
nationally recognized statistical rating organizations ("NRSROs"), such as
Moody's and S&P, or (ii) it (or a comparable security of the same issuer) is
rated by only one NRSRO, and is rated by that NRSRO with the highest such
rating, or (iii) it is not rated and is determined to be of comparable quality
as determined by the Fund's Board. The Fund's Board must approve or ratify the
acquisition of any unrated security or a security rated by only one NRSRO.
These standards must be satisfied at the time an investment is made. If the
quality of the investment later declines below the quality required for
purchase, the Portfolio shall dispose of the investment in accordance with
procedures adopted by the Fund's Board, except in certain circumstances where
there is a finding by the Fund's Board that disposing of the investment would
not be in the Portfolio's best interest. (For a description of the NRSRO
ratings, see the SAI.)
The Portfolio may also invest in securities of a when-issued or delayed delivery
basis and in certain privately-placed securities and repurchase and reverse
repurchase agreements. The Portfolio may invest up to 10% of its net assets in
illiquid securities.
The Portfolio may invest up to 10% of its total assets, calculated at the time
of purchase, in the securities of money market funds, which are investment
companies. The Portfolio may not invest (i) more than 5% of its total assets in
the securities of any one investment company or (ii) in more than 3% of the
voting securities of any other investment company. The Portfolio will indirectly
bear its proportionate share of any investment advisory fees and expenses paid
by the money market funds in which it invests, in addition to the Portfolio's
own investment advisory fee and expenses paid.
The Portfolio operates under a rule of the SEC that permits it, subject to
certain conditions, to use the amortized cost method of valuing its shares. (See
the SAI for a description of these conditions.)
/diamond//diamond//diamond//diamond//diamond/
/diamond/ OTHER INVESTMENT POLICIES AND RESTRICTIONS
The Portfolios are subject to certain other investment policies and restrictions
which are described in the SAI for the Portfolios, some of which are fundamental
restrictions of the Portfolios and as such may not be changed without the
approval of the Policyholders of each Portfolio.
Unless otherwise stated, each of the following policies applies to all of the
Portfolios. In addition, unless otherwise stated below, the percentage
limitations included in these policies and elsewhere in this Prospectus apply
only at the time of purchase of the security.
/diamond/ CASH POSITION
A Portfolio may, at times, choose to hold some portion of its net assets in
cash, or to invest that cash in a variety of debt securities. This may be done
as a defensive measure at times when desirable risk/reward characteristics are
not available in stocks or to earn income from otherwise uninvested cash. When a
Portfolio increases its cash or debt investment position, its income may
increase while its ability to participate in stock market advances or declines
decreases.
/diamond/ DIVERSIFICATION AND CONCENTRATION
The 1940 Act classifies investment companies as either diversified or
non-diversified.
Diversification is the practice of spreading a portfolio's assets over a number
of investments, investment types, industries or countries to reduce risk. A
non-diversified portfolio has the ability to take larger positions in fewer
issuers. Because the appreciation or depreciation of a single security may have
a greater impact on the net asset value of a non-diversified portfolio, its
share price can be expected to fluctuate more than a comparable portfolio.
All of the Portfolios qualify as diversified funds under the 1940 Act. The
Portfolios are subject to the following diversification requirements:
/diamond/ As a fundamental policy, no Portfolio may own more than 10% of the
outstanding voting shares of any issuer other than U.S. Government
securities, bank money marketing instruments or bank repos.
/diamond/ As a fundamental policy, with respect to 75% of the total assets of
a Portfolio, the Portfolio will not purchase a security of any
issuer if such purchase would cause the Portfolio's holdings of that
issuer to amount to more than 5% of the Portfolio's total assets.
/diamond/ As a fundamental policy governing concentration, no Portfolio
(except the Utility Portfolio) will invest more
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than 25% of its assets in any one particular industry, other than
U.S. Government securities.
/diamond/ SMALL CAPITALIZATION COMPANIES
A Portfolio may invest in equity securities issued by small-cap companies. For
these purposes, a Sub-Adviser may define small-cap companies differently.
Generally a small-cap company will have market capitalizations of $1 billion or
less. A Portfolio's investments in small capitalization stocks may include
companies that have limited operating histories, product lines, and financial
and managerial resources. These companies may be subject to intense competition
from larger companies, and their stocks may be subject to more abrupt or erratic
market movements than the stocks of larger, more established companies. Due to
these and other factors, small-cap companies may suffer significant losses as
well as realize substantial growth. See each Portfolio's discussion of small-cap
companies under the section "The Portfolios In Detail."
/diamond/ PORTFOLIO TURNOVER
A portfolio turnover rate is, in general, the percentage calculated by taking
the lesser of purchases or sales of portfolio securities (excluding certain
short-term securities) for a year and dividing it by the monthly average of the
market value of such securities during the year. (See "Financial Highlights" for
each Portfolio on pages 1-8 for more information on historical turnover rates.)
Changes in security holdings are made by a Portfolio's Sub-Adviser when it is
deemed necessary. Such changes may result from: liquidity needs; securities
having reached a price or yield objective; anticipated changes in interest rates
or the credit standing of an issuer; or developments not foreseen at the time of
the investment decision.
A Sub-Adviser may engage in a significant number of short-term transactions if
such investing serves a Portfolio's objective. The rate of portfolio turnover
will not be a limiting factor when such short-term investing is considered
appropriate.
Increased turnover results in higher brokerage costs or mark-up charges for a
Portfolio; these charges are ultimately borne by the Policyholders. For further
discussion of portfolio turnover, see the SAI.
/diamond/ BORROWING
Each Portfolio may borrow money from banks for temporary or emergency purposes.
The amount borrowed shall not exceed 33-1/3% of total assets for the
Meridian/INVESCO Global Sector, the International Equity, the U.S. Equity and
the Aggressive Growth Portfolios; 10% of total assets for the Value Equity
Portfolio; and 25% of total assets for all other Portfolios. (The Utility
Portfolio does not presently intend to borrow.)
To secure borrowings, a Portfolio may not mortgage or pledge its securities in
amounts that exceed 15% of its net assets (10% for the Value Equity Portfolio).
(See the SAI for any exceptions to this limitation.)
The Portfolios with a common Sub-Adviser may also borrow (or lend) money to
other funds that permit such transactions and are also advised by that
Sub-Adviser, provided each Portfolio seeks and obtains permission from the SEC.
There is no assurance that such permission would be granted.
The Aggressive Growth Portfolio may borrow for investment purposes - this is
called "leveraging." The Portfolio may borrow only from banks, not from other
investment companies. There are risks associated with leveraging:
/diamond/ If a Portfolio's asset coverage drops below 300% of borrowings, the
Portfolio may be required to sell securities within three days to
reduce its debt and restore the 300% coverage, even though it may be
disadvantageous to do so.
/diamond/ Leveraging may exaggerate the effect on net asset value of any
increase or decease in the market value of a Portfolio's securities.
/diamond/ Money borrowed for leveraging will be subject to interest costs. In
certain cases, interest costs may exceed the return received on the
securities purchased.
/diamond/ A Portfolio may be required to maintain minimum average balances in
connection with borrowing or to pay a commitment or other fee to
maintain a line of credit. Either of these requirements would
increase the cost of borrowing over the stated interest rate.
Notwithstanding the limitations set forth above, in accordance with the
requirements of current California insurance regulations, each Portfolio will
restrict borrowings to no more than 10% of total assets, except that a Portfolio
may temporarily borrow amounts equal to as much as 25% of total assets if such
borrowing is necessary to meet redemptions. If California's insurance
regulations are changed at some future time to permit borrowings in excess of
10%, but less than the borrowing limitation for a Portfolio, the Portfolio may
conduct borrowings in accordance with such revised limits.
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State laws and regulations may impose additional limitations on borrowings. See
the SAI for further information on borrowing.
/diamond/ LENDING
Each Portfolio may lend securities to broker-dealers and financial institutions
to realize additional income. As a fundamental policy, the Utility and
Meridian/INVESCO Global Sector Portfolios will not lend securities or other
assets, if as a result, more than 33-1/3% of total assets would be lent to other
parties; the International Equity Portfolio, the U.S. Equity Portfolio and the
Short-to-Intermediate Government Portfolio may lend up to 30% of total assets;
and all other Portfolios (except the Aggressive Growth Portfolio) may lend up to
25% of total assets.
The Aggressive Growth Portfolio may not make loans to others, except through
buying qualified debt obligations, lending portfolio securities or entering into
repurchase agreements. The Aggressive Growth Portfolio will not lend securities
or other assets if, as a result, more than 20% of its total assets would be lent
to other parties.
If the borrower of a security defaults, the Portfolio may be delayed or
prevented from recovering collateral, or may be otherwise required to cover a
transaction in the security loaned.
If portfolio securities are loaned, collateral values must be continuously
maintained at no less than 100% by pricing both the securities loaned and the
collateral daily.
If a material event is to be voted upon affecting a Portfolio's investment in
securities which are on loan, the Portfolio will take such actions as may be
appropriate in order to vote its shares.
The Growth, Bond, Global, International Equity, Short-to-Intermediate
Government, Emerging Growth and Equity-Income Portfolios may also lend (or
borrow) money to other funds that are managed by their respective Sub-Adviser
provided each Portfolio seeks and obtains permission from the SEC.
For more information about Portfolio lending, see the SAI.
/diamond/ SHORT SALES
Each Portfolio may sell securities "short against the box." A short sale is the
sale of a security that the Portfolio does not own. A short sale is "against the
box" if at all times when the short position is open, the Portfolio owns an
equal amount of the securities sold short or securities convertible into, or
exchangeable without further consideration for, securities of the same issue as
the securities sold short.
/diamond/ OTHER INVESTMENT COMPANIES
A Portfolio may invest up to 10% of its total assets, calculated at the time of
purchase, in the securities of money market funds, which are investment
companies. The Portfolio may not invest (i) more than 5% of its total assets in
the securities of any one investment company or (ii) in more than 3% of the
voting securities of any other investment company. (Investments by the
International Equity and U.S. Equity Portfolios in the GEI Short-Term Investment
Trust, as described below under "Portfolio Securities and Risk Factors - Money
Market Instruments," is not considered an investment in another investment
company for purposes of these limitations.) A Portfolio (except the Growth, Bond
and Global Portfolios) will indirectly bear its proportionate share of any
investment advisory fees and expenses paid by the funds in which it invests, in
addition to the investment advisory fee and expenses paid by the Portfolio. If
the Growth, Bond and Global Portfolios invest in a money market fund, the
Investment Adviser will reduce the advisory or administrative service fees paid
to the investment manager of the money market fund.
/diamond/ SPECIAL SITUATIONS
Each Portfolio may invest in "special situations" from time to time. A special
situation arises when, in the opinion of its Sub-Adviser, the securities of a
particular issuer will be recognized and appreciate in value due to a specific
development with respect to that issuer. Developments creating a special
situation might include, among others, a new product or process, a management
change, a technological breakthrough, or other extraordinary corporate event, or
differences in market supply and demand for the security.
Investment in special situations may carry an additional risk of loss in the
event that the anticipated development does not occur or does not attract the
expected attention. The impact of this strategy on a Portfolio will depend on a
Portfolio's size and the extent of the holdings of the special situation issuer
relative to its total assets.
/diamond/ PORTFOLIO SECURITIES AND RISK FACTORS
This section provides a more detailed description of some of the types of
securities and other instruments in which a Portfolio may invest. A Portfolio
may invest in these instruments to the extent permitted by its investment
objective, policies, and restrictions. Not all of
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these instruments are used by each Portfolio. A Portfolio is not limited by this
discussion and may invest in other types of instruments not precluded by the
policies discussed above. (See "Portfolio Policies and Techniques," above, and
the SAI for more information regarding a Portfolio's investment objective and
its policies, that include limitations imposed on certain investments.)
/diamond/ EQUITY SECURITIES
Equity securities include common stocks, preferred stocks and securities
convertible into common stocks, such as rights, warrants and convertible debt
securities. Equity securities may also include certain equity-indexed
securities, the value of which is linked to a securities index (E.G., the S&P
500).
Common stock represents the basic ownership of a corporation. Common stocks
historically have provided the greatest long-term growth potential in a company,
but future results are not guaranteed. Owners of common stock share directly in
the success or failure of the business.
Preferred stock ranks senior to common stock and has certain fixed-income
features.
Preferred stockholders receive dividends before they are distributed to the
common stockholders.
/diamond/ RISK FACTORS
The price of any equity security rises and falls. Common stocks generally
represent the riskiest investment in a company. It is possible that investors
may lose their entire investment.
In addition to the risk associated with individual equity securities, an
equity-indexed security carries overall market risk and the risk of fluctuation
inherent in the indexed security as distinguished from the securities comprising
the applicable index.
/diamond/ DEBT SECURITIES AND FIXED-INCOME INVESTING
Debt securities include such securities as corporate bonds and debentures,
commercial paper, debt securities issued by the U.S. Government, its agencies
and instrumentalities, or foreign governments, asset-backed securities, CMOs,
zero coupon bonds, "strips", pay-in-kind and step securities.
Fixed-income investing is the purchase of a debt security that maintains a level
of income that does not change. For instance, bonds paying interest at a
specified rate that does not change are fixed-income securities. When a debt
security is purchased, the Portfolio owns "debt" and becomes a creditor to the
company or government.
Fixed-income securities generally include short- and long-term government,
corporate and municipal obligations that pay a specified rate of interest or
coupons for a specified period of time, or preferred stock, which pays fixed
dividends. Coupon and dividend rates may be fixed for the life of the issue or,
in the case of adjustable and floating rate securities, for a shorter period of
time. A Portfolio may vary the average maturity of its portfolio of debt
securities based on the Sub-Adviser's analysis of interest rate trends and
factors.
Bonds rated Baa by Moody's or BBB by S&P are considered medium grade
obligations, I.E., they are neither highly protected nor poorly secured.
Interest payments and principal security for such bonds appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and, in fact, have speculative
characteristics. (See Appendix A for a description of debt securities ratings.)
/diamond/ RISK FACTORS
Investments in debt securities are generally subject to both credit risk and
market risk. Credit risk relates to the ability of the issuer to meet interest
or principal payments, or both, as they come due. Market risk relates to the
fact that the market values of the debt securities in which the Portfolio
invests generally will be affected by changes in the level of interest rates. An
increase in interest rates will tend to reduce the market value of debt
securities, whereas a decline in interest rates will tend to increase their
value.
Generally, shorter term securities are less sensitive to interest rate changes,
but longer term securities offer higher yields. The Portfolio's share price and
yield will also depend, in part, on the quality of its investments in debt
securities.
Such securities may be affected by changes in the creditworthiness of the issuer
of the security. The extent that such changes are reflected in the Portfolio's
share price will depend upon the extent of the Portfolio's investment in such
securities.
/diamond/ CONVERTIBLE SECURITIES
Convertible securities may include corporate notes or preferred stock, but
ordinarily are a long-term debt
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obligation of the issuer convertible at a stated exchange rate into common stock
of the issuer.
Convertible securities generally rank senior to common stocks in an issuer's
capital structure and are consequently of higher quality and entail less risk of
decline in market value than the issuer's common stock. However, the extent to
which such risk is reduced depends greatly upon the degree to which the
convertible security sells above its value as a fixed-income security. In
evaluating investment in a convertible security, primary emphasis will be given
to the attractiveness of the underlying common stock.
/diamond/ RISK FACTORS
As with all debt securities, the market value of convertible debt securities
tends to decline as interest rates increase and, conversely, to increase as
interest rates decline.
Convertible securities generally offer lower interest or dividend yields than
non-convertible securities of similar quality. However, when the market price of
the common stock underlying a convertible security exceeds the conversion price,
the price of the convertible security tends to reflect the value of the
underlying common stock. As the market price of the underlying common stock
declines, the convertible security tends to trade increasingly on a yield basis,
and thus may not depreciate to the same extent as the underlying common stock.
/diamond/ REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
A repurchase agreement involves the purchase of a security by a Portfolio and a
simultaneous agreement (generally from a bank or broker-dealer) to repurchase
that security back from the Portfolio at a specified price and date upon demand.
This technique offers a method of earning income on idle cash. The repurchase
agreement is effectively secured by the value of the underlying security.
Repurchase agreements not terminable within seven days are considered illiquid
securities.
A Portfolio invests in a reverse repurchase agreement when it sells a portfolio
security to another party, such as a bank or broker-dealer, in return for cash,
and agrees to buy the security back at a future date and price. Reverse
repurchase agreements may be used to provide cash to satisfy unusually heavy
redemption requests or for other temporary or emergency purposes without the
necessity of selling portfolio securities or to earn additional income on
portfolio securities such as U.S. Treasury bills and notes. While a reverse
repurchase agreement is outstanding, a Portfolio will segregate with its
custodian cash and other liquid assets to cover its obligation under the
agreement. Reverse repurchase agreements are considered a form of borrowing by
the Portfolio for purposes of the 1940 Act.
/diamond/ RISK FACTORS
Repurchase agreements involve the risk that the seller will fail to repurchase
the security, as agreed. In that case, a Portfolio will bear the risk of market
value fluctuations until the security can be sold and may encounter delays and
incur costs in liquidating the security. In the event of bankruptcy or
insolvency of the seller, delays and costs are incurred.
Reverse repurchase agreements may expose a Portfolio to greater fluctuations in
the value of its assets.
/diamond/ MONEY MARKET INSTRUMENTS
Except as described below with respect to the International Equity and U.S.
Equity Portfolios, a Portfolio, other than the Money Market Portfolio, may
invest in the following types of money market instruments: U.S. Government
Securities; obligations issued or guaranteed by foreign governments or by any of
their political subdivisions, authorities, agencies or instrumentalities; bank
obligations (including certificates of deposit, time deposits and bankers'
acceptances of foreign or domestic banks, domestic savings and loan associations
and other banking institutions); commercial paper; and repurchase agreements.
The International Equity and U.S. Equity Portfolios may also invest in the GEI
Short-Term Investment Fund (the "Investment Fund"), a private investment fund
created specifically to serve as a vehicle for the collective investment of cash
balances of these Portfolios and other accounts advised by GE Investment
Management Incorporated ("GEIM") or its affiliate, General Electric Investment
Corporation ("GEIC"). The Investment Fund is not registered with the SEC as an
investment company. The Investment Fund invests exclusively in the money market
instruments described in (i) through (vii) below. The Investment Fund is advised
by GEIM. No advisory fee is charged by GEIM to the Investment Fund, nor will a
Portfolio incur any sales charge, redemption fee, distribution fee or service
fee in connection with its investments in the Investment Fund. The International
Equity and U.S. Equity Portfolios may each invest up to 25% of its assets in the
Investment Fund. The types of money market instruments in which the
International Equity and U.S. Equity Portfolios may invest directly or
indirectly through their investment in the Investment Fund are as follows: (i)
securities issued or guaranteed by the U.S. Government or one of its agencies or
instrumentalities; (ii) debt obligations of banks, savings and loan
institutions, insurance
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companies and mortgage bankers; (iii) commercial paper and notes, including
those with variable and floating rates of interest; (iv) debt obligations of
foreign branches of U.S. banks, U.S. branches of foreign banks and foreign
governments or any of their political subdivisions, agencies or
instrumentalities, including obligations of supranational entities; (vi) debt
securities issued by foreign issuers; and (vii) repurchase agreements.
/diamond/ U.S. GOVERNMENT SECURITIES
U.S. Government securities are obligations issued or guaranteed by the U.S.
Government or by its agencies or instrumentalities. Obligations of certain
agencies and instrumentalities of the U.S. Government, such as those of the
Government National Mortgage Association ("GNMA"), are supported by the "full
faith and credit" of the U.S. Government; others, such as those of the
Export-Import Bank of the U.S., are supported by the right of the issuer to
borrow from the U.S. Treasury; others, such as those of the Federal National
Mortgage Association ("FNMA"), are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; and still others, such
as those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
Government would provide financial support to U.S. Government-sponsored
instrumentalities if it is not obligated to do so by law.
/diamond/ RISK FACTORS
Investors should be aware that the value of the U.S. Government securities held
by a Portfolio will fluctuate with changes in interest rates, with a decrease in
interest rates generally resulting in an increase in the value of the securities
and an increase in interest rates having the opposite effect.
In addition, certain obligations, such as long-term obligations issued by the
GNMA and the FNMA, represent ownership interest in pools of mortgages that may
be subject to significant unscheduled prepayments as a result of a drop in
mortgage interest rates. Because these prepayments must be reinvested, possibly
in pools including mortgages bearing lower interest rates, these obligations may
have less potential for capital appreciation during periods of declining
interest rates than other investments of comparable maturity. They have a
comparable risk of decline during periods of rising interest rates.
/diamond/ BANK OBLIGATIONS
Subject to its investment policy, a Portfolio may invest in bank obligations
such as CDs or time deposits. Such investments involve the risks that an
investment in the banking industry may entail.
/diamond/ RISK FACTORS
Banks are subject to extensive governmental regulations which may limit both the
amount and types of loans and other financial commitments which may be made and
interest rates and fees which may be charged.
The profitability of this industry is largely dependent upon the availability
and cost of capital funds for the purpose of financing lending operations under
prevailing money market conditions. Also, general economic conditions play an
important part in the operations of this industry.
Exposure to credit losses arising from possible financial difficulties of
borrowers might affect a bank's ability to meet its obligations.
/diamond/ FOREIGN BANK OBLIGATIONS
A Portfolio may invest in foreign bank obligations and obligations of foreign
branches of domestic banks. These investments prevent certain risks.
/diamond/ RISK FACTORS
Risks include the impact of future political and economic developments, the
possible imposition of withholding taxes on interest income, the possible
seizure or nationalization of foreign deposits, the possible establishment of
exchange controls and/or the addition of other foreign governmental restrictions
that might adversely affect the payment of principal and interest on these
obligations.
In addition, there may be less publicly available and reliable information about
a foreign bank than about domestic banks owing to different accounting,
auditing, reporting and recordkeeping standards.
/diamond/ FOREIGN SECURITIES
Foreign securities include equity and debt securities of foreign issuers. Each
Portfolio may invest in foreign securities subject to its investment
limitations.
In accordance with the requirements of current California regulations, a
Portfolio will have no more than 20% of its net assets invested in securities of
issuers located in any one foreign country, but may have an additional 15% of
its net assets invested in securities of issuers located in any one of the
following foreign countries: Australia, Canada, France, Japan, the United
Kingdom or West Germany. If California's insurance regulations are changed at
some future time to permit a larger
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percentage of a Portfolio's net assets to be invested in a single foreign
country, the Portfolio may invest more of its net assets in a single foreign
country, in accordance with the Portfolio's investment objective and investment
restrictions.
In addition to direct foreign investment, many of the Portfolios may invest in
foreign securities through ADRs or ADSs, which are dollar-denominated receipts
issued by domestic banks or securities firms. ADRs and ADSs are publicly traded
on U.S. exchanges, and may not involve the same risks as securities denominated
in foreign currency.
Some Portfolios may also indirectly invest in foreign securities through EDRs,
which are typically issued by European banks; in GDRs, which may be issued by
domestic or foreign banks; and in other types of receipts evidencing ownership
of foreign securities.
/diamond/ RISK FACTORS
For U.S. investors, the returns on foreign securities are influenced not only by
the returns on the foreign investments themselves, but also by several risks
which include:
/diamond/ CURRENCY RISK. Changes in the value of the currencies in which the
securities are denominated relative to the U.S. dollar may affect
the value of foreign securities and the value of their dividend or
interest payments and, therefore, a Portfolio's share price and
returns.
Generally, in a period when the U.S. dollar commonly rises against
foreign currencies, the return on foreign securities for a U.S.
investor are diminished. By contrast, in a period when the U.S.
dollar generally declines, the returns on foreign securities
generally are enhanced.
Exchange rates are affected by numerous factors, including relative
interest rates, balances of trade, levels of foreign investment and
manipulation by central banks. The foreign currency market is
essentially unregulated and can be subject to speculative trading.
From time to time, many countries impose exchange controls which
limit or prohibit trading in certain currencies.
ADRs do not involve the same direct currency and liquidity risks as
securities denominated in foreign currencies. However, the value of
the currency in which the foreign security represented by the ADR is
denominated may affect the value of the ADR.
To the extent that a Portfolio invests in foreign securities
denominated in foreign currencies, its share price reflects the
price movements both of its securities and of the currencies in
which they are denominated. The share price of a Portfolio that
invests in both U.S. and foreign securities may have a low
correlation with movements in the U.S. markets. If most of the
securities in a Portfolio are denominated in foreign currencies or
depend on the value of foreign currencies, the relative strength of
the U.S. dollar against those foreign currencies may be an important
factor in the Portfolio's performance.
/diamond/ CURRENCY TRADING COSTS. A Portfolio incurs costs in converting
foreign currencies into U.S. dollars, and vice versa.
/diamond/ DIFFERENT ACCOUNTING AND REPORTING PRACTICES. Foreign companies are
generally subject to tax laws and to accounting, auditing and
financial reporting standards, practices and requirements different
from those that apply in the U.S.
/diamond/ LESS INFORMATION AVAILABLE. There is generally less public
information available about foreign companies.
/diamond/ MORE DIFFICULT BUSINESS NEGOTIATIONS. A Portfolio may find it
difficult to enforce obligations in foreign countries or to
negotiate favorable brokerage commission RATES.
/diamond/ REDUCED LIQUIDITY/INCREASED VOLATILITY. Some foreign securities are
less liquid and their prices more volatile, than securities of
comparable U.S. companies.
/diamond/ SETTLEMENT DELAYS. Settling foreign securities may take longer than
settlements in the U.S.
/diamond/ HIGHER CUSTODY CHARGES. Custodianship of shares may cost more for
foreign securities than it does for U.S. securities.
/diamond/ ASSET VULNERABILITY. In some foreign countries, there is a risk of
direct seizure or appropriation through taxation of assets of a
Portfolio. Certain countries may also impose limits on the removal
of securities or other assets of a Portfolio. Interest, dividends
and capital gains on foreign securities held by a Portfolio may be
subject to foreign withholding taxes.
/diamond/ POLITICAL INSTABILITY. In some countries, political instability, war
or diplomatic developments could affect investments.
These risks may be greater in developing countries or in countries
with limited or developing markets. In particular, developing
countries have relatively unstable governments, economies based on
only a few industries, and securities markets that trade only a
small number of securities. As a result, securities of issuers
located in developing countries may have limited marketability and
may be subject to abrupt or erratic price fluctuations.
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<PAGE>
At times, a Portfolio's foreign securities may be listed on exchanges or
traded in markets which are open on days (such as Saturday) when the
Portfolio does not compute a price or accept orders for purchase, sale or
exchange of shares. As a result, the net asset value of the Portfolio may be
significantly affected by trading on days when Policyholders cannot make
transactions.
ADRS are subject to some of the same risks as direct investments in foreign
securities, including the currency risk discussed above. The regulatory
requirements with respect to ADRs that are issued in sponsored and unsponsored
programs are generally similar but the issuers of unsponsored ADRs are not
obligated to disclose material information in the U.S., and, therefore, such
information may not be reflected in the market value of the ADRs.
/diamond/ ILLIQUID SECURITIES
Securities are considered illiquid because of the absence of a readily available
market or due to legal or contractual restrictions on resale. However, certain
restricted securities that are not registered for sale to the general public but
that can be sold to institutional investors ("Rule 144A Securities") may not be
considered illiquid, provided that a dealer or institutional trading market
exists. The institutional trading market is relatively new and liquidity of a
Portfolio's investments could be impaired if such trading does not further
develop or declines. The Sub-Advisers will determine the liquidity of Rule 144A
Securities under guidelines approved by the Fund's Board. (See the SAI for a
description of these guidelines.)
/diamond/ RISK FACTORS
Investments in illiquid securities involve certain risks to the extent that a
Portfolio may be unable to dispose of such securities at the time desired or at
a reasonable price. In addition, in order to resell a restricted security, the
Portfolio might have to bear the expense and incur the delays associated with
effecting a registration required in order to qualify for resale.
/diamond/ FUTURES, OPTIONS AND OTHER DERIVATIVES
Instruments commonly called "derivatives" include options on securities or
foreign currency futures contracts, options on futures contracts, forward
contracts, interest rate swaps, caps and floors, stock index futures and options
on stock index futures. These instruments are commonly called derivatives
because their price is derived from an underlying index, security or other
measure of value.
Each Portfolio that may use derivatives may do so only as a hedge - that is, for
example, to protect portfolio positions against market or currency swings, to
equitize a cash position, for duration management, or to reduce the risk
inherent in the management of the Portfolio involved.
A Portfolio may engage in futures contracts and options. Thereon the Portfolios
intend to use such techniques primarily for bona fide hedging purposes,
including to protect portfolio positions against market, interest rate or
currency fluctuations, to equitize a cash position, for duration management, or
to reduce the risk inherent in the management of the portfolio involved. If used
for other purposes as may be permitted under applicable rules pursuant to which
the Portfolio would remain exempt from the definition of a "commodity pool
operator" under the rules of the CFTC, the aggregate initial margin and premiums
required to establish any non-hedging positions will not exceed 5% of the fair
market value of the Portfolio's net assets.
FORWARD CONTRACTS are contracts to purchase or sell a specified amount of
property for an agreed upon price at a specified time. Forward contracts are not
currently exchange traded and are typically negotiated on an individual basis. A
Portfolio may enter into forward currency contracts to hedge against declines in
the value of non-dollar denominated securities or to reduce the impact of
currency appreciation on purchases of non-dollar denominated securities. A
Portfolio may also enter into forward contracts to purchase or sell securities
or other financial indices.
FUTURES CONTRACTS are contracts that obligate the buyer to receive and the
seller to deliver an instrument or money at a specified price on a specified
date. A Portfolio may buy and sell futures contracts on foreign currencies,
securities and financial indexes including interest rates or an index of U.S.
Government, foreign government, equity or fixed-income securities.
A Portfolio may also buy options on futures contracts. An option on a futures
contract gives the buyer the right, but not the obligation, to buy or sell a
futures contract at a specific price on or before a specified date.
Futures contracts and options on futures are standardized and traded on
designated exchanges.
INTEREST RATE SWAPS involve the exchange by two parties of their respective
commitments to pay or receive interest (E.G., an exchange of floating rate
payments for fixed rate payments).
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<PAGE>
INTEREST RATE FUTURES CONTRACTS involve the purchase or sale of contracts for
the future delivery of fixed-income securities at an established price.
OPTIONS are the right, but not the obligation, to buy or sell a specified amount
of securities or other assets on or before a fixed date at a predetermined
price. A Portfolio may purchase put and call options on securities, securities
indexes and foreign currencies, subject to its investment restrictions.
CALL OPTIONS give a buyer the right to purchase a portfolio security at a
designated price until a certain date. The option must be "covered" - for
example, the seller may own the securities required to fulfill the contract.
PUT OPTIONS give the buyer the right to sell the security at a designated
price until a certain date. Put options are "covered" , for example, by
segregating an amount of cash or securities equal to the exercise price.
STOCK INDEX FUTURES obligate the seller to deliver (and the purchaser to take)
an amount of cash equal to a specific dollar amount times the difference between
the value of a specified stock index at the close of the last trading day of the
contract and the price at which the agreement is made. No physical delivery of
the underlying stocks in the index is made.
OPTIONS ON STOCK INDEX FUTURES CONTRACTS, as contrasted with the direct
investment in such a contract, gives the purchaser the right, in return for the
premium paid, to assume a position in a stock index futures contract at a
specified exercise price at any time prior to the expiration date of the option.
/diamond/ RISK FACTORS
There can be no assurance the use of derivatives will help a Portfolio achieve
its investment objective. Derivatives involve special risks and transaction
costs, and draw upon skills and experience which are different from those needed
to choose the other securities or instruments in which a Portfolio invests.
Special risks of these instruments include:
/diamond/ INACCURATE MARKET PREDICTIONS. If interest rates, securities prices
or currency markets do not move in the direction expected by a
Sub-Adviser who used derivatives based on those measures, these
instruments may fail in their intended purpose and result in losses
to the Portfolio.
/diamond/ IMPERFECT CORRELATION. Derivatives' prices may be imperfectly
correlated with the prices of the securities, interest rates or
currencies being hedged. When this happens, the expected benefits
may be diminished.
/diamond/ ILLIQUIDITY. A liquid secondary market may not be available for a
particular instrument at a particular time. A Portfolio may
therefore be unable to control losses by closing out a derivative
position.
/diamond/ TAX CONSIDERATIONS. A Portfolio may have to delay closing out
certain derivative positions to avoid adverse tax consequences.
The risk of loss from investing in derivative instruments is potentially
unlimited.
/diamond/ FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("forward contract") is used to purchase or
sell foreign currencies at a future date as a hedge against fluctuations in
foreign exchange rates pending the settlement of transactions in foreign
securities or during the time a Portfolio has exposure to foreign currencies. A
forward contract, which is also included in the types of instruments commonly
known as derivatives, is an agreement between contracting parties to exchange an
amount of currency at some future time at an agreed upon rate.
/diamond/ RISK FACTORS
Investors should be aware that hedging against a decline in the value of a
currency in the foregoing manner does not eliminate fluctuations in the prices
of portfolio securities or prevent losses if the prices of portfolio securities
decline.
Furthermore, such hedging transactions preclude the opportunity for gain if the
value of the hedging currency should rise. Forward contracts may, from time to
time, be considered illiquid, in which case they would be subject to a
Portfolio's limitation on investing in illiquid securities.
/diamond/ WHEN-ISSUED, DELAYED SETTLEMENT AND FORWARD DELIVERY SECURITIES
Securities may be purchased and sold on a "when-issued," "delayed settlement,"
or "forward delivery" basis.
"When-issued" or "forward delivery" refers to securities whose terms are
available, and for which a market exists, but which are not available for
immediate delivery. When-issued or forward delivery transactions may be expected
to occur a month or more before delivery is due.
A Portfolio may engage in when-issued transactions to obtain what is considered
to be an advantageous price
33
<PAGE>
and yield at the time of the transaction. When a Portfolio engages in
when-issued or forward delivery transactions, it will do so for the purpose of
acquiring securities consistent with its investment objective and policies and
not for the purpose of investment leverage.
"Delayed settlement" is a term used to describe settlement of a securities
transaction in the secondary market which will occur sometime in the future. No
payment or delivery is made by a Portfolio until it receives payment or delivery
from the other party to any of the above transactions.
The Portfolio will segregate with its custodian cash, U.S. Government securities
or other liquid assets at least equal to the value of purchase commitments until
payment is made. Such segregated securities will either mature or, if necessary,
be sold on or before the settlement date. Typically, no income accrues on
securities purchased on a delayed delivery basis prior to the time delivery of
the securities is made, although a Portfolio may earn income in securities it
has segregated to collateralize its delayed delivery purchases.
New issues of stocks and bonds, private placements and U.S. Government
securities may be sold in this manner.
/diamond/ RISK FACTORS
At the time of settlement, the market value of the security may be more or less
than the purchase price. The Portfolio bears the risk of such market value
fluctuations.
/diamond/ MORTGAGE- AND OTHER ASSET-BACKED SECURITIES
Mortgage-backed securities represent interests in a pool of mortgages. Principal
and interest payments made on the mortgages in the underlying mortgage pool are
passed through to the Portfolio.
CMOs are "pass-through" securities collateralized by mortgages or
mortgage-backed securities. (Pass-through securities mean that principal and
interest payments on the underlying securities, less servicing fees, are passed
through to Policyholders on a pro rata basis.) CMOs are issued in classes and
series that have different maturities and often are retired in sequence.
Asset-backed securities represent interests in pools of consumer loans
(generally unrelated to mortgage loans), and most often are structured as
pass-through securities.
Interest and principal payments ultimately depend on payment of the underlying
loans by individuals, although the securities may be supported by letters of
credit or other credit enhancements.
/diamond/ RISK FACTORS
Prepayments will shorten these securities' weighted average life and may lower
their returns. The value of these securities may change because of changes in
the market's perception of the creditworthiness of the federal agency or private
institution that issued them, in the case of mortgage-backed securities, or in
the servicing agent for the pool, the originator of the pool or the financial
institution providing the credit support or enhancement in the case of
asset-backed securities. Interest rate risks are also involved with these
investments; see "Debt Securities and Fixed-Income Investing," page _____.
In addition, the mortgage securities market may be adversely affected by changes
in government regulation or tax policies.
/diamond/ REAL ESTATE INVESTMENT TRUSTS ("REITS")
REITs are pooled investment vehicles which invest primarily in income producing
real estate, or real estate related loans or interests. REITs are generally
classified as equity REITs, mortgage REITs, or hybrid REITs.
Equity REITs invest the majority of their assets directly in real property and
derive income primarily from the collection of rents. Equity REITs can also
realize capital gains by selling properties that have appreciated in value.
Mortgage REITs invest the majority of their assets in real estate mortgages and
derive income from the collection of interest payments. Hybrid REITs invest
their assets in both real property and mortgages. REITs are not taxed on income
distributed to Policyholders provided they comply with several requirements of
the Internal Revenue Code of 1986, as amended (the "Code").
/diamond/ RISK FACTORS
REITs may subject a Portfolio to certain risks associated with the direct
ownership of real estate. These risks include, among others: possible declines
in the value of real estate; possible lack of availability of mortgage funds;
extended vacancies of properties; risks related to general and local economic
conditions; overbuilding; increases in competition, property taxes and operating
expenses; changes in zoning laws; costs resulting from the clean-up of, and
liability to third parties for damages resulting from, environmental problems;
casualty or condemnation losses; uninsured damages from floods,
34
<PAGE>
earthquakes or other natural disasters; limitations on and variations in rents;
and changes in interest rates.
Investing in REITs involves certain unique risks, in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to heavy cash flow dependency, default by borrowers,
self-liquidation and the possibilities of failing to qualify for the exemption
from tax for distributed income under the Code. REITs (especially mortgage
REITs) are also subject to interest rate risk. (See "Debt Securities and
Fixed-Income Investing," page____.
/diamond/ ZERO COUPON, STRIPS, PAY-IN-KIND AND STEP COUPON SECURITIES
Zero coupon bonds do not make regular interest payments; rather, they are sold
at a discount from face value. Principal and accreted discount (representing
interest accrued but not paid) are paid at maturity. Step coupon bonds sell at a
discount and pay a low coupon rate for an initial period and a higher coupon
rate thereafter. Pay-in-kind securities may pay interest in cash or a similar
bond. Strips are debt securities that are stripped of their interest after the
securities are issued, but otherwise are comparable to zero coupon bonds.
/diamond/ RISK FACTORS
The market value of zero coupon bonds, step coupon bonds, pay-in-kind securities
and strips generally fluctuates in response to changes in interest rates to a
greater degree than interest-paying securities of comparable term and quality.
A Portfolio may realize greater gains or losses as a result of such
fluctuations. In order to pay cash distributions from these types of securities,
a Portfolio may sell certain portfolio securities and may incur a gain or loss
on such sales.
/diamond/ HIGH-YIELD/HIGH-RISK SECURITIES
High-yield/high-risk securities (or "junk bonds") are debt securities rated
below investment grade by the primary rating agencies (such as S&P and Moody's).
(See Appendix A for a description of debt securities ratings.)
/diamond/ RISK FACTORS
The value of lower quality securities generally is more dependent on the ability
of the issuer to meet interest and principal payments (I.E., credit risk) than
is the case for higher quality securities. Conversely, the value of higher
quality securities may be more sensitive to interest rate movements than lower
rated securities. Issuers of high-yield securities may not be as strong
financially as those issuing bonds with higher credit ratings. Investments in
such companies are considered to be more speculative than higher quality
investments.
Issuers of high-yield securities are more vulnerable to real or perceived
economic changes (for instance, an economic downturn or prolonged period of
rising interest rates), political changes or adverse developments specific to
the issuer. Adverse economic, political or other developments may impair the
issuer's ability to service principal and interest obligations, to meet
projected business goals and to obtain additional financing, particularly if the
issuer is highly leveraged.
In the event of a default, a Portfolio would experience a reduction of its
income and could expect a decline in the market value of the defaulted
securities.
The market for lower quality securities is generally less liquid than the market
for higher quality bonds. Adverse publicity and investor perceptions, as well as
new or proposed laws, may also have a greater negative impact on the market for
lower quality securities. Unrated debt, while not necessarily of lower quality
than rated securities, may not have as broad a market as higher quality
securities.
/diamond/ VARIABLE RATE MASTER DEMAND NOTES
Variable rate master demand notes are unsecured commercial paper instruments
that permit the indebtedness thereunder to vary and provide for periodic
adjustments in the interest rate. Because variable rate master demand notes are
direct lending arrangements between a Portfolio and the issuer, they are not
normally traded.
Although no active secondary market may exist for these notes, a Portfolio may
demand payment of principal and accrued interest at any time or may resell the
note to a third party.
While the notes are not typically rated by credit rating agencies, issuers of
variable rate master demand notes must satisfy a Sub-Adviser that the ratings
are within the two highest ratings of commercial paper. (See the SAI for further
information on these ratings.)
In addition, when purchasing variable rate master demand notes, a Sub-Adviser
will consider the earning power, cash flows, and other liquidity ratios of the
35
<PAGE>
issuers of the notes and will continuously monitor their financial status and
ability to meet payment on demand.
/diamond/ RISK FACTORS
In the event an issuer of a variable rate master demand note defaulted on its
payment obligations, a Portfolio might be unable to dispose of the note because
of the absence of a secondary market and could, for this or other reasons,
suffer a loss to the extent of the default.
/diamond/ WARRANTS AND RIGHTS
A warrant is a type of security that entitles the holder to buy a proportionate
amount of common stock at a specified price, usually higher than the market
price at the time of issuance, for a period of years or to perpetuity.
In contrast, rights, which also represent the right to buy common shares,
normally have a subscription price lower than the current market value of the
common stock and a life of two to four weeks.
/diamond/ RISK FACTORS
Warrants and rights may be considered more speculative than certain other types
of investments because they do not entitle a holder to the dividends or voting
rights for the securities that may be purchased. They do not represent any
rights in the assets of the issuing company.
Also, the value of a warrant or right does not necessarily change with the value
of the underlying securities. A warrant or right ceases to have value if it is
no t exercised prior to the expiration date.
/diamond/ GOLD STOCK AND GOLD BULLION
Gold stocks are equity securities involved in the exploration, mining,
processing, or dealing or investing in gold. Investments in gold bullion involve
the purchase of bars or ingots of the precious metal.
/diamond/ RISK FACTORS
Due to monetary and political policies on a national and international level,
the price of gold is subject to substantial fluctuations, which will have an
effect on the profitability of issuers of gold stocks and the market value of
their securities.
Changes in the political or economic climate for the two largest gold producers
- - South Africa and the Commonwealth of Independent States (the former Soviet
Union) - may have a direct impact on the price of gold worldwide.
A Portfolio's investments in gold bullion will earn no income return.
Appreciation in the market price of gold is the sole manner in which a Portfolio
would be able to realize gains on such investments. Furthermore, a Portfolio may
encounter storage and transaction costs in connection with their ownership of
gold bullion that may be higher than those associated with the purchase, holding
and disposition of more traditional types of investments.
MANAGEMENT OF THE FUND
/diamond/ DIRECTORS
The Board of Directors is responsible for managing the business affairs of the
Fund. It oversees the operation of the Fund by its officers. It also reviews the
management of the Portfolios' assets by the Investment Adviser and Sub-Advisers.
Information about the Directors and executive officers of the Fund is contained
in the SAI.
/diamond/ INVESTMENT ADVISER
WRL Management, located at 201 Highland Avenue, Largo, Florida 33770-2597,
serves as the Fund's Investment Adviser. The Investment Adviser is a indirect,
wholly-owned subsidiary of Western Reserve Life Assurance Co. of Ohio ("Western
Reserve"), a stock life insurance company which is wholly-owned by First AUSA
Life Insurance Company, which is wholly-owned by AEGON USA, Inc. ("AEGON").
AEGON is a financial services holding company whose primary emphasis is on life
and health insurance and annuity and investment products. AEGON is a
wholly-owned indirect subsidiary of AEGON nv, a Netherlands corporation, which
is a publicly traded international insurance group. The Investment Adviser has
served as the investment adviser to the Fund since January 1, 1997. Prior to
this date, Western Reserve served as investment adviser to each Portfolio.
Subject to the supervision of the Fund's Board, the Investment Adviser is
responsible to furnishing continuous advice and recommendations to the Fund as
to the acquisition, holding or disposition of any or all of the securities or
other assets which the Portfolios may own or contemplate acquiring from time to
time; to cause its officers to attend meetings and furnish oral or written
reports, as the Fund may reasonably require, in order to keep the Board of
Directors and appropriate
36
<PAGE>
officers of the Fund fully informed as to the conditions of each investment
portfolio of the Portfolios, the investment recommendations of the Investment
Adviser, and the investment considerations which have given rise to those
recommendations; to supervise the purchase and sale of securities of the
Portfolios as directed by the appropriate officers of the Fund; and to maintain
all books and records required to be maintained by the Investment Adviser
pursuant to the 1940 Act and the rules and regulations promulgated thereunder
with respect to transactions on behalf of the Fund.
\diamond\ ADVISORY FEES PAID BY THE PORTFOLIOS
Subject to the supervision and direction of the Fund's Board, the Investment
Adviser is responsible for managing the Portfolios in accordance with each
Portfolio's stated investment objective and policies. As compensation for its
services to the Portfolios, the Investment Adviser received monthly compensation
at an annual rate of a percentage of the average daily net assets of each
Portfolio. The table below lists each Portfolio and the annual rate of the
monthly compensation the Investment Adviser received for the fiscal year ended
December 31, 1995.
<TABLE>
<CAPTION>
ADVISORY ADVISORY
PORTFOLIO FEE PORTFOLIO FEE
--------- --- --------- ---
<S> <C> <C> <C>
Growth 0.80% Emerging Growth 0.80%
Bond 0.50% Equity-Income 0.80%
Global 0.80% Aggressive Growth 0.80%
Money Market 0.40% (prior Utility 0.75%
to 5/1/96,
0.50%) Tactical Asset Allocation 0.80%
Short-to-Intermediate
Government 0.60% C.A.S.E.Growth 0.80%
Balanced 0.80% Value Equity 0.80%*
International Equity 1.00%* Meridian/INVESCO
Global Sector 1.10%*
U.S. Equity 0.80%*
<FN>
- -------------------
* No advisory fees were paid by these Portfolios in 1995 because they had not
commenced operations as of December 31, 1995.
</FN>
</TABLE>
\diamond\ ADVISORY FEE REIMBURSEMENT
The Investment Adviser has voluntarily undertaken, until at least April 30,
1997, to pay expenses on behalf of the Portfolios to the extent normal operating
expenses (including investment advisory fees but excluding interest, taxes,
brokerage fees, commissions and extraordinary charges) exceed a certain
percentage of each Portfolio's average daily net assets. The table below shows
the expense limit and actual expenses for each Portfolio and the reimbursement a
Portfolio received, if any, for the fiscal year ended December 31, 1995.
PORTFOLIO EXPENSE ACTUAL REIMBURSEMENT
LIMIT EXPENSES
--------- ------- -------- -------------
Growth 1.00% 0.86% NONE
Bond 0.70% 0.61% NONE
Global 1.00% 0.99% NONE
Money Market 0.70% 0.46% NONE
Short-to-Intermediate 1.00% 0.78% NONE
Government
Balanced 1.00% 0.97% NONE
Emerging Growth 1.00% 0.91% NONE
Equity-Income 1.00% 0.87% NONE
Aggressive Growth 1.00% 0.92%* NONE
Utility 1.00% 1.08% $14,417
Tactical Asset Allocation 1.00% 0.93% NONE
C.A.S.E. Growth 1.00% 0.93% NONE
Value Equity 1.00% ** NONE
Meridian/INVESCO Global Sector 1.10% ** NONE
37
<PAGE>
PORTFOLIO EXPENSE ACTUAL REIMBURSEMENT
LIMIT EXPENSES
--------- ------- -------- -------------
International Equity 1.50% ** NONE
U.S. Equity 1.30% ** NONE
- ------------------
* The actual expenses of the Aggressive Growth Portfolio as a percentage of
average daily net assets were 1.07%. Of these expenses, 0.15% were
attributable to interest paid by this Portfolio resulting from borrowing
activities; as noted above, such interest is not subject to the voluntary
expense limitation. Therefore, the expenses of this Portfolio to which the
expense limitation was applicable were 0.92%; and no expenses were paid by
the Investment Adviser on behalf of this Portfolio.
** These Portfolios had not commenced operations as of December 31, 1995.
/diamond/ DISTRIBUTION AND SERVICE PLANS
DISTRIBUTION PLAN AND DISTRIBUTION AGREEMENT
Effective January 1, 1997, the Fund has adopted a Plan of Distribution pursuant
to Rule 12b-1 under the 1940 Act ("Distribution Plan") and pursuant to the Plan,
has entered into a Distribution Agreement with InterSecurities, Inc. ("ISI"),
whose principal office is located at 201 Highland Avenue, Largo, Florida 33770.
ISI is an affiliate of the Investment Adviser, and serves as principal
underwriter for the Fund.
The expenses the Fund may pay pursuant to the Distribution Plan shall include,
but not necessarily limited to, the following: cost of printing and mailing Fund
prospectuses and statements of additional information, and any supplements
thereto to prospective investors; costs relating to development and preparation
of Fund advertisements, sales literature and brokers' and other promotional
materials describing and/or relating to the Fund; expenses in connection with
presentation of seminars and sales meetings describing the Fund; development of
consumer-oriented sales materials describing the Fund; and expenses attributable
to "distribution-related services" provided to the Fund (E.G., salaries and
benefits, office expenses, equipment expenses (I.E., computers, software, office
equipment, etc.), training expenses, travel costs, printing costs, supply
expenses, programming time and data center expenses, each as they relate to the
promotion of the sale of Fund shares).
Under the Distribution Plan, the Fund, on behalf of the Portfolios, is
authorized to pay to various service providers, as direct payment for expenses
incurred in connection with the distribution of a Portfolio's shares, amounts
equal to actual expenses associated with distributing such Portfolio's shares,
up to a maximum rate of 0.15% on an annualized basis of the average daily net
assets. This fee is measured and accrued daily and paid monthly.
ISI will submit to the Fund's Board for approval annual distribution expenses
with respect to each Portfolio. ISI allocates to each Portfolio distribution
expenses specifically attributable to the distribution of shares of such
Portfolio. Distribution expenses not specifically attributable to the
distribution of shares of a particular Portfolio are allocated among the
Portfolios, based upon the ratio of net asset value of each Portfolio to the net
asset value of all Portfolios, or such other factors as ISI deems fair and are
approved by the Fund's Board.
/diamond/ ADMINISTRATIVE AND TRANSFER AGENCY SERVICES
Effective January 1, 1997, the Fund has entered into an Administrative Services
and Transfer Agency Agreement with WRL Investment Services, Inc. ("WRL
Services"), an affiliate of WRL Management and Western Reserve, to furnish the
Fund with administrative services to assist the Fund in carrying out certain of
its functions and operations. Under this Agreement, WRL Services shall furnish
to each Portfolio, subject to the overall supervision of the Board, supervisory,
administrative, and transfer agency services, including recordkeeping and
reporting. WRL Services is reimbursed by the Fund monthly on a cost incurred
basis. Prior to January 1, 1997, Western Reserve performed these services in
connection with its serving as the Fund's investment adviser.
/diamond/ SUB-ADVISERS
Each Sub-Adviser provides investment advisory assistance and portfolio
management advice to the Investment Adviser for its respective Portfolio(s).
Subject to review and supervision by the Investment Adviser and the Fund's
Board, each Sub-Adviser is responsible for the actual investment management of
its Portfolio(s) and for making decisions to buy, sell or hold any particular
security. Each Sub-Adviser also places orders to buy or sell securities on
behalf of that Portfolio. Each Sub-Adviser bears all of its expenses in
connection with the performance of its services, such as compensating and
furnishing office space for its officers and employees connected with investment
and economic research, trading and investment management of its Portfolio(s).
Each Sub-Adviser is a registered investment adviser under the Investment
Advisers Act of 1940, as amended.
/diamond//diamond//diamond//diamond//diamond/
38
<PAGE>
JANUS CAPITAL CORPORATION
Janus Capital Corporation ("Janus Capital"), located at 100 Fillmore Street,
Denver, CO 80206, serves as the Sub-Adviser to the Growth, Bond and Global
Portfolios. Thomas H. Bailey is the President of Janus Capital. Kansas City
Southern Industries, Inc. ("KCSI") owns approximately 83% of Janus Capital.
Janus Capital provides investment management and related services to other
mutual funds, and individuals, corporate, charitable and retirement accounts.
See "Management of the Fund - The Sub-Adviser" in the SAI for a more detailed
description of the previous experience of Janus Capital as an investment
adviser.
/diamond/ PORTFOLIO MANAGERS:
SCOTT W. SCHOELZEL has served as the Portfolio Manager for the Growth Portfolio
since January 2, 1996. Mr. Schoelzel also serves as co-portfolio manager of
other mutual funds. Mr. Schoelzel is a Vice President of Janus Capital, where he
has been employed since 1994. From 1991 to 1993, Mr. Schoelzel was a portfolio
manager with Founders Asset Management, Denver, Colorado. Prior to 1991, he was
a general partner of Ivy Lane Investments, Denver, Colorado (a real estate
investment brokerage).
RONALD V. SPEAKER has served as Portfolio Manager for the Bond Portfolio since
1988. Mr. Speaker also serves as portfolio manager of other mutual funds. Mr.
Speaker is also an Executive Vice President of Janus Investment Fund and Janus
Aspen Series and previously served as a securities analyst and research
associate of Janus Capital (from 1986).
HELEN Y. HAYES has served as Portfolio Manager of the Global Portfolio since its
inception. Ms. Hayes also serves as a portfolio manager of other mutual funds.
Ms. Hayes is also an Executive Vice President of Janus Investment Fund and Janus
Aspen Series. Ms. Hayes has been employed by Janus Capital since 1987.
/diamond//diamond//diamond//diamond//diamond/
J.P. MORGAN INVESTMENT MANAGEMENT INC.
J. P. Morgan Investment Management Inc. ("J.P. Morgan Investment"), located at
522 Fifth Avenue, New York, NY 10036, has served as the Sub-Adviser to the Money
Market Portfolio since May 1, 1996. J. P. Morgan Investment is a wholly-owned
subsidiary of J.P. Morgan & Co. Incorporated. J.P. Morgan Investment provides
investment management and related services for corporate, public, and union
employee benefit funds, foundations, endowments, insurance companies and
government agencies.
/diamond//diamond//diamond//diamond//diamond/
AEGON USA INVESTMENT MANAGEMENT, INC.
AEGON USA Investment Management, Inc. ("AEGON Management"), located at 4333
Edgewood Road, N.E., Cedar Rapids, IA 52499, serves as the Sub-Adviser to the
Short-to-Intermediate Government and Balanced Portfolios. AEGON Management is an
indirect wholly-owned subsidiary of AEGON.
/diamond/ PORTFOLIO MANAGERS:
CLIFFORD A. SHEETS AND JARRELL D. FREY serve as Portfolio managers of the
Short-to-Intermediate Government Portfolio. Mr. Sheets has served as the
Portfolio Manager of the Short-to-Intermediate Government Portfolio since its
inception. Mr. Sheets has been a Senior Vice President of AEGON Management since
1990. Prior to joining AEGON Management, Mr. Sheets was head of the Fixed Income
Management Department of the Trust and Asset Management Group of Bank One,
Indianapolis NA. Mr. Frey has served as Portfolio Manager for the
Short-to-Intermediate Government Portfolio since May, 1995. Mr. Frey joined
AEGON Management in 1994. Prior to joining AEGON Management, Mr. Frey was
employed for five years by Woodmen Accident and Life Company in Lincoln, NE
where he analyzed fixed income (both public and private debt offerings) and
equity securities.
MICHAEL VAN METER has served as the Senior Portfolio Manager of the Balanced
Portfolio since its inception. Mr. Van Meter also serves as Chairman of the
Equity Investment Policy Committee of AEGON Management. Mr. Van Meter was
President and Managing Partner of Perpetual Investment Advisors from 1983 to
1989, when AEGON acquired that firm.
/diamond//diamond//diamond//diamond//diamond/
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
Van Kampen American Capital Asset Management, Inc. ("Van Kampen"), located at
One Parkview Plaza, Oakbrook Terrace, IL 60181, serves as the Sub-Adviser to the
Emerging Growth Portfolio.
Van Kampen became an indirect wholly-owned subsidiary of Morgan Stanley Group
Inc. on October __, 1996.
/diamond/ PORTFOLIO MANAGER:
GARY M. LEWIS has served as Portfolio Manager for the Emerging Growth Portfolio
since its inception. Mr. Lewis has also served as portfolio manager at American
Capital Asset Management, Inc., a predecessor firm of Van Kampen American
Capital Asset Management, Inc. for over six years and portfolio manager for the
Van Kampen American Capital Emerging Growth Fund, Inc. since April, 1989.
/diamond//diamond//diamond//diamond//diamond/
39
<PAGE>
LUTHER KING CAPITAL MANAGEMENT CORPORATION
Luther King Capital Management Corporation ("Luther King Capital"), located at
301 Commerce Street, Suite 1600, Fort Worth, TX 76102, serves as the Sub-Adviser
to the Equity-Income Portfolio. Ultimate control of Luther King Capital is
exercised by J. Luther King, Jr. Luther King Capital is a registered investment
adviser and provides investment management services to accounts of individual
investors, mutual funds and other institutional investors. See "Management of
the Fund - The Sub-Adviser" in the SAI for a more detailed description of the
previous experience of Luther King Capital as an investment adviser.
/diamond/ PORTFOLIO MANAGERS:
LUTHER KING, JR. AND SCOT HOLLMANN have served as Portfolio Managers of the
Equity-Income Portfolio since its inception. Mr. King has been President of
Luther King Capital since 1979. Mr. Hollmann has served as Vice President of
Luther King Capital since 1983.
/diamond//diamond//diamond//diamond//diamond/
FRED ALGER MANAGEMENT, INC.
Fred Alger Management, Inc. ("Alger Management"), located at 75 Maiden Lane, New
York, NY 10038, serves as the Sub-Adviser to the Aggressive Growth Portfolio.
Alger Management is a wholly-owned subsidiary of Fred Alger & Company,
Incorporated ("Alger, Inc."), which in turn is a wholly-owned subsidiary of
Alger Associates, Inc., a financial services holding company controlled by Fred
M. Alger and David D. Alger. As of September 30, 1996, Alger Management had
approximately $6.8 billion in assets under management for investment companies
and private accounts.
/diamond/ PORTFOLIO MANAGERS:
DAVID D. ALGER, SEILAI KHOO AND RONALD TARTARO are primarily responsible for the
day-to-day management of the Aggressive Growth Portfolio. Mr. Alger has been
employed by Alger Management as Executive Vice President and Director of
Research since 1971 and as President since 1995. Ms. Khoo has been employed by
Alger Management as a senior research analyst since 1989 and as a Senior Vice
President since 1995. Mr. Tartaro has been employed by Alger Management as a
senior research analyst since 1990 and as a Senior Vice President since 1995.
Mr. David Alger has served as Portfolio Manager of the Aggressive Growth
Portfolio since its inception. Ms. Khoo and Mr. Tartaro have each served as
Co-Portfolio Managers of the Aggressive Growth Portfolio since May 1, 1996. Mr.
Alger, Ms. Khoo and Mr. Tartaro also serve as portfolio managers for other
mutual funds and investment accounts managed by Alger Management.
/diamond//diamond//diamond//diamond//diamond/
FEDERATED INVESTMENT COUNSELING
Federated Investment Counseling ("Federated"), located at Federated Investors
Tower, Pittsburgh, PA 15222-3779, serves as the Sub-Adviser to the Utility
Portfolio. Federated, a Delaware business trust organized on April 11, 1989, is
a registered investment adviser under the Investment Advisers Act of 1940. It is
a subsidiary of Federated Investors. Federated serves as investment adviser to a
number of investment companies and private accounts. Total assets under
management or administered by Federated and other subsidiaries of Federated
Investors is approximately $85 billion.
/diamond/ PORTFOLIO MANAGERS:
CHRISTOPHER H. WILES AND LINDA A. DUESSEL serve as Co-Portfolio Managers of the
Utility Portfolio. Mr. Wiles has been a Portfolio Manager of the Portfolio since
its inception. Mr. Wiles joined Federated in 1990 and has been a Vice President
of an affiliate of Federated since 1992. Mr. Wiles served as Assistant Vice
President of Federated from 1990 to 1992. Mr. Wiles is a Chartered Financial
Analyst and received his MBA in Finance from Cleveland State University. Ms.
Duessell has served as Co-Portfolio Manager of the Utility Portfolio since July,
1996. Ms. Duessel is a Chartered Financial Analyst. Ms. Duessel also serves as
co-portfolio manager for other utility funds managed by Federated. Ms. Duessel
received her B.S., Finance, from the Wharton School of the University of
Pennsylvania and her M.S.I.A., from Carnegie Mellon University. Ms. Duessel has
been a Vice President of an affiliate of Federated since 1995, and was an
Assistant Vice president from 1991 - 1995.
/diamond//diamond//diamond//diamond//diamond/
DEAN INVESTMENT ASSOCIATES
Dean Investment Associates ("Dean"), a Division of C.H. Dean and Associates,
Inc., located at 2480 Kettering Tower, Dayton, OH 45423-2480, serves as the
Sub-Adviser to the Tactical Asset Allocation Portfolio. Dean is a registered
investment adviser with the SEC. Dean is wholly-owned by C.H. Dean and
Associates, Inc. Founded in 1972, Dean manages portfolios for individuals and
institutional clients worldwide. Dean provides a full range of investment
advisory services and as of January 31, 1996 had over $3.756 billion of assets
under management.
/diamond/ PORTFOLIO MANAGERS:
The Tactical Asset Allocation Portfolio is managed by a team of 10 senior
investment professionals (Central Investment Committee), with over 135 years of
total investment experience.
JOHN C. RIAZZI, CFA, as served as the Senior Portfolio Manager of the Tactical
Asset Allocation Portfolio and ARVIND SACHDEVA, CFA has served as Senior Equity
Strategist of this Portfolio since its inception. Mr. Riazzi
40
<PAGE>
joined Dean in March of 1989. Before being promoted to Vice President and
Director of Consulting Services at Dean, Mr. Riazzi was responsible for client
servicing, portfolio execution and trading operations. Mr. Riazzi has been a
member of the Central Investment Committee and a Senior Institutional Portfolio
Manager for the past four years. He received a B.A. in Economics from Kenyon
College in 1985 and was awarded the Chartered Financial Analyst designation in
1993. Mr. Sachdeva joined Dean in 1993. Prior to working at Dean, he was the
Senior Security Analyst and Equity Portfolio Manager for Carillon Advisors,
Inc., from January, 1985 to September, 1993. Carillon Advisors, Inc. is an
investment subsidiary of the Union Central Life Insurance Co.
/diamond//diamond//diamond//diamond//diamond/
C.A.S.E. MANAGEMENT, INC.
C.A.S.E. Management, Inc. ("C.A.S.E."), located at 2255 Glades Road, Suite
221-A, Boca Raton, FL 33431, serves as the Sub-Adviser to the C.A.S.E. Growth
Portfolio. C.A.S.E. is a registered investment advisory firm and a wholly-owned
subsidiary of C.A.S.E. Inc. C.A.S.E. Inc. is indirectly controlled by William
Edward Lange, president and chief executive officer of C.A.S.E. C.A.S.E.
provides investment management services to financial institutions, high net
worth individuals, and other professional money managers.
/diamond/ PORTFOLIO MANAGERS:
Informally, C.A.S.E.'s Board members confer on a continuous basis, gathering
economic sector, industry and stock specific information from C.A.S.E.'s
research and management resources. Each Board member is individually responsible
for the analytical coverage of one or two of the market's eight economic
sectors. C.A.S.E.'s "sector specialists" are encouraged to maintain contact with
counterpart sector specialists from leading outside research organizations. The
information gathered for consideration by the Board's sector specialists also
includes objective forms of research from various governmental agencies, stock
exchanges and financial capitols. Formally, the Board meets monthly to formulate
overall strategic investment positions. The Board then formally reviews its
current investment focus towards every stock, industry, and economic sector
owned in its overall stock population.
/diamond//diamond//diamond//diamond//diamond/
NWQ INVESTMENT MANAGEMENT COMPANY, INC.
NWQ Investment Management Company, Inc. ("NWQ Investment"), located at 655 South
Hope Street, 11th Floor, Los Angeles, CA 90017, serves as the Sub-Adviser to the
Value Equity Portfolio. NWQ Investment was founded in 1982 and is a wholly-owned
subsidiary of United Asset Management Corporation. NWQ Investment provides
investment management services to institutions and high net worth individuals.
As of September 30, 1996, NWQ Investment had over $6.3 billion in assets under
management.
/diamond/ PORTFOLIO MANAGER:
An investment policy committee is responsible for the day-to-day management of
the Value Equity Portfolio's investments. David A. Polak, CFA, Edward C.
Friedel, CFA, James H. Galbreath, CFA, Phyllis G. Thomas, CFA, and Jon D. Bosse,
CFA, constitute the committee.
EDWARD C. FRIEDEL, CFA serves as Senior Portfolio Manager for the Value Equity
Portfolio. Mr. Friedel has been a managing director and investment
strategist/portfolio manager of NWQ Investment since 1983. From 1971 to 1983,
Mr. Friedel was a portfolio manager for Beneficial Standard Investment
Management. Mr. Friedel is a graduate of the University of California at
Berkeley (BS) and Stanford University (MBA).
/diamond//diamond//diamond//diamond//diamond/
MERIDIAN INVESTMENT MANAGEMENT CORPORATION
Meridian Investment Management Corporation ("Meridian"), located at 12835 East
Arapahoe Road, Tower II, 7th Floor, Englewood, CO 80112, serves as a
Co-Sub-Adviser to the Meridian/INVESCO Global Sector Portfolio. Meridian is a
wholly-owned subsidiary of Meridian Management & Research Corporation ("MM&R").
Michael J. Hart and Dr. Craig T. Callahan each own 50% of MM&R. Meridian
provides investment management and related services to other mutual fund
portfolios and individual, corporate, charitable and retirement accounts.
Meridian manages seven mutual fund wrap-fee programs which, as of March 1, 1996,
had aggregate assets of approximately $500 million. Meridian provides investment
advisory assistance and portfolio management advice to the Investment Adviser
for the Meridian/INVESCO Global Sector Portfolio. Meridian also provides
quantitative investment research and portfolio management advice. Subject to
review and supervision by the Investment Adviser and the Fund's Board, Meridian
is responsible for making decisions and recommendations as to asset allocation
and industry and country selections for the Meridian/INVESCO Global Sector
Portfolio.
INVESCO GLOBAL ASSET MANAGEMENT LIMITED
INVESCO Global Asset Management Limited ("INVESCO"), located at Rosebank, 12
Bermudiana Road, Hamilton, Bermuda HM11, serves as a Co-Sub-Adviser to the
Meridian/INVESCO Global Sector Portfolio. INVESCO is an indirect wholly-owned
subsidiary of INVESCO PLC, a global firm that managed approximately $84 billion
as of December 31, 1995. INVESCO PLC is headquartered in London, with money
managers located in Europe, North America and the Far East.
41
<PAGE>
INVESCO provides investment advisory assistance and portfolio management advice
to the Investment Adviser for the Meridian/INVESCO Global Sector Portfolio.
Subject to review and supervision by the Investment Adviser and the Fund's
Board, INVESCO is responsible for actual security selection for the Portfolio
(within the constraints of Meridian's asset, industry, and country selections).
INVESCO's services are provided by a team of portfolio managers. Individual
industry and country specialists are responsible for managing security selection
for their assigned shares of the asset, industry and country allocations
established by Meridian. In performing these services, INVESCO is authorized to
draw upon the resources of certain INVESCO-affiliated companies and their
employees, provided that INVESCO supervises and remains fully responsible for
all such services. Pursuant to this authority, INVESCO has entered into
agreements with INVESCO Asset Management Limited ("IAML"), 11 Devonshire Square,
London, EC2M 4YR England, for assistance in managing the Portfolio's investments
in foreign securities, and with INVESCO Trust Company ("ITC"), 7800 East Union
Avenue, Denver, CO 80237, for assistance in managing the Portfolio's investments
in U.S. securities. IAML is an indirect wholly-owned subsidiary of INVESCO PLC
and a registered investment adviser. IAML provided investment advisory services
to five U.S. mutual funds distributed by INVESCO affiliates, as well as a number
of offshore funds, as of September 30, 1996. ITC is an indirect wholly-owned
subsidiary of INVESCO PLC and a registered investment adviser. ITC provided
investment advisory or sub-advisory services to 41 investment portfolios as of
September 30, 1996.
/diamond/ PORTFOLIO MANAGER:
Meridian's Investment Committee determines guidelines for asset, country and
industry weightings based on Meridian's proprietary quantitative methods. The
Committee is comprised of Dr. Craig T. Callahan, Michael J. Hart, Patrick S.
Boyle and Bryan M. Ritz.
BRYAN M. RITZ, C.F.A., serves as Portfolio Manager of the Meridian/INVESCO
Global Sector Portfolio. Mr. Ritz is also a portfolio manager for Meridian's
premier private accounts, and previously served as a research analyst for
Meridian beginning in 1992. Prior to entering the investment management
industry, Mr. Ritz was a research and teaching assistant in the Finance
Department at the University of Denver. His educational background is B.S.B.A.,
M.B.A., University of Denver. Mr. Ritz is a Chartered Financial Analyst.
/diamond//diamond//diamond//diamond//diamond/
SCOTTISH EQUITABLE INVESTMENT MANAGEMENT LIMITED
Scottish Equitable Investment Management Limited ("Scottish Equitable"), located
at Edinburgh Park, Edinburgh EH12 9SE, Scotland, serves as a Co-Sub-Adviser to
the International Equity Portfolio. Scottish Equitable is a wholly-owned
subsidiary of Scottish Equitable plc. Scottish Equitable plc, is successor to
Scottish Equitable Life Assurance Society, which was founded in Edinburgh in
1831. As of December 31, 1995, Scottish Equitable plc had approximately $15.9
billion in assets under management. Like the Investment Adviser, Scottish
Equitable is also an indirect wholly-owned subsidiary of AEGON nv. Scottish
Equitable has not previously advised a U.S.-registered mutual fund. Scottish
Equitable currently provides investment advisory and management services to
certain of its affiliates, including Scottish Equitable plc and to external
organizations.
/diamond/ PORTFOLIO MANAGER:
CAROL CLARK has served as a Portfolio Manager of the Portfolio since its
inception. Ms. Clark is the Manager of Scottish Equitable's Asset Allocation
group and has served both as a Portfolio Manager and Investment Analyst. Ms.
Clark joined Scottish Equitable in 1983 directly from Glasgow University where
she earned a MA(Honors) in Political Economy; and she also holds the Securities
Industry Diploma.
GE INVESTMENT MANAGEMENT INCORPORATED
GE Investment Management Incorporated ("GEIM") serves as a Co-Sub-Adviser to the
International Equity Portfolio and as the Sub-Adviser to the U.S. Equity
Portfolio. GEIM, located at 3003 Summer Street, Stamford, Connecticut 06905, was
formed under the laws of Delaware in 1988. GEIM is a wholly-owned subsidiary of
General Electric Company ("GE"). GEIM's principal officers and directors serve
in similar capacities with respect to General Electric Investment Corporation
("GEIC", and, together with GEIM and their predecessors, collectively referred
to as "GE Investments"), which like GEIM is a wholly-owned subsidiary of GE.
GEIC serves as investment adviser to various GE pension and benefit plans and
certain employee mutual funds. GE Investments has roughly 70 years of investment
management experience, and has managed mutual funds since 1935. As of June 30,
1996, GEIM and GEIC together managed assets in excess of $55 billion.
/diamond/ PORTFOLIO MANAGERS:
RALPH R. LAYMAN has served as a Portfolio Manager of the International Equity
Portfolio since its inception. Mr. Layman has more than 17 years of investment
experience and has held positions with GE Investments since 1991. From 1989 to
1991, Mr. Layman served as Executive Vice President, Partner and Portfolio
Manager of Northern Capital Management, and prior thereto, served as Vice
President and Portfolio Manager of Templeton Investment Counsel.
42
<PAGE>
Mr. Layman is currently a Director and Executive Vice President of GE
Investments.
EUGENE K. BOLTON is responsible for the overall management of the U.S. Equity
Portfolio and has served in that capacity since its inception. Mr. Bolton has
more than 12 years of investment experience and has held positions with GE
Investments since 1984. Mr. Bolton is currently a Director and Executive Vice
President of GE Investments.
DAVID B. CARLSON is one of the five Portfolio Managers for the U.S. Equity
Portfolio and has served in that capacity since its inception. Mr. Carlson is
also responsible for the management of the equity related investments of the
portfolio of the Strategic Fund. He has more than 13 years of investment
experience and has held positions with GE Investments since 1982. Mr. Carlson is
currently a Senior Vice president of GE Investments.
CHRISTOPHER D. BROWN is one of the five Portfolio Managers for the U.S. Equity
Po rtfolio and has served in that capacity since its inception. He has ten years
of investment experience, and has held positions with GE Investments since 1985.
Mr. Brown is currently a Vice President of GE Investments.
PETER J. HATHAWAY is one of the five Portfolio Managers for the U.S. Equity
Por tfolio and has served in that capacity since its inception. He has more than
35 years of investment experience and has held positions with GE Investments
since 1985. Mr. Hathaway is currently a Senior Vice President of GE Investments.
A. JOHN KOHLHEPP is one of the five Portfolio Managers for the U.S. Equity
Portfolio and has served in that capacity since its inception. He has more than
36 years of investment experience and has held positions with GE Investments
since 1968. Mr. Kohlhepp is currently a Senior Vice President of GE Investments.
PAUL C. REINHARDT is one of the five Portfolio Managers for the U.S. Equity
Portfolio and has served in that capacity since its inception. He has more than
14 years of investment experience and has held positions with GE Investments
since 1982. Mr. Reinhardt is currently a Senior Vice President of GE
Investments.
/diamond/ SUB-ADVISERS' COMPENSATION
Each Sub-Adviser receives monthly compensation from the Investment Adviser at
the annual rate of a specified percentage of the average daily net assets of
each Portfolio managed by that Sub-Adviser. The table below lists those
percentages by Portfolio.
PORTFOLIO PERCENTAGE OF AVERAGE
--------- DAILY NET ASSETS
----------------
Growth 0.40%
Bond 0.25%
Global 0.40%
Money Market 0.15% (Prior to May 1, 1996, Janus
Capital Corporation, previous
Sub-Adviser, received 0.25%)
Short-to-Intermediate 0.30%, less 50% of amount of excess
Government expenses*
Balanced 0.40%, less 50% of amount of excess
expenses*
Emerging Growth 0.40%, less 50% of amount of excess
expenses*
Equity-Income 0.40%
Aggressive Growth 0.40%
Tactical Asset Allocation 0.40%, less 50% of amount of excess
expenses*
C.A.S.E. Growth 0.40%
Utility 0.50% of the first $30 million of
assets; 0.35% of the next $20 million
in assets, and 0.25% of assets in
excess of $50 million
Value Equity 0.40%, less 50% of amount of excess
expenses*
Meridian/INVESCO Global Meridian: 0.30% of first $100 million
Sector of assets, and 0.35% of assets in
excess of $100 million; INVESCO**:
0.40% of first $100 million of assets,
and 0.35% of assets in excess of $100
million
43
<PAGE>
PORTFOLIO PERCENTAGE OF AVERAGE
--------- DAILY NET ASSETS
----------------
International Equity Scottish Equitable: 0.50% of assets
managed by Scottish Equitable, less
50% of amount of excess expenses
attributable to such assets\dagger\
GEIM: 0.50% of assets managed by
GEIM, less 50% of amount of excess
expenses attributable to such assets*
U.S. Equity 0.40%, less 50% of amount of excess
expenses**
- ---------------
* Excess expenses are those expenses paid by the Investment Adviser on
behalf of a Portfolio pursuant to any expense limitation.
** With respect to the Meridian/INVESCO Global Sector Portfolio, neither
IAML nor ITC receives any compensation from the Investment Adviser.
IAML and ITC are compensated for their services by INVESCO. INVESCO
pays 50% of the compensation it receives from the Investment Adviser to
IAML for investment advisory services, and 40% to ITC for investment
advisory services and administrative assistance. IAML and ITC each pay
their own expenses relating to personnel, office space and equipment.
\dagger\ Any amount borne by GEIM pursuant to any expense limitation constitutes
an agreement between the Investment Adviser and GEIM only for the first
twelve months following the Portfolio's commencement of operations.
Thereafter, any such arrangements will be as mutually agreed upon by
GEIM and the Investment Adviser.
\diamond\\diamond\\diamond\\diamond\\diamond\
\diamond\ PORTFOLIO TRANSACTIONS
Each Sub-Adviser is also responsible for selecting the broker-dealers who
execute the portfolio transactions for its respective Portfolio(s). In placing
portfolio business with all dealers, the Sub-Adviser seeks best execution of
each transaction and all brokerage placement must be consistent with the Rules
of Fair Practice of the National Association of Securities Dealers, Inc. Within
these parameters, each Sub-Adviser is authorized to consider sales of the
Policies or Annuity Contracts described in the accompanying prospectus by a
broker-dealer as a factor in the selection of broker-dealers to execute
portfolio transactions. Each Sub-Adviser may occasionally place portfolio
brokerage with InterSecurities, Inc., an affiliated broker of the Investment
Adviser. The Sub-Adviser is authorized to pay higher commissions to brokerage
firms that provide it with investment and research information than to firms
which do not provide such services, if the Sub-Adviser determines that such
commissions are reasonable in relation to the overall services provided and the
Sub-Adviser receives best execution. The information received may be used by the
Sub-Adviser in managing the assets of other advisory and sub-advisory accounts,
as well as in the management of the assets of a Portfolio.
With respect to the Aggressive Growth Portfolio, it is anticipated that Alger,
Inc., an affiliate of Alger Management, will serve as the Portfolio's broker in
effecting substantially all of the Aggressive Growth Portfolio's transactions on
securities exchanges and will retain commissions in accordance with certain
regulations of the SEC.
With respect to the Short-to-Intermediate Government and Balanced Portfolios, it
is anticipated that AEGON Management may occasionally place portfolio business
with InterSecurities, Inc. and AEGON USA Securities, Inc., affiliated brokers of
the Investment Adviser and AEGON Management.
The other Sub-Advisers may also from time to time place portfolio brokerage with
their affiliates in accordance with SEC regulations.
OTHER INFORMATION
\diamond\ JOINT TRADING ACCOUNTS
Subject to approval by the Fund's Board, the Growth, Bond and Global Portfolios
may transfer uninvested cash balances on a daily basis into certain joint
trading accounts. Assets in the joint trading accounts are invested in money
market instruments. All other participants in the joint trading accounts will be
other clients, including registered mutual fund clients, of Janus Capital or its
affiliates. The Growth, Bond and Global Portfolios will participate in the joint
trading accounts
44
<PAGE>
only to the extent that the investments of the joint trading accounts are
consistent with each Portfolio's investment policies and restrictions. Janus
Capital anticipates that the investment made by a Portfolio through the joint
trading accounts will be at least as advantageous to that Portfolio as if the
Portfolio had made such investment directly. (See "Management of the Fund - The
Sub-Advisers" in the SAI.)
\diamond\ PERSONAL SECURITIES TRANSACTIONS
The Fund permits "Access Persons" as defined by Rule 17j-1 under the 1940 Act to
engage in personal securities transactions, subject to the terms of the Code of
Ethics and Insider Trading Policy ("Ethics Policy") that has been adopted by the
Fund's Board. Access Persons are required to follow the guidelines established
by this Ethics Policy in connection with all personal securities transactions
and are subject to certain prohibitions on personal trading. The Fund's
Sub-Advisers, pursuant to Rule 17j-1 and other applicable laws, and pursuant to
the terms of the Ethics Policy, must adopt and enforce their own Code of Ethics
and Insider Trading Policies appropriate to their operations. Each Sub-Adviser
is required to report to the Fund's Board on a quarterly basis with respect to
the administration and enforcement of such Ethics Policy, including any
violations thereof which may potentially affect the Fund.
\diamond\ PURCHASE AND REDEMPTION OF SHARES
Shares of the Portfolios are sold and redeemed at their net asset value next
determined after receipt of a purchase order or notice of redemption in proper
form. Shares are sold and redeemed without the imposition of any sales
commission or redemption charge. However, certain sales and other charges may
apply to the Policies and the Annuity Contracts. Such charges are described in
the respective prospectuses for the Policies and the Annuity Contracts.
\diamond\ VALUATION OF SHARES
Each Portfolio's net asset value per share is ordinarily determined, once daily,
as of the close of the regular session of business on the New York Stock
Exchange ("Exchange") (usually 4:00 p.m., Eastern time), on each day the
Exchange is open.
Net asset value of a Portfolio share is computed by dividing the value of the
net assets of the Portfolio by the total number of shares outstanding in the
Portfolio.
Except for money market instruments maturing in 60 days or less, securities held
by Portfolios other than the Money Market Portfolio are valued at market value.
Securities for which market values are not readily available are valued at fair
value as determined in good faith by the Investment Adviser or Sub-Adviser under
the supervision of the Fund's Board. Money market instruments maturing in 60
days or less are valued on the amortized cost basis. (See the SAI for details.)
The Fund's Board has determined that the most appropriate method for valuing the
securities of the Money Market Portfolio is the amortized cost method. Under
this method, the net asset value of Portfolio shares is expected to remain at a
constant $1.00 per share, although there can be no assurance that the Portfolio
will be able to maintain a stable net asset value. (See the SAI for details
concerning the amortized cost valuation method, including the conditions under
which it may be used.)
\diamond\ THE FUND AND ITS SHARES
The Fund was incorporated under the laws of the State of Maryland on August 21,
1985 and is registered with the SEC as a diversified, open-end, management
investment company.
The Fund offers its shares only for purchase by the Separate Accounts of the
Life Companies to fund benefits under variable life insurance or variable
annuity contracts issued by the Life Companies. Because Fund shares are sold to
Separate Accounts established to receive and invest premiums received under
variable life insurance policies and purchase payments received under the
variable annuity contracts, it is conceivable that, in the future, it may become
disadvantageous for variable life insurance Separate Accounts and variable
annuity Separate Accounts of the Life Companies to invest in the Fund
simultaneously. Neither the Life Companies nor the Fund currently foresees any
such disadvantages or conflicts, either to variable life insurance policyholders
or to variable annuity contract owners. Any Life Company may notify the Fund's
Board of a potential or existing conflict. The Fund's Board will then determine
if a material conflict exists and what action, if any, should be taken in
response. Such action could include the sale of Fund shares by one or more of
the Separate Accounts, which could have adverse consequences. Material conflicts
could result from, for example, (1) changes in state insurance laws, (2) changes
in Federal income tax laws, or (3) differences in voting instructions between
those given by variable life insurance policyholders and those given by variable
annuity contract owners. The Fund's Board might conclude that separate funds
should be established for variable life and variable annuity Separate Accounts.
If this happens, the affected Life Companies will bear the attendant expenses of
establishing separate funds. As a result, variable life insurance policyholders
and variable
45
<PAGE>
annuity contract owners would no longer have the economies of scale typically
resulting from a larger combined fund.
The Fund offers a separate class of Common Stock for each Portfolio. All shares
of a Portfolio have equal voting rights, but only shares of a particular
Portfolio are entitled to vote on matters concerning only that Portfolio. Each
of the issued and outstanding shares of a Portfolio is entitled to one vote and
to participate equally in dividends and distributions declared by the Portfolio
and, upon liquidation or dissolution, to participate equally in the net assets
of the Portfolio remaining after satisfaction of outstanding liabilities. The
shares of a Portfolio, when issued, will be fully paid and nonassessable, have
no preference, preemptive, conversion, exchange or similar rights, and will be
freely transferable. Shares do not have cumulative voting rights. The holders of
more than 50% of the shares of the Fund voting for the election of directors can
elect all of the directors of the Fund if they so choose. In such event, holders
of the remaining shares would not be able to elect any directors.
Only the Separate Accounts of the Life Companies may hold shares of the Fund and
are entitled to exercise the rights directly as described above. To the extent
required by law, the Life Companies will vote the Fund's shares held in the
Separate Accounts, including Fund shares which are not attributable to
Policyholders, at meetings of the Fund, in accordance with instructions received
from persons having voting interests in the corresponding sub-accounts of the
Separate Accounts. Except as required by the 1940 Act, the Fund does not hold
regular or special Policyholder meetings. If the 1940 Act or any regulation
thereunder should be amended, or if present interpretation thereof should
change, and as a result it is determined that the Life Companies are permitted
to vote the Fund's shares in their own right, they may elect to do so. The
rights of Policyholders are described in more detail in the prospectuses or
disclosure documents for the Policies and the Annuity Contracts, respectively.
\diamond\ REPORTS TO POLICYHOLDERS
The fiscal year of each Portfolio ends on December 31 of each year. The Fund
will send to the Portfolios' Policyholders, at least semi-annually, reports
showing the Portfolios' composition and other information. An annual report,
containing financial statements audited by the Fund's independent accountants,
will be sent to Policyholders each year.
\diamond\ CUSTODIAN AND DIVIDEND DISBURSING AGENT
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111, acts as
Custodian and Dividend Disbursing Agent of the Portfolios' assets.
\diamond\ ADDITIONAL INFORMATION
The telephone number or the address of the Fund appearing on the first page of
this Prospectus should be used for requests for additional information.
DISTRIBUTIONS AND TAXES
\diamond\ DIVIDENDS AND DISTRIBUTIONS
Each Portfolio intends to distribute substantially all of its net investment
income, if any. Dividends from investment income of a Portfolio normally are
declared daily and reinvested monthly in additional shares of the Portfolio at
net asset value. Distributions of net realized capital gains from security
transactions normally are declared and paid in additional shares of the
Portfolio at the end of the fiscal year.
\diamond\ TAXES
Each Portfolio has qualified and expects to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended ("Code"). As qualified under Subchapter M, a Portfolio is not subject to
Federal income tax on that part of its investment company taxable income that it
distributes to its Policyholders. Taxable income consists generally of net
investment income, net gains from certain foreign currency transactions, and net
short-term capital gain, if any and any net capital gain (the excess of net
long-term capital gain over net short-term capital loss. It is each Portfolio's
intention to distribute all such income and gains.
Shares of each Portfolio are offered only to the Separate Accounts, which are
insurance company separate accounts that fund the Policies and the Annuity
Contracts. Under the Code, an insurance company pays no tax with respect to
income of a qualifying separate account when the income is properly allocable to
the value of eligible variable annuity or variable life insurance contracts. For
a discussion of the taxation of life insurance companies and the Separate
Accounts, as
46
<PAGE>
well as the tax treatment of the Policies and Annuity Contracts and the holders
thereof, see "Federal Tax Matters" included in the respective prospectuses for
the Policies and the Annuity Contracts.
Section 817(h) of the Code and the regulations thereunder impose
"diversification" requirements on each Portfolio. Each Portfolio intends to
comply with the diversification requirements. These requirements are in addition
to the diversification requirements imposed on each Portfolio by Subchapter M
and the 1940 Act. The 817(h) requirements place certain limitations on the
assets of each separate account that may be invested in securities of a single
issuer. These limitations apply to each Portfolio's assets that may be invested
in securities of a single issuer. Specifically, the regulations provide that,
except as permitted by "safe harbor", described below, as of the end of each
calendar quarter or within 30 days thereafter, no more than 55% of the
Portfolio's total assets may be represented by any one investment, no more than
70% by any two investments, no more than 80% by any three investments, and no
more than 90% by any four investments.
Section 817(h) provides, as a safe harbor, that a separate account will be
treated as being adequately diversified if the diversification requirements
under Subchapter M are satisfied and no more than 55% of the value of the
account's total assets are cash and cash items, government securities, and
securities of other regulated investment companies. For purposes of section
817(h), all securities of the same issuer, all interests in the same real
property project, and all interests in the same commodity are treated as a
single investment. In addition, each U.S. Government agency or instrumentality
is treated as a separate issuer, while the securities of a particular foreign
government and its agencies, instrumentalities, and political subdivisions all
will be considered securities issued by the same issuer. Failure of a Portfolio
to satisfy the section 817(h) requirements would result in taxation of the
Separate Accounts, the insurance companies, the Policies and the Annuity
Contracts, and tax consequences to the holders thereof, other than as described
in the respective prospectuses for the Policies and the Annuity Contracts.
The foregoing is only a summary of some of the important Federal income tax
considerations generally affecting a Portfolio and its Policyholders; see the
SAI for a more detailed discussion. Prospective investors are urged to consult
their tax advisors.
47
<PAGE>
APPENDIX A
BRIEF EXPLANATION OF RATING CATEGORIES
BOND RATING EXPLANATION
----------- -----------
STANDARD & POOR'S CORPORATION AAA Highest rating; extremely strong
capacity to pay principal and
interest. AA High quality; very
strong capacity to pay principal
and interest. A Strong capacity
to pay principal and interest;
somewhat more susceptible to the
adverse effects of changing
circumstances and economic
conditions. BBB Adequate capacity
to pay principal and interest;
normally exhibit adequate
protection parameters, but
adverse economic conditions or
changing circumstances more
likely to lead to a weakened
capacity to pay principal and
interest than for higher rated
bonds.
BB,B, Predominantly speculative with
to the issuer's capacity to meet
CCC,CC,C required interest and principal
payments. BB - lowest degree of
speculation; C- the highest
degree of speculation. Quality
and protective characteristics
outweighed by large uncertainties
or major risk exposure to
adverse conditions.
D In default.
PLUS (+) OR MINUS (-) - The ratings from "AA" to "BBB" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
UNRATED - Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
MOODY'S INVESTOR Aaa Highest quality, smallest degree
SERVICES, INC. of investment risk.
Aa High quality; together with Aaa
bonds, they compose the
high-grade bond group.
A Upper-medium grade obligations;
many favorable investment
attributes.
Baa Medium-grade obligations;
neither highly protected nor
poorly secured. Interest and
principal appear adequate for the
present but certain protective
elements may be lacking or may be
unreliable over any great length
of time.
Ba More uncertain, with speculative
elements. Protection of interest
principal payments not well
safeguarded during good and bad
times.
B Lack characteristics of desirable
investment; potentially low
assurance of timely interest and
principal payments or maintenance
of other contract terms over
time.
Caa Poor standing, may be in default;
elements of danger with respect
to principal or interest
payments. Ca Speculative in a
high degree; could be in default
or have other marked
short-comings.
C Lowest-rated; extremely poor
prospects of ever attaining
investment standing.
UNRATED - Where no rating has been assigned or where a rating has been suspended
or withdrawn, it may be for reasons unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that are
not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published
in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
<PAGE>
WRL SERIES FUND, INC.
OFFICE OF THE FUND:
WRL Series Fund, Inc.
201 Highland Avenue
Largo, Florida 33770-2597
(800) 851-9777
(813) 585-6565
INVESTMENT ADVISER: CUSTODIAN:
WRL Investment Management, Inc. Investors Bank & Trust Company
201 Highland Avenue 89 South Street
Largo, FL 33770-2597 Boston, MA 02111
INDEPENDENT ACCOUNTANTS:
Price Waterhouse LLP
1055 Broadway
Kansas City, MO 64105
SUB-ADVISERS:
JANUS CAPITAL CORPORATION AEGON USA INVESTMENT MANAGEMENT, INC.
100 Fillmore Street 4333 Edgewood Road, N.E.
Denver, CO 80206 Cedar Rapids, IA 52449
LUTHER KING CAPITAL MANAGEMENT DEAN INVESTMENT ASSOCIATES
CORPORATION 2480 Kettering Tower
301 Commerce Street Dayton, OH 45423-2480
Fort Worth, TX 76102
FEDERATED INVESTMENT COUNSELING FRED ALGER MANAGEMENT, INC.
Federated Investors Tower 75 Maiden Lane
Pittsburgh, PA 15222-3779 New York, NY 10038
C.A.S.E. MANAGEMENT, INC. VAN KAMPEN AMERICAN CAPITAL ASSET
2255 Glades Road MANAGEMENT, INC.
Suite 221-A One Parkview Plaza
Boca Raton, FL 33431 Oakbrook Terrace, IL 60181
J.P. MORGAN INVESTMENT INVESCO GLOBAL ASSET MANAGEMENT LIMITED
MANAGEMENT INC. Rosebank, 12 Bermudiana Road
522 Fifth Avenue Hamilton, Bermuda HM11
New York, NY 10036
MERIDIAN INVESTMENT MANAGEMENT NWQ INVESTMENT MANAGEMENT
CORPORATION COMPANY, INC. 655 South Hope Street
12835 East Arapahoe Road 11th Floor
Tower II, 7th Floor Los Angeles, CA 90017
Englewood, CO 80112
SCOTTISH EQUITABLE INVESTMENT GE INVESTMENT MANAGEMENT INCORPORATED
MANAGEMENT LIMITED 3003 Summer Street
Edinburgh Park Stamford, CT 06905
Edinburgh EH12 9SE, Scotland
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING OF ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY STATE
OR JURISDICTION OF THE UNITED STATES OR ANY COUNTRY WHERE SUCH OFFER WOULD BE
UNLAWFUL.
<PAGE>
WRL SERIES FUND, INC.
AGGRESSIVE GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
MERIDIAN/INVESCO GLOBAL SECTOR PORTFOLIO
GLOBAL PORTFOLIO
GROWTH PORTFOLIO
C.A.S.E. GROWTH
U.S. EQUITY PORTFOLIO
VALUE EQUITY PORTFOLIO
TACTICAL ASSET ALLOCATION PORTFOLIO
EQUITY-INCOME PORTFOLIO
UTILITY PORTFOLIO
BALANCED PORTFOLIO
BOND PORTFOLIO
SHORT-TO-INTERMEDIATE GOVERNMENT PORTFOLIO
MONEY MARKET PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus but supplements and
should be read in conjunction with the WRL Series Fund, Inc. (the "Fund")
Prospectus. A copy of the Prospectus may be obtained from the Fund by writing
the Fund at 201 Highland Avenue, Largo, Florida 33770-2597 or by calling the
Fund at (800) 851-9777.
Investment Adviser:
WRL INVESTMENT MANAGEMENT, INC.
Sub-Advisers:
FRED ALGER MANAGEMENT, INC.
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
SCOTTISH EQUITABLE INVESTMENT MANAGEMENT LIMITED
GE INVESTMENT MANAGEMENT INCORPORATED
MERIDIAN INVESTMENT MANAGEMENT CORPORATION
INVESCO GLOBAL ASSET MANAGEMENT LIMITED
JANUS CAPITAL CORPORATION
C.A.S.E. MANAGEMENT, INC.
NWQ INVESTMENT MANAGEMENT COMPANY, INC.
DEAN INVESTMENT ASSOCIATES
LUTHER KING CAPITAL MANAGEMENT CORPORATION
FEDERATED INVESTMENT COUNSELING
AEGON USA INVESTMENT MANAGEMENT, INC.
J.P. MORGAN INVESTMENT MANAGEMENT INC.
The date of the Prospectus to which this Statement of Additional Information
relates and the date of this Statement of Additional Information is January 1,
1997.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE IN THIS STATEMENT CROSS-REFERENCE
OF TO
ADDITIONAL INFORMATION PAGE IN PROSPECTUS
---------------------- ------------------
<S> <C> <C>
INVESTMENT OBJECTIVES AND POLICIES
Investment Restrictions
Aggressive Growth Portfolio
Emerging Growth Portfolio
International Equity Portfolio
Meridian/INVESCO Global Sector Portfolio
Global Portfolio
Growth, C.A.S.E. Growth and Bond Portfolios
U.S. Equity Portfolio
Value Equity Portfolio
Tactical Asset Allocation Portfolio
Equity-Income Portfolio
Utility Portfolio
Balanced Portfolio
Short-to-Intermediate Government Portfolio
Money Market Portfolio
Investment Policies
Lending
Borrowing
Foreign Securities
Investment Funds (International Equity Portfolio)
Repurchase and Reverse Repurchase
Agreements
U.S. Government Securities
Non-Investment Grade Debt Securities
Convertible Securities
Investments in Futures, Options and Other
Derivative Instruments
Zero Coupon, Pay-In-Kind and Step Coupon
Securities
Warrants and Rights
Mortgage-Backed Securities
Asset-Backed Securities
Pass-Through Securities
Other Income Producing Securities
Illiquid and Restricted/144A Securities
Other Investment Companies
Quality and Diversification Requirements
(Money Market Portfolio)
Bank and Thrift Obligations
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE IN THIS STATEMENT CROSS-REFERENCE
OF TO
ADDITIONAL INFORMATION PAGE IN PROSPECTUS
---------------------- ------------------
<S> <C> <C>
Management of the Fund
Directors and Officers
The Investment Adviser
The Sub-Advisers
Portfolio Transactions and Brokerage
Portfolio Turnover
Placement of Portfolio Brokerage
Purchase and Redemption of Shares
Determination of Offering Price
Net Asset Valuation
Investment Experience Information
Calculation of Performance Related Information
Total Return
Yield Quotations
Yield Quotations - Money Market Portfolio
Taxes
Capital Stock of the Fund
Registration Statement
Financial Statements
Appendix A - Description of Portfolio Securities
ii
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the International Equity Portfolio, Aggressive
Growth Portfolio, Emerging Growth Portfolio, Meridian/INVESCO Global Sector
Portfolio, Global Portfolio, Growth Portfolio, C.A.S.E. Growth Portfolio, U.S.
Equity Portfolio, Value Equity Portfolio, Tactical Asset Allocation Portfolio,
Equity-Income Portfolio, Utility Portfolio, Balanced Portfolio, Bond Portfolio,
Short-to-Intermediate Government Portfolio, and Money Market Portfolio, (a
"Portfolio" or collectively, the "Portfolios") of the Fund are described in the
Portfolios' Prospectus. Shares of the Portfolios are sold only to the separate
accounts of Western Reserve Life Assurance Co. of Ohio ("Western Reserve") and
to separate accounts of certain of its affiliated life insurance companies
(collectively, the "Separate Accounts") to fund the benefits under certain
variable life insurance policies (the "Policies") and variable annuity contracts
(the "Annuity Contracts").
As indicated in the Prospectus, each Portfolio's investment objective and,
unless otherwise noted, their investment policies and techniques may be changed
by the Board of Directors of the Fund without approval of shareholders or
holders of the Policies or of the Annuity Contracts (collectively,
"Policyholders"). A change in the investment objectives or policies of a
Portfolio may result in the Portfolio having investment objectives or policies
different from those which a Policyholder deemed appropriate at the time of
investment.
As indicated in the Prospectus, each Portfolio is subject to certain
fundamental policies and restrictions which may not be changed without the
approval of the holders of a majority of the outstanding voting shares of the
Portfolio. "Majority" for this purpose and under the Investment Company Act of
1940, as amended (the "1940 Act") means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares of a
Portfolio are represented or (ii) more than 50% of the outstanding shares of a
Portfolio. A complete statement of all such fundamental policies is set forth
below.
INVESTMENT RESTRICTIONS
\Diamond\ AGGRESSIVE GROWTH PORTFOLIO
The Portfolio may not, as a matter of fundamental policy:
1. With respect to 75% of the Portfolio's total assets, purchase the
securities of any one issuer (other than Government securities as defined in the
1940 Act) if immediately after and as a result of such purchase (a) the value of
the holdings of the Portfolio in the securities of such issuer exceeds 5% of the
value of the Portfolio's total assets, or (b) the Portfolio owns more than 10%
of the outstanding voting securities of any one class of securities of such
issuer.
2. Purchase any securities that would cause more than 25% of the value of
the Portfolio's total assets to be invested in the securities of issuers
conducting their principal business activities in the same industry; provided
that there shall be no limit on the purchase of U.S. Government securities.
3. Invest in commodities except that the Portfolio may purchase or sell
stock index futures contracts and related options thereon if thereafter no more
than 5% of its total assets are invested in aggregate initial margin and
premiums.
4. Purchase or sell real estate or real estate limited partnerships, except
that the Portfolio may purchase and sell securities secured by real estate,
mortgages or interests therein and securities that are issued by companies that
invest or deal in real estate.
5. Make loans to others, except through purchasing qualified debt
obligations, lending portfolio securities or entering into repurchase
agreements.
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of its portfolio securities.
1
<PAGE>
Furthermore, the Portfolio has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Directors of the Fund without
shareholder or Policyholder approval:
(A) The Portfolio may not invest in warrants, except that the Portfolio may
invest in warrants if, as a result, the investments (valued at the lower of cost
or market) would not exceed 5% of the value of the Portfolio's net assets, of
which not more than 2% of the Portfolio's net assets may be invested in warrants
not listed on a recognized domestic stock exchange. Warrants by the Portfolio as
part of a unit or attached to securities at the time of acquisition are not
subject to this limitation.
(B) The Portfolio may not sell securities short or purchase securities on
margin, except that the Portfolio may obtain any short-term credit necessary for
the clearance of purchases and sales of securities. These restrictions shall not
apply to transactions involving selling securities "short against the box."
(C) The Portfolio may not invest in securities of other investment
companies, except as it may be acquired as part of a merger, consolidation,
reorganization, acquisition of assets or offer of exchange.
(D) The Portfolio may not pledge, hypothecate, mortgage or otherwise
encumber more than 10% of the value of the Portfolio's total assets except as
noted in (G) below. These restrictions shall not apply to transactions involving
reverse repurchase agreements or the purchase of securities subject to firm
commitment agreements or on a when-issued basis.
(E) The Portfolio may not invest directly in oil, gas, or other mineral
development or exploration programs or leases, however, the Portfolio may own
debt or equity securities of companies engaged in those businesses.
(F) The Portfolio may not borrow money, except that the Portfolio may
borrow from banks for investment purposes as set forth in the Prospectus.
Immediately after any borrowing, including reverse repurchase agreements, the
Portfolio will maintain asset coverage of not less than 300% with respect to all
borrowings.
(G) The Portfolio may not invest more than 15% of its net assets in
illiquid securities. This does not include securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933 or any other securities
as to which the Board of Directors has made a determination as to liquidity, as
permitted under the 1940 Act.
(H) The Portfolio may not invest in companies for the purpose of exercising
control or management.
(I) The Portfolio may not issue senior securities, except that the
Portfolio may borrow from banks for investment purposes so long as the Portfolio
maintains the required coverage.
(J) The Portfolio may not purchase or retain the securities of any issuer
if, to the knowledge of the Portfolio, any of the officers or directors of the
Portfolio or Investment Adviser individually owns more than 0.5% of the
outstanding securities of the issuer and together they own beneficially more
than 5% of the securities.
\Diamond\ EMERGING GROWTH
The Portfolio may not, as a matter of fundamental policy:
1. With respect to 75% of the Portfolio's total assets purchase the
securities of any one issuer (other than Government securities as defined in the
1940 Act) if immediately after and as a result of such purchase (a) the value of
the holdings of the Portfolio in the securities of such issuer exceeds 5% of the
value of the Portfolio's total assets, or (b) the Portfolio owns more than 10%
of the outstanding voting securities of any one class of securities of such
issuer.
2. Invest more than 25% of the Portfolio's assets in the securities of
issuers primarily engaged in the same industry. Utilities will be divided
according to their services, for example, gas, gas transmission, electric and
telephone, and each will be considered a separate industry for purposes of this
restriction. In addition, there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, or of certificates of deposit and bankers' acceptances.
3. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Portfolio from investing in securities
2
<PAGE>
or other instruments backed by physical commodities).
4. Purchase or sell real estate (but this shall not prevent the Portfolio
from investing in securities or other instruments backed by real estate,
including mortgage-backed securities, or securities of companies engaged in the
real estate business).
5. Lend any security or make any other loan if, as a result, more than 25%
of its total assets would be lent to other parties (but this limitation does not
apply to purchases of commercial paper, debt securities or repurchase
agreements).
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of its portfolio securities.
Furthermore, the Portfolio has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Directors of the Fund without
shareholder or Policyholder approval:
(A) The Portfolio's investment in warrants (options on securities), valued
at the lower of cost or market, may not exceed 5% of the value of its total
assets. Included within that amount, but not to exceed 2% of the value of the
Portfolio's net assets, may be warrants that are not listed on the New York or
American Stock Exchange. Warrants acquired by the Portfolio in units or attached
to securities shall be deemed to be without value.
(B) The Portfolio may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short, provided that margin payments and other deposits in connection with
transactions in options, futures contracts and options on futures contracts
shall not be deemed to constitute selling securities short.
(C) The Portfolio may not purchase securities on margin, except that the
Portfolio may obtain such short-term credits as are necessary for the clearance
of transactions and that margin payments and other deposits in connection with
transactions in options, futures contracts and options on futures contracts
shall not be deemed to constitute purchasing securities on margin.
(D) The Portfolio may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds or to securities received as dividends, through offers of
exchange, or as a result of a consolidation, merger or other reorganization.
(E) the Portfolio may not mortgage or pledge any securities owned or held
by the Portfolio in amounts that exceed, in the aggregate, 15% of the
Portfolio's net assets, provided that this limitation does not apply in the case
of assets deposited to provide margin or guarantee positions in options, futures
contracts and options on futures contracts or the segregation of assets in
connection with such contracts.
(F) The Portfolio may not invest directly in oil, gas, or other mineral
development or exploration programs or leases; however, the Portfolio may own
debt or equity securities of companies engaged in those businesses.
(G) The Portfolio may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 25% of the value
of the Portfolio's total assets (including the amount borrowed) less liabilities
(other than borrowings). Any borrowings that exceed 25% of the value of the
Portfolio's total assets by reason of a decline in total assets will be reduced
within three business days to the extent necessary to comply with the 25%
limitation. This policy shall not prohibit reverse repurchase agreements.
(H) The Portfolio may not invest more than 15% of its net assets in
illiquid securities. This does not include securities eligible for resale
pursuant to Rule 144A under the 1933 Act or any other securities as to which the
Board of Directors has made a determination as to liquidity, as permitted under
the 1940 Act.
(I) The Portfolio may not invest in companies for the purpose of exercising
control or management.
(J) The Portfolio may not issue senior securities, except as permitted by
the 1940 Act.
3
<PAGE>
(K) the Portfolio may not invest in securities of foreign issuers
denominated in foreign currency and not publicly traded in the United States if
at the time of acquisition more than 20% of the Portfolio's total assets would
be invested in such securities.
\Diamond\ INTERNATIONAL EQUITY PORTFOLIO
The Portfolio may not, as a matter of fundamental policy:
1. With respect to 75% of the Portfolio's total assets, purchase the
securities of any one issuer (other than Government securities as defined in the
1940 Act) if immediately after and as a result of such purchase (a) the value of
the holdings of the Portfolio in the securities of such issuer exceeds 5% of the
value of the Portfolio's total assets, or (b) the Portfolio owns more than 10%
of the outstanding voting securities of any one class of securities of such
issuer. All securities of a foreign government and its agencies will be treated
as a single issuer for purposes of this restriction.
2. Invest more than 25% of the Portfolio's assets in the securities of
issuers primarily engaged in the same industry. Utilities will be divided
according to their services, for example, gas, gas transmission, electric and
telephone, and each will be considered a separate industry for purposes of this
restriction, provided that there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, or of certificates of deposit and bankers' acceptances. For
purposes of this restriction, (a) the government of a country, other than the
United States, will be viewed as one industry; and (b) all supranational
organizations together will be viewed as one industry.
3. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this shall not
prevent the Portfolio from purchasing or selling options, futures, swaps and
forward contracts or from investing in securities or other instruments backed by
physical commodities).
4. Invest directly in real estate or interests in real estate; however, the
Portfolio may own securities or other instruments backed by real estate,
including mortgage-backed securities, or debt or equity securities issued by
companies engaged in those businesses.
5. Lend any security or make any other loan if, as a result, more than 30%
of its total assets would be lent to other parties (but this limitation does not
apply to purchases of commercial paper, debt securities or to repurchase
agreements).
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of its portfolio securities.
Furthermore, the Portfolio has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Directors of the Fund without
shareholder or Policyholder approval:
(A) The Portfolio may not (i) enter into any futures contracts or options
on futures contracts for purposes other than bona fide hedging transactions
within the meaning of Commodity Futures Trading Commission regulations if the
aggregate initial margin deposits and premiums required to establish positions
in futures contracts and related options that do not fall within the definition
of bona fide hedging transactions would exceed 5% of the fair market value of
the Portfolio's net assets, after taking into account unrealized profits and
losses on such contracts it has entered into and (ii) enter into any futures
contracts or options on futures contracts if the aggregate amount of the
Portfolio's commitments under outstanding futures contracts positions and
options on futures contracts would exceed the market value of its total assets.
(B) The Portfolio may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short and provided that transactions in options, swaps and forward futures
contracts are not deemed to constitute selling securities short.
(C) The Portfolio may not purchase securities on margin, except that the
Portfolio may obtain such short-term credits as are necessary for the clearance
of transactions, provided that margin payments and other deposits in connection
with transactions in options, futures, swaps and forward contracts shall not be
deemed to constitute purchasing securities on margin.
4
<PAGE>
(D) The Portfolio may not purchase securities of other investment
companies, other than a security acquired in connection with a merger,
consolidation, acquisition, reorganization or offer of exchange and except as
otherwise permitted under the 1940 Act. Investments by the Portfolio in GEI
Short-Term Investment Fund, a private investment fund advised by GE Investment
Management Incorporated ("GEIM"), created specifically to serve as a vehicle for
the collective investment of cash balances of the Portfolio and other accounts
advised by GEIM or General Electric Investment Corporation ("GEIC"), are not
subject to this restriction, pursuant to and in accordance with necessary
regulatory approvals.
(E) The Portfolio may not mortgage or pledge any securities owned or held
by the Portfolio in amounts that exceed, in the aggregate, 15% of the
Portfolio's net assets, provided that this limitation does not apply to reverse
repurchase agreements or in the case of assets deposited to margin or guarantee
positions in futures, options, swaps or forward contracts or the segregation of
assets in connection with such contracts.
(F) The Portfolio may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 33-1/3% of the
value of the Portfolio's total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that exceed 33-1/3% of the
value of the Portfolio's total assets by reason of a decline in net assets will
be reduced within three business days to the extent necessary to comply with the
33-1/3% limitation. This policy shall not prohibit reverse repurchase
agreements or deposits of assets to margin or guarantee positions in futures,
options, swaps or forward contracts, or the segregation of assets in connection
with such contracts. (California insurance regulations currently limit such
borrowings to 25% of total assets. See the Prospectus for the Fund's Portfolios,
page ___.)
(G) The Portfolio may not invest more than 15% of its net assets in
illiquid securities. This does not include securities eligible for resale
pursuant to Rule 144A under the 1933 Act or any other securities as to which a
determination as to liquidity has been made pursuant to guidelines adopted by
the Board of Directors, as permitted under the 1940 Act.
(H) The Portfolio may not invest in companies for the purpose of exercising
control or management.
(I) The Portfolio may not issue senior securities, except as permitted by
the 1940 Act.
With respect to investment restriction 2. above, the Portfolio may use the
industry classifications reflected by the S&P 500 Composite Stock Index, if
applicable at the time of determination. For all other Portfolio holdings, the
Portfolio may use the Directory of Companies Required to File Annual Reports
with the SEC and Bloomberg Inc. In addition, the Portfolio may select its own
industry classifications, provided such classifications are reasonable.
\Diamond\ MERIDIAN/INVESCO GLOBAL SECTOR PORTFOLIO
The Portfolio may not, as a matter of fundamental policy:
1. With respect to seventy-five percent (75%) of the Portfolio's total
assets, purchase the securities of any one issuer, except cash items and
"government securities" as defined under the 1940 Act, if the purchase would
cause the Portfolio to have more than 5% of the value of its total assets
invested in the securities of such issuer or to own more than 10% of the
outstanding voting securities of such issuer.
2. Borrow money from banks or issue senior securities (as defined in the
1940 Act), except that the Portfolio may borrow money from banks for temporary
or emergency purposes (not for leveraging or investment) and may enter into
reverse repurchase agreements in an aggregate amount not exceeding 33-1/3% of
the value of its total assets (including the amount borrowed) less liabilities
(other than borrowings). Any borrowings that come to exceed 33-1/3% of the value
of the Portfolio's total assets by reason of a decline in net assets will be
reduced within three business days to the extent necessary to comply with the
33-1/3% limitation. This restriction shall not prohibit deposits of assets to
margin or guarantee positions in futures, options, swaps or forward contracts,
or the segregation of assets in connection with such contracts.
3. Invest directly in real estate or interests in real estate; however, the
Portfolio may own
5
<PAGE>
debt or equity securities issued by companies engaged in those
businesses.
4. Purchase or sell physical commodities other than gold or foreign
currencies unless acquired as a result of ownership of securities (but this
shall not prevent the Portfolio from purchasing or selling options, futures,
swaps and forward contracts or from investing in securities or other instruments
backed by physical commodities).
5. Lend any security or make any other loan if, as a result, more than
33-1/3% of its total assets would be lent to other parties (but this limitation
does not apply to purchases of commercial paper, debt securities or to
repurchase agreements).
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of portfolio securities of the Portfolio.
7. Invest more than 25% of the value of its total assets in any particular
industry (other than government securities).
With respect to restriction no. 2, above, in accordance with the requirements of
current California insurance regulations, the Portfolio will restrict borrowings
to no more than 10% of total assets, except that the Portfolio may temporarily
borrow amounts equal to as much as 25% of total assets if such borrowing is
necessary to meet redemptions. If California's insurance regulations are changed
at some future time to permit borrowings in excess of 10% but less than 33-1/3%
of total assets, the Portfolio may conduct borrowings in accordance with such
revised limits.
Furthermore, the Portfolio has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Directors of the Fund without
shareholder or Policyholder approval:
(A) The Portfolio will not (i) enter into any futures contracts or options
on futures contracts if immediately thereafter the aggregate margin deposits on
all outstanding futures contracts positions held by the Portfolio and premiums
paid on outstanding options on futures contracts, after taking into account
unrealized profits and losses, would exceed 5% of the market value of the total
assets of the Portfolio, or (ii) enter into any futures contracts if the
aggregate net amount of the Portfolio's commitments under outstanding futures
contracts positions of the Portfolio would exceed the market value of the total
assets of the Portfolio.
(B) The Portfolio may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short without the payment of any additional consideration therefor, and provided
that transactions in options, swaps and forward futures contracts are not deemed
to constitute selling securities short.
(C) The Portfolio may not purchase securities on margin, except that the
Portfolio may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments and other deposits in
connection with transactions in options, futures, swaps and forward contracts
shall not be deemed to constitute purchasing securities on margin.
(D) The Portfolio may not (i) purchase securities of closed-end investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds, funds that are the only practical means, or one of the few
practical means, of investing in a particular emerging country, or to securities
received as dividends, through offers of exchange, or as a result of a
reorganization, consolidation, or merger.
(E) The Portfolio may not mortgage or pledge any securities owned or held
by the Portfolio in amounts that exceed, in the aggregate, 15% of the
Portfolio's net asset value, provided that this limitation does not apply to
reverse repurchase agreements or in the case of assets deposited to margin or
guarantee positions in futures, options, swaps or forward contracts or placed in
a segregated account in connection with such contracts.
(F) The Portfolio may not purchase securities of any issuer with a record
of less than three years' continuous operation, including that of predecessors
(other than U.S. government agencies and instrumentalities or instruments
guaranteed by an entity with a record of more than three years' continuous
operation, including that of predecessors), if
6
<PAGE>
such purchase would cause the Portfolio's investments in all such issuers to
exceed 5% of the Portfolio's total assets taken at market value at the time of
such purchase.
(G) The Portfolio may not invest directly in oil, gas, or other mineral
development or exploration programs or leases; however, the Portfolio may own
debt or equity securities of companies engaged in those businesses.
(H) The Portfolio may not purchase any security or enter into a repurchase
agreement if, as a result, more than 15% of its net assets would be invested in
any combination of: (i) repurchase agreements not entitling the holder to
payment of principal and interest within seven days, and (ii) securities that
are illiquid by virtue of legal or contractual restrictions on resale or the
absence of a readily available market. The Board of Directors, or the
Portfolio's Co-Sub-Advisers acting pursuant to authority delegated by the Board
of Directors, may determine that a readily available market exists for
securities eligible for resale pursuant to Rule 144A under the 1933 Act, or any
successor to such rule. According to the determination, such securities would
not be subject to the foregoing limitation.
(I) The Portfolio may not invest in companies for the purpose of exercising
control or management, except to the extent that exercise by the Fund of its
rights under agreements related to Portfolio securities would be deemed to
constitute such control.
With respect to investment restriction (H) above, the Fund's Board of Directors
has delegated to the Co-Sub-Advisers the authority to determine that a liquid
market exists for securities eligible for resale pursuant to Rule 144A under the
1933 Act, or any successor to such rule and that such securities are not subject
to such restriction. Under guidelines established by the Board of Directors, the
Co-Sub-Advisers will consider the following factors, among others, in making
this determination: (1) the frequency of trades and quotes for the security; (2)
the number of dealers willing to purchase or sell the security and the number of
other potential purchasers; (3) the willingness of dealers to undertake to make
a market in the security; and (4) the nature of the security and the nature of
marketplace trades (E.G., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of transfer).
\Diamond\ GLOBAL PORTFOLIO
The Portfolio may not, as a matter of fundamental policy:
1. (a) With respect to 75% of the Portfolio's assets, invest in the
securities (other than Government securities as defined in the 1940 Act) of any
one issuer if immediately thereafter, more than 5% of the Portfolio's total
assets would be invested in securities of that issuer; or (b) with respect to
100% of the Portfolio's assets, own more than either (i) 10% in principal amount
of the outstanding debt securities of an issuer, or (ii) 10% of the outstanding
voting securities of an issuer, except that such restrictions shall not apply to
Government securities, bank money market instruments or bank repurchase
agreements.
2. Invest more than 25% of the Portfolio's assets in the securities of
issuers primarily engaged in the same industry. Utilities will be divided
according to their services; for example, gas, gas transmission, electric and
telephone, and each will be considered a separate industry for purposes of this
restriction, provided that there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, or of certificates of deposit and bankers' acceptances.
3. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this shall not
prevent the Portfolio from purchasing or selling options, futures, swaps and
forward contracts or from investing in securities or other instruments backed by
physical commodities).
4. Invest directly in real estate or interests in real estate; however, the
Portfolio may own debt or equity securities issued by companies engaged in those
businesses.
5. Lend any security or make any other loan if, as a result, more than 25%
of its total assets would be lent to other parties (but this limitation does not
apply to purchases of commercial paper, debt securities or to repurchase
agreements).
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of its portfolio securities.
7
<PAGE>
Furthermore, the Portfolio has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Directors of the Fund without
shareholder or Policyholder approval:
(A) The Portfolio's investment in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of its net assets. Included within that
amount, but not to exceed 2% of the value of the Portfolio's net assets, may be
warrants that are not listed on the New York or American Stock Exchange.
Warrants acquired by the Portfolio in units or attached to securities shall be
deemed to be without value.
(B) The Portfolio may not (i) enter into any futures contracts or options
on futures contracts for purposes other than bona fide hedging transactions
within the meaning of Commodity Futures Trading Commission regulations if the
aggregate initial margin deposits and premiums required to establish positions
in futures contracts and related options that do not fall within the definition
of bona fide hedging transactions would exceed 5% of the fair market value of
the Portfolio's net assets, after taking into account unrealized profits and
losses on such contracts it has entered into and (ii) enter into any futures
contracts or options on futures contracts if the aggregate amount of the
Portfolio's commitments under outstanding futures contracts positions and
options on futures contracts would exceed the market value of its total assets.
(C) The Portfolio may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short and provided that transactions in options, swaps and forward futures
contracts are not deemed to constitute selling securities short.
(D) The Portfolio may not purchase securities on margin, except that the
Portfolio may obtain such short-term credits as are necessary for the clearance
of transactions, provided that margin payments and other deposits in connection
with transactions in options, futures, swaps and forward contracts shall not be
deemed to constitute purchasing securities on margin.
(E) The Portfolio may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies.
Limitations (i) and (ii) do not apply to money market funds or to securities
received as dividends, through offers of exchange, or as a result of a
consolidation, merger or other reorganization.
(F) The Portfolio may not mortgage or pledge any securities owned or held
by the Portfolio in amounts that exceed, in the aggregate, 15% of the
Portfolio's net assets, provided that this limitation does not apply to reverse
repurchase agreements or in the case of assets deposited to margin or guarantee
positions in futures, options, swaps or forward contracts or the segregation of
assets in connection with such contracts.
(G) The Portfolio may not invest directly in oil, gas, or other mineral
development or exploration programs or leases; however, the Portfolio may own
debt or equity securities of companies engaged in those businesses.
(H) The Portfolio may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 25% of the value
of the Portfolio's total assets (including the amount borrowed) less liabilities
(other than borrowings). Any borrowings that exceed 25% of the value of the
Portfolio's total assets by reason of a decline in net assets will be reduced
within three business days to the extent necessary to comply with the 25%
limitation. This policy shall not prohibit reverse repurchase agreements or
deposits of assets to margin or guarantee positions in futures, options, swaps
or forward contracts, or the segregation of assets in connection with such
contracts.
(I) The Portfolio may not invest more than 15% of its net assets in
illiquid securities. This does not include securities eligible for resale
pursuant to Rule 144A under the 1933 Act or any other securities as to which the
Board of Directors has made a determination as to liquidity, as permitted under
the 1940 Act.
(J) The Portfolio may not invest in companies for the purpose of exercising
control or management.
(K) The Portfolio may not issue senior securities, except as permitted by
the 1940 Act.
8
<PAGE>
\Diamond\ GROWTH PORTFOLIO
C.A.S.E. GROWTH PORTFOLIO
BOND PORTFOLIO
A Portfolio may not, as a matter of fundamental policy:
1. With respect to 75% of the Portfolio's total assets, purchase the
securities of any one issuer (other than cash items and "Government securities"
as defined in the 1940 Act) if immediately after and as a result of such
purchase (a) the value of the holdings of the Portfolio in the securities of
such issuer exceeds 5% of the value of the Portfolio's total assets, or (b) the
Portfolio owns more than 10% of the outstanding voting securities of any one
class of securities of such issuer.
2. Invest more than 25% (15% for C.A.S.E. Growth Portfolio) of the value of
the Portfolio's assets in any particular industry (other than Government
securities).
3. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this restriction
shall not prevent the Portfolio from purchasing or selling options, futures
contracts, caps, floors and other derivative instruments, engaging in swap
transactions or investing in securities or other instruments backed by physical
commodities).
4. Invest directly in real estate or interests in real estate, including
limited partnership interests; however, the Portfolio may own debt or equity
securities issued by companies engaged in those businesses.
5. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of portfolio securities of the Portfolio.
6. Lend any security or make any other loan if, as a result, more than 25%
of its total assets would be lent to other parties (but this limitation does not
apply to purchases of commercial paper, debt securities or to repurchase
agreements).
Furthermore, the Portfolios have adopted the following non-fundamental
investment restrictions which may be changed by the Board of Directors of the
Fund without shareholder or Policyholder approval:
(A) A Portfolio may not, as a matter of non-fundamental policy: (i) enter
into any futures contracts or options on futures contracts for purposes other
than bona fide hedging transactions within the meaning of Commodity Futures
Trading Commission regulations if the aggregate initial margin deposits and
premiums required to establish positions in futures contracts and related
options that do not fall within the definition of bona fide hedging transactions
would exceed 5% of the fair market value of the Portfolio's net assets, after
taking into account unrealized profits and losses on such contracts it has
entered into and (ii) enter into any futures contracts or options on futures
contracts if the aggregate amount of the Portfolio's commitments under
outstanding futures contracts positions and options on futures contracts would
exceed the market value of its total assets.
(B) A Portfolio may not mortgage or pledge any securities owned or held by
the Portfolio in amounts that exceed, in the aggregate, 15% of the Portfolio's
net assets, provided that this limitation does not apply to reverse repurchase
agreements or in the case of assets deposited to provide margin or guarantee
positions in options, futures contracts, swaps, forward contracts or other
derivative instruments or the segregation of assets in connection with such
transactions.
(C) A Portfolio may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short, and provided that transactions in options, futures contracts, swaps,
forward contracts and other derivative instruments are not deemed to constitute
selling securities short.
(D) A Portfolio may not purchase securities on margin, except that a
Portfolio may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments and other deposits made in
connection with transactions in options, futures contracts, swaps, forward
contracts, and other derivative instruments shall not be deemed to constitute
purchasing securities on margin.
(E) A Portfolio may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 25% of the value
of the Portfolio's total assets (including the amount borrowed)
9
<PAGE>
less liabilities (other than borrowings). Any borrowings that exceed 25% of the
value of the Portfolio's total assets by reason of a decline in net assets will
be reduced within three business days to the extent necessary to comply with the
25% restriction. This policy shall not prohibit reverse repurchase agreements or
deposits of assets to provide margin or guarantee positions in connection with
transactions in options, future contracts, swaps, forward contracts, or other
derivative instruments or the segregation of assets in connection with such
transactions.
(F) A Portfolio may not invest more than 15% of its net assets in illiquid
securities. This does not include securities eligible for resale pursuant to
Rule 144A under the 1933 Act or any securities for which the Board of Directors
or the Sub-Adviser has made a determination of liquidity, as permitted under the
1940 Act.
(G) A Portfolio may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Restrictions (i) and (ii) do not apply to
money market funds or to securities received as dividends, through offers to
exchange, or as a result of reorganization, consolidation, or merger. If the
Portfolio invests in a money market fund, the Investment Adviser will reduce its
advisory fee by the amount of any investment advisory or administrative service
fees paid to the investment manager of the money market fund.
(H) A Portfolio may not invest directly in oil, gas or other mineral
development or exploration programs or leases; however, the Portfolio may own
debt or equity securities of companies engaged in those businesses.
(I) A Portfolio may not invest more than 25% of its net assets at the time
of purchase in the securities of foreign issuers and obligors.
(J) A Portfolio may not invest in companies for the purpose of exercising
control or management.
(K) A Portfolio may not issue senior securities, except as permitted by the
1940 Act.
\Diamond\ U.S. EQUITY PORTFOLIO
The Portfolio may not, as a matter of fundamental policy:
1. With respect to 75% of the Portfolio's total assets purchase the
securities of any one issuer (other than Government securities as defined in the
1940 Act) if immediately after and as a result of such purchase (a) the value of
the holdings of the Portfolio in the securities of such issuer exceeds 5% of the
value of the Portfolio's total assets, or (b) the Portfolio owns more than 10%
of the outstanding voting securities of any one class of securities of such
issuer. All securities of a foreign government and its agencies will be treated
as a single issuer for purposes of this restriction.
2. Purchase any security that would cause more than 25% of the value of the
Portfolio's total assets to be invested in the securities of issuers conducting
their principal business activities in the same industry; provided that there
shall be no limit on the purchase of U.S. government securities (as defined in
the 1940 Act). For purposes of this restriction, (a) the government of a
country, other than the United States, will be viewed as one industry; and (b)
all supranational organizations together will be viewed as one industry.
3. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Portfolio from purchasing or selling options, futures, swaps and forward
contracts or from investing in securities or other instruments backed by
physical commodities).
4. Purchase or sell real estate (but this shall not prevent the Portfolio
from investing in securities or other instruments backed by real-estate,
including mortgage-backed securities, or securities of companies engaged in the
real estate business).
5. Lend any security or make any other loan if, as a result, more than 30%
of its total assets would be lent to other parties (but this limitation does not
apply to purchases of commercial paper, debt securities or repurchase
agreements).
10
<PAGE>
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of its portfolio securities.
7. Borrow money or issue senior securities (as defined in the 1940 Act),
except that the Portfolio may borrow money from banks for temporary or emergency
purposes (not for leveraging or investment) in an aggregate amount not exceeding
33-1/3% of the value of its total assets (including the amount borrowed) less
liabilities (other than borrowings) at the time the borrowing is made. Whenever
borrowings, including reverse repurchase agreements, of 5% or more of the
Portfolio's total assets are outstanding, the Portfolio will not purchase
securities. (California insurance regulations currently limit such borrowings to
25% of total assets. See the Prospectus for the Portfolios of the Fund, page
_____.)
Furthermore, the Portfolio has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Directors of the Fund without
shareholder or Policyholder approval:
(A) The Portfolio may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount of the securities sold
short.
(B) The Portfolio may not purchase securities on margin, except that the
Portfolio may obtain such short-term credits as are necessary for clearance of
transactions. (For purposes of this restriction, the deposit or payment of
initial or variation margin in connection with futures contracts, financial
futures contracts or related options, and options on securities, options on
securities indexes and options on currencies will not be deemed to be a purchase
of securities on margin by the Portfolio.)
(C) The Portfolio may not purchase securities of other investment
companies, other than a security acquired in connection with a merger,
consolidation, acquisition, reorganization or offer of exchange and except as
otherwise permitted under the 1940 Act. Investments by the Portfolio in GEI
Short-Term Investment Fund, a private investment fund advised by GE Investment
Management Incorporated ("GEIM"), created specifically to serve as a vehicle for
the collective investment of cash balances of the Portfolio and other accounts
advised by GEIM or General Electric Investment Corporation ("GEIC") are not
subject to this restriction, pursuant to and in accordance with necessary
regulatory approvals.
(D) The Portfolio may not invest more than 15% of its net assets in
illiquid securities. For purposes of this restriction, illiquid securities are
securities that cannot be disposed of by the Portfolio within seven days in the
ordinary course of business at approximately the amount at which the Portfolio
has valued the securities. This Restriction does not include securities eligible
for resale pursuant to Rule 144A under the 1933 Act or any other securities as
to which a determination as to liquidity has been made pursuant to guidelines
adopted by the Board of Directors, as permitted under the 1940 Act.
(E) The Portfolio may not purchase restricted securities if more than 10%
of the total assets of the Portfolio would be invested in restricted securities.
Restricted securities are securities that are subject to contractual or legal
restrictions on transfer, excluding for purposes of this restriction, restricted
securities that are eligible for resale pursuant the Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A Securities), that have been
determined to be liquid under guidelines established by the Fund's Board of
Directors. In no event, will the Portfolio's investment in illiquid and
non-publicly traded securities, in the aggregate, exceed 15% of its net assets.
(F) The Portfolio may not invest in companies for the purpose of exercising
control or management, except to the extent that exercise by the Fund of its
rights under agreements related to Portfolio securities would be deemed to
constitute such control.
(G) The Portfolio may not purchase or sell put options, call options,
spreads or combinations of put options, call options and spreads, except that
the Portfolio may purchase and sell covered put and call options on securities
and stock indexes, and futures contracts and options on futures contracts.
With respect to investment restriction 2. above, the Portfolio may use the
industry classifications reflected by the S&P 500 Composite Stock Index, if
applicable at the time of determination. For all other Portfolio holdings, the
Portfolio may use the Directory of Companies Required to File Annual Reports
with the SEC and Bloomberg Inc. In addition, the Portfolio may select its own
11
<PAGE>
industry classifications, provided such classifications are reasonable.
\Diamond\ VALUE EQUITY PORTFOLIO
The Portfolio may not, as a matter of fundamental policy:
1. With respect to 75% of the Portfolio's total assets, purchase the
securities of any one issuer (other than Government securities as defined in the
1940 Act) if immediately after and as a result of such purchase (a) the value of
the holdings of the Portfolio in the securities of such issuer exceeds 5% of the
value of the Portfolio's total assets, or (b) the Portfolio owns more than 10%
of the outstanding voting securities of such issuer.
2. Invest more than 25% of the Portfolio's assets in the securities of
issuers primarily engaged in the same industry. Utilities will be divided
according to their services, for example, gas, gas transmission, electric and
telephone, and each will be considered a separate industry for purposes of this
restriction. In addition, there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, or of certificates of deposit and bankers' acceptances.
3. Make loans except (i) by purchasing debt securities in accordance with
its investment objectives and policies or by entering into repurchase agreements
or (ii) by lending the Portfolio securities to banks, brokers, dealers and other
financial institutions so long as such loans are not inconsistent with the 1940
Act or the rules and regulations or interpretations of the Securities and
Exchange Commission (the "SEC") thereunder.
4. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments.
5. Purchase or sell real estate or real estate limited partnerships (but
this shall not prevent the Portfolio from investing in securities or other
instruments backed by real estate, including mortgage-backed securities, or
securities of companies engaged in the real estate business).
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of its portfolio securities.
Furthermore, the Portfolio has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Directors of the Fund without
shareholder or Policyholder approval:
(A) The Portfolio may not purchase on margin or sell short.
(B) The Portfolio may not invest more than an aggregate of 15% of the net
assets of the Portfolio, determined at the time of investment, in illiquid
securities, subject to legal or contractual restrictions on resale or securities
for which there are no readily available markets.
(C) The Portfolio may not invest in companies for the purpose of exercising
control or management.
(D) The Portfolio may not write or acquire options or interests, or invest
directly, in oil, gas, mineral leases or other mineral exploration or
development programs or leases; however, the Portfolio may own debt or equity
securities of companies engaged in these businesses.
(E) The Portfolio may not pledge, mortgage or hypothecate any of its assets
to an extent greater than 10% of its total assets at fair market value.
(F) The Portfolio may borrow money only from banks for temporary or
emergency purposes (not for leveraging or investment) in an amount not exceeding
10% of the value of the Portfolio's total assets (including the amount borrowed)
less liabilities (other than borrowings). Any borrowings that exceed 10% of the
value of the Portfolio's total assets by reason of a decline in net assets will
be reduced within three business days to the extent necessary to comply with the
10% limitation. The Portfolio may not purchase additional securities when
borrowings exceed 5% of total assets.
(G) The Portfolio may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds or to securities received as dividends, through offers of
exchange, or as a
12
<PAGE>
result of a consolidation, merger or other reorganization.
(H) The Portfolio may not issue senior securities, except as permitted by
the 1940 Act.
\Diamond\ TACTICAL ASSET ALLOCATION
PORTFOLIO
The Portfolio may not, as a matter of fundamental policy:
1. With respect to 75% of the Portfolio's total assets, purchase the
securities of any one issuer (other than Government securities as defined in the
1940 Act) if immediately after and as a result of such purchase (a) the value of
the holdings of the Portfolio in the securities of such issuer exceeds 5% of the
value of the Portfolio's total assets, or (b) the Portfolio owns more than 10%
of the outstanding voting securities of such issuer.
2. Invest more than 25% of the Portfolio's assets in the securities of
issuers primarily engaged in the same industry. Utilities will be divided
according to their services, for example, gas, gas transmission, electric and
telephone, and each will be considered a separate industry for purposes of this
restriction. In addition, there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, or of certificates of deposit and bankers' acceptances.
3. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments.
4. Purchase or sell real estate (but this shall not prevent the Portfolio
from investing in securities or other instruments backed by real estate,
including mortgage-backed securities, or securities of companies engaged in the
real estate business).
5. Lend any security or make any other loan if, as a result, more than 25%
of its total assets would be lent to other parties (but this limitation does not
apply to purchases of commercial paper or debt securities).
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of its portfolio securities.
Furthermore, the Portfolio has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Directors of the Fund without
shareholder or Policyholder approval:
(A) The Portfolio's investment in warrants valued at the lower of cost or
market, may not exceed 5% of the value of its net assets. Included within that
amount, but not to exceed 2% of the value of the Portfolio's net assets, may be
warrants that are not listed on the New York or American Stock Exchange.
Warrants acquired by the Portfolio in units or attached to securities shall be
deemed to be without value.
(B) The Portfolio may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short.
(C) The Portfolio may not purchase securities on margin, except that the
Portfolio may obtain such short-term credits as are necessary for the clearance
of transactions.
(D) The Portfolio may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds or to securities received as dividends, through offers of
exchange, or as a result of a consolidation, merger or other reorganization.
(E) The Portfolio may not mortgage or pledge any securities owned or held
by the Portfolio in amounts that exceed, in the aggregate, 15% of the
Portfolio's net assets.
(F) The Portfolio may not invest directly in oil, gas, or other mineral
development or exploration programs or leases; however, the Portfolio may own
debt or equity securities of companies engaged in those businesses.
(G) The Portfolio may not invest in companies for the purpose of exercising
control or management.
(H) The Portfolio may not issue senior securities, except as permitted by
the 1940 Act.
13
<PAGE>
(I) The Portfolio may not invest in securities of foreign issuers
denominated in foreign currency and not publicly traded in the United States if
at the time of acquisition more than 25% of the Portfolio's total assets would
be invested in such securities. SEE "Foreign Securities", below.
(J) The Portfolio may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in excess of 25% of the value of the
Portfolio's total assets (including the amount borrowed) less liabilities (other
than borrowings). Any borrowings that exceed 25% of the value of the Portfolio's
total assets by reason of a decline in net assets will be reduced within three
business days to the extent necessary to comply with the 25% limitation.
\Diamond\ EQUITY-INCOME PORTFOLIO
The Portfolio may not, as a matter of fundamental policy:
1. With respect to 75% of the Portfolio's total assets, purchase the
securities of any one issuer (other than Government securities as defined in the
1940 Act) if immediately after and as a result of such purchase (a) the value of
the holdings of the Portfolio in the securities of such issuer exceeds 5% of the
value of the Portfolio's total assets, or (b) the Portfolio owns more than 10%
of the outstanding voting securities of such issuer.
2. Invest more than 25% of the Portfolio's assets in the securities of
issuers primarily engaged in the same industry. Utilities will be divided
according to their services, for example, gas, gas transmission, electric and
telephone, and each will be considered a separate industry for purposes of this
restriction. In addition, there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, or of certificates of deposit and bankers' acceptances.
3. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Portfolio from investing in securities or other instruments backed by physical
commodities).
4. Purchase or sell real estate (but this shall not prevent the Portfolio
from investing in securities or other instruments backed by real estate,
including mortgage-backed securities, or securities of companies engaged in the
real estate business).
5. Lend any security or make any other loan if, as a result, more than 25%
of its total assets would be lent to other parties (but this limitation does not
apply to purchases of commercial paper or debt securities).
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of its portfolio securities.
Furthermore, the Portfolio has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Directors of the Fund without
shareholder or Policyholder approval:
(A) The Portfolio's investment in warrants valued at the lower of cost or
market, may not exceed 5% of the value of its net assets. Included within that
amount, but not to exceed 2% of the value of the Portfolio's net assets, may be
warrants that are not listed on the New York or American Stock Exchange.
Warrants acquired by the Portfolio in units or attached to securities shall be
deemed to be without value.
(B) The Portfolio may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short, and provided that margin payments and other deposits in connection with
transactions in options, swaps and forward futures contracts are not deemed to
constitute selling securities short.
(C) The Portfolio may not purchase securities on margin, except that the
Portfolio may obtain such short-term credits as are necessary for the clearance
of transactions, and that margin payments and other deposits in connection with
transactions in options, futures, swaps and forward contracts shall not be
deemed to constitute purchasing securities on margin.
(D) The Portfolio may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies.
14
<PAGE>
Limitations (i) and (ii) do not apply to money market funds or to securities
received as dividends, through offers of exchange, or as a result of a
consolidation, merger or other reorganization.
(E) The Portfolio may not mortgage or pledge any securities owned or held
by the Portfolio in amounts that exceed, in the aggregate, 15% of the
Portfolio's net assets, provided that this limitation does not apply in the case
of assets deposited to margin or guarantee positions in options, futures
contracts and options on futures contracts or placed in a segregated account in
connection with such contracts.
(F) The Portfolio may not invest directly in oil, gas, or other mineral
development or exploration programs or leases; however, the Portfolio may own
debt or equity securities of companies engaged in those businesses.
(G) The Portfolio may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 25% of the value
of the Portfolio's total assets (including the amount borrowed) less liabilities
(other than borrowings). Any borrowings that exceed 25% of the value of the
Portfolio's total assets by reason of a decline in net assets will be reduced
within three business days to the extent necessary to comply with the 25%
limitation.
(H) The Portfolio may not invest more than 15% of its net assets in
illiquid securities. This does not include securities eligible for resale
pursuant to Rule 144A under the 1933 Act or any other securities as to which the
Board of Directors has made a determination as to liquidity, as permitted under
the 1940 Act.
(I) The Portfolio may not invest in companies for the purpose of exercising
control or management.
(J) The Portfolio may not issue senior securities, except as permitted by
the 1940 Act.
(K) The Portfolio may not invest in securities of foreign issuers
denominated in foreign currency and not publicly traded in the United States if
at the time of acquisition more than 10% of the Portfolio's total assets would
be invested in such securities.
\Diamond\ UTILITY PORTFOLIO
The Portfolio may not, as a matter of fundamental policy:
1. With respect to 75% of the Portfolio's total assets, purchase the
securities of any one issuer (other than Government securities as defined in the
1940 Act) if immediately after and as a result of such purchase (a) the value of
the holdings of the Portfolio in the securities of such issuer exceeds 5% of the
value of the Portfolio's total assets, or (b) the Portfolio owns more than 10%
of the outstanding voting securities of any one class of securities of such
issuer.
2. Purchase or sell commodities. However, the Portfolio may purchase put
options on portfolio securities and on financial futures contracts. In addition,
the Portfolio reserves the right to hedge the Portfolio by entering into
financial futures contracts and to sell calls on financial futures contracts.
3. Purchase or sell real estate, although it may invest in the securities
of companies whose business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real estate.
4. Lend any of its assets except portfolio securities up to one-third of
the value of its total assets. This shall not prevent the purchase or holding of
corporate bonds, debentures, notes, certificates of indebtedness or other debt
securities of an issuer, repurchase agreements, or other transactions which are
permitted by the Portfolio's investment objective and policies.
5. Underwrite any issue of securities, except as it may be deemed to be an
underwriter under the 1933 Act in connection with the sale of restricted
securities which the Portfolio may purchase pursuant to its investment objective
and policies.
Furthermore, the Portfolio has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Directors of the Fund without
shareholder or Policyholder approval:
(A) The Portfolio will not sell securities short unless: (i) during the
time the short position is open, it owns an equal amount of the securities
15
<PAGE>
sold or securities readily and freely convertible into or exchangeable, without
payment of additional consideration, for securities of the same issue as, and
equal in amount to, the securities sold short; and (ii) not more than 10% of the
Portfolio's net assets (taken at current value) is held as collateral for such
sales at any one time.
(B) The Portfolio will not purchase securities on margin, other than in
connection with the purchase of put options on financial futures contracts, but
may obtain such short-term credits as may be necessary for the clearance of
transactions.
(C) The Portfolio will not invest more than 15% of its net assets in
illiquid securities. This does not include securities eligible for resale
pursuant to Rule 144A under the 1933 Act or any securities for which the Board
of Directors or the Sub-Adviser has made a determination of liquidity, as
permitted under the 1940 Act.
(D) The Portfolio will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may invest in or
sponsor such programs.
(E) The Portfolio will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary, extraordinary, or
emergency measure to facilitate management of the Portfolio by enabling the
Portfolio to meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. The Portfolio will
not purchase any securities while any borrowings are outstanding. However,
during the period any reverse repurchase agreements are outstanding, but only to
the extent necessary to assure completion of the reverse repurchase agreements,
the Portfolio will restrict the purchase of portfolio instruments to money
market instruments maturing on or before the expiration date of the reverse
repurchase agreements.
(F) The Portfolio will not purchase or retain the securities of any issuer
if the officers and Directors of the Portfolio or its Sub-Adviser owning
individually more than 1/2 of 1% of the issuer's securities together own more
than 5% of the issuer's securities.
(G) The Portfolio will not purchase securities of a company for the purpose
of exercising control or management. However, the Portfolio will acquire no more
than 10% of the voting securities of an issuer and may exercise its voting power
in the Portfolio's best interest. From time to time, the Portfolio, together
with other investment companies advised by affiliates or subsidiaries of
Federated Investors, may together buy and hold substantial amounts of a
company's voting stock. All such stock may be voted together. In some cases, the
Portfolio and the other investment companies might collectively be considered to
be in control of the company in which they have invested.
(H) The Portfolio will not issue senior securities, except that the
Portfolio may borrow money and engage in reverse repurchase agreements in
amounts up to one-third of the value of its net assets, including the amounts
borrowed.
(I) The Portfolio will not purchase the securities of any issuer (other
than the U.S. Government, its agencies, or instrumentalities or instruments
secured by securities of such issuers, such as repurchase agreements or cash or
cash items) if, as a result, more than 5% of the value of its total assets would
be invested in the securities of such issuer, or acquire more than 10% of any
class of voting securities of any issuer. For these purposes the Portfolio takes
all common stock and all preferred stock of an issuer each as a single class,
regardless of priorities, series, designations, or other differences.
(J) The Portfolio will not write call options on securities unless the
securities are held in the Portfolio's portfolio or unless the Portfolio is
entitled to them in deliverable form without further payment or after
segregating cash in the amount of any further payment. The Portfolio will not
purchase put options on securities unless the securities are held in the
Portfolio's portfolio.
\Diamond\ BALANCED PORTFOLIO
The Portfolio may not, as a matter of fundamental policy:
1. With respect to 75% of the Portfolio's total assets, purchase the
securities of any one issuer (other than Government securities as defined in the
1940 Act) if immediately after and as a result of such purchase (a) the value of
the holdings of the Portfolio in the securities of such
16
<PAGE>
issuer exceeds 5% of the value of the Portfolio's total assets, or (b) the
Portfolio owns more than 10% of the outstanding voting securities of such
issuer.
2. Invest more than 25% of the Portfolio's assets in the securities of
issuers primarily engaged in the same industry. Utilities will be divided
according to their services, for example, gas, gas transmission, electric and
telephone, and each will be considered a separate industry for purposes of this
restriction. In addition, there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, or of certificates of deposit and bankers' acceptances.
3. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Portfolio from purchasing or selling options, futures, swaps and forward
contracts or from investing in securities or other instruments backed by
physical commodities).
4. Purchase or sell real estate (but this shall not prevent the Portfolio
from investing in securities or other instruments backed by real estate,
including mortgage-backed securities, or securities of companies engaged in the
real estate business).
5. Lend any security or make any other loan if, as a result, more than 25%
of its total assets would be lent to other parties (but this limitation does not
apply to purchase of commercial paper or debt securities).
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of its portfolio securities.
Furthermore, the Portfolio has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Directors of the Fund without
shareholder or Policyholder approval:
(A) The Portfolio's investment in warrants valued at the lower of cost or
market, may not exceed 5% of the value of its net assets. Included within that
amount, but not to exceed 2% of the value of the Portfolio's net assets, may be
warrants that are not listed on the New York or American Stock Exchange.
Warrants acquired by the Portfolio in units or attached to securities shall be
deemed to be without value.
(B) The Portfolio may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short.
(C) The Portfolio may not purchase securities on margin, except that the
Portfolio may obtain such short-term credits as are necessary for the clearance
of transactions.
(D) The Portfolio may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds or to securities received as dividends, through offers of
exchange, or as a result of a consolidation, merger or other reorganization.
(E) The Portfolio may not mortgage or pledge any securities owned or held
by the Portfolio in amounts that exceed, in the aggregate, 15% of the
Portfolio's net assets.
(F) The Portfolio may not invest directly in oil, gas, or other mineral
development or exploration programs or leases; however, the Portfolio may own
debt or equity securities of companies engaged in those businesses.
(G) The Portfolio may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in excess of 25% of the value of the
Portfolio's total assets (including the amount borrowed) less liabilities (other
than borrowings). Any borrowings that exceed 25% of the value of the Portfolio's
total assets by reason of decline in net assets will be reduced within three
business days to the extent necessary to comply with the 25% limitation.
(H) The Portfolio may not invest more than 15% of its net assets in
illiquid securities. This does not include securities eligible for resale
pursuant to Rule 144A under the 1933 Act or any other securities as to which the
Board of Directors has made a determination as to liquidity, as permitted under
the 1940 Act.
(I) The Portfolio may not invest in companies for the purpose of exercising
control or management.
17
<PAGE>
(J) The Portfolio may not issue senior securities, except as permitted by
the 1940 Act.
(K) The Portfolio may not invest in securities of foreign issuers
denominated in foreign currency and not publicly traded in the United States if
at the time of acquisition more than 25% of the Portfolio's total assets would
be invested in such securities. SEE "Foreign Securities", p. ___.
\Diamond\ SHORT-TO-INTERMEDIATE
GOVERNMENT PORTFOLIO
The Portfolio may not, as a matter of fundamental policy:
1. (a) With respect to 75% of the Portfolio's assets, invest in the
securities (other than Government securities as defined in the 1940 Act) of any
one issuer if immediately thereafter, more than 5% of the Portfolio's total
assets would be invested in securities of that issuer; or (b) with respect to
100% of the Portfolio's assets, own more than either (i) 10% in principal amount
of the outstanding debt securities of an issuer, or (ii) 10% of the outstanding
voting securities of an issuer, except that such restrictions shall not apply to
Government securities, bank money market instruments or bank repurchase
agreements.
2. Invest more than 25% of the Portfolio's assets in the securities of
issuers primarily engaged in the same industry. Utilities will be divided
according to their services, for example, gas, gas transmission, electric and
telephone, and each will be considered a separate industry for purposes of this
restriction, provided that there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, or of certificates of deposit and bankers' acceptances.
3. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Portfolio from investing in securities or other instruments backed by physical
commodities).
4. Purchase or sell real estate (but this shall not prevent the Portfolio
from investing in securities or other instruments backed by real estate,
including mortgage-backed securities, or securities of companies engaged in the
real estate business).
5. Lend any security or make any other loan if, as a result, more than 30%
of its total assets would be lent to other parties (but this limitation does not
apply to purchases of commercial paper, debt securities or repurchase
agreements).
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of its portfolio securities.
Furthermore, the Portfolio has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Directors of the Fund without
shareholder or Policyholder approval:
(A) The Portfolio's investment in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of its net assets. Included within that
amount, but not to exceed 2% of the value of the Portfolio's net assets, may be
warrants that are not listed on the New York or American Stock Exchange.
Warrants acquired by the Portfolio in units or attached to securities shall be
deemed to be without value.
(B) The Portfolio may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short.
(C) The Portfolio may not purchase securities on margin, except that the
Portfolio may obtain such short-term credits as are necessary for the clearance
of transactions.
(D) The Portfolio may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not apply to
money market funds or to securities received as dividends, through offers of
exchange, or as a result of a consolidation, merger or other reorganization.
(E) The Portfolio may not mortgage or pledge any securities owned or held
by the Portfolio in amounts that exceed, in the aggregate, 15% of the
Portfolio's net assets,
18
<PAGE>
provided that this limitation does not apply to reverse repurchase agreements.
(F) The Portfolio may not invest directly in oil, gas, or other mineral
development or exploration programs or leases; however, the Portfolio may own
debt or equity securities of companies engage in those businesses.
(G) The Portfolio may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 25% of the value
of the Portfolio's total assets (including the amount borrowed) less liabilities
(other than borrowings). Any borrowings that exceed 25% of the value of the
Portfolio's total assets by reason of a decline in net assets will be reduced
within three business days to the extent necessary to comply with the 25%
limitation. This policy shall not prohibit reverse repurchase agreements.
(H) The Portfolio may not invest more than 15% of its net assets in
illiquid securities. This does not include securities eligible for resale
pursuant to Rule 144A under the 1933 Act or any other securities as to which the
Board of Directors has made a determination as to liquidity, as permitted under
the 1940 Act.
(I) The Portfolio may not invest in companies for the purpose of exercising
control or management.
(J) The Portfolio may not issue senior securities, except as permitted by
the 1940 Act.
(K) The Portfolio may not invest in securities of foreign issuers
denominated in foreign currency and not publicly traded in the United States if
at the time of acquisition more than 10% of the Portfolio's total assets would
be invested in such securities. SEE "Foreign Securities," p. ____.
\Diamond\ MONEY MARKET PORTFOLIO
The Portfolio may not, as a matter of fundamental policy:
1. With respect to 75% of the Portfolio's total assets, purchase the
securities of any one issuer (other than cash items and "Government securities"
as defined in the 1940 Act) if immediately after and as a result of such
purchase (a) the value of the holdings of the Portfolio in the securities of
such issuer exceeds 5% of the value of the Portfolio's total assets, or (b) the
Portfolio owns more than 10% of the outstanding voting securities of any one
class of securities of such issuer.
2. Invest more than 25% of the value of the Portfolio's assets in any
particular industry (other than Government securities or obligations of U.S.
branches of U.S. banks).
3. Purchase or sell physical commodities u nless acquired as a result of
ownership of securities.
4. Purchase or sell puts, calls, straddles, spreads, or any combination
thereof, real estate (including real estate limited partnerships), commodities,
or commodity contracts or interest in oil, gas or mineral exploration or
development programs or leases. However, the Portfolio may purchase debt
securities or commercial paper issued by companies which invest in real estate
or interest therein, including real estate investment trusts;
5. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of portfolio securities of the Portfolio; and
6. Lend any security or make any other loan if, as a result, more than 25%
of its total assets would be lent to other parties (but this limitation does not
apply to purchases of commercial paper, debt securities or to repurchase
agreements).
Furthermore, the Portfolio has adopted the following non-fundamental investment
restrictions which may be changed by the Board of Directors of the Fund without
shareholder or Policyholder approval:
(A) The Portfolio may not mortgage or pledge any securities owned or held
by the Portfolio in amounts that exceed, in the aggregate, 15% of the
Portfolio's net assets, provided that this limitation does not apply to reverse
repurchase agreements or the segregation of assets in connection with such
transactions.
(B) The Portfolio may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short.
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(C) The Portfolio may not purchase securities on margin, except that the
Portfolio may obtain such short-term credits as are necessary for the clearance
of transactions.
(D) The Portfolio may borrow money only for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 25% of the value
of the Portfolio's total assets (including the amount borrowed) less liabilities
(other than borrowings). Any borrowings that exceed 25% of the value of the
Portfolio's total assets by reason of a decline in net assets will be reduced
within three business days to the extent necessary to comply with the 25%
restriction. This policy shall not prohibit reverse repurchase agreements or the
segregation of assets in connection with such transactions.
(E) The Portfolio may not invest more than 10% of its net assets in
illiquid securities. This does not include securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933 or any securities for
which the Board of Directors or the Sub-Adviser has made a determination of
liquidity, as permitted under the 1940 Act.
(F) The Portfolio may not (i) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Restrictions (i) and (ii) do not apply to
securities received as dividends, through offers to exchange, or as a result of
reorganization, consolidation, or merger.
(G) The Portfolio may not invest directly in oil, gas or other mineral
development or exploration programs or leases; however, the Portfolio may own
securities of companies engaged in those businesses.
(H) The Portfolio may not invest in companies for the purpose of exercising
control or management.
(I) The Portfolio may not issue senior securities, except as permitted by
the 1940 Act.
Except with respect to borrowing money, if a percentage limitation set forth
above in the investment restrictions for each Portfolio is complied with at the
time of the investment, a subsequent change in the percentage resulting from any
change in value of a Portfolio's net assets will not result in a violation of
such restriction. State laws and regulations may impose additional limitations
on borrowing, lending, and the use of options, futures, and other derivative
instruments. In addition, such laws and regulations may require a Portfolio's
investments in foreign securities to meet additional diversification and other
requirements.
INVESTMENT POLICIES
This section explains certain other Portfolio policies, subject to each
Portfolio's investment restrictions. PLEASE CAREFULLY REVIEW THE "INVESTMENT
RESTRICTIONS" FOR EACH PORTFOLIO LISTED ABOVE. (For a complete discussion of
each Portfolio's investment policies and restrictions, please refer to the
Fund's Prospectus for these Portfolios.)
\Diamond\ LENDING
Each of the Portfolios may lend its portfolio securities subject to the
restrictions stated in this Statement of Additional Information. Under
applicable regulatory requirements (which are subject to change), the following
conditions apply to securities loans: (a) the loan must be continuously secured
by liquid assets maintained on a current basis in an amount at least equal to
the market value of the securities loaned; (b) each of the Portfolios must
receive any dividends or interest paid by the issuer on such securities; (c)
each of the Portfolios must have the right to call the loan and obtain the
securities loaned at any time upon notice of not more than five business days,
including the right to call the loan to permit voting of the securities; and (d)
each of the Portfolios must receive either interest from the investment of
collateral or a fixed fee from the borrower. Securities loaned by a Portfolio
remain subject to fluctuations in market value. A Portfolio may pay reasonable
finders, custodian and administrative fees in connection with a loan. Securities
lending, as with other extensions of credit, involves the risk that the borrower
may default. Although securities loans will be fully collateralized at all
times, a Portfolio may experience delays in, or be prevented from, recovering
the collateral. During the period that the Portfolio seeks to enforce its rights
against the borrower, the collateral and the securities loaned remain subject to
fluctuations in market value. The Portfolios do not have the right to
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vote securities on loan, but would terminate the loan and regain the right to
vote if it were considered important with respect to the investment. A Portfolio
may also incur expenses in enforcing its rights. If a Portfolio has sold a
loaned security, it may not be able to settle the sale of the security and may
incur potential liability to the buyer of the security on loan for its costs to
cover the purchase.
The Growth, Bond, Global, International Equity, Short-to-Intermediate
Government, Emerging Growth and Equity-Income Portfolios may also lend (or
borrow) money to other funds that are managed by their respective Sub-Adviser,
provided each Portfolio seeks and obtains permission from the SEC. (See "Other
Investment Policies And Restrictions - Borrowing" in the Fund's Prospectus.)
\Diamond\ BORROWING
Subject to its investment restrictions, each Portfolio may borrow money from
banks for temporary or emergency purposes. (The Aggressive Growth Portfolio may
also borrow for investment purposes.) For a complete discussion of Portfolio
borrowing, see "Other Investment Policies And Restrictions- Borrowing" in the
Fund's Prospectus.
\Diamond\ FOREIGN SECURITIES
Subject to the limitations set forth above, a Portfolio may purchase certain
foreign securities. Investments in foreign securities, particularly those of
non-governmental issuers, involve considerations which are not ordinarily
associated with investing in domestic issuers. These considerations include
changes in currency rates, currency exchange control regulations, the
possibility of expropriation, the unavailability of financial information or the
difficulty of interpreting financial information prepared under foreign
accounting standards, less liquidity and more volatility in foreign securities
markets, the impact of political, social or diplomatic developments, and the
difficulty of assessing economic trends in foreign countries. It is possible
that market quotations for foreign securities will not be readily available. In
such event, these securities shall be valued at fair market value as determined
in good faith by the Sub-Adviser for each Portfolio under the supervision of the
Board of Directors. If it should become necessary, a Portfolio could encounter
greater difficulties in invoking legal processes abroad than would be the case
in the United States. Transaction costs with respect to foreign securities may
be higher. The Portfolio's Investment Adviser and each Sub-Adviser will consider
these and other factors before investing in foreign securities.
A Portfolio may also purchase American Depositary Receipts (`ADRs"), which are
dollar-denominated receipts issued generally by domestic banks and represent the
deposit with the bank of a security of a foreign issuer. A Portfolio may also
invest in American Depositary Shares ("ADSs"), European Depositary Receipts
("EDRs") or Global Depositary Receipts ("GDRs") and other types of receipts of
shares evidencing ownership of the underlying foreign security.
FOREIGN EXCHANGE TRANSACTIONS. To the extent a Portfolio invests directly in
foreign securities, a Portfolio will engage in foreign exchange transactions.
The foreign currency exchange market is subject to little government regulation,
and such transactions generally occur directly between parties rather than on an
exchange or in an organized market. This means that a Portfolio is subject to
the full risk of default by a counterparty in such a transaction. Because such
transactions often take place between different time zones, a Portfolio may be
required to complete a currency exchange transaction at a time outside of normal
business hours in the counterparty's location, making prompt settlement of such
transaction impossible. This exposes a Portfolio to an increased risk that the
counterparty will be unable to settle the transaction. Although the counterparty
in such transactions is often a bank or other financial institution, currency
transactions are generally NOT covered by insurance otherwise applicable to such
institutions. For a more detailed explanation regarding the special risks of
investing in foreign securities, see "Portfolio Securities And Risk Factors -
Foreign Securities" and "Portfolio Securities And Risk Factors - Foreign Bank
Obligations" in the Fund's Prospectus.
\Diamond\ INVESTMENT FUNDS (INTERNATIONAL
EQUITY PORTFOLIO)
The International Equity Portfolio may invest in investment funds which have
been authorized by the governments of certain countries specifically to permit
foreign investment in
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securities of companies listed and traded on the stock exchanges in these
respective countries. If the Portfolio invests in such investment funds, the
Portfolio's shareholders will bear not only their proportionate share of the
expenses of the Portfolio (including operating expenses and the fees of the
Investment Adviser), but also will bear indirectly similar expenses of the
underlying investment funds. In addition, the securities of these investment
funds may trade at a premium over their net asset value.
\Diamond\ REPURCHASE AND REVERSE
REPURCHASE AGREEMENTS
Subject to a Portfolio's investment restrictions and Policies, a Portfolio may
enter into repurchase or reverse repurchase agreements.
In a repurchase agreement, a Portfolio purchases a security and simultaneously
commits to resell that security to the seller at an agreed upon price on an
agreed upon date within a number of days (usually not more than seven) from the
date of purchase. The resale price reflects the purchase price plus an agreed
upon incremental amount that is unrelated to the coupon rate or maturity of the
purchased security. A repurchase agreement involves the obligation of the seller
to pay the agreed upon price, which obligation is in effect secured by the value
(at least equal to the amount of the agreed upon resale price and
marked-to-market daily) of the underlying security. A Portfolio may engage in a
repurchase agreement with respect to any security in which it is authorized to
invest. While it does not presently appear possible to eliminate all risks from
these transactions (particularly the possibility of a decline in the market
value of the underlying securities, as well as delays and costs to a Portfolio
in connection with bankruptcy proceedings), it is the policy of the Portfolio to
limit repurchase agreements to those parties whose creditworthiness has been
reviewed and found satisfactory by a Portfolio's Sub-Adviser.
In a reverse repurchase agreement, a Portfolio sells a portfolio security to
another party, such as a bank or broker-dealer, in return for cash and agrees to
repurchase the instrument at a particular price and time. While a reverse
repurchase agreement is outstanding, the Portfolio will segregate with its
custodian cash and appropriate liquid assets to cover its obligation under the
agreement. A Portfolio will enter into reverse repurchase agreements only with
parties that the Portfolio's Sub-Adviser deems creditworthy.
\Diamond\ U.S. GOVERNMENT SECURITIES
Subject to a Portfolio's investment restrictions or policies, a Portfolio may
invest in U.S. Government obligations which generally include direct obligation
of the U.S. Treasury (such as U.S. Treasury bills, notes, and bonds) and
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities. Examples of the types of U.S. Government securities that the
Portfolio may hold include the Federal Housing Administration, Small Business
Administration, General Services Administration, Federal Farm Credit Banks,
Federal Intermediate Credit Banks, and Maritime Administration. U.S. Government
securities may be supported by the full faith and credit of the U.S. Government
(such as securities of the Small Business Administration); by the right of the
issuer to borrow from the U.S. Treasury (such as securities of the Federal Home
Loan Bank); by the discretionary authority of the U.S. Government to purchase
the agency's obligations (such as securities of the Federal National Mortgage
Association); or only by the credit of the issuing agency.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. Government are: Federal Land Banks; Central Bank
for Cooperatives; Federal Intermediate Credit Banks; Federal Home Loan Banks;
Farmers Home Administration; and Federal National Mortgage Association ("FNMA").
\Diamond\ NON-INVESTMENT GRADE DEBT
SECURITIES
Subject to limitations set forth in a Portfolio's investment policies, a
Portfolio may invest its assets in debt securities below the four highest grades
("lower grade debt securities" commonly referred to as "junk bonds"), as
determined by Moody's Investors Service, Inc. ("Moody's") (lower than Baa) or
Standard & Poor's Corporation (lower than BBB). Bonds and preferred stock rated
"B" or "b" by Moody's are not considered investment grade debt securities. (See
Appendix A in the Prospectus for a description of debt security ratings.)
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Before investing in any lower-grade debt securities, a Portfolio's Sub-Adviser
will determine that such investments meet the Portfolio's investment objective
and that the lower-grade debt securities ratings are supported by an internal
credit review, which the Portfolio's Sub-Adviser will conduct in each such
instance. Lower-grade debt securities usually have moderate to poor protection
of principal and interest payments, have certain speculative characteristics,
and involve greater risk of default or price declines due to changes in the
issuer's creditworthiness than investment-grade debt securities. Because the
market for lower-grade debt securities may be thinner and less active than for
investment grade debt securities, there may be market price volatility for these
securities and limited liquidity in the resale market. Market prices for
lower-grade debt securities may decline significantly in periods of general
economic difficulty or rising interest rates. Through portfolio diversification
and credit analysis, investment risk can be reduced, although there can be no
assurance that losses will not occur.
The quality limitation set forth in each Portfolio's investment policies is
determined immediately after the Portfolio's acquisition of a given security.
Accordingly, any later change in ratings will not be considered when determining
whether an investment complies with the Portfolio's investment policies.
\Diamond\ CONVERTIBLE SECURITIES
Subject to any investment limitations set forth in a Portfolio's policies or
investment restrictions, a Portfolio may invest in convertible securities.
Convertible securities may include corporate notes or preferred stock, but
ordinarily are a long-term debt obligation of the issuer convertible at a stated
exchange rate into common stock of the issuer. As with all debt securities, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, to increase as interest rates decline. Convertible
securities generally offer lower interest or dividend yields than
non-convertible securities of similar quality. However, when the market price of
the common stock underlying a convertible security exceeds the conversion price,
the price of the convertible security tends to reflect the value of the
underlying common stock. As the market price of the underlying common stock
declines, the convertible security tends to trade increasingly on a yield basis,
and thus may not depreciate to the same extent as the underlying common stock.
Convertible securities generally rank senior to common stocks in an issuer's
capital structure and are consequently of higher quality and entail less risk of
declines in market value than the issuer's common stock. However, the extent to
which such risk is reduced depends in large measure upon the degree to which the
convertible security sells above its value as a fixed-income security. In
evaluating investment in a convertible security, primary emphasis will be given
to the attractiveness of the underlying common stock. The convertible debt
securities in which a Portfolio may invest are subject to the same rating
criteria as the Portfolio's investment in non-convertible debt securities.
\Diamond\ INVESTMENTS IN FUTURES, OPTIONS
AND OTHER DERIVATIVE
INSTRUMENTS
The following investments are subject to limitations as set forth in each
Portfolio's investment restrictions and policies:
FUTURES CONTRACTS. A Portfolio may enter into contracts for the purchase or sale
for future delivery of equity or fixed-income securities, foreign currencies or
contracts based on financial indices, including interest rates or indices of
U.S. Government or foreign government securities or equity or fixed-income
securities ("futures contracts"). U.S. futures contracts are traded on exchanges
that have been designated "contract markets" by the Commodity Futures Trading
Commission ("CFTC") and must be executed through a futures commission merchant
("FCM"), or brokerage firm, which is a member of the relevant contract market.
Through their clearing corporations, the exchanges guarantee performance of the
contracts as between the clearing members of the exchange. Since all
transactions in the futures market are made through a member of, and are offset
or fulfilled through a clearinghouse associated with, the exchange on which the
contracts are traded, a Portfolio will incur brokerage fees when it buys or
sells futures contracts.
When a Portfolio buys or sells a futures contract, it incurs a contractual
obligation to receive or deliver the underlying instrument (or a cash payment
based on the difference between the underlying instrument's closing price and
the
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price at which the contract was entered into) at a specified price on a
specified date. Transactions in futures contracts will not be made other than to
seek to hedge against potential changes in interest or currency exchange rates
or the prices of a security or a securities index which might correlate with or
otherwise adversely affect either the value of a Portfolio's securities or the
prices of securities which the Portfolio is considering buying at a later date.
The buyer or seller of futures contracts is not required to deliver or pay for
the underlying instrument unless the contract is held until the delivery date.
However, both the buyer and seller are required to deposit `initial margin" for
the benefit of an FCM when the contract is entered into. Initial margin deposits
are equal to a percentage of the contract's value, as set by the exchange on
which the contract is traded, and may be maintained in cash or certain
high-grade liquid assets. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments with an
FCM to settle the change in value on a daily basis. The party that has a gain
may be entitled to receive all or a portion of this amount. Initial and
variation margin payments are similar to good faith deposits or performance
bonds, unlike margin extended by a securities broker, and initial and variation
margin payments do not constitute purchasing securities on margin for purposes
of the Portfolio's investment limitations. In the event of the bankruptcy of an
FCM that holds margin on behalf of a Portfolio, the Portfolio may be entitled to
return of margin owed to the Portfolio only in proportion to the amount received
by the FCM's other customers. The Portfolio's Sub-Adviser will attempt to
minimize the risk by careful monitoring of the creditworthiness of the FCM's
with which the Portfolio does business and by depositing margin payments in a
segregated account with the custodian when practical or otherwise required by
law.
Although a Portfolio would hold cash and liquid assets in a segregated account
with a value sufficient to cover the Portfolio's open futures obligations, the
segregated assets would be available to the Portfolio immediately upon closing
out the futures position, while settlement of securities transactions could take
several days. However, because the Portfolio's cash that may otherwise be
invested would be held uninvested or invested in liquid assets so long as the
futures position remains open, the Portfolio's return could be diminished due to
the opportunity cost of foregoing other potential investments.
The acquisition or sale of a futures contract may occur, for example, when a
Portfolio holds or is considering purchasing equity securities and seeks to
protect itself from fluctuations in prices without buying or selling those
securities. For example, if prices were expected to decrease, a Portfolio might
sell equity index futures contracts, thereby hoping to offset a potential
decline in the value of equity securities in the Portfolio by a corresponding
increase in the value of the futures contract position held by the Portfolio and
thereby preventing a Portfolio's net asset value from declining as much as it
otherwise would have. A Portfolio also could seek to protect against potential
price declines by selling portfolio securities and investing in money market
instruments. However, since the futures market is more liquid than the cash
market, the use of futures contracts as an investment technique allows a
Portfolio to maintain a defensive position without having to sell portfolio
securities.
Similarly, when prices of equity securities are expected to increase, futures
contracts may be bought to attempt to hedge against the possibility of having to
buy equity securities at higher prices. This technique is sometimes known as an
anticipatory hedge. Since the fluctuations in the value of futures contracts
should be similar to those of equity securities, a Portfolio could take
advantage of the potential rise in the value of equity securities without buying
them until the market has stabilized. At that time, the futures contracts could
be liquidated and the Portfolio could buy equity securities on the cash market.
To the extent a Portfolio enters into futures contracts for this purpose, the
assets in the segregated asset account maintained to cover the Portfolio's
obligations with respect to futures contracts will consist of liquid assets from
its portfolio in an amount equal to the difference between the contract price
and the aggregate value of the initial and variation margin payments made by the
Portfolio with respect to the futures contracts.
The ordinary spreads between prices in the cash and futures markets, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial margin and
variation margin requirements. Rather than meeting
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additional variation margin requirements, investors may close out futures
contracts through offsetting transactions which could distort the normal price
relationship between the cash and futures markets. Second, the liquidity of the
futures market depends on participants entering into offsetting transactions
rather than making or taking delivery. To the extent participants decide to make
or take delivery, liquidity in the futures market could be reduced and prices in
the futures market distorted. Third, from the point of view of speculators, the
margin deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market may cause temporary price distortions. Due to
the possibility of the foregoing distortions, a correct forecast of general
price trends by a Portfolio's Sub-Adviser still may not result in a successful
use of futures contracts.
Futures contracts entail risks. Although each Portfolio's Sub-Adviser believes
that use of such contracts can benefit a Portfolio, if the Sub-Adviser's
investment judgment is incorrect, a Portfolio's overall performance could be
worse than if the Portfolio had not entered into futures contracts. For example,
if a Portfolio has attempted to hedge against the effects of a possible decrease
in prices of securities held by the Portfolio and prices increase instead, the
Portfolio may lose part or all of the benefit of the increased value of these
securities because of offsetting losses in the Portfolio's futures positions. In
addition, if the Portfolio has insufficient cash, it may have to sell securities
from its portfolio to meet daily variation margin requirements. Those sales may,
but will not necessarily, be at increased prices which reflect the rising market
and may occur at a time when the sales are disadvantageous to a Portfolio.
The prices of futures contracts depend primarily on the value of their
underlying instruments. Because there are a limited number of types of futures
contracts, it is possible that the standardized futures contracts available to a
Portfolio will not match exactly the Portfolio's current or potential
investments. A Portfolio may buy and sell futures contracts based on underlying
instruments with different characteristics from the securities in which it
typically invests - for example, by hedging investments in portfolio securities
with a futures contract based on a broad index of securities - which involves a
risk that the futures position will not correlate precisely with the performance
of the Portfolio's investments.
Futures prices can also diverge from the prices of their underlying instruments,
even if the underlying instruments correlate with a Portfolio's investments.
Futures prices are affected by such factors as current and anticipated
short-term interest rates, changes in volatility of the underlying instruments,
and the time remaining until expiration of the contract. Those factors may
affect securities prices differently from futures prices. Imperfect correlations
between a Portfolio's investments and its futures positions may also result from
differing levels of demand in the futures markets and the securities markets,
from structural differences in how futures and securities are traded, and from
imposition of daily price fluctuation limits for futures contracts. A Portfolio
may buy or sell futures contracts with a greater or lesser value than the
securities it wishes to hedge or is considering purchasing in order to attempt
to compensate for differences in historical volatility between the futures
contract and the securities, although this may not be successful in all cases.
If price changes in a Portfolio's futures positions are poorly correlated with
its other investments, its futures positions may fail to produce desired gains
or result in losses that are not offset by the gains in the Portfolio's other
investments.
Because futures contracts are generally settled within a day from the date they
are closed out, compared with a settlement period of seven days for some types
of securities, the futures markets can provide superior liquidity to the
securities markets. Nevertheless, there is no assurance a liquid secondary
market will exist for any particular futures contract at any particular time. In
addition, futures exchanges may establish daily price fluctuation limits for
futures contracts and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days when the
price fluctuation limit is reached, it may be impossible for a Portfolio to
enter into new positions or close out existing positions. If the secondary
market for a futures contract is not liquid because of price fluctuation limits
or otherwise, a Portfolio may not be able to promptly liquidate unfavorable
positions and potentially be required to continue to hold a futures position
until the delivery date, regardless of changes in its value. As a result, the
Portfolio's access to other assets held to
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cover its futures positions also could be impaired.
Although futures contracts by their terms call for the delivery or acquisition
of the underlying commodities or a cash payment based on the value of the
underlying commodities, in most cases the contractual obligation is offset
before the delivery date of the contract by buying, in the case of a contractual
obligation to sell, or selling, in the case of a contractual obligation to buy,
an identical futures contract on a commodities exchange. Such a transaction
cancels the obligation to make or take delivery of the commodities.
Each of the Portfolios intend to comply with guidelines of eligibility for
exclusion from the definition of the term "commodity pool operator" with the
CFTC and the National Futures Association, which regulate trading in the futures
markets. Such guidelines presently require that to the extent that a Portfolio
enters into futures contracts or options on a futures position that are not for
bona fide hedging purposes (as defined by the CFTC), the aggregate initial
margin and premiums on these positions (excluding the amount by which options
are "in-the-money") may not exceed 5% of the Portfolio's net assets.
OPTIONS ON FUTURES CONTRACTS. A Portfolio may buy and write options on futures
contracts. An option on a futures contract gives the Portfolio the right (but
not the obligation) to buy or sell a futures contract at a specified price on or
before a specified date. The purchase and writing of options on futures
contracts is similar in some respects to the purchase and writing of options on
individual securities. See `Options on Securities" on page ____. Transactions in
options on futures contracts will generally not be made other than to attempt to
hedge against potential changes in interest rates or currency exchange rates or
the price of a security or a securities index which might correlate with or
otherwise adversely affect either the value of the Portfolio's securities or the
process of securities which the Portfolio is considering buying at a later date.
The purchase of a call option on a futures contract may or may not be less risky
than ownership of the futures contract or the underlying instrument, depending
on the pricing of the option compared to either the price of the futures
contract upon which it is based or the price of the underlying instrument. As
with the purchase of futures contracts, when a Portfolio is not fully invested
it may buy a call option on a futures contract to attempt to hedge against a
market advance.
The writing of a call option on a futures contract may constitute a partial
hedge against declining prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
futures price at the expiration of the option is below the exercise price, the
Portfolio will retain the full amount of the option premium which provides a
partial hedge against any decline that may have occurred in the Portfolio's
holdings. The writing of a put option on a futures contract may constitute a
partial hedge against increasing prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures contract. If
the futures price at expiration of the option is higher than the exercise price,
the Portfolio will retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities which the
Portfolio is considering buying. If a call or put option a Portfolio has written
is exercised, the portfolio will incur loss which will be reduced by the amount
of the premium it received. Depending on the degree of correlation between
change in the value of its portfolio securities and changes in the value of the
futures positions, a Portfolio's losses from existing options on futures may to
some extent be reduced or increase by changes in the value of portfolio
securities.
The purchase of a put option on a futures contract is similar in some respect to
the purchase of protective put options on portfolio securities. For example, a
Portfolio may buy a put option on a futures contact to attempt to hedge the
Portfolio's securities against the risk of falling prices.
The amount of risk a Portfolio assumes when it buys an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the options bought.
FORWARD CONTRACTS. A Portfolio may enter into forward foreign currency exchange
contracts ("forward currency contracts") to attempt to minimize the risk to the
Portfolio from adverse
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changes in the relationship between the U.S. dollar and other currencies. A
forward currency contract is an obligation to buy or sell an amount of a
specified currency for an agreed price (which may be in U.S. dollars or a
foreign currency) at a future date which is individually negotiated between
currency traders and their customers. A Portfolio may invest in forward currency
contracts with stated contract values of up to the value of the Portfolio's
assets.
A Portfolio may exchange foreign currencies for U.S. dollars and for other
foreign currencies in the normal course of business and may buy and sell
currencies through forward currency contracts in order to fix a price for
securities it has agreed to buy or sell. A Portfolio may enter into a forward
currency contract, for example, when it enters into a contract to buy or sell a
security denominated in or exposed to fluctuations in a foreign currency in
order to "lock in" the U.S. dollar price of the security ("transaction hedge").
Additionally, when a Portfolio's Sub-Adviser believes that a foreign currency in
which portfolio securities are denominated may suffer a substantial decline
against the U.S. dollar, a Portfolio may enter into a forward currency contract
to sell an amount of that foreign currency (or a proxy currency whose
performance is expected to replicate the performance of that currency) for U.S.
dollars approximating the value of some or all of the portfolio securities
denominated in that currency (not exceeding the value of the Portfolio's assets
denominated in that currency) or by participating in options or futures
contracts with respect to the currency, or, when the Portfolio's Sub-Adviser
believes that the U.S. dollar may suffer a substantial decline against a foreign
currency for a fixed U.S. dollar amount ("position hedge"). This type of hedge
seeks to minimize the effect of currency appreciation as well as depreciation,
but does not protect against a decline in the security's value relative to other
securities denominated in the foreign currency.
A Portfolio also may enter into a forward currency contract with respect to a
currency where the Portfolio is considering the purchase of investments
denominated in that currency but has not yet done so ("anticipatory hedge").
In any of the above circumstances a Portfolio may, alternatively, enter into a
forward currency contract with respect to a different foreign currency when a
Portfolio's Sub-Adviser believes that the U.S. dollar value of that currency
will correlate with the U.S. dollar value of the currency in which portfolio
securities of, or being considered for purchase by, the Portfolio are
denominated ("cross-hedge"). For example, if a Portfolio's Sub-Adviser believes
that a particular foreign currency may decline relative to the U.S. dollar, a
Portfolio could enter into a contract to sell that currency or a proxy currency
(up to the value of the Portfolio's assets denominated in that currency) in
exchange for another currency that the Sub-Adviser expects to remain stable or
to appreciate relative to the U.S. dollar. Shifting a Portfolio's currency
exposure from one foreign currency to another removes the Portfolio's
opportunity to profit from increases in the value of the original currency and
involves a risk of increased losses to the Portfolio if the Portfolio's
Sub-Adviser's projection of future exchange rates is inaccurate.
A Portfolio also may enter into forward contracts to buy or sell at a later date
instruments in which a Portfolio may invest directly or on financial indices
based on those instruments. The market for those types of forward contracts is
developing and it is not currently possible to identify instruments on which
forward contracts might be created in the future.
A Portfolio will cover outstanding forward currency contracts by maintaining
liquid portfolio securities denominated in the currency underlying the forward
contract or the currency being hedged. To the extent that a Portfolio is not
able to cover its forward currency positions with underlying portfolio
securities, the Fund's custodian will segregate cash or other liquid assets
having a value equal to the aggregate amount of the Portfolio's commitments
under forward contracts entered into with respect to position hedges and
cross-hedges. If the value of the segregated securities declines, additional
cash or liquid assets will be segregated on a daily basis so that the value of
the account will be equal to the amount of the Portfolio's commitments with
respect to such contracts. As an alternative to maintaining all or part of the
segregated assets, a Portfolio may buy call options permitting the Portfolio to
buy the amount of foreign currency subject to the hedging transaction by a
forward sale contract or the Portfolio may buy put options permitting the
Portfolio to sell the amount of foreign currency subject to a forward buy
contract.
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While forward contracts are not currently regulated by the CFTC, the CFTC may in
the future assert authority to regulate forward contracts. In such event a
Portfolio's ability to utilize forward contracts in the manner set forth in the
Prospectus may be restricted. Forward contracts will reduce the potential gain
from a positive change in the relationship between the U.S. dollar and foreign
currencies. Unforeseen changes in currency prices may result in poorer overall
performance for a Portfolio than if it had not entered into such contracts. The
use of foreign currency forward contracts will not eliminate fluctuations in the
underlying U.S. dollar equivalent value of the proceeds of or rates of return on
a Portfolio's foreign currency denominated portfolio securities.
The matching of the increase in value of a forward contract and the decline in
the U.S. dollar equivalent value of the foreign currency denominated asset that
is the subject of the hedging transaction generally will not be precise. In
addition, a Portfolio may not always be able to enter into forward contracts at
attractive prices and accordingly may be limited in its ability to use these
contracts in seeking to hedge the Portfolio's assets.
Also, with regard to a Portfolio's use of cross-hedging transactions, there can
be no assurance that historical correlations between the movement of certain
foreign currencies relative to the U.S. dollar will continue. Thus, at any time
poor correlation may exist between movements in the exchange rates of the
foreign currencies underlying a Portfolio's cross-hedges and the movements in
the exchange rates of the foreign currencies in which the Portfolio's assets
that are subject of the cross-hedging transactions are denominated.
OPTIONS ON FOREIGN CURRENCIES. A Portfolio may buy put and call options and may
write covered put and call options on foreign currencies for hedging purposes in
a manner similar to that in which futures contracts or forward contracts on
foreign currencies may be utilized. For example, a decline in the U.S. dollar
value of a foreign currency in which portfolio securities are denominated will
reduce the U.S. dollar value of such securities, even if their value in the
foreign currency remains constant. In order to protect against such diminutions
in the value of portfolio securities, a Portfolio may buy put options on the
foreign currency. If the value of the currency declines, the Portfolio will have
the right to sell such currency for a fixed amount in U.S. dollars and will
thereby offset, in whole or in part, the adverse effect on its portfolio which
otherwise would have resulted.
Conversely, when a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, a Portfolio may buy call options thereon. The purchase
of such options could offset, at least partially, the effects of the adverse
movements in exchange rates. The purchase of an option on a foreign currency may
constitute an effective hedge against fluctuations in exchange rates, although,
in the event of exchange rate movements adverse to a Portfolio's option
position, the Portfolio could sustain losses on transactions in foreign currency
options which would require that the Portfolio lose a portion or all of the
benefits of advantageous changes in those rates. In addition, in the case of
other types of options, the benefit to a Portfolio from purchases of foreign
currency options will be reduced by the amount of the premium and related
transaction costs.
A Portfolio may write options on foreign currencies for the same types of
hedging purposes. For example, in attempting to hedge against a potential
decline in the U.S. dollar value of foreign currency denominated securities due
to adverse fluctuations in exchange rates, a Portfolio could, instead of
purchasing a put option, write a call option on the relevant currency. If the
expected decline occurs, the option will most likely not be exercised and the
diminution in value of portfolio securities will be offset by the amount of the
premium received.
Similarly, instead of purchasing a call option to attempt to hedge against a
potential increase in the U.S. dollar cost of securities to be acquired, a
Portfolio could write a put option on the relevant currency which, if rates move
in the manner projected, will expire unexercised and allow the Portfolio to
hedge the increased cost up to the amount of premium. As in the case of other
types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium received, and
only if exchange rates move in the expected direction. If that does not occur,
the option may be exercised and the Portfolio would be required to buy or sell
the underlying currency at a loss which may not be offset by the amount of the
premium. Through the writing of options on foreign currencies, a Portfolio also
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may lose all or a portion of the benefits which might otherwise have been
obtained from favorable movements in exchange rates.
A Portfolio may write covered call options on foreign currencies. A call option
written on a foreign currency by a Portfolio is "covered" if the Portfolio owns
the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by its custodian) upon conversion or exchange of other foreign currency held in
its portfolio. A call option is also covered if the Portfolio has a call on the
same foreign currency and in the same principal amount as the call written if
the exercise price of the call held (i) is equal to or less than the exercise
price of the call written or (ii) is greater than the exercise price of the call
written, and if the difference is maintained by the Portfolio in cash or
high-grade liquid assets in a segregated account with the Fund's custodian.
A Portfolio may also write call options on foreign currencies for cross-hedging
purposes that may not be deemed to be covered. A call option on a foreign
currency is for cross-hedging purposes if it is not covered but is designed to
provide a hedge against a decline due to an adverse change in the exchange rate
in the U.S. dollar value of a security which the Portfolio owns or has the right
to acquire and which is denominated in the currency underlying the option. In
such circumstances, the Portfolio collateralizes the option by maintaining
segregated assets in an amount not less than the value of the underlying foreign
currency in U.S. dollars marked-to-market daily.
A Portfolio may buy or write options in privately negotiated transactions on the
types of securities and indices based on the types of securities in which the
Portfolio is permitted to invest directly. A Portfolio will effect such
transactions only with investment dealers and other financial institutions (such
as commercial banks or savings and loan institutions) deemed creditworthy, and
only pursuant to procedures adopted by the Portfolio's Sub-Adviser for
monitoring the creditworthiness of those entities. To the extent that an option
bought or written by a Portfolio in a negotiated transaction is illiquid, the
value of an option bought or the amount of the Portfolio's obligations under an
option written by the Portfolio, as the case may be, will be subject to the
Portfolio's limitation on illiquid investments. In the case of illiquid options,
it may not be possible for the Portfolio to effect an offsetting transaction at
the time when the Portfolio's Sub-Adviser believes it would be advantageous for
the Portfolio to do so.
OPTIONS ON SECURITIES. In an effort to reduce fluctuations in net asset value, a
Portfolio may write covered put and call options and may buy put and call
options and warrants on securities that are traded on United States and foreign
securities exchanges and over-the-counter ("OTC"). A Portfolio also may write
call options that are not covered for cross-hedging purposes. A Portfolio may
write and buy options on the same types of securities that the Portfolio could
buy directly and may buy options on financial indices as described above with
respect to futures contracts. There are no specific limitations on a Portfolio's
writing and buying options on securities.
A put option gives the holder the right, upon payment of a premium, to deliver a
specified amount of a security to the writer of the option on or before a fixed
date at a predetermined price. A call option gives the holder the right, upon
payment of a premium, to call upon the writer to deliver a specified amount of a
security on or before a fixed date at a predetermined price.
A put option written by a Portfolio is "covered" if the Portfolio (i) maintains
cash not available for investment or other liquid assets with a value equal to
the exercise price in a segregated account with its custodian or (ii) holds a
put on the same security and in the same principal amount as the put written and
the exercise price of the put held is equal to or greater than the exercise
price of the put written. The premium paid by the buyer of an option will
reflect, among other things, the relationship of the exercise price to the
market price and the volatility of the underlying security, the remaining term
of the option, supply and demand and interest rates. A call option written by a
Portfolio is "covered" if the Portfolio owns the underlying security covered by
the call or has an absolute and immediate right to acquire that security without
additional cash consideration (or has segregated additional cash consideration
with its custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also deemed to be covered if the Portfolio holds a
call on the same security and in the same principal amount as the call written
and the exercise price of the call held (i) is equal to or less than the
exercise price of the call written or (ii) is greater than the exercise
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price of the call written if the difference is maintained by the Portfolio in
cash and high-grade liquid assets in a segregated account with its custodian.
A Portfolio collateralizes its obligation under a written call option for
cross-hedging purposes by segregating with its custodian cash or other liquid
assets in an amount not less than the market value of the underlying security,
marked-to-market daily. A Portfolio would write a call option for cross-hedging
purposes, instead of writing a covered call option, when the premium to be
received from the cross-hedge transaction would exceed that which would be
received from writing a covered call option and the Portfolio's Sub-Adviser
believes that writing the option would achieve the desired hedge.
If a put or call option written by a Portfolio was exercised, the Portfolio
would be obligated to buy or sell the underlying security at the exercise price.
Writing a put option involves the risk of a decrease in the market value of the
underlying security, in which case the option could be exercised and the
underlying security would then be sold by the option holder to the Portfolio at
a higher price than its current market value. Writing a call option involves the
risk of an increase in the market value of the underlying security, in which
case the option could be exercised and the underlying security would then be
sold by the Portfolio to the option holder at a lower price than its current
market value. Those risks could be reduced by entering into an offsetting
transaction. The Portfolio retains the premium received from writing a put or
call option whether or not the option is exercised.
The writer of an option may have no control when the underlying security must be
sold, in the case of a call option, or bought, in the case of a put option,
since with regard to certain options, the writer may be assigned an exercise
notice at any time prior to the termination of the obligation. Whether or not an
option expires unexercised, the writer retains the amount of the premium. This
amount, of course, may, in the case of a covered call option, be offset by a
decline in the market value of the underlying security during the option period.
If a call option is exercised, the writer experiences a profit or loss from the
sale of the underlying security. If a put option is exercised, the writer must
fulfill the obligation to buy the underlying security.
The writer of an option that wishes to terminate its obligation may effect a
"closing purchase transaction". This is accomplished by buying an option of the
same series as the option previously written. The effect of the purchase is that
the writer's position will be canceled by the clearing corporation. However, a
writer may not effect a closing purchase transaction after being notified of the
exercise of an option. Likewise, an investor who is the holder of an option may
liquidate its position by effecting a "closing sale transaction". This is
accomplished by selling an option of the same series as the option previously
bought. There is no guarantee that either a closing purchase or a closing sale
transaction can be effected.
Effecting a closing transaction in the case of a written call option will permit
a Portfolio to write another call option on the underlying security with either
a different exercise price or expiration date or both or, in the case of a
written put option, will permit a Portfolio to write another put option to the
extent that the exercise price thereof is secured by deposited high-grade liquid
assets. Also, effecting a closing transaction will permit the cash or proceeds
from the concurrent sale of any securities subject to the option to be used for
other portfolio investments. If a Portfolio desires to sell a particular
security on which the Portfolio has written a call option, the Portfolio will
effect a closing transaction prior to or concurrent with the sale of the
security.
A Portfolio may realize a profit from a closing transaction if the price of the
purchase transaction is less than the premium received from writing the option
or the price received from a sale transaction is more than the premium paid to
buy the option; a Portfolio may realize a loss from a closing transaction if the
price of the purchase transaction is less than the premium paid to buy the
option. Because increases in the market of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the repurchase of a call option is likely to be offset in whole or in part
by appreciation of the underlying security owned by the Portfolio.
An option position may be closed out only where there exists a secondary market
for an option of the same series. If a secondary market does not exist, it might
not be possible to effect closing transactions in particular options with the
result that a Portfolio would have to exercise the
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options in order to realize any profit. If a Portfolio is unable to effect a
closing purchase transaction in a secondary market, it will not be able to sell
the underlying security until the option expires or the Portfolio delivers the
underlying security upon exercise. Reasons for the absence of a liquid secondary
market may include the following: (i) there may be insufficient trading interest
in certain options, (ii) restrictions may be imposed by a national securities
exchange on which the option is traded ("Exchange") on opening or closing
transactions or both, (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of options or underlying
securities, (iv) unusual or unforeseen circumstances may interrupt normal
operations on an Exchange, (v) the facilities of an Exchange or the Options
Clearing Corporation ("OCC") may not at all times be adequate to handle current
trading volume, or (vi) one or more Exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that Exchange (or in that class or series of options) would
cease to exist, although outstanding options on that Exchange that had been
issued by the OCC as a result of trades on that Exchange would continue to be
exercisable in accordance with their terms.
A Portfolio may write options in connection with buy-and-write transactions;
that is, a Portfolio may buy a security and then write a call option against
that security. The exercise price of a call option may be below
("in-the-money"), equal to ("at-the-money") or above ("out-of-the-money") the
current value of the underlying security at the time the option is written.
Buy-and-write transactions using in-the-money call options may be used when it
is expected that the price of the underlying security will remain flat or
decline moderately during the option period. Buy-and-write transactions using
at-the-money call options may be used when it is expected that the price of the
underlying security will remain fixed or advance moderately during the option
period. Buy-and-write transactions using out-of-the-money call options may be
used when it is expected that the premiums received from writing the call option
plus the appreciation in the market price of the underlying security up to the
exercise price will be greater than the appreciation in the price of the
underlying security alone. If the call options are exercised in such
transactions, a Portfolio's maximum gain will be the premium received by it for
writing the option, adjusted upwards or downwards by the difference between the
Portfolio's purchase price of the security and the exercise price. If the
options are not exercised and the price of the underlying security declines, the
amount of such decline will be offset by the amount of premium received.
The writing of covered put options is similar in terms of risk and return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and a Portfolio's gain will be limited to the
premium received. If the market price of the underlying security declines or
otherwise is below the exercise price, the Portfolio may elect to close the
position or take delivery of the security at the exercise price and a
Portfolio's return will be the premium received from the put options minus the
amount by which the market price of the security is below the exercise price.
A Portfolio may buy put options to attempt to hedge against a decline in the
value of its securities. By using put options in this way, a Portfolio will
reduce any profit it might otherwise have realized in the underlying security by
the amount of the premium paid for the put option and by transaction costs.
A Portfolio may buy call options to attempt to hedge against an increase in the
price of securities that the Portfolio may buy in the future. The premium paid
for the call option plus any transaction costs will reduce the benefit, if any,
realized by a Portfolio upon exercise of the option, and, unless the price of
the underlying security rises sufficiently, the option may expire worthless to
the Portfolio.
In purchasing an option, a Portfolio would be in a position to realize a gain
if, during the option period, the price of the underlying security increased (in
the case of a call) or decreased (in the case of a put) by an amount in excess
of the premium paid and would realize a loss if the price of the underlying
security did not increase (in the case of a call) or decrease (in the case of a
put) during the period by more than the amount of the premium. If a put or call
option brought by a Portfolio were permitted to expire without being sold or
exercised, the Portfolio would lose the amount of the premium.
Although they entitle the holder to buy equity securities, warrants on and
options to purchase
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equity securities do not entitle the holder to dividends or voting rights with
respect to the underlying securities, nor do they represent any rights in the
assets of the issuer of those securities.
INTEREST RATE SWAPS AND SWAP-RELATED PRODUCTS. In order to attempt to protect
the value of a Portfolio's investments from interest rate or currency exchange
rate fluctuations, a Portfolio may enter into interest rate swaps, and may buy
or sell interest rate caps and floors. A Portfolio expects to enter into these
transactions primarily to attempt to preserve a return or spread on a particular
investment or portion of its portfolio. A Portfolio also may enter into these
transactions to attempt to protect against any increase in the price of
securities the Portfolio may consider buying at a later date. A Portfolio does
not intend to use these transactions as a speculative investment. Interest rate
swaps involve the exchange by a Portfolio with another party of their respective
commitments to pay or receive interest, E.G., an exchange of floating rate
payments for fixed rate payments. The exchange commitments can involve payments
to be made in the same currency or in different currencies. The purchase of an
interest rate cap entitles the purchaser, to the extent that a specified index
exceeds a predetermined interest rate, to receive payments of interest on a
contractually based principal amount from the party selling the interest rate
cap. The purchase of an interest rate floor entitles the purchaser, to the
extent that a specified index falls below a predetermined interest rate, to
receive payments of interest on a contractually based principal amount from the
party selling the interest rate floor.
Swap and swap-related products are specialized OTC instruments and their use
involves risks specific to the markets in which they are entered into. A
Portfolio will usually enter into interest rate swaps on a net basis, I.E., the
two payment streams are netted out, with the Portfolio receiving or paying, as
the case may be, only the net amount of the two payments. The net amount of the
excess, if any, of a Portfolio's obligations over its entitlements with respect
to each interest rate swap will be calculated on a daily basis and an amount of
cash or other liquid assets having an aggregate net asset value of at least
equal to the accrued excess will be segregated with the Fund's custodian. If a
Portfolio enters into an interest rate swap on other than a net basis, the
Portfolio would segregate assets in the full amount accrued on a daily basis of
the Portfolio's obligations with respect to the swap. A Portfolio will not enter
into any interest rate swap, cap or floor transaction unless the unsecured
senior debt or the claims-paying ability of the other party thereto is rated in
one of the three highest rating categories of at least one nationally recognized
statistical rating organization at the time of entering into such transaction. A
Portfolio's Sub-Adviser will monitor the creditworthiness of all counterparties
on an ongoing basis. If there is a default by the other party to such a
transaction, a Portfolio will have contractual remedies pursuant to the
agreements related to the transaction.
The swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. The Sub-Advisers have determined
that, as a result, the swap market has become relatively liquid. Caps and floors
are more recent innovations for which standardized documentation has not yet
been developed and, accordingly, they are less liquid than swaps. To the extent
a Portfolio sells (I.E., writes) caps and floors, it will segregate with the
custodian cash or other liquid assets having an aggregate net asset value at
least equal to the full amount, accrued on a daily basis, of the Portfolio's
obligations with respect to any caps or floors.
Interest rate swap transactions are subject to limitations set forth in each
Portfolio's policies. These transactions may in some instances involve the
delivery of securities or other underlying assets by a Portfolio or its
counterparty to collateralize obligations under the swap. Under the
documentation currently used in those markets, the risk of loss with respect to
interest rate swaps is limited to the net amount of the interest payments that a
Portfolio is contractually obligated to make. If the other party to an interest
rate swap that is not collateralized defaults, a Portfolio would risk the loss
of the net amount of the payments that the Portfolio contractually is entitled
to receive. A Portfolio may buy and sell (I.E., write) caps and floors without
limitation, subject to the segregated account requirement described above.
In addition to the instruments, strategies and risks described in this Statement
of Additional Information and in the Prospectus, there may be
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additional opportunities in connection with options, futures contracts, forward
currency contracts, and other hedging techniques, that become available as each
Portfolio's Sub-Adviser develops new techniques, as regulatory authorities
broaden the range of permitted transactions and as new instruments and
techniques are developed. A Sub-Adviser may use these opportunities to the
extent they are consistent with each Portfolio's respective investment objective
and are permitted by each Portfolio's respective investment limitations and
applicable regulatory requirements.
SPECIAL INVESTMENT CONSIDERATIONS AND RISKS. The successful use of the
investment practices described above with respect to futures contracts, options
on futures contracts, forward contracts, options on securities and on foreign
currencies, and swaps and swap-related products draws upon skills and experience
which are different from those needed to select the other instruments in which
the Portfolios invest. Should interest or exchange rates or the prices of
securities or financial indices move in an unexpected manner, a Portfolio may
not achieve the desired benefits of futures, options, swaps and forwards or may
realize losses and thus be in a worse position than if such strategies had not
been used. Unlike many exchange-traded futures contracts and options on futures
contracts, there are no daily price fluctuation limits with respect to options
on currencies, forward contracts and other negotiated or OTC instruments, and
adverse market movements could therefore continue to an unlimited extent over a
period of time. In addition, the correlation between movements in the price of
the securities and currencies hedged or used for cover will not be perfect and
could produce unanticipated losses.
A Portfolio's ability to dispose of its positions in the foregoing instruments
will depend on the availability of liquid markets in the instruments. Markets in
a number of the instruments are relatively new and still developing, and it is
impossible to predict the amount of trading interest that may exist in those
instruments in the future. Particular risks exist with respect to the use of
each of the foregoing instruments and could result in such adverse consequences
to a Portfolio as the possible loss of the entire premium paid for an option
bought by the Portfolio, the inability of the Portfolio, as the writer of a
covered call option, to benefit from the appreciation of the underlying
securities above the exercise price of the option and the possible need to defer
closing out positions in certain instruments to avoid adverse tax consequences.
As a result, no assurance can be given that a Portfolio will be able to use
those instruments effectively for the purposes set forth above.
In connection with certain of its hedging transactions, assets must be
segregated with the Fund's custodian bank to ensure that the Portfolio will be
able to meet its obligations under these instruments. Assets held in a
segregated account generally may not be disposed of for so long as the Portfolio
maintains the positions giving rise to the segregation requirement. Segregation
of a large percentage of the Portfolio's assets could impede implementation of
the Portfolio's investment policies or the Portfolio's ability to meet
redemption requests or other current obligations.
ADDITIONAL RISKS OF OPTIONS ON FOREIGN CURRENCIES, FORWARD CONTRACTS AND FOREIGN
INSTRUMENTS. Unlike transactions entered into by a Portfolio in futures
contracts, options on foreign currencies and forward contracts are not traded on
contract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the SEC. To the contrary, such instruments are traded
through financial institutions acting as market-makers, although foreign
currency options are also traded OTC. In an OTC trading environment, many of the
protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the buyer of an option cannot lose more than the amount of the premium
plus related transaction costs, this entire amount could be lost. Moreover, an
option writer and a buyer or seller of futures or forward contracts could lose
amounts substantially in excess of any premium received or initial margin or
collateral posted due to the potential additional margin and collateral
requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges are within
the jurisdiction of the SEC, as are other securities traded on such exchanges.
As a result, many of the protections provided to traders on organized exchanges
are available with respect to such transactions. In particular, all foreign
currency option positions entered into on a national securities exchange are
cleared and guaranteed
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by the OCC, thereby reducing the risk of counterparty default. Further, a liquid
secondary market in options traded on a national securities exchange may be more
readily available than in the OTC market, potentially permitting a Portfolio to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however, is
subject to the risks of the availability of a liquid secondary market described
above, as well as the risks regarding adverse market movements, margining of
options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign currencies
involve certain risks not presented by the OTC market. For example, exercise and
settlement of such options must be made exclusively through the OCC, which has
established banking relationships in applicable foreign countries for this
purpose. As a result, the OCC may, if it determines that foreign government
restrictions or taxes would prevent the orderly settlement of foreign currency
option exercises, or would result in undue burdens on the OCC or its clearing
member, impose special procedures on exercise and settlement, such as technical
changes in the mechanics of delivery of currency, the fixing of dollar
settlement prices or prohibitions, on exercise.
In addition, options on U.S. Government securities, futures contracts, options
on futures contracts, forward contracts and options on foreign currencies may be
traded on foreign exchanges and over-the-counter in foreign countries. Such
transactions are subject to the risk of governmental actions affecting trading
in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in a Portfolio's
ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) low trading volume.
\Diamond\ ZERO COUPON, PAY-IN-KIND AND
STEP COUPON SECURITIES
Subject to any limitations set forth in the policies and investment restrictions
for a Portfolio, a Portfolio may invest in zero coupon, pay-in-kind or step
coupon securities. Zero coupon and step coupon bonds are issued and traded at a
discount from their face amounts. They do not entitle the holder to any periodic
payment of interest prior to maturity or prior to a specified date when the
securities begin paying current interest. The discount from the face amount or
par value depends on the time remaining until cash payments begin, prevailing
interest rates, liquidity of the security and the perceived credit quality of
the issuer. Pay-in-kind securities may pay all or a portion of their interest or
dividends in the form of additional securities. Because they do not pay current
income, the price of pay-in-kind securities can be very volatile when interest
rates change.
Current Federal income tax law requires holders of zero coupon securities and
step coupon securities to report the portion of the original issue discount on
such securities that accrues that year as interest income, even though the
holders receive no cash payments of interest during the year. In order to
qualify as a "regulated investment company" under the Internal Revenue Code,
each Portfolio must distribute its investment company taxable income, including
the original issue discount accrued on zero coupon or step coupon bonds. Because
a Portfolio will not receive cash payments on a current basis in respect of
accrued original-issue discount on zero coupon bonds or step coupon bonds during
the period before interest payments begin, in some years a Portfolio may have to
distribute cash obtained from other sources in order to satisfy the distribution
requirements under the Code. A Portfolio might obtain such cash from selling
other portfolio holdings. These actions are likely to reduce the assets to which
a Portfolio's expenses could be allocated and to reduce the rate of return for
the Portfolio. In some circumstances, such sales might be necessary in order to
satisfy cash distribution requirements even though investment considerations
might otherwise make it undesirable for the Portfolio to sell the securities at
the time.
34
<PAGE>
Generally, the market prices of zero coupon, step coupon and pay-in-kind
securities are more volatile than the prices of securities that pay interest
periodically and in cash and are likely to respond to changes in interest rates
to a greater degree than other types of debt securities having similar
maturities and credit quality.
\Diamond\ WARRANTS AND RIGHTS
Subject to its investment limitations, a Portfolio may invest in warrants and
rights. Warrants are, in effect, longer-term call options. They give the holder
the right to purchase a given number of shares of a particular company at
specified prices, usually higher than the market price at the time of issuance,
for a period of years or to perpetuity. The purchaser of a warrant expects the
market price of the security will exceed the purchase price of the warrant plus
the exercise price of the warrant, thus giving him a profit. Of course, because
the market price may never exceed the exercise price before the expiration date
of the warrant, the purchaser of the warrant risks the loss of the entire
purchase price of the warrant. Warrants generally trade in the open market and
may be sold rather than exercised. Warrants are sometimes sold in unit form with
other securities of an issuer. Units of warrants and common stock may be
employed in financing young unseasoned companies. The purchase price of a
warrant varies with the exercise price of the warrant, the current market value
of the underlying security, the life of the warrant and various other investment
factors.
In contrast, rights, which also represent the right to buy common shares,
normally have a subscription price lower than the current market value of the
common stock and a life of two to four weeks.
Warrants and rights may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the securities which may be purchased, nor do they
represent any rights in the assets of the issuing company. Also, the value of a
warrant or right does not necessarily change with the value of the underlying
securities and a warrant or right ceases to have value if it is not exercised
prior to the expiration date.
\Diamond\ MORTGAGE-BACKED SECURITIES
A Portfolio may invest in mortgage-backed securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, or institutions such as
banks, insurance companies, and savings and loans. Some of these securities,
such as Government National Mortgage Association ("GNMA") certificates, are
backed by the full faith and credit of the U.S. Treasury while others, such as
Federal Home Loan Mortgage Corporation ("Freddie Mac") certificates, are not.
Mortgage-backed securities represent interests in a pool of mortgages. Principal
and interest payments made on the mortgages in the underlying mortgage pool are
passed through to the Portfolio. Unscheduled prepayments of principal shorten
the securities' weighted average life and may lower their total return. The
value of these securities also may change because of changes in the market's
perception of the creditworthiness of the federal agency or private institution
that issued them. In addition, the mortgage securities market in general may be
adversely affected by changes in governmental regulation or tax policies.
\Diamond\ ASSET-BACKED SECURITIES
Asset-backed securities represent interests in pools of consumer loans
(generally unrelated to mortgage loans) and most often are structured as
pass-through securities. Interest and principal payments ultimately depend on
payment of the underlying loans by individuals, although the securities may be
supported by letters of credit or other credit enhancements. The underlying
assets (E.G., loans) are subject to prepayments which shorten the securities'
weighted average life and may lower their returns. If the credit support or
enhancement is exhausted, losses or delays in payment may result if the required
payments of principal and interest are not made. The value of these securities
also may change because of changes in the market's perception of the
creditworthiness of the servicing agent for the pool, the originator of the
pool, or the financial institution providing the credit support or enhancement.
A Portfolio will invest its assets in asset-backed securities subject to any
limitations set forth in its investment policies or restrictions.
35
<PAGE>
\Diamond\ PASS-THROUGH SECURITIES
Subject to a Portfolio's investment restrictions and policies, a Portfolio may
invest its net assets in various types of pass-through securities, such as
mortgage-backed securities, asset-backed securities and participation interests.
A pass-through security is a share or certificate of interest in a pool of debt
obligations that have been repackaged by an intermediary, such as a bank or
broker-dealer. The purchaser receives an undivided interest in the underlying
pool of securities. The issuers of the underlying securities make interest and
principal payments to the intermediary which are passed through to purchasers,
such as the Portfolio. The most common type of pass-through securities are
mortgage-backed securities. GNMA Certificates are mortgage-backed securities
that evidence an undivided interest in a pool of mortgage loans. GNMA
Certificates differ from traditional bonds in that principal is paid back
monthly by the borrowers over the term of the loan rather than returned in a
lump sum at maturity. The Portfolio will generally purchase "modified
pass-through" GNMA Certificates, which entitle the holder to receive a share of
all interest and principal payments paid and owned on the mortgage pool, net of
fees paid to the "issuer" and GNMA, regardless of whether or not the mortgagor
actually makes the payment. GNMA Certificates are backed as to the timely
payment of principal and interest by the full faith and credit of the U.S.
Government.
The Federal Home Loan Mortgage Corporation ("FHLMC") issues two types of
mortgage pass-through securities: mortgage participation certificates ("PCs")
and guaranteed mortgage certificates ("GMCs"). PCs resemble GNMA Certificates in
that each PC represents a pro rata share of all interest and principal payments
made and owned on the underlying pool. FHLMC guarantees timely payments of
interest on PCs and the full return of principal. GMCs also represent a pro rata
interest in a pool of mortgages. However, these instruments pay interest
semi-annually and return principal once a year in guaranteed minimum payments.
This type of security is guaranteed by FHLMC as to timely payment of principal
and interest, but is not backed by the full faith and credit of the U.S.
Government.
FNMA issues guaranteed mortgage pass-through certificates ("FNMA Certificates").
FNMA Certificates resemble GNMA Certificates in that each FNMA Certificate
represents a pro rata share of all interest and principal payments made and
owned on the underlying pool. This type of security is guaranteed by FNMA as to
timely payment of principal and interest, but it is not backed by the full faith
and credit of the U.S. Government.
\Diamond\ OTHER INCOME PRODUCING
SECURITIES
Subject to each Portfolio's investment restrictions and policies, other types of
income producing securities that a Portfolio may purchase include, but are not
limited to, the following types of securities:
VARIABLE AND FLOATING RATE OBLIGATIONS. These types of securities are
relatively long-term instruments that often carry demand features
permitting the holder to demand payment of principal at any time or at
specified intervals prior to maturity.
STANDBY COMMITMENTS. These instruments, which are similar to a put,
give a Portfolio the option to obligate a broker, dealer or bank to
repurchase a security held by the Portfolio at a specified price.
TENDER OPTION BONDS. Tender option bonds are relatively long-term bonds
that are coupled with the agreement of a third party (such as a broker,
dealer or bank) to grant the holders of such securities the option to
tender the securities to the institution at periodic intervals.
INVERSE FLOATERS. Inverse floaters are instruments whose interest bears
an inverse relationship to the interest rate on another security. A
Portfolio will not invest more than 5% of its assets in inverse floaters.
A Portfolio will purchase instruments with demand features, standby commitments
and tender option bonds primarily for the purpose of increasing the liquidity of
its portfolio. See Appendix A in this Statement of Additional Information
regarding income producing securities in which a Portfolio may invest.
36
<PAGE>
\Diamond\ ILLIQUID AND RESTRICTED/144A
SECURITIES
A Portfolio may invest up to 15% of its net assets in illiquid securities (I.E.,
securities that are not readily marketable).
In recent years, a large institutional market has developed for certain
securities that are not registered under the 1933 Act. Institutional investors
generally will not seek to sell these instruments to the general public, but
instead will often depend on an efficient institutional market in which such
unregistered securities can readily be resold or on an issuer's ability to honor
a demand for repayment. Therefore, the fact that there are contractual or legal
restrictions on resale to the general public or certain institutions is not
dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act established a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Institutional markets for restricted securities that might
develop as a result of Rule 144A could provide both readily ascertainable values
for restricted securities and the ability to liquidate an investment in order to
satisfy share redemption orders. An insufficient number of qualified
institutional buyers interested in purchasing a Rule 144A-eligible security held
by a Portfolio could, however, adversely affect the marketability of such
portfolio security and the Portfolio might be unable to dispose of such security
promptly or at reasonable prices.
The Fund's Board of Directors has authorized each Portfolio's Sub-Adviser to
make liquidity determinations with respect to Rule 144A securities in accordance
with the guidelines established by the Board of Directors. Under the guidelines,
the Portfolio's Sub-Adviser will consider the following factors in determining
whether a Rule 144A security is liquid: 1) the frequency of trades and quoted
prices for the security; 2) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers; 3) the willingness of
dealers to undertake to make a market in the security; and 4) the nature of the
marketplace trades, including the time needed to dispose of the security, the
method of soliciting offers and the mechanics of the transfer. The sale of
illiquid securities often requires more time and results in higher brokerage
charges or dealer discounts and other selling expenses than does the sale of
securities eligible for trading on national securities exchanges or in the OTC
markets. The Portfolio may be restricted in its ability to sell such securities
at a time when a Portfolio's Sub-Adviser deems it advisable to do so. In
addition, in order to meet redemption requests, a Portfolio may have to sell
other assets, rather than such illiquid securities, at a time which is not
advantageous.
\Diamond\ OTHER INVESTMENT COMPANIES
In accordance with certain provisions of the 1940 Act, the Portfolio may invest
up to 10% of its total assets, calculated at the time of purchase, in the
securities of money market funds, which are investment companies. The 1940 Act
also provides that a Portfolio generally may not invest (i) more than 5% of its
total assets in the securities of any one investment company or (ii) in more
than 3% of the voting securities of any other investment company. A Portfolio
(except the Growth, Bond and Global Portfolios) will indirectly bear its
proportionate share of any investment advisory fees and expenses paid by the
funds in which it invest, in addition to the investment advisory fee and
expenses paid by the Portfolio. If the Growth, Bond and Global Portfolios invest
in a money market fund, the Investment Adviser will reduce its advisory fee by
the amount of any investment advisory or administrative service fees paid to the
investment manager of the money market fund.
The International Equity and U.S. Equity Portfolios may not purchase
securities of other investment companies, other than a security acquired in
connection with a merger, consolidation, acquisition, reorganization or offer of
exchange and except as otherwise permitted under the 1940 Act. Investments by
the International Equity and U.S. Equity Portfolios in GEI Short-Term Investment
Fund, an investment fund advised by GEIM, created specifically to serve as a
vehicle for the collective investment of cash balances of these Portfolios and
other accounts advised by GEIM or GEIC, is not considered an investment in
another investment company for purposes of these restrictions. The Investment
Fund is not registered with the Securities and Exchange Commission as an
investment company.
37
<PAGE>
\Diamond\ QUALITY AND DIVERSIFICATION
REQUIREMENTS (MONEY MARKET
PORTFOLIO)
For the purpose of maintaining a stable net asset value per share, the Money
Market Portfolio will (i) limit its investment in the securities (other than
U.S. Government securities and securities that benefit from certain types of
credit enhancement arrangements) of any one issuer to no more than 5% of its
total assets, measured at the time of purchase, except at any time for an
investment in a single issuer of up to 25% of the Portfolio's total assets held
for not more than three business days; and (ii) limit investments to securities
that present minimal credit risks and securities (other than U.S. Government
securities) that are rated within the highest short-term rating category by at
least two nationally recognized statistical rating organizations NRSROs or by
the only NRSRO that has rated the security. Securities which originally had a
maturity of over one year are subject to more complicated, but generally similar
rating requirements. A description of illustrative credit ratings is set forth
in Appendix A to the Fund's Prospectus. The Portfolio may also purchase unrated
securities that are of comparable quality to the rated securities described
above as determined by the Board of Directors. Additionally, if the issuer of a
particular security has issued other securities of comparable priority and
security and which have been rated in accordance with (ii) above, that security
will be deemed to have the same rating as such other rated securities.
In addition, the Board of Directors of the Fund has adopted procedures which (i)
require the Fund's Directors to approve or ratify purchases by the Portfolio of
securities (other than U.S. Government securities) that are rated by only one
NRSRO or that are unrated; (ii) require the Portfolio to maintain a
dollar-weighted average portfolio maturity of not more than 90 days and to
invest only in securities with a remaining maturity of not more than 13 months;
and (iii) require the Portfolio, in the event of certain downgrading of or
defaults on portfolio holdings, to dispose of the holdings, subject in certain
circumstances to a finding by the Fund's Directors that disposing of the holding
would not be in the Portfolio's best interest.
\Diamond\ BANK AND THRIFT OBLIGATIONS
Bank and thrift obligations in which a Portfolio may invest are limited to
dollar-denominated certificates of deposit, time deposits and bankers'
acceptances issued by bank or thrift institutions. Certificates of deposit are
short-term, unsecured, negotiable obligations of commercial banks and thrift
institutions. Time deposits are non-negotiable deposits maintained in bank or
thrift institutions for specified periods of time at stated interest rates.
Bankers' acceptances are negotiable time drafts drawn on commercial banks
usually in connection with international transactions.
Bank and thrift obligations in which the Portfolio invests may be, but are not
required to be, issued by institutions that are insured by the Federal Deposit
Insurance Corporation (the "FDIC"). Bank and thrift institutions organized under
Federal law are supervised and examined by Federal authorities and are required
to be insured by the FDIC. Institutions organized under state law are supervised
and examined by state banking authorities but are insured by the FDIC only if
they so elect. State institutions insured by the FDIC are subject to Federal
examination and to a substantial body of Federal law regulation. As a result of
Federal and state laws and regulations, federally insured bank and thrift
institutions are, among other things, generally required to maintain specified
levels of reserves and are subject to other supervision and regulation designed
to promote financial soundness.
Obligations of foreign branches of domestic banks and of United Kingdom branches
of foreign banks may be general obligations of the parent bank in addition to
the issuing branch, or may be limited by the terms of a specific obligation and
governmental regulation. Such obligations are subject to different risks than
are those of domestic banks or domestic branches of foreign banks. These risks
include foreign economic and political developments, foreign governmental
restrictions that may adversely affect payment of principal and interest on the
obligations, foreign exchange controls and foreign withholding and other taxes
on interest income. Foreign branches of domestic banks and United Kingdom
branches of foreign banks are not necessarily subject to the same or
38
<PAGE>
similar regulatory requirements that apply to domestic banks, such as mandatory
reserve requirements, loan limitations and accounting, auditing and financial
recordkeeping requirements. In addition, less information may be publicly
available about a foreign branch of a domestic bank or about a foreign bank than
about a domestic bank. Certificates of deposit issued by wholly-owned Canadian
subsidiaries of domestic banks are guaranteed as to repayment of principal and
interest (but not as to sovereign risk) by the domestic parent bank.
Obligations of domestic branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by governmental regulation as
well as governmental action in the country in which the foreign bank has its
head office. A domestic branch of a foreign bank with assets in excess of $1
billion may or may not be subject to reserve requirements imposed by the Federal
Reserve System or by the state in which the branch is located if the branch is
licensed by that state. In addition, branches licensed by the Comptroller of the
Currency and branches licensed by certain states ("State Branches") may or may
not be required to: (i) pledge to the regulator, by depositing assets with a
designated bank within the state, an amount of its assets equal to 5% of its
total liabilities; and (ii) maintain assets within the state in an amount equal
to a specified percentage of the aggregate amount of liabilities of the foreign
bank payable at or through all of its agencies or branches within the state. The
deposits of State Branches may not necessarily be insured by the FDIC.
A Portfolio may purchase obligations, or all or a portion of a package of
obligations, of smaller institutions that are Federally insured, provided the
obligation of any single institution does not exceed the Federal insurance
coverage of the obligation, presently $100,000.
MANAGEMENT OF THE FUND
\Diamond\ DIRECTORS AND OFFICERS
The directors and executive officers of the Fund and their principal
occupations for at least the last five years are set forth below:
PETER R. BROWN, DIRECTOR (DOB 5/10/28), 1475 South Belcher Road, Largo, Florida
33771. Chairman of the Board, Peter Brown Construction Company,
(construction contractors and engineers), Largo, Florida (1963 - present);
Trustee of IDEX Fund, IDEX II Series Fund and IDEX Fund 3 (___ - September,
1996) Trustee of IDEX Series Fund (September, 1996 - present) Rear Admiral
(Ret.) U.S. Navy Reserve, Civil Engineer Corps.
CHARLES C. HARRIS, DIRECTOR (DOB 7/15/30), 35 Winston Drive, Clearwater, Florida
34616. Retired (1988 present); Senior Vice President, Treasurer (1966 -
1988), Western Reserve Life Assurance Co. of Ohio; Vice President,
Treasurer (1968 - 1988), Director (1968 - 1987), Pioneer Western
Corporation; Vice President of the Fund (1986 to December, 1990); Trustee
of IDEX Fund, IDEX II Series Fund and IDEX Fund 3 (____- September, 1996);
Trustee of IDEX Series Fund (September, 1996 - present).
RUSSELL A. KIMBALL, JR., DIRECTOR (DOB 8/17/44), 1160 Gulf Boulevard, Clearwater
Beach, Florida 34630. General Manager, Sheraton Sand Key Resort (resort
hotel), Clearwater, Florida (1975 - present).
JOHN R. KENNEY (1, 2) CHAIRMAN OF THE BOARD OF DIRECTORS AND PRESIDENT (DOB
2/8/38). Chairman of the Board of Directors (1982 - present), Chief
Executive Officer (1982 - Present), President (1978 - 1987 and December,
1992 - present), Director (1978 - present), Western Reserve Life Assurance
Co. of Ohio; Chairman of the Board of Directors (September, 1996 -
present), WRL Investment Management, Inc. (investment adviser), Largo,
Florida; Chairman of the Board of Directors (September, 1996 - present),
WRL Investment Services, Inc., Largo, Florida; Chairman of the Board of
Directors and Chief Executive Officer (1988 - February, 1991), President
(1988 - 1989), Director (1976 - February, 1991), Executive Vice President
(1972 - 1988), Pioneer Western Corporation (financial services), Largo,
Florida; President and Director (1985 -
39
<PAGE>
1990) and Director (December, 1990 - present); Idex Management, Inc.
(investment adviser), Largo, Florida; Trustee (1987 - September. 1996),
Chairman (December, 1989 - September, 1990 and November, 1990 - September,
1996) and President and Chief Executive Officer (November, 1986 -
September, 1990), IDEX Fund, IDEX II Series Fund and IDEX Fund 3 (____ -
September, 1996) (investment companies); Trustee and Chairman (September,
1996 present) of IDEX Series Fund, all of Largo, Florida.
G. JOHN HURLEY (1, 2), DIRECTOR AND EXECUTIVE VICE PRESIDENT (DOB 9/12/48).
Executive Vice President (June, 1993 - present), Chief Operating Officer
(March, 1994 - present), Western Reserve Life Assurance Co. of Ohio;
Director (September, 1996 - present), WRL Investment Management, Inc.
(investment adviser), Largo, Florida; Director (September, 1996 - present),
WRL Investment Services, Inc., Largo, Florida; President and Chief
Executive Officer (September, 1990 - September, 1996), Trustee (June, 1990
- September, 1996) and Executive Vice President (June, 1988 - September,
1990) of IDEX Fund, IDEX II Series Fund and IDEX Fund 3 (investment
companies) (___ - September, 1996); Trustee, President and Chief Financial
Officer (September, 1996 present) of IDEX Series Fund ; President, Chief
Executive Officer and Director of InterSecurities, Inc. (May, 1988 -
present); Assistant Vice President of AEGON USA Managed Portfolios, Inc.
(September, 1991 August, 1992); Vice President of Pioneer Western
Corporation (May, 1988 - February, 1991) (financial services), Largo,
Florida.
RICHARD B. FRANZ, II (1, 2) TREASURER (DOB 7/12/50). Senior Vice President (1987
- present), Chief Financial Officer (1987 - December, 1995) and Treasurer
(1988 - present), Western Reserve Life Assurance Co. of Ohio; Senior Vice
President and Treasurer (1988 - February, 1991), Pioneer Western
Corporation (financial services), Largo, Florida; Treasurer (1988 -
September, 1990 and November, 1990 - September, 1996), IDEX Fund, IDEX II
Series Fund and IDEX Fund 3 (investment companies) and Treasurer
(September, 1996 - present) of IDEX Series Fund, all of Largo, Florida.
REBECCA A. FERRELL (1, 2) SECRETARY, VICE PRESIDENT AND COUNSEL (DOB 12/10/60).
Assistant Vice President and Counsel (June, 1995 - present), Attorney
(August, 1993 - June, 1995), Western Reserve Life Assurance Co. of Ohio;
Secretary and Assistant Vice President (March, 1994 - September, 1995),
Secretary, Vice President and Counsel (September, 1995 - September, 1996)
of IDEX Fund, IDEX II Series Fund and IDEX Fund 3 (investment companies)
(___ - September, 1996); Secretary, Vice President and Counsel of IDEX
Series Fund (September, 1996 - present); Attorney (September, 1992 -
August, 1993), Hearne, Graziano, Nader & Buhr, P.A.; Legal Writing
Instructor (August, 1991 - June, 1992), Florida State University College of
Law.
ALAN M. YAEGER (1, 2) EXECUTIVE VICE PRESIDENT (DOB 10/21/46). Executive Vice
President (June, 1993 - present), Chief Financial Officer (December, 1995 -
present), Senior Vice President (1981 - June, 1993) and Actuary (1972 -
present), Western Reserve Life Assurance Co. of Ohio; Director (September,
1996 - present), WRL Investment Management, Inc., (investment adviser)
Largo, Florida; Director (September, 1996 - present), WRL Investment
Services, Inc., Largo, Florida.
--------------
(1) The principal business address is Western Reserve Life Assurance Co. of
Ohio, P.O. Box 5068, Clearwater, Florida 34618-5068.
(2) Interested person as defined in the 1940 Act and affiliated person of
Investment Adviser.
The Fund pays no salaries or compensation to any of its officers, all of whom
are employees of WRL. The Fund pays an annual fee of $6,000 to each Director who
is not affiliated with the Investment Adviser or the Sub-Advisers
("disinterested Director"). Each Director also receives $500, plus expenses, per
each regular and special Board meeting attended. The table below shows each
Portfolio's allocation of Directors' fees and expenses paid for the year ended
December 31, 1995. The compensation table provides compensation amounts paid to
disinterested Directors of the Fund for the fiscal year ended December 31, 1995.
40
<PAGE>
DIRECTOR'S FEES PAID - YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------
PORTFOLIO AMOUNT PAID
--------- -----------
Aggressive Growth $ 2,251
Emerging Growth 4,959
International Equity(1) N/A
Meridian/INVESCO Global Sector1 N/A
Global 4,495
Growth 10,513
C.A.S.E. Growth 3
U.S. Equity1 N/A
Value Equity1 N/A
Tactical Asset Allocation 396
Equity-Income 3,426
Utility 411
Balanced 521
Bond 1,255
Short-to-Intermediate Government 242
Money Market 528
- ------------------
(1)Portfolio had not commenced operations as of December 31, 1995.
<TABLE>
<CAPTION>
COMPENSATION TABLE
------------------
TOTAL COMPENSATION PAID TO
DIRECTORS FROM WRL SERIES
AGGREGATE COMPENSATION FROM FUND, INC., IDEX FUND, IDEX II
NAME OF PERSON, POSITION WRL SERIES FUND, INC. SERIES FUND AND IDEX FUND 3
- ------------------------ ----------------------------- ------------------------------
<S> <C> <C>
Peter R. Brown, Director $9,500 $32,500
Charles C. Harris, Director $9,500 $32,000
Russell A. Kimball, Jr., Director $8,500 $ 8,500
</TABLE>
Commencing on January 1, 1996, a non-qualified deferred compensation plan (the
"Plan") became available to directors who are not interested persons of the
Fund. Under the Plan, compensation may be deferred that would otherwise be
payable by the Fund, IDEX Fund, IDEX II Series Fund, and/or IDEX Fund 3 to a
disinterested Director or Trustee on a current basis for services rendered as
director. Deferred compensation amounts will accumulate based on the value of
Class A shares of a portfolio of IDEX II Series Fund (without imposition of
sales charge), as elected by the director. It is not anticipated that the Plan
will have any impact on the Fund. As of December 1, 1996, the Directors and
officers of the Fund beneficially owned in the aggregate less than 1% of the
Fund's shares through ownership of Policies and Annuity Contracts indirectly
invested in the Fund. The Board of Directors has established an Audit Committee
consisting of Messrs. Brown, Harris and Kimball.
\Diamond\ THE INVESTMENT ADVISER
The information that follows supplements the information provided about the
Investment Adviser under the caption "Management of the Fund - Investment
Adviser" in the Prospectus.
WRL Investment Management, Inc. ("WRL Management") serves as the investment
adviser to each Portfolio of the Fund pursuant to an Investment Advisory
Agreement dated January 1, 1997 with the Fund. The Investment Adviser is a
wholly-owned subsidiary of First AUSA Life Insurance Company ("First AUSA"), a
stock life insurance company which is wholly-owned by AEGON USA, Inc. ("AEGON").
AEGON is a financial services holding company whose primary emphasis is on life
and health insurance and annuity and investment products. AEGON is a
wholly-owned indirect subsidiary of AEGON nv, a Netherlands corporation, which
is a publicly traded international insurance group.
41
<PAGE>
The Investment Advisory Agreement was approved by the Fund's Board of Directors,
including a majority of the Directors who are not "interested persons" of the
Fund (as defined in the 1940 Act) on October 3, 1996 and by the shareholders of
each Portfolio of the Fund on December 16, 1996. The Investment Advisory
Agreement provides that it will continue in effect for an initial term ending
January 1, 1999, and from year to year thereafter, if approved annually (a) by
the Board of Directors of the Fund or by a majority of the outstanding shares of
the Portfolio, and (b) by a majority of the Directors who are not parties to
such contract or "interested persons" of any such party. The Investment Advisory
Agreement may be terminated without penalty on 60 days' written notice at the
option of either party or by the vote of the shareholders of each Portfolio and
terminates automatically in the event of its assignment (within the meaning of
the 1940 Act).
While the Investment Adviser is at all times subject to the direction of the
Board of Directors of the Fund, the Investment Advisory Agreement provides that
the Investment Adviser, subject to review by the Board of Directors, is
responsible for the actual management of the Fund and has responsibility for
making decisions to buy, sell or hold any particular security. The Investment
Adviser also is obligated to provide all the office space, facilities, equipment
and personnel necessary to perform its duties under the Investment Advisory
Agreement. For further information about the management of each Portfolio of the
Fund, SEE "The Sub-Advisers", on page ____.
ADVISORY FEE. The method of computing the investment advisory fee is fully
described in the Fund's Prospectus. For the years ended December 31, 1995, 1994
and 1993, the Investment Adviser was paid fees for its services to each
Portfolio in the following amounts:
ADVISORY FEES
-------------
YEAR ENDED DECEMBER 31
----------------------
PORTFOLIO 1995 1994 1993
- --------- -------------------------------------------
Aggressive Growth $ 849,097 $ 125,449(1) $ N/A
Emerging Growth 1,838,573 1,262,170 240,611(3)
International Equity(2) N/A N/A N/A
Meridian/INVESCO Global Sector(2) N/A N/A N/A
Global 2,075,054 1,600,706 232,026
Growth 7,847,750 6,850,340 6,840,711
C.A.S.E. Growth 5,519(4) N/A N/A
U.S. Equity(2) N/A N/A N/A
Value Equity(2) N/A N/A N/A
Tactical Asset Allocation 433,844(5) N/A N/A
Equity-Income 1,746,022 1,180,759 224,748(3)
Utility 128,859 33,553(1) N/A
Balanced 195,339 67,043(1) N/A
Bond 409,862 407,667 387,264
Short-to-Intermediate Government 126,134 133,919 72,622
Money Market 422,357 351,798 224,406
----------- ----------- ----------
TOTAL $16,078,410 $12,013,404 $8,222,388
=========== =========== ==========
- -------------------
(1)Portfolio commenced operations March 1, 1994.
(2)Portfolio had not commenced operations as of December 31, 1995.
(3)Portfolio commenced operations March 1, 1993.
(4)Portfolio commenced operations May 1, 1995.
(5)Portfolio commenced operations January 3, 1995.
42
<PAGE>
PAYMENT OF EXPENSES. Under the terms of the Investment Advisory Agreement, the
Investment Adviser is responsible for providing investment advisory services and
furnishing office space for officers and employees of the Investment Adviser
connected with investment management of the Portfolios. Each Portfolio pays: all
expenses incurred in connection with the formation and organization of a
Portfolio, including all costs and expenses of preparing and filing the
post-effective amendment to the Fund's registration statement effecting
registration of the Portfolio and its shares under the 1940 Act and the 1933
Act; expenses in connection with ongoing registration or qualification
requirements under Federal and state securities laws; pricing costs (including
the daily calculations of net asset value); brokerage commissions and all other
expenses in connection with execution of portfolio transactions, including
interest; any compensation, fees, or reimbursements which the Fund pays to its
Directors who are not "interested persons," as that phrase is defined in the
1940 Act, of the Fund or WRL Management; compensation of the Fund's custodian,
administrative and transfer agent, registrar and dividend disbursing agent;
legal, accounting and printing expenses; auditing; certain insurance premiums;
services for shareholders (including allocable telephone and personnel
expenses); costs of certificates and the expenses of delivering such
certificates to the purchaser of shares relating thereto; expenses of local
representation in Maryland; fees and/or expenses payable pursuant to any plan of
distribution adopted with respect to the Fund in accordance with Rule 12b-1
under the 1940 Act; expenses of shareholders' meetings and of preparing,
printing, and distributing notices, proxy statements and reports to
shareholders; all costs involved in preparing and printing prospectuses of the
Fund; extraordinary expenses; and all other expenses properly payable by the
Fund or the Portfolios.
The Investment Adviser has voluntarily undertaken, until at least April 30,
1997, to pay expenses on behalf of the Portfolios (except the Meridian/INVESCO
Global Sector Portfolio) to the extent normal operating expenses (including
investment advisory fees but excluding interest, taxes, brokerage fees,
commissions and extraordinary charges) exceed, as a percentage of each
Portfolio's average daily net assets, 1.00% (0.70% for the Bond and Money Market
Portfolios, 1.50% for the International Equity Portfolio and 1.30% for the U.S.
Equity Portfolio). The following expenses were paid by the previous investment
adviser, Western Reserve, for the fiscal years ended December 31, 1995, 1994,
and 1993:
PORTFOLIO EXPENSES PAID BY INVESTMENT ADVISER
---------------------------------------------
YEAR ENDED DECEMBER 31
----------------------
PORTFOLIO 1995 1994 1993
- --------- ---------- ----------- ----------
Aggressive Growth $ -0-(1) $28,885(2) $ N/A
Emerging Growth -0-(1) -0-(1) 51,181(6)
International Equity(7) N/A N/A N/A
Meridian /INVESCO Global Sector(7) N/A N/A N/A
Global(3) -0-(1) -0-(1) -0-(1)
Growth -0-(1) -0-(1) -0-(1)
C.A.S.E. Growth 23,832(4) N/A N/A
U.S. Equity(7) N/A N/A N/A
Value Equity(7) N/A N/A N/A
Tactical Asset Allocation(5) -0-(1) N/A N/A
Equity-Income -0-(1) -0-(1) 36,518(6)
Utility 14,417 40,148(2) N/A
Balanced -0-(1) 28,629(2) N/A
Bond -0-(1) -0-(1) -0-(1)
Short-to-Intermediate Government -0-(1) -0-(1) 2,226
Money Market -0-(1) -0-(1) -0-(1)
- ---------------
(1)There were no expenses paid on behalf of this Portfolio because the expenses
did not exceed the limitations.
(2)Portfolio commenced operations on March 1,1994.
(3)Prior to May 1, 1994, the Investment Adviser had voluntarily undertaken
to pay expenses on behalf of the Global Portfolio to the extent that these
expenses exceeded 2.50% of the first $30 million of assets, 2.00% of the next
$70 million of assets, and 1.50% of assets in excess of $100 million.
(4)Portfolio commenced operations on May 1, 1995.
(5)Portfolio commenced operations on January 3, 1995.
(6)Portfolio commenced operations on March 1, 1993.
(7)Portfolio had not commenced operations as of December 31, 1995.
43
<PAGE>
SERVICE AGREEMENT. Effective January 1, 1997, the Fund has entered into an
Administrative Services and Transfer Agency Agreement ("Services Agreement")
with WRL Investment Services, Inc. ("WRL Services"), an affiliate of WRL
Management and Western Reserve, to furnish the Fund with administrative services
to assist the Fund in carrying out certain of its functions and operations. The
Service Agreement was approved by the Fund's Board of Directors, including a
majority of Directors who are not "interested persons" of the Fund (as defined
in the 1940 Act) on October 3, 1996. Under this Agreement, WRL Services shall
furnish to each Portfolio, subject to the overall supervision of the Fund's
Board, supervisory, administrative, and transfer agency services, including
recordkeeping and reporting. WRL Services is reimbursed by the Fund monthly on a
cost incurred basis.
DISTRIBUTION AGREEMENT. Effective January 1, 1997, the Fund adopted a
distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended.
Pursuant to the Plan, the Fund has entered into a Distribution Agreement with
InterSecurities, Inc. ("ISI"), whose principal office is located at 201 Highland
Avenue, Largo, Florida 33770. The Distribution Plan and related Agreement were
approved by the Fund's Board of Directors, including a majority of Directors who
are not "interested persons" of the Fund (as defined in the 1940 Act) and by the
shareholders of each Portfolio of the Fund on December 16, 1996. ISI is an
affiliate of the Investment Adviser.
Under the Distribution Plan and Distribution Agreement, the Fund, on behalf of
the Portfolios, will reimburse ISI after each calendar month for certain Fund
distribution expenses incurred or paid by ISI, provided that these expenses in
the aggregate do not exceed 0.15%, on an annual basis, of the average daily net
asset value of shares of each Portfolio.
Distribution expenses for which ISI may be reimbursed under the Distribution
Plan and Distribution Agreement include, but are not limited to, expenses of
printing and distributing the Fund's prospectus and statement of additional
information to potential investors; developing and preparing Fund
advertisements; sales literature and other promotional materials; holding
seminars and sales meetings designed to promote distribution of Fund shares; the
development of consumer-oriented sales materials describing and/or relating to
the Fund; and expenses attributable to "distribution-related services" provided
to the Fund, which include such things as salaries and benefits, office
expenses, equipment expenses, training costs, travel costs, printing costs,
supply expenses, computer programming time, and data center expenses, each as
they relate to the promotion of the sale of Fund shares.
ISI submits to the Directors of the Fund for approval annual distribution
budgets and quarterly reports of distribution expenses with respect to each
Portfolio. ISI allocates to each Portfolio distribution expenses specifically
attributable to the distribution of shares of such Portfolio. Distribution
expenses not specifically attributable to the distribution of shares of a
particular Portfolio are allocated among the Portfolios, based upon the ratio of
net asset value of each Portfolio to the net asset value of all Portfolios, or
such other factors as ISI deems fair and are approved by the Fund's Board of
Directors.
It is anticipated that benefits provided by the Distribution Plan may include
lower fixed costs as a percentage of assets as Fund assets increase through the
growth of the Fund due to enhanced marketing efforts.
\Diamond\ THE SUB-ADVISERS
This discussion supplements the information provided about each Portfolio's
Sub-Adviser under the caption "Management of the Fund - The Sub-Advisers" in the
Prospectus.
Each Sub-Adviser serves pursuant to each Portfolio's Sub-Advisory Agreement
dated January 1, 1997 between WRL Management and the respective Sub-Adviser on
behalf of each Portfolio. The Sub-Advisory Agreements were approved by the Board
of Directors of the Fund, including a majority of the Directors who were not
"interested persons" of the Fund (as defined in the 1940 Act) on October 3, 1996
and by the shareholders of each Portfolio of the Fund on December 16, 1996. The
Sub-Advisory Agreements provide that they will continue in effect for an initial
term ending January 1, 1999, and from year to year thereafter, if approved
annually (a) by the Board of Directors of the Fund or by a majority of the
outstanding shares of each Portfolio and (b) by a majority of the Directors who
are not parties to such Agreements or "interested persons" (as defined
44
<PAGE>
in the 1940 Act) of any such party. The Sub-Advisory Agreements may be
terminated without penalty on 60 days' written notice at the option of either
party or by the vote of the shareholders of each Portfolio and terminate
automatically in the event of their assignment (within the meaning of the 1940
Act) or termination of the Investment Advisory Agreement.
Pursuant to the Sub-Advisory Agreements, each Sub-Adviser provides investment
advisory assistance and portfolio management advice to the Investment Adviser
for their respective Portfolio(s). Subject to review by the Investment Adviser
and the Board of Directors of the Fund, the Sub-Advisers are responsible for the
actual management of their respective Portfolio(s) and for making decisions to
buy, sell or hold a particular security. Each Sub-Adviser bears all of its
expenses in connection with the performance of its services under their
Sub-Advisory Agreement such as compensating and furnishing office space for
their officers and employees connected with investment and economic research,
trading and investment management of the respective Portfolio(s).
Each Sub-Adviser is a registered investment adviser under the Investment
Advisers Act of 1940, as amended. The Sub-Advisers for the Portfolios of the
Fund are:
FRED ALGER MANAGEMENT, INC. ("Alger Management") serves as Sub-Adviser to the
Aggressive Growth Portfolio. Alger Management, located at 75 Maiden Lane, New
York, New York 10038, is a wholly-owned subsidiary of Fred Alger & Company,
Incorporated, which in turn is a wholly-owned subsidiary of Alger Associates,
Inc., a financial services holding company. Alger Management is generally
engaged in the business of rendering investment advisory services to
institutions and, to a lesser extent, individuals. Alger Management has been
engaged in the business of rendering investment advisory services since 1964 and
has approximately $5.4 billion under management.
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC. ("Van Kampen") serves as
Sub-Adviser to the Emerging Growth Portfolio. Van Kampen, located at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181, is an indirect wholly-owned
subsidiary of VK/AC Holding, Inc. ("VK/AC Holding"). VK/AC Holding is a
wholly-owned subsidiary of MSAM Holdings II, Inc., which, in turn, is a
wholly-owned subsidiary of Morgan Stanley Group, Inc.
MERIDIAN INVESTMENT MANAGEMENT CORPORATION ("MERIDIAN") and INVESCO GLOBAL ASSET
MANAGEMENT LIMITED ("INVESCO") serve as Co-Sub-Advisers to the Meridian/INVESCO
Global Sector Portfolio. As discussed in the Prospectus, Meridian has the
responsibility for allocating the Portfolio's assets among asset categories,
countries and/or industries. After these allocations have been designed by
Meridian, INVESCO will select the specific securities within each category,
country or industry.
Meridian is located at 12835 East Arapahoe Road, Tower II, 7th Floor, Englewood,
Colorado 80112. Meridian is a wholly-owned subsidiary of Meridian Management &
Research Corporation ("MM&R"). Meridian provides investment management and
related services to other mutual fund portfolios and individual, corporate,
charitable and retired accounts.
INVESCO is located at Rosebank, 12 Bermudiana Road, Hamilton, Bermuda HM11. In
performing services under its Sub-Advisory Agreement with WRL Management,
INVESCO is authorized to use INVESCO-affiliated companies and their employees,
provided that INVESCO supervises and remains fully responsible for all such
services. Pursuant to this authority, INVESCO has entered into service
agreements with INVESCO Asset Management Limited, 11 Devonshire Square, London,
EC2M 4YR England, for assistance in managing the Portfolios' investments in
foreign securities, and with INVESCO Trust Company, 7800 East Union Avenue,
Denver, Colorado 80237, for assistance in managing the Portfolio's investments
in U.S. securities. These agreements were approved by the Board of Directors of
the Fund, including a majority of the Directors who were not "interested
persons" of the Fund (as defined in the 1940 Act) on March 18, 1996. INVESCO and
its affiliates are indirect wholly-owned subsidiaries of INVESCO PLC, a global
firm that managed approximately $84 billion as of December 31, 1995. INVESCO PLC
is headquartered in London, with money managers located in Europe, North America
and the Far East.
JANUS CAPITAL CORPORATION ("Janus") serves as the Sub-Adviser to the Growth
Portfolio, the Bond Portfolio and the Global Portfolio.
45
<PAGE>
Janus, located at 100 Fillmore Street, Denver, Colorado 80206, has been engaged
in the management of the Janus funds since 1969. Janus also serves as investment
adviser or sub-adviser to other mutual funds, and for individual, corporate,
charitable and retirement accounts. The aggregate market value of the assets
managed by Janus was over $40 billion as of October 1, 1996. Kansas City
Southern Industries, Inc. ("KCSI") owns 83% of Janus. KCSI, whose address is 114
West 11th Street, Kansas City, Missouri 64105-1804, is a publicly-traded holding
company whose largest subsidiary, the Kansas City Southern Railway Company, is
primarily engaged in the transportation industry. Other KCSI subsidiaries are
engaged in financial services and real estate.
C.A.S.E. MANAGEMENT, INC. ("C.A.S.E. Management") serves as Sub-Adviser to the
C.A.S.E. Growth Portfolio.
C.A.S.E. Management, located at 2255 Glades Road, Suite 221-A, Boca Raton,
Florida 33431, is a registered investment advisory firm and a wholly-owned
subsidiary of C.A.S.E., Inc. C.A.S.E. Management provides investment management
services to financial institutions, high net worth individuals, and other
professional money managers.
NWQ INVESTMENT MANAGEMENT COMPANY, INC. ("NWQ") serves as the Sub-Adviser to the
Value Equity Portfolio.
NWQ, located at 655 South Hope Street, 11th Floor, Los Angeles, California
90017, is a wholly-owned subsidiary of United Asset Management Corporation and
provides investment management services to institutions and high net worth
individuals. NWQ had approximately $5.6 billion in assets under management as of
December 31, 1995.
DEAN INVESTMENT ASSOCIATES ("Dean Investment") serves as Sub-Adviser to the
Tactical Asset Allocation Portfolio.
Dean Investment, located at 2480 Kettering Tower, Dayton, Ohio 45423-2480, is a
registered investment adviser with the SEC. Dean Investments is wholly-owned by
C.H. Dean and Associates, Inc. Founded in 1972, Dean Investments manages
portfolios for individuals and institutional clients worldwide. Dean Investments
provides a full range of investment advisory services and currently has over
$3.756 billion of assets under management.
LUTHER KING CAPITAL MANAGEMENT CORPORATION ("Luther King") serves as Sub-Adviser
to the Equity-Income Portfolio.
Luther King is located at 301 Commerce Street, Suite 1600, Fort Worth, Texas
76102. Ultimate control of Luther King is exercised by J. Luther King, Jr.
Luther King is a registered investment adviser and provides investment
management services to accounts of individual investors, mutual funds, and other
institutional investors. Luther King has served as an investment adviser for
approximately 17 years; as of March 1, 1996, the total assets managed by Luther
King exceeded $4.5 billion.
FEDERATED INVESTMENT COUNSELING ("Federated") serves as the Sub-Adviser to the
Utility Portfolio.
Federated, located at Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779, is a wholly-owned subsidiary of Federated Investors. All of the
voting securities of Federated Investors are owned by a trust, the trustees of
which are John F. Donahue, his wife, Rhodora Donahue, and his son, J.
Christopher Donahue.
AEGON USA INVESTMENT MANAGEMENT, INC. ("AEGON Investment") serves as Sub-Adviser
to the S hort-to-Intermediate Government Portfolio and the Balanced Portfolio.
AEGON Investment, located at 4333 Edgewood Road, N.E., Cedar Rapids, Iowa
52499, is of a wholly-owned subsidiary of AEGON and thus is an affiliate of the
Investment Adviser. AEGON Investment also serves as sub-adviser to the two bond
portfolios of IDEX Series Fund. AEGON Investment also manages the general
account investment portfolios of the life insurance subsidiaries of AEGON and
had in excess of $22.6 billion under management as of January 1, 1996.
J.P. MORGAN INVESTMENT MANAGEMENT INC. ("J.P. Morgan") serves as Sub-Adviser to
the Money Market Portfolio.
J.P. Morgan, located at 522 Fifth Avenue, New York, New York 10036, is a
wholly-owned subsidiary of J.P. Morgan & Co., Incorporated. J.P. Morgan provides
investment management and related services for corporate, public, and
46
<PAGE>
union employee benefit funds, foundations, endowments, insurance companies and
government agencies.
SCOTTISH EQUITABLE INVESTMENT MANAGEMENT LIMITED ("Scottish Equitable") serves
as a Co-Sub-Adviser to the International Equity Portfolio. Scottish Equitable is
located at Edinburgh Park, Edinburgh EH12 9SE. Scottish Equitable is a
wholly-owned subsidiary of Scottish Equitable plc, successor to Scottish
Equitable Life Assurance Society. Scottish Equitable is also an indirect
wholly-owned subsidiary of AEGON nv. As of December 31, 1995 Scottish Equitable
plc had approximately $15.9 billion in assets under management. The
Co-Sub-Adviser provides investment advisory and management services to certain
of its affiliates and to external organizations.
GE INVESTMENT MANAGEMENT INCORPORATED ("GEIM") serves as a Co-Sub-Adviser to the
International Equity Portfolio and as Sub-Adviser to the U.S. Equity Portfolio.
GEIM is located at 3003 Summer Street, Stamford, Connecticut 06905. GEIM, which
was formed under the laws of Delaware in 1988, is a wholly-owned subsidiary of
General Electric Company ("GE"). GEIM's principal officers and directors serve
in similar capacities with respect to General Electric Investment Corporation
("GEIC", and, together with GEIM, collectively referred to as "GE Investments"),
which like GEIM is a wholly-owned subsidiary of GE. As of June 30, 1996, GEIM
and GEIC together managed assets in excess of $ 55 billion. GE Investments
provides investment management services to external organizations and to certain
of its affiliates.
The method of computing each Sub-Adviser's fees is set forth in the Fund's
Prospectus. For the years ended December 31, 1995, 1994 and 1993 each
Sub-Adviser was paid fees for their services in the following amounts:
<TABLE>
<CAPTION>
SUB-ADVISORY FEES
-----------------
YEAR ENDED DECEMBER 31
--------------------------------------------
SUB-ADVISER PORTFOLIO 1995 1994 1993
- ----------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Alger Management Aggressive Growth $ 424,549 $ 62,724(2) -0-
Van Kampen Emerging Growth 919,287 630,629 $ 120,306(3)
Scottish Equitable/
GEIM International Equity(1) N/A N/A N/A
Meridian/ Meridian/INVESCO N/A N/A N/A
INVESCO Global Sector(1)
Janus Bond 204,931 203,833 193,632
Growth 3,923,875 3,425,888 3,420,355
Global 1,037,527 801,005 115,238
C.A.S.E. C.A.S.E. Growth 2,759(5) N/A N/A
Management
GEIM U.S. Equity(1) N/A N/A N/A
NWQ Value Equity(1) N/A N/A N/A
Dean Tactical Asset 216,922(4) N/A N/A
Investment Allocation
Luther King Equity-Income 873,011 590,528 112,374(3)
Federated Utility 85,906 22,369(2) N/A
AEGON Investment Short-to-Intermediate 63,067 66,959 36,310
Government
Balanced 94,669 19,275(2) N/A
J.P. Morgan Money Market 211,178(6) 176,549(6) 112,155(6)
<FN>
- --------------
(1)Portfolio had not commenced operations as of December 31, 1995.
(2)Portfolio commenced operations March 1, 1994.
(3)Portfolio commenced operations March 1, 1993.
(4)Portfolio commenced operations January 3, 1995.
(5)Portfolio commenced operations May 1, 1995.
(6)Fees paid to Janus, the Portfolio's previous Sub-Adviser.
</FN>
</TABLE>
47
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
\Diamond\ PORTFOLIO TURNOVER
The information that follows supplements the information provided about
portfolio turnover under the caption "Other Investment Policies and Restrictions
- - Portfolio Turnover" in the Prospectus. In computing the portfolio turnover
rate for a Portfolio, securities whose maturities or expiration dates at the
time of acquisition are one year or less are excluded. Subject to this
exclusion, the turnover rate for a Portfolio is calculated by dividing (a) the
lesser of purchases or sales of portfolio securities for the fiscal year by (b)
the monthly average of portfolio securities owned by the Portfolio during the
fiscal year.
The following table provides the Portfolios' turnover rates for the fiscal
years ended December 31, 1995, 1994 and 1993:
PORTFOLIO TURNOVER RATES
------------------------
YEAR ENDED DECEMBER 31
------------------------------------------
PORTFOLIO 1995 1994 1993
- --------- --------- ---------- -----------
Aggressive Growth 108.04% 89.73%(5) N/A
Emerging Growth 124.13% 72.62% 12.79%(2)
International Equity(1) N/A N/A N/A
Meridian/INVESCO Global Sector(1) N/A N/A N/A
Global 130.60% 192.06% 79.93%
Growth 130.48% 107.33% 77.91%
C.A.S.E. Growth 121.62%(3) N/A N/A
U.S. Equity(1) N/A N/A N/A
Value Equity(1) N/A N/A N/A
Tactical Asset Allocation 38.68%(4) N/A N/A
Equity-Income 52.59% 53.50% 27.41%(2)
Utility 78.34% 36.13%(5) N/A
Balanced 98.55% 57.73%(5) N/A
Bond 120.54% 131.73% 149.02%
Short-to-Intermediate Government 51.82% 93.70% 28.64%
Money Market(6) N/A N/A N/A
- ---------------
(1)Portfolio had not yet commenced operations as of December 31, 1995.
(2)Portfolio commenced operations March 1, 1993.
(3)Portfolio commenced operations May 1, 1995.
(4)Portfolio commenced operations January 3, 1995.
(5)Portfolio commenced operations March 1, 1994.
(6)Money Market does not have a stated portfolio turnover rate, as securities of
the type in which it invests are excluded in the usual calculation of that rate.
The future annual turnover rates cannot be precisely predicted, although an
annual turnover rate in excess of 100% is not presently anticipated for the
Aggressive Growth, Tactical Asset Allocation, Utility, Balanced and
Short-to-Intermediate Government Portfolios; 50% for the Value Equity Portfolio;
150% for the Growth Portfolio; and 200% for the Global Portfolio.
There are no fixed limitations regarding the portfolio turnover rates of the
Portfolios. Portfolio turnover rates are expected to fluctuate under constantly
changing economic conditions and market circumstances. Higher turnover rates
tend to result in higher brokerage fees. Securities initially satisfying the
basic policies and objective of each Portfolio may be disposed of when they are
no longer deemed suitable.
\Diamond\ PLACEMENT OF PORTFOLIO
BROKERAGE
Subject to policies established by the Board of Directors of the Fund, each
Portfolio's Sub-Adviser (INVESCO, a Co-Sub-Adviser to the Meridian/INVESCO
Global Sector Portfolio, determines placement of portfolio brokerage for that
Portfolio) is primarily responsible for
48
<PAGE>
placement of a Portfolio's securities transactions. In placing orders, it is the
policy of a Portfolio to obtain the most favorable net results, taking into
account various factors, including price, dealer spread or commissions, if any,
size of the transaction and difficulty of execution. While each Sub-Adviser
generally will seek reasonably competitive spreads or commissions, a Portfolio
will not necessarily be paying the lowest spread or commission available. A
Portfolio does not have any obligation to deal with any broker, dealer or group
of brokers or dealers in the execution of transactions in portfolio securities.
Decisions as to the assignment of portfolio brokerage business for a Portfolio
and negotiation of its commission rates are made by the Sub-Adviser, whose
policy is to obtain "best execution" (prompt and reliable execution at the most
favorable security price) of all portfolio transactions. In placing portfolio
transactions, the Sub-Adviser may give consideration to brokers who provide
supplemental investment research, in addition to such research obtained for a
flat fee, to the Sub-Adviser, and pay spreads or commissions to such brokers or
dealers furnishing such services which are in excess of spreads or commissions
which another broker or dealer may charge for the same transaction.
In selecting brokers and in negotiating commissions, the Sub-Adviser considers
such factors as: the broker's reliability; the quality of its execution services
on a continuing basis; the financial condition of the firm; and research
products and services provided, which include: (i) furnishing advice, either
directly or through publications or writings, as to the value of securities, the
advisability of purchasing or selling specific securities and the availability
of securities or purchasers or sellers of securities and (ii) furnishing
analyses and reports concerning issuers, industries, securities, economic
factors and trends and portfolio strategy and products and other services (such
as third party publications, reports and analyses, and computer and electronic
access, equipment, software, information and accessories) that assist each
Sub-Adviser in carrying out its responsibilities.
Supplemental research obtained through brokers or dealers will be in addition
to, and not in lieu of, the services required to be performed by a Sub-Adviser.
The expenses of a Sub-Adviser will not necessarily be reduced as a result of the
receipt of such supplemental information. A Sub-Adviser may use such research
products and services in servicing other accounts in addition to the respective
Portfolio. If a Sub-Adviser determines that any research product or service has
a mixed use, such that it also serves functions that do not assist in the
investment decision-making process, the Sub-Adviser will allocate the costs of
such service or product accordingly. The portion of the product or service that
a Sub-Adviser determines will assist it in the investment decision-making
process may be paid for in brokerage commission dollars. Such allocation may
create a conflict of interest for the Sub-Adviser. Conversely, such supplemental
information obtained by the placement of business for a Sub-Adviser will be
considered by and may be useful to the Sub-Adviser in carrying out its
obligations to a Portfolio.
When a Portfolio purchases or sells a security in the OTC market, the
transaction takes place directly with a principal market-maker, without the use
of a broker, except in those circumstances where, in the opinion of the
Sub-Adviser, better prices and executions are likely to be achieved through the
use of a broker.
Securities held by a Portfolio may also be held by other separate accounts,
mutual funds or other accounts for which the Investment Adviser or Sub-Adviser
serves as an adviser, or held by the Investment Adviser or Sub-Adviser for their
own accounts. Because of different investment objectives or other factors, a
particular security may be bought by the Investment Adviser or Sub-Adviser for
one or more clients when one or more clients are selling the same security. If
purchases or sales of securities for a Portfolio or other entities for which
they act as investment adviser or for their advisory clients arise for
consideration at or about the same time, transactions in such securities will be
made, insofar as feasible, for the respective entities and clients in a manner
deemed equitable to all. To the extent that transactions on behalf of more than
one client of the Investment Adviser or Sub-Adviser during the same period may
increase the demand for securities being purchased or the supply of securities
being sold, there may be an adverse effect on price.
On occasions when the Investment Adviser or a Sub-Adviser deems the purchase or
sale of a security to be in the best interests of a Portfolio as well as other
accounts or companies, it may to the extent permitted by applicable laws and
49
<PAGE>
regulations, but will not be obligated to, aggregate the securities to be sold
or purchased for the Portfolio with those to be sold or purchased for such other
accounts or companies in order to obtain favorable execution and lower brokerage
commissions. In that event, allocation of the securities purchased or sold, as
well as the expenses incurred in the transaction, will be made by the
Sub-Adviser in the manner it considers to be most equitable and consistent with
its fiduciary obligations to the Portfolio and to such other accounts or
companies. In some cases this procedure may adversely affect the size of the
position obtainable for a Portfolio.
The Board of Directors of the Fund periodically review the brokerage placement
practices of each Sub-Adviser on behalf of the Portfolios, and reviews the
prices and commissions, if any, paid by the Portfolios to determine if they were
reasonable.
The Board of Directors of the Fund has authorized the Sub-Advisers
to consider sales of the Policies and Annuity Contracts by a broker-dealer as a
factor in the selection of broker-dealers to execute Portfolio transactions. In
addition, the Sub-Advisers may occasionally place portfolio business with
affiliated brokers of the Investment Adviser or a Sub-Adviser, including:
InterSecurities, Inc. P.O. Box 5068, Clearwater, Florida 33518; DST Securities,
Inc., 301 West 11th Street, Kansas City, Missouri 64105; Fred Alger & Company,
Inc., 75 Maiden Lane, New York, New York 10038; and AEGON USA Securities, Inc.,
P.O. Box 1449, Cedar Rapids, Iowa 52499. As stated above, any such placement of
Portfolio business will be subject to the ability of the broker-dealer to
provide best execution and to the Rules of Fair Practice of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
COMMISSIONS PAID BY THE PORTFOLIOS
-------------------------------------------------------------------------------------------------------------------
AGGREGATE COMMISSIONS AFFILIATED BROKERAGE COMMISSIONS
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
------------------------------------------- ---------------------------------------------------------------------
PORTFOLIO 1995 1994 1993 1995 % 1994 % 1993 %
- --------- ------------- ------------- ------------ ----------- ------------- -------- --------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive $ 240,067 $ 76,028(2) N/A $ 240,067 100%(1) $ 75,128 98.82%(1) N/A N/A
N/A
Growth
Emerging 542,420 317,287 74,070(3) N/A N/A N/A N/A N/A N/A
Global 712,827(4) 241,051 53,250 N/A N/A N/A N/A N/A N/A
Growth 1,577,115 1,466,443 1,022,522 N/A \less than\1% 2,796 N/A 85,404 N/A
C.A.S.E. 8,662(5) N/A N/A N/A N/A N/A N/A N/A N/A
Growth
Tactical 208,950(6) N/A N/A N/A N/A N/A N/A N/A N/A
Asset
Allocation
Equity- 316,489 354,400 113,996(3) N/A N/A N/A N/A N/A N/A
Income
Utility 52,921 40,095(2) N/A N/A N/A N/A N/A N/A N/A
Balanced 90,724 43,311(2) N/A 1,040 1.15% 8,700 20.09%(7) N/A N/A
The Aggressive Growth Portfolio paid affiliated brokerage commissions to Alger,
Inc., the Growth Portfolio paid affiliated brokerage commissions to DST
Securities, Inc. and the Balanced Portfolio paid affiliated brokerage
commissions to AEGON USA Securities, Inc.
The Bond Portfolio, The Money Market Portfolio and the Short-to-Intermediate
Government Portfolio did not pay any brokerage commissions for the years ended
December 31, 1995, 1994 and 1993.
No information is included for the Meridian/INVESCO Global Sector, Value Equity,
International Equity or U.S. Equity Portfolios as they had not commenced
operations as of December 31, 1995.
<FN>
- ---------------
(1)The percentage of the Portfolio's aggregate dollar amount of transactions
involving the payment of commissions effected through Alger, Inc. for the fiscal
year ended December 31, 1995 and for the period March 1, 1994 through December
31, 1994 was 100% and 99.89%, respectively.
(2)Portfolio commenced operations March 1, 1994.
(3)Portfolio commenced operations March 1, 1993.
(4)This figure is higher than 1994 due to the relative increase in the amount
of total assets invested in foreign securities.
(5)Portfolio commenced operations May 1, 1995.
(6)Portfolio commenced operations January 3, 1995.
(7)The percentage of the Portfolio's aggregate dollar amount of transactions
involving the payment of commissions effected through AEGON USA Securities, Inc.
for the fiscal year ended December 31, 1995 and for the period March 1, 1994
to December 31, 1994 was 9.63% and 38.06%, respectively.
</FN>
</TABLE>
50
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
\Diamond\ DETERMINATION OF
OFFERING PRRICE
Shares of the Portfolios are currently sold only to the Separate Accounts to
fund the benefits under the Policies and the Annuity Contracts. The Portfolios
may, in the future, offer their shares to other insurance company separate
accounts. The Separate Accounts invest in shares of a Portfolio in accordance
with the allocation instructions received from holders of the Policies and the
Annuity Contracts. Such allocation rights are further described in the
prospectuses and disclosure documents for the Policies and the Annuity
Contracts. Shares of the Portfolios are sold and redeemed at their respective
net asset values as described in the Prospectus.
\Diamond\ NET ASSET VALUATION
As stated in the Prospectus, the net asset value of the Portfolios' shares is
ordinarily determined, once daily, as of the close of the regular session of
business on the New York Stock Exchange ("Exchange") (usually 4:00 p.m., Eastern
time) on each day the Exchange is open. (Currently the Exchange is closed on New
Year's Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.) The per share net asset value of a
Portfolio is determined by dividing the total value of the securities and other
assets, less liabilities, by the total number of shares outstanding. In
determining net asset value, securities listed on the national securities
exchanges and traded on the NASDAQ National Market are valued at the closing
prices on such markets, or if such a price is lacking for the trading period
immediately preceding the time of determination, such securities are valued at
their current bid price. Foreign securities and currencies are converted to U.S.
dollars using the exchange rate in effect at the close of the Exchange. Other
securities for which quotations are not readily available are valued at fair
values as determined in good faith by a Portfolio's Investment Adviser under the
supervision of the Fund's Board of Directors. Money market instruments maturing
in 60 days or less are valued on the amortized cost basis. Values of gold
bullion held by a Portfolio are based upon daily quotes provided by banks or
brokers dealing in such commodities.
INVESTMENT EXPERIENCE INFORMATION
The INFORMATION PROVIDED IN THIS SECTION SHOWS THE HISTORICAL INVESTMENT
EXPERIENCE OF EACH OF THE PORTFOLIOS. IT DOES NOT REPRESENT OR PROJECT FUTURE
INVESTMENT PERFORMANCE.
The Growth, Money Market and Bond Portfolios commenced operations on October 2,
1986; the Global and Short-to-Intermediate Government Portfolios commenced
operations on December 3, 1992; the Emerging Growth and the Equity-Income
Portfolios commenced operations March 1, 1993; the Aggressive Growth, Balanced
and the Utility Portfolios commenced operations on March 1, 1994; the Tactical
Asset Allocation Portfolio commenced operations on January 3, 1995; and the
C.A.S.E. Growth Portfolio commenced operations on May 1, 1995. The rates of
return shown below depict the actual investment experience of each Portfolio for
the periods shown. (The Value Equity, Meridian/INVESCO Global Sector,
International Equity, and U.S. Equity Portfolios had not commenced operations as
of December 31, 1995, so performance information is not yet available for those
Portfolios).
CALCULATION OF PERFORMANCE RELATED INFORMATION
The Prospectus contains a brief description of how performance is calculated.
\Diamond\ TOTAL RETURN
The rates of return shown are based on the actual investment performance, after
the
51
<PAGE>
deduction of investment advisory fees and direct Portfolio expenses. The rates
are average annual compounded rates of return for the periods ended on
December 31, 1995.
The rates of return do not reflect charges or deductions against the Series
Life Account or the Series Annuity Account, or charges and deductions against
the Policies or the Annuity Contracts. Accordingly, these rates of return do not
illustrate how actual investment performance will affect benefits under the
Policies or the Annuity Contracts. Where relevant, the prospectuses for the
Policies and the Annuity Contracts contain performance information about these
products. Moreover, these rates of return are not an estimate, projection or
guarantee of future performance.
Also shown are comparable figures for the unmanaged Standard and Poor's
Index of 500 Common Stocks, a widely used measure of stock market performance.
<TABLE>
<CAPTION>
AVERAGE ANNUAL COMPOUNDED RATES OF RETURN
-----------------------------------------
FOR THE PERIODS ENDED ON DECEMBER 31, 1995
--------------------------------------------------------------------------------
FUND PORTFOLIO INCEPTION 5 YEARS 4 YEARS 3 YEARS 2 YEARS 1 YEAR
- -------------- ---------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth (1.26%)(4) N/A N/A N/A N/A 38.02%
Emerging Growth 24.71%(3) N/A N/A N/A (7.36%) 46.79%
International Equity(7) N/A N/A N/A N/A N/A N/A
Meridian/INVESCO N/A N/A N/A N/A N/A N/A
Global Sector(7)
Global 18.67%(2) N/A N/A 18.55% 11.07% 23.06%
Growth 17.63%(1) 18.06% 9.46% 11.94% 16.15% 47.12%
C.A.S.E. Growth 20.65%(6) N/A N/A N/A N/A N/A
U.S. Equity(7) N/A N/A N/A N/A N/A N/A
Value Equity(7) N/A N/A N/A N/A N/A N/A
Tactical Asset 20.09%(5) N/A N/A N/A N/A N/A
Allocation
Equity-Income 13.49%(3) N/A N/A N/A (0.53%) 24.66%
Utility (4.58%)(4) N/A N/A N/A N/A 25.25%
Balanced (5.73%)(4) N/A N/A N/A N/A 19.80%
Bond 8.48%(1) 10.50% 8.50% 9.08% 6.98% 22.99%
Short-to-Intermediate N/A(2) N/A N/A 4.58% (0.43%) 13.54%
Government
Money Market 4.98%(1) 3.91% 3.57% 3.76% 4.42% 5.40%
Standard & Poor's 14.68% 16.59% 13.36% 15.34% 18.07% 37.58%
Index of 500 Common
Stocks
<FN>
- ---------------
(1)Portfolio commenced operations on October 2, 1986.
(2)Portfolio commenced operations on December 3, 1992.
(3)Portfolio commenced operations on March 1, 1993.
(4)Portfolio commenced operations on March 1, 1994.
(5)Portfolio commenced operations on January 3, 1995.
(6)Portfolio commenced operations on May 1, 1995.
(7)Portfolio had not yet commenced operations as of December 31, 1995.
</FN>
</TABLE>
Total return quotations for each of the Portfolios are computed by finding the
average annual compounded rates of return over the relevant periods that would
equate the initial amount invested to the ending redeemable value, according to
the following equation:
n
P (1+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value (at the end of the applicable period
of a hypothetical $1,000 payment made at the beginning of the
applicable period)
52
<PAGE>
The total return quotation calculations for a Portfolio reflect the deduction of
a proportionate share of the Portfolio's investment advisory fee and Portfolio
expenses and assume that all dividends and capital gains during the period are
reinvested in the Portfolio when made. The calculations also assume a complete
redemption as of the end of the particular period.
Total return quotation calculations do not reflect charges or deductions against
the Series Life Account or the Series Annuity Account or charges and deductions
against the Policies or the Annuity Contracts. Accordingly, these rates of
return do not illustrate how actual investment performance will affect benefits
under the Policies of the Annuity Contracts. Where relevant, the prospectuses
for the Policies and the Annuity Contracts contain performance information about
these products. Moreover, these rates of return are not an estimate, projection
or guarantee of future performance. Additional information regarding the
investment performance of the Portfolios appears in the Prospectus.
\Diamond\ YIELD QUOTATIONS
The yield quotations for a Portfolio (for Money Market Portfolio yield, see
"Yield Quotations - Money Market Portfolio", below) are based on a specific
thirty-day period and are computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last date of the period, according to the following formula:
a - b
------ 6
YIELD = 2 [ (cd + 1) - 1]
Where: a = dividends and interest earned during the period by the
Portfolio
b = expenses accrued for the period (net of reimbursement)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
The yield of the Bond Portfolio and the Short-to-Intermediate Government
Portfolio as computed above for the thirty day period ended December 31, 1995
was 5.75% and 5.58%, respectively.
\Diamond\ YIELD QUOTATIONS - MONEY
MARKET PORTFOLIO
From time to time the Money Market Portfolio may quote its yield in reports or
other communications to policyholders or in advertising material. Yield
quotations are expressed in annualized terms and reflect dividends of a
Portfolio declared and reinvested daily based upon the net investment income
earned by a Portfolio each day. The Portfolio's yields fluctuate and the yield
on any day for any past period is not an indication as to future yields on any
investment in the Portfolio's shares. Future yields are not guaranteed.
Yield is computed in accordance with a standardized method required by the SEC.
The yields for the Money Market Portfolio for the seven-day period ended
December 31, 1995, was 5.32% and was equivalent to a compound effective yield of
5.46%. The current yield for the Money Market Portfolio is an annualization,
without compounding, of the portfolio rate of return, and is computed by
determining the net change in the value of a hypothetical pre-existing account
in the Portfolio having a balance of one share at the beginning of a seven
calendar day period for which yield is to be quoted, dividing the net change by
the value of the account at the beginning of the period to obtain the base
period return, and annualizing the results (I.E., multiplying the base period
return by 365/7). The net change in the value of the account reflects the value
of additional shares purchased with dividends declared on the original shares
and any such additional shares, but does not include realized gains and losses
or unrealized appreciation and depreciation. The Money Market Portfolio may also
calculate the compound effective annualized yields by adding 1 to the base
period return (calculated as described above), raising that sum to a power equal
to 365/7, and subtracting 1. The yield quotations for the Money Market Portfolio
do not take into consideration any deductions imposed by the Series Life Account
or the Series Annuity Account.
Yield information is useful in reviewing the Money Market Portfolio's
performance in seeking to meet its investment objective, but, because yields
fluctuate, such information
53
<PAGE>
cannot necessarily be used to compare an investment in shares of the Portfolio
with bank deposits, savings accounts and similar investment alternatives, which
often provide an agreed or guaranteed fixed yield for a stated period of time.
Also, the Portfolio's yields cannot always be compared with yields determined by
different methods used by other funds. It should be emphasized that yield is a
function of the kind and quality of the instruments in the Money Market
Portfolio, portfolio maturity and operating expenses.
TAXES
Shares of the Portfolios are offered only to the Separate Accounts that fund the
Policies and Annuity Contracts. See the respective prospectuses for the Policies
and Annuity Contracts for a discussion of the special taxation of insurance
companies with respect to the Separate Accounts and of the Policies, the Annuity
Contracts and the holders thereof.
Each Portfolio has qualified (except the U.S. Equity Portfolio and International
Equity Portfolio which intend to qualify) and expects to continue to qualify for
treatment as a regulated investment company ("RIC") under the Internal Revenue
Code of 1986, as amended (the "Code"). In order to qualify for that treatment, a
Portfolio must distribute to its Policyholders for each taxable year at least
90% of its investment company taxable income (consisting generally of net
investment income, net short-term capital gain, and net gains from certain
foreign currency transactions) ("distribution Requirement") and must meet
several additional requirements. These requirements include the following: (1)
the Portfolio must derive at least 90% of its gross income each taxable year
from dividends, interest, payments with respect to securities loans, and gains
from the sale or other disposition of securities or foreign currencies, or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in securities or those currencies ("Income
Requirement"); (2) the Portfolio must derive less than 30% of its gross income
each taxable year from the sale or other disposition of securities, or any of
the following, that were held for less than three months - options, futures or
forward contracts (other than those on foreign currencies), or foreign
currencies (or options, futures or forward contracts thereon) that are not
directly related to the Portfolio's principal business of investing in
securities (or options and futures with respect thereto) ("Short-Short
Limitation"); (3) at the close of each quarter of the Portfolio's taxable year,
at least 50% of the value of its total assets must be represented by cash and
cash items, U.S. Government securities, securities of other RICs, and other
securities that, with respect to any one issuer, do not exceed 5% of the value
of the Portfolio's total assets and that do not represent more than 10% of the
outstanding voting securities of the issuer; and (4) at the close of each
quarter of the Portfolio's taxable year, not more than 25% of the value of its
total assets may be invested in securities (other than U.S. Government
securities or the securities of other RICs) of any one issuer.
As noted in the Prospectus, each Portfolio must, and intends to, comply with the
diversification requirements imposed by section 817(h) of the Code and the
regulations thereunder. These requirements, which are in addition to the
diversification requirements mentioned above, place certain limitations on the
proportion of each Portfolio's assets that may be represented by any single
investment (which includes all securities of the same issuer). For purposes of
section 817(h), all securities of the same issuer, all interests in the same
real property project, and all interest in the same commodity are treated as a
single investment. In addition, each U.S. Government agency or instrumentality
is treated as a separate issuer, while the securities of a particular foreign
government and its agencies, instrumentalities and political subdivisions all
will be considered securities issued by the same issuer. For information
concerning the consequences of failure to meet the requirements of section
817(h), see the respective prospectuses for the Policies or the Annuity
Contracts.
A Portfolio will not be subject to the 4% Federal excise tax imposed on RICs
that do not distribute substantially all their income and gains each calendar
year because that tax does not apply to a RIC whose only shareholders are
segregated asset accounts of life insurance companies held in connection with
variable
54
<PAGE>
annuity contracts and/or variable life insurance policies.
The use of hedging strategies, such as writing (selling) and purchasing options
and futures contracts and entering into forward contracts, involves complex
rules that will determine for income tax purposes the character and timing of
recognition of the income received in connection therewith by the Portfolios.
Income from the disposition of foreign currencies (except certain gains
therefrom that may be excluded by future regulations), and income from
transactions in options, futures, and forward contracts derived by a Portfolio
with respect to its business of investing in securities or foreign currencies,
will qualify as permissible income under the Income Requirement.
However, income from the disposition of options and futures contracts (other
than those on foreign currencies) will be subject to the Short-Short Limitation
if they are held for less than three months. Income from the disposition of
foreign currencies, and options, futures, and forward contracts on foreign
currencies, that are not directly related to a Portfolio's principal business of
investing in securities (or options and futures with respect to securities) also
will be subject to the Short-Short Limitation if they are held for less than
three months.
If a Portfolio satisfies certain requirements, any increase in value on a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Portfolio satisfies
the Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that Limitation. A
Portfolio will consider whether it should seek to qualify for this treatment for
its hedging transactions. To the extent a Portfolio does not qualify for this
treatment, it may be forced to defer the closing out of certain options and
futures contracts beyond the time when it otherwise would be advantageous to do
so, in order for the Portfolio to qualify as a RIC.
Dividends and interest received by each Portfolio may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and foreign countries generally do not impose taxes on capital gains in
respect of investments by foreign investors.
A Portfolio may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a Portfolio will be subject to
Federal income tax on a portion of any "excess distribution" received on the
stock of a PFIC or of any gain on disposition of that stock (collectively "PFIC
income"), plus interest thereon, even if the Portfolio distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC income
will be included in a Portfolio's investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders. If a Portfolio invests in a PFIC and elects to treat the
PFIC as a "qualified electing fund," then in lieu of the foregoing tax and
interest obligations, the Portfolio will be required to include in income each
year its pro rata share of the qualified electing fund's annual ordinary
earnings and net capital gain (the excess of net long-term capital gain over net
short-term capital loss), even if they are not distributed to the Portfolio;
those amounts would be subject to the Distribution Requirement. In most
instances it will be very difficult, if not impossible, to make this election
because of certain requirements thereof.
The foregoing is only a general summary of some of the important Federal income
tax considerations generally affecting the Portfolios and their shareholders. No
attempt is made to present a complete explanation of the Federal tax treatment
of the Portfolios' activities, and this discussion and the discussion in the
prospectuses and/or statements of additional information for the Policies and
Annuity Contracts are not intended as a substitute for careful tax planning.
Accordingly, potential investors are urged to consult their own tax advisors for
more detailed information and for information regarding any state, local, or
foreign taxes applicable to the Policies, Annuity Contracts and the holders
thereof.
55
<PAGE>
CAPITAL STOCK OF THE FUND
As described in the Prospectus, the Fund offers a separate class of
common stock for each Portfolio. The Fund is currently comprised of the
following Portfolios: International Equity Portfolio; Aggressive Growth
Portfolio; Emerging Growth Portfolio; Meridian/INVESCO Global Sector Portfolio;
Global Portfolio; Growth Portfolio; C.A.S.E. Growth Portfolio; Value Equity
Portfolio; Tactical Asset Allocation Portfolio; Equity-Income Portfolio; Utility
Portfolio; Balanced Portfolio; Bond Portfolio; Short-to-Intermediate Government
Portfolio; Money Market Portfolio; C.A.S.E. Growth & Income Portfolio; C.A.S.E.
Quality Growth Portfolio; Meridian/INVESCO Foreign Sector Portfolio;
Meridian/INVESCO US Sector Portfolio; Janus Balanced Portfolio; Leisure
Portfolio; and U.S. Equity Portfolio.
REGISTRATION STATEMENT
There has been filed with the Securities and Exchange Commission,
Washington, D.C. a Registration Statement under the Securities Act of 1933, as
amended, with respect to the securities to which this Statement of Additional
Information relates. If further information is desired with respect to the
Portfolios or such securities, reference is made to the Registration Statement
and the exhibits filed as part thereof.
FINANCIAL STATEMENTS
The audited financial statements for each Portfolio (except the
Meridian/INVESCO Global Sector Portfolio, the Value Equity Portfolio, the
International Equity Portfolio and the U.S. Equity Portfolio) of the Fund for
the year ended December 31, 1995, and the report of the Fund's independent
accountants are included in the 1995 Annual Reports, and are incorporated herein
by reference to such reports. Unaudited financial statements for the
Meridian/INVESCO Global Sector and Value Equity Portfolios are included in this
Statement of Additional Information. Because the International Equity and U.S.
Equity Portfolios did not commence operations until January 2, 1997, there are
no financial statements for these Portfolios.
56
<PAGE>
APPENDIX A
DESCRIPTION OF PORTFOLIO SECURITIES
The following is intended only as a supplement to the information
contained in the Prospectus and should be read only in conjunction with the
Prospectus. Terms defined in the Prospectus and not defined herein have the same
meanings as those in the Prospectus.
1. CERTIFICATE OF DEPOSIT.(*) A certificate of deposit generally is a
short-term, interest bearing negotiable certificate issue by a commercial bank
or savings and loan association against funds deposited in the issuing
institution.
2. EURODOLLAR CERTIFICATE OF DEPOSIT.(*) A Eurodollar certificate of
deposit is a short-term obligation of a foreign subsidiary of a U.S. bank
payable in U.S. dollars.
3. FLOATING RATE NOTE.(*) A floating rate note is debt issued by a
corporation or commercial bank that is typically several years in term but whose
interest rate is reset every one to six months.
4. TIME DEPOSIT.(*) A time deposit is a deposit in a commercial bank for
a specified period of time at a fixed interest rate for which a negotiable
certificate is not received.
5. BANKERS' ACCEPTANCE.(*) A bankers' acceptance is a time draft drawn on
a commercial bank by a borrower, usually in connection with international
commercial transactions (to finance the import, export, transfer or storage of
goods). The borrower is liable for payment as well as the bank, which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
secondary markets prior to maturity.
6. VARIABLE AMOUNT MASTER DEMAND NOTE.(*) A variable amount master demand
note is a note which fixes a minimum and maximum amount of credit and provides
for lending and repayment within those limits at the discretion of the lender.
Before investing in any variable amount master demand notes, a Portfolio will
consider the liquidity of the issuer through periodic credit analysis based upon
publicly available information.
7. PREFERRED STOCKS. Preferred stocks are securities which represent an
ownership interest in a corporation and which give the owner a prior claim over
common stock on the corporation's earnings and assets. Preferred stock generally
pays quarterly dividends. Preferred stocks may differ in many of their
provisions. Among the features that differentiate preferred stock from one
another are the dividend rights, which may be cumulative or non-cumulative and
participating or non-participating, redemption provisions, and voting rights.
Such features will establish the income return and may affect the prospectus for
capital appreciation or risks of capital loss.
8. CONVERTIBLE SECURITIES. A Portfolio may invest in debt securities
convertible into or exchangeable for equity securities, or debt securities that
carry with them the right to acquire equity securities, as evidenced by warrants
attached to such securities or acquired as part of units of the securities. Such
securities normally pay less current income than securities into which they are
convertible, and the concomitant risk of loss from declines in those values.
9. COMMERCIAL PAPER.(*) Commercial paper is a short-term promissory note
issued by a corporation primarily to finance short-term credit needs.
10. REPURCHASE AGREEMENT.(*) A repurchase agreement is an instrument
under which a Portfolio acquires ownership of a debt security and the seller
agrees to repurchase the obligation at a mutually agreed upon time and price.
The total amount received on repurchase is calculated to exceed the price paid
by the Portfolio, reflecting an agreed upon market rate of interest for the
period from the time of a Portfolio's purchase of the security to the settlement
date (I.E., the time of repurchase), and would not necessarily relate to the
interest rate on the underlying securities. A Portfolio will only enter into
repurchase agreements with underlying securities consisting of U.S. Government
or government agency securities, certificates of deposit, commercial paper or
bankers' acceptances, and will be entered only with primary dealers. While a
Portfolio may invest in repurchase agreements for periods up to 30 days, it is
expected that typically such periods will be for a week or less. The staff of
the SEC has taken the position that repurchase agreements of greater than seven
days
A-1
(*)Short-Term Securities
<PAGE>
together with other illiquid investments should be limited to an amount not in
excess of 15% of a Portfolio's net assets.
Although repurchase transactions usually do not impose market risks on the
purchaser, a Portfolio would be subject to the risk of loss if the seller fails
to repurchase the securities for any reason and the value of the securities is
less than the agreed upon repurchase price. In addition, if the seller defaults,
a Portfolio may incur disposition costs in connection with liquidating the
securities. Moreover, if the seller is insolvent and bankruptcy proceedings are
commenced, under current law, a Portfolio could be ordered by a court not to
liquidate the securities for an indeterminate period of time and the amount
realized by a Portfolio upon liquidation of the securities may be limited.
11. REVERSE REPURCHASE AGREEMENT. A reverse repurchase agreement involves
the sale of securities held by a Portfolio, with an agreement to repurchase the
securities at an agreed upon price, date and interest payment. A Portfolio will
use the proceeds of the reverse repurchase agreements to purchase other money
market securities maturing, or under an agreement to resell, at a date
simultaneous with or prior to the expiration of the reverse repurchase
agreement. A Portfolio will utilize reverse repurchase agreements when the
interest income to be earned from the investment of the proceeds from the
transaction is greater than the interest expense of the reverse repurchase
transactions.
12. ASSET-BACKED SECURITIES. A Portfolio may invest in securities backed
by automobile receivables and credit-card receivables and other securities
backed by other types of receivables or other assets. Credit support for
asset-backed securities may be based on the underlying assets and/or provided
through credit enhancements by a third party. Credit enhancement techniques
include letters of credit, insurance bonds, limited guarantees (which are
generally provided by the issuer), senior-subordinated structures and
over-collateralization. A Portfolio will only purchase an asset-backed security
if it is rated at least "A" by S&P or Moody's.
13. MORTGAGE-BACKED SECURITIES. A Portfolio may purchase mortgage-backed
securities issued by government and non-government entities such as banks,
mortgage lenders, or other financial institutions. Mortgage-backed securities
include mortgage pass-through securities, mortgage-backed bonds, and mortgage
pay-through securities. A mortgage pass-through security is a pro-rata interest
in a pool of mortgages where the cash flow generated from the mortgage
collateral is passed through to the security holder. Mortgage-backed bonds are
general obligations of their issuers, payable out of the issuers' general funds
and additionally secured by a first lien on a pool of mortgages. Mortgage
pay-through securities exhibit characteristics of both pass-through and
mortgage-backed bonds. Mortgage-backed securities also include other debt
obligations secured by mortgages on commercial real estate or residential
properties. Other types of mortgage-backed securities will likely be developed
in the future, and a Portfolio may invest in them if it is determined they are
consistent with the Portfolio's investment objective and policies.
14. COLLATERALIZED MORTGAGE OBLIGATIONS. (CMOs) are pay-through securities
collateralized by mortgages or mortgage-backed securities. CMOs are issued in
classes and series that have different maturities and often are retired in
sequence.
15. STRIPPED MORTGAGE-BACKED SECURITIES. Stripped mortgage-backed
securities are created when the principal and interest payments of a
mortgage-backed security are separated by a U.S. Government agency or a
financial institution. The holder of the "principal-only" security receives the
principal payments made by the underlying mortgage-backed security, while the
holder of the "interest-only" security receives interest payments from the same
underlying security.
The value of mortgage-backed securities may change due to changes in the
market's perception of issuers. In addition, the mortgage securities market in
general may be adversely affected by regulatory or tax changes. Non-governmental
mortgage-backed securities may offer a higher yield than those issued by
government entities but also may be subject to greater price change than
government securities.
Like most mortgage securities, mortgage-backed securities are subject to
prepayment risk. When prepayment occurs, unscheduled or early payments are made
on the underlying mortgages, which may shorten the effective maturities of those
securities an may lower their total return. Furthermore, the prices of stripped
mortgage-backed securities can be significantly affected by changes in interest
rates as well. As interest rates fall, prepayment rates tend to increase, which
in turn tends to reduce prices of "interest-only" securities and increase prices
of "principal-only" securities. Rising interest rates can have the opposite
effect.
A-2
<PAGE>
16. FINANCING CORPORATION SECURITIES. (FICOs) are debt obligations issued
by the Financing Corporation. The Financing Corporation was originally created
to recapitalize the Federal Savings and Loan Insurance Corporation (FSLIC) and
now functions as a financing vehicle for the FSLIC Resolution Fund, which
received substantially all of FSLIC's assets and liabilities.
17. U.S. GOVERNMENT SECURITIES. U.S. Government securities are securities
issued by or guaranteed by the U.S. Government or its agencies or
instrumentalities. U.S. Government securities have varying degrees of government
backing. They may be backed by the credit of the U.S. Government as a whole or
only by the issuing agency or instrumentality. For example, securities issued by
the Financing Corporation are supported only by the credit of the Financing
Corporation, and not by the U.S. Government. Securities issued by the Federal
Home Loan Banks and the Federal National Mortgage Association (FNMA) are
supported by the agency's right to borrow money from the U.S. Treasury under
certain circumstances. U.S. Treasury bonds, notes, and bills, and some agency
securities, such as those issued by the Government National Mortgage Association
(GNMA), are backed by the full faith and credit of the U.S. Government as to
payment of principal and interest and are the highest quality U.S. Government
securities. Each Portfolio, and its share price and yield, are not guaranteed by
the U.S. Government.
18. ZERO COUPON BONDS. Zero coupon bonds are created three ways:
1) U.S. TREASURY STRIPS (Separate Trading of Registered Interest
and Principal of Securities) are created when the coupon
payments and the principal payment are stripped from an
outstanding Treasury bond by the Federal Reserve Bank. Bonds
issued by the Resolution Funding Corporation (REFCORP) and the
Financial Corporation (FICO) also can be stripped in this
fashion.
2) STRIPS are created when a dealer deposits a Treasury Security or
a Federal agency security with a custodian for safe keeping and
then sells the coupon payments and principal payment that will
be generated by this security separately. Proprietary receipts,
such as Certificates of Accrual on Treasury Securities (CATS),
Treasury Investment Growth Receipts (TIGRS), and generic
Treasury Receipts (TRs), are stripped U.S. Treasury securities
separated into their component parts through custodial
arrangements established by their broker sponsors. FICO bonds
have been stripped in this fashion. The Portfolios have been
advised that the staff of the Division of Investment Management
of the Securities and Exchange Commission does not consider such
privately stripped obligations to be U.S. Government securities,
as defined by the 1940 Act. Therefore, the Portfolios will not
treat such obligations as U.S. Government securities for
purposes of the 65% portfolio composition ratio.
3) ZERO COUPON BONDS can be issued directly by Federal agencies and
instrumentalities, or by corporations. Such issues of zero
coupon bonds are originated in the form of a zero coupon bond
and are not created by stripping an outstanding bond.
Zero coupon bonds do not make regular interest payments. Instead they are
sold at a deep discount from their face value. Because a zero coupon bond does
not pay current income, its price can be very volatile when interest rates
change. In calculating its dividends, the fund takes into account as income a
portion of the difference between zero coupon bond's purchase price and its face
value.
19. BOND WARRANTS. A warrant is a type of security that entitles the
holder to buy a proportionate amount of a bond at a specified price, usually
higher than the market price at the time of issuance, for a period of years or
to perpetuity. Warrants generally trade in the open market and may be sold
rather than exercised.
20. OBLIGATIONS OF SUPRANATIONAL ENTITIES. Obligations of supranational
entities include those of international organizations designated or supported by
governmental entities to promote economic reconstruction or development and of
international banking institutions and related government agencies. Examples
include the International Bank for Reconstruction and Development (the World
Bank), the European Coal and Steel Community, the Asian Development Bank and the
Inter-American Development Bank. The governmental members, or "stockholders,"
usually make initial capital contributions to the supranational entity and in
many cases are committed to make additional capital contributions if the
supranational entity is unable to repay its borrowings. Each supranational
entity's lending activities are limited to a percentage of its total capital
(including "callable capital" contributed by members at the entity's call),
reserves and net income. There is no assurance that foreign governments will be
able or willing to honor their commitments.
A-3
<PAGE>
21. EQUIPMENT LEASE AND TRUST CERTIFICATES. A Portfolio may invest in
equipment lease and trust certificates, which are debt securities that are
secured by direct or indirect interest in specified equipment or equipment
leases (including, but not limited to, railroad rolling stock, planes, trucking
or shipping fleets, or other personal property).
A-4
<PAGE>
WRL SERIES FUND, INC.
MERIDIAN/INVESCO GLOBAL SECTOR PORTFOLIO
(UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
ASSETS: AUGUST 31, 1996
Investments in securities, at market value
(cost $ 3,088,114) ...................................... $ 3,067,842
Short-term securities, at amortized cost .................. 0
Cash ...................................................... 481,096
Receivables:
Fund shares sold ........................................ 0
Securities sold ......................................... 0
Interest ................................................ 12,265
Dividends ............................................... 1,900
Foreign Receivable ...................................... 132
Other ................................................... 0
-----------
Total assets .......................................... 3,563,235
-----------
LIABILITIES:
Fund shares purchased ..................................... 0
Securities purchased ...................................... 258,767
Accounts payable and accrued liabilities:
Investment advisory fees ................................ 2,523
Custody fees ............................................ 0
Auditing and accounting fees ............................ 459
Dividends to shareholders ............................... 0
Deposits for securities on loan ......................... 0
Other Fees .............................................. 0
-----------
Total liabilities ..................................... 261,749
-----------
Total net assets .................................... $ 3,301,486
===========
NET ASSETS:
Capital stock
($.01 par value 75,000,000 authorized) .................. $ 3,336
Additional paid-in capital ................................ 3,311,952
Accumulated undistributed income:
Accumulated undistributed net investment
income (loss) ......................................... 12,736
Accumulated undistributed net realized
gain (loss) on:
Investment transactions ............................... (6,461)
Foreign currency transactions ......................... 71
Net unrealized appreciation (depreciation) on:
Investment securities ................................... (20,272)
Foreign currency transactions ........................... 124
-----------
Net assets applicable to outstanding
shares of capital ....................................... $ 3,301,486
===========
Shares outstanding at August 31, 1996 ..................... 333,551
===========
Net asset value per share ................................. $ 9.90
===========
* The inception of this portfolio was May 1, 1996.
STATEMENT OF OPERATIONS
PERIOD ENDED
INVESTMENT INCOME: AUGUST 31, 1996*
----------------
Interest ................................................... $ 16,172
Dividends (Net of foreign tax of $95) ...................... 4,569
--------
Total investment income ................................ 20,741
--------
EXPENSES:
Investment advisory fees ................................... 6,773
Printing and shareholder reports ........................... 192
Custody fees ............................................... 10,181
Legal fees ................................................. 17
Auditing and accounting fees ............................... 1,505
Directors fees ............................................. 3
Registration fees .......................................... 4
Other fees ................................................. 7
--------
Total expenses ......................................... 18,682
Less:
Advisory fee waiver
and expense reimbursement .............................. 10,677
Fees paid indirectly ..................................... 0
--------
Net expenses ......................................... 8,005
--------
Net investment income (loss) ............................... 12,736
--------
Net realized gain (loss) on:
Investment securities .................................... (6,461)
Foreign currency transactions ............................ 71
--------
Total net realized gain (loss) ......................... (6,390)
========
Change in unrealized appreciation
(depreciation) on:
Investment securities .................................... (20,272)
Foreign currency transactions ............................ 124
--------
Total change in unrealized
appreciation (depreciation) ............................ (20,148)
--------
Net gain (loss) on investments ............................. (26,538)
--------
Net increase (decrease) in net assets
resulting from operations .............................. $(13,802)
========
<PAGE>
WRL SERIES FUND, INC.
MERIDIAN/INVESCO GLOBAL SECTOR PORTFOLIO
(UNAUDITED)
STATEMENT OF CHANGES IN NET ASSETS
PERIOD ENDED
AUGUST 31, 1996*
OPERATIONS:
Net investment income (loss) ............................. $ 12,736
Net realized gain (loss) on investments and foreign
currency transactions .................................. (6,390)
Change in unrealized appreciation (depreciation)
on investments and foreign currency transactions ....... (20,148)
-----------
Net increase (decrease) in net assets resulting
from operations ...................................... (13,802)
-----------
DISTRIBUTION TO SHAREHOLDERS:
Net investment income .................................... 0
Net realized gains ....................................... 0
-----------
Total distributions .................................... 0
-----------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares ........................ 3,438,371
Dividends and distributions reinvested ................... 0
Cost of shares repurchased ............................... (123,083)
-----------
Increase (decrease) in net assets from ................. 3,315,288
capital shares transactions .......................... --
Net increase (decrease) in net assets .................. 3,301,486
NET ASSETS:
Beginning of period ...................................... 0
-----------
End of period ............................................ 3,301,486
===========
Undistributed net investment income .................... 12,736
===========
SHARE ACTIVITY:
Shares outstanding - beginning of period ................... 0
-----------
Shares issued .............................................. 345,983
Shares issued - reinvestment of dividends
and distributions ........................................ 0
Shares redeemed ............................................ (12,432)
-----------
Increase (decrease) in shares outstanding .................. 333,551
-----------
Shares outstanding - end of period ......................... 333,551
===========
* The inception of this portfolio was May 1, 1996
The notes to the financial statements are an integral part of this report.
<PAGE>
WRL SERIES FUND, INC
MERIDIAN/INVESCO GLOBAL SECTOR PORTFOLIO
(UNAUDITED)
FINANCIAL HIGHLIGHTS*
FOR THE PERIOD ENDED
AUGUST 31
---------
1996 \dagger\
---------
Net asset value, beginning of period ......................... $ 10.00
Income from operations:
Net investment income (loss) ............................. .07
Net realized and unrealized
gain (loss) on investments ............................. (.17)
---------
Total income (loss) from operations .................... (.10)
---------
Distributions:
Dividends from net investment income ..................... (.00)
Distributions from net realized gains
on investments ......................................... .00
---------
Total distributions .................................... (.00)
---------
Net asset value, end of period ............................... $ 9.90
=========
Total return ................................................. -1.01%
Ratios and supplemental data:
Net assets at end of period
(in thousands) ........................................... $ 3,301
Ratio of expenses to average net assets .................... 1.10%
Ratio of net investment income (loss)
to average net assets .................................... 1.74%
Ratio of commissions paid to number of shares .............. 3.43%
Portfolio turnover rate .................................... 10.57%
* The above table illustrates the change for a share outstanding computed using
average shares outstanding through the period. See Note 5.
\dagger\ The inception of this portfolio was May 1, 1996. The total return is
not annualized.
<PAGE>
WRL SERIES FUND, INC.
VALUE EQUITY PORTFOLIO
(UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
ASSETS: AUGUST 31, 1996
Investments in securities, at market value
(cost $ 16,470,141) ...................................... $16,609,973
Short-term securities, at .................................. 5,372,743
amortized cost
Cash ....................................................... 0
Receivables:
Fund shares sold ......................................... 0
Securities sold .......................................... 0
Interest ................................................. 2,229
Dividends ................................................ 23,508
Other .................................................... 0
-----------
Total assets ........................................... 22,008,453
-----------
LIABILITIES:
Fund shares purchased ..................................... 0
Securities purchased ...................................... 1,371,441
Accounts payable and accrued liabilities:
Investment advisory fees ................................ 8,894
Custody and transfer agent fees ......................... 0
Auditing and accounting fees .............................. 2,223
Dividends to shareholders ............................... 0
Deposits for securities on loan ......................... 0
Other fees .............................................. 0
-----------
Total liabilities ..................................... 1,382,558
-----------
Total net assets .................................... $20,625,895
===========
NET ASSETS:
Capital stock
($ .01 par value 75,000,000 authorized) .................. $ 20,273
Additional paid-in capital ................................. 20,425,689
Accumulated undistributed income:
Accumulated undistributed net investment
income (loss) .......................................... 40,110
Accumulated undistributed net realized
gain (loss) on:
Investment transactions ................................ (9)
Net unrealized appreciation (depreciation) on:
Investment securities .................................... 139,832
------------
Net assets applicable to outstanding
shares of capital ........................................ $ 20,625,895
============
Shares outstanding at August 31, 1996 ...................... 2,027,264
============
Net asset value per share .................................. $ 10.17
============
STATEMENT OF OPERATIONS
PERIOD ENDED
INVESTMENT INCOME: AUGUST 31, 1996*
Interest ..................................................... $ 25,702
Dividends .................................................... 33,135
---------
Total investment income .................................. 58,837
---------
EXPENSES:
Investment advisory fees ..................................... 14,981
Printing and shareholder reports ............................. 885
Custody fees ................................................. 10,691
Legal fees ................................................... 55
Auditing and accounting fees ................................. 1,505
Directors fees ............................................... 9
Registration fees ............................................ 13
Other fees ................................................... 32
---------
Total expenses ........................................... 28,171
Less:
Advisory fee waiver
and expense reimbursement ................................ 9,440
Fees paid indirectly ....................................... 4
---------
Net expenses ........................................... 18,727
---------
Net investment income (loss) ................................. 40,110
---------
Net realized gain (loss) on:
Investment securities ...................................... (9)
---------
Total net realized gain (loss) ......................... (9)
Change in unrealized appreciation
(depreciation) on:
Investment securities ...................................... 139,832
---------
Total change in unrealized
appreciation (depreciation) ........................... 139,832
---------
Net gain (loss) on investments ............................... 139,823
---------
Net increase (decrease) in net
assets resulting from
operations ............................................... $ 179,933
=========
* The inception of this portfolio was May 1, 1996
<PAGE>
WRL SERIES FUND, INC.
VALUE EQUITY PORTFOLIO
(UNAUDITED)
STATEMENT OF CHANGES IN NET ASSETS
PERIOD ENDED
OPERATIONS: AUGUST 31, 1996*
Net investment income (loss) ................................ $ 40,110
Net realized gain (loss) on investments ..................... (9)
Change in unrealized appreciation (depreciation) ............ 139,832
on investments ------------
Net increase (decrease) in net assets ..................... 179,933
resulting from operations ------------
DISTRIBUTION TO SHAREHOLDERS:
Net investment income ....................................... 0
Net realized gains .......................................... 0
------------
Total distributions ....................................... 0
------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares ......................... 20,722,618
Dividends and distributions reinvested .................... 0
Cost of shares repurchased ................................ (276,656)
------------
Increase (decrease) in net assets from capital .......... 20,445,962
shares transactions ------------
Net increase (decrease) in net assets ................... 20,625,895
NET ASSETS:
Beginning of period ....................................... 0
------------
End of period ............................................. $ 20,625,895
============
Undistributed net investment income ..................... $ 40,110
============
SHARE ACTIVITY:
Shares outstanding - beginning of period .................. 0
------------
Shares issued ............................................. 2,055,476
Shares issued - reinvestment of dividends ................. 0
and distributions
Shares redeemed ........................................... (28,212)
------------
Increase (decrease) in shares outstanding ................. 2,027,264
------------
Shares outstanding - end of period ........................ 2,027,264
============
* The inception of this portfolio was May 1, 1996.
<PAGE>
WRL SERIES FUND, INC.
VALUE EQUITY PORTFOLIO
(UNAUDITED)
FINANCIAL HIGHLIGHTS*
FOR THE PERIOD ENDED
AUGUST 31
------------
1996\dagger\
------------
Net asset value, beginning of period .............................. $ 10.00
Income from operations:
Net investment income (loss) .................................. .06
Net realized and unrealized
gain (loss) on investments .................................. .11
----------
Total income (loss) from operations ......................... .17
----------
Distributions:
Dividends from net investment income .......................... .00
Distributions from net realized gains
on investments .............................................. .00
----------
Total distributions ......................................... .00
----------
Net asset value, end of period .................................... $ 10.17
===========
Total return ...................................................... 1.74%
Ratios and supplemental data:
Net assets at end of period
(in thousands) ................................................ $ 20,626
Ratio of expenses to average net assets ......................... 0.65%
Ratio of net investment income (loss)
to average net assets ......................................... 1.39%
Ratio of commissions paid to number of shares ................... 7.30%
Portfolio turnover rate ......................................... 1.62%
* The above table illustrates the change for a share outstanding computed using
average shares outstanding through the period. See Note 5.
\dagger\ The inception of this portfolio was May 1, 1996.
<PAGE>
WRL SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
AUGUST 31, 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The WRL Series Fund, Inc. (the "Fund") is a diversified, open-end,
investment management company registered under the Investment Company Act of
1940, as amended. The Fund was incorporated on August 21, 1985 as a Maryland
Corporation and commenced operations on October 2, 1986.
The Fund consists of a series of investment portfolios, including the
Meridian/INVESCO Global Sector Portfolio, the Meridian/INVESCO US Sector
Portfolio, the Meridian/INVESCO Foreign Sector Portfolio and the Value Equity
Portfolio (the "Portfolios"). Shares of the Fund are sold to the WRL Series Life
Account (the "Life Account") and the WRL Series Annuity Account (the "Annuity
Account"), collectively called the Separate Accounts of Western Reserve Life
Assurance Co. of Ohio ("WRL"), to fund benefits under variable universal life
insurance policies and variable annuity contracts issued by WRL.
On May 1, 1996, WRL supplied seed capital as follows:
Meridian/INVESCO Global Sector $1,000,000
Meridian/INVESCO US Sector 500,000
Meridian/INVESCO Foreign Sector 1,000,000
Value Equity 500,000
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
A. VALUATION OF INVESTMENTS
Securities held by the Portfolios are valued at market value, except
for short-term debt securities. Short-term debt securities maturing in
60 days or less are valued on the amortized cost basis, which
approximates market value. Stocks are valued at the latest sale price
on the last business day of the fiscal period as reported by the
principal securities exchange on which the issue is traded or, if no
sale is reported for a stock, the latest bid price is used. Bonds are
valued using prices quoted by a major dealer in bonds which offers a
pricing service. Certain pricing methodologies, such as matrix pricing
of bonds, may involve the use of estimates and actual sales prices may
differ. Securities for which quotations may not be readily available
are valued as determined in good faith in accordance with procedures
established by and under the general supervision of the Fund's Board of
Directors.
The value of foreign securities are translated into U.S. dollars using
spot foreign exchange rates.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are recorded on the trade date. Security gains
and losses are calculated on the first-in first-out basis for both tax
and financial reporting purposes. Dividend income is recorded on the
ex-dividend date, and interest income, including amortization of bond
premium and accretion of discount, is accrued daily. Dividend income on
foreign securities is recorded net of foreign tax withholdings.
The accounting records of the Fund are maintained in U.S. dollars. For
transactions denominated in a currency other than the U.S. dollar,
purchases and sales of securities, income received, and expenses paid
are translated into U.S. dollars at the foreign exchange spot rate on
the date the transaction is recorded. Currency gain and loss is also
calculated on payables and receivables that are denominated in foreign
currencies. The payables and receivables are generally related to
security transactions and income.
The unrealized gain or loss on forward foreign currency contracts is
due to the difference between the foreign exchange contract rate and
the foreign exchange forward rate applicable to that contract at the
end of the period. This gain or loss becomes realized when the contract
is closed or settled.
Futures contracts and options are valued based upon daily settlement
prices with the fluctuations in value recorded as unrealized gains and
losses. These gains and losses become realized when the position is
closed. The risks associated with the use of options and futures
contracts involve the possibilities of an illiquid market and an
imperfect correlation between the value of the instrument and the
underlying security.
C. FEDERAL INCOME TAXES
It is the Fund's policy to distribute substantially all its taxable
income and capital gains to its shareholders and otherwise qualify as a
regulated investment company under the Internal Revenue Code. Pursuant
to Code Section 4982(f), regulated investment companies serving as
funding vehicles
<PAGE>
WRL SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 1 (CONTINUED)
for life insurance company separate accounts are not subject to excise tax
distribution requirements. Accordingly, no provision for Federal income
taxes has been made.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for such items as wash sales, foreign currency
transactions, net operating losses and capital loss carryforwards.
D. DIVIDENDS AND DISTRIBUTIONS
Dividends of the Portfolios are declared and reinvested semi-annually,
while capital gain distributions are declared and reinvested annually.
Dividends and distributions of the Fund are generally paid to and
reinvested by the Separate Account on the next business day after
declaration.
E. ORGANIZATION COSTS
All costs incurred in connection with the formation of the Fund and its
portfolios were normally paid by WRL.
NOTE 2 - INVESTMENT ADVISORY AND AFFILIATES
A. INVESTMENT ADVISORY
The Fund has entered into an annually renewable investment advisory
agreement for the Portfolios with WRL as investment adviser. The Fund pays
to WRL, and charges to each respective Portfolio, advisory fees each month
at the following annual rate expressed as a percentage of the average daily
net assets of the respective Portfolio:
PORTFOLIO PERCENT OF ASSETS
--------- -----------------
Meridian/INVESCO Global Sector 1.10%
Meridian/INVESCO US Sector 1.10%
Meridian/INVESCO Foreign Sector 1.10%
Value Equity .80%
WRL has entered into a sub-advisory agreement with various management
companies. Pursuant to the Meridian/INVESCO Global Sector Portfolio,
Meridian/INVESCO US Sector Portfolio, and Meridian/INVESCO Foreign Sector
Portfolio agreements, Meridian Investment Management Corporation receives
monthly compensation from the Investment Adviser, as a percentage of the
Portfolio's average daily net assets, at an annual rate of 0.30% of the
first $100 million of assets and 0.35% of assets in excess of $100 million.
For its services, INVESCO Global Asset Management Limited receives monthly
compensation from the Investment Adviser, as a percentage of the
Portfolio's average daily net assets, at an annual rate of 0.40% of the
first $100 million of assets and 0.35% of assets in excess of $100 million.
Pursuant to the Value Equity Portfolio agreement, fifty percent of the
advisory fee paid to WRL less fifty percent of any expense reimbursement is
due to NWQ Investment Management, Inc.
WRL currently voluntarily waives its advisory fees to the extent a
Portfolio's normal operating expenses exceeds the percentage of net assets
of the Portfolio as listed below:
PORTFOLIO PERCENTAGE OF ASSETS
--------- --------------------
Value Equity 1.00%
The Portfolios are charged for expenses that specifically relate to their
individual operations. All other operating expenses of the Fund that are
not attributable to a specific portfolio are allocated based upon the
proportionate number of contract holders of the underlying sub-accounts.
WRL directly incurs and pays these operating expenses relating to the Fund,
which subsequently reimburses WRL. All normal operating expenses that
exceed the established expense limit set forth above will be borne by WRL.
B. AFFILIATES
WRL is an indirect wholly-owned subsidiary of AEGON USA, Inc., which is an
indirect wholly-owned subsidiary of AEGON nv, a Netherlands corporation.
<PAGE>
<TABLE>
<CAPTION>
WRL SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 3 - SECURITY TRANSACTIONS
Securities transactions are summarized as follows:
MERIDIAN/ MERIDIAN/ MERIDIAN/
INVESCO INVESCO INVESCO
GLOBAL US FOREIGN VALUE
SECTOR SECTOR SECTOR EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
For the period ended August 31, 1996:
Purchases of securities:
Long-term excluding U.S. Government ........... $2,634,192 $710,711 $1,030,632 $16,563,929
U.S. Government securities .................... 630,462 0 0 0
Proceeds from maturities and sales of securities:
Long-term excluding U.S. Government ........... 33,625 168,730 24,901 93,778
U.S. Government securities .................... 136,763 0 0 0
</TABLE>
NOTE 4 - FEDERAL INCOME TAX MATTERS
The income, expenses, gains and losses on securities transactions attributed
to each Portfolio for accounting purposes, are also attributed to that Portfolio
for Federal income tax purposes. Gains and losses on forward currency contracts,
if applicable, are treated as ordinary income for Federal income tax purposes
pursuant to Section 988 of the Internal Revenue Code.
Each portfolio has and will continue to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies, and
accordingly, has made or intends to make sufficient distributions of net
investment income and net realized gains, if any, to relieve it from all federal
and state income taxes and federal excise taxes.
The aggregate cost of investments and composition of unrealized appreciation
and depreciation for federal income tax purposes as of August 31, 1996 are as
follows:
<TABLE>
<CAPTION>
NET UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
PORTFOLIO COST BASIS APPRECIATION DEPRECIATION (DEPRECIATION)
---------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Meridian/INVESCO Global Sector $ 3,088,114 $ 75,119 $ 95,391 $ (20,272)
Meridian/INVESCO US Sector .... 530,406 22,596 28,077 5,481
Meridian/INVESCO Foreign Sector 1,006,099 58,865 49,029 9,836
Value Equity .................. 21,842,884 322,808 182,976 139,832
</TABLE>
NOTE 5 - FINANCIAL HIGHLIGHTS
The Financial Highlights for each Portfolio is for the period from
inception, which is less than one year; therefore the total return shown is not
annualized.
The total return and the change in value of the Portfolio reflect the
advisory fee and all other Portfolio expenses and include reinvestment of
dividends and capital gains; they do not reflect the charges against the
corresponding sub-accounts or the charges and deduction under the applicable
annuity contracts.
The ratio of expenses to average net assets in the financial highlights is
net of advisory fee waiver (see Note 2). The August 31, 1996 ratio is
annualized, along with the ratio of net investment income to average net assets.
Without the advisory fee waived by WRL, the ratio would be as follows:
Meridian/INVESCO Global Sector 2.56%
Meridian/INVESCO US Sector 6.53%
Meridian/INVESCO Foreign Sector 2.70%
Value Equity 0.97%
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, DATED OCTOBER 17,1996
PROSPECTUS
WRL SERIES FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
201 Highland Avenue
Largo, Florida 33770
Telephone: (800) 851-9777
(813) 585-6565
WRL Series Fund, Inc. (the "Fund") is a diversified, open-end management
investment company consisting of separate series or investment portfolios.
This Prospectus pertains only to the International Equity Portfolio of the
Fund.
The investment objective of the International Equity Portfolio is to seek
long-term growth of capital. The International Equity Portfolio seeks to
achieve its objective by investing primarily in the common stock of foreign
issuers traded on overseas exchanges and in foreign over-the-counter ("OTC")
markets. There can be, of course, no assurance that the International Equity
Portfolio will achieve its objective.
Shares of the Fund are sold only to the separate accounts (the "Separate
Accounts") of Western Reserve Life Assurance Co. of Ohio ("WRL"), PFL Life
Insurance Company ("PFL"), and AUSA Life Insurance Company, Inc. ("AUSA")
(WRL, PFL, and AUSA together, the "Life Companies") to fund the benefits
under certain individual variable life insurance policies (the "Policies")
and individual and group variable annuity contracts (the "Annuity
Contracts"). The Life Companies are affiliates. The Separate Accounts, which
may or may not be registered with the Securities and Exchange Commission,
invest in shares of one or more of the portfolios in accordance with the
allocation instructions received from holders of the Policies and the Annuity
Contracts (collectively, the "Policyholders"). Such allocation rights are
further described in the prospectuses or disclosure documents for the
Policies and the Annuity Contracts.
WRL and Scottish Equitable Investment Management Limited and GE Investment
Management Incorporated, serve as the investment adviser (the "Investment
Adviser") and co-sub-advisers (individually, a "Co-Sub-Adviser," and
collectively, the "Co-Sub-Advisers"), respectively, to the International
Equity Portfolio. See "The Investment Adviser" and "The Co-Sub-Advisers."
This Prospectus sets forth concisely the information about the
International Equity Portfolio that prospective investors ought to know
before investing. Investors should read this Prospectus and retain it for
future reference.
Additional information about the Fund, the International Equity Portfolio
and the other portfolios of the Fund has been filed with the Securities and
Exchange Commission and is available upon request without charge by calling
or writing the Fund. The Statement of Additional Information pertaining to
the International Equity Portfolio bears the same date as this Prospectus and
is incorporated by reference into this Prospectus in its entirety.
- -----------------------------------------------------------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, A BANK OR OTHER FINANCIAL INSTITUTION, AND THE SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE
INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THIS PROSPECTUS MUST BE ACCOMPANIED BY THE CURRENT PROSPECTUS OR
DISCLOSURE DOCUMENT FOR THE APPLICABLE VARIABLE ANNUITY CONTRACT OR FLEXIBLE
PREMIUM VARIABLE LIFE INSURANCE POLICY. ALL PROSPECTUSES SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
Prospectus Dated , 1997
<PAGE>
WRL SERIES FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
201 Highland Avenue
Largo, FL 33770
Telephone (813) 585-6565
(800) 851-9777
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
The International Equity Portfolio and the Fund .... 1
Management of the Fund .............................. 5
Dividends and Other Distributions ................... 7
Taxes ............................................... 7
Purchase and Redemption of Shares ................... 8
Valuation of Shares ................................. 8
The Fund and Its Shares ............................. 8
Performance Information ............................. 9
General Information ................................. 10
</TABLE>
i
<PAGE>
THE INTERNATIONAL EQUITY PORTFOLIO
AND THE FUND
The Fund is a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The International Equity Portfolio is a series of the Fund. The Fund
consists of several series, or separate investment portfolios, which offer
shares for investment by the Separate Accounts. This Prospectus describes
only the International Equity Portfolio (the "Portfolio").
A particular portfolio of the Fund may not be available under the Policy
or Annuity Contract you have chosen or may not be available in your state due
to certain state insurance law considerations. The prospectus or disclosure
document for the particular Policy or Annuity Contract you have chosen will
indicate the portfolios which are generally available under the applicable
Policy or Annuity Contract and should be read in conjunction with this
Prospectus.
INVESTMENT OBJECTIVE OF THE PORTFOLIO
The investment objective of the Portfolio is to seek long-term growth of
capital. The Portfolio seeks to achieve its objective by investing primarily
in the common stock of foreign issuers traded on overseas exchanges and in
foreign OTC markets. While the Portfolio will primarily invest in common
stock, from time to time, the Portfolio may invest in convertible securities,
warrants, or fixed-income instruments when the Co-Sub-Advisers deem
appropriate.
Daily cash inflows attributable to shares of the Portfolio purchased by
the Separate Accounts will be divided equally each day between the two
Co-Sub-Advisers, and each portion will thereafter be managed separately by
each Co-Sub-Adviser (and without consultation with the other Co-Sub-Adviser).
It is anticipated that each Co-Sub-Adviser will purchase securities for the
Portfolio with its allocation of daily cash inflows which are different from
the securities purchased by the other Co-Sub-Adviser with its respective
allocation.
There can be, of course, no assurance that the Portfolio will achieve its
investment objective. The Portfolio's investment objective and, unless
otherwise noted, its investment policies and techniques, may be changed by
the Board of Directors of the Fund without shareholder or Policyholder
approval. A change in the investment objective or policies of the Portfolio
may result in the Portfolio having an investment objective or policies
different from that which a Policyholder deemed appropriate at the time of
investment.
PORTFOLIO POLICIES AND TECHNIQUES
The Portfolio will seek to be invested in a minimum of 50 stocks of
issuers from approximately 15-25 countries, based on (i) the country in which
an issuer is organized; (ii) the country from which an issuer derives at
least 50% of its revenues or profits; or (iii) the principal trading market
for the issuer's securities. The Portfolio will not be invested in issuers of
fewer than twelve countries other than the United States at any time. (For
this purpose, American Depositary Receipts ("ADRs"), European Depositary
Receipts ("EDRs"), and Global Depositary Receipts ("GDRs") will be considered
to be issued by the issuer of the securities underlying the receipt.) See
"Foreign Investments, Related Derivative Instruments, and Special Risks,"
below.
At any time, overseas economies may not be moving in the same direction
and will be subject to substantially different fiscal and monetary policies.
These provide situations the Portfolio will aim to exploit. The Portfolio
will aim to add value through both active country allocation and stock
selection in international equity markets. Typically, the Portfolio will be
invested broadly, not only in the larger stock markets of the United Kingdom,
Continental Europe, Japan and the Far East, but also, to a lesser extent, in
the smaller stock markets of Asia, Europe and Latin America. In accordance
with the requirements of current California insurance regulations, the
Portfolio will have no more than 20% of its net assets invested in securities
of issuers located in any one foreign country, but may have an additional 15%
of its net assets invested in securities of issuers located in any one of the
following countries: Australia, Canada, France, Japan, the United Kingdom or
West Germany. If California's insurance regulations are changed at some
future time to permit a larger percentage of the Portfolio's net assets to be
invested in a single foreign country, the Portfolio may invest more of its
net assets in a single foreign country, in accordance with the Portfolio's
investment objective and investment restrictions.
In selecting investments on behalf of the Portfolio, GEIM seeks companies
that are expected to grow faster than relevant markets and whose securities
are available at a price that does not fully reflect the potential growth of
those companies. GEIM typically focuses on companies that possess one or more
of a variety of characteristics, including strong earnings growth relative to
price-to-earnings and price-to-cash earnings ratios, low price-to-book value,
strong cash flow, presence in an industry experiencing strong growth and high
1
<PAGE>
guality management.
Under normal circumstances, the Portfolio will seek to invest as described
above, and may for cash management purposes and to meet operating expenses,
invest a portion of its total assets in cash and/or money market instruments
as described under "Portfolio Securities and Risk Factors" below, pending
investment in accordance with its investment objective and policies. During
periods when a Co-Sub-Adviser believes there are unstable market, economic,
political or currency conditions abroad, the portfolio may assume a temporary
defensive posture and (i) restrict the securities markets in which its assets
will be invested and/or invest all or a significant portion of its assets in
securities of the types described above issued by companies incorporated in
and/or having their principal activities in the United States, or (ii)
without limitation, hold cash and/or invest in such money market instruments.
To the extent that it holds cash or invests in money market instruments, the
Portfolio may not achieve its investment objective of long-term growth of
capital.
1
<PAGE>
TYPES OF SECURITIES AND RISK FACTORS
The Portfolio seeks to invest its assets primarily in the common stock of
foreign issuers traded on overseas exchanges and in foreign OTC markets. The
Portfolio will seek to invest at least 80% of its net assets in equity
securities at all times. For temporary defensive purposes, the Portfolio may
invest in cash and cash equivalents, commercial paper, certificates of
deposit, bank time deposits in the currency of any nation and bankers'
acceptances with respect to these securities.
The Portfolio may purchase and sell financial futures contracts, stock
index futures contracts, and foreign currency futures contracts and related
options, forward currency contracts, and interest rate swaps, caps and floors
for hedging purposes only and not for speculation. It may engage in such
transactions only if the total contract value of the futures contracts does
not exceed one-third of the Portfolio's total assets. See "Financial Futures
Contracts," and "Foreign Investments, Related Derivative Instruments, and
Special Risks," below. Further information on these instruments, hedging
strategies and the considerations relating to them is set forth below and in
the Statement of Additional Information.
CONVERTIBLE SECURITIES
The Portfolio may invest in convertible securities. Convertible securities
may include corporate notes or preferred stock but are ordinarily a long-term
debt obligation of the issuer convertible at a stated exchange rate into
common stock of the issuer. As with all debt securities, the market value of
convertible securities tends to decline as interest rates increase and,
conversely, to increase as interest rates decline. Convertible securities
generally offer lower interest or dividend yields than non-convertible
securities of similar quality. However, when the market price of the common
stock underlying a convertible security exceeds the conversion price, the
price of the convertible security tends to reflect the value of the
underlying common stock. As the market price of the underlying common stock
declines, the convertible security tends to trade increasingly on a yield
basis, and thus may not depreciate to the same extent as the underlying
common stock. Convertible securities generally rank senior to common stocks
in an issuer's capital structure and are consequently of higher quality and
entail less risk of declines in market value than the issuer's common stock.
However, the extent to which such risk is reduced depends in large measure
upon the degree to which the convertible security sells above its value as a
fixed-income security. In evaluating a convertible security, the
Co-Sub-Advisers will give primary emphasis to the attractiveness of the
underlying common stock. Convertible securities in which the Portfolio
invests will be rated AA+ or higher by Standard & Poor's Corporation or Aa1
or higher by Moody's Investors Service, Inc. The Portfolio will not invest in
unrated convertible securities.
FINANCIAL FUTURES CONTRACTS
The Portfolio may enter into futures on specific securities and stock
index futures contracts, including indexes on specific securities, as a hedge
against changes in the market values of common stocks. The Portfolio may
enter into interest rate futures contracts as a hedge against changes in
prevailing levels of interest rates. In either case, the purpose is to
establish more definitely the effective return on securities held or intended
to be acquired by the Portfolio. The Portfolio's hedging may include sales of
futures as an offset against the effect of expected decreases in stock values
or increases in interest rates, and purchases of futures as an offset against
the effect of expected increases in stock values or decreases in interest
rates.
The Portfolio will not enter into a futures contract if, as a result
thereof, (i) the aggregate market value of all open futures positions would
exceed one-third of the Portfolio's total assets or (ii) the sum of the
initial margin deposits of all open futures positions (other than an
offsetting transaction) would be more than 5% of the Portfolio's total
assets. More than 5% of the Portfolio's total assets may be committed to the
aggregate of initial and variation margin payments however. Furthermore, in
order to be certain that the Portfolio has sufficient assets to satisfy its
obligations under a futures contract, the Portfolio segregates with the
Fund's custodian cash or liquid assets equal in value to the market value of
the futures contract.
Financial futures prices are volatile and difficult to forecast and the
correlation between changes in prices of futures contracts and the securities
being hedged can be only approximate. A decision of whether, when and how to
hedge involves the exercise of skill and judgment, and even a well-conceived
hedge may be unsuccessful to some degree because of market behavior or
unexpected stock market or interest rate trends.
Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. A relatively small price movement in a
futures contract may result in immediate and substantial loss, as well as
gain, to the investor. Thus, a purchase or sale of a futures contract may
result in losses in excess of the amount invested in the futures contract.
2
<PAGE>
A description of financial futures contracts is included in the Statement
of Additional Information.
ILLIQUID SECURITIES
Restricted securities are securities subject to legal or contractual
restrictions on their resale, such as private placements. Such restrictions
might prevent the sale of restricted securities at a time when sale would
otherwise be desirable. The Portfolio will limit investments in illiquid
securities, including restricted securities, not determined by the Board of
Directors to be liquid, non-negotiable time deposits, to 15% of its net
assets.
FOREIGN INVESTMENTS, RELATED DERIVATIVE INSTRUMENTS, AND SPECIAL RISKS
The Portfolio has an unlimited right to purchase securities in any foreign
country, developed or developing. In selecting investments in foreign
securities for the Portfolio,
2
<PAGE>
the Co-Sub-Advisers will consider a variety of factors which may include the
political and economic conditions in a country, the prospect for changes in
the value of its currency and the liquidity of the investment in that
country's securities markets. If appropriate and available, the
Co-Sub-Advisers may purchase foreign securities through dollar-denominated
ADRs, EDRs, GDRs and other types of receipts or shares evidencing ownership
of the underlying foreign securities. While ADRs are dollar-denominated
receipts that are issued by domestic banks and traded in the United States,
EDRs are typically issued by European banks, and GDRs may be issued by either
domestic or foreign banks. In addition, the Portfolio may invest indirectly
in foreign securities through foreign investment funds or trusts (including
passive foreign investment companies).
Investing in foreign securities involves opportunities and risks that
differ from those involved with investing solely in U.S. markets. The
Co-Sub-Advisers believe that there is substantial opportunity from a
professionally managed portfolio of securities selected from foreign markets.
This investment framework seeks to take advantage of the investment
opportunities created by the global economy. Accordingly, an investor may
benefit from worldwide access to investment opportunities, without being
constrained by the location of a company's headquarters or the trading market
for its shares.
At the same time, these opportunities involve considerations and risks
that may not be encountered in U.S. investments. For example, changes in
currency exchange rates and exchange rate controls may affect the value of
foreign securities and the value of their dividend or interest payments, and
therefore the Portfolio's share prices and returns. Foreign companies
generally are subject to tax laws and accounting, auditing, and financial
reporting standards, practices and requirements that differ from those
applicable to U.S. companies. There is generally less publicly available
information about foreign companies and less securities and other
governmental regulation and supervision of foreign companies, stock exchanges
and securities brokers and dealers. The Portfolio may encounter difficulties
in enforcing obligations in foreign countries and negotiating favorable
brokerage commission rates. Securities of some foreign companies are less
liquid, and their prices more volatile, than securities of comparable U.S.
companies. Security trading practices abroad may offer less protection to
investors such as the Portfolio than the practices of domestic securities
trading. Custody charges are generally higher for foreign securities than for
domestic securities.
The considerations noted above may be intensified in the case of
investments in developing countries or countries with limited or developing
capital markets. In particular, developing countries may have relatively
unstable governments, economies based on only a few industries and securities
markets that trade a small number of securities. Securities of issuers
located in developing countries may have limited marketability and may be
subject to more abrupt or erratic price fluctuations. Special custody or
other arrangements may need to be made before the Portfolio can make certain
investments in developing countries. It may be more difficult to assess the
value or prospects of an investment in an issuer from a developing country,
and the laws of some foreign countries may limit the ability of the Portfolio
to invest in securities of certain issuers in such countries.
In addition, with respect to some foreign countries, there is the
possibility of expropriation or confiscatory taxation; limitations on the
removal of securities, property or other assets of the Portfolio; political
or social instability or war; or diplomatic developments which could affect
U.S. investments in those countries. These latter considerations generally
are more of a concern in developing countries. Developing countries may also
have economies that are based on only a few industries. Although investments
in companies domiciled in developing countries may be subject to potentially
greater risk than investments in developed countries, the Portfolio will not
invest in any securities of issuers located in developing countries if the
Co-Sub-Advisers determine these securities to be speculative at the time of
acquisition.
At times, securities held by the Portfolio may be listed on foreign
exchanges or traded in foreign markets which are open on days (such as
Saturday) when the Portfolio does not compute its price or accept orders for
the purchase, redemption or exchange of its shares. As a result, the net
asset value of the Portfolio may be significantly affected by trading on days
when shareholders cannot make transactions.
To the extent the Portfolio invests in international foreign securities
markets, changes in the Portfolio's share price may have a reduced
correlation with movements in the U.S. markets. The Portfolio's share price
reflects the movements of both the prices of securities in which the
Portfolio is invested and the currencies in which the investments are
denominated. Because the foreign securities in which the Portfolio may invest
include those that are denominated in foreign currencies, or that otherwise
have values that depend on the performance of foreign currencies relative to
the U.S. dollar, the relative strength of the U.S. dollar may be, to that
extent, an important factor in the performance of the Portfolio. In an effort
to manage exchange rate risks, the Portfolio may enter into foreign currency
3
<PAGE>
exchange contracts (agreements to exchange one currency for another at a
future date). The Portfolio may exchange foreign currencies for U.S. dollars
and for other foreign currencies in the normal course of business, and may
purchase and sell currencies through currency exchange contracts in order to
fix a price for securities they have agreed to buy or sell. The
Co-Sub-Advisers may also seek to hedge some or all of the Portfolio's
investments denominated in foreign currency against a decline in the value of
that currency relative to U.S. dollars, by entering into contracts to
exchange that currency for U.S. dollars (not exceeding the value of the
Portfolio's assets denominated in that currency), or by participating in
options or futures contracts with respect to such currency. This type of
hedge may
3
<PAGE>
minimize the effect of currency appreciation as well as depreciation, but
does not protect against a decline in the security's value relative to other
securities denominated in that currency.
The Portfolio may also enter into foreign currency exchange contracts to
shift exposure to currency exchange rate changes from one foreign currency to
another. This technique is known as cross-hedging. For example, if a
Co-Sub-Adviser believed that a particular currency may decline relative to
the U.S. dollar, the Portfolio could enter into a contract to sell that
currency (up to the value of the Portfolio's assets denominated in that
currency) in exchange for another currency that the Co-Sub-Adviser expects to
remain stable or to appreciate relative to the U.S. dollar. As a
non-fundamental operating policy, the Portfolio will not enter into currency
exchange contracts if, as a result, more than 10% of its assets would be
committed to the consummation of cross-hedge contracts, and will instruct its
custodian bank to segregate liquid assets to cover the Portfolio's purchase
obligations under this type of contract.
Generally, the use of hedging strategies involves investment risks and
transaction costs to which the Portfolio would not be subject absent the use
of these strategies. If the Co-Sub-Advisers engage in a hedging transaction
intended to protect the Portfolio against potential adverse movements in the
securities, foreign currency or interest rate markets using these hedging
instruments, and such markets do not move in a direction adverse to the
Portfolio, the Portfolio could be left in a less favorable position than if
such hedging strategy had not been used. The use of hedging strategies
involves special risks, which include: 1) the risk that interest rates,
securities prices and currency markets will not move in the directions
anticipated; 2) imperfect correlation between the price of the hedging
instruments and movements in the prices of the securities or currencies
underlying the hedging transaction; 3) the fact that the skills needed to use
these strategies are different from those needed to select portfolio
securities; 4) the possible absence of a liquid secondary market for any
particular instrument at any time; and 5) the possible need to defer closing
out certain hedged positions to avoid adverse tax consequences. See the
Statement of Additional Information for further information concerning these
risks.
INVESTMENT FUNDS AND OTHER INVESTMENT COMPANIES
The Portfolio may invest in investment funds which have been authorized by
the governments of certain countries specifically to permit foreign
investment in securities of companies listed and traded on the stock
exchanges in these respective countries. If the Portfolio invests in such
investment funds, the Portfolio's shareholders will bear not only their
proportionate share of the expenses of the Portfolio (including operating
expenses and the fees of the investment adviser), but also will bear
indirectly similar expenses of the underlying investment funds. In addition,
the securities of these investment funds may trade at a premium over their
net asset value.
In accordance with certain provisions of the 1940 Act, the Portfolio may
invest up to 10% of its total assets, calculated at the time of purchase, in
securities issued by investment companies, including such investment funds.
The Portfolio may not invest (i) more than 5% of its total assets in the
securities of any one investment company or (ii) in more than 3% of the
voting securities of any other investment company. In accordance with
regulatory exemptions obtained by GEIM and its affiliates, the Portfolio's
investment in the GEI Short-Term Investment Fund, as described below under
"Money Market Instruments," is not considered an investment in another
investment company for purposes of these limitations.
BORROWING
The Portfolio may borrow only for temporary or emergency purposes (not for
leveraging or investments) in an amount not to exceed 33 1/3 % of its total
assets, including the amount borrowed. To secure borrowings, the Portfolio
may not mortgage or pledge its securities in amounts that exceed 15% of its
net assets, at the time the loan or borrowing is made. In addition, the
Portfolio may borrow money from or lend money to other funds that permit such
transactions which are also advised by the Co-Sub-Advisers, provided the
Portfolio seeks and obtains permission to do so from the Securities and
Exchange Commission. There is no assurance that such permission would be
granted. Notwithstanding the limitations set forth above, in accordance with
the requirements of current California insurance regulations, the Portfolio
will restrict borrowings to no more than 10% of total assets, except that the
Portfolio may temporarily borrow amounts equal to as much as 25% of total
assets if such borrowing is necessary to meet redemptions. If California's
insurance regulations are changed at some future time to permit borrowings in
excess of 10% but less than 25% of total assets, the Portfolio may conduct
borrowings in accordance with such revised limits.
LENDING OF PORTFOLIO SECURITIES
In order to generate income and to offset expenses, the Portfolio may lend
securities to brokers, dealers, banks or other financial institutions or make
4
<PAGE>
any other loan up to 25% of its total assets, although this limitation does
not apply to purchases of commercial paper or debt securities. Securities
lending may involve some credit risk to the Portfolio if the borrower
defaults and the Portfolio is delayed or prevented from recovering the
collateral for the loan or is otherwise required to cover a transaction in
the security loaned. Loans of securities will be collateralized by cash,
letters of credit or U.S. Government securities that are maintained at all
times in an amount equal to at least 100% of the current market value of the
loaned securities. If a material event is to be voted upon affecting the
Portfolio's investment in securities which are on loan, the Portfolio will
take such action as may be appropriate in order to vote its shares. The
Portfolio does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if it were considered
important with respect to the investment. (See the Statement of Additional
Information for further information on securities loans.)
4
<PAGE>
FIXED-INCOME INVESTING
The performance of the debt component of the Portfolio (if any) depends
primarily on interest rate changes, the average weighted maturity of the
Portfolio and the quality of securities held. The debt component of the
Portfolio will tend to decrease in value when interest rates rise and
increase when interest rates fall. The Portfolio may vary the average
maturities of its portfolio of debt securities based on the portfolio
manager's analysis of interest rate trends and other factors. Generally,
shorter term securities are less sensitive to interest rate changes, but
longer term securities offer higher yields. The Portfolio's share price and
yield will also depend, in part, on the quality of its investments in debt
securities. For example, while U.S. Government securities generally are of
high quality, government securities that are not backed by the full faith and
credit of the United States and other debt securities, including those of
foreign governments, may be affected by changes in the creditworthiness of
the issuer of the security. The extent that such changes are reflected in the
Portfolio's share price will depend upon the extent of the Portfolio's
investment in such securities.
MONEY MARKET INSTRUMENTS
The types of money market instruments in which the Portfolio may invest
directly, or indirectly through its investment in the GEI Short-Term
Investment Fund described below, are as follows: (i) securities issued or
guaranteed by the U.S. Government or one of its agencies or
instrumentalities; (ii) debt obligations of banks, savings and loan
institutions, insurance companies and mortgage bankers; (iii) commercial
paper and notes, including those with variable and floating rates of
interest, (iv) debt obligations of foreign branches of U.S. banks, U.S.
branches of foreign banks and foreign branches of foreign banks; (v) debt
obligations issued or guaranteed by one or more foreign governments or any of
their political subdivisions, agencies or instrumentalities, including
obligations of supranational entities, (vi) debt securities issued by foreign
issuers and (vii) repurchase agreements. The Portfolio may invest in the GEI
Short-Term Investment Fund (the "Investment Fund"), an investment fund
created specifically to serve as a vehicle for the collective investment of
cash balances of the Portfolio and other accounts advised by GE Investment
Management Incorporated ("GEIM") or its affiliate, General Electric
Investment Corporation ("GEIC"). The Investment Fund is not registered with
the securities and Exchange Commission as an investment company. The
Investment Fund invests exclusively in the money market instruments described
in (i) through (vii) above. The Investment Fund is advised by GEIM. No
advisory fee is charged by GEIM to the Investment Fund, nor will the
Portfolio incur any sales charge, redemption fee, distribution fee or service
fee in connection with its investments in the Investment Fund. The Portfolio
may invest up to 25% of its assets in the Investment Fund.
BANK OBLIGATIONS
Because the Portfolio may invest (up to 100%) of its assets in bank
obligations, an investment in the Portfolio should be made with an
understanding of the characteristics of the banking industry and the risks
which such an investment may entail. Banks are subject to extensive
governmental regulations which may limit both the amounts and types of loans
and other financial commitments which may be made and interest rates and fees
which may be charged. The profitability of this industry is largely dependent
upon the availability and cost of capital funds for the purpose of financing
lending operations under prevailing money market conditions. Also, general
economic conditions play an important part in the operations of this
industry, and exposure to credit losses arising from possible financial
difficulties of borrowers might affect a bank's ability to meet its
obligations.
OTHER INVESTMENT POLICIES AND RESTRICTIONS
The Portfolio is subject to certain other investment policies and
restrictions which are described in the Statement of Additional Information,
some of which are fundamental policies of the Portfolio and as such may not
be changed without the approval of a majority of the Portfolio's shareholders
and the Policyholders.
PORTFOLIO TURNOVER
The Portfolio's turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities (excluding
certain short-term securities) for a year and dividing it by the monthly
average of the market value of such securities during the year. The
Portfolio's annual portfolio turnover rate is expected to exceed 100% but is
not expected to exceed 200%; the rate of portfolio turnover is not expected
to be a limiting factor when changes are deemed appropriate. High turnover
and short-term trading involve correspondingly higher transaction costs for
the Portfolio which are ultimately borne by the shareholders and
Policyholders. See "Portfolio Transactions and Brokerage" in the Statement of
Additional Information.
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MANAGEMENT OF THE FUND
Overall responsibility for management and supervision of the Fund rests
with the Fund's Board of Directors. There are currently five Directors, three
of whom are not "interested persons" of the Fund as that term is defined in
the 1940 Act. The Board meets regularly four times each year and at other
times as necessary. By virtue of the functions performed by the Investment
Adviser and Sub-Advisers, the Fund requires no employees other than its
executive officers, none of whom devotes full time to the affairs of the
Fund. These officers are employees of WRL and receive no compensation from
the Fund. The Statement of Additional Information contains the names and
general background information regarding each Director and executive officer
of the Fund.
RESTRUCTURING
Pursuant to an internal restructuring plan (the "Restructuring"), WRL, the
current investment adviser of the Fund, has formed two new wholly-owned
subsidiaries, WRL Investment Management, Inc. ("WRL Management") and WRL
Investment Services, Inc. ("WRL Services"). It is anticipated that WRL
Management and WRL Services together will
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assume the business of WRL as it relates to the management, supervision, and
administration of registered investment companies, including the Fund.
Subject to approval by the existing shareholders at a special shareholders'
meeting to be held on or about December 16, 1996 (the "Meeting"), if the
Restructuring is implemented, (1) WRL Management will replace WRL as the
investment adviser to each Portfolio of the Fund; and (ii) WRL Services will
replace WRL as the provider of administrative services to each Portfolio of
the Fund with an anticipated effective date of January 1, 1997.
In light of the Restructuring, a new Investment Advisory Agreement and a
Sub-Advisory Agreement for each Portfolio of the Fund with WRL Management
will be executed, subject to approval of the proposed agreements by the
shareholders of the Fund at the meeting. The new advisory agreements, if
approved, will result in an indirect increase in advisory fees.
It is also contemplated that, subject to shareholder approval, the Fund
will adopt a distribution plan ("12b-1 Plan") effective January 1, 1997.
Under the 12b-1 Plan, InterSecurities, Inc. ("ISI"), an affiliate of WRL,
will perform distribution-related services for the Fund. The 12-b-1 Plan
provides that the Fund, on behalf of the Portfolios, will reimburse ISI for
certain expenses related to the distribution of Fund shares, and incurred or
paid by ISI. The 12b-1 Plan limits reimbursements to 0.15%, on an annual
basis, of the average daily net asset value of shares of each Portfolio.
On October 3, 1996, at a special meeting of the Board of Directors of the
Fund (the "Board"), the Board unanimously approved the proposed advisory and
sub-advisory agreements, and the 12b-1 Plan and related distribution
agreement, subject to the approval of the shareholders at the Meeting.
Policyowners with cash value attributable to a Portfolio of the Fund on the
record date of the shareholders' meeting will be asked to provide voting
instructions to WRL in connection with the Meeting.
THE INVESTMENT ADVISER
WRL, a life insurance company located at 201 Highland Avenue, Largo,
Florida 33770, serves as the Portfolio's Investment Adviser and is a
registered investment adviser under the Investment Advisers Act of 1940, as
amended. The Investment Adviser is a wholly-owned subsidiary of First AUSA
Life Insurance Company ("First AUSA"), a stock life insurance company which
is wholly-owned by AEGON USA, Inc. ("AEGON"). AEGON is a financial services
holding company whose primary emphasis is on life and health insurance and
annuity and investment products. AEGON is an indirect wholly-owned subsidiary
of AEGON nv, a Netherlands corporation, which is a publicly-traded
international insurance group.
Subject to the supervision and direction of the Fund's Board of Directors,
the Investment Adviser is responsible for managing the Portfolio in
accordance with the Portfolio's stated investment objective and policies. As
compensation for its services to the Portfolio, the Investment Adviser
receives monthly compensation at the annual rate of 1.00% of the average
daily net assets of the Portfolio.
The Investment Adviser is responsible for providing investment advisory
services and furnishes or makes available to the Portfolio the services of
executive and management personnel to supervise the performance of all
administrative, recordkeeping, regulatory reporting and compliance services,
including the supervision of the Portfolio's custodian. The Investment
Adviser also assists the Portfolio in maintaining communications and
relations with the shareholders of the Portfolio, including assisting in the
preparation of reports to shareholders. The Investment Adviser may incur and
will pay certain additional expenses, including legal and accounting fees, in
connection with the formation and organization of the Portfolio, including
the preparation and filing, when appropriate, of all documents, including
registration statements, post-effective amendments, and any registration or
qualification under state securities laws required in connection with the
Portfolio's offering of shares. The Investment Adviser will also pay all
reasonable compensation, fees, and related expenses of the officers and
Directors of the Fund, except for such Directors who are not interested
persons (as that term is defined in the 1940 Act) of the Investment Adviser,
and the rental of offices. The Portfolio pays all other expenses incurred in
its operations, including general administrative expenses. Accounting
services are provided for the Portfolio by the Investment Adviser. Pursuant
to an expense limitation voluntarily adopted by WRL, WRL has undertaken,
until at least April 30, 1997, to pay expenses on behalf of the Portfolio to
the extent normal operating expenses (including investment advisory fees but
excluding interest, taxes, brokerage fees, commissions and extraordinary
charges) exceed 1.50% of the Portfolio's average daily net assets.
THE CO-SUB-ADVISERS
Scottish Equitable Investment Management Limited ("Scottish Equitable"),
located at Edinburgh Park, Edinburgh EH12 9SE, Scotland, serves as a
Co-Sub-Adviser to the Portfolio. Scottish Equitable is a wholly-owned
subsidiary of Scottish Equitable plc and is a registered investment adviser
under the Investment Advisers Act of 1940, as amended. Scottish Equitable plc
is successor to Scottish Equitable Life Assurance Society, which was founded
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in Edinburgh in 1831. As of December 31, 1995, Scottish Equitable plc had
approximately $15.9 billion in assets under management. Like the Investment
Adviser, Scottish Equitable is an indirect wholly-owned subsidiary of AEGON
nv. Scottish Equitable has not previously advised a U.S.-registered mutual
fund. Scottish Equitable currently provides investment advisory and
management services to certain of its affiliates, including Scottish
Equitable plc. and to external organizations.
GE Investment Management Incorporated, located at 3003 Summer Street,
Stamford, CT 06905 ("GEIM") also serves as a Co-Sub-Adviser to the Portfolio.
GEIM, which was formed under the laws of Delaware in 1988, is a wholly-owned
subsidiary of General Electric Company ("GE") and is a registered investment
adviser under the Investment Advisers Act of 1940, as amended. GEIM's
principal officers
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and directors serve in similar capacities with respect to General Electric
Investment Corporation ("GEIC", and, together with GEIM and their
predecessors, collectively referred to as "GE Investments"), which like GEIM
is a wholly-owned subsidiary of GE. GEIC serves as investment adviser to
various GE pension and benefit plans and certain employee mutual funds. GE
Investments has roughly 70 years of investment management experience and has
managed mutual funds since 1935. As of June 30, 1996, GEIM and GEIC together
managed assets in excess of $55 billion.
Carol Clark has served as a Portfolio Manager of the Portfolio since its
inception. Ms. Clark is the Manager of Scottish Equitable's Asset Allocation
group and has served both as a Portfolio Manager and Investment Analyst. Ms.
Clark joined Scottish Equitable in 1983 directly from Glasgow University
where she earned a MA(Honors) in Political Economy; and she also holds the
Securities Industry Diploma.
Ralph R. Layman has served as a Portfolio Manager of the Portfolio since
its inception. Mr. Layman has more than 17 years of investment experience and
has held positions with GE Investments since 1991. From 1989 to 1991, Mr.
Layman served as Executive Vice President, Partner and Portfolio Manager of
Northern Capital Management, and prior thereto, served as Vice President and
Portfolio Manager of Templeton Investment Counsel. Mr. Layman is currently an
Executive Vice President of GE Investments.
The Co-Sub-Advisers provide investment advisory assistance and portfolio
management advice to the Investment Adviser for the Portfolio. Subject to
review and supervision by the Investment Adviser and the Board of Directors
of the Fund, the Co-Sub-Advisers are responsible for the actual management of
their respective portions of the Portfolio and for making decisions to buy,
sell or hold any particular security, and they places orders to buy or sell
securities on behalf of the Portfolio. The Co-Sub-Advisers bear all of their
expenses in connection with the performance of their services, such as
compensating and furnishing office space for their respective officers and
employees connected with investment and economic research, trading and
investment management of the Portfolio.
For its services, each Co-Sub-Adviser receive monthly compensation from
the Investment Adviser. In return, each will receive compensation, paid
monthly, equal to 50% of the investment management fees received by the
Investment Adviser with respect to the amount of Portfolio assets managed by
each Co-Sub-Adviser during such period, less 50% of the amount of any excess
expenses paid by the Investment Adviser on behalf of the Portfolio pursuant
to an expense limitation (see "The Investment Adviser", p. 5) in the amount
of 50% of the investment management fees received by the Investment Adviser
with respect to the amount of the Portfolio's assets managed by the
Co-Sub-Adviser during such period, less 50% of the amount of any excess
expenses paid by the Investment Adviser on behalf of the Portfolio pursuant
to the expense limitation described above with respect to the amount of
assets managed by the Co-Sub-Adviser during such period. (See "The Investment
Adviser", p.5.) Any amount borne by GEIM pursuant to the expense limitation
described above constitutes an agreement between the Investment Adviser and
GEIM only for the first twelve months, following the Portfolio's commencement
of operations. Thereafter, any such arrangements will be as mutually agreed
upon by the GEIM and the Investment Adviser.
The Co-Sub-Advisers are also responsible for selecting the broker-dealers
who execute the portfolio transactions for the Portfolio. Each Co-Sub-Adviser
is authorized to consider sales of the Policies or Annuity Contracts
described in the accompanying prospectus by a broker-dealer as a factor in
the selection of broker-dealers to execute portfolio transactions. In
addition, the Co-Sub-Advisers may from time to time place portfolio business
with affiliated brokers of the Investment Adviser or a Co-Sub-Adviser. In
placing portfolio business with all dealers, the Co-Sub-Advisers seek best
execution of each transaction and all brokerage placement must be consistent
with the Rules of Fair Practice of the National Association of Securities
Dealers, Inc.
PERSONAL SECURITIES TRANSACTIONS
The Fund permits "Access Persons" as defined by Rule 17j-1 under the 1940
Act to engage in personal securities transactions, subject to the terms of
the Code of Ethics and Insider Trading Policy (the "Ethics Policy") that has
been adopted by the Board of Directors of the Fund. Access Persons are
required to follow the guidelines established by this Ethics Policy in
connection with all personal securities transactions and are subject to
certain prohibitions on personal trading. The Fund's Sub-Advisers, pursuant
to Rule 17j-1 and other applicable laws, and pursuant to the terms of the
Ethics Policy, must adopt and enforce their own Code of Ethics and Insider
Trading Policies appropriate to their operations. Each Sub-Adviser is
required to report to the Board of Directors on a quarterly basis with
respect to the administration and enforcement of such Ethics Policy,
including any violations thereof which may potentially affect the Fund.
DIVIDENDS AND OTHER DISTRIBUTIONS
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The Portfolio intends to distribute substantially all of its net
investment income, if any. Dividends, if any, from investment income normally
are declared and paid semi-annually in additional shares of the Portfolio at
net asset value. Distributions of net realized capital gains from security
transactions and net gains from foreign currency transactions, if any,
normally are declared and paid in additional shares of the Portfolio at the
end of the fiscal year.
TAXES
The Portfolio intends to qualify and expects to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code
of 1986, as amended ("Code"). As such, the Portfolio is not subject to
Federal income tax on that part of its investment company taxable income
(consisting generally of net investment income,
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net gains from certain foreign currency transactions, and net short-term
capital gain, if any) and any net capital gain (the excess of net long-term
capital gain over net short-term capital loss) that it distributes to its
shareholders. It is the Portfolio's intention to distribute all such income
and gains.
Portfolio shares are offered only to the Separate Accounts (which are
insurance company separate accounts that fund the Policies and the Annuity
Contracts). Under the Code, no tax is imposed on an insurance company with
respect to income of a qualifying separate account properly allocable to the
value of eligible variable annuity or variable life insurance contracts. For
a discussion of the taxation of life insurance companies and the Separate
Accounts, as well as the tax treatment of the Policies and Annuity Contracts
and the holders thereof, see "Federal Tax Matters" included in the respective
prospectuses for the Policies and the Annuity Contracts.
The Portfolio intends to comply with the diversification requirements
imposed by section 817(h) of the Code and the regulations thereunder. These
requirements are in addition to the diversification requirements imposed on
the Portfolio by Subchapter M and the 1940 Act. These requirements place
certain limitations on the assets of each separate account that may be
invested in securities of a single issuer, and, because section 817(h) and
the regulations thereunder treat the Portfolio's assets as assets of the
related separate account, these limitations also apply to the Portfolio's
assets that may be invested in securities of a single issuer. Specifically,
the regulations provide that, except as permitted by the "safe harbor"
described below, as of the end of each calendar quarter, or within 30 days
thereafter, no more than 55% of the Portfolio's total assets may be
represented by any one investment, no more than 70% by any two investments,
no more than 80% by any three investments, and no more than 90% by any four
investments.
Section 817(h) provides, as a safe harbor, that a separate account will be
treated as being adequately diversified if the diversification requirements
under Subchapter M are satisfied and no more than 55% of the value of the
account's total assets are cash and cash items, government securities, and
securities of other regulated investment companies. For purposes of section
817(h), all securities of the same issuer, all interests in the same real
property project, and all interests in the same commodity are treated as a
single investment. In addition, each U.S. Government agency or
instrumentality is treated as a separate issuer, while the securities of a
particular foreign government and its agencies, instrumentalities, and
political subdivisions all will be considered securities issued by the same
issuer. Failure of the Portfolio to satisfy the section 817(h) requirements
would result in taxation of the Separate Accounts, the insurance companies,
the Policies, and the Annuity Contracts, and tax consequences to the holders
thereof, other than as described in the respective prospectuses for the
Policies and the Annuity Contracts.
The foregoing is only a summary of some of the important Federal income
tax considerations generally affecting the Portfolio and its shareholders;
see the Statement of Additional Information for a more detailed discussion.
Prospective investors are urged to consult their tax advisors.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Portfolio are sold and redeemed at their net asset value
next determined after receipt of a purchase order or notice of redemption in
proper form. Shares are sold and redeemed without the imposition of any sales
commission or redemption charge. However, certain sales and other charges may
apply to the Policies and the Annuity Contracts. Such charges are described
in the respective prospectuses for the Policies and the Annuity Contracts.
VALUATION OF SHARES
The Portfolio's net asset value per share is ordinarily determined, once
daily, as of the close of the regular session of business on the New York
Stock Exchange ("Exchange") (usually 4:00 p.m., Eastern time), on each day
the Exchange is open.
The value of a foreign security held by the Portfolio is determined in its
national currency as of the close of trading on the foreign exchange on which
it is traded, or as of 4:00 p.m., New York time, if that is earlier, and that
value is then converted into its U.S. dollar equivalent at foreign exchange
rates in effect at noon, New York time, on the day the value of the foreign
security is determined.
Net asset value of the Portfolio's shares is computed by dividing the
value of the net assets of the Portfolio by the total number of Portfolio
shares outstanding.
Except for money market instruments maturing in 60 days or less,
securities held by the Portfolio are valued at market value. Securities for
which market values are not readily available are valued at fair value as
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<PAGE>
determined in good faith by the Advisers under the supervision of the Fund's
Board of Directors. Money market instruments maturing in 60 days or less are
valued on the amortized cost basis.
THE FUND AND ITS SHARES
The Fund was incorporated under the laws of the State of Maryland on
August 21, 1985, and is registered with the Securities and Exchange
Commission as a diversified, open-end management investment company.
The Fund offers its shares for purchase by the Separate Accounts of the
Life Companies to fund benefits under variable life insurance or variable
annuity contracts issued by the Life Companies. Because Fund shares are sold
to Separate Accounts established to receive and invest premiums received
under variable life insurance policies and purchase payments received under
variable annuity contracts, it is conceivable that, in the future, it may
become disadvantageous for variable life insurance Separate Accounts and
variable annuity Separate Accounts to invest in the Fund simultaneously.
Neither the Life Companies nor the Fund currently foresees any such
disadvantages or conflicts, either to variable life insurance policyholders
or to variable annuity contractowners.
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After being notified by one or more of the Life Companies of a potential or
existing conflict, the Fund's Board of Directors will determine if a material
conflict exists and what action, if any, should be taken in response thereto.
Such action could include the sale of Fund shares by one or more of the
Separate Accounts, which could have adverse consequences. Material conflicts
could result from, for example, (1) changes in state insurance laws, (2)
changes in Federal income tax laws, or (3) differences in voting instructions
between those given by variable life insurance policyholders and those given
by variable annuity contractowners. If the Board of Directors were to
conclude that separate funds should be established for variable life and
variable annuity Separate Accounts, the affected Life Companies will bear the
attendant expenses, but variable life insurance policyholders and variable
annuity contractowners would no longer have the economies of scale typically
resulting from a larger combined fund.
The Fund offers a separate class of Common Stock for each portfolio. All
shares of the Portfolio and of each of the other portfolios have equal voting
rights, except that only shares of a particular portfolio are entitled to
vote on matters concerning only that portfolio. Each issued and outstanding
share of the Portfolio is entitled to one vote and to participate equally in
dividends and distributions declared by the Portfolio and, upon liquidation
or dissolution, to participate equally in the net assets of the Portfolio
remaining after satisfaction of outstanding liabilities. The shares of the
Portfolio, when issued, will be fully paid and nonassessable, have no
preference, preemptive, conversion, exchange or similar rights, and will be
freely transferable. Shares do not have cumulative voting rights and the
holders of more than 50% of the shares of the Fund voting for the election of
directors can elect all of the directors of the Fund if they choose to do so
and, in such event, holders of the remaining shares would not be able to
elect any directors.
Only the Separate Accounts of the Life Companies may hold shares of the
Fund and are entitled to exercise the rights directly as described above. If
and to the extent required by law, Life Companies will vote the Fund's shares
in the Separate Accounts, including Fund shares which are not attributable to
Policyholders, at meetings of the Fund in accordance with instructions
received from Policyholders having voting interests in the corresponding
sub-accounts of the Separate Accounts. Except as required by the 1940 Act,
the Fund does not hold regular or special shareholder meetings. If the 1940
Act or any regulation thereunder should be amended or if present
interpretation thereof should change, and as a result it is determined that
the Life Companies are permitted to vote Fund shares in their own right, they
may elect to do so. The rights of Policyholders are described in more detail
in the prospectuses or disclosure documents for the Policies and the Annuity
Contracts, respectively.
PERFORMANCE INFORMATION
The Portfolio may, from time to time, include quotations of its total
return or yield in connection with the total return for any Separate Account
in advertisements, sales literature or reports to Policyholders or to
prospective investors. Total return and yield quotations reflect only the
performance of a hypothetical investment in the Portfolio during the
particular time period shown as calculated based on the historical
performance of the Portfolio during that period. SUCH QUOTATIONS DO NOT IN
ANY WAY INDICATE OR PROJECT FUTURE PERFORMANCE. Quotations of total return
and yield regarding the Portfolio do not reflect charges or deductions
against the Separate Accounts or charges and deductions against the Policies
or the Annuity Contracts. Where relevant, the prospectuses for the Policies
and the Annuity Contracts contain additional performance information.
The total return of the Portfolio refers to the average annual percentage
change in value of an investment in the Portfolio held for various periods of
time, including, but not limited to, one year, five years, ten years and
since the Portfolio began operations, as of a stated ending date. When the
Portfolio has been in operation for these periods, the total return for such
periods will be provided if performance information is quoted. Total return
quotations are expressed as average annual compound rates of return for each
of the periods quoted, reflect the deduction of a proportionate share of the
Portfolio's investment advisory fees and Portfolio expenses and assume that
all dividends and capital gains distributions during the period are
reinvested in the Portfolio when made.
The Portfolio may, from time to time, disclose in advertisements, sales
literature and reports to Policyholders or to prospective investors, total
return for the Portfolio for periods in addition to those required to be
presented, or disclose other nonstandardized data such as cumulative total
returns, actual year-by-year returns, or any combination thereof.
The Portfolio may also, from time to time, compare the performance of the
Portfolio in advertisements, sales literature and reports to Policyholders or
to prospective investors to: (1) the Standard & Poor's Index of 500 Common
Stocks, the Dow Jones Industrial Average or other widely recognized indices;
(2) other mutual funds whose performance is reported by Lipper Analytical
Services, Inc., ("Lipper"), Variable Annuity Research & Data Service
9
<PAGE>
("VARDS") and Morningstar, Inc. ("Morningstar") or reported by other
services, companies, individuals or other industry or financial publications
of general interest, such as FORBES, MONEY, THE WALL STREET JOURNAL, BUSINESS
WEEK, BARRON'S, KIPLINGER'S PERSONAL FINANCE, AND FORTUNE, which rank and/or
rate mutual funds by overall performance or other criteria; and (3) the
Consumer Price Index. Lipper, VARDS and Morningstar are widely quoted
independent research firms which rank mutual funds by overall performance,
investment objectives, and assets. Unmanaged indices may assume the
reinvestment of dividends but usually do not reflect any "deduction" for the
expense of operating or managing a fund. In connection with a ranking, a
Portfolio will also provide additional information with respect to the
ranking, including the particular category to which it relates, the number of
funds in the category, the
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period and criteria on which the ranking is based, and the effect of fee
waivers and/or expense reimbursements.
The Portfolio yield quotation refers to the income generated by a
hypothetical investment in the Portfolio over a specified thirty-day period
expressed as a percentage rate of return for that period. The yield is
calculated by dividing the net investment income per share for the period by
the price per share on the last day of that period.
(See the Statement of Additional Information for more information about
the Portfolio's performance.)
GENERAL INFORMATION
REPORTS TO POLICYHOLDERS
The fiscal year of the Portfolio ends on December 31 of each year. The
Fund will send to the Portfolio's Policyholders, at least semi-annually,
reports showing the Portfolio's composition and other information. An annual
report, containing financial statements audited by the Fund's independent
accountants, will be sent to Policyholders each year.
CUSTODIAN AND DIVIDEND DISBURSING AGENT
Investors Bank & Trust Company, 89 South Street, Boston, Massachusetts
02111, acts as Custodian and Dividend Disbursing Agent of the Portfolio's
assets.
ADDITIONAL INFORMATION
The telephone number or the address of the Fund appearing on the first
page of this Prospectus should be used for requests for additional
information.
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WRL SERIES FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
OFFICE OF THE FUND:
WRL Series Fund, Inc.
201 Highland Avenue
Largo, Florida 33770
(800) 851-9777
(813) 585-6565
INVESTMENT ADVISER:
Western Reserve Life Assurance Co. of Ohio
201 Highland Avenue
Largo, FL 34640
CO-SUB-ADVISERS:
Scottish Equitable Investment Management Limited
Edinburgh Park
Edinburgh EH12 9SE, Scotland
GE Investment Management Incorporated
3003 Summer Street
Stamford, CT 06905
CUSTODIAN:
Investors Bank & Trust Company
89 South Street
Boston, MA 02111
INDEPENDENT ACCOUNTANTS:
Price Waterhouse LLP
1055 Broadway
Kansas City, MO 64105
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING OF ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR
AN OFFER TO ANY PERSON IN ANY STATE OR JURISDICTION OF THE UNITED STATES
OR ANY COUNTRY WHERE SUCH OFFER WOULD BE UNLAWFUL.
WRL00086-10/96
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE A
PROSPECTUS.
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
SUBJECT TO COMPLETION, DATED OCTOBER 17, 1996
WRL SERIES FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is NOT a prospectus but
supplements and should be read in conjunction with the Prospectus for the
International Equity Portfolio of the WRL Series Fund, Inc. (the "Fund"). A
copy of the Prospectus may be obtained from the Fund by writing the Fund at
201 Highland Avenue, Largo, Florida 34640 or by calling the Fund at (800)
851-9777.
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Investment Adviser
SCOTTISH EQUITABLE INVESTMENT MANAGEMENT LIMITED
GE INVESTMENT MANAGEMENT INCORPORATED
Co-Sub-Advisers
The date of the Prospectus to which this Statement of Additional
Information relates and the date of this Statement of Additional Information
is , 1997.
WRL00087-
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE IN THIS STATEMENT CROSS-REFERENCE
OF TO
ADDITIONAL INFORMATION PAGE IN PROSPECTUS
---------------------- ------------------
<S> <C> <C>
Investment Objective and Policies 1 1
Investment Restrictions 1 5
Lending of Portfolio Securities 3 4
Borrowing 3 4
Foreign Securities 3 2
Foreign Currency Futures 4 3
Investment Funds and Other
Investment Companies 4 4
Warrants 4 1
Investments in Futures, Options and
Other Derivative Instruments 4 1
Illiquid and Restricted/144A Securities 16
Management of the Fund 16 5
Directors and Officers 16 5
Restructuring 18
The Investment Adviser 19 5
The Co-Sub-Advisers 20 5
Portfolio Transactions and Brokerage 21 6
Portfolio Turnover 21 5
Placement of Portfolio Brokerage 21 6
Purchase and Redemption of Shares 22 7
Determination of Offering Price 22 7
Net Asset Valuation 22 7
Calculation of Performance Related Information 23 8
Total Return 23 8
Yield Quotations 24 8
Taxes 24 6
Capital Stock of the Fund 26 7
Registration Statement 26 N/A
Financial Statements 26 8
</TABLE>
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INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the International Equity Portfolio (the
"Portfolio") of the Fund is described in the Portfolio's Prospectus. Shares
of the Portfolio are sold only to the separate accounts of Western Reserve
Life Assurance Co. of Ohio ("WRL") and to separate accounts of certain of its
affiliated life insurance companies (collectively, the "Separate Accounts")
to fund the benefits under certain variable life insurance policies (the
"Policies") and variable annuity contracts (the "Annuity Contracts").
As indicated in the Prospectus, the Portfolio's investment objective and,
unless otherwise noted, its investment policies and techniques may be changed
by the Board of Directors of the Fund without approval of shareholders or
holders of the Policies or of the Annuity Contracts (collectively,
"Policyholders"). A change in the investment objective or policies of the
Portfolio may result in the Portfolio having an investment objective or
policies different from that which a Policyholder deemed appropriate at the
time of investment.
INVESTMENT RESTRICTIONS
As indicated in the Prospectus, the Portfolio is subject to certain
fundamental policies and restrictions which may not be changed without the
approval of the holders of a majority of the outstanding voting shares of the
Portfolio. "Majority" for this purpose and under the Investment Company Act
of 1940, as amended (the "1940 Act") means the lesser of (i) 67% of the
shares represented at a meeting at which more than 50% of the outstanding
shares of the Portfolio are represented or (ii) more than 50% of the
outstanding shares of the Portfolio. A complete statement of all such
fundamental policies is set forth below.
The Portfolio may not, as a matter of fundamental policy:
1. With respect to 75% of the Portfolio's total assets, purchase the
securities of any one issuer (other than Government securities as defined in
the 1940 Act) if immediately after and as a result of such purchase (a) the
value of the holdings of the Portfolio in the securities of such issuers
exceeds 5% of the value of the Portfolio's total assets, or (b) the Portfolio
owns more than 10% of the outstanding voting securities of any one class of
securities of such issuer. All securities of a foreign government and its
agencies will be treated as a single issuer for purposes of this restriction.
2. Invest more than 25% of the Portfolio's assets in the securities of
issuers primarily engaged in the same industry. Utilities will be divided
according to their services, for example, gas, gas transmission, electric and
telephone each will be considered a separate industry for purposes of this
restriction, provided that there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, or of certificates of deposit and bankers' acceptances.
For purposes of this restriction, (a) the government of a country, other than
the United States, will be viewed as one industry; and (b) all supranational
organizations together will be viewed as one industry;
3. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this shall not
prevent the Portfolio from purchasing or selling options, futures, swaps and
forward contracts or from investing in securities or other instruments backed
by physical commodities);
4. Invest directly in real estate or interests in real estate; however,
the Portfolio may own securities or other instruments backed by real estate,
including mortgage backed securities, or debt or equity securities issued by
companies engaged in those businesses;
5. Lend any security or make any other loan if, as a result, more than 30%
of its total assets would be lent to other parties (but this limitation does
not apply to purchases of commercial paper, debt securities or to repurchase
agreements); and
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of its portfolio securities.
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Furthermore, the Portfolio has adopted the following non-fundamental
investment restrictions which may be changed by the Board of Directors of the
Fund without shareholder or Policyholder approval:
(A) The Portfolio may not (i) enter into any futures contracts or options
on futures contracts for purposes other than bona fide hedging transactions
within the meaning of Commodity Futures Trading Commission regulations if the
aggregate initial margin deposits and premiums required to establish
positions in futures contracts and related options that do not fall within
the definition of bona fide hedging transactions would exceed 5% of the fair
market value of the Portfolio's net assets, after taking into account
unrealized profits and losses on such contracts it has entered into and (ii)
enter into any futures contracts or options on futures contracts if the
aggregate amount of the Portfolio's commitments under outstanding futures
contracts positions and options on futures contracts would exceed the market
value of its total assets;
(B) The Portfolio may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities
sold short and provided that transactions in options, swaps and forward
futures contracts are not deemed to constitute selling securities short;
(C) The Portfolio may not purchase securities on margin, except that the
Portfolio may obtain such short-term credits as are necessary for the
clearance of transactions, provided that margin payments and other deposits
in connection with transactions in options, futures, swaps and forward
contracts shall not be deemed to constitute purchasing securities on margin;
(D) The Portfolio may not purchase securities of other investment
companies, other than a security acquired in connection with a merger,
consolidation, acquisition, reorganization or offer of exchange and except as
otherwise permitted under the 1940 Act. Investments by the Portfolio in GEI
Short-Term Investment Fund, a private investment fund advised by GE
Investment Management Incorporated ("GEIM"), created specifically to serve as
a vehicle for the collective investment of cash balances of the Portfolio and
other accounts advised by GEIM or General Electric Investment Corporation
("GEIC"), are not subject to this restriction pursuant to and in accordance
with necessary regulatory approvals.
(E) The Portfolio may not mortgage or pledge any securities owned or held
by the Portfolio in amounts that exceed, in the aggregate, 15% of the
Portfolio's net assets, provided that this limitation does not apply to
reverse purchase agreements or in the case of assets deposited to margin or
guarantee positions in futures, options, swaps or forward contracts or the
segregation of assets in connection with such contracts.
(F) The Portfolio may borrow money only for temporary or emergency
purposes (not for leveraging or investment) in an amount not exceeding 33 1/3
% of the value of the Portfolio's total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
exceed 33 1/3 % of the value of the Portfolio's total assets by reason of a
decline in net assets will be reduced within three business days to the
extent necessary to comply with the 33 1/3 % limitation. This policy shall
not prohibit reverse repurchase agreements or deposits of assets to margin or
guarantee positions in futures, options, swaps or forward contracts, or the
segregation of assets in connection with such contracts; (California
insurance regulations currently limit such borrowings to 25% of total assets.
See Prospectus, page 4.)
(G) The Portfolio may not invest more than 15% of its net assets in
illiquid securities. This does not include securities eligible for resale
pursuant to Rule 144A under the 1933 Act of any other securities as to which
a determination as to the liquidity has been made pursuant to guidelines
adopted by the Board of Directors as permitted under the 1940 Act.
(H) The Portfolio may not invest in companies for the purpose of
exercising control or management; and
(I) The Portfolio may not issue senior securities, except as permitted by
the 1940 Act.
Except with respect to borrowing money, if a percentage limitation set
forth above is complied with at the time of the investment, a subsequent
change in the percentage resulting from any change in
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value or of a Portfolio's net assets will not result in a violation of such
restriction. State laws and regulations may impose additional limitations on
borrowing, lending, and the use of options, futures, and other derivative
instruments. In addition, such laws and regulations may require the
Portfolio's investments in foreign securities to meet additional
diversification and other requirements.
With respect to investment restriction 2. above, the Portfolio may use the
industry classifications reflected by the S&P 500 Composite Stock Index, if
applicable at the time of determination. For all other Portfolio holdings,
the Portfolio may use the Directory of Companies Required to File Annual
Reports with the SEC and Bloomberg Inc. In addition, the Portfolio may select
its own industry classifications, provided such classifications are
reasonable.
LENDING OF PORTFOLIO SECURITIES
Subject to Investment Restriction 5, above, the Portfolio from time to
time may lend securities from its portfolio to brokers, dealers and financial
institutions and receive as collateral cash or U.S. Treasury securities which
at all times while the loan is outstanding will be maintained in amounts
equal to at least 100% of the current market value of the loaned securities.
Any cash collateral will be invested in short-term securities, which will
likely increase the current income of the Portfolio. Such loans, which may
not have terms longer than 30 days, will be terminable at any time. The
Portfolio may also pay reasonable fees to persons unaffiliated with the
Portfolio for services in arranging such loans.
BORROWING
The Portfolio may borrow money from or lend money to other funds that
permit such transactions and are also advised by the Adviser or
Co-Sub-Advisers if the Portfolio seeks and obtains permission to do so from
the Securities and Exchange Commission ("SEC"). There is no assurance that
such permission would be granted. The Portfolio may also borrow money only
for temporary or emergency purposes (not for leveraging or investment). Any
such loans or borrowings are expected to be short-term in nature and used for
temporary or emergency purposes, such as to provide cash for redemptions, and
will not exceed 33 1/3 % of the Portfolio's total assets, including the
amount borrowed, at the time the loan or borrowing is made. California
insurance regulations currently limit such borrowings to 25% of total assets.
(See Prospectus, page 4.)
FOREIGN SECURITIES
Subject to the limitations set forth above, the Portfolio has the right to
purchase securities in any foreign country, developed or underdeveloped.
Investments in foreign securities, particularly those of non-governmental
issuers, involve considerations which are not ordinarily associated with
investing in domestic issuers. These considerations include changes in
currency rates, currency exchange control regulations, the possibility of
expropriation, the unavailability of financial information or the difficulty
of interpreting financial information prepared under foreign accounting
standards, less liquidity and more volatility in foreign securities markets,
the impact of political, social or diplomatic developments, and the
difficulty of assessing economic trends in foreign countries. It is possible
that market quotations for foreign securities will not be readily available.
In such event, these securities shall be valued at fair market value as
determined in good faith by the Co-Sub-Advisers under the supervision of the
Fund's Board of Directors. If it should become necessary, the Portfolio could
encounter greater difficulties in invoking legal processes abroad than would
be the case in the United States. Transaction costs with respect to foreign
securities may be higher. The Investment Adviser and the Co-Sub-Advisers will
consider these and other factors before investing in foreign securities. The
Portfolio will not concentrate its investments in any particular foreign
country. For a more detailed explanation regarding the special risks of
investing in foreign securities, see "Foreign Investments, Related Derivative
Instruments, and Special Risks" in the Prospectus.
To the extent the Portfolio invests directly in foreign securities, the
Portfolio will engage in foreign exchange transactions. The foreign currency
exchange market is subject to little government regulation, and such
transactions generally occur directly between parties rather than on an
exchange or in an organized market. This means that the Portfolio is subject
to the full risk of default by a counterparty in such a transaction. Because
such transactions often take place between different time
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<PAGE>
zones, the Portfolio may be required to complete a currency exchange
transaction at a time outside of normal business hours in the counterparty's
location, making prompt settlement of such transaction impossible. This
exposes the Portfolio to an increased risk that the counterparty will be
unable to settle the transaction. Although the counterparty in such
transactions is often a bank or other financial institution, currency
transactions are generally NOT covered by insurance otherwise applicable to
such institutions.
FOREIGN CURRENCY FUTURES
The Portfolio has the authority to deal in forward foreign exchange
between currencies of the different countries in which the Portfolio will
invest as a hedge against possible variations in the foreign exchange rate
between these currencies. This is accomplished through contractual agreements
to purchase or sell a specified currency at a specified future date and price
set at the time of the contract. The Portfolio's dealings in forward foreign
exchange will be limited to hedging involving either specific transactions or
portfolio positions or anticipated transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward foreign currency with
respect to specific receivables or payables of the Portfolio arising from the
purchase and sale of portfolio securities, the sale and redemption of shares
of the Portfolio, or the payment of dividends and distributions by the
Portfolio. Position hedging is the sale of forward foreign currency with
respect to portfolio security positions denominated or quoted in such foreign
currency. The Portfolio will not speculate in forward foreign exchange. For a
more detailed explanation regarding futures, see "Investments in Futures,
Options and Other Derivative Instruments" below.
INVESTMENT FUNDS AND OTHER INVESTMENT COMPANIES
The Portfolio may invest in investment funds which have been authorized by
the governments of certain countries specifically to permit foreign
investment in securities of companies listed and traded on the stock
exchanges in these respective countries. If the Portfolio invests in such
investment funds, the Portfolio's shareholders will bear not only their
proportionate share of the expenses of the Portfolio (including operating
expenses and the fees of the investment adviser), but also will bear
indirectly similar expenses of the underlying investment funds. In addition,
the securities of these investment funds may trade at a premium over their
net asset value.
The Portfolio may invest up to 10% of its total assets, calculated at the
time of purchase, in securities issued by investment companies, including
such investment funds. The Portfolio may not invest (i) more than 5% of its
total assets in the securities of any one investment company or (ii) in more
than 3% of the voting securities of any other investment company. In
accordance with regulatory exemptions obtained by GEIM and its affiliates,
the Portfolio's investment in the GEI Short-Term Investment Fund ("Investment
Fund"), as described in the Prospectus under "Money Market Instruments," is
not considered an investment in another investment company for purposes of
these limitations. The Investment Fund is not registered with the Securities
and Exchange Commission as an investment company.
WARRANTS
Warrants are, in effect, longer-term call options. They give the holder
the right to purchase a given number of shares of a particular company at
specified prices within certain periods of time. The purchaser of a warrant
expects that the market price of the security will exceed the purchase price
of the warrant plus the exercise price of the warrant, thus giving him a
profit. Of course, because the market price may never exceed the exercise
price before the expiration date of the warrant, the purchaser of the warrant
risks the loss of the entire purchase price of the warrant. Warrants
generally trade in the open market and may be sold rather than exercised.
Warrants are sometimes sold in unit form with other securities of an issuer.
Units of warrants and common stock may be employed in financing young
unseasoned companies. The purchase price of a warrant varies with the
exercise price of the warrant, the current market value of the underlying
security, the life of the warrant and various other investment factors.
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INVESTMENTS IN FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
Futures Contracts. As discussed in the section of the Portfolio's
Prospectus entitled "Financial Futures Contracts," the Portfolio may enter
into futures contracts, which are contracts for the purchase or sale for
future delivery of equity or fixed-income securities, foreign currencies or
contracts based on financial indices of U.S. Government or foreign government
securities or equity or fixed-income securities. U.S. futures contracts are
traded on exchanges that have been designated "contract markets" by the
Commodity Futures Trading Commission ("CFTC") and must be executed through a
futures commission merchant ("FCM"), or brokerage firm, which is a member of
the relevant contract market. Through their clearing corporations, the
exchanges guarantee performance of the contracts as between the clearing
members of the exchange. Because all transactions in the futures market are
made through a member of, and are offset or fulfilled through a clearinghouse
associated with, the exchange on which the contracts are traded, the
Portfolio will incur brokerage fees when it buys or sells futures contract.
When the Portfolio buys or sells a futures contract, it incurs a
contractual obligation to receive or deliver the underlying instrument (or a
cash payment based on the difference between the underlying instrument's
closing price and the price at which the contract was entered into) at a
specified price on a specified date. Transactions in futures contracts will
not be made for speculation and will not be made other than to seek to hedge
against potential changes in interest or currency exchange rates or the price
of a security or a securities index which might correlate with or otherwise
adversely affect either the value of the Portfolio's securities or the prices
of securities which the Portfolio is considering buying at a later date.
The buyer or seller of a futures contract is not required to deliver or
pay for the underlying instrument unless the contract is held until the
delivery date. However, both the buyer and seller are required to deposit
"initial margin" for the benefit of a FCM when the contract is entered into.
Initial margin deposits are equal to a percentage of the contract's value, as
set by the exchange on which the contract is traded, and may be maintained in
cash or certain high-grade liquid assets. If the value of either party's
position declines, that party will be required to make additional "variation
margin" payments with a FCM to settle the change in value on a daily basis.
The party that has a gain may be entitled to receive all or a portion of this
amount. Initial and variation margin payments are similar to good faith
deposits or performance bonds, unlike margin extended by a securities broker,
and initial and variation margin payments do not constitute purchasing
securities on margin for purposes of the Portfolio's investment limitations.
In the event of the bankruptcy of a FCM that holds margin on behalf of the
Portfolio, the Portfolio may be entitled to return of margin owed to the
Portfolio only in proportion to the amount received by the FCM's other
customers. The Sub-Adviser will attempt to minimize the risk by careful
monitoring of the creditworthiness of the FCM's with which the Portfolio does
business and by depositing margin payments in a segregated account with the
custodian when practical or otherwise required by law.
Although the Portfolio would segregate with the custodian liquid assets,
with a value sufficient to cover the Portfolio's open futures obligations,
the segregated assets would be available to the Portfolio immediately upon
closing out the futures position, while settlement of securities transactions
could take several days. However, because the Portfolio's cash that may
otherwise be invested would be held uninvested or invested in liquid assets
so long as the futures position remains open, the Portfolio's return could be
diminished due to the opportunity cost of foregoing other potential
investments.
The acquisition or sale of a futures contract may occur, for example, when
the Portfolio holds or is considering purchasing equity securities and seeks
to protect itself from fluctuations in prices without buying or selling those
securities. For example, if prices were expected to decrease, the Portfolio
might sell equity index futures contracts, thereby hoping to offset a
potential decline in the value of equity securities in the Portfolio by a
corresponding increase in the value of the futures contract position held by
the Portfolio and thereby preventing the Portfolio's net asset value from
declining as much as it otherwise would have. The Portfolio also could seek
to protect against potential price declines by selling portfolio securities
and investing in money market instruments. However, since the futures
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market is more liquid than the cash market, the use of futures contracts as
an investment technique allows the Portfolio to maintain a defensive position
without having to sell portfolio securities.
Similarly, when prices of equity securities are expected to increase,
futures contracts may be bought to attempt to hedge against the possibility
of having to buy equity securities at higher prices. This technique is
sometimes known as an anticipatory hedge. Because the fluctuations in the
value of futures contracts should be similar to those of equity securities,
the Portfolio could take advantage of the potential rise in the value of
equity securities without buying them until the market has stabilized. At
that time, the futures contracts could be liquidated and the Portfolio could
buy equity securities on the cash market. To the extent the Portfolio enters
into futures contracts for this purpose, the segregated assets maintained to
cover the Portfolio's obligations with respect to futures contracts will
consist of liquid assets from its portfolio in an amount equal to the
difference between the contract price and the aggregate value of the initial
and variation margin payments made by the Portfolio with respect to the
futures contracts.
The ordinary spreads between prices in the cash and futures markets, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial margin
and variation margin requirements. Rather than meeting additional variation
margin requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal price relationship
between the cash and futures markets. Second, the liquidity of the futures
market depends on participants entering into offsetting transactions rather
than making or taking delivery. To the extent participants decide to make or
take delivery, liquidity in the futures market could be reduced and prices in
the futures market distorted. Third, from the point of view of speculators,
the margin deposit requirements in the futures market are less onerous than
margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may cause temporary price
distortions. Due to the possibility of the foregoing distortions, a correct
forecast of general price trends by the Co-Sub-Advisers still may not result
in a successful use of futures contracts.
Futures contracts entail risks. Although the Co-Sub-Advisers believe that
use of such contracts can benefit the Portfolio, if a Co-Sub-Adviser's
investment judgment is incorrect, the Portfolio's overall performance could
be worse than if the Portfolio had not entered into futures contracts. For
example, if the Portfolio has attempted to hedge against the effects of a
possible decrease in prices of securities held by the Portfolio and prices
increase instead, the Portfolio may lose part or all of the benefit of the
increased value of these securities because of offsetting losses in the
Portfolio's futures positions. In addition, if the Portfolio has insufficient
cash, it may have to sell securities from its portfolio to meet daily
variation margin requirements. Those sales may, but will not necessarily, be
at increased prices which reflect the rising market and may occur at a time
when the sales are disadvantageous to the Portfolio.
The prices of futures contracts depend primarily on the value of their
underlying instruments. Because there are a limited number of types of
futures contracts, it is possible that the standardized futures contracts
available to the Portfolio will not match exactly the Portfolio's current or
potential investments. The Portfolio may buy and sell futures contracts based
on underlying instruments with different characteristics from the securities
in which it typically invests --for example, by hedging investments in
portfolio securities with a futures contract based on a broad index of
securities --which involves a risk that the futures position will not
correlate precisely with the performance of the Portfolio's investments.
Futures prices can also diverge from the prices of their underlying
instruments, even if the underlying instruments correlate with the
Portfolio's investments. Futures prices are affected by such factors as
current and anticipated short-term interest rates, changes in volatility of
the underlying instruments, and the time remaining until expiration of the
contract. Those factors may affect securities prices differently from futures
prices. Imperfect correlations between the Portfolio's investments and its
futures positions may also result from differing levels of demand in the
futures markets and the securities markets, from structural differences in
how futures and securities are traded, and from
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imposition of daily price fluctuation limits for futures contracts. The
Portfolio may buy or sell futures contracts with a greater or lesser value
than the securities it wishes to hedge or is considering purchasing in order
to attempt to compensate for differences in historical volatility between the
futures contract and the securities, although this may not be successful in
all cases. If price changes in the Portfolio's futures positions are poorly
correlated with its other investments, its futures positions may fail to
produce desired gains or result in losses that are not offset by the gains in
the Portfolio's other investments.
Because futures contracts are generally settled within a day from the date
they are closed out, compared with a settlement period of three days for some
types of securities, the futures markets can provide superior liquidity to
the securities markets. Nevertheless, there is no assurance a liquid
secondary market will exist for any particular futures contract at any
particular time. In addition, futures exchanges may establish daily price
fluctuation limits for futures contracts and may halt trading if a contract's
price moves upward or downward more than the limit in a given day. On
volatile trading days when the price fluctuation limit is reached, it may be
impossible for the Portfolio to enter into new positions or close out
existing positions. If the secondary market for a futures contract is not
liquid because of price fluctuation limits or otherwise, the Portfolio may
not be able to promptly liquidate unfavorable positions and potentially be
required to continue to hold a futures position until the delivery date,
regardless of changes in its value. As a result, the Portfolio's access to
other assets held to cover its futures positions also could be impaired.
Although futures contracts by their terms call for the delivery or
acquisition of the underlying commodities or a cash payment based on the
value of the underlying commodities, in most cases the contractual obligation
is offset before the delivery date of the contract by buying, in the case of
a contractual obligation to sell, or selling, in the case of a contractual
obligation to buy, an identical futures contract on a commodities exchange.
Such a transaction cancels the obligation to make or take delivery of the
commodities.
The Portfolio intends to comply with guidelines of eligibility for
exclusion from the definition of the term "commodity pool operator" with the
CFTC and the National Futures Association, which regulate trading in the
futures markets. Such guidelines presently require that to the extent that
the Portfolio enters into futures contracts or options on a futures position
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums on these positions (excluding the
amount by which options are "in-the-money") may not exceed 5% of the
Portfolio's net assets.
OPTIONS ON FUTURES CONTRACTS. The Portfolio may buy and write options on
futures contracts for only hedging purposes. An option on a futures contract
gives the Portfolio the right (but not the obligation) to buy or sell a
futures contract at specified price on or before a specified date. The
purchase and writing of options on futures contracts is similar in some
respects to the purchase and writing of options on individual securities. See
"Options on Securities", p. 10. Transactions in options on futures contracts
will not be made for speculation and will not be made other than to attempt
to hedge against potential changes in interest rates, or currency exchange
rates, or the price of a security or a securities index which might correlate
with, or otherwise adversely affect, either the value of the Portfolio's
securities or the prices of securities which the Portfolio is considering
buying at a later date.
The purchase of a call option on a futures contract may or may not be less
risky than ownership of the futures contract or the underlying instrument,
depending on the pricing of the option compared to either the price of the
futures contract upon which it is based or the price of the underlying
instrument. As with the purchase of futures contracts, when the Portfolio is
not fully invested it may buy a call option on a futures contract to attempt
to hedge against a market advance.
The writing of a call option on a futures contract may constitute a
partial hedge against declining prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures contract.
If the futures price at the expiration of the option is below the exercise
price, the Portfolio will retain the full amount of the option premium which
provides a partial hedge against any
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decline that may have occurred in the Portfolio's holdings. The writing of a
put option on a futures contract may constitute a partial hedge against
increasing prices of the security or foreign currency which is deliverable
under, or of the index comprising, the futures contract. If the futures price
at expiration of the option is higher than the exercise price, the Portfolio
will retain the full amount of the option premium which provides a partial
hedge against any increase in the price of securities which the Portfolio is
considering buying. If a call or put option a Portfolio has written is
exercised, the Portfolio will incur loss which will be reduced by the amount
of the premium it received. Depending on the degree of correlation between
change in the value of its portfolio securities and changes in the value of
the futures positions, the Portfolio's losses from existing options on
futures may to some extent be reduced or increased by changes in the value of
portfolio securities.
The purchase of a put option on a futures contract is similar in some
respect to the purchase of protective put options on portfolio securities.
For example, the Portfolio may buy a put option on a futures contract to
attempt to hedge the Portfolio's securities against the risk of falling
prices.
The amount of risk the Portfolio assumes when it buys an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of
an option also entails the risk that changes in the value of the underlying
futures contract will not be fully reflected in the value of the options
bought.
FORWARD CONTRACTS. The Portfolio may enter into forward foreign currency
exchange contracts ("forward currency contracts") to attempt to minimize the
risk to the Portfolio from adverse changes in the relationship between the
U.S. dollar and other currencies. A forward currency contract is an
obligation to buy or sell an amount of a specified currency for an agreed
price (which may be in U.S. dollars or a foreign currency) at a future date
which is individually negotiated between currency traders and their
customers. The Portfolio may invest in forward currency contracts with stated
contract values of up to the value of the Portfolio's assets.
The Portfolio may exchange foreign currencies for U.S. dollars and for
other foreign currencies in the normal course of business and may buy and
sell currencies through forward currency contracts in order to fix a price
for securities it has agreed to buy or sell. The Portfolio may enter into a
forward currency contract, for example, when it enters into a contract to buy
or sell a security denominated in a foreign currency in order to "lock in"
the U.S. dollar price of the security ("transaction hedge").
Additionally, when a Co-Sub-Adviser believes that a foreign currency in
which portfolio securities are denominated may suffer a substantial decline
against the U.S. dollar, the Portfolio may enter into a forward currency
contract to sell an amount of that foreign currency (or a proxy currency
whose performance is expected to replicate the performance of that currency)
for U.S. dollars approximating the value of some or all of the portfolio
securities denominated in that currency (not exceeding the value of the
Portfolio's assets denominated in that currency) or by participating in
options or futures contracts with respect to the currency. When the
Co-Sub-Advisers believe that the U.S. dollar may suffer a substantial decline
against a foreign currency, the Portfolio may enter into a forward currency
contract to buy that foreign currency for a fixed U.S. dollar amount
("position hedge"). This type of hedge seeks to minimize the effect of
currency appreciation as well as depreciation, but does not protect against a
decline in the security's value relative to other securities denominated in
the foreign currency.
The Portfolio also may enter into a forward currency contract with respect
to a currency where the Portfolio is considering the purchase of investments
denominated in that currency but has not yet done so ("anticipatory hedge")
in an effort to hedge currency-related risk or against market movements.
In any of the above circumstances the Portfolio may, alternatively, enter
into a forward currency contract with respect to a different foreign currency
when the Co-Sub-Advisers believe that the U.S. dollar value of that currency
will correlate with the U.S. dollar value of the currency in which portfolio
securities of, or being considered for purchase by, the Portfolio are
denominated ("cross-hedge"). For example, if the Co-Sub-Advisers believe that
a particular foreign currency may decline relative to the U.S. dollar, the
Portfolio could enter into a contract to sell that currency or a proxy
currency (up to the
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value of the Portfolio's assets denominated in that currency) in exchange for
another currency that the Co-Sub-Advisers expect to remain stable or to
appreciate relative to the U.S. dollar. Shifting the Portfolio's currency
exposure from one foreign currency to another removes the Portfolio's
opportunity to profit from increases in the value of the original currency
and involves a risk of increased losses to the Portfolio if the
Co-Sub-Advisers' projection of future exchange rates is inaccurate.
The Portfolio also may enter into forward contracts to buy or sell at a
later date instruments in which a Portfolio may invest directly or on
financial indices based on those instruments. The market for those types of
forward contracts is developing and it is not currently possible to identify
instruments on which forward contracts might be created in the future.
Forward contracts are currently considered illiquid. Accordingly, the
Fund's custodian will segregate cash or other liquid assets having a value
equal to the aggregate amount of the Portfolio's commitments under forward
contracts entered into with respect to position hedges and cross-hedges. If
the value of the segregated securities declines, additional cash or liquid
assets will be segregated on a daily basis so that the value of the account
will be equal to the amount of the Portfolio's commitments with respect to
such contracts. As an alternative to maintaining all or part of the
segregated assets, the Portfolio may buy call options permitting the
Portfolio to buy the amount of foreign currency subject to the hedging
transaction by a forward sale contract or the Portfolio may buy put options
permitting the Portfolio to sell the amount of foreign currency subject to a
forward buy contract.
While forward contracts are not currently regulated by the CFTC, the CFTC
may in the future assert authority to regulate forward contracts. In such
event the Portfolio's ability to utilize forward contracts in the manner set
forth in the Prospectus may be restricted. Forward contracts will reduce the
potential gain from a positive change in the relationship between the U.S.
dollar and foreign currencies. Unforeseen changes in currency prices may
result in poorer overall performance for the Portfolio than if it had not
entered into such contracts. The use of foreign currency forward contracts
will not eliminate fluctuations in the underlying U.S. dollar equivalent
value of the proceeds or rates of return on the Portfolio's foreign currency
denominated portfolio securities.
The matching of the increase in value of a forward contract with the
decline in the U.S. dollar equivalent value of the foreign currency
denominated asset that is the subject of the hedging transaction generally
will not be precise. In addition, the Portfolio may not always be able to
enter into forward contracts at attractive prices and accordingly may be
limited in its ability to use these contracts in seeking to hedge the
Portfolio's assets.
Also, with regard to the Portfolio's use of cross-hedging transactions,
there can be no assurance that historical correlations between the movement
of certain foreign currencies relative to the U.S. dollar will continue.
Thus, at any time poor correlation may exist between movements in the
exchange rates of the foreign currencies underlying a Portfolio's
cross-hedges and the movements in the exchange rates of the foreign
currencies in which the Portfolio's assets that are subject of the
cross-hedging transaction are denominated.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio may buy put and call options
and may write covered put and call options on foreign currencies for hedging
purposes in a manner similar to that in which futures contracts or forward
contracts on foreign currencies may be utilized. For example, a decline in
the U.S. dollar value of a foreign currency in which portfolio securities are
denominated will reduce the U.S. dollar value of such securities, even if
their value in the foreign currency remains constant. In order to protect
against such diminutions in the value of portfolio securities, the Portfolio
may buy put options on the foreign currency. If the value of the currency
declines, the Portfolio will have the right to sell such currency for a fixed
amount in U.S. dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have resulted.
Conversely, when a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing
the cost of such securities, the Portfolio may buy call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. The purchase of an option on a foreign
currency may constitute an
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effective hedge against fluctuations in exchange rates, although, in the
event of exchange rate movements adverse to the Portfolio's option position,
the Portfolio could sustain losses on transactions in foreign currency
options which would require that the Portfolio lose a portion or all of the
benefits of advantageous changes in those rates. In addition, in the case of
other types of options, the benefit to the Portfolio from purchases of
foreign currency options will be reduced by the amount of the premium and
related transaction costs.
The Portfolio may write options on foreign currencies for the same types
of hedging purposes. For example, in attempting to hedge against a potential
decline in the U.S. dollar value of foreign currency denominated securities
due to adverse fluctuations in exchange rates, the Portfolio could, instead
of purchasing a put option, write a call option on the relevant currency. If
the expected decline occurs, the option will most likely not be exercised and
the diminution in value of portfolio securities will be offset by the amount
of the premium received.
Similarly, instead of purchasing a call option to attempt to hedge against
a potential increase in the U.S. dollar cost of securities to be acquired,
the Portfolio could write a put option on the relevant currency which, if
rates move in the manner projected, will expire unexercised and allow the
Portfolio to hedge the increased cost up to the amount of premium. As in the
case of other types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of the premium
received, and only if exchange rates move in the expected direction. If that
does not occur, the option may be exercised and the Portfolio would be
required to buy or sell the underlying currency at a loss which may not be
offset by the amount of the premium. Through the writing of options on
foreign currencies, the Portfolio also may lose all or a portion of the
benefits which might otherwise have been obtained from favorable movements in
exchange rates.
The Portfolio may write covered call options on foreign currencies. A call
option written on a foreign currency by the Portfolio is "covered" if the
Portfolio owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without
additional cash consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange of other
foreign currency held in its portfolio. A call option is also covered if (i)
the Portfolio holds a call at the same exercise price for the same exercise
period and on the same currency as the call written or (ii) at the time the
call is written, an amount of cash, U.S. Government securities or other
liquid assets equal to the fluctuating market value of the optioned currency
is segregated with the custodian.
The Portfolio may also write call options on foreign currencies for
cross-hedging purposes that may not be deemed to be covered. A call option on
a foreign currency is for cross-hedging purposes if it is not covered but is
designed to provide a hedge against a decline due to an adverse change in the
exchange rate in the U.S. dollar value of a security which the Portfolio owns
or has the right to acquire and which is denominated in the currency
underlying the option. In such circumstances, the Portfolio collateralizes
the option by maintaining segregated assets in an amount not less than the
value of the underlying foreign currency in U.S. dollars marked-to-market
daily.
The Portfolio may buy or write options in privately negotiated
transactions on the types of securities and indices based on the types of
securities in which the Portfolio is permitted to invest directly. The
Portfolio will effect such transactions only with investment dealers and
other financial institutions (such as commercial banks or savings and loan
institutions) deemed creditworthy, and only pursuant to procedures adopted by
the Co-Sub-Advisers for monitoring the creditworthiness of those entities. To
the extent that an option bought or written by the Portfolio in a negotiated
transaction is illiquid, the value of an option bought or the amount of the
Portfolio's obligations under an option written by the Portfolio, as the case
may be, will be subject to the Portfolio's limitation on illiquid
investments. In the case of illiquid options, it may not be possible for the
Portfolio to effect an offsetting transaction at the time when a
Co-Sub-Adviser believes it would be advantageous for the Portfolio to do so.
OPTIONS ON SECURITIES. In an effort to reduce fluctuations in net asset
value, the Portfolio may write covered put and call options and may buy put
and call options and warrants on securities that are
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traded on United States and foreign securities exchanges and
over-the-counter. The Portfolio also may write call options that are not
covered for cross-hedging purposes. The Portfolio may write and buy options
on the same types of securities that the Portfolio could buy directly and may
buy options on financial indices as described above with respect to futures
contracts. There are no specific limitations on the Portfolio's writing and
buying options on securities.
A put option gives the holder the right, upon payment of a premium, to
deliver a specified amount of a security to the writer of the option on or
before a fixed date at a predetermined price. A call option gives the holder
the right, upon payment of a premium, to call upon the writer to deliver a
specified amount of a security on or before a fixed date at a predetermined
price.
A put option written by the Portfolio is "covered" if the Portfolio (i)
secregates with the custodian cash not available for investment or other
liquid assets with a value equal to the exercise price, or (ii) continues to
own an equivalent number of puts of the same "series" (i.e., puts on the same
underlying securities having the same exercise prices and expiration dates as
those written by the Portfolio), or an equivalent number of puts of the same
"class" (i.e., puts on the same underlying securities) with exercise prices
greater than those it has written (or if the exercise prices of the puts it
holds are less than the exercise price of those it has written, the
difference is segregated with the custodian). The premium paid by the buyer
of an option will reflect, among other things, the relationship of the
exercise price to the market price and the volatility of the underlying
security, the remaining term of the option, supply and demand and interest
rates.
A call option written by the Portfolio is "covered" if the Portfolio owns
the underlying security covered by the call or has an absolute and immediate
right to acquire that security without additional cash consideration (or has
segregated additional cash consideration with its custodian) upon conversion
or exchange of other securities held in its portfolio. A call option is also
deemed to be covered (i) if the Portfolio holds a call at the same exercise
price for the same exercise period and on the same securities as the call
written, (ii) in the case of a call on a stock index, if the Portfolio owns a
portfolio of securities substantially replicating the movement of the index
underlying the call option, or (iii) if at the time the call is written, an
amount of cash, U.S. Government securities or other liquid assets equal to
the fluctuating market value of the optioned securities is segregated with
the custodian.
The Portfolio collateralizes its obligation under a written call option
for cross-hedging purposes by segregating with its custodian cash or other
liquid assets in an amount not less than the market value of the underlying
security, marked-to-market daily. The Portfolio would write a call option for
cross-hedging purposes, instead of writing a covered call option, when the
premium to be received from the cross-hedge transaction would exceed that
which would be received from writing a covered call option and the
Co-Sub-Adviser believes that writing the option would achieve the desired
hedge.
If a put or call option written by the Portfolio was exercised, the
Portfolio would be obligated to buy or sell the underlying security at the
exercise price. Writing a put option involves the risk of a decrease in the
market value of the underlying security, in which case the option could be
exercised and the underlying security would then be sold by the option holder
to the Portfolio at a higher price than its current market value. Writing a
call option involves the risk of an increase in the market value of the
underlying security; in which case the option could be exercised and the
underlying security would than be sold by the Portfolio to the option holder
at a lower price than its current market value. Those risks could be reduced
by entering into an offsetting transaction. The Portfolio retains the premium
received from writing a put or call option whether or not the option is
exercised.
The writer of an option may have no control when the underlying security
must be sold, in the case of a call option, or bought, in the case of a put
option, because with regard to certain options, the writer may be assigned an
exercise notice at any time prior to the termination of the obligation.
Whether or not an option expires unexercised, the writer retains the amount
of the premium. This amount, of course, may, in the case of a covered call
option, be offset by a decline in the market value of the underlying security
during the option period. If a call option is exercised, the writer
experiences a profit or loss from the sale of the underlying security. If a
put option is exercised, the writer must fulfill the obligation to buy the
underlying security.
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The writer of an option who wishes to terminate its obligation may effect
a "closing purchase transaction." This is accomplished by buying an option of
the same series as the option previously written. The effect of the purchase
is that the writer's position will be canceled by the clearing corporation.
However, a writer may not effect a closing purchase transaction after being
notified of the exercise of an option. Likewise, an investor who is the
holder of an option may liquidate its position by effecting a "closing sale
transaction." This is accomplished by selling an option of the same series as
the option previously bought. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected.
Effecting a closing transaction in the case of a written call option will
permit the Portfolio to write another call option on the underlying security
with either a different exercise price or expiration date or both or, in the
case of a written put option, will permit the Portfolio to write another put
option to the extent that the exercise price thereof is secured by deposited
high-grade liquid assets. Also, effecting a closing transaction will permit
the cash or proceeds from the concurrent sale of any securities subject to
the option to be used for other portfolio investments. If the Portfolio
desires to sell a particular security on which the Portfolio has written a
call option, the Portfolio will effect a closing transaction prior to or
concurrent with the sale of the security.
The Portfolio may realize a profit from a closing transaction if the price
of the purchase transaction is less than the premium received from writing
the option, or the price received from a sale transaction is more than the
premium paid to buy the option; the Portfolio may realize a loss from a
closing transaction if the price of the purchase transaction is more than the
premium received from writing the option, or the price received from a sale
transaction is less than the premium paid to buy the option. Because
increases in the market of a call option will generally reflect increases in
the market price of the underlying security, any loss resulting from the
repurchase of a call option is likely to be offset in whole or in part by
appreciation of the underlying security owned by the Portfolio.
An option position may be closed out only where there exists a secondary
market for an option of the same series. If a secondary market does not
exist, it might not be possible to effect closing transactions in particular
options with the result that the Portfolio would have to exercise the options
in order to realize any profit. If the Portfolio is unable to effect a
closing purchase transaction in a secondary market, it will not be able to
sell the underlying security until the option expires or the Portfolio
delivers the underlying security upon exercise. Reasons for the absence of a
liquid secondary market may include the following: (i) there may be
insufficient trading interest in certain options, (ii) restrictions may be
imposed by a national securities exchange on which the option is traded
("Exchange") on opening or closing transactions or both, (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities, (iv) unusual or
unforeseen circumstances may interrupt normal operations on an Exchange, (v)
the facilities of an Exchange or the Options Clearing Corporation ("OCC") may
not at all times be adequate to handle current trading volume, or (vi) one or
more Exchanges could, for economic or other reasons, decide or be compelled
at some future date to discontinue the trading of options (or a particular
class or series of options), in which event the secondary market on that
Exchange (or in that class or series of options) would cease to exist,
although outstanding options on that Exchange that had been issued by the OCC
as a result of trades on that Exchange would continue to be exercisable in
accordance with their terms.
The Portfolio may write options in connection with buy-and-write
transactions; that is, the Portfolio may buy a security and then write a call
option against that security. The exercise price of the call the Portfolio
determines to write will depend upon the expected price movement of the
underlying security. The exercise price of a call option may be below
("in-the-money"), equal to ("at-the-money") or above ("out-of-the-money") the
current value of the underlying security at the time the option is written.
Buy-and-write transactions using in-the-money call options may be used when
it is expected that the price of the underlying security will remain flat or
decline moderately during the option period. Buy-and-write transactions using
at-the-money call options may be used when it is expected that the price of
the underlying security will remain fixed or advance moderately during the
option period. Buy-and-write
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transactions using out-of-the-money call options may be used when it is
expected that the premiums received from writing the call option plus the
appreciation in the market price of the underlying security up to the
exercise price will be greater than the appreciation in the price of the
underlying security alone. If the call options are exercised in such
transactions, the Portfolio's maximum gain will be the premium received by it
for writing the option, adjusted upwards or downwards by the difference
between the Portfolio's purchase price of the security and the exercise
price. If the options are not exercised and the price of the underlying
security declines, the amount of such decline will be offset by the amount of
premium received.
The writing of covered put options is similar in terms of risk and return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the Portfolio's gain will be limited to the
premium received. If the market price of the underlying security declines or
otherwise is below the exercise price, the Portfolio may elect to close the
position or take delivery of the security at the exercise price and the
Portfolio's return will be the premium received from the put options minus
the amount by which the market price of the security is below the exercise
price.
The Portfolio may buy put options to attempt to hedge against a decline in
the value of its securities. By using put options in this way, the Portfolio
will reduce any profit it might otherwise have realized in the underlying
security by the amount of the premium paid for the put option and by
transaction costs.
The Portfolio may buy call options to attempt to hedge against an increase
in the price of securities that the Portfolio may buy in the future. The
premium paid for the call option plus any transaction costs will reduce the
benefit, if any, realized by the Portfolio upon exercise of the option, and,
unless the price of the underlying security rises sufficiently, the option
may expire worthless to the Portfolio.
In purchasing an option, the Portfolio would be in a position to realize a
gain if, during the option period, the price of the underlying security
increased (in the case of a call) or decreased (in the case of a put) by an
amount in excess of the premium paid and would realize a loss if the price of
the underlying security did not increase (in the case of a call) or decrease
(in the case of a put) during the period by more than the amount of the
premium. If a put or call option brought by the Portfolio were permitted to
expire without being sold or exercised, the Portfolio would lose the amount
of the premium.
Although they entitle the holder to buy equity securities, warrants on and
options to purchase equity securities do not entitle the holder to dividends
or voting rights with respect to the underlying securities, nor do they
represent any rights in the assets of the issuer of those securities.
INTEREST RATE SWAPS AND SWAP-RELATED PRODUCTS. In order to attempt to
protect the value of the Portfolio's investments from interest rate or
currency exchange rate fluctuations, the Portfolio may enter into interest
rate swaps, and may buy or sell interest rate caps and floors. The Portfolio
expects to enter into these transactions primarily to attempt to preserve a
return or spread on a particular investment or portion of its portfolio. The
Portfolio also may enter into these transactions to attempt to protect
against any increase in the price of securities the Portfolio may consider
buying at a later date. The Portfolio does not intend to use these
transactions as a speculative investment. Interest rate swaps involve the
exchange by the Portfolio with another party of their respective commitments
to pay or receive interest, e.g., an exchange of floating rate payments for
fixed rate payments. The exchange commitments can involve payments to be made
in the same currency or in different currencies. The purchase of an interest
rate cap entitles the purchaser, to the extent that a specified index exceeds
a predetermined interest rate, to receive payments of interest on a
contractually based principal amount from the party selling the interest rate
cap. The purchase of an interest rate floor entitles the purchaser, to the
extent that a specified index falls below a predetermined interest rate, to
receive payments of interest on a contractually based principal amount from
the party selling the interest rate floor.
Swap and swap-related products are specialized over-the-counter
instruments and their use involves risks specific to the markets in which
they are entered into. The Portfolio will usually enter into
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interest rate swaps on a net basis, i.e., the two payment streams are netted
out, with the Portfolio receiving or paying, as the case may be, only the net
amount of the two payments. The net amount of the excess, if any, of the
Portfolio's obligations over its entitlements with respect to each interest
rate swap will be calculated on a daily basis and an amount of cash or other
liquid assets having an aggregate net asset value at least equal to the
accrued excess will be segregated with the Fund's custodian. If the Portfolio
enters into an interest rate swap on other than a net basis, the Portfolio
would segregate assets in the full amount accrued on a daily basis of the
Portfolio's obligations with respect to the swap. The Portfolio will not
enter into any interest rate swap, cap or floor transaction unless the
unsecured senior debt or the claims-paying ability of the other party thereto
is rated in one of the three highest rating categories of at least one
nationally recognized statistical rating organization at the time of entering
into such transaction. The Co-Sub-Advisers will monitor the creditworthiness
of all counterparties on an ongoing basis. If there is a default by the other
party to such a transaction, the Portfolio will have contractual remedies
pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large
number of banks and investment banking firms acting both as principals and as
agents utilizing standardized swap documentation. The Sub-Adviser has
determined that, as a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized
documentation has not yet been developed and, accordingly, they are less
liquid than swaps. To the extent the Portfolio sells (I.E., writes) caps and
floors, it will segregate with the custodian cash or other liquid assets
having an aggregate net asset value at least equal to the full amount,
accrued on a daily basis, of the Portfolio's obligations with respect to any
caps or floors.
There is no limit on the amount of interest rate swap transactions that
may be entered into by the Portfolio; although the Portfolio does not
presently intend to engage in such transactions in excess of 5% of its total
assets. These transactions may in some instances involve the delivery of
securities or other underlying assets by the Portfolio or its counterparty to
collateralize obligations under the swap. Under the documentation currently
used in those markets, the risk of loss with respect to interest rate swaps
is limited to the net amount of the interest payments that the Portfolio is
contractually obligated to make. If the other party to an interest rate swap
that is not collateralized defaults, the Portfolio would risk the loss of the
net amount of the payments that the Portfolio contractually is entitled to
receive. The Portfolio may buy and sell (I.E., write) caps and floors without
limitation, subject to the segregated account requirement described above.
In addition to the instruments, strategies and risks described in this
Statement of Additional Information and in the Prospectus, there may be
additional opportunities in connection with options, futures contracts,
forward currency contracts and other hedging techniques, that become
available as the Co-Sub-Advisers develop new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
instruments and techniques are developed. The Co-Sub-Advisers may use these
opportunities to the extent they are consistent with the Portfolio's
investment objective and are permitted by the Portfolio's respective
investment limitations and applicable regulatory requirements.
SPECIAL INVESTMENT CONSIDERATIONS AND RISKS. The successful use of the
investment practices described above with respect to futures contracts,
options on futures contracts, forward contracts, options on securities and on
foreign currencies, and swaps and swap-related products draws upon skills and
experience which are different from those needed to select the other
instruments in which the Portfolio invests. Should interest or exchange rates
or the prices of securities or financial indices move in an unexpected
manner, the Portfolio may not achieve the desired benefits of futures,
options, swaps and forwards or may realize losses and thus be in a worse
position than if such strategies had not been used. Unlike many
exchange-traded futures contracts and options on futures contracts, there are
no daily price fluctuation limits with respect to options on currencies,
forward contracts and other negotiated or over-the-counter instruments, and
adverse market movements could therefore continue to an unlimited extent over
a period of time. In addition, the correlation between movements in the price
of the securities and currencies hedged or used for cover will not be perfect
and could produce unanticipated losses.
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The Portfolio's ability to dispose of its positions in the foregoing
instruments will depend on the availability of liquid markets in the
instruments. Markets in a number of the instruments are relatively new and
still developing, and it is impossible to predict the amount of trading
interest that may exist in those instruments in the future. Particular risks
exist with respect to the use of each of the foregoing instruments and could
result in such adverse consequences to the Portfolio as the possible loss of
the entire premium paid for an option bought by the Portfolio, the inability
of the Portfolio, as the writer of a covered call option, to benefit from the
appreciation of the underlying securities above the exercise price of the
option and the possible need to defer closing out positions in certain
instruments to avoid adverse tax consequences. As a result, no assurance can
be given that the Portfolio will be able to use those instruments effectively
for the purposes set forth above.
In connection with certain of the Portfolio's hedging transactions, assets
must be segregated with the Fund's Custodian bank to ensure that the
Portfolio will be able to meet its obligations under these instruments.
Assets so segregated generally may not be disposed of for so long as the
Portfolio maintains the positions giving rise to the segregation requirement.
Segregation of a large percentage of the Portfolio's assets could impede
implementation of the Portfolio's investment policies or the Portfolio's
ability to meet redemption requests or other current obligations.
ADDITIONAL RISKS OF OPTIONS ON FOREIGN CURRENCIES, FORWARD CONTRACTS AND
FOREIGN INSTRUMENTS. Unlike transactions entered into by the Portfolio in
futures contracts, options on foreign currencies and forward contracts are
not traded on contract markets regulated by the CFTC or (with the exception
of certain foreign currency options) by the SEC. To the contrary, such
instruments are traded through financial institutions acting as
market-makers, although foreign currency options are also traded on certain
national securities exchanges, such as the Philadelphia Stock Exchange and
the Chicago Board Options Exchange, subject to SEC regulation. Similarly,
options on currencies may be traded over-the-counter. In an over-the-counter
trading environment, many of the protections afforded to exchange
participants will not be available. For example, there are no daily price
fluctuation limits, and adverse market movements could therefore continue to
an unlimited extent over a period of time. Although the buyer of an option
cannot lose more than the amount of the premium plus related transaction
costs, this entire amount could be lost. Moreover, an option writer and a
buyer or seller of futures or forward contracts could lose amounts
substantially in excess of any premium received or initial margin or
collateral posted due to the potential additional margin and collateral
requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on
organized exchanges are available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the OCC, thereby reducing
the risk of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more readily
available than in the over-the-counter market, potentially permitting the
Portfolio to liquidate open positions at a profit prior to exercise or
expiration, or to limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market
movements, margining of options written, the nature of the foreign currency
market, possible intervention by governmental authorities and the effects of
other political and economic events. In addition, exchange-traded options on
foreign currencies involve certain risks not presented by the
over-the-counter market. For example, exercise and settlement of such options
must be made exclusively through the OCC, which has established banking
relationships in applicable foreign countries for this purpose. If the OCC
determines that foreign government restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or place undue
burdens on the OCC or its clearing member, they may impose special procedures
on exercise and settlement, such as technical changes in the mechanics of
delivery of currency, the fixing of dollar settlement prices, or
prohibitions.
15
<PAGE>
In addition, options on U.S. Government securities, futures contracts,
options on futures contracts, forward contracts and options on foreign
currencies may be traded on foreign exchanges and over-the-counter in foreign
countries. Such transactions are subject to the risk of governmental actions
affecting trading in or the prices of foreign currencies or securities. The
value of such positions also could be adversely affected by (i) other complex
foreign political and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions, (iii) delays in the
Portfolio's ability to act upon economic events occurring in foreign markets
during nonbusiness hours in the United States, (iv) the imposition of
different exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) low trading volume.
ILLIQUID AND RESTRICTED/144A SECURITIES
The Portfolio may invest up to 15% of its net assets in illiquid
securities (i.e., securities that are not readily marketable).
In recent years, a large institutional market has developed for certain
securities that are not registered under the 1933 Act. Institutional
investors generally will not seek to sell these instruments to the general
public, but instead will often depend on an efficient institutional market in
which such unregistered securities can readily be resold or on an issuer's
ability to honor a demand for repayment. Therefore, the fact that there are
contractual or legal restrictions on resale to the general public or certain
institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act established a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities
to qualified institutional buyers. Institutional markets for restricted
securities that might develop as a result of Rule 144A could provide both
readily ascertainable values for restricted securities and the ability to
liquidate an investment in order to satisfy share redemption orders. An
insufficient number of qualified institutional buyers interested in
purchasing a Rule 144A-eligible security held by the Portfolio could,
however, adversely affect the marketability of such portfolio security and
the Portfolio might be unable to dispose of such security promptly or at
reasonable prices.
The Fund's Board of Directors has authorized the Portfolio's
Co-Sub-Advisers to make liquidity determinations with respect to Rule 144A
securities in accordance with the guidelines established by the Board of
Directors. Under the guidelines, a Co-Sub-Adviser will consider the following
factors in determining whether a Rule 144A security is liquid: 1) the
frequency of trades and quoted prices for the security; 2) the number of
dealers willing to purchase or sell the security and the number of other
potential purchasers; 3) the willingness of dealers to undertake to make a
market in the security; and 4) the nature of the marketplace trades,
including the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer. The sale of illiquid
securities often requires more time and results in higher brokerage charges
or dealer discounts and other selling expenses than does the sale of
securities eligible for trading on national securities exchanges or in the
OTC markets. The Portfolio may be restricted in its ability to sell such
securities at a time when a Co-Sub-Adviser deems it advisable to do so. In
addition, in order to meet redemption requests, the Portfolio may have to
sell other assets, rather than such illiquid securities, at a time which is
not advantageous.
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund and their principal
occupations for at least the last five years are set forth below:
PETER R. BROWN, DIRECTOR (DOB 5/10/28), 1475 South Belcher Road, Largo,
Florida 34641. Chairman of the Board, Peter Brown Construction Company,
(construction contractors and engineers), Largo, Florida (1963 -present);
Trustee of IDEX Fund, IDEX II Series Fund and IDEX Fund 3; Rear Admiral
(Ret.) U.S. Navy Reserve, Civil Engineer Corps.
16
<PAGE>
CHARLES C. HARRIS, DIRECTOR (DOB 7/15/30), 35 Winston Drive, Clearwater,
Florida 34616. Retired (1988 -present); Senior Vice-President, Treasurer
(1966 -1988), Western Reserve Life Assurance Co. of Ohio; Vice President,
Treasurer (1968 -1988), Director (1968 -1987), Pioneer Western Corporation;
Vice President of the Fund (1986 -December, 1990).
RUSSELL A. KIMBALL, JR., DIRECTOR (DOB 8/17/44), 1160 Gulf Boulevard,
Clearwater, Florida 34630. General Manager, Sheraton Sand Key Resort (resort
hotel), Clearwater, Florida (1975 -present).
G. JOHN HURLEY (1, 2), EXECUTIVE VICE PRESIDENT AND DIRECTOR (DOB 9/12/48).
Executive Vice President (June, 1993 -present), Chief Operating Officer
(March, 1994 -present), Western Reserve Life Assurance Co. of Ohio;
President and Chief Executive Officer (September, 1990 -present), Trustee
(June, 1990 -present) and Executive Vice President (June, 1988 -September,
1990) of IDEX Fund, IDEX II Series Fund and IDEX Fund 3; President, Chief
Executive Officer and Director of InterSecurities, Inc. (May, 1988
-present); Assistant Vice President of AEGON USA Managed Portfolios, Inc.
(September, 1991 -August, 1992); Vice President of Pioneer Western
Corporation (May, 1988 -February, 1991).
JOHN R. KENNEY (1, 2), CHAIRMAN OF THE BOARD OF DIRECTORS AND PRESIDENT (DOB
2/8/38). Chairman of the Board of Directors (1987 -present), Chief Executive
Officer (1982 -present), President, (1978 -1987 and December, 1992 -present)
Director (1978 -present), Western Reserve Life Assurance Co. of Ohio;
Chairman of the Board of Directors and Chief Executive Officer (1988 to
February, 1991), President (1988 -1989), Director (1976 -February, 1991),
Executive Vice President (1972 -1988), Pioneer Western Corporation
(financial services), Largo, Florida; President and Director (1985
-September, 1990) and Director (December, 1990 -present); Idex Management,
Inc. (investment adviser), Largo, Florida; Trustee (1987 -present), Chairman
(December, 1989 -September, 1990 and November, 1990 -present) and President
and Chief Executive Officer (November, 1986 -September, 1990), IDEX Fund,
IDEX II Series Fund and IDEX Fund 3 (investment companies), all of Largo,
Florida.
RICHARD B. FRANZ, II (1, 2), TREASURER (DOB 7/12/50). Senior Vice President
(1987 -present), Chief Financial Officer (1987 -December, 1995) and
Treasurer (1988 -present), Western Reserve Life Assurance Co. of Ohio;
Senior Vice President and Treasurer (1988 -February, 1991), Pioneer Western
Corporation (financial services), Largo, Florida; Treasurer (1988
-September, 1990 and November, 1990 -present), IDEX Fund, IDEX II Series
Fund and IDEX Fund 3 (investment companies), all of Largo, Florida.
REBECCA A. FERRELL (1, 2), SECRETARY, VICE PRESIDENT AND COUNSEL (DOB
12/10/60). Assistant Vice President and Counsel (June, 1995 -present),
Attorney (August, 1993 -June, 1995), Western Reserve Life Assurance Co. of
Ohio; Secretary and Assistant Vice President (March, 1994 -September, 1995)
Secretary, Vice President and Counsel (September, 1995 -present) of IDEX
Fund, IDEX II Series Fund and IDEX Fund 3; Attorney (September, 1992
-August, 1993), Hearne, Graziano, Nader & Buhr, P.A.; Legal Writing
Instructor (August, 1991 -June, 1992), Florida State University College of
Law.
ALAN M. YAEGER (1, 2), EXECUTIVE VICE PRESIDENT (DOB 10/21/46). Executive
Vice President (June, 1993 -present), Chief Financial Officer (December,
1995 -present), Senior Vice President (1981 -June, 1993) and Actuary (1972
-present), Western Reserve Life Assurance Co. of Ohio.
- -------------------
(1) The principal business address is Western Reserve Life Assurance Co. of
Ohio, P.O. Box 5068, Clearwater, Florida 34618-5068.
(2) Interested person as defined in the 1940 Act and affiliated person of
the Investment Adviser.
The Fund pays no salaries or compensation to any of its officers, all of
whom are employees of WRL. The Fund pays an annual fee of $6,000 to each
Director who is not affiliated with the Investment Adviser or the
Co-Sub-Advisers ("disinterested Director"). Each such Director also receives
$500, plus expenses, per each regular and special Board meeting attended.
Because the Portfolio had not commenced operations as of December 31, 1995,
the Portfolio did not pay any Directors' fees for the
17
<PAGE>
fiscal year ended December 31, 1995. The following table provides
compensation amounts paid to disinterested Directors of the Fund for the
fiscal year ended December 31, 1995.
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL COMPENSATION
PAID TO DIRECTORS FROM
WRL SERIES FUND, INC.,
IDEX FUND, IDEX II
AGGREGATE COMPENSATION SERIES FUND AND
NAME OF PERSON, POSITION FROM WRL SERIES FUND, INC. IDEX FUND 3
- ------------------------ ------------------------- ----------------------
<S> <C> <C>
Peter R. Brown, Director .......... $9,500 $32,500
Charles C. Harris, Director ...... $9,500 $32,000
Russell A. Kimball, Jr., Director.. $8,500 $ 8,500
</TABLE>
Commencing on January 1, 1996, a non-qualified deferred compensation plan
(the "Plan") became available to directors who are not interested persons of
the Fund. Under the Plan, compensation may be deferred that would otherwise
be payable by the Fund or IDEX Series Fund and, until September 20, 1996,
IDEX Fund and IDEX Fund 3, to a disinterested Director or Trustee on a
current basis for services rendered as director. Deferred compensation
amounts will accumulate based on the value of Class A shares of a portfolio
of IDEX Series Fund (without imposition of sales charge), as elected by the
directors. It is not anticipated that the Plan will have any impact on the
Fund.
As of March 1, 1996, the Directors and officers of the Fund beneficially
owned in the aggregate less than 1% of the Fund's shares through ownership of
Policies and Annuity Contracts indirectly invested in the Fund. The Board of
Directors has established an Audit Committee consisting of Messrs. Brown,
Harris and Kimball.
RESTRUCTURING
Pursuant to an internal restructuring plan (the "Restructuring"), WRL, the
current investment adviser of the Fund, has formed two new wholly-owned
subsidiaries, WRL Investment Management, Inc. ("WRL Management") and WRL
Investment Services, Inc. ("WRL Services"). It is anticipated that WRL
Management and WRL Services together will assume the business of WRL as it
relates to the management, supervision, and administration of registered
investment companies, including the Fund. Subject to approval by the existing
shareholders at a special shareholders' meeting to be held on or about
December 16, 1996 (the "Meeting"), if the Restructuring is implemented, (1)
WRL Management will replace WRL as the investment adviser to each Portfolio
of the Fund; and (ii) WRL Services will replace WRL as the provider of
administrative services to each Portfolio of the Fund with an anticipated
effective date of January 1, 1997.
In light of the Restructuring, a new Investment Advisory Agreement and a
Sub-Advisory Agreement for each Portfolio of the Fund with WRL Management
will be executed, subject to approval of the proposed agreements by the
shareholders of the Fund at the meeting. The new advisory agreements, if
approved, will result in an indirect increase in advisory fees.
It is also contemplated that, subject to shareholder approval, the Fund
will adopt a distribution plan ("12b-1 Plan") effective January 1, 1997.
Under the 12b-1 Plan, InterSecurities, Inc. ("ISI"), an affiliate of WRL,
will perform distribution-related services for the Fund. The 12-b-1 Plan
provides that the Fund, on behalf of the Portfolios, will reimburse ISI for
certain expenses related to the distribution of Fund shares, and incurred or
paid by ISI. The 12b-1 Plan limits reimbursements to 0.15%, on an annual
basis, of the average daily net asset value of shares of each Portfolio.
On October 3, 1996, at a special meeting of the Board of Directors of the
Fund (the "Board"), the Board unanimously approved the proposed advisory and
sub-advisory agreements, and the 12b-1 Plan and related distribution
agreement, subject to the approval of the shareholders at the Meeting.
Policyowners with cash value attributable to a Portfolio of the Fund on the
record date of the shareholders' meeting will be asked to provide voting
instructions to WRL in connection with the Meeting.
18
<PAGE>
THE INVESTMENT ADVISER
The information that follows supplements the information provided about
the Investment Adviser under the caption "Management of the Fund -Investment
Adviser" in the Prospectus.
Western Reserve Life Assurance Co. of Ohio (the "Investment Adviser")
serves as the investment adviser to the Portfolio pursuant to an Investment
Advisory Agreement dated March 13, 1995 with the Fund. The Investment Adviser
is a wholly-owned subsidiary of First AUSA Life Insurance Company ("First
AUSA"), a stock life insurance company which is wholly-owned by AEGON USA,
Inc. ("AEGON"). AEGON is a financial services holding company whose primary
emphasis is on life and health insurance and annuity and investment products.
AEGON is a wholly-owned indirect subsidiary of AEGON nv, a Netherlands
corporation, which is a publicly traded international insurance group.
The Investment Advisory Agreement was approved by the Fund's Board of
Directors, including a majority of the Directors who are not "interested
persons" of the Fund (as defined in the 1940 Act) on March 6, 1995. The
Investment Advisory Agreement provides that subsequent to its approval by the
Portfolio's initial shareholder, it will continue in effect for an initial
term ending April 22, 1997, and from year to year thereafter if approved
annually (a) by the Board of Directors of the Fund or by a majority of the
outstanding shares of the Portfolio, and (b) by a majority of the Directors
who are not parties to such contract or "interested persons" of any such
party. The Investment Advisory Agreement may be terminated without penalty on
60 days' written notice at the option of either party or by the vote of the
shareholders of the Portfolio and terminates automatically in the event of
its assignment (within the meaning of the 1940 Act).
While the Investment Adviser is at all times subject to the direction of
the Board of Directors of the Fund, the Investment Advisory Agreement
provides that the Investment Adviser, subject to review by the Board of
Directors, is responsible for the actual management of the Fund and has
responsibility for making decisions to buy, sell or hold any particular
security. The Investment Adviser also is obligated to provide all the office
space, facilities, equipment and personnel necessary to perform its duties
under the Agreement. For further information about the management of the
Portfolio, see "The Co-Sub-Advisers", page 18.
ADVISORY FEE. The method of computing the investment advisory fee is fully
described in the Prospectus. No fees have been paid to the Investment Adviser
by the Portfolio for the year ended December 31, 1995 because the Portfolio
had not commenced operations as of that date.
PAYMENT OF EXPENSES. Under the terms of the Investment Advisory Agreement,
the Investment Adviser is responsible for providing investment advisory
services and pays all compensation of and furnishes office space for officers
and employees of the Investment Adviser connected with investment management
of the Portfolio, as well as the fees of all directors of the Fund who are
affiliated persons of WRL or any of its subsidiaries. Accounting services are
provided for the Portfolio by the Investment Adviser. The Investment Adviser
also pays all expenses incurred in connection with the formation and
organization of the Portfolio, including all costs and expenses of preparing
and filing the post-effective amendment to the Fund's registration statement
effecting the registration of the Portfolio and its shares under the 1940 Act
and the Securities Act of 1933. The Portfolio pays all other expenses
incurred in its operation and all of the Portfolio's general administrative
expenses.
Expenses that are borne directly by the Portfolio include redemption
expenses, expenses of portfolio transactions, expenses in connection with
ongoing registration or qualification requirements under Federal and state
securities laws, pricing costs (including the daily calculation of net asset
value), interest, certain taxes, charges of the custodian, fees and expenses
of Fund directors who are not "interested persons" of the Fund, legal
expenses, state franchise taxes, cost of auditing services, costs of printing
proxies, SEC fees, advisory fees, certain insurance premiums, costs of
corporate meetings, costs of maintenance of corporate existence, investor
services (including allocable telephone and personnel expenses),
extraordinary expenses, and other expenses properly payable by the Portfolio.
Depending upon the nature of the lawsuit, litigation costs may be borne by
the Portfolio.
19
<PAGE>
Expenses that relate exclusively to a particular portfolio of the Fund,
such as brokerage commissions, custodian fees, and registration fees for
shares, are paid by that portfolio. Other expenses are allocated to the
portfolios in an equitable manner determined by the Portfolio's Investment
Adviser.
The Investment Adviser has voluntarily undertaken, until at least April
30, 1997, to pay expenses on behalf of the Portfolio to the extent normal
operating expenses (including investment advisory fees but excluding
interest, taxes, brokerage fees, commissions and extraordinary charges)
exceed, as a percentage of the Portfolio's average daily net assets, 1.50%.
THE CO-SUB-ADVISERS
This discussion supplements the information provided about the
Co-Sub-Advisers under the caption "Management of the Fund -The
Co-Sub-Advisers" in the Prospectus.
GE Investment Management Incorporated ("GEIM") and Scottish Equitable
Investment Management Limited ("Scottish Equitable," and collectively with
GEIM, the "Co-Sub-Advisers") each serve as a Co-Sub-Adviser for the Portfolio
pursuant to Co-Sub-Advisory Agreements dated , and ,
respectively. The Co-Sub-Advisory Agreements were approved by the Board of
Directors of the Fund, including a majority of Directors who were not
"interested persons" of the Fund (as defined in the 1940 Act) on October 3,
1996. The Co-Sub-Advisory Agreement with GEIM and Scottish Equitable provide
that they will continue in effect for an initial term ending , and
each Agreement provides that it will continue in effect from year to year
thereafter, if approved annually (a) by the Board of Directors of the Fund or
by a majority of the outstanding voting securities of the Portfolio, and (b)
by a majority of the Directors who are not parties to such Agreement or
"interested persons" (as defined in the 1940 Act) of any such party. Each
Co-Sub-Advisory Agreement may be terminated without penalty on 60 days'
written notice at the option of either party or by the vote of the
shareholders of the Portfolio and terminates automatically in the event of
its assignment (within the meaning of the 1940 Act) or termination of the
Investment Advisory Agreement.
Pursuant to the Co-Sub-Advisory Agreements, the Co-Sub-Advisers each
provide investment advisory assistance and portfolio management advice to the
Investment Adviser with respect to the Portfolio. Subject to review by the
Investment Adviser and the Board of Directors of the Fund, the
Co-Sub-Advisers are responsible for the actual management of the Portfolio
and for making decisions to buy, sell or hold any particular security. The
Co-Sub-Advisers provide the portfolio managers for the Portfolio. The
Co-Sub-Advisers bear all of their expenses in connection with the performance
of their services under the Co-Sub-Advisory Agreements, such as compensating
and furnishing office space for their officers and employees connected with
investment and economic research, trading and investment management of the
Portfolio. The method of computing the Co-Sub-Advisers' fees are set forth in
the Prospectus. Because the Portfolio had not commenced operations as of
December 31, 1995, there were no sub-advisory fees paid for the fiscal year
ended December 31, 1995.
GEIM is located at 3003 Summer Street, Stamford, Connecticut 06905. GEIM,
which was formed under the laws of Delaware in 1988, is a wholly-owned
subsidiary of General Electric Company ("GE") and is a registered investment
adviser under the Investment Advisers Act of 1940, as amended. GEIM's
principal officers and directors serve in similar capacities with respect to
General Electric Investment Corporation ("GEIC", and, together with GEIM,
collectively referred to as "GE Investments"), which like GEIM is a wholly
owned subsidiary of GE. As of June 30, 1996, GE Investments managed assets in
excess of $55 billion. GE Investments provides investment management services
to external organizations and to certain of their affiliates.
Scottish Equitable is located at Edinburgh Park, Edinburgh EH12 9SE.
Scottish Equitable is a wholly-owned subsidiary of Scottish Equitable plc
(successor to Scottish Equitable Life Assurance Society). Scottish Equitable
is also an indirect wholly-owned subsidiary of AEGON nv. As of December 31,
1995 Scottish Equitable plc had approximately $15.9 billion in assets under
management. Scottish Equitable provides investment advisory and management
services to certain of its affiliates and to external organizations.
20
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
PORTFOLIO TURNOVER
The information that follows supplements the information provided about
portfolio turnover under the caption "The International Equity Portfolio and
The Fund -Portfolio Turnover" in the Prospectus. In computing the portfolio
turnover rate for the Portfolio, securities whose maturities or expiration
dates at the time of acquisition are one year or less are excluded. Subject
to this exclusion, the turnover rate for the Portfolio is calculated by
dividing (a) the lesser of purchases or sales of portfolio securities for the
fiscal year by (b) the monthly average of portfolio securities owned by the
Portfolio during the fiscal year. The Portfolio's annual portfolio turnover
rate is expected to exceed 100%, but is not expected to exceed 200%.
There are no fixed limitations regarding the portfolio turnover of the
Portfolio. Portfolio turnover rates are expected to fluctuate under
constantly changing economic conditions and market circumstances. Higher
turnover rates tend to result in higher brokerage fees. Securities initially
satisfying the basic objective and policies of the Portfolio may be disposed
of when they are no longer deemed suitable.
PLACEMENT OF PORTFOLIO BROKERAGE
Subject to policies established by the Board of Directors of the Fund, the
Co-Sub-Advisers are primarily responsible for placement of the Portfolio's
securities transactions. In placing orders, it is the policy of the Portfolio
to obtain the most favorable net results, taking into account various
factors, including price, dealer spread or commissions, if any, size of the
transaction and difficulty of execution. While the Co-Sub-Advisers generally
will seek reasonably competitive spreads or commissions, the Portfolio will
not necessarily be paying the lowest spread or commission available. The
Portfolio does not have any obligation to deal with any broker, dealer or
group of brokers or dealers in the execution of transactions in portfolio
securities.
Decisions as to the assignment of portfolio brokerage business for the
Portfolio and negotiation of its commission rates are made by the
Co-Sub-Advisers, each of whose policy is to obtain "best execution" (prompt
and reliable execution at the most favorable security price) of all portfolio
transactions. In placing portfolio transactions, the Co-Sub-Advisers may give
consideration to brokers who provide supplemental investment research, in
addition to such research obtained for a flat fee, to the Co-Sub-Advisers,
and pay spreads or commissions to such brokers or dealers furnishing such
services which are in excess of spreads or commissions which another broker
or dealer may charge for the same transaction.
In selecting brokers and in negotiating commissions, the Co-Sub-Advisers
consider such factors as: the broker's reliability; the quality of its
execution services on a continuing basis; the financial condition of the
firm; and research products and services provided, which include: (i)
furnishing advice, either directly or through publications or writings, as to
the value of securities, the advisability of purchasing or selling specific
securities and the availability of securities or purchasers or sellers of
securities and (ii) furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends and portfolio strategy
and products and other services (such as third party publications, reports
and analyses, and computer and electronic access, equipment, software,
information and accessories) that assist a Co-Sub-Adviser in carrying out its
responsibilities. Supplemental research obtained through brokers or dealers
will be in addition to and not in lieu of the services required to be
performed by a Co-Sub-Adviser. The expenses of the Co-Sub-Advisers will not
necessarily be reduced as a result of the receipt of such supplemental
information. The Co-Sub-Advisers may use such research products and services
in servicing other accounts in addition to the Portfolio. If a Co-Sub-Adviser
determines that any research product or service has a mixed use, such that it
also serves functions that do not assist in the investment decision-making
process, the Co-Sub-Adviser will allocate the costs of such service or
product accordingly. The portion of the product or service that a
Co-Sub-Adviser determines will assist it in the investment decision-making
process may be paid for in brokerage commission dollars. Such allocation may
create a conflict of interest for the
21
<PAGE>
Co-Sub-Adviser. Conversely, such supplemental information obtained by the
placement of business for the Co-Sub-Adviser will be considered by and may be
useful to the Co-Sub-Adviser in carrying out its obligations to the
Portfolio.
When the Portfolio purchases or sells a security in the over-the-counter
market, the transaction takes place directly with a principal market-maker,
without the use of a broker, except in those circumstances where, in the
opinion of a Co-Sub-Adviser, better prices and executions are likely to be
achieved through the use of a broker.
Securities held by the Portfolio may also be held by other separate
accounts, mutual funds or other accounts for which the Investment Adviser or
a Co-Sub-Adviser serves as an adviser, or held by the Investment Adviser or
Co-Sub-Advisers for their own accounts. Because of different investment
objectives or other factors, a particular security may be bought by the
Investment Adviser or a Co-Sub-Adviser for one or more clients when one or
more clients are selling the same security. If purchases or sales of
securities for the Portfolio or other entities for which they act as
investment adviser or for their advisory clients arise for consideration at
or about the same time, transactions in such securities will be made, insofar
as feasible, for the respective entities and clients in a manner deemed
equitable to all. To the extent that transactions on behalf of more than one
client of the Investment Adviser or a Co-Sub-Adviser during the same period
may increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price.
On occasions when the Investment Adviser or a Co-Sub-Adviser deems the
purchase or sale of a security to be in the best interests of the Portfolio
as well as other accounts or companies, it may to the extent permitted by
applicable laws and regulations, but will not be obligated to, aggregate the
securities to be sold or purchased for the Portfolio with those to be sold or
purchased for such other accounts or companies in order to obtain favorable
execution and lower brokerage commissions. In that event, allocation of the
securities purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Co-Sub-Adviser in the manner it considers to
be most equitable and consistent with its fiduciary obligations to the
Portfolio and to such other accounts or companies. In some cases this
procedure may adversely affect the size of the position obtainable for the
Portfolio.
The Board of Directors of the Fund periodically reviews the brokerage
placement practices of the Co-Sub-Advisers on behalf of the Portfolio, and
reviews the prices and commissions, if any, paid by the Portfolio to
determine if they were reasonable.
The Board of Directors of the Fund has authorized the Co-Sub-Advisers to
consider sales of the Policies and Annuity Contracts by a broker-dealer as a
factor in the selection of broker-dealers to execute Portfolio transactions.
In addition, the Co-Sub-Advisers may from time to time place portfolio
business with affiliated brokers of the Investment Adviser or a
Co-Sub-Adviser. As stated above, any such placement of portfolio business
will be subject to the ability of the broker-dealer to provide best execution
and to the Rules of Fair Practice of the National Association of Securities
Dealers, Inc.
PURCHASE AND REDEMPTION OF SHARES
DETERMINATION OF OFFERING PRICE
Shares of the Portfolio are currently sold only to the Separate Accounts
to fund the benefits under the Policies and the Annuity Contracts. The
Portfolio may, in the future, offer its shares to other insurance company
separate accounts. The Separate Accounts invest in shares of the Portfolio in
accordance with the allocation instructions received from holders of the
Policies and the Annuity Contracts. Such allocation rights are further
described in the prospectuses and disclosure documents for the Policies and
the Annuity Contracts. Shares of the Portfolio are sold and redeemed at their
respective net asset values as described in the Prospectus.
NET ASSET VALUATION
The Portfolio calculates net asset value per share, and therefore effects
sales and redemptions of its shares, as of the close of the New York Stock
Exchange (the "Exchange") once on each day on which that Exchange is open.
Such calculation does not take place contemporaneously with the
22
<PAGE>
determination of the prices of many of the portfolio securities used in such
calculation and if events occur which materially affect the value of these
foreign securities, they will be valued at fair market value as in good faith
by the Investment Adviser and the Co-Sub-Advisers under the supervision of
the Fund's Board of Directors.
The value of a foreign security held by the Portfolio is determined in its
national currency as of the close of trading on the foreign exchange on which
it is traded, or as of 4:00 p.m., New York time, if that is earlier, and that
value is then converted into its U.S. dollar equivalent at foreign exchange
rates in effect at the close of the regular session of business on the
Exchange on the day the value of the foreign security is determined. If no
sale is reported at that time, the mean between the current bid and asked
price is used. Occasionally, events which affect the values of such
securities and such exchange rates may occur between the times at which they
are determined and the close of the New York Stock Exchange, and will
therefore not be reflected in the computation of the Portfolio's net asset
value. Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed well before the close of
business in New York on each day on which the New York Stock Exchange is
open. Trading in European or Far Eastern securities generally, or in a
particular country or countries, may not take place on every New York
business day. Furthermore, trading takes place in various foreign markets on
days which are not business days in New York and on which the Fund's net
asset value is not calculated.
Any other securities for which market quotations are not readily available
will be valued at their fair value as determined in good faith by the
Investment Adviser and the Co-Sub-Advisers under the supervision of the
Fund's Board of Directors.
The net asset value of Portfolio shares is ordinarily determined, once
daily, as of the close of the regular session of business on the New York
Stock Exchange ("Exchange") (usually 4:00 p.m., Eastern time) on each day the
Exchange is open. (Currently the Exchange is closed on New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.) The per share net asset value of the
Portfolio is determined by dividing the total value of the securities and
other assets, less liabilities, by the total number of shares outstanding.
In determining asset value, securities listed on the national securities
exchanges and traded on the NASDAQ National Market are valued at the closing
prices on such markets, or if such a price is lacking for the trading period
immediately preceding the time of determination, such securities are valued
at their current bid price. Other securities which are traded on the
over-the-counter market are valued at bid price. Money market instruments
maturing in 60 days or less are valued on the amortized cost basis.
CALCULATION OF PERFORMANCE RELATED INFORMATION
The Prospectus contains a brief description of how performance is
calculated.
TOTAL RETURN
Total return quotations are computed by finding the average annual
compounded rates of return over the relevant periods that would equate the
initial amount invested to the ending redeemable value, according to the
following equation:
P (1+T)(n) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value (at the end of the applicable period
of a hypothetical $1,000 payment made at the beginning of the
applicable period).
The total return quotation calculations reflect the deduction of a
proportionate share of the Portfolio's investment advisory fee and Portfolio
expenses and assume that all dividends and capital gains during the period
are reinvested in the Portfolio when made. The calculations also assume a
complete redemption as of the end of the particular period.
23
<PAGE>
Total return quotation calculations do not reflect charges or deductions
against the Series Life Account or the Series Annuity Account or charges and
deductions against the Policies or the Annuity Contracts. Accordingly, these
rates of return do not illustrate how actual investment performance will
affect benefits under the Policies or the Annuity Contracts. Where relevant,
the prospectuses for the Policies and the Annuity Contracts contain
performance information about these products. Moreover, these rates of return
are not an estimate, projection or guarantee of future performance.
Additional Information regarding the investment performance of the
Portfolio appears in the Prospectus.
YIELD QUOTATIONS
The yield quotations for the Portfolio are based on a specific thirty-day
period and are computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last
date of the period, according to the following formula:
YIELD = 2 [(a-b cd + 1)(6)-1]
Where: a = dividends and interest earned during the period by the Portfolio.
b = expenses accrued for the period (net of reimbursement).
the average daily number of shares outstanding during the period
that were
c = entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
Because the Portfolio had not commenced operations as of December 31,
1995, no quotations of standardized or non-standardized performance
information are available.
TAXES
Shares of the Portfolio are offered only to the Separate Accounts that
fund the Policies and Annuity Contracts. See the respective prospectuses for
the Policies and Annuity Contracts for a discussion of the special taxation
of insurance companies with respect to the Separate Accounts and of the
Policies, the Annuity Contracts and the holders thereof.
The Portfolio intends to qualify and expects to continue to qualify as a
regulated investment company ("RIC") under the Internal Revenue Code of 1986,
as amended (the "Code"). In order to qualify for that treatment, the
Portfolio must distribute to its Policyholders for each taxable year at least
90% of its investment company taxable income (consisting generally of net
investment income, net short-term capital gain, and net gains from certain
foreign currency transactions) ("Distribution Requirement") and must meet
several additional requirements. These requirements include the following:
(1) the Portfolio must derive at least 90% of its gross income each taxable
year from dividends, interest, payments with respect to securities loans, and
gains from the sale or other disposition of securities or foreign currencies,
or other income (including gains from options, futures or forward contracts)
derived with respect to its business of investing in securities or those
currencies ("Income Requirement"); (2) the Portfolio must derive less than
30% of its gross income each taxable year from the sale or other disposition
of securities, or any of the following, that were held for less than three
months -options, futures or forward contracts (other than those on foreign
currencies), or foreign currencies (or options, futures or forward contracts
thereon) that are not directly related to the Portfolio's principal business
of investing in securities (or options and futures with respect thereto)
("Short-Short Limitation"); (3) at the close of each quarter of the
Portfolio's taxable year, at least 50% of the value of its total assets must
be represented by cash and cash items, U.S. Government securities, securities
of other RICs, and other securities that, with respect to any one issuer, do
not exceed 5% of the value of the Portfolio's total assets and that do not
represent more than 10% of the outstanding voting securities of the issuer;
and (4) at the close of each quarter of the Portfolio's taxable year, not
more than 25% of the value of its total assets may be invested in securities
(other than U.S. Government securities or the securities of other RICs) of
any one issuer.
As noted in the Prospectus, the Portfolio must, and intends to, comply
with the diversification requirements imposed by section 817(h) of the Code
and the regulations thereunder. These
24
<PAGE>
requirements, which are in addition to the diversification requirements
mentioned above, place certain limitations on the proportion of the
Portfolio's assets that may be represented by any single investment (which
includes all securities of the same issuer). For purposes of section 817(h),
all securities of the same issuer, all interests in the same real property
project, and all interests in the same commodity are treated as a single
investment. In addition, each U.S. Government agency or instrumentality is
treated as a separate issuer, while the securities of a particular foreign
government and its agencies, instrumentalities and political subdivisions all
will be considered securities issued by the same issuer. For information
concerning the consequences of failure to meet the requirements of section
817(h), see the respective prospectuses for the Policies or the Annuity
Contracts.
The Portfolio will not be subject to the 4% Federal excise tax imposed on
RICs that do not distribute substantially all their income and gains each
calendar year because that tax does not apply to a RIC whose only
shareholders are segregated asset accounts of life insurance companies held
in connection with variable annuity contracts and/or variable life insurance
policies.
The use of hedging strategies, such as writing (selling) and purchasing
options and futures contracts and entering into forward contracts, involves
complex rules that will determine for income tax purposes the character and
timing of recognition of the income received in connection therewith by the
Portfolio. Income from the disposition of foreign currencies (except certain
gains therefrom that may be excluded by future regulations), and income from
transactions in options, futures, and forward contracts derived by the
Portfolio with respect to its business of investing in securities or foreign
currencies, will qualify as permissible income under the Income Requirement.
However, income from the disposition of options and futures contracts (other
than those on foreign currencies) will be subject to the Short-Short
Limitation if they are held for less than three months. Income from the
disposition of foreign currencies, and options, futures, and forward
contracts on foreign currencies, that are not directly related to the
Portfolio's principal business of investing in securities (or options and
futures with respect to securities) also will be subject to the Short-Short
Limitation if they are held for less than three months.
If the Portfolio satisfies certain requirements, any increase in value on
a position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of the offsetting hedging
position during the period of the hedge for purposes of determining whether
the Portfolio satisfies the Short-Short Limitation. Thus, only the net gain
(if any) from the designated hedge will be included in gross income for
purposes of that Limitation. The Portfolio will consider whether it should
seek to qualify for this treatment for its hedging transactions. To the
extent the Portfolio does not qualify for this treatment, it may be forced to
defer the closing out of certain options and futures contracts beyond the
time when it otherwise would be advantageous to do so, in order for the
Portfolio to qualify as a RIC.
Dividends and interest received by the Portfolio may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between
certain countries and the United States may reduce or eliminate these foreign
taxes, however, and foreign countries generally do not impose taxes on
capital gains in respect of investments by foreign investors.
The Portfolio may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (1) at least 75% of its gross income is
passive or (2) an average of at least 50% of its assets produce, or are held
for the production of, passive income. Under certain circumstances, the
Portfolio will be subject to Federal income tax on a portion of any "excess
distribution" received on the stock of a PFIC or of any gain on disposition
of that stock (collectively "PFIC income"), plus interest thereon, even if
the Portfolio distributes the PFIC income as a taxable dividend to its
shareholders. The balance of the PFIC income will be included in the
Portfolio's investment company taxable income and, accordingly, will not be
taxable to it to the extent that income is distributed to its shareholders.
If the Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Portfolio will be required to include in income each year its
pro rata share of the qualified
25
<PAGE>
electing fund's annual ordinary earnings and net capital gain (the excess of
net long-term capital gain over net short-term capital loss), even if they
are not distributed to the Portfolio; those amounts would be subject to the
Distribution Requirement. In most instances it will be very difficult, if not
impossible, to make this election because of certain requirements thereof.
The foregoing is only a general summary of some of the important Federal
income tax considerations generally affecting the Portfolio and its
shareholders. No attempt is made to present a complete explanation of the
Federal tax treatment of the Portfolio's activities, and this discussion and
the discussion in the prospectuses and/or statements of additional
information for the Policies and Annuity Contracts are not intended as a
substitute for careful tax planning. Accordingly, potential investors are
urged to consult their own tax advisors for more detailed information and for
information regarding any state, local, or foreign taxes applicable to the
Policies, Annuity Contracts and the holders thereof.
CAPITAL STOCK OF THE FUND
As described in the Prospectus, the Fund offers a separate class of common
stock for each portfolio. The Fund is currently comprised of the following
portfolios: Money Market Portfolio; Bond Portfolio; Growth Portfolio; Global
Portfolio; Short-to-Intermediate Government Portfolio; Emerging Growth
Portfolio; Equity-Income Portfolio; Balanced Portfolio; Utility Portfolio;
Aggressive Growth Portfolio; Tactical Asset Allocation Portfolio; C.A.S.E.
Quality Growth Portfolio; C.A.S.E. Growth & Income Portfolio; C.A.S.E. Growth
Portfolio; Janus Balanced Portfolio; Leisure Portfolio; International Equity
Portfolio; Value Equity Portfolio; Meridian/INVESCO Global Sector Portfolio;
Meridian/INVESCO US Sector Portfolio Meridian/INVESCO Foreign Sector
Portfolio; and U.S. Equity Portfolio.
REGISTRATION STATEMENT
There has been filed with the Securities and Exchange Commission,
Washington, D.C. a Registration Statement under the Securities Act of 1933,
as amended, with respect to the securities to which this Statement of
Additional Information relates. If further information is desired with
respect to the Portfolio or such securities, reference is made to the
Registration Statement and the exhibits filed as part thereof.
FINANCIAL STATEMENTS
No financial statements for the Portfolio are available for the year ended
Decembr 31, 1995, because the Portfolio had not commenced operations as of
that date.
26
<PAGE>
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements.
1. The audited Financial Statements of the Fund in the 1995 Annual
Report are incorporated by reference into the Statement of
Additional Information for the Portfolios. (Part B)
2. The unaudited Financial Statements of the Fund in the 1996
Semi-Annual Report are incorporated by reference into the
Statement of Additional Information for the Portfolios.
(Part B)
3. Unaudited Financial Statements dated 8-31-96 for the
Meridian/INVESCO Global Sector Portfolio and the Value Equity
Portfolio are included in the Statement of Additional
Information. (Part B.)
4. The Financial Statements of the International Equity Portfolio
and U.S. Equity Portfolios will be included in a future
amendment.
5. Audited Per Share Income and Capital Changes are included in
the Prospectus for the Portfolios. (Part A)
6. Audited Per Share Income and Capital Changes for the
International Equity Portfolio, the Meridian/INVESCO Global
Sector Portfolio, the Value Equity Portfolio and the U.S.
Equity Portfolio will be included in a future Amendment.
7. Unaudited Per Share Income and Capital Changes for the
Meridian/INVESCO Global Sector Portfolio and the Value Equity
Portfolio are included in the Prospectus for the Portfolios.
(Part A).
(b) Exhibits
1.(A) Articles of Incorporation of WRL Series Fund, Inc.
(B) Articles Supplementary to Articles of Incorporation of WRL
Series Fund, Inc.
(C) Articles Supplementary to Articles of Incorporation of WRL
Series Fund, Inc.
(D) Articles Supplementary to Articles of Incorporation of WRL
Series Fund, Inc.
(E) Articles Supplementary to Articles of Incorporation of WRL
Series Fund, Inc.
(F) Articles Supplementary to Articles of Incorporation of WRL
Series Fund, Inc.
(G) Articles Supplementary to Articles of Incorporation of WRL
Series Fund, Inc.
2. Bylaws of WRL Series Fund, Inc.
3. Not applicable.
4. Not applicable.
5. (i) Form of Investment Advisory Agreement on behalf of the
Portfolios of the WRL Series Fund, Inc. with WRL Investment
Management, Inc.
(ii) Form of Sub-Advisory Agreement on behalf of the Growth,
Bond and Global Portfolios of the Fund.
(iii) Form of Sub-Advisory Agreement on behalf of the Money
Market Portfolio of the Fund.
(iv) Form of Sub-Advisory Agreement on behalf of the Balanced
and the Short-to-Intermediate Government Portfolios of the
Fund.
(v) Form of Sub-Advisory Agreement on behalf of the Emerging
Growth Portfolio of the Fund.
(vi) Form of Sub-Advisory Agreement on behalf of the Equity-
Income Portfolio of the Fund.
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(vii) Form of Sub-Advisory Agreement on behalf of the Utility
Portfolio of the Fund.
(viii) Form of Sub-Advisory Agreement on behalf of the
Aggressive Growth Portfolio of the Fund.
(ix) Form of Sub-Advisory Agreement on behalf of the Tactical
Asset Allocation Portfolio of the Fund.
(x) Form of Sub-Advisory Agreement on behalf of the C.A.S.E.
Quality Growth Portfolio, C.A.S.E. Growth & Income Portfolio
and C.A.S.E. Growth Portfolio of the Fund.
(xi) Form of Co-Sub-Advisory Agreements on behalf of the
International Equity Portfolio of the Fund.
(xii) Form of Co-Sub-Advisory Agreements on behalf of the
Meridian/INVESCO US Sector, Meridian/INVESCO Global Sector and
Meridian/INVESCO Foreign Sector Portfolios of the Fund.
(xiii) Form of Sub-Advisory Agreement on behalf of the Value
Equity Portfolio of the Fund.
(xiv) Form of Sub-Advisory Agreement on behalf of the U.S.
Equity Portfolio.
(xv) Service Agreement dated 4-30-96 between INVESCO Global
Asset Management Limited and INVESCO Trust Company, Inc.
(xvi) Service Agreement dated 4-30-96 between INVESCO Global
Asset Management Limited and INVESCO Asset Management Limited.
6. Form of Distribution Agreement.
7. Directors' Deferred Compensation Plan. (3)
8. Form of Custodian Agreement.
9. Administrative Services and Transfer Agency Agreement.
10. Opinion and consent of Thomas E. Pierpan, Esq. as to
legality of the securities being registered. (2)
11. Consent of Price Waterhouse LLP.
12. Not applicable.
13. Not applicable.
14. Not applicable.
15. Proposed Plan of Distribution.
16. Schedules for Computations of Performance Quotations. (1)
17. Financial Data Schedules.
18. Powers of Attorney. (2)
- ---------------------
(1) Previously filed with Post-Effective Amendment No. 11 to Form N-1A
dated February 26, 1993 and incorporated herein by reference
(2) Previously filed with Post-Effective Amendment No. 19 to Form N-1A
dated April 21, 1995 and incorporated herein by reference.
(3) Previously filed with Post-Effective Amendment No. 23 to Form N-1A
dated April 19, 1996 and incorporated herein by reference.
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Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Shares of the Registrant are sold and owned by the WRL Series Life Account and
WRL Series Annuity Account established by Western Reserve Life Assurance Co. of
Ohio ("Western Reserve") to fund benefits under certain flexible premium
variable life insurance policies and variable annuity contracts issued by it. In
addition, shares of the Growth Portfolio Common Stock of the Registrant are also
sold to the PFL Endeavor Variable Annuity Account established by PFL Life
Insurance Company and AUSA Endeavor Variable Annuity Account established by AUSA
Life Insurance Company, Inc., both affiliates of Western Reserve. Shares of the
Growth, Bond, Money Market, Global, Equity-Income, Balanced, Aggressive Growth,
Emerging Growth, Short-to-Intermediate Government, Utility and Tactical Asset
Allocation Portfolio Common Stock are sold to Pooled Account No. 27 established
by AUSA Life Insurance Company, Inc.
Item 26. NUMBER OF HOLDERS OF SECURITIES.
(2)
(1) NUMBER OF RECORD HOLDERS
TITLE OF CLASS AS OF OCTOBER 1, 1996
-------------- ------------------------
Growth Portfolio
Common Stock ($.01 par value) 4
Bond Portfolio
Common Stock ($.01 par value) 3
Money Market Portfolio
Common Stock ($.01 par value) 3
Global Portfolio
Common Stock ($.01 par value) 3
Short-to-Intermediate Government Portfolio
Common Stock ($.01 par value) 3
Emerging Growth Portfolio
Common Stock ($.01 par value) 3
Equity-Income Portfolio
Common Stock ($.01 par value) 3
Balanced Portfolio
Common Stock ($.01 par value) 3
Utility Portfolio
Common Stock ($.01 par value) 3
Aggressive Growth Portfolio
Common Stock ($.01 par value) 3
Tactical Asset Allocation Portfolio
Common Stock ($.01 par value) 3
C.A.S.E. Growth Portfolio
Common Stock ($.01 par value) 2
C.A.S.E. Growth & Income Portfolio
Common Stock ($.01 par value) 1
C.A.S.E. Quality Growth Portfolio
Common Stock ($.01 par value) 1
International Equity Portfolio
Common Stock ($.01 par value) 0
Meridian/INVESCO Global Sector Portfolio
Common Stock ($.01 par value) 2
Meridian/INVESCO US Sector Portfolio
Common Stock ($.01 par value) 1
Meridian/INVESCO Foreign Sector Portfolio
Common Stock ($.01 par value) 1
Value Equity Portfolio
Common Stock ($.01 par value) 2
U.S. Equity Portfolio
Common Stock ($.01 par value) 0
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Item 27. INDEMNIFICATION.
Article VI of the By-Laws of WRL Series Fund, Inc. provides in its entirety as
follows:
Each director, officer, or employee (and his heirs, executors and
administrators) shall be indemnified by the Corporation against all
liability and expense incurred by reason of the fact that he is or was a
director, officer or employee of the corporation, to the full extent and in
any manner permitted by Maryland law, as in effect at any time, provided
that nothing herein shall be construed to protect any director, officer or
employee against any liability to the corporation or to its security holders
to which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office ("disabling conduct"). No indemnification of a
director, officer or employee shall be made pursuant to the preceding
sentence unless there has been (a) a final decision on the merits by a court
or other body before whom the proceeding was brought that the person to be
indemnified ("indemnity") was not liable by reason of disabling conduct or
(b) in the absence of such a decision, a reasonable determination, based
upon a review of the facts, that the indemnity was not liable by reason of
disabling conduct by (i) the vote of a majority of a quorum of directors who
are neither "interested persons" of the corporation, as defined in Section
2(a)(19) of the Investment Company Act of 1940, nor parties to the
proceeding ("non-interested, non-party directors"), or (ii) an independent
legal counsel in a written opinion. Reasonable expenses incurred by each
such director, officer or employee may be paid by the corporation in advance
of the final disposition of any proceeding to which such person is a party,
to the full extent and under the circumstances permitted by Maryland law,
provided that such person undertakes to repay the advance unless it is
ultimately determined that he is entitled to indemnification and either (i)
he provides security for his undertaking, (ii) the corporation is insured
against losses by reason of any lawful advances or (iii) a majority of a
quorum of the non-interested, non-party directors, or an independent legal
counsel in a written opinion, determines, based on a review of readily
available facts, and there is reason to believe that such person ultimately
will be found entitled to indemnification. The corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer
or employee of the corporation against any liability asserted against and
incurred by such person in any such capacity or arising out of such person's
position, whether or not the corporation would have the power to indemnify
against such liability under the provisions of this Article VI.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
A. WRL INVESTMENT MANAGEMENT, INC.
WRL Investment Management, Inc. ("WRL Management") is principally
engaged in offering investment advisory services.
The only business, professions, vocations or employments of a
substantial nature of Messrs. Kenney, Hurley and Yaeger, directors of
WRL Management, are described in the Statement of Additional Information
under the section entitled "Management of the Fund." Additionally, the
following describes the principal occupations of other persons who serve
as executive officers of WRL Management: Kenneth P. Beil, President and
Treasurer, is Assistant Vice President and Principal Accounting Officer
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<PAGE>
of the WRL Series Fund, Inc. and is Vice President and Assistant
Treasurer of Western Reserve Life Assurance Co. of Ohio; and Thomas E.
Pierpan, Esq., Vice President and Secretary, is Vice President and
Assistant Secretary of the WRL Series Fund, Inc. and Vice President,
Counsel and Assistant Secretary of Western Reserve Life Assurance Co. of
Ohio.
B. GROWTH, BOND, AND GLOBAL PORTFOLIOS: SUB-ADVISER - JANUS CAPITAL
CORPORATION
Janus Capital Corporation, the Sub-Adviser to the Growth, Bond, and
Global Portfolios of the WRL Series Fund, Inc. is majority-owned by
Kansas City Southern Industries, Inc.
Janus Capital Corporation also serves as sub-adviser to certain of the
mutual funds within the IDEX Group and as investment adviser or
sub-adviser to other mutual funds, and for private and retirement
accounts. Thomas H. Bailey, Trustee, Chairman and President of Janus
Investment Fund and Janus Aspen Series, Chairman, Director and President
of the Sub-Adviser and Chairman and Director of IDEX Management, Inc.,
has no business, profession, vocation or employment of a substantial
nature other than his positions with IDEX Management, Inc. and Janus
Capital Corporation. James P. Craig, Executive Vice President of Janus
Investment Fund and Janus Aspen Series, Director, Vice President and
Chief Investment Officer of Janus Capital Corporation, has no
substantial business, profession, vocation or employment other than his
positions with Janus Capital Corporation and/or IDEX Management, Inc.
David C. Tucker, Vice President, Secretary and General Counsel of Janus
Capital Corporation, Vice President, General Counsel and Director of
Janus Service Corporation and Janus Distributors, Inc. and Vice
President and General Counsel of Janus Investment Fund and Janus Aspen
Series. Michael N. Stolper, a Director of Janus Capital Corporation, is
President of Stolper & Company, 525 "B" Street, Suite 1080, San Diego,
CA 92101, an investment performance consultant. Michael E. Herman, a
Director of Janus Capital Corporation, is Chairman of the Finance
Committee of Ewing Marion Kauffman Foundation, 9900 Oak, Kansas City, MO
64113. Thomas A. McDonnell, a Director of Janus Capital Corporation, is
President, Chief Executive Officer and Director of DST Systems, Inc.,
1055 Broadway, 9th Floor, Kansas City, MO 64105, a provider of data
processing and recordkeeping services for various mutual funds and
Executive Vice President and Director of Kansas City Southern
Industries, Inc., 114 West 11th Street, Kansas City, MO 64105, a
publicly traded holding company whose primary subsidiaries are engaged
in transportation, information processing and financial services. Landon
H. Rowland, a Director of Janus Capital, President and Chief Executive
Officer of Kansas City Southern Industries, Inc. Steven R. Goodbarn is
Vice President and Treasurer of Janus Investment Fund and Janus Aspen
Series, Vice President of Finance, Treasurer and Chief Financial officer
of Janus Capital Corporation, Janus Service Corporation and Janus
Distributors, Inc. Helen Young Hayes, Scott W. Schoelzel, and Ronald V
Speaker are each a Vice President of Janus Capital Corporation and an
Executive Vice President of Janus Investment Fund and Janus Aspen Series.
C. MONEY MARKET PORTFOLIO: SUB-ADVISER - J.P. MORGAN INVESTMENT MANAGEMENT
INC.
J.P. Morgan Investment Management Inc., the Sub-Adviser to the Money
Market Portfolio, is a wholly-owned subsidiary of J.P. Morgan & Co.
Incorporated. J.P. Morgan Investment Management Inc. provides investment
management and related services for corporate, public and union employee
benefit funds, foundations, endowments, insurance companies and
government agencies.
The directors and principal officers of J.P. Morgan Investment Management
Inc. are listed below. Unless otherwise indicated, each director and
officer has a principal business address of 522 Fifth Avenue, New York,
NY 10036: Kenneth W. Anderson, Director and Managing Director (J.P.
Morgan Investment Management Inc., 28 King Street, London SW1Y 6XA,
United Kingdom); Robert A. Anselmi, Director, Managing Director, General
Counsel and Secretary; George E. Austin, Managing Director; Jean L.P.
Brunel, Director; William L. Cobb, Jr., Vice Chairman, Director and
Managing Director; Louis George Gardella, Managing Director; Michael R.
Granito, Director and Managing Director; Thomas M. Luddy, Director and
Managing Director; Michael E. Patterson, Director (J.P. Morgan & Co.
Incorporated, 60 Wall Street, New York, NY 10260-0060); C. Nicholas
Potter, Chairman of the Board and Director; Keith M. Schappert,
President, Director and Managing Director; M. Steven Soltis, Director,
Managing Director, and Chief Administrative and Financial Officer; John
R.
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Thomas, Director (J.P. Morgan Trust Bank Ltd., Akasaka Park Building
2-20, Akasaka 5-chome, Minato-ku, Tokyo, Japan).
D. SHORT-TO-INTERMEDIATE GOVERNMENT AND BALANCED PORTFOLIOS:
SUB-ADVISER - AEGON USA INVESTMENT MANAGEMENT, INC.
AEGON USA Investment Management, Inc., the Sub-Adviser to the
Short-to-Intermediate Government and Balanced Portfolios, is an Iowa
corporation which was incorporated on April 12, 1989. AEGON USA
Investment Management, Inc. became a registered investment adviser on
March 16, 1992 and will assume all of the investment advisory functions
of its wholly-owned subsidiary, MidAmerica Management Corporation. AEGON
USA Investment Management, Inc. is a wholly-owned subsidiary of First
AUSA Holding Company which is a wholly-owned subsidiary of AEGON USA,
Inc.
AEGON USA Investment Management, Inc., also serves as sub-adviser to IDEX
II Series Fund High Yield Portfolio and Tax-Exempt Portfolio. Patrick E.
Falconio is President and Director of AEGON USA Investment Management,
Inc., and AEGON USA Charitable Foundation, Inc., Chairman of the Board
and Director of AEGON USA Managed Portfolios, Inc., AEGON USA Realty
Advisors, Inc., Cedar Income Fund, Ltd., Landauer Realty Advisors, Inc.,
Realty Information Systems, Inc., and USP Real Estate Investment Trust,
Director, Chief Investment Officer and Senior Vice President of Bankers
United Life Assurance Company, First AUSA Life Insurance Company, Life
Investors Insurance Company of America, Monumental General Casualty
Company, Monumental Life Insurance Company, PFL Life Insurance Company
and Transunion Casualty Company, Director and Senior Vice President of
AUSA Holding Company, Director of AEGON USA Securities, Inc., AMCORP,
Inc., AUSA Financial Markets, Inc., AUSA Institutional Marketing Group,
Inc., Cadet Holding Corp., Creditor Resources, Inc., Executive Management
& Consultant Services, Inc., Investors Warranty of America, Inc.,
Landauer Associates, Inc., Money Services, Inc., Monumental General
Administrators, Inc., Monumental General Insurance Group, Inc.,
Monumental General Mass Marketing, Inc., Supplemental Insurance Division,
Inc., The Whitestone Corporation, United Financial Services, Inc. and
Zahorik Company, Inc., Chief Investment Officer and Executive Vice
President of AEGON USA, Inc. and Chief Investment Officer and Senior Vice
President of AUSA Life Insurance Company, Inc. and Western Reserve Life
Assurance Co. of Ohio and Senior Vice President and Chief Financial
Officer of Southwest Equity Life Insurance Company; Brenda K. Clancy,
Director of AEGON USA Investment Management, Inc., Director and Vice
President of First AUSA Life Insurance Company, Life Investors Insurance
Company of America, Monumental Life Insurance Company and Transunion
Casualty Company, Director and Treasurer of Massachusetts Fidelity Trust
Company, and AEGON USA Securities Inc., Senior Vice President, Controller
and Treasurer of Cadet Holding Corp., Vice President and Controller of
AEGON USA, Inc., Vice President of Bankers United Life Assurance Company,
Investors Warranty of America, Inc., Money Services, Inc., PFL Life
Insurance Company and Western Reserve Life Assurance Co. of Ohio and
Treasurer of Zahorik Company, Inc.; Craig D. Vermie, Director and
Secretary of AEGON USA Investment Management Inc., AEGON USA Charitable
Foundation, Inc., AMCORP, Inc., AUSA Financial Markets, Inc., AUSA
Institutional Marketing Group, Inc., CADET Holding Corp., First AUSA Life
Insurance Company, Massachusetts Fidelity Trust Company, and Transunion
Casualty Company, Director, Secretary, Vice President and Corporate
Counsel of Bankers United Life Assurance Company, Life Investors
Insurance Company of America, and PFL Life Insurance Company, Director,
Secretary and Vice President of Investors Warranty of America, Inc.,
Director, Vice President, Corporate Counsel and Assistant Secretary of
Monumental Life Insurance Company, Director, Vice President and Assistant
Secretary of Monumental General Casualty Company and Zahorik Company,
Inc., Director and Assistant Secretary of Creditor Resources, Inc. and
Monumental General Insurance Group, Inc., Vice President and Assistant
Secretary of Money Services, Inc. and Western Reserve Life Assurance Co.
of Ohio, Vice President and Corporate Counsel of AEGON USA, Inc.,
Director and Vice President of The Whitestone Corporation, Director of
Corpa Reinsurance Company, Monumental General Administrators Inc., Short
Hills Management Company and United Financial Services Inc., Secretary of
AUSA Holding Company, AUSA Life Insurance Company, Inc., International
Life Investors Insurance Company, Tele-Quote Corporation and Universal
Benefits Corporation, Assistant Secretary of AEGON USA Realty Advisors
Inc., Bankers Financial Life Insurance Company, Supplemental Insurance
Division, Inc. and ZCI, Inc., and Vice President of AEGON USA Realty
Management Inc.; Donald E. Flynn is an Executive Vice
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President of AEGON USA Investment Management, Inc., and President of
AEGON USA Managed Portfolios, Inc. and Vice President of AUSA Life
Insurance Company, Inc., Bankers United Life Assurance Company, First
AUSA Life Insurance Company, International Life Investors Insurance
Company, Life Investors Insurance Company of America, Money Services,
Inc., Monumental General Casualty Company, Monumental Life Insurance
Company, PFL Life Insurance Company and Western Reserve Life Assurance
Co. of Ohio; Donald W. Chamberlain is an Executive Vice President of
AEGON USA Investment Management, Inc. and Vice President of AUSA Life
Insurance Company, Inc., Bankers United Life Assurance Company, First
AUSA Life Insurance Company, Life Investors Insurance Company of America,
Monumental General Casualty Company, Monumental Life Insurance Company,
PFL Life Insurance Company and Western Reserve Life Assurance Co. of
Ohio; James D. Ross is Vice President of Life Investors Insurance Company
of America, Monumental Life Insurance Company, PFL Life Insurance Company
and Western Reserve Life Assurance Co. of Ohio; Clifford A. Sheets is
Senior Vice President of AEGON USA Investment Management, Inc., and Vice
President of Bankers United Life Assurance Company, Life Investors
Insurance Company of America, Monumental Life Insurance Company and PFL
Life Insurance Company; Ralph M. O'Brien is a Senior Vice President of
AEGON USA Investment Management, Inc., Vice President of AEGON USA
Managed Portfolios, Inc., AUSA Life Insurance Company, Inc., Bankers
United Life Assurance Company, First AUSA Life Insurance Company, Life
Investors Insurance Company of America, Monumental General Casualty
Company, Monumental Life Insurance Company, PFL Life Insurance Company,
and Western Reserve Life Assurance Co. of Ohio, and Trust Officer of
Massachusetts Fidelity Trust Company; Michael Van Meter is a Senior Vice
President of AEGON USA Investment Management, Inc.; David R. Halfpap is
Assistant Secretary and Vice President of AEGON USA Managed Portfolios,
Inc., and Vice President of AEGON USA Investment Management, Inc., AUSA
Life Insurance Company, Inc., Bankers United Life Assurance Company,
First AUSA Life Insurance Company, Life Investors Insurance Company of
America, Monumental General Casualty Company, Monumental Life Insurance
Company, PFL Life Insurance Company and Western Reserve Life Assurance
Co. of Ohio; Gregory W. Theobald is Secretary and Vice President of AEGON
USA Investment Management, Inc., Secretary of AEGON USA Managed
Portfolios, Inc., and Vice President and Assistant Secretary of AUSA Life
Insurance Company, Inc., Bankers United Life Assurance Company, First
AUSA Life Insurance Company, International Life Investors Insurance
Company, Life Investors Insurance Company of America, Monumental General
Casualty Company, Monumental Life Insurance Company, PFL Life Insurance
Company and Western Reserve Life Assurance Co. of Ohio, and Vice
President of Money Services, Inc.; Lewis O. Funkhouser is a Vice
President of AEGON USA Investment Management, Inc.; Jon D. Kettering is
Vice President and Treasurer of AEGON USA Investment Management, Inc. and
Vice President of AUSA Life Insurance Company, Inc., Bankers United Life
Assurance Company, First AUSA Life Insurance Company, International Life
Investors Insurance Company, Life Investors Insurance Company of America,
Monumental General Casualty Company, Monumental Life Insurance Company,
PFL Life Insurance Company and Western Reserve Life Assurance Co. of
Ohio; Michael N. Meese is a Vice President of AEGON USA Investment
Management, Inc., and Portfolio Manager of AUSA Life Insurance Company,
Inc. and International Life Investor Insurance Company; Robert L. Hansen
is Vice President of AEGON USA Investment Management, Inc., AUSA Life
Insurance Company, Inc., Bankers United Life Assurance Company, First
AUSA Life Insurance Company, Life Investors Insurance Company of America,
Monumental Life Insurance Company, PFL Life Insurance Company, and
Western Reserve Life Assurance Co. of Ohio; Frederick A. Sabetta is Vice
President of AEGON USA Investment Management, Inc., Bankers United Life
Assurance Company, First AUSA Life Insurance Company, Life Investors
Insurance Company of America, Monumental General Casualty Company,
Monumental Life Insurance Company, PFL Life Insurance Company and Western
Reserve Life Assurance Co. of Ohio; Kenneth M. Certain, Rachel A. Dennis,
David M. Carney, Frederick A. Sabetta, Steven P. Opp and Drew E. Washburn
are also Vice Presidents of AEGON USA Investment Management, Inc.; James
E. Fine, Thomas E. Myers, Bradley J. Beman and Mary T. Pech are each an
Assistant Vice President of AEGON USA Investment Management, Inc.
E. EMERGING GROWTH PORTFOLIO: SUB-ADVISER - VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
Van Kampen American Capital Asset Management, Inc., the Sub-Adviser to
the Emerging Growth Portfolio, is an indirect wholly-owned subsidiary of
VK/AC Holding, Inc. ("VK/AC Holding"). VK/AC
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Holding is a wholly-owned subsidiary of MSAM Holdings II, Inc., which in
turn, is a wholly-owned subsidiary of Morgan Stanley Group, Inc.
Don G. Powell, Chairman, CEO and Director of the Sub-Adviser and
President, CEO and Director of Van Kampen American Capital, Inc.
("VKAC"), has no business, profession, vocation or employment of a
substantial nature other than his positions with the Sub-Adviser, its
subsidiaries and affiliates. Dennis J. McDonnel, Director, President, and
Chief Operating Officer of the Sub-Adviser , Chairman, COO and Director
of Van Kampen American Capital Investment Advisory Corp. ("VK Advisor")
and is Executive Vice President of VKAC; Ronald A. Nyberg, Director of
the Sub-Adviser, and Executive Vice President and General Counsel of
VKAC; William R. Rybak, Director of Sub-Adviser and Executive Vice
President and CFO of VKAC; Robert C. Peck, Jr., Director of Sub-Adviser
and Executive Vice President of Van Kampen; Alan R. Sachtleben, Director
of Sub-Adviser and Executive Vice President of Van Kampen; and Peter W.
Hegel, Director of Sub-Adviser and Executive Vice President of VK
Advisor.
F. EQUITY-INCOME PORTFOLIO: SUB-ADVISER - LUTHER KING CAPITAL MANAGEMENT
CORPORATION
Luther King Capital Management Corporation, the Sub-Adviser to the
Equity-Income Portfolio, is a registered investment adviser providing
investment management services.
Luther King Capital Management Corporation also provides investment
management services to individual and institutional investors on a
private basis. J. Luther King, Jr., President of the Sub-Adviser, Paul W.
Greenwell, Robert M. Holt, Jr., Scot C. Hollmann, David L. Dowler, J.
Patrick Clegg, Donald R. Andrews, Joan M. Maynard, Scott M. Kleberg and
Barbara S. Garcia, officers of Luther King Capital Management
Corporation, have no substantial business, profession, vocation or
employment other than their positions with Luther King Capital Management
Corporation, Inc.
G. UTILITY PORTFOLIO: SUB-ADVISER - FEDERATED INVESTMENT COUNSELING
Federated Investment Counseling, the Sub-Adviser to the Utility
Portfolio, is a registered investment adviser under the Investment
Advisers Act of 1940. It is a subsidiary of Federated Investors.
The Sub-Adviser serves as investment adviser to a number of investment
companies and private accounts. Total assets under management or
administered by the Sub-Adviser and other subsidiaries of Federated
Investors is approximately $80 billion. The Trustees of the Sub-Adviser,
their position with the Sub-Adviser, and, in parenthesis, their principal
occupations are as follows: John F. Donahue, Trustee (Chairman and
Trustee, Federated Investors, Federated Advisers, Federated Management,
and Federated Research; Chairman and Director, Federated Research Corp.
and Federated Global Research Corp.; President, Passport Research, Ltd.);
J. Christopher Donahue, Trustee (President and Trustee, Federated
Investors, Federated Advisers, Federated Management, and Federated
Research; President and Director, Federated Research Corp. and Federated
Global Research Corp.; President, Passport Research, Ltd; Trustee,
Federated Shareholder Services Company and Federated Shareholder
Services; Director, Federated Services Company); Henry J. Gailliott,
Chairman and Trustee (Trustee, Federated Investors; Senior Vice
President-Economist, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., Federated Global Research Corp. and
Passport Research, Ltd.); Mark L. Mallon, President and Trustee
(Executive Vice President, Federated Advisers, Federated Management,
Federated Research, Federated Research Corp., Federated Global Research
Corp. and Passport Research, Ltd.); John W. McGonigle, Trustee (Executive
Vice President, Secretary and Trustee, Federated Investors; Trustee,
Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company and Federated Shareholder
Services; Director, Federated Services Company; and Director, Federated
Securities Corp.); Mark D. Olson, Trustee (Trustee, Federated Investors,
Federated Advisers, Federated Research, Federated Management, Federated
Shareholder Services, and Federated Shareholder Services Company;
Partner, Wilson, Halbrook & Bayard, 107 W. Market Street, Georgetown,
Delaware 19947). The business address of the Trustees, with the exception
of Mark D. Olson, is Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779.
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The remaining Officers of the Sub-Adviser are: Robert J. Ostrowski and J.
Alan Minteer, Senior Vice Presidents; G. Michael Cullen, Michael P.
Donnelly, Edward C. Gonzales, Stephen A. Keen, Robert K. Kinsey, Charles
A. Ritter, Christopher J. Smith, and Edward T. Tiedge, Vice Presidents;
Stephen A. Keen, Secretary; and Thomas R. Donahue, Treasurer. The
business address of each of the Officers of the Sub-Adviser is Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779. These individuals
are also officers of some of the investments advisers to other mutual
funds.
H. AGGRESSIVE GROWTH PORTFOLIO: SUB-ADVISER - FRED ALGER MANAGEMENT, INC.
Fred Alger Management, Inc. ("Alger Management"), the Sub-Adviser to the
Aggressive Growth Portfolio, is a wholly-owned subsidiary of Fred Alger &
Company, Incorporated ("Alger, Inc.") which in turn is a wholly-owned
subsidiary of Alger Associates, Inc., a financial services holding
company. Alger Management is generally engaged in rendering investment
advisory services to mutual funds, institutions and, to a lesser extent,
individuals.
Fred M. Alger III, serves as Chairman of the Board, David D. Alger serves
as President and Director, Gregory S. Duch serves as Treasurer and Mary
Marsden-Cochran serves as Secretary of the following companies: Alger
Associates, Inc.; Alger Management; Alger, Inc.; Alger Properties, Inc.,
Alger Shareholder Services, Inc.; Alger Life Insurance Agency, Inc.;
Castel Convertible Fund, Inc. and Spectra Fund, Inc. Fred M. Alger also
serves as Chairman of the Board of Analysts Resources, Inc. ("ARI") and
Chairman of the Board and Trustee of The Alger Fund, The Alger American
Fund and The Alger Defined Contribution Trust. David D. Alger also serves
as Executive Vice President and Director of ARI and as President and
Trustee of The Alger Fund, The Alger American Fund and The Alger Defined
Contribution Trust. Gregory S. Duch also serves as Treasurer of Fred
Alger Asset Management ("FAAM"), ARI, The Alger Fund, The Alger American
Fund and The Alger Defined Contribution Trust. Mary Marsden-Cochran also
serves as Secretary of ARI, The Alger Fund, The Alger American Fund and
The Alger Defined Contribution Trust. The principal business address of
each of the companies listed above, other than Alger, Inc., is 75 Maiden
Lane, New York, NY 10038. The principal business address of Alger, Inc.
is 30 Montgomery Street, Jersey City, NJ 07302.
I. TACTICAL ASSET ALLOCATION PORTFOLIO: SUB-ADVISER - DEAN INVESTMENT
ASSOCIATES
Dean Investment Associates ("Dean"), the Sub-Adviser to the Tactical
Asset Allocation Portfolio, is a division of C.H. Dean and Associates,
Inc. Dean is the money management division of C.H. Dean and Associates,
Inc. Dean became a registered investment adviser in October, 1972 and
will assume all of the investment advisory functions. C.H. Dean and
Associates is an Ohio corporation which was incorporated on March 28,
1975.
Chauncey H. Dean is the Chairman and Chief Executive Officer; Dennis D.
Dean is President; Frank H. Scott is Senior Vice President; John C.
Riazzi is Vice President and Director of Consulting Services; Robert D.
Dean is Vice President and Director of Research; Richard M. Luthman is
Senior Vice President; Darrell N. Fulton is Vice President of Information
Systems. The business address of each of the Officers of the Sub-Adviser
is 2480 Kettering Tower, Dayton, Ohio 45423-2480.
J. C.A.S.E. QUALITY GROWTH PORTFOLIO, C.A.S.E. GROWTH & INCOME PORTFOLIO AND
C.A.S.E. GROWTH PORTFOLIO (THE "PORTFOLIOS"): SUB-ADVISER - C.A.S.E.
MANAGEMENT, INC.
C.A.S.E. Management, Inc. ("C.A.S.E."), the Sub-Adviser to the
Portfolios, is a registered investment advisory firm and a wholly-owned
subsidiary of C.A.S.E. Inc. C.A.S.E. Inc. is indirectly controlled by
William Edward Lange, President and Chief Executive Officer of C.A.S.E.
C.A.S.E. provides investment management services to financial
institutions, high net worth individuals, and other professional money
managers.
William E. Lange is the President, Chief Executive Officer and Founder;
Robert G. Errigo, Investment Committee Board Member; John Gordon,
Investment Committee Board Member; Bruce H. Jordan, Senior Vice President
and James M. LaBonte, Chief Operating Officer; William Fagon, Senior Vice
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President Marketing; Richard Wells, Senior Vice President Marketing; and
Robert Hardy, Marketing Director. The business address of each of the
Officers of the Sub-Adviser is 2255 Glades Road, Suite 221-A, Boca Raton,
Florida 33431.
K. INTERNATIONAL EQUITY PORTFOLIO: CO-SUB-ADVISERS - SCOTTISH EQUITABLE
INVESTMENT MANAGEMENT LIMITED AND GE INVESTMENT MANAGEMENT INCORPORATED
Scottish Equitable Investment Management Limited ("Scottish Equitable")
serves as a Co-Sub-Adviser to the International Equity Portfolio. See
"Management of the Fund - The Co-Sub-Advisers" in the Prospectus and
Statement of Additional Information for regarding the business of
Scottish Equitable.
The directors and officers of Scottish Equitable are listed below. Unless
otherwise indicated, each director and officer has a principal business
address of Edinburgh Park, Edinburgh EH12 9SE: David J. Kirkpatrick,
Chairman of the Board and Managing Director, Investment (also Director of
Scottish Equitable Life Assurance Society, Scottish Equitable plc,
Scottish Equitable Holdings Limited, Scottish Equitable (Managed Funds)
Limited, Peterwake Limited and Rashkirk Limited); Otto Thoresen,
Director, International Business (also Director of SEFM Ltd. and SEISA);
Niall A. M. Franklin, Finance Director (also Director of Scottish
Equitable Holdings Limited, Scottish Equitable plc, Scottish Equitable
Fund Managers Limited, College Green Associates Limited and Royal
Scottish Assurance plc); Russell Hogan, Director and Investment Manager
(also Director of Scottish Equitable Fund Managers Limited); Roy Patrick,
Director and Secretary (also Director of Scottish Equitable Fund Managers
Limited); William W. Stewart, Executive Director, Strategy (also Director
of Scottish Equitable Life Assurance Society, Scottish Equitable plc,
Scottish Equitable Holdings Limited, Scottish Equitable Fund Managers
Limited, Scottish Equitable (Managed Funds) Limited, College Green
Associates Limited, Royal Scottish Assurance plc, Royal Scottish
Assurance Services Limited, AEGON Life Assurance Company (UK) Limited,
AEGON Financial Services Group (UK) plc, AEGON Holdings (UK) Limited,
AEGON Unit Trusts Limited, AEGON Investment Services Limited, AEGON
Financial Services Limited, Western General Hospital NHS Trust and
National LVA Financial Services Limited); Paul N. Ritchie, Director and
Investment Administration Manager (also Director of Scottish Equitable
Fund Managers Limited); and Otto Thoresen, Director, International
Business, SEFM Ltd. and SEISA.
GE Investment Management Incorporated ("GEIM") also serves as a
Co-Sub-Adviser for the International Equity Portfolio. GEIM is a
wholly-owned subsidiary of General Electric Company ("GE"). GEIM's
principal officers and directors serve in similar capacities with respect
to General Electric Investment Corporation ("GEIC," and, together with
GEIM, collectively referred to as "GE Investments"), which like GEIM is a
wholly-owned subsidiary of GE. GEIC serves as investment adviser to
various GE pension and benefit plans and certain employee mutual funds.
The directors and officers of GEIC are: Dale F. Frey, Chairman, Director
and CEO; Michael J. Cosgrove, Executive Vice President, Alan M. Lewis,
Executive Vice President and General Counsel; John H. Myers, Executive
Vice President; Eugene K. Bolton, Executive Vice President; Donald W.
Torey, Executive Vice President and Ralph R. Layman, Executive Vice
President. All of these officers and/or directors have no substantial
business, profession, vocation or employment other than their positions
with GEIM and/or its subsidiaries and affiliates.
L. MERIDIAN/INVESCO GLOBAL SECTOR, MERIDIAN/INVESCO US SECTOR AND
MERIDIAN/INVESCO FOREIGN SECTOR PORTFOLIOS ("MERIDIAN/INVESCO
PORTFOLIOS"): CO-SUB-ADVISERS - MERIDIAN INVESTMENT MANAGEMENT
CORPORATION AND INVESCO GLOBAL ASSET MANAGEMENT LIMITED
Meridian Investment Management Corporation and INVESCO Global Asset
Management Limited serve as the Co-Sub-Advisers for the Meridian/INVESCO
Portfolios. Meridian Investment Management Corporation ("Meridian") is a
wholly-owned subsidiary of Meridian Management & Research Corporation and
provides investment management and related services to other mutual fund
portfolios and individual, corporate, charitable and retirement accounts.
INVESCO Global Asset Management Limited ("IGAM") is a wholly-owned
subsidiary of INVESCO PLC.
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The directors and officers of Meridian are listed below. Unless otherwise
indicated, each director and officer has held the position listed for at
least the past two years and has a principal business address of 12835
East Arapahoe Road, Tower II, 7th Floor, Englewood, CO 80112: Michael J.
Hart, President & Director, President of Meridian Management & Research
Corporation and President of Meridian Clearing Corporation; and Dr. Craig
T. Callahan, Secretary, Treasurer & Director, Chief Investment Advisor of
Meridian Management & Research Corporation and Vice President of Meridian
Clearing Corporation.
The directors and officers of IGAM are listed below. Unless otherwise
indicated, each director and officer has a principal business address of
Rosebank, 12 Bermudiana Road, Hamilton, Bermuda HM11: John D. Campbell,
Director and senior partner at the law firm Appleby, Spurling & Kempe,
Hamilton, Bermuda; Stephen A. Dana, Director, also serves as Vice
President of INVESCO Capital Management, Inc. in Atlanta, GA; David A.
Hartley, Assistant Secretary & Treasurer and also serves as Secretary &
Treasurer of INVESCO Group Services, Inc., Atlanta, GA; Everard T.
Richards, Deputy Chairman and Director and also serves as Chief Executive
Officer of Bermuda Asset Management Ltd.; John D. Rogers, Director and
also serves as President of INVESCO Asset Management (Japan) Limited in
Tokyo, Japan; Wendell M. Starke, Chairman & Director and also serves as
Chairman & Director of INVESCO Capital Management, Inc. in Atlanta, GA,
Chairman and Director of INVESCO, Inc. in Atlanta, GA and Director of
INVESCO PLC in London, England; Michael A. Wood, Secretary; and Luis A.
Aguilar, General Counsel and also serves as General Counsel of INVESCO,
Inc. in Atlanta, GA.
IGAM has entered into agreements with its affiliates, INVESCO Asset
Management Limited, 11 Devonshire Square, London, EC2M 4YR England, and
INVESCO Trust Company, 7800 East Union Avenue, Denver, Colorado 80237,
for assistance in managing the Meridian/INVESCO Portfolios' investments.
(See "Management of the Fund - The Co-Sub-Advisers" in the Prospectus and
Statement of Additional Information for information regarding INVESCO
Asset Management Limited and INVESCO Trust Company.) The directors and
officers of INVESCO Trust Company are listed below. Unless otherwise
indicated, each director and officer has held the positions listed for
that least the past two years and has a principal business address of
7800 East Union Avenue, Denver, Colorado 80237: R. Dalton Sim, Chairman
of the Board, President and Chief Executive Officer and Portfolio Manager
(also Director of INVESCO Funds Group, Inc.); Frank M. Bishop, Director
(also President, Chief Operating Officer and a Director of INVESCO, Inc.
and Vice President, Portfolio Manager and a Director of INVESCO Capital
Management, Inc., both of which are located at 1315 Peachtree Street,
N.E., Atlanta, Georgia 30309; Director of other companies affiliated with
the Sub-Adviser); Samuel T. DeKinder, Director (also Executive Vice
President and a Director of INVESCO, Inc. and Director of Marketing of
INVESCO Capital Management, Inc., both of which are located at 1315
Peachtree Street, N.E., Atlanta, Georgia 30309); Dan J. Hesser, Director
(also Chairman, President and Chief Executive Officer of INVESCO Funds
Group, Inc.); Ronald L. Grooms, Senior Vice President and Treasurer (Mr.
Grooms also holds similar positions with INVESCO Funds Group, Inc.); Glen
A. Payne, Senior Vice President, General Counsel and Secretary (formerly,
Vice President, General Counsel and Secretary from May 1989 to April
1995; Mr. Payne also holds similar positions with INVESCO Funds Group,
Inc.); Roger D. Maurer, Senior Vice President, Senior Trust Officer and
Portfolio Manager; Daniel B. Leonard, Senior Vice President and Portfolio
Manager; Barry Kurokawa, Senior Vice President and Portfolio Manager
(formerly, Vice President from January 1993 to January 1994); Charles P.
Mayer, Senior Vice President (since January 1994) and Portfolio Manager
(formerly, Vice President from March 1993 to January 1994); Timothy J.
Miller, Senior Vice President (since April 1995) and Portfolio Manager
(formerly, Vice President from January 1993 to April 1995); Robert R.
Schoonbeck, Senior Trust Officer (also President and a Director of
INVESCO Retirement Plan Services, Inc., 1355 Peachtree Street, N.E.,
Atlanta, Georgia 30309); Donovan J. Paul, Senior Vice President
(formerly, President of Quixote Investment Management, Inc., 5442 S.
Dayton Court, Englewood, Colorado 80111, from April 1993 to May 1994);
Gregg J. Smolenski, Vice President - Marketing; E. E. Frye, Jr., Vice
President; Douglas N. Pratt, Vice President and Portfolio Manager; Paul
J. Rasplicka, Vice President (formerly, Vice President of Chase
Investment Counsel Corp., 300 Preston Avenue, Suite 403, Charlottesville,
Virginia 22902 from October 1992 to January 1994); Brian F. Kelly, Vice
President (since April 1994) and Portfolio Manager; John R. Schroer, Vice
President (since January 1995) and Portfolio Manager; Kenneth R.
Christoffersen, Vice President and Assistant
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General Counsel (formerly, Assistant Vice President and Assistant General
Counsel from February 1993 to April 1995; Mr. Christoffersen also holds
similar positions with INVESCO Funds Group, Inc.); Ritis S. Skinner,
Assistant Vice President and Senior Trust Officer (also Senior Vice
President and Senior Trust Officer of INVESCO Retirement Plan Services,
Inc.); Jeraldine E. Kraus, Assistant Secretary (also Assistant Secretary
and Director of Office Services Administration of INVESCO Funds Group,
Inc.); Jay M. Sommer, Trust Officer (also Director, Retirement
Operations, INVESCO Funds Group, Inc.); Judy P. Wiese, Trust Officer
(also Vice President of INVESCO Funds Group, Inc.); Alan I. Watson, Trust
Officer (also Vice President of INVESCO Funds Group, Inc.); William J.
Galvin, Jr., Trust Officer (also Vice President of INVESCO Funds Group,
Inc.); and Theresa K. Philip, Trust Officer (also Director, Client
Services and Operations Administration with INVESCO Funds Group, Inc.)
The directors and officers of INVESCO Asset Management Limited ("IAM")
are listed below. Unless otherwise indicated, each director and officer
has held the positions for at least the past two years and has a
principal business address of 11 Devonshire Square, London EC2M 4YR
England: Norman M. Riddell, Principal Executive Officer and Chairman;
Jeffrey C. Attfield, Chief Executive; Sarah C. Bates, Managing Director -
Investment Trust Division; Francesco Bertoni, Investment Director -
Global Equities; Anthony Broccardo, Portfolio Manager - Asset Allocation;
Ian A. Carstairs, Investment Director - U.K. Equities; Adam D. Cooke,
Director - Institutional Business Group; Peter S. Dawson, Investment
Director - Treasury/Dealing; David C. Gillan, Director - Institutional
Business Group; Peter J. Glynne-Percy, Director, Investment Management;
Tristan P. Hillgarth, Executive Director - Investment Management; David
C. Hypher, Director - Institutional Business Group; Jeremy C. Lambourne,
Director - Finance; Rory S. Powe, Investment Director - European
Equities; Jennifer M. Prince, Project Director - Central Management;
Riccardo Ricciardi, Investment Director - Investment Management; and Alan
C. Wren, Executive Director - Management.
M. VALUE EQUITY PORTFOLIO: SUB-ADVISER - NWQ INVESTMENT MANAGEMENT COMPANY,
INC.
NWQ Investment Management Company, Inc. ("NWQ") serves as Sub-Adviser for
the Value Equity Portfolio. NWQ is a Massachusetts corporation and is a
wholly-owned subsidiary of United Asset Management Corporation. NWQ
provides investment advice to individuals, pension funds, profit sharing
funds, charitable institutions, educational institutions, trust accounts,
corporations, insurance companies, municipalities and governmental
agencies.
The directors and officers of NWQ are listed below. Unless otherwise
indicated, each director and officer has held the positions listed for at
least the past two years and is located at NWQ's principal business
address of 655 South Hope Street, 11th Floor, Los Angeles, CA 90017:
David A. Polak, President, Director & Chief Investment Officer; Edward C.
Friedel, Jr., Director & Managing Director; James H. Galbreath (Denver),
Director & Managing Director; Mary-Gene Slaven, Secretary/Treasurer &
Managing Director; James P. Owen, Managing Director; Michael C. Mendez
(Scottsdale, AZ), Managing Director; Phyllis M. Thomas, Managing
Director; Louis T. Chambers, Vice President, Justin T. Clifford, Vice
President; Jeffrey M. Cohen, Vice President; Paul R. Guastamacchio, Vice
President; Ronald R. Halverson (Minneapolis, MN), Vice President; Thomas
J. Laird, Vice President; Karen S. McCue, Vice President; Martin Pollack,
Vice President; and Ronald R. Sternal (Minneapolis, MN), Vice President.
N. U.S. EQUITY PORTFOLIO: SUB-ADVISER - GE INVESTMENT MANAGEMENT
INCORPORATED
GE Investment Management Incorporated ("GEIM") serves as the Sub-Adviser
for the U.S. Equity Portfolio. GEIM is a wholly-owned subsidiary of
General Electric Company ("GE"). GEIM's principal officers and directors
serve in similar capacities with respect to General Electric Investment
Corporation ("GEIC," and, together with GEIM, collectively referred to as
"GE Investments") which like GEIM is a wholly-owned subsidiary of GE.
GEIC serves as investment adviser to various GE pension and benefit plans
and certain employee mutual funds. The directors and officers of GEIC
are: Dale F. Frey, Chairman, Director and CEO; Michael J. Cosgrove,
Executive Vice President, Alan M. Lewis, Executive Vice President and
General Counsel; John H. Myers, Executive Vice President; Eugene K.
Bolton, Executive Vice President; Donald W. Torey, Executive Vice
President and Ralph R. Layman,
C-12
<PAGE>
Executive Vice President. All of these officers and/or directors have no
substantial business, profession, vocation or employment other than their
positions with GEIM and/or its subsidiaries and affiliates.
Item 29. PRINCIPAL UNDERWRITERS.
(a) The Registrant has entered into a Distribution Agreement with
InterSecurities, Inc. ("ISI"), whose address is P.O. Box 9053,
Clearwater, FL 34618-9053, to act as the principal underwriter of
Fund Shares. ISI also serves as an investment adviser and principal
underwriter to the Idex Funds and as principal underwriter to the
WRL Series Life Account and the WRL Series Annuity Account.
(b) Directors and Officers of Principal Underwriter
<TABLE>
<CAPTION>
(1) (2) (3)
NAME AND PRINCIPAL BUSINESS POSITIONS AND OFFICES WITH POSITIONS AND OFFICES WITH
ADDRESS UNDERWRITER REGISTRANT
---------------------- -------------------------- --------------------------
<S> <C> <C>
John R. Kenney* Chairman and Director Chairman, Director &
President
G. John Hurley* Director, President & CEO Director and Executive
Vice President
Rebecca A. Ferrell* Assistant Vice President, Secretary, Vice President
Counsel and Assistant President and Counsel
Secretary
William H. Geiger* Director and Secretary Vice President & Asst.
Secretary
Richard B. Franz II* Treasurer Treasurer & Principal
Financial Officer
J. Will Paull Director N/A
Associated Mariner Agency
17199 Laurel Park Dr. N. #100
Livonia, MI 48152
Thomas R. Moriarty* Senior Vice President N/A
Christopher G. Roetzer* Assistant Vice President N/A
Cynthia L. Remley* Vice President, Counsel & N/A
Assistant Secretary
Terry L. Garvin* Vice President N/A
Gordon E. Hippner* Vice President N/A
Gerald P. Kirk* Vice President N/A
Leslie E. Martin, III* Vice President N/A
Stanley R. Orr* Vice President N/A
<FN>
- ---------
* 201 Highland Avenue, Largo, Florida 33770
</FN>
</TABLE>
C-13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
William G. Cummings* Vice President N/A
Pamela C. Dils* Assistant Vice President and N/A
Assistant Secretary
Kristy L. Dowd* Assistant Vice President N/A
Diane Rogers* Assistant Vice President N/A
Ronald J. Klimas* Assistant Vice President N/A
Russell W. Crooks* Assistant Vice President N/A
Gregory Limardi* Assistant Vice President N/A
Laura Schneider* Assistant Secretary N/A
Stuart Walsky* Assistant Vice President N/A
Ronald L. Hall* Vice President, Sales & N/A
Marketing
Christine M. Goodwin* Assistant Vice President N/A
<FN>
- ---------------
*201 Highland Avenue, Largo, Florida 33770
</FN>
</TABLE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of
1940, as amended, and rules promulgated thereunder are in the
possession of WRL Investment Management, Inc. and WRL Investment
Services, Inc. at their offices at 201 Highland Avenue, Largo, Florida
33770, or at the offices of the Fund's custodian, Investors Bank &
Trust Company, 89 South Street, Boston, MA 02111.
Item 31. MANAGEMENT SERVICES.
Not applicable
Item 32. UNDERTAKINGS.
The Registrant undertakes to file a post-effective amendment including
the financial statements of the International Equity Portfolio and the
U.S. Equity Portfolio of the WRL Series Fund, Inc., which need not be
certified, within four to six months after the date that operations of
these portfolios commence.
The Registrant undertakes to furnish to each person to whom a
prospectus is delivered with a copy of the Registrant's latest Annual
Report to shareholders, Policyowners or Contract Owners upon request
and without charge.
C-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant, WRL Series Fund, Inc., has duly
caused this Post Effective Amendment No. 25 to its Registration Statement to be
signed on its behalf by the undersigned, thereunder duly authorized, in the City
of Largo, State of Florida, on this 15th day of October, 1996.
WRL SERIES FUND, INC.
(Registrant)
By: /s/ JOHN R. KENNEY
-------------------
John R. Kenney
Chairman of the Board and President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 25 to its Registration Statement has been signed
below by the following persons in the capacities and on the dates
indicated:
SIGNATURE AND TITLE DATE
- ------------------- ----
/s/ JOHN R. KENNEY October 15, 1996
- -----------------------------------
Chairman of the Board and President
John R. Kenney
/s/ G. JOHN HURLEY October 15, 1996
- -------------------------------------
Executive Vice President and Director
G. John Hurley
/s/ PETER R. BROWN October 15, 1996
- --------------------------
Director - Peter R. Brown*
/s/ CHARLES C. HARRIS
- ----------------------------- October 15, 1996
Director - Charles C. Harris*
/s/ RUSSELL A. KIMBALL, JR.
- ----------------------------------- October 15, 1996
Director - Russell A. Kimball, Jr.*
<PAGE>
/s/ RICHARD B. FRANZ, II October 15, 1996
- -----------------------------------------
Treasurer and Principal Financial Officer
Richard B. Franz, II
/s/ KENNETH P. BEIL October 15, 1996
- ----------------------------
Assistant Vice President and
Principal Accounting Officer
Kenneth P. Beil
/s/ THOMAS E. PIERPAN October 15, 1996
- -----------------------------
* Signed by Thomas E. Pierpan
as Attorney-in-fact
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS FILED WITH
POST-EFFECTIVE AMENDMENT NO. 25 TO
REGISTRATION STATEMENT
ON FORM N-1A
WRL SERIES FUND, INC.
REGISTRATION NO. 33-507
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
NO. OF EXHIBIT
1. (A) Articles of Incorporation of WRL Series Fund, Inc.
1. (B) Articles Supplementary to Articles of Incorporation of WRL
Series Fund, Inc.
1. (C) Articles Supplementary to Articles of Incorporation of WRL Series
Fund, Inc.
1. (D) Articles Supplementary to Articles of Incorporation of WRL Series
Fund, Inc.
1. (E) Articles Supplementary to Articles of Incorporation of WRL Series
Fund, Inc.
1. (F) Articles Supplementary to Articles of Incorporation of WRL Series
Fund, Inc.
1. (G) Articles Supplementary to Articles of Incorporation of WRL Series
Fund, Inc.
2. By-Laws of WRL Series Fund, Inc.
5. (i) Form of Investment Advisory Agreement on behalf of the Portfolios
of the WRL Series Fund, Inc. with WRL Investment Management, Inc.
5. (ii) Form of Sub-Advisory Agreement on behalf of the Growth, Bond and
Global Portfolios of the Fund.
5. (iii) Form of Sub-Advisory Agreement on behalf of the Money Market
Portfolio of the Fund.
5. (iv) Form of Sub-Advisory Agreement on behalf of the Balanced and the
Short-to-Intermediate Government Portfolios of the Fund.
5. (v) Form of Sub-Advisory Agreement on behalf of the Emerging Growth
Portfolio of the Fund.
5. (vi) Form of Sub-Advisory Agreement on behalf of the Equity-Income
Portfolio of the Fund.
5. (vii) Form of Sub-Advisory Agreement on behalf of the Utility Portfolio
of the Fund.
5. (viii) Form of Sub-Advisory Agreement on behalf of the Aggressive Growth
Portfolio of the Fund.
5. (ix) Form of Sub-Advisory Agreement on behalf of the Tactical Asset
Allocation Portfolio of the Fund.
5. (x) Form of Sub-Advisory Agreement on behalf of the C.A.S.E. Quality
Growth Portfolio, C.A.S.E. Growth & Income Portfolio and C.A.S.E.
Growth Portfolio of the Fund.
<PAGE>
5. (xi) Form of Co-Sub-Advisory Agreements on behalf of the
International Equity Portfolio of the Fund.
5. (xii) Form of Co-Sub-Advisory Agreements on behalf of the
Meridian/INVESCO US Sector, Meridian/INVESCO Global Sector and
Meridian/INVESCO Foreign Sector Portfolios of the Fund.
5. (xiii) Form of Sub-Advisory Agreement on behalf of the Value Equity
Portfolio of the Fund.
5. (xiv) Form of Sub-Advisory Agreement on behalf of the U.S. Equity
Portfolio.
5. (xv) Service Agreement dated 4-30-96 between INVESCO Global Asset
Management Limited and INVESCO Trust Company, Inc.
5. (xvi) Service Agreement dated 4-30-96 between INVESCO Global Asset
Management Limited and INVESCO Asset Management Limited.
6. Form of Distribution Agreement.
8. Form of Custodian Agreement.
9. Form of Administrative Services and Transfer Agency Agreement.
11. Consent of Price Waterhouse LLP.
15. Proposed Plan of Distribution.
17. Financial Data Schedules.
EXHIBIT 1 (A)
ARTICLES OF INCORPORATION OF WRL SERIES FUND, INC.
<PAGE>
ARTICLES OF INCORPORATION
OF
WRL SERIES FUND, INC.
ARTICLE I
THE UNDERSIGNED, JAMES A. ROWE, whose post office address is 201 Highland
Avenue, Largo, Florida 33540, being at least eighteen years of age, does hereby
act as an incorporator, under and by virtue of the General Laws of the State of
Maryland authorizing the formation of corporations and with the intention of
forming a corporation.
ARTICLE II
NAME
The name of the Corporation is WRL SERIES FUND, INC.
ARTICLE III
PURPOSES AND POWERS
The purpose or purposes for which the Corporation is formed and the business
or objects to be transacted, carried on and promoted by it are as follows:
1. To conduct and carry on the business of an investment company of the
open-end, management type as defined in the Investment Company Act of 1940, as
amended, and to engage in all activities incident thereto.
2. To hold, invest and reinvest its assets in securities, and in connection
therewith to hold part or all of its assets in cash.
3. To issue and sell shares of its own capital stock in such amounts and on
such terms and conditions for such purposes and for such amount or kind of
consideration now or hereafter permitted by the General Laws of the State of
Maryland and by these Articles of Incorporation, as its Board of Directors may
determine, consistent with all applicable laws and regulations, including the
Investment Company Act of 1940, as amended; provided, however, that the value of
the consideration per share to
1
<PAGE>
be received by the Corporation upon the sale or other disposition of any shares
of its capital stock shall not be less than the net asset value per share of
such capital stock outstanding at the time of such event.
4. To redeem, purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the stockholders
of the Corporation) shares of its capital stock, in any manner and to the extent
now or hereafter permitted by the General Laws of the State of Maryland and by
these Articles of Incorporation.
5. To do any and all such further acts or things and to exercise any and all
such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of all or any of the foregoing purposes or objects.
The corporation shall be authorized to exercise and enjoy all of the powers,
rights and privileges granted to, or conferred upon, corporations by the General
Laws of the State of Maryland now or hereafter in force, and the enumeration of
the foregoing shall not be deemed to exclude any powers, rights or privileges so
granted or conferred.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in the
State of Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The name of the resident agent of the Corporation in
Maryland is The Corporation Trust Incorporated, a Maryland corporation, whose
post office address is 32 South Street, Baltimore, Maryland 21202.
ARTICLE V
CAPITAL STOCK
1. The total number of shares of capital stock which the Corporation shall
have authority to issue is one billion (1,000,000,000) shares of the par value
of one cent ($0.01) per share and of the aggregate par value of $10,000,000. All
shares shall be issued, if at all, in series. Three hundred million
(300,000,000) shares shall be allocated to a class of Common Stock designated
Money Market Portfolio Common Stock; twenty-five million (25,000,000) shares
shall be allocated to a class of Common Stock designated Bond Portfolio Common
Stock; and six hundred seventy-five million (675,000,000) shares shall be
2
<PAGE>
allocated to a class of Common Stock designated Growth Portfolio Common Stock.
In addition, the Board of Directors is hereby expressly granted authority to
change the designation of any class, and to increase or decrease the number of
shares of any class, but the number of shares of any class shall not be
decreased by the Board of Directors below the number of shares thereof then
outstanding.
2. The Corporation may issue, sell, redeem, repurchase and otherwise deal in
and with said shares of Common Stock in fractional shares, and any such
fractional shares shall carry proportionately all the rights of a whole share,
excepting any right to receive a certificate evidencing such fractional shares,
but including, without limitation, the right to vote, the right to receive
dividends and distributions, and the right to participate upon liquidation of
the Corporation.
3. All persons who shall acquire stock in the Corporation shall acquire the
same subject to the provisions of these Articles of Incorporation and the
By-Laws of the Corporation.
4. Unless otherwise provided in the resolution of the Board of Directors
providing for the issuance of shares in any new class or classes not designated
in this Article, each class of stock of the Corporation shall have the following
powers, preferences and rights, and qualifications, restrictions, and
limitations thereof:
(a) The holders of each share of stock of the Corporation shall be
entitled to one vote for each full share, and a fractional vote for each
fractional share of stock, irrespective of the class, then standing in his
name on the books of the Corporation. On any matter submitted to a vote of
Stockholders, all shares of the Corporation then issued and outstanding and
entitled to vote shall be voted in the aggregate and not by class except that
(1) when otherwise expressly required by the Maryland General Corporation Law
or the Investment Company Act of 1940, as amended, shares shall be voted by
individual class; (2) only shares of the respective portfolios are entitled
to vote on matters concerning only that Portfolio; and (3) fundamental
policies, as specified in the By-Laws, may not be changed, unless a change
affects only one Portfolio, without the approval of the holders of a majority
[as defined under the Investment Company Act of 1940] of the shares of each
Portfolio affected by the change.
(b) Each class of stock of the Corporation shall have the following powers
of preferences or other special rights, and the qualifications, restrictions,
and limitations thereof shall be as follows:
3
<PAGE>
(1) The shares of each Portfolio, when issued, will be fully paid and
non-assessable, have no preference, preemptive, conversion, exchange, or
similar rights, and will be freely transferable.
(2) The Board of Directors may from time to time declare and pay
dividends or distributions, in stock or in cash, on any or all classes of
stock, the amount of such dividends and distributions and the payment of
them being wholly in the discretion of the Board of Directors; provided,
however, dividends or distributions on shares of any class of stock shall
be paid only out of earned surplus or other lawfully available assets
belonging to such class.
ARTICLE VI
PROVISIONS FOR DEFINING, LIMITING AND REGULATING
CERTAIN POWERS OF THE CORPORATION AND
OF THE DIRECTORS AND STOCKHOLDERS
1. The number of directors of the Corporation shall be nine (9), which number
may be increased pursuant to the By-Laws of the Corporation but shall never be
less than three (3). The names of the directors who shall act until the first
annual meeting or until their successors are duly elected and qualify are:
Gerald Benson Robert F. McGrath
W. Scane Bowler Nicholas S. Rashford
Charles C. Harris Jack R. Thompson
Arthur S. Hecker Jack E. Zimmerman
John R. Kenney
2. The Board of Directors of the Corporation is hereby empowered to authorize
the issuance from time to time of shares of Capital Stock, whether now or
hereafter authorized, for such consideration as the Board of Directors may deem
advisable, subject to such limitations as may be set forth in these Articles of
Incorporation or in the By-Laws of the Corporation or in the General Laws of the
State of Maryland.
3. No holder of stock of the Corporation shall, as such holder, have any
right to purchase or subscribe for any shares of the capital stock of the
Corporation or any other security of the Corporation which it may issue or sell
(whether out of the number of shares authorized by these Articles of
Incorporation, or out of any shares of the Capital Stock of the Corporation
acquired by it after the issue
4
<PAGE>
thereof, or otherwise) other than such right, if any, as the Board of Directors,
in its discretion may determine.
4. The Board of Directors shall have authority by resolution to classify and
reclassify any authorized but unissued shares of capital stock from time to time
by setting or changing in any one or more respects the restrictions, limitations
as to dividends, qualifications or terms or conditions of redemption of capital
stock. Subject to the provisions of Section 6, 7 and 8 of this Article VI and
applicable law, the power of the Board of Directors to classify or reclassify
any of the shares of capital stock shall include, without limitation, authority
to classify or reclassify the stock into a class or classes of capital stock and
to divide and classify shares of any class into one or more series of the class,
by determining, fixing or altering one or more of the following:
(a) The distinctive designation of a class or series; provided that,
unless otherwise prohibited by the terms of the class or series, the number
of shares of any class or series may be decreased by the Board of Directors
in connection with any classification or reclassification of unissued shares
and the number of shares of the class or series may be increased by the Board
of Directors in connection with the classification or reclassification, and
any shares of any class or series that have been redeemed, purchased or
acquired in any other manner by the Corporation shall remain part of the
authorized capital stock and be subject to classification and
reclassification as provided herein.
(b) Whether or not and, if so, the rates, amounts and times at which, and
the conditions under which, dividends shall be payable on shares of the class
or series.
(c) Whether or not shares of such class or series shall have voting
rights, in addition to any voting rights provided by law and, if so, the
terms of such voting rights.
(d) The rights of the holders of shares of the class or series upon the
liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the assets of, the Corporation.
(e) Any other rights, restrictions, including restrictions on
transferability, and qualifications of shares of the class or series, not
inconsistent with law and these Articles of Incorporation.
5. All consideration received by the Corporation for the issue or sale of
stock of any class, together with all income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale,
5
<PAGE>
exchange or liquidation thereof, and any funds or payments derived from any
reinvestment of the proceeds in whatever form the same may be, shall irrevocably
belong to the class of shares of stock with respect to which the assets,
payments or funds were received by the Corporation for all purposes, subject
only to the rights of creditors, and shall be so handled upon the books of
account of the Corporation. Such assets, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or liquidation
thereof, and any assets derived from any reinvestment of the proceeds in
whatever form, are herein referred to as "assets belonging to" such class.
6. In the event of the liquidation or dissolution of the Corporation,
shareholders of each class shall be entitled to receive, as a class, out of the
assets of the Corporation available for distribution to shareholders, but other
than general assets not belonging to any particular class of stock, the assets
belonging to the class; and the assets so distributable to the stockholders of
any class shall be distributed among the stockholders in proportion to the
number of shares of the class held by them and recorded on the books of the
Corporation. In the event that there are any general assets not belonging to any
particular class of stock and available for distribution, the distribution shall
be made to the holders of stock of all classes in proportion to the asset value
of the respective classes determined as hereinafter provided.
7. The assets belonging to any class of stock shall be charged with the
liabilities of the class, and shall also be charged with the class's share of
general liabilities of the Corporation, in proportion to the asset value of the
respective classes determined as hereinafter provided. The determination of the
Board of Directors shall be conclusive (a) as to the amount of such liabilities,
including the amount of accrued expenses and reserves; (b) as to any allocation
of the same to a given class; and (c) whether the same, or general assets of the
Corporation, are allocable to one or more classes. The liabilities so allocated
to a class are herein referred to as "liabilities belonging to" the class.
8. Each director, each officer and, in the discretion of the Board of
Directors, each employee of the Corporation shall be indemnified by the
Corporation to the full extent permitted by the General Laws of the State of
Maryland, and as may be specified in the By-Laws, subject to any limitations
arising under the Investment Company Act of 1940, as amended.
9. The Board of Directors of the Corporation may make, alter or repeal from
time to time any of the By-Laws of the Corporation except any particular By-Law
which is specified as not subject to alteration or
6
<PAGE>
repeal by the Board of Directors, subject to the requirements of the Investment
Company Act of 1940, as amended.
ARTICLE VII
REDEMPTION
Each holder of shares of capital stock of the Corporation shall be entitled
to require the Corporation to redeem all or any part of the shares of capital
stock of the Corporation standing in the name of such holder on the books of the
Corporation, and all shares of capital stock issued by the Corporation shall be
subject to redemption by the Corporation, at the redemption price of such shares
as in effect from time to time as may be determined by the Board of Directors of
the Corporation in accordance with the provisions hereof, subject to the right
of the Board of Directors of the Corporation to suspend the right of redemption
of shares of capital stock of the Corporation or postpone the date of payment of
such redemption price in accordance with provisions of applicable law. The
redemption price of shares of capital stock of the Corporation shall be the net
asset value thereof as determined by the Board of Directors of the Corporation
from time to time in accordance with the provisions of applicable law, less such
redemption fee or other charge, if any, as may be fixed by resolution of the
Board of Directors of the Corporation. Payment of the redemption price shall be
made in cash by the Corporation at such time and in such manner as may be
determined from time to time by the Board of Directors of the Corporation.
The Corporation may in its discretion redeem, at such current net asset
value, outstanding shares of its capital stock not offered for redemption which
are held by any stockholder whose shares in the aggregate have a then total net
asset value of less than such amount as set forth in the By-Laws, provided that
prior to any such proposed redemption the Corporation shall have given such
stockholder written notice that such then current net asset value is less than
the amount set forth in the By-Laws as aforesaid and allowed such stockholder to
make additional investments in order to increase such then current net asset
value to the amount so set forth. The Corporation also may in its discretion
redeem the shares of its capital stock held by a stockholder or stockholders to
the extent deemed necessary by the Board of Directors to avoid taxation of the
Fund as a "personal holding company".
7
<PAGE>
ARTICLE VIII
VOTING
Not withstanding any provisions of the General Corporation Law of the State
of Maryland requiring a greater proportion than a majority of the votes of all
classes or of any class of Capital Stock entitled to be cast to take or
authorize any action, the Corporation may take or authorize any such action upon
the concurrence of a majority of the aggregate number of the votes entitled to
be cast thereon, all as permitted by Section 2-104(b) of the General Corporation
Law of the State of Maryland or any comparable successor provision. No provision
of these Articles of Incorporation shall be effective to (a) require a waiver of
compliance with any provision of the Securities Act of 1940, as amended, or of
any valid rule, regulation or order of the Securities and Exchange Commission
thereunder or (b) protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its security holders to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or disregard of the duties involved in the conduct of his
office.
ARTICLE IX
DETERMINATION BINDING
Any determination made in good faith, so far as accounting matters are
involved, in accordance with accepted accounting practice by or pursuant to the
direction of the Board of Directors, as to the amount of assets, obligations or
liabilities of the Corporation, as to the amount of net income of the
Corporation from dividends and interest for any period or amounts at any time
legally available for the payment of dividends, as to the amount of any reserves
or charges set up and the propriety thereof, as to the time of or purpose for
creating reserves or as to the use, alteration or cancellation of any reserves
or charges (whether or not any obligation or liability for which such reserves
or charges shall have been created shall have been paid or discharged), as to
the price of any security owned by the Corporation or as to any other matters
relating to the issuance, sale, redemption or other acquisition or disposition
of securities or shares of capital stock of the Corporation, and any reasonable
determination made in good faith by the Board of Directors as to whether any
transaction constitutes a purchase of securities on "margin", a sale of
securities "short", or an underwriting of the sale of, or a participation in any
underwriting or selling group in connection with the public distribution of, any
securities, shall be final and conclusive, and shall be binding upon the
Corporation and all holders of its Capital Stock, past, present and future, and
shares of the Capital Stock of the Corporation are issued and sold on the
condition and understanding,
8
<PAGE>
evidenced by the purchase of shares of Capital Stock or acceptance of share
certificates, that any and all such determinations shall be binding as
aforesaid.
ARTICLE X
PERPETUAL EXISTENCE
The duration of the Corporation shall be perpetual.
ARTICLE XI
AMENDMENT
The Corporation reserves the right from time to time to make any amendment of
its Articles of Incorporation, now or hereafter authorized by law, including any
amendment which alters the contract rights, as expressly set forth in its
Articles of Incorporation, of any outstanding stock.
IN WITNESS WHEREOF, the undersigned incorporator of WRL SERIES FUND, INC.
hereby executes the foregoing Articles of Incorporation and acknowledges the
same to be his act and further acknowledges that, to the best of his knowledge,
the matters and facts set forth therein are true in all material respects under
the penalties of perjury.
Dated this 20th day of August, 1985.
/s/ JAMES A. ROWE
-----------------
James A. Rowe
9
EXHIBIT 1 (B)
ARTICLES SUPPLEMENTARY TO ARTICLES OF INCORPORATION OF
WRL SERIES FUND, INC.
<PAGE>
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
WRL SERIES FUND, INC.
WRL SERIES FUND, INC., a Maryland corporation ("Corporation"), hereby
certifies to the Maryland Department of Assessments and Taxation as follows:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940.
SECOND: Pursuant to Article V, Paragraph 1 of the Corporation's Articles
of Incorporation, the Corporation is authorized to issue One Billion
(1,000,000,000) shares of Common Stock having a par value of one cent ($0.01)
per share and the aggregate par value of $10,000,000 ("Shares") which are
classified as follows: Three Hundred Million (300,000,000) of the Shares are
designated as Money Market Portfolio Common Stock; Twenty-Five Million
(25,000,000) of the Shares are designated as Bond Portfolio Common Stock; and
Six Hundred Seventy-five Million (675,000,000) of the Shares are designated as
Growth Portfolio Common Stock.
THIRD: The Board of Directors of the Corporation, at meetings duly
convened and held on March 18, 1992 and November 12, 1992, adopted resolutions
reclassifying Four Hundred Million (400,000,000) of the unissued Shares of the
Growth Portfolio Common Stock as follows: One Hundred Million (100,000,000) were
designated as Global Portfolio Common Stock; One Hundred Million (100,000,000)
were designated as Short-to-Intermediate Government Portfolio Common Stock; One
Hundred Million (100,000,000) were designated as Equity-Income Portfolio Common
Stock; and One Hundred Million (100,000,000) were designated as Emerging Growth
Portfolio Common Stock.
<PAGE>
FOURTH: The Shares of Common Stock as so reclassified by the Board of
Directors of the Corporation shall have the rights, powers, preferences,
qualifications, restrictions and limitations specified in Article V, Paragraph 4
of the Articles of Incorporation of the Corporation and shall be subject to all
of its provisions relating to the stock of the Corporation.
FIFTH: The aforesaid Shares of Common Stock have been duly reclassified by
the Board of Directors pursuant to authority and power contained in the Articles
of Incorporation of the Corporation and in accordance with Section 2-105(c) of
the Maryland General Corporation Law.
IN WITNESS WHEREOF, the undersigned Chairman of the Board of Directors of
WRL Series Fund, Inc., hereby executes these Articles Supplementary on behalf of
the Corporation, acknowledges that these Articles Supplementary are the act of
the Corporation, and certifies that, to the best of his knowledge, information
and belief, all matters and facts set forth herein are true in all material
respects, under the penalties of perjury.
Date: November 23, 1992
WRL SERIES FUND, INC.
/s/ JOHN R. KENNEY
------------------
John R. Kenney
Chairman of the Board
/s/ WILLIAM H. GEIGER
- ------------------------
William H. Geiger
Secretary
EXHIBIT 1 (C)
ARTICLES SUPPLEMENTARY TO ARTICLES OF INCORPORATION OF
WRL SERIES FUND, INC.
<PAGE>
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
WRL SERIES FUND, INC.
WRL SERIES FUND, INC., a Maryland corporation ("Corporation"), hereby
certifies to the Maryland Department of Assessments and Taxation as follows:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940, as amended.
SECOND: Pursuant to Article V, Paragraph 1 of the Corporation's Articles
of Incorporation, the Corporation is authorized to issue One Billion
(1,000,000,000) shares of Common Stock having a par value of one cent ($0.01)
per share and the aggregate par value of $10,000,000 ("Shares") which are
classified as follows: Three Hundred Million (300,000,000) of the Shares are
designated as Money Market Portfolio Common Stock; Twenty-Five Million
(25,000,000) of the Shares are designated as Bond Portfolio Common Stock; and
Six Hundred Seventy-five Million (675,000,000) of the Shares are designated as
Growth Portfolio Common Stock.
THIRD: Pursuant to the Corporation's Articles Supplementary to Articles of
Incorporation filed on November 25, 1992, the Shares were reclassified as
follows: Three Hundred Million (300,000,000) of the Shares are designated as
Money Market Portfolio Common Stock; Twenty-Five Million (25,000,000) of the
Shares are designated as Bond Portfolio Common Stock; and Two Hundred
Seventy-five Million (275,000,000) of the Shares are designated as Growth
Portfolio Common Stock; One Hundred Million (100,000,000) of the Shares are
designated as Global Portfolio Common Stock; One Hundred Million (100,000,000)
of the Shares are designated as Short-to-Intermediate Government Portfolio
Common Stock; One Hundred Million (100,000,000) of the Shares are designated as
Emerging Growth Portfolio Common Stock; and One Hundred Million (100,000,000) of
the Shares are designated as Equity-Income Portfolio Common Stock.
FOURTH: The Board of Directors of the Corporation, at a meeting duly
convened and held on December 6, 1993, adopted resolutions reclassifying One
Hundred Fifty Million (150,000,000) of the unissued Shares of the Growth
Portfolio Common Stock as follows: Seventy-five Million (75,000,000) were
designated as Balanced Portfolio Common Stock; and Seventy-five Million
(75,000,000) were designated as Utility Portfolio Common Stock. Seventy-five
Million (75,000,000) of the unissued Shares of the Money Market Portfolio Common
Stock were reclassified and designated as Aggressive Growth Portfolio Common
Stock.
FIFTH: The Shares of Common Stock as so reclassified by the Board of
Directors of the Corporation shall have the rights, powers, preferences,
qualifications, restrictions and limitations specified
<PAGE>
in Article V, Paragraph 4 of the Articles of Incorporation of the Corporation
and shall be subject to all its provisions relating to the stock of the
Corporation.
SIXTH: The aforesaid Shares of Common Stock have been duly reclassified by
the Board of Directors pursuant to authority and power contained in the Articles
of Incorporation of the Corporation and in accordance with Section 2-105(c) of
the Maryland General Corporation Law.
IN WITNESS WHEREOF, the undersigned Chairman of the Board of Directors of
WRL Series Fund, Inc., hereby executes these Articles Supplementary on behalf of
the Corporation, acknowledges that these Articles Supplementary are the act of
the Corporation, and certifies that, to the best of his knowledge, information
and belief, all matters and facts set forth herein are true in all material
respects, under the penalties of perjury.
Date: February 28, 1994
WRL SERIES FUND, INC.
/s/ JOHN R. KENNEY
------------------
John R. Kenney
Chairman of the Board
ATTEST:
/s/ WILLIAM H. GEIGER
- -----------------------
William H. Geiger
Secretary
EXHIBIT 1 (D)
ARTICLES SUPPLEMENTARY TO ARTICLES OF INCORPORATION
OF WRL SERIES FUND, INC.
<PAGE>
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
WRL SERIES FUND, INC.
WRL SERIES FUND, INC., a Maryland corporation ("Corporation"), hereby
certifies to the Maryland Department of Assessments and Taxation as follows:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940, as amended.
SECOND: Pursuant to Article V, Paragraph 1 of the Corporation's Articles
of Incorporation, the Corporation is authorized to issue One Billion
(1,000,000,000) shares of Common Stock having a par value of one cent ($0.01)
per share and the aggregate par value of $10,000,000 ("Shares") which are
classified as follows: Three Hundred Million (300,000,000) of the Shares are
designated as Money Market Portfolio Common Stock; Twenty-Five Million
(25,000,000) of the Shares are designated as Bond Portfolio Common Stock; and
Six Hundred Seventy-five Million (675,000,000) of the Shares are designated as
Growth Portfolio Common Stock.
THIRD: Pursuant to the Corporation's Articles Supplementary to Articles of
Incorporation filed on November 25, 1992, the Shares were reclassified as
follows: Three Hundred Million (300,000,000) of the Shares are designated as
Money Market Portfolio Common Stock; Twenty-Five Million (25,000,000) of the
Shares are designated as Bond Portfolio Common Stock; and Two Hundred
Seventy-five Million (275,000,000) of the Shares are designated as Growth
Portfolio Common Stock; One Hundred Million (100,000,000) of the Shares are
designated as Global Portfolio Common Stock; One Hundred Million (100,000,000)
of the Shares are designated as Short-to-Intermediate Government Portfolio
Common Stock; One Hundred Million (100,000,000) of the Shares are designated as
Emerging Growth Portfolio Common Stock; and One Hundred Million (100,000,000) of
the Shares are designated as Equity-Income Portfolio Common Stock.
FOURTH: Pursuant to the Corporation's Articles Supplementary to Articles
of Incorporation filed on March 1, 1994, the Shares were reclassified as
follows: One Hundred Fifty Million (150,000,000) of the unissued Shares of the
Growth Portfolio Common Stock as follows: Seventy-five Million (75,000,000) were
designated as Balanced Portfolio Common Stock; and Seventy-five Million
(75,000,000) were designated as Utility Portfolio Common Stock. Seventy-five
Million (75,000,000) of the unissued Shares of the Money Market Portfolio Common
Stock were reclassified and designated as Aggressive Growth Portfolio Common
Stock.
1
<PAGE>
FIFTH: The Board of Directors of the Corporation, at a meeting duly
convened and held on August 18, 1994, adopted resolutions reclassifying
seventy-five million (75,000,000) of the unissued Shares of the Money Market
Portfolio Common Stock to be designated as Tactical Asset Allocation Portfolio
Common Stock.
SIXTH: The Shares of Common Stock as so reclassified by the Board of
Directors of the Corporation shall have the rights, powers, preferences,
qualifications, restrictions and limitations specified in Article V, Paragraph 4
of the Articles of Incorporation of the Corporation and shall be subject to all
its provisions relating to the stock of the Corporation.
SEVENTH: The aforesaid Shares of Common Stock have been duly reclassified
by the Board of Directors pursuant to authority and power contained in the
Articles of Incorporation of the Corporation and in accordance with Section
2-105(c) of the Maryland General Corporation Law.
IN WITNESS WHEREOF, the undersigned Chairman of the Board of Directors of
WRL Series Fund, Inc., hereby executes these Articles Supplementary on behalf of
the Corporation, acknowledges that these Articles Supplementary are the act of
the Corporation, and certifies that, to the best of his knowledge, information
and belief, all matters and facts set forth herein are true in all material
respects, under the penalties of perjury.
Date: September 2, 1994
WRL SERIES FUND, INC.
/s/ JOHN R. KENNEY
-------------------
John R. Kenney
Chairman of the Board
ATTEST:
/s/ PRISCILLA I. HECHLER
- -------------------------
Priscilla I. Hechler
Assistant Secretary
2
EXHIBIT 1 (E)
ARTICLES SUPPLEMENTARY TO ARTICLES OF INCORPORATION OF
WRL SERIES FUND, INC.
<PAGE>
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
WRL SERIES FUND, INC.
WRL SERIES FUND, INC., a Maryland corporation ("Corporation"), on
behalf of its Board of Directors ("Directors"), hereby certifies to the Maryland
Department of Assessments and Taxation as follows:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940, as amended.
SECOND: Pursuant to Article V, Paragraph 1 of the Corporation's
Articles of Incorporation, the Corporation is authorized to issue One Billion
(1,000,000,000) shares of Common Stock having a par value of one cent ($0.01)
per share and the aggregate par value of $10,000,000 ("Shares") which are
classified in the Corporation's Articles of Incorporation as follows: Three
Hundred Million (300,000,000) of the Shares are designated as Money Market
Portfolio Common Stock; Twenty-Five Million (25,000,000) of the Shares are
designated as Bond Portfolio Common Stock; and Six Hundred Seventy-five Million
(675,000,000) of the Shares are designated as Growth Portfolio Common Stock.
THIRD: Pursuant to the Corporation's Articles Supplementary to Articles
of Incorporation filed on November 25, 1992, the Shares were reclassified as
follows: Three Hundred Million (300,000,000) of the Shares are designated as
Money Market Portfolio Common Stock; Twenty-Five Million (25,000,000) of the
Shares are designated as Bond Portfolio Common Stock; and Two Hundred
Seventy-five Million (275,000,000) of the Shares are designated as Growth
Portfolio Common Stock; One Hundred Million (100,000,000) of the Shares are
designated as Global Portfolio Common Stock; One Hundred Million (100,000,000)
of the Shares are designated as Short-to-Intermediate Government Portfolio
Common Stock; One Hundred Million (100,000,000) of the Shares are designated as
Emerging Growth Portfolio Common Stock; and One Hundred Million (100,000,000) of
the Shares are designated as Equity-Income Portfolio Common Stock.
FOURTH: Pursuant to the Corporation's Articles Supplementary to
Articles of Incorporation filed on March 1, 1994, Shares were reclassified as
follows: One Hundred Fifty Million (150,000,000) of the authorized but unissued
Shares of the Growth Portfolio Common Stock were reclassified and designated as
follows: Seventy-five Million (75,000,000) were designated as Balanced Portfolio
Common Stock; and Seventy-five Million (75,000,000) were designated as Utility
Portfolio Common Stock. Seventy-five
1
<PAGE>
Million (75,000,000) of the authorized but unissued Shares of the Money Market
Portfolio Common Stock were reclassified and designated as Aggressive Growth
Portfolio Common Stock.
FIFTH: Pursuant to the Corporation's Articles Supplementary to Articles
of Incorporation filed on September 2, 1994, Shares were reclassified as
follows: Seventy-five Million (75,000,000) of the authorized but unissued Shares
of the Money Market Portfolio Common Stock were reclassified and designated as
follows: Seventy-five Million (75,000,000) were designated as Tactical Asset
Allocation Portfolio Common Stock.
SIXTH: The Directors, at a meeting duly convened and held on February
6, 1995, adopted resolutions to increase the aggregate number of shares of
capital (common) stock which the Fund shall have authority to issue from One
Billion (1,000,000,000) Shares of the par value of one cent ($0.01) per share
and of the aggregate par value of $10,000,000, to two billion (2,000,000,000)
Shares of the par value of one cent ($0.01) per share and of the aggregate par
value of $20,000,000. Of the One Billion (1,000,000,000) newly authorized Shares
that the Corporation has the authority to issue, such Shares shall be classified
as follows: Seventy-five Million (75,000,000) of the Shares are designated as
C.A.S.E. Quality Growth Portfolio Common Stock; Seventy-five Million
(75,000,000) of the Shares are designated as C.A.S.E. Total Return Portfolio
Common Stock; and Seventy-five Million (75,000,000) of the Shares are designated
as C.A.S.E. Growth Portfolio Common Stock.
SEVENTH: The Shares of Common Stock as so authorized and classified by
the Directors of the Corporation shall have the powers, preferences, and rights,
and qualifications, restrictions and limitations, specified in Article V,
Paragraph 4 of the Articles of Incorporation of the Corporation and shall be
subject to all its provisions relating to the stock of the Corporation.
EIGHTH: The aforesaid Shares of Common Stock have been duly authorized
and classified by the Directors pursuant to authority and power contained in the
Articles of Incorporation of the Corporation and in accordance with Section
2-105(c) of the Maryland General Corporation Law.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned Chairman of the Board of Directors
of WRL Series Fund, Inc., hereby executes these Articles Supplementary on behalf
of the Corporation, acknowledges that these Articles Supplementary are the act
of the Corporation, and certifies that, to the best of his knowledge,
information and belief, all matters and facts set forth herein are true in all
material respects, under the penalties of perjury.
Date: March 17, 1995
WRL SERIES FUND, INC.
/S/ JOHN R. KENNEY
----------------------------------
John R. Kenney
Chairman of the Board of Directors
ATTEST:
/S/ PRISCILLA I. HECHLER
- ------------------------
Priscilla I. Hechler
Assistant Secretary
3
EXHIBIT 1 (F)
ARTICLES SUPPLEMENTARY TO ARTICLES OF INCORPORATION OF
WRL SERIES FUND, INC.
<PAGE>
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
WRL SERIES FUND, INC.
WRL SERIES FUND, INC., a Maryland corporation ("Corporation"), on behalf
of its Board of Directors ("Directors"), hereby certifies to the Maryland
Department of Assessments and Taxation as follows:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940, as amended.
SECOND: Pursuant to Article V, Paragraph 1 of the Corporation's Articles
of Incorporation, the Corporation is authorized to issue One Billion
(1,000,000,000) shares of Common Stock having a par value of one cent ($0.01)
per share and the aggregate par value of $10,000,000 ("Shares") which are
classified in the Corporation's Articles of Incorporation as follows: Three
Hundred Million (300,000,000) of the Shares are designated as Money Market
Portfolio Common Stock; Twenty-Five Million (25,000,000) of the Shares are
designated as Bond Portfolio Common Stock; and Six Hundred Seventy-five Million
(675,000,000) of the Shares are designated as Growth Portfolio Common Stock.
THIRD: Pursuant to the Corporation's Articles Supplementary to Articles of
Incorporation filed on November 25, 1992, the Shares were reclassified as
follows: Three Hundred Million (300,000,000) of the Shares are designated as
Money Market Portfolio Common Stock; Twenty-Five Million (25,000,000) of the
Shares are designated as Bond Portfolio Common Stock; and Two Hundred
Seventy-five Million (275,000,000) of the Shares are designated as Growth
Portfolio Common Stock; One Hundred Million (100,000,000) of the Shares are
designated as Global Portfolio Common Stock; One Hundred Million (100,000,000)
of the Shares are designated as Short-to-Intermediate Government Portfolio
Common Stock; One Hundred Million (100,000,000) of the Shares are designated as
Emerging Growth Portfolio Common Stock; and One Hundred Million (100,000,000) of
the Shares are designated as Equity-Income Portfolio Common Stock.
FOURTH: Pursuant to the Corporation's Articles Supplementary to Articles
of Incorporation filed on March 1, 1994, Shares were reclassified as follows:
One Hundred Fifty Million (150,000,000) of the authorized but unissued Shares of
the Growth Portfolio Common Stock were reclassified and designated as follows:
Seventy-five Million (75,000,000) were designated as Balanced Portfolio Common
Stock; and Seventy-five Million (75,000,000) were designated as Utility
Portfolio Common Stock. Seventy-five Million (75,000,000) of the authorized but
unissued Shares of the Money Market Portfolio Common Stock were reclassified and
designated as Aggressive Growth Portfolio Common Stock.
<PAGE>
FIFTH: Pursuant to the Corporation's Articles Supplementary to Articles of
Incorporation filed on September 2, 1994, Shares were reclassified
as follows: Seventy-five Million (75,000,000) of the authorized but unissued
Shares of the Money Market Portfolio Common Stock were reclassified and
designated as follows: Seventy-five Million (75,000,000) were designated as
Tactical Asset Allocation Portfolio Common Stock.
SIXTH: Pursuant to the Corporation's Articles Supplementary to Articles of
Incorporation filed on April 6, 1995, the Corporation increased the aggregate
number of shares of capital (common) stock which the Fund has authority to issue
from One Billion (1,000,000,000) Shares of the par value of one cent ($0.01) per
share and the aggregate par value of $10,000,000, to Two Billion (2,000,000,000)
Shares of the par value of one cent ($0.01) per share and the aggregate par
value of $20,000,000. Of the One Billion (1,000,000,000) shares newly authorized
by the Corporation, the Shares were classified as follows: Seventy-five Million
(75,000,000) of the Shares were designated as C.A.S.E. Quality Growth Portfolio
Common Stock; Seventy-five Million (75,000,000) of the Shares were designated as
C.A.S.E. Quality Growth & Income Portfolio Common Stock; and Seventy-five
Million (75,000,000) of the Shares were designated as C.A.S.E. Growth Portfolio
Common Stock.
SEVENTH: The Board of Directors of the Corporation, at a meeting duly
convened and held on March 6, 1995, adopted resolutions classifying Shares of
the authorized but unissued capital (common) stock as follows: Seventy-five
Million (75,000,000) of the Shares are designated as T. Rowe Price-WRL Equity
Income Portfolio Common Stock; Seventy-five Million (75,000,000) of the Shares
are designated as Leisure Portfolio Common Stock; Seventy-five Million
(75,000,000) of the Shares are designated as International Equity Portfolio
Common Stock; and Seventy-five Million (75,000,000) of the Shares are designated
as Janus Balanced Portfolio Common Stock.
EIGHTH: The Shares of Common Stock as so authorized and classified by the
Directors of the Corporation shall have the powers, preferences, and rights, and
qualifications, restrictions and limitations, specified in Article V, Paragraph
4 of the Articles of Incorporation of the Corporation and shall be subject to
all its provisions relating to the stock of the Corporation.
NINTH: The aforesaid Shares of Common Stock have been duly authorized and
classified by the Directors pursuant to authority and power contained in the
Articles of Incorporation of the Corporation and in accordance with Section
2-105(c) of the Maryland General Corporation Law.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned Chairman of the Board of Directors of
WRL Series Fund, Inc., hereby executes these Articles Supplementary on behalf of
the Corporation, acknowledges that these Articles Supplementary are the act of
the Corporation, and certifies that, to the best of his knowledge, information
and belief, all matters and facts set forth herein are true in all material
respects, under the penalties of perjury.
Date: July 12, 1995
WRL SERIES FUND, INC.
/s/ JOHN R. KENNEY
-------------------
John R. Kenney
Chairman of the Board of Directors
ATTEST:
/s/ PRISCILLA I. HECHLER
- -------------------------
Priscilla I. Hechler
Assistant Secretary
3
EXHIBIT 1 (G)
ARTICLES SUPPLEMENTARY TO ARTICLES OF INCORPORATION OF
WRL SERIES FUND, INC.
<PAGE>
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
WRL SERIES FUND, INC.
WRL SERIES FUND, INC., a Maryland corporation ("Corporation"), on behalf
of its Board of Directors ("Directors"), hereby certifies to the Maryland
Department of Assessments and Taxation as follows:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940, as amended.
SECOND: Pursuant to Article V, Paragraph 1 of the Corporation's Articles
of Incorporation, the Corporation is authorized to issue One Billion
(1,000,000,000) shares of Common Stock having a par value of one cent ($0.01)
per share and the aggregate par value of $10,000,000 ("Shares") which are
classified in the Corporation's Articles of Incorporation as follows: Three
Hundred Million (300,000,000) of the Shares are designated as Money Market
Portfolio Common Stock; Twenty-Five Million (25,000,000) of the Shares are
designated as Bond Portfolio Common Stock; and Six Hundred Seventy-five Million
(675,000,000) of the Shares are designated as Growth Portfolio Common Stock.
THIRD: Pursuant to the Corporation's Articles Supplementary to Articles of
Incorporation filed on November 25, 1992, the Shares were reclassified as
follows: Three Hundred Million (300,000,000) of the Shares are designated as
Money Market Portfolio Common Stock; Twenty-Five Million (25,000,000) of the
Shares are designated as Bond Portfolio Common Stock; and Two Hundred
Seventy-five Million (275,000,000) of the Shares are designated as Growth
Portfolio Common Stock; One Hundred Million (100,000,000) of the Shares are
designated as Global Portfolio Common Stock; One Hundred Million (100,000,000)
of the Shares are designated as Short-to-Intermediate Government Portfolio
Common Stock; One Hundred Million (100,000,000) of the Shares are designated as
Emerging Growth Portfolio Common Stock; and One Hundred Million (100,000,000) of
the Shares are designated as Equity-Income Portfolio Common Stock.
FOURTH: Pursuant to the Corporation's Articles Supplementary to Articles
of Incorporation filed on March 1, 1994, Shares were reclassified as follows:
One Hundred Fifty Million (150,000,000) of the authorized but unissued Shares of
the Growth Portfolio Common Stock were reclassified and designated as follows:
Seventy-five Million (75,000,000) were designated as Balanced Portfolio Common
Stock; and Seventy-five Million (75,000,000) were designated as Utility
Portfolio Common Stock. Seventy-five Million (75,000,000) of the authorized but
unissued Shares of the Money Market Portfolio Common Stock were reclassified and
designated as Aggressive Growth Portfolio Common Stock.
<PAGE>
FIFTH: Pursuant to the Corporation's Articles Supplementary to Articles of
Incorporation filed on September 2, 1994, Shares were reclassified as follows:
Seventy-five Million (75,000,000) of the authorized but unissued Shares of the
Money Market Portfolio Common Stock were reclassified and designated as follows:
Seventy-five Million (75,000,000) were designated as Tactical Asset Allocation
Portfolio Common Stock.
SIXTH: Pursuant to the Corporation's Articles Supplementary to Articles of
Incorporation filed on April 6, 1995, the Corporation increased the aggregate
number of shares of capital (common) stock which the Fund has authority to issue
from One Billion (1,000,000,000) Shares of the par value of one cent ($0.01) per
share and the aggregate par value of $10,000,000, to Two Billion (2,000,000,000)
Shares of the par value of one cent ($0.01) per share and the aggregate par
value of $20,000,000. Of the One Billion (1,000,000,000) shares newly authorized
by the Corporation, the Shares were classified as follows: Seventy-five Million
(75,000,000) of the Shares were designated as C.A.S.E. Quality Growth Portfolio
Common Stock; Seventy-five Million (75,000,000) of the Shares were designated as
C.A.S.E. Growth & Income Portfolio Common Stock; and Seventy-five Million
(75,000,000) of the Shares were designated as C.A.S.E. Growth Portfolio Common
Stock.
SEVENTH: Pursuant to the Corporation's Articles Supplementary to Articles
of Incorporation filed on July 14, 1995, shares of the authorized capital
(common) stock were classified as follows: Seventy-five Million (75,000,000) of
the Shares were designated as T. Rowe Price-WRL Equity Income Portfolio Common
Stock; Seventy-five Million (75,000,000) of the Shares were designated as
Leisure Portfolio Common Stock; Seventy-five Million (75,000,000) of the Shares
were designated as International Equity Portfolio Common Stock; and Seventy-five
Million (75,000,000) of the Shares were designated as Janus Balanced Portfolio
Common Stock.
EIGHTH: The Board of Directors of the Corporation, at a meeting duly
convened and held on December 4, 1995, adopted resolutions classifying Shares of
the authorized but unissued capital (common) stock as follows: Seventy-five
Million (75,000,000) of the Shares are designated as Value Equity Portfolio
Common Stock; Seventy-five Million (75,000,000) of the Shares are designated as
Meridian/INVESCO Global Sector Portfolio Common Stock; Seventy-five Million
(75,000,000) of the Shares are designated as Meridian/INVESCO US Sector
Portfolio Common Stock; and Seventy-five Million (75,000,000) of the Shares are
designated as Meridian/INVESCO Foreign Sector Portfolio Common Stock.
NINTH: The Shares of Common Stock as so authorized and classified by the
Directors of the Corporation shall have the powers, preferences, and rights, and
qualifications, restrictions and limitations,
2
<PAGE>
specified in Article V, Paragraph 4 of the Articles of Incorporation of the
Corporation and shall be subject to all its provisions relating to the stock of
the Corporation.
TENTH: The aforesaid Shares of Common Stock have been duly authorized and
classified by the Directors pursuant to authority and power contained in the
Articles of Incorporation of the Corporation and in accordance with Section
2-105(c) of the Maryland General Corporation Law.
IN WITNESS WHEREOF, the undersigned Chairman of the Board of Directors of
WRL Series Fund, Inc., hereby executes these Articles Supplementary on behalf of
the Corporation, acknowledges that these Articles Supplementary are the act of
the Corporation, and certifies that, to the best of his knowledge, information
and belief, all matters and facts set forth herein are true in all material
respects, under the penalties of perjury.
Date: January 3, 1996
WRL SERIES FUND, INC.
/s/ JOHN R. KENNEY
-------------------
John R. Kenney
Chairman of the Board of Directors
ATTEST: and President
/s/ PRISCILLA I. HECHLER
- -------------------------
Priscilla I. Hechler
Assistant Vice President
and Assistant Secretary
3
EXHIBIT 2
BY-LAWS OF WRL SERIES FUND, INC.
<PAGE>
(As Amended January 1, 1997)
BY-LAWS
OF
WRL SERIES FUND, INC.
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office of the Corporation shall
be in the City of Baltimore, State of Maryland.
SECTION 2. PRINCIPAL EXECUTIVE OFFICE. The principal executive office of
the Corporation shall be at 201 Highland Avenue, Largo, Florida 33770.
SECTION 3. OTHER OFFICES. The Corporation may have such other offices in
such places as the Board of Directors may from time to time designate or as the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. MEETINGS. Meetings of the stockholders, unless otherwise
provided by law or by the Articles of Incorporation, may be called for any
purpose or purposes by a majority of the Board of Directors, the President, or
on the written request of the holders of at least 25% of the outstanding capital
stock of the Corporation entitled to vote at such meeting. No annual meeting of
shareholders shall be held unless required by applicable law or determined by
the Board of Directors.
SECTION 2. PLACE OF MEETING. Any meeting of the stockholders shall be held
at such place within the United States as the Board of Directors may from time
to time determine.
SECTION 3. NOTICE OF MEETINGS; WAIVER OF NOTICE. Written notice of the
place, date and time of the holding of each meeting of the stockholders and the
purpose or purposes of each meeting shall be given by the Secretary to each
stockholder entitled to vote at such meeting and to each stockholder entitled to
notice of the meeting, not less than ten (10) nor more than ninety (90) days
before the date of such meeting. Notice by mail shall be deemed to be duly given
when deposited in the United States mail addressed to the stockholder at his
address as it appears on the records of the Corporation, with postage thereon
prepaid.
Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place, unless the Board of Directors, after the adjournment, shall fix
a new record date for an adjourned meeting, or the adjournment is for more than
thirty days, notice of such adjourned meeting need not be given if the time and
place to which the meeting shall be adjourned were announced at the meeting at
which the adjournment is taken.
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SECTION 4. QUORUM. At all meetings of the stockholders, the holders of a
majority of the shares of stock of the Corporation entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for the
transaction of business, except as otherwise required by statute or by the
Articles of Incorporation. In the absence of a quorum no business may be
transacted, except that the holders of a majority of the shares of stock present
in person or by proxy and entitled to vote may adjourn the meeting from time to
time, without notice other than announcement thereat except as otherwise
required by these By-Laws, until the holders of the requisite amount of shares
of stock shall be so present. At any such adjourned meeting at which a quorum
may be present, any business may be transacted at the meeting as originally
called. The absence from any meeting, in person or by proxy, of holders of the
number of shares of stock of the Corporation in excess of a majority thereof
which may be required by the laws of the State of Maryland, the Investment
Company Act of 1940, as amended, or other applicable statute, the Articles of
Incorporation, or these By-Laws, for action upon any given matter shall not
prevent action at such meeting upon any other matter or matters which may
properly come before the meeting, if there shall be present thereat, in person
or by proxy, holders of the number of shares of stock of the Corporation
required for action in respect of such other matter or matters.
SECTION 5. ORGANIZATION. At each meeting of the stockholders, the Chairman
of the Board (if one has been designated by the Board) or, in his absence or
inability to act, the President or, in the absence or inability to act of the
Chairman of the Board and the President, a Vice-President shall act as chairman
of the meeting. The Secretary or, in his absence or inability to act, any person
appointed by the chairman of the meeting shall act as secretary of the meeting
and keep the minutes thereof.
SECTION 6. ORDER OF BUSINESS. The order of business at all meetings of the
stockholders shall be as determined by the chairman of the meeting.
SECTION 7. VOTING. Except as otherwise provided by statute, applicable
regulations or the Articles of Incorporation, each holder of record of shares of
stock of the Corporation having voting power shall be entitled at each meeting
of the stockholders to one vote for every share of such stock standing in his
name on the record of stockholders of the Corporation as of the record date
determined pursuant to Section 8 of this Article II or, if such record date
shall not have been so fixed, than at the later of (i) the close of business on
the day on which notice of the meeting is mailed or (ii) the thirtieth day
before the meeting.
Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases where such proxy states that it is
irrevocable and where an irrevocable proxy is permitted by law. Except as
otherwise required by statute, the Articles of Incorporation or these By-Laws,
any corporate action to be taken by vote of the stockholders shall be authorized
by a majority of the total votes cast at a meeting of stockholders at which a
quorum is present by the holders of shares present in person or represented by
proxy and entitled to vote on such action.
If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute or
these By-Laws, or determined by the chairman of the meeting to be advisable, any
such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
SECTION 8. FIXING OF RECORD DATE. The Board of Directors may fix in advance
a record date not more than ninety (90) nor less than ten (10) days before the
date then fixed for the holding of any meeting of stockholders. All persons who
were holders of record of shares at such time, and no others, shall be entitled
to vote at such meeting and any adjournment thereof.
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SECTION 9. INSPECTORS. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any stockholder entitled to vote thereat shall, appoint inspectors.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath to execute faithfully the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares outstanding and the voting power of each,
the number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of the meeting or any
stockholder entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the office
of director shall act as inspector of an election of directors. Inspectors need
not be stockholders. At every meeting of the stockholders where the voting is
not conducted by inspectors, all questions with respect to the qualifications of
voters and the validity of proxies and the acceptance or rejection of votes
shall be decided by the chairman of the meeting.
SECTION 10. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Except as otherwise
provided by statute or the Articles of Incorporation, any action required to be
taken at any meeting of stockholders, or any action which may be taken at any
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if the following are filed with the records of
stockholders meetings: (i) a unanimous written consent which sets forth the
action and is signed by each stockholder entitled to vote on the matter and (ii)
a written waiver of any right to dissent signed by each stockholder entitled to
notice of the meeting but not entitled to vote thereat.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. Except as otherwise provided in the Articles of
Incorporation, the business and affairs of the Corporation shall be managed
under the direction of the Board of Directors. All powers of the Corporation may
be exercised by or under authority of the Board of Directors except as conferred
on or reserved to the stockholders by law or by the Articles of Incorporation or
these By-Laws.
SECTION 2. NUMBER OF DIRECTORS. The number of directors shall be fixed from
time to time by resolution of the Board of Directors adopted by a majority of
the Directors then in office; provided, however, that the number of directors
shall in no event be less than three (3) nor more than fifteen (15). Any vacancy
created by an increase in Directors may be filled in accordance with Section 6
of this Article III. No reduction in the number of directors shall have the
effect of removing any director from office prior to the expiration of his term
unless such director is specifically removed pursuant to Section 5 of this
Article III at the time of such decrease. Directors need not be stockholders.
SECTION 3. ELECTION AND TERM OF DIRECTORS. The term of office of each
director shall be from the time of his election and qualification until his
successor shall have been elected and shall have qualified, or until his death,
or until he shall have resigned or have been removed as hereinafter provided in
these By-Laws, or as otherwise provided by statute or the Articles of
Incorporation.
SECTION 4. RESIGNATION. A director of the Corporation may resign at any
time by giving written notice of his resignation to the Board or the Chairman of
the Board or the President or the Secretary. Any such resignation shall take
effect at the time specified therein, immediately upon its receipt, and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
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SECTION 5. REMOVAL OF DIRECTORS. Any director of the Corporation may be
removed by the stockholders by a vote of a majority of the votes entitled to be
cast for the election of directors.
SECTION 6. VACANCIES. Any vacancies in the Board, whether arising from
death, resignation, removal, an increase in the number of directors or any other
cause, shall be filled by a vote of the majority of the Board of Directors then
in office even though such majority is less than a quorum, provided that no
vacancies shall be filled by action of the remaining directors if, after the
filling of said vacancy or vacancies, less than two-thirds of the directors then
holding office shall have been elected by the stockholders of the Corporation.
In the event that at any time there is a vacancy in any office of a director,
which vacancy may not be filled by the remaining directors, a special meeting of
the stockholders shall be held as promptly as possible, and in the event within
sixty days, for the purpose of filling said vacancy or vacancies. Any directors
elected or appointed to fill a vacancy shall hold office until the next meeting
of stockholders of the Corporation and until a successor shall have been chosen
and qualifies or until his earlier resignation or removal.
SECTION 7. PLACE OF MEETINGS. Meetings of the Board may be held at such
place as the Board may from time to time determine or as shall be specified in
the notice of such meeting.
SECTION 8. REGULAR MEETINGS. Regular meetings of the Board may be held
without notice at such time and place as may be determined by the Board of
Directors.
SECTION 9. SPECIAL MEETINGS. Special meetings of the Board may be called by
two or more directors of the Corporation or by the Chairman of the Board or the
President.
SECTION 10. NOTICE OF SPECIAL MEETINGS. Notice of each special meeting of
the Board shall be given by the Secretary as hereinafter provided, in which
notice shall be stated at the time and place of the meeting. Notice of each such
meeting shall be delivered to each director, either personally or by telephone
or any standard form of telecommunication, at least twenty-four hours before the
time at which such meeting is to be held, or by first-class mail, postage
prepaid, addressed to him at his residence or usual place of business, at least
three days before the day on which such meeting is to be held.
SECTION 11. TELEPHONE MEETINGS. Any member or members of the Board of
Directors or of any committee designated by the Board may participate in a
meeting of the Board, or any such committee, as the case may be, by means of a
conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time. Participation
in a meeting by these means constitutes presence in person at the meeting.
SECTION 12. WAIVER OF NOTICE OF MEETING. Notice of any special meeting need
not be given to any director who shall, either before or after the meeting, sign
a written waiver of notice which is filed with the records of the meeting or who
shall attend such meeting. Except as otherwise specifically required by these
By-Laws, a notice or waiver of notice of any meeting need not state the purposes
of such meeting.
SECTION 13. QUORUM AND VOTING. One-third, but not less than two, of the
members of the entire Board shall be present in person at any meeting of the
Board in order to constitute a quorum for the transaction of business at such
meeting, and, except as otherwise expressly required by statute, the Articles of
Incorporation, these By-Laws, the Investment Company Act of 1940, as amended, or
other applicable statute, the act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the Board; provided,
however, that the approval of any contract with an investment adviser or
principal underwriter, as such terms are defined in the Investment Company Act
of 1940, as amended, which the Corporation enters into or any renewal or
amendment thereof, the approval of the fidelity bond required by the Investment
Company Act of 1940, as amended, and the selection of the Corporation's
independent public accountants shall each require the affirmative vote of a
majority of the directors who are not interested persons, as defined in the
Investment Company Act of 1940, as amended, of the Corporation. In the absence
of a quorum at any meeting of the Board, a majority of the
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directors present thereat may adjourn such meeting to another time and place
until a quorum shall be present thereat. Notice of the time and place of any
such adjourned meeting shall be given to the directors who were not present at
the time of the adjournment and, unless such time and place were announced at
the meeting at which the adjournment was taken, to the other directors. At any
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally called.
SECTION 14. ORGANIZATION. The Board may, by resolution adopted by a
majority of the entire Board, designate a Chairman of the Board, who shall
preside at each meeting of the Board. In the absence or inability of the
Chairman of the Board to preside at a meeting, the President, or, in his absence
or inability to act, another director chosen by a majority of the directors
present shall act as chairman of the meeting and preside thereat. The Secretary
(or, in his absence or inability to act, any person appointed by the chairman)
shall act as secretary of the meeting and keep the minutes thereof.
SECTION 15. WRITTEN CONSENT OF DIRECTORS IN LIEU OF A MEETING. Any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting, to the extent permissible
under applicable law, if all members of the Board or committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of the Board or committee.
SECTION 16. COMPENSATION. Directors may receive compensation for services
to the Corporation in their capacities as directors or otherwise in such a
manner and in such amounts as may be fixed from time to time by the Board.
SECTION 17. INVESTMENT POLICIES. It shall be the duty of the Board of
Directors to ensure that the purchase, sale, retention and disposal of portfolio
securities and the other investment practices of the Corporation are at all
times consistent with the investment policies and restrictions with respect to
securities investments and otherwise of the Corporation, as recited in the
current Prospectus of the Corporation filed from time to time with the
Securities and Exchange Commission and as required by the Investment Company Act
of 1940, as amended. The Board, however, may delegate the duty of management of
the assets and the administration of its day to day operations to an individual
or corporate management company and/or investment adviser pursuant to a written
contract or contracts which have obtained the requisite approvals, including the
requisite approvals of renewals thereof, of the Board of Directors and/or the
stockholders of the Corporation in accordance with applicable provisions of the
Investment Company Act of 1940, as amended, and the rules thereunder.
SECTION 18. CONTRACTS. Except as otherwise provided by law or by the
Articles of Incorporation, no contract or transaction between the Corporation
and any partnership or corporation, and no act of the Corporation, shall in any
way be affected or invalidated by the fact that any officer or director of the
Corporation is pecuniarily or otherwise interested therein or is a member,
officer or director of such corporation or partnership provided such interest
shall be known to the Board of Directors of the Corporation. Specifically, but
without limitation of the foregoing, the Corporation may enter into one or more
contracts appointing WRL Investment Management, Inc. ("WRL Management")
investment adviser to the Corporation, notwithstanding the fact that one or more
of the directors of the Corporation and some or all of its officers are, have
been or may become directors, officers, members, employees, or stockholders of
WRL Management who may deal freely with each other, and neither such contract
appointing WRL Management investment adviser to the Corporation nor any other
contract or transaction between the Corporation and WRL Management shall be
invalidated or in any way affected thereby, nor shall any director or officer of
the Corporation by reason thereof be liable to the Corporation or to any
stockholder or creditor of the Corporation or to any other person for any loss
incurred under or by reason of any such contract or transaction. For purposes of
this paragraph, any reference to "WRL Investment Management, Inc." or "WRL
Management" shall be deemed to include said company and any parent, subsidiary,
affiliate or separate account of said company and any successor (by merger,
consolidation or otherwise) to said company or any such parent, subsidiary,
affiliate or separate account.
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ARTICLE IV
COMMITTEES
SECTION 1. EXECUTIVE COMMITTEE. Unless otherwise required by statute, the
Articles of Incorporation, these By-Laws or the Investment Company Act of 1940,
as amended, and all rules thereunder, the Board may, by resolution adopted by a
majority of the entire board, designate an Executive Committee consisting of two
or more of the directors of the Corporation, which committee shall have and may
exercise all the powers and authority of the Board with respect to all matters
other than:
(a) the submission to stockholders of any action requiring
authorization of stockholders pursuant to statute or the Articles of
Incorporation;
(b) the filling of vacancies on the Board of Directors;
(c) the fixing of compensation of the directors for serving on
the Board or on any committee of the Board, including the Executive Committee;
(d) the approval or termination of any contract with an
investment adviser or principal underwriter, as such terms are defined in the
Investment Company Act of 1940, as amended;
(e) the amendment or repeal of these By-Laws or the adoption of
new by-laws;
(f) the amendment or repeal of any resolution of the Board which
by its terms may be amended or repealed only by the Board;
(g) the declaration of dividends and the issuance of capital
stock of the Corporation; and
(h) the approval of any merger or share exchange which does not
require stockholder approval.
The Executive Committee shall keep written minutes of its proceedings and
shall report such minutes to the Board. All such proceedings shall be subject to
revision or alteration by the Board; provided, however, that third parties shall
not be prejudiced by such revision or alteration.
SECTION 2. OTHER COMMITTEES OF THE BOARD. The Board of Directors may from
time to time, by resolution adopted by a majority of the whole Board, designate
one or more other committees of the Board, each such committee to consist of two
or more directors and to have such powers and duties as the Board of Directors
may, be resolution, prescribe.
SECTION 3. GENERAL. One-third, but not less than two, of the members of any
committee shall be present in person at any meeting of such committee in order
to constitute a quorum for the transaction of business at such meeting, and the
act of a majority present shall be the act of such committee. The Board may
designate a chairman of any committee and such chairman or any two members of
any committee may fix the time and place of its meetings unless the Board shall
otherwise provide. In the absence or disqualification of any member of any
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. The Board shall
have the power at any time to change the membership of any committee, to fill
all vacancies, to designate alternate members to replace any absent or
disqualified member, or to dissolve any such absent or disqualified member, or
to dissolve any such committee. Nothing herein shall be deemed to prevent the
Board from appointing one or more committees consisting in whole or in part of
persons who are not directors of the Corporation; provided,
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however, that no such committee shall have or may exercise any authority or
power of the Board in the management of the business or affairs of the
Corporation.
ARTICLE V
OFFICERS, AGENTS AND EMPLOYEES
SECTION 1. NUMBER AND QUALIFICATIONS. The officers of the Corporation shall
be a President, a Secretary and a Treasurer, each of whom shall be elected by
the Board of Directors. The Board of Directors may elect or appoint one or more
Vice Presidents and also may appoint such other officers, agents and employees
as it may deem necessary or proper. Any two or more offices may be held by the
same person, except the offices of President and Vice President, but no officer
shall execute, acknowledge or verify any instrument in more than one capacity.
Such officers shall be elected by the Board of Directors, each to hold office
until his successor shall have been duly elected and shall have qualified, or
until his death, or until he shall have resigned, or have been removed, as
hereinafter provided in these By-Laws. The Board may from time to time elect, or
delegate to the President, the power to appoint such officers (including one or
more Assistant Vice Presidents, one or more Assistant Treasurers and one or more
Assistant Secretaries) and such agents, as may be necessary or desirable agents
shall have such duties and shall hold their offices for such terms as may be
prescribed by the Board or by the appointing authority.
SECTION 2. RESIGNATIONS. Any officer of the Corporation may resign at any
time by giving written notice of his resignation to the Board, the Chairman of
the Board, the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 3. REMOVAL OF OFFICER, AGENT OR EMPLOYEE. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate such power of removal as
to agents and employees not elected or appointed by the Board of Directors. Such
removal shall be without prejudice to such person's contract rights, if any, but
the appointment of any person as an officer, agent or employee of the
Corporation shall not of itself create contract rights.
SECTION 4. VACANCIES. A vacancy in any office, whether arising from death,
resignation, removal or any other cause, may be filled for the unexpired portion
of the term of the office which shall be vacant, in the manner prescribed in
these By-Laws for the regular election or appointment to such office.
SECTION 5. COMPENSATION. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer in respect to other officers under his control.
SECTION 6. BONDS OR OTHER SECURITY. If required by the Board, any officer,
agent or employee of the Corporation shall give a bond or other security for the
faithful performance of his duties, in such amount and with such surety or
sureties as the Board may require.
SECTION 7. PRESIDENT. In the absence of the Chairman of the Board (or if
there be none), the President shall have, subject to the control of the Board of
Directors, general charge of the business and affairs of the Corporation. He may
employ and discharge employees and agents of the Corporation, except such as
shall be appointed by the Board, and he may delegate these powers.
SECTION 8. VICE PRESIDENT. Each Vice President shall have such powers and
perform such duties as the Board of Directors or the President may from time to
time prescribe.
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SECTION 9. TREASURER. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the
funds and securities of the Corporation, except those which the Corporation has
placed in the custody of a bank or trust company or member of a national
securities exchange (as that term is defined in the Securities Exchange Act of
1934) pursuant to a written agreement designating such bank or trust company or
member of a national securities exchange as custodian of the property of the
Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;
(c) cause all monies and other valuables to be deposited to the
credit of the Corporation;
(d) receive, and give receipts for, monies due and payable to
the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investment of its funds as ordered or authorized by the Board, taking proper
vouchers therefor; and
(f) in general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Board of Directors or the President.
SECTION 10. SECRETARY. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for
the purpose, the minutes of all meetings of the Board, the committees of the
Board and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation
and affix and attest the seal to all stock certificates of the Corporation
(unless the seal of the Corporation on such certificates shall be a facsimile,
as hereinafter provided) and affix and attest the seal to all other documents to
be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board or the President.
SECTION 11. DELEGATION OF DUTIES. In case of the absence of any officer of
the Corporation, or for any other reason that the Board may deem sufficient, the
Board may confer for the time being the powers or duties, or any of them, of
such officer upon any other officer or upon any director.
ARTICLE VI
INDEMNIFICATION
Each director, officer or employee (and his heirs, executors and
administrators) shall be indemnified by the Corporation against all liability
and expense incurred by reason of the fact that he is or was a director, officer
or employee of the Corporation, to the full extent and in any manner permitted
by Maryland law, as in effect at any time, provided that nothing herein shall be
construed to protect any director, officer or employee against any liability to
the Corporation or to its security holders to which he
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would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office ("disabling conduct"). No indemnification of a director, officer or
employee shall be made pursuant to the preceding sentence unless there has been
(a) a final decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified ("indemnitee") was not
liable by reason of disabling conduct or (b) in the absence of such a decision,
a reasonable determination, based upon a review of the facts, that the
indemnitee was not liable by reason of disabling conduct, by (i) the vote of a
majority of a quorum of the directors who are neither "interested persons" of
the Corporation, as defined in Section 2(a)(19) of the Investment Company Act of
1940, as amended, nor parties to the proceeding ("non-interested, non-party
directors"), or (ii) an independent legal counsel in a written opinion.
Reasonable expenses incurred by each such director, officer or employee may be
paid by the Corporation in advance of the final disposition of any proceeding to
which such person is a party, to the full extent and under the circumstances
permitted by Maryland law, unless it is ultimately determined that he is
entitled to indemnification and either (i) he provides security for his
undertaking, (ii) the Corporation is insured against losses by reason of any
lawful advances or (iii) a majority of a quorum of the non-interested, non-party
directors, or an independent legal counsel in a written opinion, determines,
based on a review of readily available facts, that there is reason to indemnify.
The Corporation may purchase and maintain insurance on behalf of any person who
is or was a director, officer or employee of the Corporation against any
liability asserted against and incurred by such person in any such capacity or
arising out of such person's position, whether or not the Corporation would have
the power to indemnify against such liability under the provision of this
Article VI.
ARTICLE VII
CAPITAL STOCK
SECTION 1. STOCK CERTIFICATES. Each holder of stock of the Corporation
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Board, representing the number of shares of
stock of the Corporation owned by him, provided, however, that certificates for
fractional shares will not be delivered in any case. The certificates
representing shares of stock shall be signed by or in the name of the
Corporation by the President or a Vice President and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed with
the seal of the Corporation. Any or all of the signatures or the seal on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate shall be issued, it may be issued by the Corporation with the same
effect as if such officer, transfer agent or registrar were still in office at
the date of the issue.
SECTION 2. BOOKS AND ACCOUNT OF RECORD OF STOCKHOLDERS. There shall be kept
at the principal executive office of the Corporation correct and complete books
and records of account of all the business and transactions of the Corporation.
There shall be made available upon request of any stockholder, in accordance
with Maryland law, a record containing the number of shares of stock issued
during a specified period not to exceed twelve months and the consideration
received by the Corporation for each such share.
SECTION 3. TRANSFER OF SHARES. Transfer of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or certificates, if issued,
for such shares properly endorsed or accompanied by a duly executed stock
transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of such share or shares of all purposes, including,
without limitation, the rights to receive dividends or other
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distributions, and to vote as such owner, and the Corporation shall not be bound
to recognize any equitable or legal claim to or interest in any such share or
shares on the part of any other person.
SECTION 4. REGULATIONS. The Board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
SECTION 5. LOST, DESTROYED OR MUTILATED CERTIFICATES. The holder of any
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof shall
allege to have been lost or destroyed or which shall have been mutilated, and
the Board may, in its discretion, require such owner or his legal
representatives to give to the Corporation a bond in which sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
SECTION 6. FIXING OF A RECORD DATE FOR DIVIDENDS AND DISTRIBUTIONS. The
Board may fix, in advance, a date not more than ninety (90) days preceding the
date fixed for the payment of any dividend or the making of any distribution or
the allotment of rights to subscribe for securities of the Corporation, or for
the delivery of evidences of rights or evidences of interests arising out of any
change, conversion or exchange of common stock or other securities, as the
record date for the determination of the stockholders entitled to receive any
such dividend, distribution, allotment, rights or interests, and in such case
only the stockholders of record at the time so fixed shall be entitled to
receive such dividend, distribution, allotment, rights or interest.
SECTION 7. INFORMATION TO STOCKHOLDERS AND OTHERS. Any stockholder of the
Corporation or his agent may inspect and copy during usual business hours the
Corporation's By-Laws, minutes of the proceedings of its stockholders, annual
statements of its affairs, and voting trust agreements on file at its principal
office.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE; VALUATION OF
PORTFOLIO SECURITIES AND OTHER ASSETS
SECTION 1. NET ASSET VALUE. The net asset value of a share of Common Stock
of the Corporation shall be determined in accordance with applicable laws and
regulations or under the supervision of such persons and at such times as shall
from time to time be prescribed by the Board of Directors. Each such
determination shall be made by subtracting from the value of the assets of the
Corporation (as determined pursuant to Article VIII, Section 2 of these By-Laws)
the amount of its liabilities, dividing the remainder by the number of shares of
Common Stock issued and outstanding, and adjusting the results to the nearest
full cent per share.
SECTION 2. VALUATION OF PORTFOLIO SECURITIES AND OTHER ASSETS. Except as
otherwise required by any applicable law or regulation of any regulatory agency
having jurisdiction over the activities of the Corporation, the Corporation
shall determine the value of its portfolio securities and other assets as
follows:
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(a) securities for which market quotations are readily available
shall be valued at current market value determined in such manner as the Board
of Directors may from time to time prescribe; and
(b) all other securities and assets shall be valued at amounts
deemed best to reflect their fair value as determined in good faith by the Board
of Directors, or by other persons designated and supervised by the Board acting
pursuant to procedures adopted by the Board in good faith, and at such time or
times as shall from time to time be prescribed by the Board.
All quotations, sale prices, bid and asked prices and other information
shall be obtained from such sources the persons making such determination
believe to be reliable and any determination of net asset value based thereon
shall be conclusive.
ARTICLE IX
SEAL
The seal of the Corporation shall be circular in form and shall bear, in
addition to any other emblem or device approved by the Board of Directors, the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal" and "Maryland". Said seal may be used by causing it or a facsimile thereof
to be impressed or affixed or in any other manner reproduced.
ARTICLE X
FISCAL YEAR
Unless otherwise determined by the Board, the fiscal year of the
Corporation shall end on the 31st day of December each year.
ARTICLE XI
DEPOSITORIES AND CUSTODIANS
SECTION 1. DEPOSITORIES. The funds of the Corporation shall be deposited
with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
SECTION 2. CUSTODIANS. All securities and other investments shall be
deposited in the safekeeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every arrangement
entered into with any bank or other company for the safekeeping of the
securities and investments of the Corporation shall contain provisions complying
with the Investment Company Act of 1940, as amended, and the general rules and
regulations thereunder.
ARTICLE XII
EXECUTION OF INSTRUMENTS
SECTION 1. CHECKS, NOTES, DRAFTS, ETC. Checks, notes, drafts, acceptances,
bill of exchange and other orders of obligations for the payment of money shall
be signed by such officer or officers or person or persons as the Board of
Directors by resolution shall from time to time designate.
SECTION 2. SALE OR TRANSFER OF SECURITIES. Stock certificates, bonds or
other securities at any time owned by the Corporation may be held on behalf of
the Corporation or sold, transferred or otherwise disposed of subject to any
limits imposed by these By-Laws and pursuant to authorization by the Board and,
when so authorized to be held on behalf of the Corporation or sold, transferred
or otherwise disposed of, may be transferred from the name of the Corporation by
the signature of the President or a
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Vice President or the Treasurer or pursuant to any procedure approved by the
Board of Directors, subject to applicable law.
ARTICLE XIII
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of independent public accountants which shall sign or certify the
financial statements of the Corporation which are filed with the Securities and
Exchange Commission shall be selected annually by the Board of Directors and
ratified by the stockholders to the extent required by applicable provisions of
the Investment Company Act of 1940, as amended, and the rules thereunder.
ARTICLE XIV
NEW ANNUAL STATEMENT
The books of account of the Corporation shall be examined by an independent
firm of public accountants at the close of each annual period of the Corporation
and at such other times as may be directed by the Board. A report to the
stockholders based upon each such examination shall be mailed to each
stockholder of the Corporation of record on such date with respect to each
report as may be determined by the Board, at his address as the same appears on
the books of the Corporation. Such annual statement shall also be available at
the annual meeting of stockholders and within twenty (20) days thereafter, be
placed on file at the Corporation's principal executive office. Each such report
shall show the assets and liabilities of the Corporation as of the close of the
annual or quarterly period covered by the report and the securities in which the
funds of the Corporation were then invested. Such report shall also show the
Corporation's income and expenses for the period from the end of the
Corporation's preceding fiscal year to the close of the annual or quarterly
period covered by the report and any other information required by the
Investment Company Act of 1940, as amended, and shall set forth such other
matters as the Board or such firm of independent public accountants shall
determine.
ARTICLE XV
AMENDMENTS
These By-Laws or any of them may be amended, altered or repealed at any
meeting of the stockholders at which a quorum is present or represented,
provided that notice of the proposed amendment, alteration or repeal be
contained in the notice of such meeting. These By-Laws also may be amended,
altered or repealed by the affirmative vote of a majority of the Board of
Directors at any regular or special meeting of the Board of Directors, except
any particular By-Law which is specified as not subject to alteration or repeal
by the Board of Directors, subject to the requirements of the Investment Company
Act of 1940, as amended.
12
EXHIBIT 5(i)
FORM OF INVESTMENT ADVISORY AGREEMENT ON BEHALF
OF THE PORTFOLIOS OF THE FUND
<PAGE>
WRL SERIES FUND, INC.
FORM OF PROPOSED
INVESTMENT ADVISORY AGREEMENT
This Agreement, entered into as of January 1, 1997, is between WRL
Series Fund, Inc., a Maryland corporation (referred to herein as the "Fund"),
and WRL Investment Management, Inc., a Florida corporation (referred to herein
as "WRL Management"), to provide certain investment advisory services with
respect to the series of shares of common stock of the Fund.
The Fund is registered as an open-end investment company under the
Investment Company Act of 1940, as amended, (the "1940 Act") and consists of
more than one series of shares (the "Portfolios"). In managing its Portfolios,
the Fund wishes to have the benefit of the investment advisory services of WRL
Management and its assistance in performing certain management functions. WRL
Management desires to furnish such services to the Fund and to perform the
functions assigned to it under this Agreement for the considerations provided.
Accordingly, the parties have agreed as follows:
1. INVESTMENT ADVISORY SERVICES. In its capacity as investment adviser
to the Fund, WRL Management shall have the following responsibilities:
(a) to furnish continuous advice and recommendations to the Fund as
to the acquisition, holding or disposition of any or all of the
securities or other assets which the Portfolios may own or
contemplate acquiring from time to time;
(b) to cause its officers to attend meetings and furnish oral or
written reports, as the Fund may reasonably require, in order to keep
the Board of Directors and appropriate officers of the Fund fully
informed as to the conditions of each investment portfolio of the
Portfolios, the investment recommendations of WRL Management, and the
investment considerations which have given rise to those
recommendations;
(c) to supervise the purchase and sale of securities of the
Portfolios as directed by the appropriate officers of the Fund; and
(d) to maintain all books and records required to be maintained by
the Investment Adviser 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, WRL Management hereby agrees: (i) that all
records that it maintains for the Fund are the property of the Fund,
(ii) to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act any records that it maintains for the Fund and that are
required to be maintained by Rule 31a-1 under the 1940 Act and (iii)
agrees to surrender promptly to the Fund any records that it
maintains for the Fund upon request by the Fund; provided, however,
WRL Management may retain copies of such records.
WRL Management shall pay all expenses incurred in connection with the
performance of its responsibilities under this Agreement. It is understood and
agreed that WRL Management may, and intends to, enter into Sub-Advisory
Agreements with duly registered investment advisers (the "Sub-Advisers") for
each Portfolio, under which each Sub-Adviser will, under the supervision of WRL
Management, furnish investment information and advice with respect to one or
more Portfolios to assist WRL Management in carrying out its responsibilities
under this Section 1. The compensation to be paid to each Sub-Adviser for such
services and the other terms and conditions under which the services shall be
rendered by the Sub-Adviser shall be set forth in the Sub-Advisory Agreement
between WRL Management and each Sub-Adviser; provided, however, that such
Agreement shall be approved by the Board of Directors and by the holders of the
outstanding voting securities of each Portfolio in accordance with the
requirements of Section 15 of the 1940 Act, and shall otherwise be subject to,
and contain such provisions as shall be required by the 1940 Act.
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2. OBLIGATIONS OF THE FUND. The Fund shall have the following
obligations under this Agreement:
(a) to keep WRL Management continuously and fully informed as to the
composition of each Portfolio's investment securities and the nature
of all of its assets and liabilities from time to time;
(b) to furnish WRL Management with a certified copy of any financial
statement or report prepared for each Portfolio by certified or
independent public accountants, and with copies of any financial
statements or reports made to its shareholders or to any governmental
body or securities exchange;
(c) to furnish WRL Management with any further materials or
information which WRL Management may reasonably request to enable it
to perform its functions under this Agreement; and
(d) to compensate WRL Management for its services in accordance with
the provisions of Section 3 hereof.
3. COMPENSATION. For its services under this Agreement, WRL Management
is entitled to receive from each Portfolio a monthly fee, payable on the last
day of each month during which or part of which this Agreement is in effect, as
set forth on Schedule A attached to this Agreement, as it may be amended from
time to time in accordance with Section 11 below. For the month during which
this Agreement becomes effective and the month during which it terminates,
however, there shall be an appropriate pro-ration of the fee payable for such
month based on the number of calendar days of such month during which this
Agreement is effective.
4. EXPENSES PAID BY EACH PORTFOLIO. Nothing in this Agreement shall be
construed to impose upon WRL Management the obligation to incur, pay, or
reimburse a Portfolio for any expenses. A Portfolio shall pay all of its
expenses including, but not limited to:
(a) all costs and expenses, including legal and accounting fees,
incurred in connection with the formation and organization of a
Portfolio, including the preparation (and filing, when necessary) of
the Portfolio's contracts, plans and documents; conducting meetings
of organizers, directors and shareholders, and all other matters
relating to the formation and organization of a Portfolio and the
preparation for offering its shares. The organization of a Portfolio
for all of the foregoing purposes will be considered completed upon
effectiveness of the post-effective amendment to the Fund's
registration statement to register the Portfolio under the Securities
Act of 1933.
(b) all costs and expenses, including legal and accounting fees,
filing fees and printing costs, in connection with the preparation
and filing of the post-effective amendment to the Fund's registration
statement to register the Portfolio under the Securities Act of 1933
and the 1940 Act (including all amendments thereto prior to the
effectiveness of the registration statement under the Securities Act
of 1933);
(c) investment advisory fees;
(d) any compensation, fees, or reimbursements which the Fund pays to
its Directors who are not interested persons (as that phrase is
defined in Section 2(a)(19) of the 1940 Act) of the Fund or WRL
Management;
(e) compensation of the Fund's custodian, administrator, registar and
dividend disbursing agent;
(f) legal, accounting and printing expenses;
(g) other administrative, clerical, recordkeeping and bookkeeping
expenses;
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<PAGE>
(h) pricing costs, including the daily calculation of net asset
value;
(i) auditing;
(j) insurance premiums, including Fidelity Bond Coverage, Error &
Ommissions Coverage and Directors and Officers Coverage, in
accordance with the provisions of the 1940 Act and the rules
thereunder;
(k) services for shareholders, including allocable telephone and
personnel expenses;
(l) brokerage commissions and all other expenses in connection with
execution of portfolio transactions, including interest:
(m) all federal, state and local taxes (including stamp, excise,
income and franchise taxes) and the preparation and filing of all
returns and reports inconnection therewith;
(n) costs of certificates and the expenses of delivering such
certificates to the purchasers of shares relating thereto;
(o) expenses of local representation in Maryland;
(p) fees and/or expenses payable pursuant to any plan of distribution
adopted with respect to the Fund in accordance with Section 12(b) of
the 1940 Act and Rule 12b-1 thereunder;
(q) expenses of shareholders' meetings and of preparing, printing and
distributing notices, proxy statements and reports to shareholders;
(r) expenses of preparing and filing reports with federal and state
regulatory authorities;
(s) all costs and expenses, including fees and disbursements, of
counsel and auditors, filing and renewal fees and printing costs in
connection with the filing of any required amendments, supplements or
renewals of registration statement, qualifications or prospectuses
under the Securities Act of 1933 and the securities laws of any
states or territories subsequent to the effectiveness of the initial
registration statement under the Securities Act of 1933;
(t) all costs involved in preparing and printing prospectuses of the
Fund;
(u) extraordinary expenses; and
(v) all other expenses properly payable by the Fund or the
Portfolios.
5. TREATMENT OF INVESTMENT ADVICE. With respect to the Portfolios, the
Fund shall treat the investment advice and recommendations of WRL Management as
being advisory only, and shall retain full control over its own investment
policies. However, the Directors of the Fund may delegate to the appropriate
officers of the Fund, or to a committee of Directors, the power to authorize
purchases, sales or other actions affecting the Portfolios in the interim
between meetings of the Directors, provided such action is consistent with the
established investment policy of the Directors and is reported to the Directors
at their next meeting.
6. BROKERAGE COMMISSIONS. For purposes of this Agreement, brokerage
commissions paid by each Portfolio upon the purchase or sale of its portfolio
securities shall be considered a cost of securities of the Portfolio and shall
be paid by the Portfolio. WRL Management is authorized and directed to place
each Portfolio's securities transactions, or to delegate to the Sub-Adviser of
that Portfolio the authority and direction to place the Portfolio's securities
transactions, only with brokers and dealers who render satisfactory service in
the execution of orders at the most favorable price and at reasonable commission
rates (best price and execution); provided, however, that WRL Management or the
Sub-Adviser, may pay a broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if WRL
3
<PAGE>
Management or the Sub-Adviser determines in good faith that such amount of
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 WRL Management or the
Sub-Adviser. WRL Management and the Sub-Adviser are also authorized to consider
sales of individual and group life insurance policies and/or variable annuity
contract issued by Western Reserve Life Assurance Co. of Ohio by a broker-dealer
as a factor in selecting broker-dealers to execute the Portfolio's securities
transactions, provided that in placing portfolio business with such
broker-dealers, WRL Management and the Sub-Adviser shall seek the best execution
of each transaction and all such brokerage placement shall be consistent with
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. Notwithstanding the foregoing, the Fund shall retain the right to direct
the placement of all securities transactions of the Portfolios, and the
Directors may establish policies or guidelines to be followed by WRL Management
and the Sub-Advisers in placing securities transactions for each Portfolio
pursuant to the foregoing provisions. WRL Management shall report on the
placement of portfolio transactions each quarter to the Directors of the Fund.
7. LIMITATION ON EXPENSES OF THE PORTFOLIOS. If the insurance or
securities laws, regulations or policies of any state in which shares of the
Portfolios are qualified for sale limit the operation and management expenses
(collectively referred to as "Normal Operating Expenses" and as described
below), WRL Management will pay on behalf of the Portfolios the amount by which
such expenses exceed the lowest of such state limitations (the "Expense
Limitation"). Normal Operating Expenses include, but are not limited to, the
fees of the Portfolios' investment adviser, the compensation of its custodian,
registrar, auditors and legal counsel, printing expenses, expenses incurred in
complying with all laws applicable to the sale of shares of the Portfolios and
any compensation, fees, or reimbursement which the Portfolios pay to Directors
of the Fund who are not interested persons (as that phrase is defined in Section
2(a)(19) of the 1940 Act) of WRL Management, but excluding all interest and all
federal, state and local taxes (such as stamp, excise, income, franchise and
similar taxes). If Normal Operating Expenses exceed in any year the Expense
Limitation of the Fund, WRL Management shall pay for those excess expenses on
behalf of the Portfolios in the year in which they are incurred. Expenses of the
Portfolios shall be calculated and accrued monthly. If at the end of any month
the accrued expenses of the Portfolios exceed a pro rata portion of the
above-described Expense Limitation, based upon the average daily net asset value
of the Portfolios from the beginning of the fiscal year through the end of the
month for which calculation is made, the amount of such excess shall be paid by
WRL Management on behalf of the Portfolios and such excess amounts shall
continue to be paid until the end of a month when such accrued expenses are less
than the pro rata portion of such Expense Limitation. Any necessary final
adjusting payments, whether from WRL Management to the Portfolios or from the
Portfolios to WRL Management, shall be made as soon as reasonably practicable
after the end of the fiscal year.
8. TERMINATION. This Agreement may be terminated at any time, without
penalty, by the Directors of the Fund or by the shareholders of each Portfolio
acting by vote of at least a majority of its outstanding voting securities (as
that phrase is defined in Section 2(a)(42) of the 1940 Act) provided in either
case that 60 days' written notice of termination be given to WRL Management at
its principal place of business. This Agreement may be terminated by WRL
Management at any time by giving 60 days' written notice of termination to the
Fund, addressed to its principal place of business.
9. ASSIGNMENT. This Agreement shall terminate automatically in the
event of any assignment (as the term is defined in Section 2(a)(4) of the 1940
Act) of this Agreement.
10. TERM. This Agreement shall continue in effect, unless sooner
terminated in accordance with its terms, for an initial term ending January 1,
1999 and shall continue in effect from year to year thereafter provided such
continuance is specifically approved at least annually by the vote of a majority
of the Directors of the Fund who are not parties hereto or interested persons
(as that term is defined in Section 2(a)(19) of the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on the approval of
the terms of such renewal, and by either the Directors of the Fund or the
affirmative vote of a majority of the outstanding voting securities of each
Portfolio (as that phrase is defined in Section 2(a)(42) of the 1940 Act).
11. AMENDMENTS. This Agreement may be amended only with the approval of
the affirmative vote of a majority of the outstanding voting securities of each
Portfolio (as that phrase is defined in Section 2(a)(42) of the 1940 Act) and
the approval by the vote of a majority of Directors of the Fund who
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<PAGE>
are not parties hereto or interested persons (as that phrase is defined in
Section 2(a)(19) of the 1940 Act of 1940) of any such party, cast in person at a
meeting called for the purpose of voting on the approval of such amendment,
unless otherwise permitted in accordance with the 1940 Act.
12. PRIOR AGREEMENTS. This Agreement constitutes the entire agreement
between the parties hereto and supersedes in its entirety any and all previous
agreements between the parties relative to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ATTEST: WRL SERIES FUND, INC.
________________________ By:______________________________
Assistant Vice President Chairman of the Board and President
and Assistant Secretary
ATTEST: WRL INVESTMENT MANAGEMENT, INC.
________________________ By: _____________________________
Assistant Vice President President and Treasurer
and Assistant Secretary
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<PAGE>
SCHEDULE A
PERCENTAGE OF MONTHLY
PORTFOLIO AVERAGE DAILY NET ASSETS
- --------- ------------------------
Growth 0.80%
Bond 0.50%
Global 0.80%
Money Market 0.40%
Short-to-Intermediate Government 0.60%
Emerging Growth 0.80%
Equity-Income 0.80%
Balanced 0.80%
Aggressive Growth 0.80%
Utility 0.75%
Tactical Asset Allocation 0.80%
Value Equity 0.80%
C.A.S.E. Growth 0.80%
C.A.S.E. Growth & Income 0.80%
C.A.S.E. Quality Growth 0.80%
Meridian/INVESCO Global Sector 1.10%
Meridian/INVESCO US Sector 1.10%
Meridian/INVESCO Foreign Sector 1.10%
International Equity 1.00%
U.S. Equity 0.80%
EXHIBIT 5(ii)
FORM OF SUB-ADVISORY AGREEMENT ON BEHALF OF
THE GROWTH, BOND AND GLOBAL PORTFOLIOS
OF THE FUND
<PAGE>
SUB-ADVISORY AGREEMENT
BETWEEN
WRL INVESTMENT MANAGEMENT, INC.
AND
JANUS CAPITAL CORPORATION
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 Florida and Janus Capital Corporation
("Sub-Adviser"), a corporation organized and existing under the laws of the
State of Colorado.
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 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 Growth, Bond,
Global and Janus Balanced Portfolios ("Portfolios"), each 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 Portfolios 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. APPOINTMENT.
Investment Adviser hereby appoints the Sub-Adviser as its investment
sub-adviser with respect to the Portfolios for the period and on the terms set
forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
2. DUTIES OF THE SUB-ADVISER.
A. INVESTMENT SUB-ADVISORY SERVICES. Subject to the supervision of
the Fund's Board of Directors ("Board") and the Investment Adviser, the
Sub-Adviser shall act as the investment sub-adviser and shall supervise and
direct the investments of the Portfolios in accordance with each Portfolio's
investment objective, 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 directed by the appropriate
officers of the Investment Adviser or the Fund by notice in writing to the
Sub-Adviser. The Sub-Adviser 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 Portfolios in a manner consistent with each
Portfolio's investment objective, policies, and restrictions. In furtherance of
this duty, the Sub-Adviser, on behalf of the Portfolios, is authorized, in its
discretion and without prior consultation with the Board or the Investment
Adviser, to:
(1) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds and other securities or assets; and
(2) place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or
through such brokers, dealers, underwriters or issuers as the
Sub-Adviser may select.
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<PAGE>
B. ADDITIONAL DUTIES OF SUB-ADVISER. In addition to the above,
Sub-Adviser shall:
(1) furnish continuous investment information, advice and
recommendations to the Fund as to the acquisition, holding or
disposition of any or all of the securities or other assets which
the Portfolios may own or contemplate acquiring from time to time;
(2) cause its officers to attend meetings of the Fund and furnish
oral or written reports, as the Fund may reasonably require, in
order to keep the Fund's officers, Board and shareholders fully
informed as to the condition of the investment securities of the
Portfolios, the investment recommendations of the Sub-Adviser, and
the investment considerations which have given rise to those
recommendations; and
(3) furnish such statistical and analytical information and reports
as may reasonably be required by the Fund, its officers and the
Board from time to time, other than proprietary information and
provided Sub-Adviser shall not be responsible for Portfolio
accounting.
(4) Sub-Adviser shall be responsible for the preparation and filing
of Schedule 13G and Form 13F on behalf of the Portfolios.
Sub-Adviser shall not be responsible for the preparation or filing
of any reports required of the Portfolios by any governmental or
regulatory agency, except as expressly agreed to in writing.
Sub-Adviser shall vote proxies received in connection with
securities held by the Portfolios.
(5) Sub-Adviser shall have no responsibility to monitor certain
limitations or restrictions, including without limitation, the 1/2
of 1% limitation on personal trading (except for employees of
Sub-Adviser), the "short-short" test, and the 90%-source test for
which the Sub-Adviser determines it has not been provided
sufficient information in accordance with Section 4 of this
Agreement or otherwise. All such monitoring shall be the
responsibility of Investment Adviser.
C. FURTHER DUTIES OF SUB-ADVISER. In all matters relating to the
performance of this Agreement, the Sub-Adviser shall act in conformity with the
Fund's Articles of Incorporation and By-Laws, as each may be amended or
supplemented, and the Fund's currently effective Registration Statement (as
defined below) and with the written instructions and directions of the Board and
the Investment Adviser, and shall comply with the requirements of the 1940 Act,
the Advisers Act, the rules thereunder, and all other applicable federal and
state laws and regulations. Sub-Adviser makes no representation or warranty,
express or implied, that any level of performance or investment results will be
achieved by any Portfolio or that any Portfolio will perform comparably with any
standard or index, including other clients of Sub-Adviser, whether public or
private.
3. COMPENSATION.
For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, the Sub-Adviser shall receive a monthly investment
management fee equal to 50% of the fees received by the Investment Adviser for
services rendered under the Advisory Agreement by the Investment Adviser to the
Portfolios. The management fee shall be payable by the Investment Adviser
monthly to the Sub-Adviser upon receipt by the Investment Adviser from the
Portfolios of advisory fees payable to the Investment Adviser. 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 pro-rated according to the pro-ration which such period bears to
the full month in which such effectiveness or termination occurs.
4. DUTIES OF THE INVESTMENT ADVISER.
A. The Investment Adviser shall continue to have responsibility for
all services to be provided to the Portfolios pursuant to the Advisory Agreement
and shall oversee and review the Sub-Adviser's performance of its duties under
this Agreement.
B. The Investment Adviser has furnished the Sub-Adviser with copies
of each of the following documents and will furnish to the Sub-Adviser at its
principal office all future amendments and supplements to
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such documents, if any, as soon as practicable after such documents become
available and, when possible, before such amendments or supplements become
effective:
(1) The Articles of Incorporation of the Fund, 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 Fund as in effect on the date hereof and as
amended from time to time ("By-Laws");
(3) Certified resolutions of the Board of the Fund authorizing the
appointment of the Investment Adviser and the Sub-Adviser and
approving the form of the Advisory Agreement and this Agreement and
any other resolutions of the Board applicable to the Sub-Adviser's
duties under this Agreement;
(4) The Fund'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
Portfolios and its shares and all amendments thereto ("Registration
Statement");
(5) The Notification of Registration of the Fund 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 Statement of
Additional Information; and
(7) A certified copy of any publicly available 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 Portfolios to its shareholders or to any governmental body
or securities exchange.
The Investment Adviser shall furnish the Sub-Adviser with any further
documents, materials or information that the Sub-Adviser may reasonably request
to enable it to perform its duties pursuant to this Agreement.
C. Under the direction of Sub-Adviser, Investment Adviser shall be
responsible for setting up and maintaining brokerage accounts and other accounts
Sub-Adviser deems advisable to allow for the purchase or sale of various forms
of securities pursuant to this Agreement, or shall take such actions as
Sub-Adviser deems necessary or advisable to enable Sub-Adviser to establish such
accounts on behalf of the Fund.
D. During the term of this Agreement, the Investment Adviser shall
furnish to the Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared by the Investment Adviser for distribution to shareholders of the
Portfolios or the public, which refer to the Sub-Adviser or investment companies
or other advisory accounts advised or sponsored by the Sub-Adviser or investment
companies or other advisory accounts advised or sponsored by the Sub-Adviser in
any way, prior to the use thereof, and the Investment Adviser shall not use any
such materials if the Sub-Adviser reasonably objects in writing fifteen business
days (or such other time as may be mutually agreed) after receipt thereof.
5. BROKERAGE.
A. The Sub-Adviser 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 (best price and
execution); provided that, on behalf of the Fund, the Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder.
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<PAGE>
B. On occasions when the Sub-Adviser deems the purchase or sale of
a security to be in the best interest of the Fund as well as other clients of
the Sub-Adviser, the Sub-Adviser, 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 Sub-Adviser in the manner the Sub-Adviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund and to its other clients.
C. In addition to the foregoing, the Sub-Adviser agrees that orders
with broker-dealers for the purchase or sale of portfolio securities by the
Portfolios shall be placed in accordance with the standards set forth in the
Advisory Agreement.
6. OWNERSHIP OF RECORDS.
The Sub-Adviser shall maintain all books and records required to be
maintained by the Sub-Adviser 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
Sub-Adviser hereby agrees: (i) that all records that it maintains for the Fund
are the property of the Fund, (ii) to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any records that it maintains for the Fund and
that are required to be maintained by Rule 31a-1 under the 1940 Act and (iii)
agrees to surrender promptly to the Fund any records that it maintains for the
Fund upon request by the Fund; provided, however, the Sub-Adviser may retain
copies of such records.
7. REPORTS.
The Sub-Adviser shall furnish to the Board or the Investment Adviser,
or both, as appropriate, such information, reports, evaluations, analyses and
opinions as the Sub-Adviser and the Board or the Investment 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 Sub-Adviser, 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 Sub-Adviser, who
may also be a director, officer, or employee of the Fund, 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. REPRESENTATIONS OF SUB-ADVISER.
The Sub-Adviser represents, warrants, and agrees as follows:
A. The Sub-Adviser: (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 Agreement; (iii)
has met, and will continue to meet for so long as this Agreement remains in
effect, any 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 Investment Adviser of the
occurrence of any event that would disqualify the Sub-Adviser from serving as an
investment adviser of an investment company pursuant to Section 9 (a) of the
1940 Act or otherwise.
B. The Sub-Adviser 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 Investment Adviser and the Fund with a copy of
such code of ethics, together with evidence of its adoption.
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<PAGE>
C. The Sub-Adviser has provided the Investment Adviser and the Fund
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 Investment Adviser.
10. CONFIDENTIALITY AND PROPRIETARY RIGHTS.
Sub-Adviser will not, directly or indirectly, and will not permit its
affiliates employees, officers, directors, agents, contractors, or the
Portfolios to use, disclose, or furnish to any person or entity, records or
information concerning the business of Sub-Adviser, except as necessary for the
performance of its duties under this Agreement or the Advisory Agreement, or as
required by law upon prior written notice to Sub-Adviser. Sub-Adviser is the
sole owner of the name and mark "Janus." Sub-Adviser shall not, and shall not
permit the Portfolios to, without prior written consent of Sub-Adviser, use the
name or mark "Janus" or make representations regarding Sub-Adviser or its
affiliates. Upon termination of this Agreement for any reason, Investment
Adviser shall immediately cease, and shall cause the Portfolios to immediately
cease, all use of the Janus name or any Janus mark.
11. LIABILITY.
Except as may otherwise be provided by the 1940 Act, or other federal
securities laws, neither Sub-Adviser nor any of its affiliates, officers,
directors, shareholders, employees, or agents shall be liable for any loss,
liability, cost, damage, or expense (including reasonable attorneys' fees and
costs) (collectively, referred to in this Agreement as "Losses"), except for
Losses resulting from Sub-Adviser's gross negligence, bad faith, or willful
misconduct or reckless disregard of its obligations and duties under this
Agreement. Investment Adviser shall hold harmless and indemnify Sub-Adviser, its
affiliates, directors, officers, shareholders, employees or agents for any Loss
not resulting from Sub-Adviser's gross negligence, bad faith, or willful
misconduct or reckless disregard of its obligations and duties under this
Agreement. The obligations contained in this Section 11 shall survive
termination of this Agreement.
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 Fund 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 each 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, with respect to each Portfolio, 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 each
Portfolio; or (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 Fund who are not parties to this Agreement or interested
persons of any such party. The Sub-Adviser shall furnish to the Fund, 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 Portfolios on at least 60
days' prior written notice to the Sub-Adviser. This Agreement may also be
terminated by the Investment Adviser: (i) on at least 60 days' prior written
notice to the Sub-Adviser, without the payment of any penalty; or (ii) if the
Sub-Adviser becomes unable to discharge its duties and obligations under this
Agreement. The Sub-Adviser may terminate this Agreement at any time, or preclude
its renewal without the payment of any penalty, on at least 60 days' prior
notice to the Investment Adviser. This Agreement shall terminate automatically
in the event of its assignment or upon termination of the Advisory Agreement.
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
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<PAGE>
termination is sought, and no amendment of this Agreement shall be effective
until approved by vote of a majority of the Portfolio's outstanding voting
securities, unless otherwise permitted in accordance with the 1940 Act.
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 Fund 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 of
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 1940
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, unless the
Investment Adviser and the Sub-Adviser agree to the contrary.
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:
Title: President
Attest: JANUS CAPITAL CORPORATION
____________________________ By __________________________
Name:
Title:
6
EXHIBIT 5(iii)
FORM OF SUB-ADVISORY AGREEMENT ON BEHALF OF THE
MONEY MARKET PORTFOLIO OF THE FUND
<PAGE>
SUB-ADVISORY AGREEMENT
BETWEEN
WRL INVESTMENT MANAGEMENT, INC.
AND
J. P. MORGAN 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 J. P. Morgan
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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<PAGE>
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 1940
Act) 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 1940 Act) 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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<PAGE>
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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<PAGE>
12. MISCELLANEOUS.
All notices provided for by this Agreement shall be in writing and
shall be deemed given when received, against appropriate receipt, by Diane
Minardi at 522 Fifth Avenue, New York NY 10036 in the case of the Sub-Adviser,
General Counsel at P.O. Box 5068, Clearwater, FL 34618 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: Kenneth P. Beil
Title: President and Treasurer
Attest: J. P. MORGAN INVESTMENT MANAGEMENT INC.
____________________________ By __________________________
Name: Diane Minardi
Title: Vice President
5
EXHIBIT 5(iv)
FORM OF SUB-ADVISORY AGREEMENT ON BEHALF
OF THE BALANCED AND THE SHORT-TO-INTERMEDIATE GOVERNMENT PORTFOLIOS OF THE FUND
<PAGE>
SUB-ADVISORY AGREEMENT
BETWEEN
WRL INVESTMENT MANAGEMENT, INC.
AND
AEGON USA 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 AEGON USA
Investment Management, Inc. ("Sub-Adviser"), a corporation organized and
existing under the laws of the State of Iowa.
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 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
Short-to-Intermediate Government and Balanced Portfolios ("Portfolios"), each 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 Portfolios 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. APPOINTMENT.
Investment Adviser hereby appoints the Sub-Adviser as its investment
sub-adviser with respect to the Portfolios for the period and on the terms set
forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
2. DUTIES OF THE SUB-ADVISER.
A. INVESTMENT SUB-ADVISORY SERVICES. Subject to the supervision of
the Fund's Board of Directors ("Board") and the Investment Adviser, the
Sub-Adviser shall act as the investment sub-adviser and shall supervise and
direct the investments of the Portfolios in accordance with each Portfolio's
investment objective, 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 directed by the appropriate
officers of the Investment Adviser or the Fund by notice in writing to the
Sub-Adviser. The Sub-Adviser 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 Portfolios in a manner consistent with each
Portfolio's investment objective, policies, and restrictions. In furtherance of
this duty, the Sub-Adviser, on behalf of the Portfolios, is authorized, in its
discretion and without prior consultation with the Portfolios or the Investment
Adviser, to:
(1) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds and other securities or assets; and
1
<PAGE>
(2) place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or
through such brokers, dealers, underwriters or issuers as the
Sub-Adviser may select.
B. ADDITIONAL DUTIES OF SUB-ADVISER. In addition to the above,
Sub-Adviser shall:
(1) furnish continuous investment information, advice and
recommendations to the Fund as to the acquisition, holding or
disposition of any or all of the securities or other assets which
the Portfolios may own or contemplate acquiring from time to time;
(2) cause its officers to attend meetings of the Fund and furnish
oral or written reports, as the Fund may reasonably require, in
order to keep the Fund and its officers and Board fully informed as
to the condition of the investment securities of the Portfolios,
the investment recommendations of the Sub-Adviser, and the
investment considerations which have given rise to those
recommendations; and
(3) furnish such statistical and analytical information and reports
as may reasonably be required by the Fund from time to time.
C. FURTHER DUTIES OF SUB-ADVISER. In all matters relating to the
performance of this Agreement, the Sub-Adviser shall act in conformity with the
Fund's Articles of Incorporation and By-Laws, as each may be amended or
supplemented, and currently effective Registration Statement (as defined below)
and with the written instructions and directions of the Board and the Investment
Adviser, and shall comply with the requirements of the 1940 Act, the Advisers
Act, the rules thereunder, and all other applicable federal and state laws and
regulations. Sub-Adviser makes no representation or warranty, express or
implied, that any level of performance or investment results will be achieved by
any Portfolio, or that any Portfolio will perform comparably with any standard
or index, including other clients of Sub-Adviser, whether public or private.
3. COMPENSATION.
For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, the Sub-Adviser shall receive a monthly investment
management fee equal to (i) 50% of the fees received by the Investment Adviser
for services rendered under the Advisory Agreement by the Investment Adviser to
each Portfolio, less (ii) 50% of the amount paid by the Investment Adviser on
behalf of each Portfolio pursuant to any expense limitation or the amount of any
other reimbursement made by the Investment Adviser to each Portfolio. The
management fee shall be payable by the Investment Adviser monthly to the
Sub-Adviser upon receipt by the Investment Adviser from the Portfolios of
advisory fees payable to the Investment Adviser. 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
pro-rated according to the pro-ration which such period bears to the full month
in which such effectiveness or termination occurs.
4. DUTIES OF THE INVESTMENT ADVISER.
A. The Investment Adviser shall continue to have responsibility for
all services to be provided to the Portfolios pursuant to the Advisory Agreement
and shall oversee and review the Sub-Adviser's performance of its duties under
this Agreement.
B. The Investment Adviser has furnished the Sub-Adviser with copies
of each of the following documents and will furnish to the Sub-Adviser at its
principal office all future amendments and supplements to such documents, if
any, as soon as practicable after such documents become available and, when
possible, before such amendments or supplements become effective:
(1) The Articles of Incorporation of the Fund, 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 Fund as in effect on the date hereof and as
amended from time to time ("By-Laws");
2
<PAGE>
(3) Certified resolutions of the Board of the Fund authorizing the
appointment of the Investment Adviser and the Sub-Adviser and
approving the form of the Advisory Agreement and this Agreement and
any other resolutions of the Board applicable to the Sub-Adviser's
duties under this Agreement;
(4) The Fund'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
Portfolios and its shares and all amendments thereto ("Registration
Statement");
(5) The Notification of Registration of the Fund 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
(7) A certified copy of any publicly available 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 Portfolios to its shareholders or to any governmental body
or securities exchange.
The Investment Adviser shall furnish the Sub-Adviser with any further
documents, materials or information that the Sub-Adviser may reasonably request
to enable it to perform its duties pursuant to this Agreement.
C. During the term of this Agreement, the Investment Adviser shall
furnish to the Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to shareholders of the Portfolios or the public, which
refer to the Sub-Adviser or investment companies or other advisory accounts
advised or sponsored by the Sub-Adviser or investment companies or other
advisory accounts advised or sponsored by the Sub-Adviser in any way, prior to
the use thereof, and the Investment Adviser shall not use any such materials if
the Sub-Adviser reasonably objects in writing fifteen business days (or such
other time as may be mutually agreed) after receipt thereof.
5. BROKERAGE.
A. The Sub-Adviser 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 (best price and
execution); provided that, on behalf of the Fund, the Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder.
B. On occasions when the Sub-Adviser deems the purchase or sale of
a security to be in the best interest of the Fund as well as other clients of
the Sub-Adviser, the Sub-Adviser, 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 Sub-Adviser in the manner the Sub-Adviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund and to its other clients.
C. In addition to the foregoing, the Sub-Adviser agrees that orders
with broker-dealers for the purchase or sale of portfolio securities by the
Portfolios shall be placed in accordance with the standards set forth in the
Advisory Agreement.
3
<PAGE>
6. OWNERSHIP OF RECORDS.
The Sub-Adviser shall maintain all books and records required to be
maintained by the Sub-Adviser 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
Sub-Adviser hereby agrees: (i) that all records that it maintains for the Fund
are the property of the Fund, (ii) to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any records that it maintains for the Fund and
that are required to be maintained by Rule 31a-1 under the 1940 Act and (iii)
agrees to surrender promptly to the Fund any records that it maintains for the
Fund upon request by the Fund; provided, however, the Sub-Adviser may retain
copies of such records.
7. REPORTS.
The Sub-Adviser shall furnish to the Board or the Investment Adviser,
or both, as appropriate, such information, reports, evaluations, analyses and
opinions as the Sub-Adviser and the Board or the Investment 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 Sub-Adviser, 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 Sub-Adviser, who
may also be a director, officer, or employee of the Fund, 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. REPRESENTATIONS OF SUB-ADVISER.
The Sub-Adviser represents, warrants, and agrees as follows:
A. The Sub-Adviser: (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 Agreement; (iii)
has met, and will continue to meet for so long as this Agreement remains in
effect, any 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 Investment Adviser of the
occurrence of any event that would disqualify the Sub-Adviser from serving as an
investment adviser of an investment company pursuant to Section 9 (a) of the
1940 Act or otherwise.
B. The Sub-Adviser 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 Investment Adviser and the Fund with a copy of
such code of ethics, together with evidence of its adoption.
C. The Sub-Adviser has provided the Investment Adviser and the Fund
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 Investment Adviser.
10. CONFIDENTIALITY AND PROPRIETARY RIGHTS.
Sub-Adviser will not, directly or indirectly, and will not permit its
affiliates employees, officers, directors, agents, contractors, or the
Portfolios to use, disclose or furnish to any person or entity, records or
information concerning the business of Sub-Adviser, except as necessary for the
performance of its duties under this Agreement or the Advisory Agreement, or as
required by law upon prior written notice to Sub-Adviser. Sub-Adviser is the
sole owner of the name and mark "AEGON USA Investment Management, Inc."
Sub-Adviser shall not, and shall not permit the Portfolios to, without prior
written consent of Sub-Adviser, use the name or mark "AEGON USA Investment
Management, Inc." or make representations regarding Sub-Adviser or its
affiliates. Upon termination of this Agreement for any reason, Investment
Adviser shall immediately cease, and shall cause the Portfolios to
4
<PAGE>
immediately cease, all use of the AEGON USA Investment Management, Inc. name or
any AEGON USA Investment Management, Inc. mark.
11. LIABILITY.
Except as may otherwise be provided by the 1940 Act, or other federal
securities laws, neither Sub-Adviser nor any of its affiliates, officers,
directors, shareholders, employees, or agents shall be liable for any loss,
liability, cost, damage, or expense (including reasonable attorneys' fees and
costs) (collectively, referred to in this Agreement as "Losses"), except for
Losses resulting from Sub-Adviser's gross negligence, bad faith, or willful
misconduct or reckless disregard of its obligations and duties under this
Agreement. Investment Adviser shall hold harmless and indemnify Sub-Adviser, its
affiliates, directors, officers, shareholders, employees or agents for any Loss
not resulting from Sub-Adviser's gross negligence, bad faith, or willful
misconduct or reckless disregard of its obligations and duties under this
Agreement. The obligations contained in this Section 11 shall survive
termination of this Agreement.
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 Fund 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 each 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, with respect to each Portfolio, 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 each
Portfolio; and (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 Fund who are not parties to this Agreement or interested
persons of any such party. The Sub-Adviser shall furnish to the Fund, 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 Portfolios on at least 60
days' prior written notice to the Sub-Adviser. This Agreement may also be
terminated by the Investment Adviser: (i) on at least 60 days' prior written
notice to the Sub-Adviser, without the payment of any penalty; or (ii) if the
Sub-Adviser becomes unable to discharge its duties and obligations under this
Agreement. The Sub-Adviser may terminate this Agreement at any time, or preclude
its renewal without the payment of any penalty, on at least 60 days' prior
notice to the Investment Adviser. This Agreement shall terminate automatically
in the event of its assignment or upon termination of the Advisory Agreement.
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 amendment of this Agreement shall be effective until approved by
vote of a majority of each Portfolio's outstanding voting securities, unless
otherwise permitted in accordance with the 1940 Act.
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.
5
<PAGE>
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 Fund 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 of
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 1940
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, unless the
Investment Adviser and the Sub-Adviser agree to the contrary.
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: Kenneth P. Beil
Title: President and Treasurer
Attest: AEGON USA INVESTMENT MANAGEMENT, INC.
____________________________ By __________________________
Name:
Title:
6
EXHIBIT 5(v)
FORM OF SUB-ADVISORY AGREEMENT ON BEHALF
OF THE EMERGING GROWTH PORTFOLIO OF THE FUND
<PAGE>
SUB-ADVISORY AGREEMENT
BETWEEN
WRL INVESTMENT MANAGEMENT, INC.
AND
VAN KAMPEN AMERICAN CAPITAL ASSET 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 Van Kampen American
Capital Asset 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 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 Emerging Growth
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. APPOINTMENT.
Investment Adviser hereby appoints the Sub-Adviser as its investment
sub-adviser with respect to the Portfolio for the period and on the terms set
forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
2. DUTIES OF THE SUB-ADVISER.
A. INVESTMENT SUB-ADVISORY SERVICES. Subject to the supervision of the
Fund's Board of Directors ("Board") and the Investment Adviser, the Sub-Adviser
shall act as the investment sub-adviser and shall supervise and direct the
investments of the Portfolio in accordance with the Portfolio's investment
objective, 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 directed by the appropriate officers of the
Investment Adviser or the Fund by notice in writing to the Sub-Adviser. The
Sub-Adviser 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 Portfolio in a manner consistent with the Portfolio's
investment objective, policies, and restrictions. In furtherance of this duty,
the Sub-Adviser, on behalf of the Portfolio, is authorized, in its discretion
and without prior consultation with the Portfolio or the Investment Adviser, to:
(1) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds and other securities or assets; and
(2) place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or
through such brokers, dealers, underwriters or issuers as the
Sub-Adviser may select.
1
<PAGE>
B. ADDITIONAL DUTIES OF SUB-ADVISER. In addition to the above,
Sub-Adviser shall:
(1) furnish continuous investment information, advice and
recommendations to the Fund as to the acquisition, holding or
disposition of any or all of the securities or other assets which the
Portfolio may own or contemplate acquiring from time to time;
(2) cause its officers to attend meetings of the Fund and furnish oral
or written reports, as the Fund may reasonably require, in order to
keep the Fund and its officers and Board 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; and
(3) furnish such statistical and analytical information and reports as
may reasonably be required by the Fund from time to time.
C. FURTHER DUTIES OF SUB-ADVISER. In all matters relating to the
performance of this Agreement, the Sub-Adviser shall act in conformity with the
Fund's Articles of Incorporation and By-Laws, as each may be amended or
supplemented, and currently effective Registration Statement (as defined below)
and with the written instructions and directions of the Board and the Investment
Adviser, and shall comply with the requirements of the 1940 Act, the Advisers
Act, the rules thereunder, and all other applicable federal and state laws and
regulations.
3. COMPENSATION.
For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, the Sub-Adviser shall receive a monthly investment
management fee equal to (i) 50% of the fees received by the Investment Adviser
for services rendered under the Advisory Agreement by the Investment Adviser to
the Portfolio, less (ii) 50% of the amount paid by the Investment Adviser on
behalf of the Portfolio pursuant to any expense limitation or the amount of any
other reimbursement made by the Investment Adviser to the Portfolio. The
management fee shall be payable by the Investment Adviser monthly to the
Sub-Adviser upon receipt by the Investment Adviser from the Portfolio of
advisory fees payable to the Investment Adviser. 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
pro-rated according to the pro-ration which such period bears to the full month
in which such effectiveness or termination occurs.
4. DUTIES OF THE INVESTMENT ADVISER.
A. The Investment Adviser shall continue to have responsibility for
all services to be provided to the Portfolio pursuant to the Advisory Agreement
and shall oversee and review the Sub-Adviser's performance of its duties under
this Agreement.
B. The Investment Adviser has furnished the Sub-Adviser with copies
of each of the following documents and will furnish to the Sub-Adviser 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 Fund, 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 Fund as in effect on the date hereof and
as amended from time to time ("By-Laws");
(3) Certified resolutions of the Board of the Fund authorizing
the appointment of the Investment Adviser and the Sub-Adviser and
approving the form of the Advisory Agreement and this Agreement;
(4) The Fund'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
Portfolio and its shares and all amendments thereto ("Registration
Statement");
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(5) The Notification of Registration of the Fund under the 1940
Act on Form N-8A as filed with the SEC and any amendments thereto:
(6) The Fund's Prospectus and Statement of Additional
Information (as defined above); and
(7) A certified copy of any publicly available 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 Portfolio to its shareholders or
to any governmental body or securities exchange.
The Investment Adviser shall furnish the Sub-Adviser with any further
documents, materials or information that the Sub-Adviser may reasonably request
to enable it to perform its duties pursuant to this Agreement.
C. During the term of this Agreement, the Investment Adviser shall
furnish to the Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to shareholders of the Portfolio or the public, which
refer to the Sub-Adviser or investment companies or other advisory accounts
advised or sponsored by the Sub-Adviser or investment companies or other
advisory accounts advised or sponsored by the Sub-Adviser in any way, prior to
the use thereof, and the Investment Adviser shall not use any such materials if
the Sub-Adviser reasonably objects in writing fifteen business days (or such
other time as may be mutually agreed) after receipt thereof.
5. BROKERAGE.
A. The Sub-Adviser 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 (best price and
execution); provided that, on behalf of the Fund, the Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder.
B. On occasions when the Sub-Adviser deems the purchase or sale of
a security to be in the best interest of the Fund as well as other clients of
the Sub-Adviser, the Sub-Adviser, 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 Sub-Adviser in the manner the Sub-Adviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund and to its other clients.
C. In addition to the foregoing, the Sub-Adviser agrees that orders
with broker-dealers for the purchase or sale of portfolio securities by the
Portfolio shall be placed in accordance with the standards set forth in the
Advisory Agreement.
6. OWNERSHIP OF RECORDS.
The Sub-Adviser shall maintain all books and records required to be
maintained by the Sub-Adviser 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
Sub-Adviser hereby agrees: (i) that all records that it maintains for the Fund
are the property of the Fund, (ii) to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any records that it maintains for the Fund and
that are required to be maintained by Rule 31a-1 under the 1940 Act and (iii)
agrees to surrender promptly to the Fund any records that it maintains for the
Fund upon request by the Fund; provided, however, the Sub-Adviser may retain
copies of such records.
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7. REPORTS.
The Sub-Adviser shall furnish to the Board or the Investment
Adviser, or both, as appropriate, such information, reports, evaluations,
analyses and opinions as the Sub-Adviser and the Board or the Investment
Adviser, as appropriate, may mutually agree upon from time to time.
8. SUB-ADVISER'S USE OF THE SERVICES OF OTHERS.
The Sub-Adviser 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
obtaining 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
Sub-Adviser may deem necessary, appropriate, or convenient for the discharge of
its obligations hereunder or otherwise helpful to the Fund as appropriate, or in
the discharge of Sub-Adviser's overall responsibilities with respect to the
other accounts that it serves as investment manager or counselor, provided that
the Sub-Adviser shall at all times retain responsibility for making investment
recommendations with respect to the Portfolio.
9. REPRESENTATIONS OF SUB-ADVISER.
The Sub-Adviser represents, warrants, and agrees as follows:
A. The Sub-Adviser: (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 Agreement; (iii)
has met, and will continue to meet for so long as this Agreement remains in
effect, any 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 Investment Adviser of the
occurrence of any event that would disqualify the Sub-Adviser from serving as an
investment adviser of an investment company pursuant to Section 9 (a) of the
1940 Act or otherwise.
B. The Sub-Adviser 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 Investment Adviser and the Fund with a copy of
such code of ethics, together with evidence of its adoption.
C. The Sub-Adviser has provided the Investment Adviser and the Fund
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 Investment Adviser.
10. 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 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 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, with respect to the Portfolio, 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
Portfolio; and (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 Fund who are not parties to this Agreement or interested
persons of any such party. The Sub-Adviser shall furnish to the Fund, 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.
11. 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 Portfolio on at
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least 60 days' prior written notice to the Sub-Adviser. This Agreement may also
be terminated by the Investment Adviser: (i) on at least 60 days' prior written
notice to the Sub-Adviser, without the payment of any penalty; or (ii) if the
Sub-Adviser becomes unable to discharge its duties and obligations under this
Agreement. The Sub-Adviser may terminate this Agreement at any time, or preclude
its renewal without the payment of any penalty, on at least 60 days' prior
notice to the Investment Adviser. This Agreement shall terminate automatically
in the event of its assignment or upon termination of the Advisory Agreement.
12. 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 amendment of this Agreement shall be effective until approved by
vote of a majority of the Portfolio's outstanding voting securities, unless
otherwise permitted in accordance with the 1940 Act.
13. 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 Fund 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 1940
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, unless the
Investment Adviser and the Sub-Adviser agree to the contrary.
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<PAGE>
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: Kenneth P. Beil
Title: President and Treasurer
Attest: VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
___________________________ By __________________________________
Name:
Title:
EXHIBIT 5(vi)
FORM OF SUB-ADVISORY AGREEMENT ON BEHALF OF THE
EQUITY-INCOME PORTFOLIO OF THE FUND
<PAGE>
SUB-ADVISORY AGREEMENT
BETWEEN
WRL INVESTMENT MANAGEMENT, INC.
AND
LUTHER KING CAPITAL MANAGEMENT CORPORATION
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 Luther King
Capital Management Corporation ("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 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 Equity-Income
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. APPOINTMENT.
Investment Adviser hereby appoints the Sub-Adviser as its investment
sub-adviser with respect to the Portfolio for the period and on the terms set
forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
2. DUTIES OF THE SUB-ADVISER.
A. INVESTMENT SUB-ADVISORY SERVICES. Subject to the supervision of
the Fund's Board of Directors ("Board") and the Investment Adviser, the
Sub-Adviser shall act as the investment sub-adviser and shall supervise and
direct the investments of the Portfolio in accordance with the Portfolio's
investment objective, 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 directed by the appropriate
officers of the Investment Adviser or the Fund by notice in writing to the
Sub-Adviser. The Sub-Adviser 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 Portfolio in a manner consistent with the
Portfolio's investment objective, policies, and restrictions. In furtherance of
this duty, the Sub-Adviser, on behalf of the Portfolio, is authorized, in its
discretion and without prior consultation with the Portfolio or the Investment
Adviser, to:
(1) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds and other securities or assets; and
(2) place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or
through such brokers, dealers, underwriters or issuers as the
Sub-Adviser may select.
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B. ADDITIONAL DUTIES OF SUB-ADVISER. In addition to the above,
Sub-Adviser shall:
(1) furnish continuous investment information, advice and
recommendations to the Fund as to the acquisition, holding or
disposition of any or all of the securities or other assets which
the Portfolio may own or contemplate acquiring from time to time;
(2) cause its officers to attend meetings of the Fund and furnish
oral or written reports, as the Fund may reasonably require, in
order to keep the Fund and its officers and Board 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; and
(3) furnish such statistical and analytical information and reports
as may reasonably be required by the Fund from time to time.
C. FURTHER DUTIES OF SUB-ADVISER. In all matters relating to the
performance of this Agreement, the Sub-Adviser shall act in conformity with the
Fund's Articles of Incorporation and By-Laws, as each may be amended or
supplemented, and currently effective Registration Statement (as defined below)
and with the written instructions and directions of the Board and the Investment
Adviser, and shall comply with the requirements of the 1940 Act, the Advisers
Act, the rules thereunder, and all other applicable federal and state laws and
regulations.
3. COMPENSATION.
For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, the Sub-Adviser shall receive a monthly investment
management fee equal to 50% of the fees received by the Investment Adviser for
services rendered under the Advisory Agreement by the Investment Adviser to the
Portfolio. The management fee shall be payable by the Investment Adviser monthly
to the Sub-Adviser upon receipt by the Investment Adviser from the Portfolio of
advisory fees payable to the Investment Adviser. 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
pro-rated according to the pro-ration which such period bears to the full month
in which such effectiveness or termination occurs.
4. DUTIES OF THE INVESTMENT ADVISER.
A. The Investment Adviser shall continue to have responsibility for
all services to be provided to the Portfolio pursuant to the Advisory Agreement
and shall oversee and review the Sub-Adviser's performance of its duties under
this Agreement.
B. The Investment Adviser has furnished the Sub-Adviser with copies
of each of the following documents and will furnish to the Sub-Adviser 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 Fund, 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 Fund as in effect on the date hereof and as
amended from time to time ("By-Laws");
(3) Certified resolutions of the Board of the Fund authorizing the
appointment of the Investment Adviser and the Sub-Adviser and
approving the form of the Advisory Agreement and this Agreement;
(4) The Fund'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
Portfolio and its shares and all amendments thereto ("Registration
Statement");
(5) The Notification of Registration of the Fund under the 1940 Act
on Form N-8A as filed with the SEC and any amendments thereto:
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<PAGE>
(6) The Fund's Prospectus (as defined above); and
(7) A certified copy of any publicly available 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 Portfolio to its shareholders or to any governmental body or
securities exchange.
The Investment Adviser shall furnish the Sub-Adviser with any further
documents, materials or information that the Sub-Adviser may reasonably request
to enable it to perform its duties pursuant to this Agreement.
C. During the term of this Agreement, the Investment Adviser shall
furnish to the Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to shareholders of the Portfolio or the public, which
refer to the Sub-Adviser or investment companies or other advisory accounts
advised or sponsored by the Sub-Adviser or investment companies or other
advisory accounts advised or sponsored by the Sub-Adviser in any way, prior to
the use thereof, and the Investment Adviser shall not use any such materials if
the Sub-Adviser reasonably objects in writing fifteen business days (or such
other time as may be mutually agreed) after receipt thereof.
5. BROKERAGE.
A. The Sub-Adviser 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 (best price and
execution); provided that, on behalf of the Fund, the Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder.
B. On occasions when the Sub-Adviser deems the purchase or sale of
a security to be in the best interest of the Fund as well as other clients of
the Sub-Adviser, the Sub-Adviser, 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 Sub-Adviser in the manner the Sub-Adviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund and to its other clients.
C. In addition to the foregoing, the Sub-Adviser agrees that orders
with broker-dealers for the purchase or sale of portfolio securities by the
Portfolio shall be placed in accordance with the standards set forth in the
Advisory Agreement.
6. OWNERSHIP OF RECORDS.
The Sub-Adviser shall maintain all books and records required to be
maintained by the Sub-Adviser 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
Sub-Adviser hereby agrees: (i) that all records that it maintains for the Fund
are the property of the Fund, (ii) to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any records that it maintains for the Fund and
that are required to be maintained by Rule 31a-1 under the 1940 Act and (iii)
agrees to surrender promptly to the Fund any records that it maintains for the
Fund upon request by the Fund; provided, however, the Sub-Adviser may retain
copies of such records.
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<PAGE>
7. REPORTS.
The Sub-Adviser shall furnish to the Board or the Investment Adviser,
or both, as appropriate, such information, reports, evaluations, analyses and
opinions as the Sub-Adviser and the Board or the Investment 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 Sub-Adviser, 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 Sub-Adviser, who
may also be a director, officer, or employee of the Fund, 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. REPRESENTATIONS OF SUB-ADVISER.
The Sub-Adviser represents, warrants, and agrees as follows:
A. The Sub-Adviser: (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 Agreement; (iii)
has met, and will continue to meet for so long as this Agreement remains in
effect, any 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 Investment Adviser of the
occurrence of any event that would disqualify the Sub-Adviser from serving as an
investment adviser of an investment company pursuant to Section 9 (a) of the
1940 Act or otherwise.
B. The Sub-Adviser 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 Investment Adviser and the Fund with a copy of
such code of ethics, together with evidence of its adoption.
C. The Sub-Adviser has provided the Investment Adviser and the Fund
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 Investment Adviser.
10. 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 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 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, with respect to the Portfolio, 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
Portfolio; and (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 Fund who are not parties to this Agreement or interested
persons of any such party. The Sub-Adviser shall furnish to the Fund, 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.
11. 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 Portfolio on at
4
<PAGE>
least 60 days' prior written notice to the Sub-Adviser. This Agreement may also
be terminated by the Investment Adviser: (i) on at least 60 days' prior written
notice to the Sub-Adviser, without the payment of any penalty; or (ii) if the
Sub-Adviser becomes unable to discharge its duties and obligations under this
Agreement. The Sub-Adviser may terminate this Agreement at any time, or preclude
its renewal without the payment of any penalty, on at least 60 days' prior
notice to the Investment Adviser. This Agreement shall terminate automatically
in the event of its assignment or upon termination of the Advisory Agreement.
12. 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 amendment of this Agreement shall be effective until approved by
vote of a majority of the Portfolio's outstanding voting securities, unless
otherwise permitted in accordance with the 1940 Act.
13. 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 Fund 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 1940
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, unless the
Investment Adviser and the Sub-Adviser agree to the contrary.
5
<PAGE>
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: Kenneth P. Beil
Title: President and Treasurer
Attest: LUTHER KING CAPITAL MANAGEMENT
CORPORATION
____________________________ By ______________________________
Name:
Title:
6
EXHIBIT 5(vii)
FORM OF SUB-ADVISORY AGREEMENT ON BEHALF OF THE
UTILITY PORTFOLIO OF THE FUND
<PAGE>
SUB-ADVISORY AGREEMENT
BETWEEN
WRL INVESTMENT MANAGEMENT, INC.
AND
FEDERATED INVESTMENT COUNSELING
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 Federated
Investment Counseling ("Sub-Adviser"), a business trust 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 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 Utility
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. APPOINTMENT.
Investment Adviser hereby appoints the Sub-Adviser as its investment
sub-adviser with respect to the Portfolio for the period and on the terms set
forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
2. DUTIES OF THE SUB-ADVISER.
A. INVESTMENT SUB-ADVISORY SERVICES. Subject to the supervision of
the Fund's Board of Directors ("Board") and the Investment Adviser, the
Sub-Adviser shall act as the investment sub-adviser and shall supervise and
direct the investments of the Portfolio in accordance with the Portfolio's
investment objective, 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 and procedures adopted by the Board as
directed by the appropriate officers of the Investment Adviser or the Fund by
notice in writing to the Sub-Adviser. The parties hereto agree that the
Sub-Adviser is not a pricing agent of the Fund, and that all prices will be
finally determined by the entity acting as pricing agent to the Fund. The
Sub-Adviser 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 Portfolio in a manner consistent with the Portfolio's
investment objective, policies, and restrictions. In furtherance of this duty,
the Sub-Adviser, on behalf of the Portfolio, is authorized, in its discretion
and without prior consultation with the Portfolio or the Investment Adviser, to:
(1) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds and other securities or assets; and
1
<PAGE>
(2) place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or
through such brokers, dealers, underwriters or issuers as the
Sub-Adviser may select.
B. ADDITIONAL DUTIES OF SUB-ADVISER. In addition to the above,
Sub-Adviser shall:
(1) furnish continuous investment information, advice and
recommendations to the Fund as to the acquisition, holding or
disposition of any or all of the securities or other assets which
the Portfolio may own or contemplate acquiring from time to time;
(2) cause its officers to attend meetings of the Fund and furnish
oral or written reports, as the Fund may reasonably require, in
order to keep the Fund and its officers and Board 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; and
(3) furnish such statistical and analytical information and reports
as may reasonably be required by the Fund from time to time.
C. FURTHER DUTIES OF SUB-ADVISER. In all matters relating to the
performance of this Agreement, the Sub-Adviser shall act in conformity with the
Fund's Articles of Incorporation and By-Laws, as each may be amended or
supplemented, and currently effective Registration Statement (as defined below)
and with the written instructions and directions of the Board and the Investment
Adviser, and shall comply with the requirements of the 1940 Act, the Advisers
Act, the rules thereunder, and all other applicable federal and state laws and
regulations. Except as may otherwise be required by the 1940 Act or the rules
thereunder or other applicable law, the Fund and WRL Management agree that the
Sub-Adviser, any affiliated person of the Sub-Adviser, and each person, if any,
who, within the meaning of Section 15 of the Securities Act of 1933 controls the
Sub-Adviser, shall not be liable for, or subject to any damages, expenses,
losses in connection with any act or omission connected with or arising out of
any services rendered under this Agreement, except by reason of willful
misfeasance, bad faith, or gross negligence in the performance of the
Sub-Adviser's duties, or by reason of reckless disregard of the Sub-Adviser's
obligations and duties under this Agreement.
3. COMPENSATION.
For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, the Sub-Adviser shall receive a monthly investment
management fee from the Investment Adviser as a percentage of the Portfolio's
average daily net assets at an annual rate of 0.50% of the first $30 million of
assets, 0.35% of the next $20 million in assets, and 0.25% of assets in excess
of $50 million. The management fee shall be payable by the Investment Adviser
monthly to the Sub-Adviser upon receipt by the Investment Adviser from the
Portfolio of advisory fees payable to the Investment Adviser. 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 pro-rated according to the pro-ration which such period bears to
the full month in which such effectiveness or termination occurs.
4. DUTIES OF THE INVESTMENT ADVISER.
A. The Investment Adviser shall continue to have responsibility for
all services to be provided to the Portfolio pursuant to the Advisory Agreement
and shall oversee and review the Sub-Adviser's performance of its duties under
this Agreement.
B. The Investment Adviser has furnished the Sub-Adviser with copies
of each of the following documents and will furnish to the Sub-Adviser 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 Fund, 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 Fund as in effect on the date hereof and as
amended from time to time ("By-Laws");
2
<PAGE>
(3) Certified resolutions of the Board of the Fund authorizing the
appointment of the Investment Adviser and the Sub-Adviser and
approving the form of the Advisory Agreement and this Agreement;
(4) The Fund'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
Portfolio and its shares and all amendments thereto ("Registration
Statement");
(5) The Notification of Registration of the Fund 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);
(7) A certified copy of any publicly available 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 Portfolio to its shareholders or to any governmental body or
securities exchange;
(8) A copy of the Advisory Agreement currently in effect, and all
amendments; and
(9) Fund procedures adopted by the Board.
The Investment Adviser shall furnish the Sub-Adviser with any further
documents, materials or information that the Sub-Adviser may reasonably request
to enable it to perform its duties pursuant to this Agreement.
C. During the term of this Agreement, the Investment Adviser shall
furnish to the Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to shareholders of the Portfolio or the public, which
refer to the Sub-Adviser or investment companies or other advisory accounts
advised or sponsored by the Sub-Adviser or investment companies or other
advisory accounts advised or sponsored by the Sub-Adviser in any way, prior to
the use thereof, and the Investment Adviser shall not use any such materials if
the Sub-Adviser reasonably objects in writing fifteen business days (or such
other time as may be mutually agreed) after receipt thereof.
5. BROKERAGE.
A. The Sub-Adviser 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 (best price and
execution); provided that, on behalf of the Fund, the Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser or its affiliated person 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 Sub-Adviser, or any
affiliated person thereof, except in accordance with the federal securities laws
and the rules and regulations thereunder.
B. On occasions when the Sub-Adviser deems the purchase or sale of
a security to be in the best interest of the Fund as well as other clients of
the Sub-Adviser or its affiliated person, the Sub-Adviser, 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
Sub-Adviser in the manner the Sub-Adviser considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to its other clients.
C. In addition to the foregoing, the Sub-Adviser agrees that orders
with broker-dealers for the purchase or sale of portfolio securities by the
Portfolio shall be placed in accordance with the standards set forth in the
Advisory Agreement.
3
<PAGE>
6. OWNERSHIP OF RECORDS.
The Sub-Adviser shall maintain all books and records required to be
maintained by the Sub-Adviser 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
Sub-Adviser hereby agrees: (i) that all records that it maintains for the Fund
are the property of the Fund, (ii) to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any records that it maintains for the Fund and
that are required to be maintained by Rule 31a-1 under the 1940 Act and (iii)
agrees to surrender promptly to the Fund any records that it maintains for the
Fund upon request by the Fund; provided, however, the Sub-Adviser may retain
copies of such records.
7. REPORTS.
The Sub-Adviser shall furnish to the Board or the Investment Adviser,
or both, as appropriate, such information, reports, evaluations, analyses and
opinions as the Sub-Adviser and the Board or the Investment 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 Sub-Adviser, 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 Sub-Adviser, who
may also be a director, officer, or employee of the Fund, 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. REPRESENTATIONS OF SUB-ADVISER.
The Sub-Adviser represents, warrants, and agrees as follows:
A. The Sub-Adviser: (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 Agreement; (iii)
has met, and will continue to meet for so long as this Agreement remains in
effect, any 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 Investment Adviser of the
occurrence of any event that would disqualify the Sub-Adviser from serving as an
investment adviser of an investment company pursuant to Section 9 (a) of the
1940 Act or otherwise.
B. The Sub-Adviser 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 Investment Adviser and the Fund with a copy of
such code of ethics, together with evidence of its adoption.
C. The Sub-Adviser has provided the Investment Adviser and the Fund
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 Investment Adviser.
10. 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 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 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, with respect to the Portfolio, subject to the
termination provisions and all other terms and conditions hereof, so long as
such continuation shall
4
<PAGE>
be specifically approved at least annually (a) by either the Board, or by vote
of a majority of the outstanding voting securities of the Portfolio; and (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 Fund who are not
parties to this Agreement or interested persons of any such party. The
Sub-Adviser shall furnish to the Fund, 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.
11. 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 Portfolio on at least 60
days' prior written notice to the Sub-Adviser. This Agreement may also be
terminated by the Investment Adviser: (i) on at least 60 days' prior written
notice to the Sub-Adviser, without the payment of any penalty; or (ii) if the
Sub-Adviser becomes unable to discharge its duties and obligations under this
Agreement. The Sub-Adviser may terminate this Agreement at any time, or preclude
its renewal without the payment of any penalty, on at least 60 days' prior
notice to the Investment Adviser. This Agreement shall terminate automatically
in the event of its assignment or upon termination of the Advisory Agreement.
12. 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 amendment of this Agreement shall be effective until approved by
vote of a majority of the Portfolio's outstanding voting securities, unless
otherwise permitted in accordance with the 1940 Act.
13. 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 Fund 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 of
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 1940
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, unless the
Investment Adviser and the Sub-Adviser agree to the contrary.
5
<PAGE>
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: Kenneth P. Beil
Title: President and Treasurer
Attest: FEDERATED INVESTMENT COUNSELING
____________________________ By __________________________
Name:
Title:
6
EXHIBIT 5(viii)
FORM OF SUB-ADVISORY AGREEMENT ON BEHALF OF THE
AGGRESSIVE GROWTH PORTFOLIO OF THE FUND
<PAGE>
SUB-ADVISORY AGREEMENT
BETWEEN
WRL INVESTMENT MANAGEMENT, INC.
AND
FRED ALGER 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 Fred Alger
Management, Inc. ("Sub-Adviser"), a corporation organized and existing under the
laws of the State of New York.
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 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 Aggressive
Growth 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. APPOINTMENT.
Investment Adviser hereby appoints the Sub-Adviser as its investment
sub-adviser with respect to the Portfolio for the period and on the terms set
forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
2. DUTIES OF THE SUB-ADVISER.
A. INVESTMENT SUB-ADVISORY SERVICES. Subject to the supervision of
the Fund's Board of Directors ("Board") and the Investment Adviser, the
Sub-Adviser shall act as the investment sub-adviser and shall supervise and
direct the investments of the Portfolio in accordance with the Portfolio's
investment objective, 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 directed by the appropriate
officers of the Investment Adviser or the Fund by notice in writing to the
Sub-Adviser. The Sub-Adviser 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 Portfolio in a manner consistent with the
Portfolio's investment objective, policies, and restrictions. In furtherance of
this duty, the Sub-Adviser, on behalf of the Portfolio, is authorized, in its
discretion and without prior consultation with the Portfolio or the Investment
Adviser, to:
(1) buy, sell exchange, convert, lend, and otherwise trade in any
stocks, bonds and other securities or assets; and
(2) place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or
through such brokers, dealers, underwriters or issuers as the
Sub-Adviser may select.
1
<PAGE>
B. ADDITIONAL DUTIES OF SUB-ADVISER. In addition to the above,
Sub-Adviser shall:
(1) furnish continuous investment information, advice and
recommendations to the Fund as to the acquisition, holding or
disposition of any or all of the securities or other assets which
the Portfolio may own or contemplate acquiring from time to time;
(2) cause its officers to attend meetings of the Fund and furnish
oral or written reports, as the Fund may reasonably require, in
order to keep the Fund and its officers and Board 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; and
(3) furnish such statistical and analytical information and reports
as may reasonably be required by the Fund from time to time.
C. FURTHER DUTIES OF SUB-ADVISER. In all matters relating to the
performance of this Agreement, the Sub-Adviser shall act in conformity with the
Fund's Articles of Incorporation and By-Laws, as each may be amended or
supplemented, and currently effective Registration Statement (as defined below)
and with the written instructions and directions of the Board and the Investment
Adviser, and shall comply with the requirements of the 1940 Act, the Advisers
Act, the rules thereunder, and all other applicable federal and state laws and
regulations.
3. COMPENSATION.
For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, the Sub-Adviser shall receive a monthly investment
management fee equal to 50% of the fees received by the Investment Adviser for
services rendered under the Advisory Agreement by the Investment Adviser to the
Portfolio. The management fee shall be payable by the Investment Adviser monthly
to the Sub-Adviser upon receipt by the Investment Adviser from the Portfolio of
advisory fees payable to the Investment Adviser. 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
pro-rated according to the pro-ration which such period bears to the full month
in which such effectiveness or termination occurs.
4. DUTIES OF THE INVESTMENT ADVISER.
A. The Investment Adviser shall continue to have responsibility for
all services to be provided to the Portfolio pursuant to the Advisory Agreement
and shall oversee and review the Sub-Adviser's performance of its duties under
this Agreement.
B. The Investment Adviser has furnished the Sub-Adviser with copies
of each of the following documents and will furnish to the Sub-Adviser 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 Fund, 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 Fund as in effect on the date hereof and
as amended from time to time ("By-Laws");
(3) Certified resolutions of the Board of the Fund authorizing
the appointment of the Investment Adviser and the Sub-Adviser
and approving the form of the Advisory Agreement and this
Agreement;
(4) The Fund'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
Portfolio and its shares and all amendments thereto
("Registration Statement");
(5) The Notification of Registration of the Fund under the 1940
Act on Form N-8A as filed with the SEC and any amendments
thereto;
2
<PAGE>
(6) The Fund's Prospectus (as defined above); and
(7) A certified copy of any publicly available 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 Portfolio to its shareholders
or to any governmental body or securities exchange.
The Investment Adviser shall furnish the Sub-Adviser with any further
documents, materials or information that the Sub-Adviser may reasonably request
to enable it to perform its duties pursuant to this Agreement.
C. During the term of this Agreement, the Investment Adviser shall
furnish to the Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to shareholders of the Portfolio or the public, which
refer to the Sub-Adviser or investment companies or other advisory accounts
advised or sponsored by the Sub-Adviser or investment companies or other
advisory accounts advised or sponsored by the Sub-Adviser in any way, prior to
the use thereof, and the Investment Adviser shall not use any such materials if
the Sub-Adviser reasonably objects in writing fifteen business days (or such
other time as may be mutually agreed) after receipt thereof.
5. BROKERAGE.
A. The Sub-Adviser 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 (best price and
execution); provided that, on behalf of the Fund, the Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser 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). The Sub-Adviser may direct orders for purchase or
sale of securities to Fred Alger & Company, Incorporated, a member of the New
York Stock Exchange, Inc. In no instance will portfolio securities be purchased
from or sold to the Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder.
B. On occasions when the Sub-Adviser deems the purchase or sale of
a security to be in the best interest of the Fund as well as other clients of
the Sub-Adviser, the Sub-Adviser, 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 Sub-Adviser in the manner the Sub-Adviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund and to its other clients.
C. In addition to the foregoing, the Sub-Adviser agrees that orders
with broker-dealers for the purchase or sale of portfolio securities by the
Portfolio shall be placed in accordance with the standards set forth in the
Advisory Agreement.
6. OWNERSHIP OF RECORDS.
The Sub-Adviser shall maintain all books and records required to be
maintained by the Sub-Adviser 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
Sub-Adviser hereby agrees: (i) that all records that it maintains for the Fund
are the property of the Fund, (ii) to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any records that it maintains for the Fund and
that are required to be maintained by Rule 31a-1 under the 1940 Act and (iii)
agrees to surrender promptly to the Fund any records that it maintains for the
Fund upon request by the Fund; provided, however, the Sub-Adviser may retain
copies of such records.
3
<PAGE>
7. REPORTS.
The Sub-Adviser shall furnish to the Board or the Investment Adviser,
or both, as appropriate, such information, reports, evaluations, analyses and
opinions as the Sub-Adviser and the Board or the Investment 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 Sub-Adviser, 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 Sub-Adviser, who
may also be a director, officer, or employee of the Fund, 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. REPRESENTATIONS OF SUB-ADVISER.
The Sub-Adviser represents, warrants, and agrees as follows:
A. The Sub-Adviser: (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 Agreement; (iii)
has met, and will continue to meet for so long as this Agreement remains in
effect, any 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 Investment Adviser of the
occurrence of any event that would disqualify the Sub-Adviser from serving as an
investment adviser of an investment company pursuant to Section 9 (a) of the
1940 Act or otherwise.
B. The Sub-Adviser 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 Investment Adviser and the Fund with a copy of
such code of ethics, together with evidence of its adoption.
C. The Sub-Adviser has provided the Investment Adviser and the Fund
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 Investment Adviser.
10. 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 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 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, with respect to the Portfolio, 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
Portfolio; and (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 Fund who are not parties to this Agreement or interested
persons of any such party. The Sub-Adviser shall furnish to the Fund, 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.
11. 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 Portfolio on at least 60
days' prior written notice to the Sub-Adviser. This Agreement may also be
terminated by the Investment
4
<PAGE>
Adviser: (i) on at least 60 days' prior written notice to the Sub-Adviser,
without the payment of any penalty; or (ii) if the Sub-Adviser becomes unable to
discharge its duties and obligations under this Agreement. The Sub-Adviser may
terminate this Agreement at any time, or preclude its renewal without the
payment of any penalty, on at least 60 days' prior notice to the Investment
Adviser. This Agreement shall terminate automatically in the event of its
assignment or upon termination of the Advisory Agreement.
12. 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 amendment of this Agreement shall be effective until approved by
vote of a majority of the Portfolio's outstanding voting securities, unless
otherwise permitted in accordance with the 1940 Act.
13. 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 Fund 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 1940
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, unless the
Investment Adviser and the Sub-Adviser agree to the contrary.
5
<PAGE>
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: Kenneth P. Beil
Title: President and Treasurer
Attest: FRED ALGER MANAGEMENT, INC.
_______________________________ By: __________________________
Name:
Title:
EXHIBIT 5(ix)
FORM OF SUB-ADVISORY AGREEMENT ON BEHALF OF THE
TACTICAL ASSET ALLOCATION PORTFOLIO OF THE FUND
<PAGE>
SUB-ADVISORY AGREEMENT
BETWEEN
WRL INVESTMENT MANAGEMENT, INC.
AND
DEAN INVESTMENT ASSOCIATES
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 Dean Investment
Associates ("Sub-Adviser"), a corporation organized and existing under the laws
of the State of Ohio.
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 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 Tactical Asset
Allocation 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. APPOINTMENT.
Investment Adviser hereby appoints the Sub-Adviser as its investment
sub-adviser with respect to the Portfolio for the period and on the terms set
forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
2. DUTIES OF THE SUB-ADVISER.
A. INVESTMENT SUB-ADVISORY SERVICES. Subject to the supervision of
the Fund's Board of Directors ("Board") and the Investment Adviser, the
Sub-Adviser shall act as the investment sub-adviser and shall supervise and
direct the investments of the Portfolio in accordance with the Portfolio's
investment objective, 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 directed by the appropriate
officers of the Investment Adviser or the Fund by notice in writing to the
Sub-Adviser. The Sub-Adviser 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 Portfolio in a manner consistent with the
Portfolio's investment objective, policies, and restrictions. In furtherance of
this duty, the Sub-Adviser, on behalf of the Portfolio, is authorized, in its
discretion and without prior consultation with the Portfolio or the Investment
Adviser, to:
(1) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds and other securities or assets; and
1
<PAGE>
(2) place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or through
such brokers, dealers, underwriters or issuers as the Sub-Adviser may
select.
B. ADDITIONAL DUTIES OF SUB-ADVISER. In addition to the above,
Sub-Adviser shall:
(1) furnish continuous investment information, advice and
recommendations to the Fund as to the acquisition, holding or
disposition of any or all of the securities or other assets which the
Portfolio may own or contemplate acquiring from time to time;
(2) cause its officers to attend meetings of the Fund and furnish oral
or written reports, as the Fund may reasonably require, in order to
keep the Fund and its officers and Board 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; and
(3) furnish such statistical and analytical information and reports as
may reasonably be required by the Fund from time to time.
C. FURTHER DUTIES OF SUB-ADVISER. In all matters relating to the
performance of this Agreement, the Sub-Adviser shall act in conformity with the
Fund's Articles of Incorporation and By-Laws, as each may be amended or
supplemented, and currently effective Registration Statement (as defined below)
and with the written instructions and directions of the Board and the Investment
Adviser, and shall comply with the requirements of the 1940 Act, the Advisers
Act, the rules thereunder, and all other applicable federal and state laws and
regulations.
3. COMPENSATION.
For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, the Sub-Adviser shall receive a monthly investment
management fee equal to (i) 50% of the fees received by the Investment Adviser
for services rendered under the Advisory Agreement by the Investment Adviser to
the Portfolio, less (ii) 50% of the amount paid by the Investment Adviser on
behalf of the Portfolio pursuant to any expense limitation or the amount of any
other reimbursement made by the Investment Adviser to the Portfolio. The
management fee shall be payable by the Investment Adviser monthly to the
Sub-Adviser upon receipt by the Investment Adviser from the Portfolio of
advisory fees payable to the Investment Adviser. 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
pro-rated according to the pro-ration which such period bears to the full month
in which such effectiveness or termination occurs.
4. DUTIES OF THE INVESTMENT ADVISER.
A. The Investment Adviser shall continue to have responsibility for all
services to be provided to the Portfolio pursuant to the Advisory Agreement and
shall oversee and review the Sub-Adviser's performance of its duties under this
Agreement.
B. The Investment Adviser has furnished the Sub-Adviser with copies of
each of the following documents and will furnish to the Sub-Adviser 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 Fund, 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 Fund as in effect on the date hereof and as
amended from time to time ("By-Laws");
(3) Certified resolutions of the Board of the Fund authorizing the
appointment of the Investment Adviser and the Sub-Adviser and
approving the form of the Advisory Agreement and this Agreement;
2
<PAGE>
(4) The Fund'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 Portfolio
and its shares and all amendments thereto ("Registration Statement");
(5) The Notification of Registration of the Fund 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
(7) A certified copy of any publicly available 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 Portfolio to its shareholders or to any governmental body or
securities exchange.
The Investment Adviser shall furnish the Sub-Adviser with any further
documents, materials or information that the Sub-Adviser may reasonably request
to enable it to perform its duties pursuant to this Agreement.
C. During the term of this Agreement, the Investment Adviser shall
furnish to the Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to shareholders of the Portfolio or the public, which
refer to the Sub-Adviser or investment companies or other advisory accounts
advised or sponsored by the Sub-Adviser or investment companies or other
advisory accounts advised or sponsored by the Sub-Adviser in any way, prior to
the use thereof, and the Investment Adviser shall not use any such materials if
the Sub-Adviser reasonably objects in writing fifteen business days (or such
other time as may be mutually agreed) after receipt thereof.
5. BROKERAGE.
A. The Sub-Adviser 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 (best price and execution);
provided that, on behalf of the Fund, the Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser, or any affiliated person thereof, except in accordance
with the federal securities laws and the rules and regulations thereunder.
B. On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients of the
Sub-Adviser, the Sub-Adviser, 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 Sub-Adviser in the manner the Sub-Adviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund and to its other clients.
C. In addition to the foregoing, the Sub-Adviser agrees that orders
with broker-dealers for the purchase or sale of portfolio securities by the
Portfolio shall be placed in accordance with the standards set forth in the
Advisory Agreement.
6. OWNERSHIP OF RECORDS.
The Sub-Adviser shall maintain all books and records required to be
maintained by the Sub-Adviser 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
Sub-Adviser hereby agrees: (i) that all records that it maintains for the Fund
are the property of the Fund, (ii) to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any records that it maintains for the Fund and
that are
3
<PAGE>
required to be maintained by Rule 31a-1 under the 1940 Act and (iii) agrees to
surrender promptly to the Fund any records that it maintains for the Fund upon
request by the Fund; provided, however, the Sub-Adviser may retain copies of
such records.
7. REPORTS.
The Sub-Adviser shall furnish to the Board or the Investment Adviser, or
both, as appropriate, such information, reports, evaluations, analyses and
opinions as the Sub-Adviser and the Board or the Investment 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 Sub-Adviser, 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 Sub-Adviser, who
may also be a director, officer, or employee of the Fund, 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. REPRESENTATIONS OF SUB-ADVISER.
The Sub-Adviser represents, warrants, and agrees as follows:
A. The Sub-Adviser: (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 Agreement; (iii)
has met, and will continue to meet for so long as this Agreement remains in
effect, any 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 Investment Adviser of the
occurrence of any event that would disqualify the Sub-Adviser from serving as an
investment adviser of an investment company pursuant to Section 9 (a) of the
1940 Act or otherwise.
B. The Sub-Adviser 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 Investment Adviser and the Fund with a copy of such
code of ethics, together with evidence of its adoption.
C. The Sub-Adviser has provided the Investment Adviser and the Fund
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 Investment Adviser.
10. 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 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 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, with respect to the Portfolio, 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
Portfolio; and (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 Fund who are not parties to this Agreement or interested
persons of any such party. The Sub-Adviser shall furnish to the Fund, 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.
4
<PAGE>
11. 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 Portfolio on at least 60
days' prior written notice to the Sub-Adviser. This Agreement may also be
terminated by the Investment Adviser: (i) on at least 60 days' prior written
notice to the Sub-Adviser, without the payment of any penalty; or (ii) if the
Sub-Adviser becomes unable to discharge its duties and obligations under this
Agreement. The Sub-Adviser may terminate this Agreement at any time, or preclude
its renewal without the payment of any penalty, on at least 60 days' prior
notice to the Investment Adviser. This Agreement shall terminate automatically
in the event of its assignment or upon termination of the Advisory Agreement.
12. 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 amendment of this Agreement shall be effective until approved by
vote of a majority of the Portfolio's outstanding voting securities, unless
otherwise permitted in accordance with the 1940 Act.
13. 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 Fund 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 of
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 1940
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, unless the
Investment Adviser and the Sub-Adviser agree to the contrary.
5
<PAGE>
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: Kenneth P. Beil
Title: President and Treasurer
Attest: DEAN INVESTMENT ASSOCIATES
________________________ By: ___________________________
Name:
Title:
6
EXHIBIT 5(x)
FORM OF SUB-ADVISORY AGREEMENT ON BEHALF OF THE
C.A.S.E. QUALITY GROWTH, C.A.S.E. GROWTH AND C.A.S.E. GROWTH &
INCOME PORTFOLIOS OF THE FUND
<PAGE>
SUB-ADVISORY AGREEMENT
BETWEEN
WRL INVESTMENT MANAGEMENT, INC.
AND
C.A.S.E. 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 C.A.S.E.
Management, Inc. ("Sub-Adviser"), a corporation organized and existing under the
laws of the State of Pennsylvania.
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 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 C.A.S.E. Growth,
C.A.S.E. Growth & Income and C.A.S.E. Quality Growth Portfolios ("Portfolios"),
each 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 Portfolios 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. APPOINTMENT.
Investment Adviser hereby appoints the Sub-Adviser as its investment
sub-adviser with respect to the Portfolios for the period and on the terms set
forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
2. DUTIES OF THE SUB-ADVISER.
A. INVESTMENT SUB-ADVISORY SERVICES. Subject to the supervision of the
Fund's Board of Directors ("Board") and the Investment Adviser, the Sub-Adviser
shall act as the investment sub-adviser and shall supervise and direct the
investments of the Portfolios in accordance with each Portfolio's investment
objective, 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 directed by the appropriate officers of the
Investment Adviser or the Fund by notice in writing to the Sub-Adviser. The
Sub-Adviser 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 Portfolios in a manner consistent with each Portfolio's
investment objective, policies, and restrictions. In furtherance of this duty,
the Sub-Adviser, on behalf of each Portfolio, is authorized, in its discretion
and without prior consultation with the Portfolios or the Investment Adviser,
to:
(1) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds and other securities or assets; and
(2) place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or
through such brokers, dealers, underwriters or issuers as the
Sub-Adviser may select.
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B. ADDITIONAL DUTIES OF SUB-ADVISER. In addition to the above,
Sub-Adviser shall:
(1) furnish continuous investment information, advice and
recommendations to the Fund as to the acquisition, holding or
disposition of any or all of the securities or other assets which
the Portfolios may own or contemplate acquiring from time to time;
(2) cause its officers to attend meetings of the Fund and furnish
oral or written reports, as the Fund may reasonably require, in
order to keep the Fund and its officers and Board fully informed as
to the condition of the investment securities of the Portfolios,
the investment recommendations of the Sub-Adviser, and the
investment considerations which have given rise to those
recommendations; and
(3) furnish such statistical and analytical information and reports
as may reasonably be required by the Fund from time to time.
C. FURTHER DUTIES OF SUB-ADVISER. In all matters relating to the
performance of this Agreement, the Sub-Adviser shall act in conformity with the
Fund's Articles of Incorporation and By-Laws, as each may be amended or
supplemented, and currently effective Registration Statement (as defined below)
and with the written instructions and directions of the Board and the Investment
Adviser, and shall comply with the requirements of the 1940 Act, the Advisers
Act, the rules thereunder, and all other applicable federal and state laws and
regulations.
3. COMPENSATION.
For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, the Sub-Adviser shall receive a monthly investment
management fee equal to 50% of the fees received by the Investment Adviser for
services rendered under the Advisory Agreement by the Investment Adviser to each
Portfolio. The management fee shall be payable by the Investment Adviser monthly
to the Sub-Adviser upon receipt by the Investment Adviser from each Portfolio of
advisory fees payable to the Investment Adviser. 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
pro-rated according to the pro-ration which such period bears to the full month
in which such effectiveness or termination occurs.
4. DUTIES OF THE INVESTMENT ADVISER.
A. The Investment Adviser shall continue to have responsibility for
all services to be provided to the Portfolios pursuant to the Advisory Agreement
and shall oversee and review the Sub-Adviser's performance of its duties under
this Agreement.
B. The Investment Adviser has furnished the Sub-Adviser with copies
of each of the following documents and will furnish to the Sub-Adviser 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 Fund, 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 Fund as in effect on the date hereof and as
amended from time to time ("By-Laws");
(3) Certified resolutions of the Board of the Fund authorizing the
appointment of the Investment Adviser and the Sub-Adviser and
approving the form of the Advisory Agreement and this Agreement;
(4) The Fund'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
Portfolios and its shares and all amendments thereto ("Registration
Statement");
(5) The Notification of Registration of the Fund under the 1940 Act
on Form N-8A as filed with the SEC and any amendments thereto:
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(6) The Portfolios' Prospectus (as defined above); and
(7) A certified copy of any publicly available 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 Portfolios to its shareholders or to any governmental body
or securities exchange.
The Investment Adviser shall furnish the Sub-Adviser with any further
documents, materials or information that the Sub-Adviser may reasonably request
to enable it to perform its duties pursuant to this Agreement.
C. During the term of this Agreement, the Investment Adviser shall
furnish to the Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to shareholders of the Portfolios or the public, which
refer to the Sub-Adviser or investment companies or other advisory accounts
advised or sponsored by the Sub-Adviser or investment companies or other
advisory accounts advised or sponsored by the Sub-Adviser in any way, prior to
the use thereof, and the Investment Adviser shall not use any such materials if
the Sub-Adviser reasonably objects in writing fifteen business days (or such
other time as may be mutually agreed) after receipt thereof.
5. BROKERAGE.
A. The Sub-Adviser 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 (best price and
execution); provided that, on behalf of the Fund, the Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder.
B. On occasions when the Sub-Adviser deems the purchase or sale of
a security to be in the best interest of the Fund as well as other clients of
the Sub-Adviser, the Sub-Adviser, 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 Sub-Adviser in the manner the Sub-Adviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund and to its other clients.
C. In addition to the foregoing, the Sub-Adviser agrees that orders
with broker-dealers for the purchase or sale of portfolio securities by the
Portfolios shall be placed in accordance with the standards set forth in the
Advisory Agreement.
6. OWNERSHIP OF RECORDS.
The Sub-Adviser shall maintain all books and records required to be
maintained by the Sub-Adviser 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
Sub-Adviser hereby agrees: (i) that all records that it maintains for the Fund
are the property of the Fund, (ii) to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any records that it maintains for the Fund and
that are required to be maintained by Rule 31a-1 under the 1940 Act and (iii)
agrees to surrender promptly to the Fund any records that it maintains for the
Fund upon request by the Fund; provided, however, the Sub-Adviser may retain
copies of such records.
3
<PAGE>
7. REPORTS.
The Sub-Adviser shall furnish to the Board or the Investment Adviser,
or both, as appropriate, such information, reports, evaluations, analyses and
opinions as the Sub-Adviser and the Board or the Investment 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 Sub-Adviser, 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 Sub-Adviser, who
may also be a director, officer, or employee of the Fund, 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. REPRESENTATIONS OF SUB-ADVISER.
The Sub-Adviser represents, warrants, and agrees as follows:
A. The Sub-Adviser: (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 Agreement; (iii)
has met, and will continue to meet for so long as this Agreement remains in
effect, any 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 Investment Adviser of the
occurrence of any event that would disqualify the Sub-Adviser from serving as an
investment adviser of an investment company pursuant to Section 9 (a) of the
1940 Act or otherwise.
B. The Sub-Adviser 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 Investment Adviser and the Fund with a copy of
such code of ethics, together with evidence of its adoption.
C. The Sub-Adviser has provided the Investment Adviser and the Fund
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 Investment Adviser.
10. 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 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 each 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, with respect to each Portfolio, 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 each
Portfolio; and (b) in either event, by the vote, case in person at a meeting
called for the purpose of voting on such approval, of a majority of the
Directors of the Fund who are not parties to this Agreement or interested
persons of any such party. The Sub-Adviser shall furnish to the Fund, 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.
11. 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 Portfolios on at least 60
days' prior written notice to the Sub-Adviser. This Agreement may also be
terminated by the Investment
4
<PAGE>
Adviser: (i) on at least 60 days' prior written notice to the Sub-Adviser,
without the payment of any penalty; or (ii) if the Sub-Adviser becomes unable to
discharge its duties and obligations under this Agreement. The Sub-Adviser may
terminate this Agreement at any time, or preclude its renewal without the
payment of any penalty, on at least 60 days' prior notice to the Investment
Adviser. This Agreement shall terminate automatically in the event of its
assignment or upon termination of the Advisory Agreement.
12. 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 amendment of this Agreement shall be effective until approved by
vote of a majority of each Portfolio's outstanding voting securities, unless
otherwise permitted in accordance with the 1940 Act.
13. 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 Fund 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 of
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 1940
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, unless the
Investment Adviser and the Sub-Adviser agree to the contrary.
5
<PAGE>
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: Kenneth P. Beil
Title: President and Treasurer
Attest: C.A.S.E. MANAGEMENT, INC.
____________________________ By ____________________________
Name:
Title:
6
EXHIBIT 5(xi)
FORM OF CO-SUB-ADVISORY AGREEMENTS ON BEHALF OF THE
INTERNATIONAL EQUITY PORTFOLIO OF THE FUND
<PAGE>
SUB-ADVISORY AGREEMENT
BETWEEN
WRL INVESTMENT MANAGEMENT, INC.
AND
SCOTTISH EQUITABLE INVESTMENT MANAGEMENT LIMITED
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 Scottish Equitable
Investment Management Limited ("Co-Sub-Adviser"), a corporation organized and
existing under the laws of Scotland, United Kingdom.
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 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 International Equity
Portfolio ("Portfolio"), a separate series of the Fund;
WHEREAS, the Co-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 Co-Sub-Adviser as
sub-adviser to furnish certain investment advisory services to the Investment
Adviser with respect to the Portfolio and the Co-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. APPOINTMENT.
Investment Adviser hereby appoints the Co-Sub-Adviser as an investment
sub-adviser with respect to the Portfolio for the period and on the terms set
forth in this Agreement. The Co-Sub-Adviser accepts such appointment and agrees
to render the services herein set forth, for the compensation herein provided.
2. DUTIES OF THE CO-SUB-ADVISER.
A. INVESTMENT SUB-ADVISORY SERVICES. Subject to the supervision of the
Fund's Board of Directors ("Board") and the Investment Adviser, the
Co-Sub-Adviser shall act as an investment sub-adviser and shall supervise and
direct the investments of the Portfolio's assets under its management in
accordance with the Portfolio's investment objective, 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
directed by the appropriate officers of the Investment Adviser or the Fund by
notice in writing to the Co-Sub-Adviser. The Co-Sub-Adviser 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
Portfolio allocated to it in a manner consistent with the Portfolio's investment
objective, policies, and restrictions. In furtherance of this duty, the
Co-Sub-Adviser, on behalf of the Portfolio, is authorized, in its discretion and
without prior consultation with the Portfolio or the Investment Adviser, to:
(1) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds and other securities or assets; and
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<PAGE>
(2) place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or through
such brokers, dealers, underwriters or issuers as the Co-Sub-Adviser
may select.
B. ADDITIONAL DUTIES OF CO-SUB-ADVISER. In addition to the above,
Co-Sub-Adviser shall:
(1) furnish continuous investment information, advice and
recommendations to the Fund as to the acquisition, holding or
disposition of any or all of the securities or other assets which the
Portfolio may own or contemplate acquiring from time to time;
(2) cause its officers or other representatives to attend meetings of
the Fund and furnish oral or written reports, as the Fund may
reasonably require, in order to keep the Fund and its officers and
Board fully informed as to the condition of the investment securities
of the Portfolio, the investment recommendations of the Co-Sub-Adviser,
and the investment considerations which have given rise to those
recommendations; and
(3) furnish such statistical and analytical information and reports as
may reasonably be required by the Fund from time to time.
C. FURTHER DUTIES OF CO-SUB-ADVISER. In all matters relating to the
performance of this Agreement, the Co-Sub-Adviser shall act in conformity with
the Fund's Articles of Incorporation and By-Laws, as each may be amended or
supplemented, and currently effective Registration Statement (as defined below)
and with the written instructions and directions of the Board and the Investment
Adviser, and shall comply with the requirements of the 1940 Act, the Advisers
Act, the rules thereunder, and all other applicable federal and state laws and
regulations.
3. COMPENSATION.
For the services provided and the expenses assumed by the Co-Sub-Adviser
pursuant to this Agreement, the Co-Sub-Adviser shall receive a monthly
investment management fee equal to (i) 50% of the fees received by the
Investment Adviser for services rendered under the Advisory Agreement by the
Investment Adviser with respect to the amount of the Portfolio's assets managed
by the Co-Sub-Adviser during such period, less (ii) 50% of the amount paid by
the Investment Adviser on behalf of the Portfolio pursuant to any expense
limitation with respect to the amount of the Portfolio's assets managed by the
Co-Sub-Adviser during such period. The management fee shall be payable by the
Investment Adviser monthly to the Co-Sub-Adviser upon receipt by the Investment
Adviser from the Portfolio of advisory fees payable to the Investment Adviser.
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 pro-rated according to the pro-ration which such
period bears to the full month in which such effectiveness or termination
occurs.
4. DUTIES OF THE INVESTMENT ADVISER.
A. The Investment Adviser shall continue to have responsibility for all
services to be provided to the Portfolio pursuant to the Advisory Agreement and
shall oversee and review the Co-Sub-Adviser's performance of its duties under
this Agreement.
B. The Investment Adviser has furnished the Co-Sub-Adviser with copies
of each of the following documents and will furnish to the Co-Sub-Adviser 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 Fund, 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 Fund as in effect on the date hereof and
as amended from time to time ("By-Laws");
(3) Certified resolutions of the Board of the Fund authorizing
the appointment of the Investment Adviser and the Co-Sub-Adviser and
approving the form of the Advisory Agreement and this Agreement;
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<PAGE>
(4) The Fund'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 Portfolio
and its shares and all amendments thereto ("Registration
Statement");
(5) The Notification of Registration of the Fund 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 any amendments
effected from time to time; and
(7) A certified copy of any publicly available 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 Portfolio to its shareholders or
to any governmental body or securities exchange.
(8) Written instructions and directions of the Board and such
other limitations applicable from time to time, including those
specified in Clause 2.A.
The Investment Adviser shall furnish the Co-Sub-Adviser with any further
documents, materials or information that the Co-Sub-Adviser may reasonably
request to enable it to perform its duties pursuant to this Agreement.
C. During the term of this Agreement, the Investment Adviser shall
furnish to the Co-Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to shareholders of the Portfolio or the public, which
refer to the Co-Sub-Adviser or investment companies or other advisory accounts
advised or sponsored by the Co-Sub-Adviser or investment companies or other
advisory accounts advised or sponsored by the Co-Sub-Adviser in any way, prior
to the use thereof, and the Investment Adviser shall not use any such materials
if the Co-Sub-Adviser reasonably objects in writing fifteen business days (or
such other time as may be mutually agreed) after receipt thereof.
5. BROKERAGE.
A. The Co-Sub-Adviser 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 (best price and
execution); provided that, on behalf of the Fund, the Co-Sub-Adviser 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 Co-Sub-Adviser 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 Co-Sub-Adviser 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 Co-Sub-Adviser, or any affiliated
person thereof, except in accordance with the federal securities laws and the
rules and regulations thereunder.
B. On occasions when the Co-Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients of the
Co-Sub-Adviser, the Co-Sub-Adviser, 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 Co-Sub-Adviser in the manner
the Co-Sub-Adviser considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to its other clients.
C. In addition to the foregoing, the Co-Sub-Adviser agrees that orders
with broker-dealers for the purchase or sale of portfolio securities by the
Portfolio shall be placed in accordance with the standards set forth in the
Advisory Agreement.
3
<PAGE>
6. OWNERSHIP OF RECORDS.
The Co-Sub-Adviser shall maintain all books and records required to be
maintained by the Co-Sub-Adviser 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
Co-Sub-Adviser hereby agrees: (i) that all records that it maintains for the
Fund are the property of the Fund, (ii) to preserve for the periods prescribed
by Rule 31a-2 under the 1940 Act any records that it maintains for the Fund and
that are required to be maintained by Rule 31a-1 under the 1940 Act and (iii)
agrees to surrender promptly to the Fund any records that it maintains for the
Fund upon request by the Fund; provided, however, the Co-Sub-Adviser may retain
copies of such records.
7. REPORTS.
The Co-Sub-Adviser shall furnish to the Board or the Investment Adviser, or
both, as appropriate, such information, reports, evaluations, analyses and
opinions as the Co-Sub-Adviser and the Board or the Investment 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 Co-Sub-Adviser, 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 Co-Sub-Adviser, who may also be a
director, officer, or employee of the Fund, 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. REPRESENTATIONS OF CO-SUB-ADVISER.
The Co-Sub-Adviser represents, warrants, and agrees as follows:
A. The Co-Sub-Adviser: (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 Agreement; (iii)
has met, and will continue to meet for so long as this Agreement remains in
effect, any 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 Investment Adviser of the
occurrence of any event that would disqualify the Co-Sub-Adviser from serving as
an investment adviser of an investment company pursuant to Section 9 (a) of the
1940 Act or otherwise.
B. The Co-Sub-Adviser 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 Investment Adviser and the Fund with a copy of
such code of ethics, together with evidence of its adoption.
C. The Co-Sub-Adviser has provided the Investment Adviser and the Fund
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 Investment Adviser.
10. 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 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 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, with respect to the Portfolio, 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
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securities of the Portfolio; and (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 Fund who are not parties to this Agreement or
interested persons of any such party. The Co-Sub-Adviser shall furnish to the
Fund, 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.
11. 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 Portfolio on at least 60
days' prior written notice to the Co-Sub-Adviser. This Agreement may also be
terminated by the Investment Adviser: (i) on at least 60 days' prior written
notice to the Co-Sub-Adviser, without the payment of any penalty; or (ii) if the
Co-Sub-Adviser becomes unable to discharge its duties and obligations under this
Agreement. The Co-Sub-Adviser may terminate this Agreement at any time, or
preclude its renewal without the payment of any penalty, on at least 60 days'
prior notice to the Investment Adviser. This Agreement shall terminate
automatically in the event of its assignment or upon termination of the Advisory
Agreement.
12. 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 amendment of this Agreement shall be effective until approved by
vote of a majority of the Portfolio's outstanding voting securities, unless
otherwise permitted in accordance with the 1940 Act.
13. 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 Fund 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 of 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 1940
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, unless the
Investment Adviser and the Co-Sub-Adviser agree to the contrary.
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<PAGE>
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: Kenneth P. Beil
Title: President and Treasurer
Attest: SCOTTISH EQUITABLE INVESTMENT
MANAGEMENT LIMITED
__________________________ By: ____________________________
Name:
Title:
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<PAGE>
SUB-ADVISORY AGREEMENT
BETWEEN
WRL INVESTMENT MANAGEMENT, INC.
AND
GE INVESTMENT MANAGEMENT INCORPORATED
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 GE Investment Management
Incorporated ("Co-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 International Equity
Portfolio ("Portfolio"), a separate series of the Fund;
WHEREAS, the Co-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 Co-Sub-Adviser as
sub-adviser to furnish certain investment advisory services to the Investment
Adviser with respect to the Portfolio and the Co-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. APPOINTMENT.
Investment Adviser hereby appoints the Co-Sub-Adviser as an investment
sub-adviser with respect to the Portfolio for the period and on the terms set
forth in this Agreement. The Co-Sub-Adviser accepts such appointment and agrees
to render the services herein set forth, for the compensation herein provided.
2. DUTIES OF THE CO-SUB-ADVISER.
A. INVESTMENT SUB-ADVISORY SERVICES. Subject to the supervision of the
Fund's Board of Directors ("Board") and the Investment Adviser, the
Co-Sub-Adviser shall act as an investment sub-adviser and shall supervise and
direct the investments of the Portfolio's assets under its management in
accordance with the Portfolio's investment objective, 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
directed by the appropriate officers of the Investment Adviser or the Fund by
notice in writing to the Co-Sub-Adviser. The Co-Sub-Adviser 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
Portfolio allocated to it in a manner consistent with the Portfolio's investment
objective, policies, and restrictions. In furtherance of this duty, the
Co-Sub-Adviser, on behalf of the Portfolio, is authorized, in its discretion and
without prior consultation with the Portfolio or the Investment Adviser, to:
(1) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds and other securities or assets; and
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<PAGE>
(2) place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or through
such brokers, dealers, underwriters or issuers as the Co-Sub-Adviser
may select.
B. ADDITIONAL DUTIES OF CO-SUB-ADVISER. In addition to the above,
Co-Sub-Adviser shall:
(1) furnish continuous investment information, advice and
recommendations to the Fund as to the acquisition, holding or
disposition of any or all of the securities or other assets which the
Portfolio may own or contemplate acquiring from time to time;
(2) cause its officers to attend quarterly (or such less frequent)
meetings of the Fund in person, via telephone or teleconference
capabilities and furnish oral or written reports, as the Fund may
reasonably require, in order to keep the Fund and its officers and
Board fully informed as to the condition of the investment securities
of the Portfolio, the investment recommendations of the Co-Sub-Adviser,
and the investment considerations which have given rise to those
recommendations; and
(3) furnish such statistical and analytical information and reports as
may reasonably be required by the Fund from time to time.
C. FURTHER DUTIES OF CO-SUB-ADVISER. In all matters relating to the
performance of this Agreement, the Co-Sub-Adviser shall act in conformity with
the Fund's Articles of Incorporation and By-Laws, as each may be amended or
supplemented, and currently effective Registration Statement (as defined below)
and with the written instructions and directions of the Board and the Investment
Adviser, either as reflected in the Registration Statement (as defined below) or
otherwise provided in writing to the Co-Sub-Adviser by the Investment Adviser,
and shall comply with the requirements of the 1940 Act, the Advisers Act, the
rules thereunder, and all other applicable federal and state laws and
regulations, either as reflected in the Registration Statement (as defined
below), or otherwise provided in writing to the Co-Sub-Adviser by the Investment
Adviser.
3. COMPENSATION.
For the services provided and the expenses assumed by the Co-Sub-Adviser
pursuant to this Agreement, the Co-Sub-Adviser shall receive a monthly
investment management fee equal to (i) 50% of the fees received by the
Investment Adviser for services rendered under the Advisory Agreement by the
Investment Adviser with respect to the amount of the Portfolio's assets managed
by the Co-Sub-Adviser during such period, less (ii) 50% of the amount paid by
the Investment Adviser on behalf of the Portfolio pursuant to any expense
limitation with respect to the amount of the Portfolio's assets managed by the
Co-Sub-Adviser during such period. The management fee shall be payable by the
Investment Adviser monthly to the Co-Sub-Adviser upon receipt by the Investment
Adviser from the Portfolio of advisory fees payable to the Investment Adviser.
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 pro-rated according to the pro-ration which such
period bears to the full month in which such effectiveness or termination
occurs. Any amount borne by the Co-Sub-Adviser pursuant to (ii) above in this
paragraph constitutes an agreement between the Investment Adviser and
Co-Sub-Adviser only for the first twelve months following commencement of
operations of the Portfolio. The fee payable to the Co-Sub-Adviser pursuant to
this paragraph will not be waived by the Co-Sub-Adviser or otherwise reduced by
any waiver or expense limitation affecting the fee that is payable to the
Investment Adviser under the Advisory Agreement, except as may be mutually
agreed upon by the Co-Sub-Adviser and the Investment Adviser.
4. DUTIES OF THE INVESTMENT ADVISER.
A. The Investment Adviser shall continue to have responsibility for all
services to be provided to the Portfolio pursuant to the Advisory Agreement and
shall oversee and review the Co-Sub-Adviser's performance of its duties under
this Agreement.
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<PAGE>
B. The Investment Adviser has furnished the Co-Sub-Adviser with copies
of each of the following documents and will furnish to the Co-Sub-Adviser 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 Fund, 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 Fund as in effect on the date hereof and
as amended from time to time ("By-Laws");
(3) Certified resolutions of the Board of the Fund authorizing
the appointment of the Investment Adviser and the Co-Sub-Adviser and
approving the form of the Advisory Agreement and this Agreement;
(4) The Fund's Registration Statement under the 1940 Act and the
Securities Act of 1933, as amended ("1933 Act"), on Form N-1A, as
filed with the Securities and Exchange Commission ("SEC") relating
to the Portfolio and its shares and all amendments thereto
("Registration Statement");
(5) The Notification of Registration of the Fund under the 1940
Act on Form N-8A as filed with the SEC and any amendments thereto;
(6) The Fund's Prospectus and Statement of Additional Information
(as defined above); and
(7) A certified copy of any publicly available 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 Portfolio to its shareholders or
to any governmental body or securities exchange.
The Investment Adviser shall furnish the Co-Sub-Adviser with any further
documents, materials or information that the Co-Sub-Adviser may reasonably
request to enable it to perform its duties pursuant to this Agreement.
C. During the term of this Agreement, the Investment Adviser shall
furnish to the Co-Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to shareholders of the Portfolio or the public, which
refer to the Co-Sub-Adviser or investment companies or other advisory accounts
advised or sponsored by the Co-Sub-Adviser in any way, prior to the use thereof,
and the Investment Adviser shall not use any such materials if the
Co-Sub-Adviser reasonably objects in writing fifteen business days (or such
other time as may be mutually agreed) after receipt thereof.
5. BROKERAGE.
A. The Co-Sub-Adviser 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 (best price and
execution); provided that, on behalf of the Fund, the Co-Sub-Adviser 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 Co-Sub-Adviser 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 Co-Sub-Adviser 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 Co-Sub-Adviser, or any affiliated
person thereof, except in accordance with the federal securities laws and the
rules and regulations thereunder.
B. On occasions when the Co-Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients of the
Co-Sub-Adviser, the Co-Sub-Adviser, 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
3
<PAGE>
such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Co-Sub-Adviser in the
manner the Co-Sub-Adviser considers to be the most equitable and consistent with
its fiduciary obligations to the Fund and to its other clients.
C. In addition to the foregoing, the Co-Sub-Adviser agrees that orders
with broker-dealers for the purchase or sale of portfolio securities by the
Portfolio shall be placed in accordance with the standards set forth in the
Advisory Agreement, and the Investment Adviser acknowledges in this Agreement
the specific authority given to both the Investment Adviser and the
Co-Sub-Adviser under the Advisory Agreement with respect to the placement of
brokerage.
6. OWNERSHIP OF RECORDS.
The Co-Sub-Adviser shall maintain all books and records required to be
maintained by the Co-Sub-Adviser 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
Co-Sub-Adviser hereby agrees: (i) that all records that it maintains for the
Fund are the property of the Fund, (ii) to preserve for the periods prescribed
by Rule 31a-2 under the 1940 Act any records that it maintains for the Fund and
that are required to be maintained by Rule 31a-1 under the 1940 Act and (iii)
agrees to surrender promptly to the Fund any records that it maintains for the
Fund upon request by the Fund; provided, however, the Co-Sub-Adviser may retain
copies of such records.
7. REPORTS.
The Co-Sub-Adviser shall furnish to the Board or the Investment Adviser, or
both, as appropriate, such information, reports, evaluations, analyses and
opinions as the Co-Sub-Adviser and the Board or the Investment 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 Co-Sub-Adviser, or any affiliated person thereof, to render investment
advisory, management and corporate administrative services to any other
investment companies, to act as investment manager or investment counselor to
any 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
Co-Sub-Adviser, who may also be a director, officer, or employee of the Fund, 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. REPRESENTATIONS OF CO-SUB-ADVISER.
The Co-Sub-Adviser represents, warrants, and agrees as follows:
A. The Co-Sub-Adviser: (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 Agreement; (iii)
has met, and will seek to 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 promptly notify the Investment Adviser of the occurrence
of any event that would disqualify the Co-Sub-Adviser from serving as an
investment adviser of an investment company pursuant to Section 9 (a) of the
1940 Act or otherwise.
B. The Co-Sub-Adviser 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 Investment Adviser and the Fund with a copy of
such code of ethics, together with evidence of its adoption.
C. The Co-Sub-Adviser has provided the Investment Adviser and the Fund
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 Investment Adviser.
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<PAGE>
10. REPRESENTATIONS AND WARRANTIES OF INVESTMENT ADVISER.
The Investment Adviser represents, warrants and agrees as follows:
A. The Investment Adviser (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 from
performing the services contemplated by the Advisory Agreement; (iii) has met,
and will seek to 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 the Advisory Agreement;
(iv) has the authority to enter into and perform the services contemplated by
the Advisory Agreement and has the authority to enter into this Agreement; and
(v) will promptly notify the Co-Sub-Adviser of the occurrence of any event that
would disqualify the Investment Adviser from serving as an investment adviser of
an investment company pursuant to Section 9(a) of the 1940 Act or otherwise.
B. The Investment Adviser agrees that it will notify the
Co-Sub-Adviser, to the extent possible, within a reasonable period of time prior
to any termination of this Agreement pursuant to Section 14 which arises from a
termination of the Advisory Agreement (including any termination by assignment
resulting from a foreseeable change in control of the Investment Adviser that is
a matter of public information).
11. LIMITATION OF LIABILITY.
The Co-Sub-Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Portfolio, the Fund or its shareholders
or by the Investment Adviser 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.
12. INDEMNIFICATION.
A. The Investment Adviser agrees to indemnify the Co-Sub-Adviser, its
officers and directors, and any person who controls the Co-Sub-Adviser within
the meaning of Section 15 of the 1933 Act for any loss or expense (including
attorney's fees) arising out of any claim, demand, action or suit in the event
that the Co-Sub-Adviser has been found to be without fault and the Investment
Adviser or any other investment sub-adviser to the Portfolio, or any person who
controls the Investment Adviser or such other investment sub-adviser within the
meaning of Section 15 of the 1933 Act has been found at fault (i) by the final
judgment of a court of competent jurisdiction or (ii) in any order of settlement
of any claim, demand, action or suit that has been approved by the Board of
Directors of the Investment Adviser, such other investment sub-adviser or such
other controlling person.
B. The Co-Sub-Adviser agrees to indemnify the Investment Adviser, its
officers and directors, and any person who controls the Investment Adviser
within the meaning of Section 15 of the 1933 Act for any loss or expense
(including attorney's fees) arising out of any claim, demand, action or suit in
the event that the Investment Adviser has been found to be without fault and the
Co-Sub-Adviser or any person who controls the Co-Sub-Adviser within the meaning
of Section 15 of the 1933 Act has been found at fault (i) by the final judgment
of a court of competent jurisdiction or (ii) in any order of settlement of any
claim, demand, action or suit that has been approved by the Board of Directors
of the Co-Sub-Adviser or such other controlling person.
13. 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 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 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, with respect to the Portfolio, 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
Portfolio; and (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 Fund who are not parties to this Agreement or interested
persons of any such party. The Co-Sub-Adviser shall furnish to the Fund,
promptly upon its request
5
<PAGE>
such information as may reasonably be necessary to evaluate the terms of this
Agreement or any extension, renewal, or amendment hereof.
14. 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 Portfolio on at least 60
days' prior written notice to the Co-Sub-Adviser. This Agreement may also be
terminated by the Investment Adviser: (i) on at least 60 days' prior written
notice to the Co-Sub-Adviser, without the payment of any penalty; or (ii) if the
Co-Sub-Adviser becomes unable to discharge its duties and obligations under this
Agreement. The Co-Sub-Adviser may terminate this Agreement at any time, or
preclude its renewal without the payment of any penalty, on at least 60 days'
prior notice to the Investment Adviser. This Agreement shall terminate
automatically in the event of its assignment or upon termination of the Advisory
Agreement.
15. 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 amendment of this Agreement shall be effective until approved by
vote of a majority of the Portfolio's outstanding voting securities, unless
otherwise permitted in accordance with the 1940 Act.
16. 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 Fund 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 1940
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, unless the
Investment Adviser and the Co-Sub-Adviser agree to the contrary.
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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: Kenneth P. Beil
Title: President and Treasurer
Attest: GE INVESTMENT MANAGEMENT INCORPORATED
__________________________ By: ___________________________________
Assistant Secretary Name: Michael J. Cosgrove
Title: Executive Vice President
EXHIBIT 5(xii)
FORM OF CO-SUB-ADVISORY AGREEMENTS ON BEHALF OF THE
MERIDIAN/INVESCO US SECTOR, MERIDIAN/INVESCO GLOBAL SECTOR AND MERIDIAN/INVESCO
FOREIGN SECTOR PORTFOLIOS OF THE FUND
<PAGE>
SUB-ADVISORY AGREEMENT
BETWEEN
WRL INVESTMENT MANAGEMENT, INC.
AND
MERIDIAN INVESTMENT MANAGEMENT CORPORATION
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 Meridian Investment
Management Corporation ("Co-Sub-Adviser"), a corporation organized and existing
under the laws of the State of Colorado.
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 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 Meridian/INVESCO
Global Sector, Meridian/INVESCO US Sector and Meridian/INVESCO Foreign Sector
Portfolios ("Portfolios"), each a separate series of the Fund;
WHEREAS, the Co-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 Co-Sub-Adviser as
sub-adviser to furnish certain investment advisory services to the Investment
Adviser with respect to the Portfolios and the Co-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. APPOINTMENT.
Investment Adviser hereby appoints the Co-Sub-Adviser as its investment
sub-adviser with respect to the Portfolios for the period and on the terms set
forth in this Agreement. The Co-Sub-Adviser accepts such appointment and agrees
to render the services herein set forth, for the compensation herein provided.
2. DUTIES OF THE CO-SUB-ADVISER.
A. INVESTMENT SUB-ADVISORY SERVICES. Subject to the supervision of the
Fund's Board of Directors ("Board") and the Investment Adviser, the
Co-Sub-Adviser shall act as the investment sub-adviser and shall supervise and
direct the investments of the Portfolios in accordance with each Portfolio's
investment objective, 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 directed by the appropriate
officers of the Investment Adviser or the Fund by notice in writing to the
Co-Sub-Adviser. The Co-Sub-Adviser 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 Portfolios in a manner
consistent with each Portfolio's investment objective, policies, and
restrictions. In furtherance of this duty, the Co-Sub-Adviser, on behalf of the
Portfolios, is authorized, in its discretion and without prior consultation with
the Portfolios or the Investment Adviser, to:
(1) furnish continuous investment information, advice and
recommendations to the Fund as to the asset allocation, industry and
country selections for any or all of the securities or of the
securities or other assets which the Portfolios may own or contemplate
acquiring from time to time;
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(2) cause its officers to attend meetings of the Fund and furnish oral
or written reports, as the Fund may reasonably require, in order to
keep the Fund and its officers and Board fully informed as to the
condition of the investment securities of the Portfolios, the
investment recommendations of the Co-Sub-Adviser, and the investment
considerations which have given rise to those recommendations;
(3) furnish such quantitative investment research, statistical and
analytical information and reports as may reasonably be required by the
Fund from time to time; and
(4) to make decisions with regard to asset allocation, industry and
country selections for each Portfolio.
B. FURTHER DUTIES OF CO-SUB-ADVISER. In all matters relating to the
performance of this Agreement, the Co-Sub-Adviser shall act in conformity with
the Fund's Articles of Incorporation and By-Laws, as each may be amended or
supplemented, and currently effective Registration Statement (as defined below)
and with the written instructions and directions of the Board and the Investment
Adviser, and shall comply with the requirements of the 1940 Act, the Advisers
Act, the rules thereunder, and all other applicable federal and state laws and
regulations.
3. COMPENSATION.
For the services provided and the expenses assumed by the Co-Sub-Adviser
pursuant to this Agreement, the Co-Sub-Adviser shall receive a monthly
investment management fee from the Investment Adviser fees equal, as a
percentage of each Portfolio's average daily net assets, to an annual rate of
0.30% of the first $100 million of assets, and 0.35% of assets in excess of $100
million. The management fee shall be payable by the Investment Adviser monthly
to the Co-Sub-Adviser upon receipt by the Investment Adviser from the Portfolios
of advisory fees payable to the Investment Adviser. 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
pro-rated according to the pro-ration which such period bears to the full month
in which such effectiveness or termination occurs.
4. DUTIES OF THE INVESTMENT ADVISER.
A. The Investment Adviser shall continue to have responsibility for all
services to be provided to the Portfolios pursuant to the Advisory Agreement and
shall oversee and review the Co-Sub-Adviser's performance of its duties under
this Agreement.
B. The Investment Adviser has furnished the Co-Sub-Adviser with copies
of each of the following documents and will furnish to the Co-Sub-Adviser 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 Fund, 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 Fund as in effect on the date hereof and
as amended from time to time ("By-Laws");
(3) Certified resolutions of the Board of the Fund authorizing
the appointment of the Investment Adviser and the Co-Sub-Adviser and
approving the form of the Advisory Agreement and this Agreement;
(4) The Fund'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
Portfolios and its shares and all amendments thereto ("Registration
Statement");
(5) The Notification of Registration of the Fund under the 1940
Act on Form N-8A as filed with the SEC and any amendments thereto;
(6) The Portfolios' Prospectus (as defined above); and
2
<PAGE>
(7) A certified copy of any publicly available 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 Portfolios to its shareholders or
to any governmental body or securities exchange.
The Investment Adviser shall furnish the Co-Sub-Adviser with any further
documents, materials or information that the Co-Sub-Adviser may reasonably
request to enable it to perform its duties pursuant to this Agreement.
C. During the term of this Agreement, the Investment Adviser shall
furnish to the Co-Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to shareholders of the Portfolios or the public, which
refer to the Co-Sub-Adviser or investment companies or other advisory accounts
advised or sponsored by the Co-Sub-Adviser or investment companies or other
advisory accounts advised or sponsored by the Co-Sub-Adviser in any way, prior
to the use thereof, and the Investment Adviser shall not use any such materials
if the Co-Sub-Adviser reasonably objects in writing fifteen business days (or
such other time as may be mutually agreed) after receipt thereof.
5. BROKERAGE.
A. The Co-Sub-Adviser 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 (best price and
execution); provided that, on behalf of the Fund, the Co-Sub-Adviser 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 Co-Sub-Adviser 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 Co-Sub-Adviser 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 Co-Sub-Adviser, or any affiliated
person thereof, except in accordance with the federal securities laws and the
rules and regulations thereunder.
B. On occasions when the Co-Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients of the
Co-Sub-Adviser, the Co-Sub-Adviser, 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 Co-Sub-Adviser in the manner
the Co-Sub-Adviser considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to its other clients.
C. In addition to the foregoing, the Co-Sub-Adviser agrees that orders
with broker-dealers for the purchase or sale of portfolio securities by the
Portfolios shall be placed in accordance with the standards set forth in the
Advisory Agreement.
6. OWNERSHIP OF RECORDS.
The Co-Sub-Adviser shall maintain all books and records required to be
maintained by the Co-Sub-Adviser 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
Co-Sub-Adviser hereby agrees: (i) that all records that it maintains for the
Fund are the property of the Fund, (ii) to preserve for the periods prescribed
by Rule 31a-2 under the 1940 Act any records that it maintains for the Fund and
that are required to be maintained by Rule 31a-1 under the 1940 Act and (iii)
agrees to surrender promptly to the Fund any records that it maintains for the
Fund upon request by the Fund; provided, however, the Co-Sub-Adviser may retain
copies of such records.
3
<PAGE>
7. REPORTS.
The Co-Sub-Adviser shall furnish to the Board or the Investment Adviser, or
both, as appropriate, such information, reports, evaluations, analyses and
opinions as the Co-Sub-Adviser and the Board or the Investment 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 Co-Sub-Adviser, 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 Co-Sub-Adviser, who may also be a
director, officer, or employee of the Fund, 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. REPRESENTATIONS OF CO-SUB-ADVISER.
The Co-Sub-Adviser represents, warrants, and agrees as follows:
A. The Co-Sub-Adviser: (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 Agreement; (iii)
has met, and will continue to meet for so long as this Agreement remains in
effect, any 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 Investment Adviser of the
occurrence of any event that would disqualify the Co-Sub-Adviser from serving as
an investment adviser of an investment company pursuant to Section 9 (a) of the
1940 Act or otherwise.
B. The Co-Sub-Adviser 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 Investment Adviser and the Fund with a copy of
such code of ethics, together with evidence of its adoption.
C. The Co-Sub-Adviser has provided the Investment Adviser and the Fund
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 Investment Adviser.
10. 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 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 each 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, with respect to the Portfolios, 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 each
Portfolio; and (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 Fund who are not parties to this Agreement or interested
persons of any such party. The Co-Sub-Adviser shall furnish to the Fund,
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.
11. 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 each Portfolio on at least 60
days' prior written notice to the Co-Sub-Adviser. This Agreement may also be
terminated by the
4
<PAGE>
Investment Adviser: (i) on at least 60 days' prior written notice to the
Co-Sub-Adviser, without the payment of any penalty; or (ii) if the
Co-Sub-Adviser becomes unable to discharge its duties and obligations under this
Agreement. The Co-Sub-Adviser may terminate this Agreement at any time, or
preclude its renewal without the payment of any penalty, on at least 60 days'
prior notice to the Investment Adviser. This Agreement shall terminate
automatically in the event of its assignment or upon termination of the Advisory
Agreement.
12. 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 amendment of this Agreement shall be effective until approved by
vote of a majority of each Portfolio's outstanding voting securities, unless
otherwise permitted in accordance with the 1940 Act.
13. 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 Fund 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 of 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 1940
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, unless the
Investment Adviser and the Co-Sub-Adviser agree to the contrary.
5
<PAGE>
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: Kenneth P. Beil
Title: President and Treasurer
Attest: MERIDIAN INVESTMENT MANAGEMENT
CORPORATION
__________________________ By: __________________________________
Name:
Title:
6
<PAGE>
SUB-ADVISORY AGREEMENT
BETWEEN
WRL INVESTMENT MANAGEMENT, INC.
AND
INVESCO GLOBAL ASSET MANAGEMENT LIMITED
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 State of Florida and INVESCO Global Asset Management
Limited ("Co-Sub-Adviser"), a corporation organized and existing under the laws
of Bermuda.
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 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 Meridian/INVESCO
Global Sector, Meridian/INVESCO US Sector and Meridian/INVESCO Foreign Sector
Portfolios ("Portfolios"), each a separate series of the Fund;
WHEREAS, the Co-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 Co-Sub-Adviser as
sub-adviser to furnish certain investment advisory services to the Investment
Adviser with respect to each Portfolio and the Co-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. APPOINTMENT.
Investment Adviser hereby appoints the Co-Sub-Adviser as an investment
sub-adviser with respect to the Portfolios for the period and on the terms set
forth in this Agreement. The Co-Sub-Adviser accepts such appointment and agrees
to render the services herein set forth, for the compensation herein provided.
2. DUTIES OF THE CO-SUB-ADVISER.
A. INVESTMENT SUB-ADVISORY SERVICES. Subject to the supervision of the
Fund's Board of Directors ("Board") and the Investment Adviser, the
Co-Sub-Adviser shall act as an investment sub-adviser and shall supervise and
direct the investments of the Portfolios in accordance with each Portfolio's
investment objective, 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 directed by the appropriate
officers of the Investment Adviser or the Fund by notice in writing to the
Co-Sub-Adviser. The Co-Sub-Adviser 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 Portfolios in a manner
consistent with each Portfolio's investment objective, policies, and
restrictions. In furtherance of this duty, the Co-Sub-Adviser, on behalf of the
Portfolios, is authorized, in its discretion and without prior consultation with
the Portfolios or the Investment Adviser, to:
(1) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds and other securities or assets; and
1
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(2) place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or through
such brokers, dealers, underwriters or issuers as the Co-Sub-Adviser
may select.
B. ADDITIONAL DUTIES OF CO-SUB-ADVISER. In addition to the above,
Co-Sub-Adviser shall:
(1) furnish continuous investment information, advice and
recommendations to the Fund as to the acquisition, holding or
disposition of any or all of the securities or other assets which the
Portfolios may own or contemplate acquiring from time to time;
provided, however, that not withstanding any other provision of this
Agreement to the contrary, the Co-Sub-Adviser shall have no
responsibility with respect to the allocation of each Portfolio's
assets among industrial sectors or countries, it being understood that
Meridian Investment Management Corporation will provide such allocation
services to the Investment Adviser;
(2) cause its officers to attend meetings of the Fund and furnish oral
or written reports, as the Fund may reasonably require, in order to
keep the Fund and its officers and Board fully informed as to the
condition of the investment securities of the Portfolios, the
investment recommendations of the Co-Sub-Adviser, and the investment
considerations which have given rise to those recommendations;
(3) furnish such statistical and analytical information and reports as
may reasonably be required by the Fund from time to time; and
(4) in connection with the rendering of the services required to be
provided by the Co-Sub-Adviser under this Agreement, the Co-Sub-Adviser
may, to the extent it deems appropriate and subject to the prior
consent of the Investment Adviser, enter into service agreements with
one or more companies affiliated with the Co-Sub-Adviser ("INVESCO
Affiliates"), pursuant to which such INVESCO Affiliate(s) provides
investment management information and services/support to the
Co-Sub-Adviser with respect to one or more of the Portfolios; provided,
however, that the Co-Sub-Adviser shall supervise and remain fully
responsible for all such services in accordance with and to the extent
provided by this Agreement; and further provided that each such service
agreement shall be subject to the requirements of the 1940 Act and
regulations thereunder.
C. FURTHER DUTIES OF CO-SUB-ADVISER. In all matters relating to the
performance of this Agreement, the Co-Sub-Adviser shall act in conformity with
the Fund's Articles of Incorporation and By-Laws, as each may be amended or
supplemented, and currently effective Registration Statement (as defined below)
and with the written instructions and directions of the Board and the Investment
Adviser, and shall comply with the requirements of the 1940 Act, the Advisers
Act, the rules thereunder, and all other applicable federal and state laws and
regulations.
3. COMPENSATION.
For the services provided and the expenses assumed by the Co-Sub-Adviser
pursuant to this Agreement, the Co-Sub-Adviser shall receive a monthly
investment management fee equal, as a percentage of each Portfolio's average
daily net assets, to an annual rate of 0.40% of the first $100 million of
assets, and 0.35% of assets in excess of $100 million. The management fee shall
be payable by the Investment Adviser monthly to the Co-Sub-Adviser upon receipt
by the Investment Adviser from each Portfolio of advisory fees payable to the
Investment Adviser. 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 pro-rated according to the
pro-ration which such period bears to the full month in which such effectiveness
or termination occurs.
4. DUTIES OF THE INVESTMENT ADVISER.
A. The Investment Adviser shall continue to have responsibility for all
services to be provided to the Portfolios pursuant to the Advisory Agreement and
shall oversee and review the Co-Sub-Adviser's performance of its duties under
this Agreement.
B. The Investment Adviser has furnished the Co-Sub-Adviser with copies
of each of the following documents and will furnish to the Co-Sub-Adviser at its
principal office all future amendments and supplements to such documents, if
any, as soon as practicable after such documents become available:
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<PAGE>
(1) The Articles of Incorporation of the Fund, 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 Fund as in effect on the date hereof and
as amended from time to time ("By-Laws");
(3) Certified resolutions of the Board of the Fund authorizing
the appointment of the Investment Adviser and the Co-Sub-Adviser and
approving the form of the Advisory Agreement and this Agreement;
(4) The Fund'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
Portfolios and its shares and all amendments thereto ("Registration
Statement");
(5) The Notification of Registration of the Fund under the 1940
Act on Form N-8A as filed with the SEC and any amendments thereto:
(6) The Portfolios' Prospectus (as defined above); and
(7) A certified copy of any publicly available 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 Portfolios to its shareholders or
to any governmental body or securities exchange.
The Investment Adviser shall furnish the Co-Sub-Adviser with any further
documents, materials or information that the Co-Sub-Adviser may reasonably
request to enable it to perform its duties pursuant to this Agreement.
C. During the term of this Agreement, the Investment Adviser shall
furnish to the Co-Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to shareholders of the Portfolios or the public, which
refer to the Co-Sub-Adviser or investment companies or other advisory accounts
advised or sponsored by the Co-Sub-Adviser or investment companies or other
advisory accounts advised or sponsored by the Co-Sub-Adviser in any way, prior
to the use thereof, and the Investment Adviser shall not use any such materials
if the Co-Sub-Adviser reasonably objects in writing fifteen business days (or
such other time as may be mutually agreed) after receipt thereof.
5. BROKERAGE.
A. The Co-Sub-Adviser 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 (best price and
execution); provided that, on behalf of the Fund, the Co-Sub-Adviser 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 Co-Sub-Adviser 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 Co-Sub-Adviser 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 Co-Sub-Adviser, or any affiliated
person thereof, except in accordance with the federal securities laws and the
rules and regulations thereunder.
B. On occasions when the Co-Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients of the
Co-Sub-Adviser, the Co-Sub-Adviser, 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 Co-Sub-Adviser in the manner
the Co-Sub-Adviser considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to its other clients.
3
<PAGE>
C. In addition to the foregoing, the Co-Sub-Adviser agrees that orders
with broker-dealers for the purchase or sale of portfolio securities by the
Portfolios shall be placed in accordance with the standards set forth in the
Advisory Agreement.
6. OWNERSHIP OF RECORDS.
The Co-Sub-Adviser shall maintain all books and records required to be
maintained by the Co-Sub-Adviser 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
Co-Sub-Adviser hereby agrees: (i) that all records that it maintains for the
Fund are the property of the Fund, (ii) to preserve for the periods prescribed
by Rule 31a-2 under the 1940 Act any records that it maintains for the Fund and
that are required to be maintained by Rule 31a-1 under the 1940 Act and (iii)
agrees to surrender promptly to the Fund any records that it maintains for the
Fund upon request by the Fund; provided, however, the Co-Sub-Adviser may retain
copies of such records.
7. REPORTS.
The Co-Sub-Adviser shall furnish to the Board or the Investment Adviser, or
both, as appropriate, such information, reports, evaluations, analyses and
opinions as the Co-Sub-Adviser and the Board or the Investment 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 Co-Sub-Adviser, 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 Co-Sub-Adviser, who may also be a
director, officer, or employee of the Fund, 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. REPRESENTATIONS OF CO-SUB-ADVISER.
The Co-Sub-Adviser represents, warrants, and agrees as follows:
A. The Co-Sub-Adviser: (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 Agreement; (iii)
has met, and will continue to meet for so long as this Agreement remains in
effect, any 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 Investment Adviser of the
occurrence of any event that would disqualify the Co-Sub-Adviser from serving as
an investment adviser of an investment company pursuant to Section 9 (a) of the
1940 Act or otherwise.
B. The Co-Sub-Adviser 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 Investment Adviser and the Fund with a copy of
such code of ethics, together with evidence of its adoption.
C. The Co-Sub-Adviser has provided the Investment Adviser and the Fund
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 Investment Adviser.
10. 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 of any such party, cast in
person at a meeting called for the
4
<PAGE>
purpose of voting on such approval, and (ii) by vote of a majority of each
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,
with respect to each Portfolio, 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 Portfolios; and (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 Fund who are not
parties to this Agreement or interested persons of any such party. The
Co-Sub-Adviser shall furnish to the Fund, 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.
11. 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 each Portfolio on at least 60
days' prior written notice to the Co-Sub-Adviser. This Agreement may also be
terminated by the Investment Adviser: (i) on at least 60 days' prior written
notice to the Co-Sub-Adviser, without the payment of any penalty; or (ii) if the
Co-Sub-Adviser becomes unable to discharge its duties and obligations under this
Agreement. The Co-Sub-Adviser may terminate this Agreement at any time, or
preclude its renewal without the payment of any penalty, on at least 60 days'
prior notice to the Investment Adviser. This Agreement shall terminate
automatically in the event of its assignment or upon termination of the Advisory
Agreement.
12. 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 amendment of this Agreement shall be effective until approved by
vote of a majority of each Portfolio's outstanding voting securities, unless
otherwise permitted in accordance with the 1940 Act.
13. LIABILITY OF THE CO-SUB-ADVISER.
The Co-Sub-Adviser shall have no liability under this Agreement to WRL
Investment, the Fund, the Portfolios or to the Fund's shareholders or creditors
for any error of judgment, mistake of law, or for any loss arising out of any
investment, nor for any other act or omission in the performance of its duties
under this Agreement not involving willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties hereunder. WRL
Investment shall have no liability under this Agreement to the Co-Sub-Adviser
for any error of judgment, mistake of law, or for any loss arising out of any
investment, nor for any other act of omission in the performance of its duties
under this Agreement or the Advisory Agreement not involving willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties hereunder.
14. 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 Fund 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.
5
<PAGE>
E. DEFINITIONS. Any question of interpretation of any term of 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 1940
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, unless the
Investment Adviser and the Co-Sub-Adviser agree to the contrary.
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: Kenneth P. Beil
Title: President and Treasurer
Attest: INVESCO GLOBAL ASSET MANAGEMENT LIMITED
__________________________ By: __________________________________
Name:
Title:
EXHIBIT 5(xiii)
FORM OF SUB-ADVISORY AGREEMENT ON BEHALF OF THE
VALUE EQUITY PORTFOLIO OF THE FUND
<PAGE>
SUB-ADVISORY AGREEMENT
BETWEEN
WRL INVESTMENT MANAGEMENT, INC.
AND
NWQ INVESTMENT MANAGEMENT COMPANY, 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 NWQ Investment Management
Company, Inc. ("Sub-Adviser"), a corporation organized and existing under the
laws of the State of Massachusetts.
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 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 Value Equity
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. APPOINTMENT.
Investment Adviser hereby appoints the Sub-Adviser as its investment
sub-adviser with respect to the Portfolio for the period and on the terms set
forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
2. DUTIES OF THE SUB-ADVISER.
A. INVESTMENT SUB-ADVISORY SERVICES. Subject to the supervision of the
Fund's Board of Directors ("Board") and the Investment Adviser, the Sub-Adviser
shall act as the investment sub-adviser and shall supervise and direct the
investments of the Portfolio in accordance with the Portfolio's investment
objective, 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 directed by the appropriate officers of the
Investment Adviser or the Fund by notice in writing to the Sub-Adviser. The
Sub-Adviser 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 Portfolio in a manner consistent with the Portfolio's
investment objective, policies, and restrictions. In furtherance of this duty,
the Sub-Adviser, on behalf of the Portfolio, is authorized, in its discretion
and without prior consultation with the Portfolio or the Investment Adviser, to:
(1) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds and other securities or assets; and
(2) place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or through
such brokers, dealers, underwriters or issuers as the Sub-Adviser may
select.
1
<PAGE>
B. ADDITIONAL DUTIES OF SUB-ADVISER. In addition to the above,
Sub-Adviser shall:
(1) furnish continuous investment information, advice and
recommendations to the Fund as to the acquisition, holding or
disposition of any or all of the securities or other assets which the
Portfolio may own or contemplate acquiring from time to time;
(2) cause its officers to attend meetings of the Fund and furnish oral
or written reports, as the Fund may reasonably require, in order to
keep the Fund and its officers and Board 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; and
(3) furnish such statistical and analytical information and reports as
may reasonably be required by the Fund from time to time.
C. FURTHER DUTIES OF SUB-ADVISER. In all matters relating to the
performance of this Agreement, the Sub-Adviser shall act in conformity with the
Fund's Articles of Incorporation and By-Laws, as each may be amended or
supplemented, and currently effective Registration Statement (as defined below)
and with the written instructions and directions of the Board and the Investment
Adviser, and shall comply with the requirements of the 1940 Act, the Advisers
Act, the rules thereunder, and all other applicable federal and state laws and
regulations.
3. COMPENSATION.
For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, the Sub-Adviser shall receive a monthly investment
management fee equal to (i) 50% of the fees received by the Investment Adviser
for services rendered under the Advisory Agreement by the Investment Adviser to
the Portfolio, less (ii) 50% of the amount paid by the Investment Adviser on
behalf of the Portfolio pursuant to any expense limitation or the amount of any
other reimbursement made by the Investment Adviser to the Portfolio. The
management fee shall be payable by the Investment Adviser monthly to the
Sub-Adviser upon receipt by the Investment Adviser from the Portfolio of
advisory fees payable to the Investment Adviser. 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
pro-rated according to the pro-ration which such period bears to the full month
in which such effectiveness or termination occurs.
4. DUTIES OF THE INVESTMENT ADVISER.
A. The Investment Adviser shall continue to have responsibility for all
services to be provided to the Portfolio pursuant to the Advisory Agreement and
shall oversee and review the Sub-Adviser's performance of its duties under this
Agreement.
B. The Investment Adviser has furnished the Sub-Adviser with copies of
each of the following documents and will furnish to the Sub-Adviser 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 Fund, 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 Fund as in effect on the date hereof and
as amended from time to time ("By-Laws");
(3) Certified resolutions of the Board of the Fund authorizing
the appointment of the Investment Adviser and the Sub-Adviser and
approving the form of the Advisory Agreement and this Agreement;
(4) The Fund'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 Portfolio
and its shares and all amendments thereto ("Registration
Statement");
2
<PAGE>
(5) The Notification of Registration of the Fund 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
(7) A certified copy of any publicly available 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 Portfolio to its shareholders or
to any governmental body or securities exchange.
The Investment Adviser shall furnish the Sub-Adviser with any further
documents, materials or information that the Sub-Adviser may reasonably request
to enable it to perform its duties pursuant to this Agreement.
C. During the term of this Agreement, the Investment Adviser shall
furnish to the Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to shareholders of the Portfolio or the public, which
refer to the Sub-Adviser or investment companies or other advisory accounts
advised or sponsored by the Sub-Adviser or investment companies or other
advisory accounts advised or sponsored by the Sub-Adviser in any way, prior to
the use thereof, and the Investment Adviser shall not use any such materials if
the Sub-Adviser reasonably objects in writing fifteen business days (or such
other time as may be mutually agreed) after receipt thereof.
5. BROKERAGE.
A. The Sub-Adviser 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 (best price and execution);
provided that, on behalf of the Fund, the Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser, or any affiliated person thereof, except in accordance
with the federal securities laws and the rules and regulations thereunder.
B. On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients of the
Sub-Adviser, the Sub-Adviser, 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 Sub-Adviser in the manner the Sub-Adviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund and to its other clients.
C. In addition to the foregoing, the Sub-Adviser agrees that orders
with broker-dealers for the purchase or sale of portfolio securities by the
Portfolio shall be placed in accordance with the standards set forth in the
Advisory Agreement.
6. OWNERSHIP OF RECORDS.
The Sub-Adviser shall maintain all books and records required to be
maintained by the Sub-Adviser 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
Sub-Adviser hereby agrees: (i) that all records that it maintains for the Fund
are the property of the Fund, (ii) to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any records that it maintains for the Fund and
that are required to be maintained by Rule 31a-1(f) under the 1940 Act and (iii)
agrees to surrender promptly to the Fund any records that it maintains for the
Fund upon request by the Fund; provided, however, the Sub-Adviser may retain
copies of such records.
3
<PAGE>
7. REPORTS.
The Sub-Adviser shall furnish to the Board or the Investment Adviser, or
both, as appropriate, such information, reports, evaluations, analyses and
opinions as the Sub-Adviser and the Board or the Investment 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 Sub-Adviser, 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 Sub-Adviser, who may also be a
director, officer, or employee of the Fund, 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. REPRESENTATIONS OF SUB-ADVISER.
The Sub-Adviser represents, warrants, and agrees as follows:
A. The Sub-Adviser: (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 Agreement; (iii)
has met, and will continue to meet for so long as this Agreement remains in
effect, any 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 Investment Adviser of the
occurrence of any event that would disqualify the Sub-Adviser from serving as an
investment adviser of an investment company pursuant to Section 9 (a) of the
1940 Act or otherwise.
B. The Sub-Adviser 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 Investment Adviser and the Fund with a copy of such
code of ethics, together with evidence of its adoption.
C. The Sub-Adviser has provided the Investment Adviser and the Fund
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 Investment Adviser.
10. 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 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 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, with respect to the Portfolio, 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
Portfolio; and (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 Fund who are not parties to this Agreement or interested
persons of any such party. The Sub-Adviser shall furnish to the Fund, 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.
11. 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 Portfolio on at least 60
days' prior written notice to the Sub-Adviser. This Agreement may also be
terminated by the Investment
4
<PAGE>
Adviser: (i) on at least 60 days' prior written notice to the Sub-Adviser,
without the payment of any penalty; or (ii) if the Sub-Adviser becomes unable to
discharge its duties and obligations under this Agreement. The Sub-Adviser may
terminate this Agreement at any time, or preclude its renewal without the
payment of any penalty, on at least 60 days' prior notice to the Investment
Adviser. This Agreement shall terminate automatically in the event of its
assignment or upon termination of the Advisory Agreement.
12. 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 amendment of this Agreement shall be effective until approved by
vote of a majority of the Portfolio's outstanding voting securities, unless
otherwise permitted in accordance with the 1940 Act.
13. 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 Fund 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 of 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 1940
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, unless the
Investment Adviser and the Sub-Adviser agree to the contrary.
5
<PAGE>
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: Kenneth P. Beil
Title: President and Treasurer
Attest: NWQ INVESTMENT MANAGEMENT COMPANY, INC.
__________________________ By: __________________________________
Name:
Title:
6
EXHIBIT 5(xiv)
FORM OF SUB-ADVISORY AGREEMENT ON BEHALF OF THE
U.S. EQUITY PORTFOLIO OF THE FUND
<PAGE>
SUB-ADVISORY AGREEMENT
BETWEEN
WRL INVESTMENT MANAGEMENT, INC.
AND
GE INVESTMENT MANAGEMENT INCORPORATED
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 State of Florida and GE Investment Management
Incorporated ("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 U.S. Equity 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. APPOINTMENT.
Investment Adviser hereby appoints the Sub-Adviser as its investment
sub-adviser with respect to the Portfolio for the period and on the terms set
forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
2. DUTIES OF THE SUB-ADVISER.
A. INVESTMENT SUB-ADVISORY SERVICES. Subject to the supervision of the
Fund's Board of Directors ("Board") and the Investment Adviser, the Sub-Adviser
shall act as the investment sub-adviser and shall supervise and direct the
investments of the Portfolio in accordance with the Portfolio's investment
objective, 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 directed by the appropriate officers of the
Investment Adviser or the Fund by notice in writing to the Sub-Adviser. The
Sub-Adviser 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 Portfolio in a manner consistent with the Portfolio's
investment objective, policies, and restrictions. In furtherance of this duty,
the Sub-Adviser, on behalf of the Portfolio, is authorized, in its discretion
and without prior consultation with the Portfolio or the Investment Adviser, to:
(1) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds and other securities or assets; and
(2) place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or through
such brokers, dealers, underwriters or issuers as the Sub-Adviser may
select.
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<PAGE>
B. ADDITIONAL DUTIES OF SUB-ADVISER. In addition to the above,
Sub-Adviser shall:
(1) furnish continuous investment information, advice and
recommendations to the Fund as to the acquisition, holding or
disposition of any or all of the securities or other assets which the
Portfolio may own or contemplate acquiring from time to time;
(2) cause its officers to attend quarterly (or such less frequent)
meetings of the Fund in person, via telephone or teleconference
capabilities and furnish oral or written reports, as the Fund may
reasonably require, in order to keep the Fund and its officers and
Board 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; and
(3) furnish such statistical and analytical information and reports as
may reasonably be required by the Fund from time to time.
C. FURTHER DUTIES OF SUB-ADVISER. In all matters relating to the
performance of this Agreement, the Sub-Adviser shall act in conformity with the
Fund's Articles of Incorporation and By-Laws, as each may be amended or
supplemented, and currently effective Registration Statement (as defined below)
and with the written instructions and directions of the Board and the Investment
Adviser, either as reflected in the Registration Statement (as defined below) or
otherwise provided in writing to the Sub-Adviser by the Investment Adviser, and
shall comply with the requirements of the 1940 Act, the Advisers Act, the rules
thereunder, and all other applicable federal and state laws and regulations,
either as reflected in the Registration Statement (as defined below), or
otherwise provided in writing to the Sub-Adviser by the Investment Adviser.
3. COMPENSATION.
For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Agreement, the Sub-Adviser shall receive a monthly investment
management fee equal to (i) 50% of the fees received by the Investment Adviser
for services rendered under the Advisory Agreement by the Investment Adviser
with respect to the Portfolio, less (ii) 50% of the amount paid by the
Investment Adviser on behalf of the Portfolio pursuant to any expense limitation
applicable to the Portfolio. The management fee shall be payable by the
Investment Adviser monthly to the Sub-Adviser upon receipt by the Investment
Adviser from the Portfolio of advisory fees payable to the Investment Adviser.
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 pro-rated according to the pro-ration which such
period bears to the full month in which such effectiveness or termination
occurs. Any amount borne by the Sub-Adviser pursuant to (ii) above in this
paragraph constitutes an agreement between the Investment Adviser and
Sub-Adviser only for the first twelve months following commencement of
operations of the Portfolio. The fee payable to the Sub-Adviser pursuant to this
paragraph will not be waived by the Sub-Adviser or otherwise reduced by any
waiver or expense limitation affecting the fee that is payable to the Investment
Adviser under the Advisory Agreement, except as may be mutually agreed to by the
Sub-Adviser and the Investment Adviser.
4. DUTIES OF THE INVESTMENT ADVISER.
A. The Investment Adviser shall continue to have responsibility for all
services to be provided to the Portfolio pursuant to the Advisory Agreement and
shall oversee and review the Sub-Adviser's performance of its duties under this
Agreement.
B. The Investment Adviser has furnished the Sub-Adviser with copies of
each of the following documents and will furnish to the Sub-Adviser 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 Fund, as filed with the
State of Maryland, as in effect on the date hereof and as amended
from time to time ("Articles");
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<PAGE>
(2) The By-Laws of the Fund as in effect on the date hereof and
as amended from time to time ("By-Laws");
(3) Certified resolutions of the Board of the Fund authorizing
the appointment of the Investment Adviser and the Sub-Adviser and
approving the form of the Advisory Agreement and this Agreement;
(4) The Fund's Registration Statement under the 1940 Act and the
Securities Act of 1933, as amended ("1933 Act"), on Form N-1A, as
filed with the Securities and Exchange Commission ("SEC") relating
to the Portfolio and its shares and all amendments thereto
("Registration Statement");
(5) The Notification of Registration of the Fund under the 1940
Act on Form N-8A as filed with the SEC and any amendments thereto;
(6) The Fund's Prospectus and Statement of Additional Information
(as defined above); and
(7) A certified copy of any publicly available 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 Portfolio to its shareholders or
to any governmental body or securities exchange.
The Investment Adviser shall furnish the Sub-Adviser with any further
documents, materials or information that the Sub-Adviser may reasonably request
to enable it to perform its duties pursuant to this Agreement.
C. During the term of this Agreement, the Investment Adviser shall
furnish to the Sub-Adviser at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other material
prepared for distribution to shareholders of the Portfolio or the public, which
refer to the Sub-Adviser or investment companies or other advisory accounts
advised or sponsored by the Sub-Adviser in any way, prior to the use thereof,
and the Investment Adviser shall not use any such materials if the Sub-Adviser
reasonably objects in writing fifteen business days (or such other time as may
be mutually agreed) after receipt thereof.
5. BROKERAGE.
A. The Sub-Adviser 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 (best price and execution);
provided that, on behalf of the Fund, the Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser, or any affiliated person thereof, except in accordance
with the federal securities laws and the rules and regulations thereunder.
B. On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients of the
Sub-Adviser, the Sub-Adviser, 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 Sub-Adviser in the manner the Sub-Adviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund and to its other clients.
C. In addition to the foregoing, the Sub-Adviser agrees that orders
with broker-dealers for the purchase or sale of portfolio securities by the
Portfolio shall be placed in accordance with the standards set forth in the
Advisory Agreement, and the Investment Adviser acknowledges in this Agreement
the specific authority given
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<PAGE>
to both the Investment Adviser and the Sub-Adviser under the Advisory Agreement
with respect to the placement of brokerage.
6. OWNERSHIP OF RECORDS.
The Sub-Adviser shall maintain all books and records required to be
maintained by the Sub-Adviser 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
Sub-Adviser hereby agrees: (i) that all records that it maintains for the Fund
are the property of the Fund, (ii) to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any records that it maintains for the Fund and
that are required to be maintained by Rule 31a-1 under the 1940 Act and (iii)
agrees to surrender promptly to the Fund any records that it maintains for the
Fund upon request by the Fund; provided, however, the Sub-Adviser may retain
copies of such records.
7. REPORTS.
The Sub-Adviser shall furnish to the Board or the Investment Adviser, or
both, as appropriate, such information, reports, evaluations, analyses and
opinions as the Sub-Adviser and the Board or the Investment 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 Sub-Adviser, or any affiliated person thereof, to render investment
advisory, management and corporate administrative services to any other
investment companies, to act as investment manager or investment counselor to
any 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
Sub-Adviser, who may also be a director, officer, or employee of the Fund, 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. REPRESENTATIONS OF SUB-ADVISER.
The Sub-Adviser represents, warrants, and agrees as follows:
A. The Sub-Adviser: (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 Agreement; (iii)
has met, and will seek to 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 promptly notify the Investment Adviser of the occurrence
of any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9 (a) of the 1940 Act or
otherwise.
B. The Sub-Adviser 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 Investment Adviser and the Fund with a copy of such
code of ethics, together with evidence of its adoption.
C. The Sub-Adviser has provided the Investment Adviser and the Fund
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 Investment Adviser.
10. REPRESENTATIONS AND WARRANTIES OF INVESTMENT ADVISER.
The Investment Adviser represents, warrants and agrees as follows:
A. The Investment Adviser (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 from
performing the services contemplated by the Advisory Agreement; (iii) has met,
and will seek to continue
4
<PAGE>
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 the Advisory Agreement; (iv) has the authority to enter
into and perform the services contemplated by the Advisory Agreement and has the
authority to enter into this Agreement; and (v) will promptly notify the
Sub-Adviser of the occurrence of any event that would disqualify the Investment
Adviser from serving as an investment adviser of an investment company pursuant
to Section 9(a) of the 1940 Act or otherwise.
B. The Investment Adviser agrees that it will notify the Sub-Adviser,
to the extent possible, within a reasonable period of time prior to any
termination of this Agreement pursuant to Section 14 which arises from a
termination of the Advisory Agreement (including any termination by assignment
resulting from a foreseeable change in control of the Investment Adviser that is
a matter of public information).
11. LIMITATION OF LIABILITY.
The Sub-Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Portfolio, the Fund or its shareholders or
by the Investment Adviser 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.
12. INDEMNIFICATION.
A. The Investment Adviser agrees to indemnify the Sub-Adviser, its
officers and directors, and any person who controls the Sub-Adviser within the
meaning of Section 15 of the 1933 Act for any loss or expense (including
attorney's fees) arising out of any claim, demand, action or suit in the event
that the Sub-Adviser has been found to be without fault and the Investment
Adviser or any other investment sub-adviser to the Portfolio, or any person who
controls the Investment Adviser or such other investment sub-adviser within the
meaning of Section 15 of the 1933 Act has been found at fault (i) by the final
judgment of a court of competent jurisdiction or (ii) in any order of settlement
of any claim, demand, action or suit that has been approved by the Board of
Directors of the Investment Adviser, such other investment sub-adviser or such
other controlling person.
B. The Sub-Adviser agrees to indemnify the Investment Adviser, its
officers and directors, and any person who controls the Investment Adviser
within the meaning of Section 15 of the 1933 Act for any loss or expense
(including attorney's fees) arising out of any claim, demand, action or suit in
the event that the Investment Adviser has been found to be without fault and the
Sub-Adviser or any person who controls the Sub-Adviser within the meaning of
Section 15 of the 1933 Act has been found at fault (i) by the final judgment of
a court of competent jurisdiction or (ii) in any order of settlement of any
claim, demand, action or suit that has been approved by the Board of Directors
of the Sub-Adviser or such other controlling person.
13. 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 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 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, with respect to the Portfolio, 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
Portfolio; and (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 Fund who are not parties to this Agreement or interested
persons of any such party. The Sub-Adviser shall furnish to the Fund, 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.
14. 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 Portfolio on at least 60
days' prior written notice to the Sub-Adviser. This Agreement may also be
terminated by the Investment
5
<PAGE>
Adviser: (i) on at least 60 days' prior written notice to the Sub-Adviser,
without the payment of any penalty; or (ii) if the Sub-Adviser becomes unable to
discharge its duties and obligations under this Agreement. The Sub-Adviser may
terminate this Agreement at any time, or preclude its renewal without the
payment of any penalty, on at least 60 days' prior notice to the Investment
Adviser. This Agreement shall terminate automatically in the event of its
assignment or upon termination of the Advisory Agreement.
15. 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 amendment of this Agreement shall be effective until approved by
vote of a majority of the Portfolio's outstanding voting securities, unless
otherwise permitted in accordance with the 1940 Act.
16. 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 Fund 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 of 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 1940
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, unless the
Investment Adviser and the Sub-Adviser agree to the contrary.
6
<PAGE>
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: Kenneth P. Beil
Title: President and Treasurer
Attest: GE INVESTMENT MANAGEMENT INCORPORATED
__________________________ By: __________________________________
Assistant Secretary Name: Michael J. Cosgrove
Title: Executive Vice President
EXHIBIT 5 (xv)
SERVICE AGREEMENT DATED 4-30-96 BETWEEN
INVESCO GLOBAL ASSET MANAGEMENT LIMITED
AND INVESCO TRUST COMPANY, INC.
<PAGE>
SERVICE AGREEMENT
AGREEMENT made as of the 30th day of April, 1996, by and between INVESCO
Global Asset Management Limited, a corporation organized under the laws of the
Islands of Bermuda ("IGAM"), and INVESCO Trust Company, Inc. a Colorado trust
company ("INVESCO").
WITNESSETH:
WHEREAS, IGAM has developed a proprietary system for global asset
allocation and desires to obtain from time to time information from INVESCO to
assist IGAM in making certain determinations regarding IGAM's global asset
allocation decisions; and
WHEREAS, IGAM will enter into a Sub-Advisory Agreement (the "IGAM
Agreement") with Western Reserve Life Assurance Co. of Ohio (the "Client"),
which has selected IGAM to act as investment sub-adviser with respect to one or
more of the Portfolios of the WRL Series Fund, Inc. ("Fund"), as indicated in
the IGAM Agreement and as set forth in Schedule A hereto (the "Portfolios"); and
WHEREAS, the IGAM Agreement provides that IGAM may, with prior notice
to Client, provide services to the Client that reflect information and
services/support provided by any or all of its affiliates worldwide; and
WHEREAS, IGAM wishes to avail itself of INVESCO's services for (i)
providing information related to IGAM's global asset allocation process and (ii)
assistance with IGAM's provision of investment advisory services to Client; and
WHEREAS, IGAM and INVESCO are engaged principally in rendering
investment advisory services and are registered as investment advisers under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, INVESCO is willing to provide services to IGAM on the terms
and conditions hereinafter set forth; and
WHEREAS, it is understood by the parties that this Agreement is solely
between the parties, and that this Agreement is not intended to, and shall not,
impose any obligation on Client;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, IGAM and INVESCO hereby agree as follows:
ARTICLE I
DUTIES OF INVESCO
IGAM hereby employs INVESCO to furnish, or arrange for affiliates of
INVESCO to provide, such investment management information and services/support
to IGAM as may be instructed by IGAM from time to time, subject to the
supervision of IGAM and the terms of the IGAM Agreement. A copy of the IGAM
Agreement is attached hereto as Exhibit A.
<PAGE>
Page 2
RE: Service Agreement
INVESCO accepts such employment and agrees during such period, at its
own expense, to render such services and to assume the obligations herein set
forth for the compensation provided for herein. INVESCO shall for all purposes
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided or authorized, have no authority to act for or represent IGAM
in any way or otherwise be deemed an agent of IGAM.
ARTICLE II
COMPENSATION OF INVESCO
For the services rendered with respect to each Portfolio, the
facilities furnished and expenses assumed by INVESCO, IGAM shall pay to INVESCO
compensation as set forth on Schedule A hereto. INVESCO assumes and shall pay
for maintaining the staff and personnel necessary to perform its obligations
under this Agreement, and shall at its own expense, provide the office space,
equipment and facilities necessary to perform its obligations under this
Agreement.
ARTICLE III
LIMITATION OF LIABILITY OF INVESCO
INVESCO shall not be liable for any error of judgment, mistake of law
or for any loss arising out of any investment or for any act or omission in the
performance of the services rendered hereunder, except for willful misfeasance,
bad faith or gross negligence in the performance of its duties or by reason or
reckless disregard of its obligations and duties hereunder. As used in this
Article III, INVESCO shall include directors, officers and employees of INVESCO.
ARTICLE IV
ACTIVITIES OF INVESCO
The services of INVESCO to IGAM are not to be deemed to be exclusive,
INVESCO and any person controlled by or under common control with INVESCO being
free to render services to others.
ARTICLE V
COMPLIANCE WITH THE LAWS
IGAM and INVESCO will comply with all applicable laws in acting
hereunder including, without limitation, the Securities Exchange Act of 1934, as
amended, the Advisers Act, the Employee Retirement Income Security Act of 1974,
as amended, the Investment Company Act of 1940, as amended ("1940 Act"), and all
applicable rules and regulations duly promulgated under the foregoing.
<PAGE>
Page 3
RE: Service Agreement
ARTICLE VI
TERM
This Agreement shall continue in effect, unless sooner terminated in
accordance with its terms, for an initial term ending April 22, 1998 and shall
continue in effect from year to year thereafter provided continuance is
specifically approved at least annually by the vote of a majority of the
Directors of the Fund who are not parties hereto or interested persons (as that
term is defined in Section 2(a)(19) of the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on the approval of the
terms of such renewal, and by either the Directors of the Fund or the
affirmative vote of a majority of the outstanding voting securities of each
Portfolio (as that phrase is defined in Section 2(a)(42) of the 1940 Act). This
Agreement shall automatically terminate in the event of its assignment (as that
term is defined in Section 2(a)(4) of the 1940 Act) or in the event of the
termination of the IGAM Agreement. This Agreement may be terminated at any time,
without penalty, by IGAM by giving 60 days' written notice of such termination
to INVESCO at its principal place of business, provided that such termination is
approved by the Board of Directors of the Fund or by vote of a majority of the
outstanding voting securities (as that phrase is defined in Section 2(a)(42) of
the 1940 Act) of each Portfolio. This Agreement may be terminated at any time by
INVESCO by giving 60 days' written notice of such termination to IGAM at its
principal place of business.
ARTICLE VII
AMENDMENTS
This Agreement may be amended only with the approval by the affirmative
vote of a majority of the outstanding voting securities of each Portfolio (as
that phrase is defined in Section 2(a)(42) of the 1940 Act) and the approval by
the vote of a majority of the Directors of the Fund who are not parties hereto
or interested persons (as that term is defined in Section 2(a)(19) of the 1940
Act) of any such party, cast in person at a meeting called for the purpose of
voting on the approval of such amendment, unless otherwise permitted in
accordance with the 1940 Act.
ARTICLE VIII
GOVERNING LAW
This Agreement shall be construed in accordance with laws of the
Islands of Bermuda and the applicable provisions of the 1940 Act and the
Advisers Act. To the extent that the applicable laws of the Islands of Bermuda,
or any of the provisions herein, conflict with applicable provisions of the 1940
Act and the Advisers Act, the latter shall control.
<PAGE>
Page 4
RE: Service Agreement
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
INVESCO GLOBAL ASSET MANAGEMENT LIMITED
By: /s/STEPHEN A. DANA
------------------------------
Title: DIRECTOR
------------------------------
INVESCO TRUST COMPANY
By: /s/ R D SIM
------------------------------
Title: PRESIDENT
------------------------------
EXHIBIT 5 (xvi)
SERVICE AGREEMENT DATED 4-30-96 BETWEEN
INVESCO GLOBAL ASSET MANAGEMENT LIMITED
AND INVESCO ASSET MANAGEMENT LIMITED
<PAGE>
SERVICE AGREEMENT
AGREEMENT made as of the 30th day of April, 1996, by and between
INVESCO Global Asset Management Limited, a corporation organized under the laws
of the Islands of Bermuda ("IGAM"), and INVESCO Asset Management Limited, a
United Kingdom corporation ("INVESCO Asset").
WITNESSETH:
WHEREAS, IGAM has developed a proprietary system for global asset
allocation and desires to obtain from time to time information from INVESCO
Asset to assist IGAM in making certain determinations regarding IGAM's global
asset allocation decisions; and
WHEREAS, IGAM will enter into a Sub-Advisory Agreement (the "IGAM
Agreement") with Western Reserve Life Assurance Co. of Ohio (the "Client"),
which has selected IGAM to act as investment sub-adviser with respect to one or
more of the Portfolios of the WRL Series Fund, Inc. ("Fund"), as indicated in
the IGAM Agreement and as set forth in Schedule A hereto (the "Portfolios"); and
WHEREAS, the IGAM Agreement provides that IGAM may, with prior notice
to Client, provide services to the Client that reflect information and
services/support provided by any or all of its affiliates worldwide; and
WHEREAS, IGAM wishes to avail itself of INVESCO Asset's services for
(i) providing information related to IGAM's global asset allocation process and
(ii) assistance with IGAM's provision of investment advisory services to Client;
and
WHEREAS, IGAM and INVESCO Asset are engaged principally in rendering
investment advisory services and are registered as investment advisers under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, INVESCO Asset is willing to provide services to IGAM on the
terms and conditions hereinafter set forth; and
WHEREAS, it is understood by the parties that this Agreement is solely
between the parties, and that this Agreement is not intended to, and shall not,
impose any obligation on Client;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, IGAM and INVESCO Asset hereby agree as follows:
ARTICLE I
DUTIES OF INVESCO ASSET
IGAM hereby employs INVESCO Asset to furnish, or arrange for affiliates
of INVESCO Asset to provide, such investment management information and
services/support to IGAM as may be instructed by IGAM from time to time, subject
to the supervision of IGAM and the terms of the IGAM Agreement. A copy of the
IGAM Agreement is attached hereto as Exhibit A.
<PAGE>
Page 2
RE: Service Agreement
INVESCO Asset accepts such employment and agrees during such period, at
its own expense, to render such services and to assume the obligations herein
set forth for the compensation provided for herein. INVESCO Asset shall for all
purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent IGAM in any way or otherwise be deemed an agent of IGAM.
ARTICLE II
COMPENSATION OF INVESCO ASSET
For the services rendered with respect to each Portfolio, the
facilities furnished and expenses assumed by INVESCO Asset, IGAM shall pay to
INVESCO Asset compensation as set forth on Schedule A hereto. INVESCO Asset
assumes and shall pay for maintaining the staff and personnel necessary to
perform its obligations under this Agreement, and shall at its own expense,
provide the office space, equipment and facilities necessary to perform its
obligations under this Agreement.
ARTICLE III
LIMITATION OF LIABILITY OF INVESCO ASSET
INVESCO Asset shall not be liable for any error of judgment, mistake of
law or for any loss arising out of any investment or for any act or omission in
the performance of the services rendered hereunder, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason or reckless disregard of its obligations and duties hereunder. As used
in this Article III, INVESCO Asset shall include directors, officers and
employees of INVESCO Asset.
ARTICLE IV
ACTIVITIES OF INVESCO ASSET
The services of INVESCO Asset to IGAM are not to be deemed to be
exclusive, INVESCO Asset and any person controlled by or under common control
with INVESCO Asset being free to render services to others.
ARTICLE V
COMPLIANCE WITH THE LAWS
IGAM and INVESCO Asset will comply with all applicable laws in acting
hereunder including, without limitation, the Securities Exchange Act of 1934, as
amended, the Advisers Act, the Employee Retirement Income Security Act of 1974,
as amended, the Investment Company Act of 1940, as amended ("1940 Act"), and all
applicable rules and regulations duly promulgated under the foregoing.
<PAGE>
Page 3
RE: Service Agreement
ARTICLE VI
TERM
This Agreement shall continue in effect, unless sooner terminated in
accordance with its terms, for an initial term ending April 22, 1998 and shall
continue in effect from year to year thereafter provided continuance is
specifically approved at least annually by the vote of a majority of the
Directors of the Fund who are not parties hereto or interested persons (as that
term is defined in Section 2(a)(19) of the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on the approval of the
terms of such renewal, and by either the Directors of the Fund or the
affirmative vote of a majority of the outstanding voting securities of each
Portfolio (as that phrase is defined in Section 2(a)(42) of the 1940 Act). This
Agreement shall automatically terminate in the event of its assignment (as that
term is defined in Section 2(a)(4) of the 1940 Act) or in the event of the
termination of the IGAM Agreement. This Agreement may be terminated at any time,
without penalty, by IGAM by giving 60 days' written notice of such termination
to INVESCO Asset at its principal place of business, provided that such
termination is approved by the Board of Directors of the Fund or by vote of a
majority of the outstanding voting securities (as that phrase is defined in
Section 2(a)(42) of the 1940 Act) of each Portfolio. This Agreement may be
terminated at any time by INVESCO Asset by giving 60 days' written notice of
such termination to IGAM at its principal place of business.
ARTICLE VII
AMENDMENTS
This Agreement may be amended only with the approval by the affirmative
vote of a majority of the outstanding voting securities of each Portfolio (as
that phrase is defined in Section 2(a)(42) of the 1940 Act) and the approval by
the vote of a majority of the Directors of the Fund who are not parties hereto
or interested persons (as that term is defined in Section 2(a)(19) of the 1940
Act) of any such party, cast in person at a meeting called for the purpose of
voting on the approval of such amendment, unless otherwise permitted in
accordance with the 1940 Act.
ARTICLE VIII
GOVERNING LAW
This Agreement shall be construed in accordance with laws of the
Islands of Bermuda and the applicable provisions of the 1940 Act and the
Advisers Act. To the extent that the applicable laws of the Islands of Bermuda,
or any of the provisions herein, conflict with applicable provisions of the 1940
Act and the Advisers Act, the latter shall control.
<PAGE>
Page 4
RE: Service Agreement
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
INVESCO GLOBAL ASSET MANAGEMENT LIMITED
By: /s/ STEPHEN A. DANA
---------------------------
Title: DIRECTOR
---------------------------
INVESCO ASSET MANAGEMENT LIMITED
By: /s/ NORTON M. RIDDER
---------------------------
Title: CHAIRMAN
---------------------------
EXHIBIT 6
FORM OF DISTRIBUTION AGREEMENT
<PAGE>
DISTRIBUTION AGREEMENT
AGREEMENT made this 1st day of January, 1997, between WRL Series Fund,
Inc., a Maryland corporation (the "Fund"), and InterSecurities, Inc., a Delaware
corporation (the "Distributor"), each with offices at 201 Highland Avenue,
Largo, Florida 33770.
WHEREAS, the Fund is a registered open-end management investment
company, which currently offers shares of its common stock in twenty series,
each as set forth on Schedule A hereto (the "Current Portfolios"), and the Fund
may offer shares of one or more additional Portfolios in the future;
WHEREAS, the Fund was originally organized to act as the funding
vehicle for certain individual variable life insurance policies and individual
and group variable annuity contracts offered by Western Reserve Life Assurance
Co. of Ohio ("Western Reserve") or life insurance companies affiliated with
Western Reserve through separate accounts of such life insurance companies; and
WHEREAS, in the future, the Fund may also offer its shares to life
insurance companies unaffiliated with Western Reserve (together with Western
Reserve and its affiliated life insurance companies, the "Life Companies") as a
funding vehicle for variable life insurance policies and variable annuity
contracts (together with the variable life insurance policies and variable
annuity contracts offered by Western Reserve and its affiliated life insurance
companies, the "Policies"), and/or to qualified pension and retirement plans
(the "Qualified Plans"); and
WHEREAS, from time to time, the Fund may enter into sales agreements
with Life Companies that have or will establish one or more separate accounts to
offer Policies, pursuant to which one or more Portfolios of the Fund serves as
the underlying funding vehicle for such Policies; and, under certain
circumstances, may enter into sales agreements with the Qualified Plans; and
WHEREAS, it is contemplated that, in addition to entering into sales
agreements with Life Companies and/or Qualified Plans, the Distributor shall
engage in certain promotional and sales efforts on behalf of the Fund, as
described in the Distribution Plan pursuant to Rule 12b-1 adopted by the Fund
concurrent with the effective date of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. (a) The Fund proposes to issue and sell shares of common stock of
the Fund (the "Shares") to separate accounts of Life Companies and to the
Qualified Plans as may be permitted by applicable law and subject to the Fund's
obtaining any necessary regulatory approvals. The Fund hereby appoints the
Distributor as agent to sell the Shares and the Distributor hereby accepts such
appointment. The Shares will be distributed under such terms as are set by the
Fund and will be sold to the separate accounts and the Qualified Plans permitted
to buy the Shares as specified by the Fund's Board of Directors.
(b) In the event that the Fund from time to time designates one or
more Portfolios in addition to the Current Portfolios ("Additional Portfolios"),
it shall notify the Distributor. If the Distributor is willing to perform
services hereunder to the Additional Portfolios, it shall so notify the Fund.
Thereafter, the Fund and the Distributor shall mutually agree to amend Schedule
A to this Agreement in writing to add the Additional Portfolios and the
Additional Portfolios shall be subject to this Agreement, subject to the
approval of the Board of Directors as set forth in Section 7.(a) below.
1
<PAGE>
2. (a) The Distributor agrees that (i) all Shares sold by the
Distributor shall be sold at the net asset value thereof as described in the
Fund's prospectus, and (ii) the Fund shall receive 100% of such net asset value.
(b) The Shares will be sold in accordance with any sales agreements
between the Fund and Life Companies and, where applicable, the Fund and
Qualified Plans. The Current Portfolios and all Additional Portfolios subject to
this Agreement are referred to collectively as "Portfolios."
3. (a) All sales literature and advertisements used by the Distributor
in connection with sales of Shares shall be subject to approval by the Fund. The
Fund authorizes the Distributor, in connection with the sales or arranging for
the sale of Shares, to provide only such information and to make only such
statements or representations as are contained in the Fund's then-current
Prospectus or in sales literature or advertisements approved by the Fund or in
such financial and other statements which are furnished to the Distributor
pursuant to the next paragraph. The Fund shall not be responsible in any way for
any information provided or statements or representations made by the
Distributor or its representatives or agents other than the information,
statements and representations described in the preceding sentence. The
Distributor shall review all materials submitted to it by Life Companies and
Qualified Plans that describe the Fund, the Shares or the Fund's investment
adviser. The Distributor shall not be responsible for any information provided
or statements or representations made by Life Companies or Qualified Plans,
representatives or agents of Life Companies or Qualified Plans, or any other
persons or entities other than the Distributor's representatives or agents.
(b) The Fund shall keep the Distributor fully informed with regard
to its affairs, shall furnish the Distributor with a certified copy of all
financial statements and a signed copy of each report prepared by its
independent certified public accountants, and shall cooperate fully in the
efforts of the Distributor to sell the Shares and in the performance by the
Distributor of all its duties under this Agreement.
4. (a) The Fund will pay or cause to be paid:
(i) registration fees for registering its shares under the
Securities Act of 1933 (the "1933 Act");
(ii) the expenses, including counsel fees, of preparing
registration statements and such other documents as the Fund
believes are necessary for registering the Shares with the
Securities and Exchange Commission (the "SEC") and such states
as are deemed necessary or appropriate;
(iii) expenses incident to preparing amendments to
registration statements of the Fund under the 1933 Act and the
Investment Company Act of 1940, as amended (the "1940 Act");
(iv) expenses for preparing and setting in type all
prospectuses and the expense of supplying them to the then
existing shareholders or beneficial owners of Shares
(including owners of Policies whose contracts use one or more
Portfolios as their funding vehicle);
(v) expenses incident to the issuance of its Shares such as
the cost of stock certificates, if any, taxes and fees of the
transfer agent for establishing shareholder record accounts
and confirmations; and
2
<PAGE>
(vi) expenses for administrative and transfer agency services,
pursuant to and in accordance with the Administrative Services
and Transfer Agency Agreement between the Fund and WRL
Investment Services, Inc. dated January 1, 1997, as it may be
amended from time to time in accordance with its terms.
(b) The Distributor shall pay all of its own costs and expenses
connected with the offer and sale of Shares ("Distribution Expenses"), except
that certain Distribution Expenses may be reimbursed to the Distributor as
provided in Section 5 hereof.
5. (a) Pursuant to a Distribution Plan (the "Plan") adopted by the
Board of Directors of the Fund in accordance with Section 12(b) of the 1940 Act,
Rule 12b-1 and the other rules and regulations promulgated thereunder, as the
same may be, from time to time, issued or amended, the Fund, on behalf of a
Portfolio that has approved the Plan pursuant to Section 3 thereof, may
reimburse the Distributor, as direct payment for expenses incurred in connection
with the distribution of a Portfolio's shares, amounts equal to actual expenses
associated with distributing such Portfolio's shares, up to a maximum rate of
0.15%, on an annualized basis of a Portfolio's average daily net assets.
Reimbursements shall be measured and accrued daily, and remitted to the
Distributor monthly. Such reimbursement may be made only for the period
commencing on the date hereof and ending December 31, 1997, and for each twelve
month period (or portion thereof) thereafter, in which the Plan is in effect for
that Portfolio.
(b) Distribution Expenses reimbursable hereunder shall include, but
not necessarily be limited to, the following:
(i) the cost for printing and mailing of Fund prospectuses and
statements of additional information, and any supplements
thereto, to potential investors;
(ii) the costs relating to the development and preparation of
Fund advertisements and sales literature and brokers' and other
promotional materials describing and/or relating to the Fund;
(iii) expenses incurred in connection with the presentation of
seminars and sales meetings describing the Fund attended by
sales personnel and potential investors;
(iv) the development of consumer-oriented sales materials
describing and/or relating to the Fund; and
(v) expenses attributable to "distribution-related" services
provided to the Fund. "Distribution-related services" include,
but are not limited to: salaries and benefits; office expenses;
equipment expenses (I.E., computers, software, office
equipment, etc.); training costs; travel costs; printing costs;
supply expenses; computer programming time; and data center
expenses, each as they relate to the promotion of the sale of
Fund shares.
(c) The Distributor shall submit annual reimbursable Distribution
Expense budgets to the Board of Directors of the Fund. As soon as practicable
after the end of each calendar quarter, the Distributor shall submit to the
Board of Directors reports requesting ratification of reimbursement of
Distribution Expenses as to each Portfolio for that quarter. The Distributor
will allocate to each Portfolio reimbursable Distribution Expenses not
specifically attributable to the distribution of shares of a particular
Portfolio, based upon the ratio of the net asset value of each Portfolio at the
end of each calendar month to the net asset value of all Portfolios on that same
date. The Board of Directors will consider each request at its next regular
meeting after such request is submitted, and the Distributor shall only retain
reimbursements
3
<PAGE>
by the Fund on behalf of a Portfolio for those reimbursable Distribution
Expenses that are approved by the Board of Directors, including a majority of
the "Disinterested Directors" (as that term is defined in Section 7 hereof).
6. (a) The Fund shall maintain a currently effective Registration
Statement on Form N-1A and shall file with the SEC such reports and other
documents as may be required under the 1933 Act and the 1940 Act or by the rule
and regulations of the SEC thereunder.
(b) The Fund represents and warrants that its Registration
Statement, post-effective amendments, Prospectus and Statement of Additional
Information (excluding statements based upon written information furnished by
the Distributor expressly for inclusion therein) shall not contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that all statements or information furnished to the Distributor, pursuant to
Section 3(b) hereof, shall be true and correct in all material respects.
7. (a) This Agreement shall take effect on the date hereof after it has
been approved by a vote of the majority of Directors of the Fund and those
Directors of the Fund who are not "interested persons" of the Fund and who have
no direct or indirect financial interest in the operation of the Plan or this
Agreement (the "Disinterested Directors"), cast in person at a meeting called
for the purpose of voting on this Agreement. This Agreement shall remain in full
force and effect until December 31, 1997, and may be continued for twelve month
periods (or portions thereof) thereafter; provided that such continuance shall
be specifically approved annually by the Board of Directors of the Fund or by a
majority of the outstanding voting securities of each Portfolio of the Fund as
it applies to that Portfolio, and in either case, also by a majority of the
Disinterested Directors. This Agreement may be amended, with respect to any
Portfolio, with the approval of the Board of Directors or of a majority of the
outstanding voting securities of each Portfolio of the Fund as it applies to
that Portfolio, provided, that in either case, such amendment shall also be
approved by a majority of the Disinterested Directors.
(b) This Agreement, with respect to any Portfolio, may be
terminated, at any time without payment of any penalty, by vote of a majority of
the Disinterested Directors or by vote of a majority of the outstanding voting
securities of that Portfolio, or may be terminated by the Distributor, in either
case on not more than 60 days' written notice delivered personally or mailed by
registered mail, postage prepaid, to the other party.
(c) This Agreement shall automatically terminate in the event of
its assignment.
(d) The terms "interested persons," "assignment" and "vote of a
majority of the outstanding voting securities" as used herein shall have the
meanings given to them in the 1940 Act.
8. In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties ("disabling conduct") hereunder
on the part of the Distributor (and its officers, directors, agents, employees,
controlling persons, shareholders and any other person or entity affiliated with
the Distributor or retained by it to perform or assist in the performance of its
obligations under this Agreement) the Distributor shall not be subject to
liability to the Fund or to any shareholder of the Fund for any act or omission
in the course of, or connected with, rendering services hereunder, of law or for
any loss suffered by any of them in connection with the matters to which this
Agreement relates.
9. This Agreement is made by the Fund, on behalf of each Portfolio,
pursuant to authority granted by the Board of Directors, and the obligations
created hereby are not binding on any of the Directors or shareholders of the
Fund individually, but bind only the property of the Fund.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed by their duly authorized officers and under their respective
seals on the day and year first above written.
WRL SERIES FUND, INC.
Attest:
_________________________ By ___________________________
Secretary John R. Kenney
Chairman of the Board and President
Attest: INTERSECURITIES, INC.
__________________________ By ____________________________
Secretary G. John Hurley
President
5
EXHIBIT 8
FORM OF CUSTODY AGREEMENT
<PAGE>
(01/97)
Custody & Fund Accounting
CUSTODIAN AGREEMENT
BETWEEN
WRL SERIES FUND, INC.
AND
INVESTORS BANK & TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. Bank Appointed Custodian ............................................. 1
2. Definitions........................................................... 1
2.1 Authorized Person............................................... 1
2.2 Security........................................................ 1
2.3 Portfolio Security.............................................. 1
2.4 Officers' Certificate........................................... 1
2.5 Book-Entry System............................................... 1
2.6 Depository...................................................... 1
2.7 Proper Instructions............................................. 2
3. Separate Accounts..................................................... 2
4. Certification as to Authorized Persons................................ 2
5. Custody of Cash....................................................... 2
5.1 Purchase of Securities.......................................... 2
5.2 Redemptions..................................................... 3
5.3 Distributions and Expenses of Fund.............................. 3
5.4 Payment in Respect of Securities................................ 3
5.5 Repayment of Loans.............................................. 3
5.6 Repayment of Cash............................................... 3
5.7 Foreign Exchange Transactions................................... 3
5.8 Other Authorized Payments....................................... 3
5.9 Termination..................................................... 3
6. Securities............................................................ 3
6.1 Segregation and Registration.................................... 3
6.2 Voting and Proxies.............................................. 4
6.3 Book-Entry System............................................... 4
6.4 Use of a Depository............................................. 5
6.5 Use of Book-Entry System for Commercial Paper................... 6
6.6 Use of Immobilization Programs.................................. 6
6.7 Eurodollar CDs.................................................. 6
6.8 Options and Futures Transactions................................ 7
(a) Puts and Calls Traded on Securities Exchanges,
NASDAQ or Over-the-Counter.............................. 7
(b) Puts, Calls, and Futures Traded
on Commodities Exchanges................................ 7
6.9 Segregated Account.............................................. 7
6.10 Interest Bearing Call or Time Deposits.......................... 8
6.11 Transfer of Securities.......................................... 9
7. Redemptions........................................................... 10
8. Merger, Dissolution, etc. of Fund..................................... 10
<PAGE>
9. Actions of Bank Without Prior Authorization........................... 10
10. Collections and Defaults.............................................. 11
11. Maintenance of Records and Accounting Services........................ 11
12. Fund Evaluation....................................................... 11
11
13. Concerning the Bank................................................... 12
13.1 Performance of Duties and
Standard of Care ...................................... 12
13.2 Agents and Subcustodians with Respect to Property
of the Fund Held in the United States.................. 12
13.3 Duties of the Bank with Respect to Property of the Fund
Held Outside of the United States...................... 13
13.4 Insurance.................................................... 15
13.5 Fees and Expenses of Bank................................... 15
13.6 Advances by Bank............................................ 15
14. Termination........................................................... 16
15. Confidentiality....................................................... 16
16. Notices............................................................... 16
17. Amendments............................................................ 17
18. Parties............................................................... 17
19. Governing Law......................................................... 17
20. Counterparts.......................................................... 17
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made as of this 1st day of January, 1997, between WRL SERIES
FUND INC., a Maryland corporation (the "Fund") and INVESTORS BANK & TRUST
COMPANY (the "Bank").
The Fund, an open-end management investment company, desires to place and
maintain all of its portfolio securities and cash in the custody of the Bank.
The Bank has at least the minimum qualifications required by Section 17(f)(1) of
the Investment Company Act of 1940 (the "1940 Act") to act as custodian of the
portfolio securities and cash of the Fund, and has indicated its willingness to
so act, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. BANK APPOINTED CUSTODIAN. The Fund hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth.
2. DEFINITIONS. Whenever used herein, the terms listed below will have
the following meaning:
2.1 AUTHORIZED PERSON. Authorized Person will mean any of the persons
duly authorized to give Proper Instructions or otherwise act on behalf of the
Fund by appropriate resolution of its Board of Directors (the "Board"), and set
forth in a certificate as required by Section 4 hereof.
2.2 SECURITY. The term security as used herein will have the same
meaning as when such term is used in the Securities Act of 1933, as amended,
including, without limitation, any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any profit
sharing agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign currency, or, in general, any interest or instrument commonly known as
a "security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.3 PORTFOLIO SECURITY. Portfolio Security will mean any security
owned by the Fund.
2.4 OFFICERS' CERTIFICATE. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund. 2.5 BOOK-ENTRY SYSTEM.
Book-Entry System shall mean the Federal Reserve-Treasury Department Book Entry
System for United States government, instrumentality and agency securities
operated by the Federal Reserve Bank, its successor or successors and its
nominee or nominees.
2.6 DEPOSITORY. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 ("Exchange
Act"), its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor or successors and its nominee
or nominees, specifically identified in a certified copy of a resolution of the
Board.
1
<PAGE>
2.7 PROPER INSTRUCTIONS. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized Person
as shall have been designated in an Officers' Certificate, such instructions to
be given in such form and manner as the Bank and the Fund shall agree upon from
time to time, and (ii) instructions (which may be continuing instructions)
regarding other matters signed or initialed by such one or more persons from
time to time designated in an Officers' Certificate as having been authorized by
the Board. Oral instructions will be considered Proper Instructions if the Bank
reasonably believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Fund shall cause all
oral instructions to be promptly confirmed in writing. The Bank shall act upon
and comply with any subsequent Proper Instruction which modifies a prior
instruction and the sole obligation of the Bank with respect to any follow-up or
confirmatory instruction shall be to make reasonable efforts to detect any
discrepancy between the original instruction and such confirmation and to report
such discrepancy to the Fund. The Fund shall be responsible, at the Fund's
expense, for taking any action, including any reprocessing, necessary to correct
any such discrepancy or error, and to the extent such action requires the Bank
to act the Fund shall give the Bank specific Proper Instructions as to the
action required. Upon receipt of an Officers' Certificate as to the
authorization by the Board accompanied by a detailed description of procedures
approved by the Fund, Proper Instructions may include communication effected
directly between electro-mechanical or electronic devices provided that the
Board and the Bank are satisfied that such procedures afford adequate safeguards
for the Fund's assets.
3. SEPARATE ACCOUNTS. If the Fund has more than one series or portfolio,
the Bank will segregate the assets of each series or portfolio to which this
Agreement relates into a separate account for each such series or portfolio
containing the assets of such series or portfolio (and all investment earnings
thereon).
4. CERTIFICATION AS TO AUTHORIZED PERSONS. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
Board, it being understood that upon the occurrence of any change in the
information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or Assistant
Secretary of the Fund, will sign a new or amended certification setting forth
the change and the new, additional or omitted names or signatures. The Bank will
be entitled to rely and act upon any Officers' Certificate given to it by the
Fund which has been signed by Authorized Persons named in the most recent
certification.
5. CUSTODY OF CASH. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the name
of the Bank, as Custodian of the Fund, and will deposit to the account of the
Fund all of the cash of the Fund, except for cash held by a subcustodian
appointed pursuant to Section 13.2 hereof, including borrowed funds, delivered
to the Bank, subject only to draft or order by the Bank acting pursuant to the
terms of this Agreement. Upon receipt by the Bank of Proper Instructions (which
may be continuing instructions) or in the case of payments for redemptions and
repurchases of outstanding shares of common stock of the Fund, notification from
WRL Investment Management, Inc. ("WRL Management"), requesting such payment,
designating the payee or the account or accounts to which the Bank will release
funds for deposit, and stating that it is for a purpose permitted under the
terms of this Section 5, specifying the applicable subsection, the Bank will
make payments of cash held for the accounts of the Fund, insofar as funds are
available for that purpose, only as permitted in subsections 5.1-5.9 below.
5.1 PURCHASE OF SECURITIES. Upon the purchase of securities for the
Fund, against contemporaneous receipt of such securities by the Bank or, against
delivery of such securities to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs, registered in the name of the Fund or in the name of, or
properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of Book Entry Paper) of
purchase of the securities received by the Bank before such payment is made, as
confirmed in the Proper Instructions received by the Bank before such payment is
made.
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5.2 REDEMPTIONS. In such amount as may be necessary for the repurchase
or redemption of common shares of the Fund offered for repurchase or redemption
in accordance with Section 7 of this Agreement.
5.3 DISTRIBUTIONS AND EXPENSES OF FUND. For the payment on the account
of the Fund of dividends or other distributions to shareholders as may from time
to time be declared by the Board, interest, taxes, management or supervisory
fees, distribution fees, fees of the Bank for its services hereunder and
reimbursement of the expenses and liabilities of the Bank as provided hereunder,
fees for legal, accounting, and auditing services, or other operating expenses
of the Fund.
5.4 PAYMENT IN RESPECT OF SECURITIES. For payments in connection with
the conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Fund held by or to be delivered to the Bank.
5.5 REPAYMENT OF LOANS. To repay loans of money made to the Fund, but,
in the case of final payment, only upon redelivery to the Bank of any Portfolio
Securities pledged or hypothecated therefor and upon surrender of documents
evidencing the loan.
5.6 REPAYMENT OF CASH. To repay the cash delivered to the Fund for the
purpose of collateralizing the obligation to return to the Fund certificates
borrowed from the Fund representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.
5.7 FOREIGN EXCHANGE TRANSACTIONS. For payments in connection with
foreign exchange contracts or options to purchase and sell foreign currencies
for spot and future delivery which may be entered into by the Bank on behalf of
the Fund upon the receipt of Proper Instructions, such Proper Instructions to
specify the currency broker or banking institution (which may be the Bank, or
any other subcustodian or agent hereunder, acting as principal) with which the
contract or option is made, and the Bank shall have no duty with respect to the
selection of such currency brokers or banking institutions with which the Fund
deals or for their failure to comply with the terms of any contract or option.
5.8 OTHER AUTHORIZED PAYMENTS. For other authorized transactions of
the Fund, or other obligations of the Fund incurred for proper Fund purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Fund, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper corporate purpose.
5.9 TERMINATION: upon the termination of this Agreement as hereinafter
set forth pursuant to Section 8 and Section 14 of this Agreement.
6. SECURITIES.
6.1 SEGREGATION AND REGISTRATION. Except as otherwise provided herein,
and except for securities to be delivered to any subcustodian appointed pursuant
to Section 13.2 hereof, the Bank as custodian, will receive and hold pursuant to
the provisions hereof, in a separate account or accounts and physically
segregated at all times from those of other persons, any and all Portfolio
Securities which may now or hereafter be delivered to it by or for the account
of the Fund. All such Portfolio Securities will be held or disposed of by the
Bank for, and subject at all times to, the instructions of the Fund pursuant to
the terms of this Agreement. Subject to the specific provisions herein relating
to Portfolio Securities that are not physically held by the Bank, the Bank will
register all Portfolio Securities (unless otherwise directed by Proper
Instructions or an Officers' Certificate), in the name of a registered nominee
of the Bank as defined in the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, and will execute and deliver all such
certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state.
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The Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any Portfolio Securities which
may from time to time be registered in the name of the Fund.
6.2 VOTING AND PROXIES. Neither the Bank nor any nominee of the Bank
will vote any of the Portfolio Securities held hereunder, except in accordance
with Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Fund all notices, proxies
and proxy soliciting materials with respect to such Securities, such proxies to
be executed by the registered holder of such Securities (if registered otherwise
than in the name of the Fund), but without indicating the manner in which such
proxies are to be voted.
6.3 BOOK-ENTRY SYSTEM. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits of Fund assets
in the Book-Entry System, and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry
System provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect
to the Fund's participation in the Book-Entry System through the Bank (or any
such agent) will identify by book entry Portfolio Securities which are included
with other securities deposited in the Account and shall at all times during the
regular business hours of the Bank (or such agent) be open for inspection by
duly authorized officers, employees or agents of the Fund. Where securities are
transferred to the Fund's account, the Bank shall also, by book entry or
otherwise, identify as belonging to the Fund a quantity of securities in
fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities purchased
for the account of the Fund or shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund upon (i) receipt of advice from the
Book-Entry System that such Securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Bank (or its agent) to reflect
such payment and transfer for the account of the Fund. The Bank (or its agent)
shall transfer securities sold or loaned for the account of the Fund upon:
(i) receipt of advice from the Book-Entry System that
payment for securities sold or payment of the initial cash collateral against
the delivery of securities loaned by the Fund has been transferred to the
Account; and
(ii) the making of an entry on the records of the Bank (or
its agent) to reflect such transfer and payment for the account of the Fund.
Copies of all advices from the Book-Entry System of transfers of securities for
the account of the Fund shall identify the Fund, be maintained for the Fund by
the Bank and shall be provided to the Fund at its request. The Bank shall send
the Fund a confirmation, as defined by Rule 17f-4 of the 1940 Act, of any
transfers to or from the account of the Fund.
(d) The Bank will promptly provide the Fund with any report
obtained by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Book-Entry System; and
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(e) The Bank shall be liable to the Fund for any loss or damage
to the Fund resulting from use of the Book-Entry System by reason of any
negligence, willful misfeasance or bad faith of the Bank or any of its agents or
of any of its or their employees or from any reckless disregard by the Bank or
any such agent of its duty to use its best efforts to enforce such rights as it
may have against the Book-Entry System; at the election of the Fund, it shall be
entitled to be subrogated for the Bank in any claim against the Book-Entry
System or any other person which the Bank or its agent may have as a consequence
of any such loss or damage if and to the extent that the Fund has not been made
whole for any loss or damage.
6.4 USE OF A DEPOSITORY. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits in
DTC or other such Depository and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and remit
to the Bank on behalf of the Fund all income and other payments thereon and to
take all steps necessary and proper in connection with the collection thereof;
(b) Registration of Portfolio Securities may be made in the
name of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made
through the clearing medium employed by such Depository for transactions of
participants acting through it. Upon any purchase of Portfolio Securities,
payment will be made only upon delivery of the securities to or for the account
of the Fund and the Fund shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund only upon delivery of the Securities to
or for the account of the Fund; and upon any sale of Portfolio Securities,
delivery of the Securities will be made only against payment thereof or, in the
event Portfolio Securities are loaned, delivery of Securities will be made only
against receipt of the initial cash collateral to or for the account of the
Fund; and
(d) The Bank shall be liable to the Fund for any loss or damage
to the Fund resulting from use of a Depository by reason of any negligence,
willful misfeasance or bad faith of the Bank or its employees or from any
reckless disregard by the Bank of its duty to use its best efforts to enforce
such rights as it may have against a Depository. In this connection, the Bank
shall use its best efforts to ensure that:
(i) The Depository obtains replacement of any certificated
Portfolio Security deposited with it in the event such Security is lost,
destroyed, wrongfully taken or otherwise not available to be returned to the
Bank upon its request;
(ii) Any proxy materials received by a Depository with
respect to Portfolio Securities deposited with such Depository are forwarded
immediately to the Bank for prompt transmittal to the Fund;
(iii) Such Depository immediately forwards to the Bank
confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the Bank such
records with respect to the performance of the Bank's obligations and duties
hereunder as may be necessary for the Fund to comply with the recordkeeping
requirements of Section 31(a) of the 1940 Act and Rule 31a-1 thereunder; and
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(v) Such Depository delivers to the Bank and the Fund all
internal accounting control reports, whether or not audited by an independent
public accountant, as well as such other reports as the Fund may reasonably
request in order to verify the Portfolio Securities held by such Depository.
6.5 USE OF BOOK-ENTRY SYSTEM FOR COMMERCIAL PAPER. Provided (i) the
Bank has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Fund has purchased such Issuer's Book-entry
Paper, the Bank shall issue and hold in book-entry form, on behalf of the Fund,
commercial paper issued by issuers with whom the Bank has entered into a
book-entry agreement (the "Issuers"). In maintaining its Book-entry Paper
System, the Bank agrees that:
(a) the Bank will maintain all Book-entry paper held by the
fund in an account of the bank that includes only assets held by it for
customers;
(b) the records of the Bank with respect to the Fund's purchase
of Book-entry Paper through the Bank will identify, by book-entry, Commercial
Paper belonging to the Fund which is included in the Book-entry Paper System and
shall at all times during the regular business hours of the Bank be open for
inspection by duly authorized officers, employees or agents of the Fund;
(c) the Bank shall pay for Book-Entry Paper purchased for the
account of the Fund upon contemporaneous (i) receipt of advice from the Issuer
that such sale of Book-Entry Paper has been effected, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for the
account of the Fund;
(d) the Bank shall cancel such Book-Entry Paper obligation upon
the maturity thereof upon contemporaneous (i) receipt of advice that payment for
such Book-Entry Paper has been transferred to the Fund, and (ii) the making of
an entry on the records of the Bank to reflect such payment for the account of
the Fund;
(e) the Bank shall transmit to the Fund a transaction journal
confirming each transaction in Book-Entry Paper for the account of the Fund on
the next business day following the transaction; and
(f) the Bank will send to the Fund such reports on its system
of internal accounting control with respect to the Book-Entry Paper System as
the Fund may reasonably request from time to time.
6.6 USE OF IMMOBILIZATION PROGRAMS. Provided (i) the Bank has received
a certified copy of a resolution of the Board specifically approving the
maintenance of Portfolio Securities in an immobilization program operated by a
bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and (ii)
for each year following such approval the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a subcustodian hereunder.
6.7 EURODOLLAR CDS. Any Portfolio Securities which are Eurodollar CDs
may be physically held by the European branch of the U.S. banking institution
that is the issuer of such Eurodollar CD (a "European Branch") pursuant to
Proper Instructions, provided that such Securities are identified on the books
of the Bank as belonging to the Fund and that the books of the Bank identify the
European Branch holding such Securities. Notwithstanding any other provision of
this Agreement to the contrary, except as stated in the first sentence of this
subsection 6.7, the Bank shall be under no other duty with respect to such
Eurodollar CDs belonging to the Fund, and shall have no liability to the Fund or
its shareholders with respect to the actions, inactions, whether negligent or
otherwise of such European Branch in connection with such Eurodollar CDs, except
for any loss or damage to the Fund resulting from the Bank's own negligence,
willful misfeasance or bad faith in the performance of its duties hereunder.
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6.8 OPTIONS AND FUTURES TRANSACTIONS.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
1. The Bank shall take action as to put options ("puts")
and call options ("calls") purchased or sold (written) by the Fund regarding
escrow or other arrangements (i) in accordance with the provisions of any
agreement entered into upon receipt of Proper Instructions between the Bank, any
broker-dealer registered under the Exchange Act and a member of the National
Association of Securities Dealers, Inc. (the "NASD"), and, if necessary, the
Fund relating to the compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange, or of any
similar organization or organizations.
2. Unless another agreement requires it to do so, the Bank
shall be under no duty or obligation to see that the Fund has deposited or is
maintaining adequate margin, if required, with any broker in connection with any
option, nor shall the Bank be under duty or obligation to present such option to
the broker for exercise unless it receives Proper Instructions from the Fund.
The Bank shall have no responsibility for the legality of any put or call
purchased or sold on behalf of the Fund, the propriety of any such purchase or
sale, or the adequacy of any collateral delivered to a broker in connection with
an option or deposited to or withdrawn from a Segregated Account (as defined in
subsection 6.9 below). The Bank specifically, but not by way of limitation,
shall not be under any duty or obligation to: (i) periodically check or notify
the Fund that the amount of such collateral held by a broker or held in a
Segregated Account is sufficient to protect such broker of the Fund against any
loss; (ii) effect the return of any collateral delivered to a broker; or (iii)
advise the Fund that any option it holds, has or is about to expire. Such duties
or obligations shall be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges.
1. The Bank shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Fund in accordance with the
provisions of any agreement among the Fund, the Bank and a Futures Commission
Merchant registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations, regarding account deposits
in connection with transactions by the Fund.
2. The responsibilities and liabilities of the Bank as to
futures, puts and calls traded on commodities exchanges, any Futures Commission
Merchant account and the Segregated Account shall be limited as set forth in
subparagraph (a)(2) of this Section 6.8 as if such subparagraph referred to
Futures Commission Merchants rather than brokers, and Futures and puts and calls
thereon instead of options.
6.9 SEGREGATED ACCOUNT. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Fund, into which Account or Accounts may be transferred upon
receipt of Proper Instructions cash and/or Portfolio Securities:
(a) in accordance with the provisions of any agreement among
the Fund, the Bank and a broker-dealer registered under the Exchange Act and a
member of the NASD or any Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Options
Clearing Corporation and of any registered national securities exchange or the
Commodity Futures Trading Commission or any registered Contract Market, or of
any similar organizations regarding escrow or other arrangements in connection
with transactions by the Fund;
(b) for the purpose of segregating cash or securities in
connection with options purchased or written by the Fund or commodity futures
purchased or written by the Fund;
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(c) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Fund's then
outstanding forward commitment or "when-issued" agreements relating to the
purchase of Portfolio Securities and all the Fund's then outstanding commitments
under reverse repurchase agreements entered into with broker-dealer firms;
(d) for the deposit of any Portfolio Securities which the Fund
has agreed to sell on a forward commitment basis, all in accordance with
Investment Company Act Release No. 10666;
(e) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies;
(f) for other proper corporate purposes, BUT ONLY, in the case
of this clause (f), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such Segregated Account and
declaring such purposes to be proper corporate purposes; and
(g) Assets may be withdrawn from the Segregated Account
pursuant to Proper Instructions only:
(i) in accordancze with the provisions of any agreements
referenced in (a) or (b) above;
(ii) for sale or delivery to meet the Fund's obligations
under outstanding firm commitment or when-issued agreements for
the purchase of Portfolio Securities and under reverse repurchase
agreements;
(iii) for exchange for other liquid assets of equal or
greater value deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding forward
commitment or when-issued agreements for the purchase of portfolio
securities or reverse repurchase agreements are sold to other
parties or the Fund's obligations thereunder are met from assets
of the Fund other than those in the Segregated Account; or
(v) for delivery upon settlement of a forward commitment
agreement for the sale of Portfolio Securities.
6.10 INTEREST BEARING CALL OR TIME DEPOSITS. The Bank shall, upon
receipt of Proper Instructions relating to the purchase by the Fund of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated in
such Proper Instructions. The Bank shall include in its records with respect to
the assets of the Fund appropriate notation as to the amount of each such
deposit, the banking institution with which such deposit is made (the "Deposit
Bank"), and shall retain such forms of advice or receipt evidencing the deposit,
if any, as may be forwarded to the Bank by the Deposit Bank. Such deposits shall
be deemed Portfolio Securities of the Fund and the responsibility of the Bank
therefore shall be the same as and no greater than the Bank's responsibility in
respect of other Portfolio Securities of the Fund.
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6.11 TRANSFER OF SECURITIES. The Bank will transfer, exchange, deliver
or release Portfolio Securities held by it hereunder, insofar as such Securities
are available for such purpose, provided that before making any transfer,
exchange, delivery or release under this Section the Bank will receive Proper
Instructions requesting such transfer, exchange or delivery stating that it is
for a purpose permitted under the terms of this Section 6.11, specifying the
applicable subsection, or describing the purpose of the transaction with
sufficient particularity to permit the Bank to ascertain the applicable
subsection, only:
(a) upon sales of Portfolio Securities for the account of the Fund,
against contemporaneous receipt by the Bank of payment therefor in full, or,
against payment to the Bank in accordance with generally accepted settlement
practices and customs in the jurisdiction or market in which the transaction
occurs, each such payment to be in the amount of the sale price shown in a
broker's confirmation of sale of the Portfolio Securities received by the Bank
before such payment is made, as confirmed in the Proper Instructions received by
the Bank before such payment is made;
(b) in exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan of merger, consolidation,
reorganization, share split-up, change in par value, recapitalization or
readjustment or otherwise, upon exercise of subscription, purchase or sale or
other similar rights represented by such Portfolio Securities, or for the
purpose of tendering shares in the event of a tender offer therefor, provided
however that in the event of an offer of exchange, tender offer, or other
exercise of rights requiring the physical tender or delivery of Portfolio
Securities, the Bank shall have no liability for failure to so tender in a
timely manner unless such Proper Instructions are received by the Bank at least
two business days prior to the date required for tender, and unless the Bank (or
its agent or subcustodian hereunder) has actual possession of such Security at
least two business days prior to the date of tender;
(c) upon conversion of Portfolio Securities pursuant to their terms into
other securities;
(d) for the purpose of redeeming in kind shares of the Fund upon
authorization from the Fund;
(e) in the case of option contracts owned by the Fund, for presentation
to the endorsing broker;
(f) when such Portfolio Securities are called, redeemed or retired or
otherwise become payable provided that, in any such case, the cash or other such
consideration is to be delivered to the Bank;
(g) for the purpose of effectuating the pledge of Portfolio Securities
held by the Bank in order to collateralize loans made to the Fund by any bank,
including the Bank; provided, however, that such Portfolio Securities will be
released only upon payment to the Bank for the account of the Fund of the moneys
borrowed, except that in cases where additional collateral is required to secure
a borrowing already made, and such fact is made to appear in the Proper
Instructions, further Portfolio Securities may be released for that purpose
without any such payment. In the event that any such pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Fund from the lender in accordance with the
normal procedures of the lender, that an event of deficiency or default on the
loan has occurred, the Bank may deliver such pledged Portfolio Securities to or
for the account of the lender;
(h) for the purpose of releasing certificates representing Portfolio
Securities, against contemporaneous receipt by the Bank of the fair market value
of such security, as set forth in the Proper Instructions received by the Bank
before such payment is made;
(i) for the purpose of delivering securities lent by the Fund to a bank
or broker dealer, but only against receipt in accordance with street delivery
custom except as otherwise provided herein, of adequate collateral as agreed
upon from time to time by the Fund and the Bank, and upon receipt of payment in
connection with any repurchase agreement relating to such securities entered
into by the Fund;
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(j) for other authorized transactions of the Fund or for other proper
corporate purposes; provided that before making such transfer, the Bank will
also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Fund (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Fund or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made; and
(k) upon termination of this Agreement as hereinafter set forth pursuant
to Section 8 and Section 14 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections (a), (b),
(c), (e), (f), (g), (h) and (i) securities or cash receivable in exchange
therefor shall be delivered to the Bank.
7. REDEMPTIONS. In the case of payment of assets of the Fund held by the
Bank in connection with redemptions and repurchases by the Fund of outstanding
common shares, the Bank will rely on notification by WRL Management of receipt
of a request for redemption and certificates, if issued, in proper form for
redemption before such payment is made. Payment shall be made in accordance with
the Articles and By-laws of the Fund, from assets available for said purpose.
8. MERGER, DISSOLUTION, ETC. OF FUND. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Fund into or the consolidation of the Fund with another investment company where
the Fund is not the surviving entity, the sale by the Fund of all, or
substantially all, of its assets to another investment company, or the
liquidation or dissolution of the Fund and distribution of its assets, the Bank
will deliver the Portfolio Securities held by it under this Agreement and
disburse cash only upon the order of the Fund set forth in an Officers'
Certificate, accompanied by a certified copy of a resolution of the Board
authorizing any of the foregoing transactions. Upon completion of such delivery
and disbursement and the payment of the fees, disbursements and expenses of the
Bank, this Agreement will terminate.
9. ACTIONS OF BANK WITHOUT PRIOR AUTHORIZATION. Notwithstanding anything
herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, it will without prior authorization or instruction
of the Fund or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name of
the Fund all checks, drafts, or other negotiable or transferable instruments or
other orders for the payment of money received by it for the account of the Fund
and hold for the account of the Fund all income, dividends, interest and other
payments or distribution of cash with respect to the Portfolio Securities held
thereunder;
9.2 Present for payment all coupons and other income items held by it
for the account of the Fund which call for payment upon presentation and hold
the cash received by it upon such payment for the account of the Fund;
9.3 Receive and hold for the account of the Fund all securities
received as a distribution on Portfolio Securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder;
9.4 Execute as agent on behalf of the Fund all necessary ownership and
other certificates and affidavits required by the Internal Revenue Code or the
regulations of the Treasury Department issued thereunder, or by the laws of any
state, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof.
The Bank will execute and deliver such certificates in connection with Portfolio
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any state;
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9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it upon
payment for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for definitive
securities.
10. COLLECTIONS AND DEFAULTS. The Bank will use all reasonable efforts to
collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Fund notice actually received by it of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such Securities. If Portfolio Securities upon which such income is
payable are in default or payment is refused after due demand or presentation,
the Bank will notify the Fund in writing of any default or refusal to pay within
two business days from the day on which it receives knowledge of such default or
refusal. In addition, the Bank will send the Fund a written report once each
month showing any income on any Portfolio Security held by it which is more than
ten days overdue on the date of such report and which has not previously been
reported.
11. MAINTENANCE OF RECORDS AND ACCOUNTING SERVICES. The Bank will
maintain records with respect to transactions for which the Bank is responsible
pursuant to the terms and conditions of this Agreement, and in compliance with
the applicable rules and regulations of the 1940 Act and will furnish the Fund
daily with a statement of condition of the Fund. The Bank will furnish to the
Fund at the end of every month, and at the close of each quarter of the Fund's
fiscal year, a list of the Portfolio Securities and the aggregate amount of cash
held by it for the Fund. The books and records of the Bank pertaining to its
actions under this Agreement and reports by the Bank or its independent
accountants concerning its accounting system, procedures for safeguarding
securities and internal accounting controls will be open to inspection and audit
at reasonable times by officers of or auditors employed by the Fund and will be
preserved by the Bank in the manner and in accordance with the applicable rules
and regulations under the 1940 Act.
The Bank shall keep the books of account and render statements or copies
from time to time as reasonably requested by the Treasurer or any executive
officer of the Fund.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
12. FUND EVALUATION. The Bank shall compute and, unless otherwise
directed by the Board, determine as of the close of business on the New York
Stock Exchange on each day on which said Exchange is open for unrestricted
trading and as of such other hours, if any, as may be authorized by the Board
the net asset value and the public offering price of a share of capital stock of
the Fund, such determination to be made in accordance with the provisions of the
Articles and By-laws of the Fund and Prospectus and Statement of Additional
Information relating to the Fund, as they may from time to time be amended, and
any applicable resolutions of the Board at the time in force and applicable; and
promptly to notify the Fund, the proper exchange and the NASD or such other
persons as the Fund may request of the results of such computation and
determination. In computing the net asset value hereunder, the Bank may rely in
good faith upon information furnished to it by any Authorized Person in respect
of (i) the manner of accrual of the liabilities of the Fund and in respect of
liabilities of the Fund not appearing on its books of account kept by the Bank,
(ii) reserves, if any, authorized by the Board or that no such reserves have
been authorized, (iii) the source of the quotations to be used in computing the
net asset value, (iv) the value to be assigned to any security for which no
price quotations are available, and (v) the method of computation of the public
offering price on the basis of the net asset value of the shares, and the Bank
shall not be responsible for any loss occasioned by such reliance or for any
good faith reliance on any quotations received from a source pursuant to (iii)
above.
11
<PAGE>
13. CONCERNING THE BANK.
13.1 PERFORMANCE OF DUTIES AND STANDARD OF CARE. In performing its
duties hereunder and any other duties listed on any Schedule hereto, if any, the
Bank will be entitled to receive and act upon the advice of independent counsel
of its own selection, which may be counsel for the Fund, and will be without
liability for any action taken or thing done or omitted to be done in accordance
with this Agreement in good faith in conformity with such advice. In the
performance of its duties hereunder, the Bank will be protected and not be
liable, and will be indemnified and held harmless for any action taken or
omitted to be taken by it in good faith reliance upon the terms of this
Agreement, any Officers' Certificate, Proper Instructions, resolution of the
Board, telegram, notice, request, certificate or other instrument reasonably
believed by the Bank to be genuine and for any other loss to the Fund except in
the case of its negligence, willful misfeasance or bad faith in the performance
of its duties or reckless disregard of its obligations and duties hereunder.
The Bank will be under no duty or obligation to inquire into and will not
be liable for:
(a) the validity of the issue of any Portfolio Securities
purchased by or for the Fund, the legality of the purchases thereof or the
propriety of the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or
for the Fund or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of
the Fund or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of the
Fund or the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the Fund
or the legality of the distribution of any Portfolio Securities as payment in
kind of such dividend; and
(f) any property or moneys of the Fund unless and until
received by it, and any such property or moneys delivered or paid by it pursuant
to the terms hereof.
Moreover, the Bank will not be under any duty or obligation to ascertain
whether any Portfolio Securities at any time delivered to or held by it for the
account of the Fund are such as may properly be held by the Fund under the
provisions of its Articles, By-laws, any federal or state statutes or any rule
or regulation of any governmental agency.Notwithstanding anything in this
Agreement to the contrary, in no event shall the Bank be liable hereunder or to
any third party:
(a) for any losses or damages of any kind resulting from acts
of God, earthquakes, fires, floods, storms or other disturbances of nature,
epidemics, strikes, riots, nationalization, expropriation, currency
restrictions, acts of war, civil war or terrorism, insurrection, nuclear fusion,
fission or radiation, the interruption, loss or malfunction of utilities,
transportation, the unavailability of energy sources and other similar
happenings or events except as results from the Bank's own gross negligence; or
(b) for special, punitive or consequential damages arising from
the provision of services hereunder, even if the Bank has been advised of the
possibility of such damages.
13.2 AGENTS AND SUBCUSTODIANS WITH RESPECT TO PROPERTY OF THE FUND
HELD IN THE UNITED STATES. The Bank may employ agents in the performance of its
duties hereunder and shall be responsible for the acts and omissions of such
agents as if performed by the Bank hereunder.
12
<PAGE>
Upon receipt of Proper Instructions, the Bank may employ certain
subcustodians, provided that any such subcustodian meets at least the minimum
qualifications required by Section 17(f)(1) of the 1940 Act to act as a
custodian of the Fund's assets with respect to property of the Fund held in the
United States. The Bank shall have no liability to the Fund or any other person
by reason of any act or omission of any such subcustodian and the Fund shall
indemnify the Bank and hold it harmless from and against any and all actions,
suits and claims, arising directly or indirectly out of the performance of any
such subcustodian. Upon request of the Bank, the Fund shall assume the entire
defense of any action, suit, or claim subject to the foregoing indemnity. The
Fund shall pay all fees and expenses of any such subcustodian.
13.3 DUTIES OF THE BANK WITH RESPECT TO PROPERTY OF THE FUND HELD
OUTSIDE OF THE UNITED STATES.
(a) APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby
authorizes and instructs the Bank to employ as sub-custodians for the Fund's
Portfolio Securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories designated on
the Schedule attached hereto (each, a "Selected Foreign Sub-Custodian"). Upon
receipt of Proper Instructions, together with a certified resolution of the
Fund's Board of Trustees, the Bank and the Fund may agree to designate
additional foreign banking institutions and foreign securities depositories to
act as Selected Foreign Sub-Custodians hereunder. Upon receipt of Proper
Instructions, the Fund may instruct the Bank to cease the employment of any one
or more such Selected Foreign Sub-Custodians for maintaining custody of the
Fund's assets, and the Bank shall so cease to employ such sub-custodian as soon
as alternate custodial arrangements have been implemented.
(b) FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be
agreed upon in writing by the Bank and the Fund, assets of the Fund shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as Selected Foreign
Sub-Custodians pursuant to the terms hereof. Where possible, such arrangements
shall include entry into agreements containing the provisions set forth in
subparagraph (d) hereof. Notwithstanding the foregoing, except as may otherwise
be agreed upon in writing by the Bank and the Fund, the Fund authorizes the
deposit in Euroclear, the securities clearance and depository facilities
operated by Morgan Guaranty Trust Company of New York in Brussels, Belgium, of
Foreign Portfolio Securities eligible for deposit therein and to utilize such
securities depository in connection with settlements of purchases and sales of
securities and deliveries and returns of securities, until notified to the
contrary pursuant to subparagraph (a) hereunder.
(c) SEGREGATION OF SECURITIES. The Bank shall identify on its
books as belonging to the Fund the Foreign Portfolio Securities held by each
Selected Foreign Sub-Custodian. Each agreement pursuant to which the Bank
employs a foreign banking institution shall require that such institution
establish a custody account for the Bank and hold in that account, Foreign
Portfolio Securities and other assets of the Fund, and, in the event that such
institution deposits Foreign Portfolio Securities in a foreign securities
depository, that it shall identify on its books as belonging to the Bank the
securities so deposited.
(d) AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each of the
agreements pursuant to which a foreign banking institution holds assets of the
Fund (each, a "Foreign Sub-Custodian Agreement") shall be substantially in the
form previously made available to the Fund and shall provide that: (a) the
Fund's assets will not be subject to any right, charge, security interest, lien
or claim of any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe custody or
administration (including, without limitation, any fees or taxes payable upon
transfers or reregistration of securities); (b) beneficial ownership of the
Fund's assets will be freely transferable without the payment of money or value
other than for custody or administration (including, without limitation, any
fees or taxes payable upon transfers or reregistration of securities); (c)
adequate records will be maintained identifying the assets as belonging to Bank;
(d) officers of or auditors employed by, or other representatives of the Bank,
including to the extent permitted under applicable law, the independent public
accountants for the Fund, will be given access to the books and records of the
foreign banking institution relating to its actions under its agreement with the
Bank; and (e) assets of the Fund held by the Selected Foreign Sub-Custodian
will be subject only to the instructions of the Bank or its agents.
13
<PAGE>
(e) ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request
of the Fund, the Bank will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of any
foreign banking institution employed as a Selected Foreign Sub-Custodian insofar
as such books and records relate to the performance of such foreign banking
institution under its Foreign Sub-Custodian Agreement.
(f) REPORTS BY BANK. The Bank will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the securities and
other assets of the Fund held by Selected Foreign Sub-Custodians, including but
not limited to an identification of entities having possession of the Foreign
Portfolio Securities and other assets of the Fund.
(g) TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. Transactions with
respect to the assets of the Fund held by a Selected Foreign Sub-Custodian shall
be effected pursuant to Proper Instructions from the Fund to the Bank and shall
be effected in accordance with the applicable Foreign Sub-Custodian Agreement.
If at any time any Foreign Portfolio Securities shall be registered in the name
of the nominee of the Selected Foreign Sub-Custodian, the Fund agrees to hold
any such nominee harmless from any liability by reason of the registration of
such securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for Foreign Portfolio Securities received for the account
of the Fund and delivery of Foreign Portfolio Securities maintained for the
account of the Fund may be effected in accordance with the customary established
securities trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivering securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such purchaser
or dealer.
In connection with any action to be taken with respect to the
Foreign Portfolio Securities held hereunder, including, without limitation, the
exercise of any voting rights, subscription rights, redemption rights, exchange
rights, conversion rights or tender rights, or any other action in connection
with any other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Fund such
information in connection therewith as is made available to the Bank by the
Foreign Sub-Custodian, and shall promptly forward to the applicable Foreign
Sub-Custodian any instructions, forms or certifications with respect to such
Rights, and any instructions relating to the actions to be taken in connection
therewith, as the Bank shall receive from the Fund pursuant to Proper
Instructions. Notwithstanding the foregoing, the Bank shall have no further duty
or obligation with respect to such Rights, including, without limitation, the
determination of whether the Fund is entitled to participate in such Rights
under applicable U.S. and foreign laws, or the determination of whether any
action proposed to be taken with respect to such Rights by the Fund or by the
applicable Foreign Sub-Custodian will comply with all applicable terms and
conditions of any such Rights or any applicable laws or regulations, or market
practices within the market in which such action is to be taken or omitted.
(h) LIABILITY OF SELECTED FOREIGN SUB-CUSTODIANS. Each Foreign
Sub-Custodian Agreement with a foreign banking institution shall require the
institution to exercise reasonable care in the performance of its duties and to
indemnify, and hold harmless, the Bank and each Fund from and against certain
losses, damages, costs, expenses, liabilities or claims arising out of or in
connection with the institution's performance of such obligations, all as set
forth in the applicable Foreign Sub-Custodian Agreement. The Fund acknowledges
that the Bank, as a participant in Euroclear, is subject to the Terms and
Conditions Governing the Euroclear System, a copy of which has been made
available to the Fund. The Fund acknowledges that pursuant to such Terms and
Conditions, Morgan Guaranty Brussels shall have the sole right to exercise or
assert any and all rights or claims in respect of actions or omissions of, or
the bankruptcy or insolvency of, any other depository, clearance system or
custodian utilized by Euroclear in connection with the Fund's securities and
other assets.
14
<PAGE>
(i) LIABILITY OF BANK. The Bank shall have no more or less
responsibility or liability on account of the acts or omissions of any Selected
Foreign Sub-Custodian employed hereunder than any such Selected Foreign
Sub-Custodian has to the Bank and, without limiting the foregoing, the Bank
shall not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions, or acts of
war or terrorism, political risk (including, but not limited to, exchange
control restrictions, confiscation, insurrection, civil strife or armed
hostilities) other losses due to Acts of God, nuclear incident or any loss where
the Selected Foreign Sub-Custodian has otherwise exercised reasonable care.
(j) MONITORING RESPONSIBILITIES. The Bank shall furnish annually
to the Fund, information concerning the Selected Foreign Sub-Custodians employed
hereunder for use by the Fund in evaluating such Selected Foreign Sub-Custodians
to ensure compliance with the requirements of Rule 17f-5 of the Act. In
addition, the Bank will promptly inform the Fund in the event that the Bank is
notified by a Selected Foreign Sub-Custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline below $200
million (U.S. dollars or the equivalent thereof) or that its shareholders'
equity has declined below $200 million (in each case computed in accordance with
generally accepted U.S. accounting principles) or any other capital adequacy
test applicable to it by exemptive order, or if the Bank has actual knowledge of
any material loss of the assets of the Fund held by a Foreign Sub-Custodian.
(k) TAX LAW. The Bank shall have no responsibility or liability
for any obligations now or hereafter imposed on the Fund or the Bank as
custodian of the Fund by the tax laws of any jurisdiction, and it shall be the
responsibility of the Fund to notify the Bank of the obligations imposed on the
Fund or the Bank as the custodian of the Fund by the tax law of any non-U.S.
jurisdiction, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The sole responsibility of the Custodian with regard to such tax law
shall be to use reasonable efforts to assist the Fund with respect to any claim
for exemption or refund under the tax law of jurisdictions for which the Fund
has provided such information.
13.4 INSURANCE. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Fund held by it as it uses
in respect of its own similar property but it need not maintain any special
insurance for the benefit of the Fund.
13.5. FEES AND EXPENSES OF BANK. The Fund will pay or reimburse the
Bank from time to time for any transfer taxes payable upon transfer of Portfolio
Securities made hereunder, and for all necessary proper disbursements, expenses
and charges made or incurred by the Bank in the performance of this Agreement
(including any duties listed on any Schedule hereto, if any) including any
indemnities for any loss, liabilities or expense to the Bank as provided above.
For the services rendered by the Bank hereunder, the Fund will pay to the Bank
such compensation or fees at such rate and at such times as shall be agreed upon
in writing by the parties from time to time. The Bank will also be entitled to
reimbursement by the Fund for all reasonable expenses incurred in conjunction
with termination of this Agreement by the Fund.
13.6 ADVANCES BY BANK. The Bank may, in its sole discretion, advance
funds on behalf of the Fund to make any payment permitted by this Agreement upon
receipt of any proper authorization required by this Agreement for such payments
by the Fund. Should such a payment or payments, with advanced funds, result in
an overdraft (due to insufficiencies of the Fund's account with the Bank, or for
any other reason) this Agreement deems any such overdraft or related
indebtedness, a loan made by the Bank to the Fund payable on demand and bearing
interest at the current rate charged by the Bank for such loans unless the Fund
shall provide the Bank with agreed upon compensating balances. The Fund agrees
that the Bank shall have a continuing lien and security interest to the extent
of any overdraft or indebtedness, in and to any property at any time held by it
for the Fund's benefit or in which the Fund has an interest and which is then in
the Bank's possession or control (or in the possession or control of any third
party acting on the Bank's behalf). The Fund authorizes the Bank, in its sole
discretion, at any time to charge any overdraft or indebtedness, together with
interest due thereon against any balance of account standing to the credit of
the Fund on the Bank's books.
15
<PAGE>
14. TERMINATION.
14.1 This Agreement may be terminated at any time without penalty upon
sixty days written notice delivered by either party to the other by means of
registered mail, and upon the expiration of such sixty days this Agreement will
terminate; provided, however, that the effective date of such termination may be
postponed to a date not more than ninety days from the date of delivery of such
notice (i) by the Bank in order to prepare for the transfer by the Bank of all
of the assets of the Fund held hereunder, and (ii) by the Fund in order to give
the Fund an opportunity to make suitable arrangements for a successor custodian.
At any time after the termination of this Agreement, the Fund will, at its
request, have access to the records of the Bank relating to the performance of
its duties as custodian.
14.2 In the event of the termination of this Agreement, the Bank will
immediately upon receipt or transmittal, as the case may be, of notice of
termination,commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Portfolio Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Fund. The obligation of the Bank to deliver and transfer over the assets of the
Fund held by it directly to such successor custodian will commence as soon as
such successor is appointed and will continue until completed as aforesaid. If
the Fund does not select a successor custodian within ninety (90) days from the
date of delivery of notice of termination the Bank may, subject to the
provisions of subsection (14.3), deliver the Portfolio Securities and cash of
the Fund held by the Bank to a bank or trust company of its own selection which
meets the requirements of Section 17(f)(1) of the 1940 Act and has a reported
capital, surplus and undivided profits aggregating not less than $2,000,000, to
be held as the property of the Fund under terms similar to those on which they
were held by the Bank, whereupon such bank or trust company so selected by the
Bank will become the successor custodian of such assets of the Fund with the
same effect as though selected by the Board.
14.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of the
Fund advising that a successor custodian cannot be found willing and able to act
upon reasonable and customary terms and that there has been submitted to the
shareholders of the Fund the question of whether the Fund will be liquidated or
will function without a custodian for the assets of the Fund held by the Bank.
In that event the Bank will deliver the Portfolio Securities and cash of the
Fund held by it, subject as aforesaid, in accordance with one of such
alternatives which may be approved by the requisite vote of shareholders, upon
receipt by the Bank of a copy of the minutes of the meeting of shareholders at
which action was taken, certified by the Fund's Secretary and an opinion of
counsel to the Fund in form and content satisfactory to the Bank.
15. CONFIDENTIALITY. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other party,
except as may be required by applicable law or at the request of a governmental
agency. The parties further agree that a breach of this provision would
irreparably damage the other party and accordingly agree that each of them is
entitled, without bond or other security, to an injunction or injunctions to
prevent breaches of this provision.
16. NOTICES. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to it at
its office at the address set forth below; NAMELY:
(a) In the case of notices sent to the Fund to:
WRL Series Fund, Inc. if hand-delivered:
AEGON Insurance Group 201 Highland Avenue
P. O. Box 5068 Largo, FL 33770
Clearwater, FL 34618-5068
Attention: Ken Beil
16
<PAGE>
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Attention: Richard Boorman
or at such other place as such party may from time to time
designate in writing.
17. AMENDMENTS. This Agreement may not be altered or amended, except
by an instrument in writing, executed by both parties, and in the case of the
Fund, such alteration or amendment will be authorized and approved by its Board.
18. PARTIES. This Agreement will be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written consent of the Bank or by the Bank without the written
consent of the Fund, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 14 hereof will not be deemed to
be an assignment within the meaning of this provision.
19. GOVERNING LAW. This Agreement and all performance hereunder will
be governed by the laws of the Commonwealth of Massachusetts.
20. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the day
and year first written above.
ATTEST: WRL SERIES FUND, INC.
_______________________ By: _______________________
Priscilla I. Hechler Name: Kenneth P. Beil
Assistant Secretary Title: Vice President
ATTEST: Investors Bank & Trust Company
_______________________ By: _______________________
Name: Kevin J. Sheehan
Title: President
17
EXHIBIT 9
FORM OF ADMINISTRATIVE SERVICES AND TRANSFER
AGENCY AGREEMENT
<PAGE>
WRL SERIES FUND, INC.
ADMINISTRATIVE SERVICES AND TRANSFER AGENCY AGREEMENT
This Agreement is entered into as of January 1, 1997 by WRL Series
Fund, Inc. (the "Fund"), a Maryland corporation, and WRL Investment Services,
Inc. ("WRL Services"), a Florida corporation.
WHEREAS, the Fund is a diversified, open-end management investment
company consisting of separate series or investment portfolios (the "Portfolios"
or "Portfolio"); and
WHEREAS, WRL Services is an administrative services company located at
201 Highland Avenue, Largo, Florida, 33770, which is or will be registered as a
transfer agent under Section 17A(c)(1) of the Securities Act of 1934, as
amended, and is a wholly-owned subsidiary of WRL Investment Management, Inc., a
registered investment adviser; and
WHEREAS, the Fund seeks to engage WRL Services to furnish the Fund with
administrative services to assist the Fund in carrying out certain of its
functions and operations.
WHEREAS, WRL Services desires to provide administrative services to the
Fund, in accordance with the terms of this Agreement.
WHEREAS, it is the purpose of this Agreement to express the mutual
agreement of the parties hereto with respect to the services to be provided by
WRL Services to the Fund and the terms and conditions under which such services
will be rendered.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties hereto agree as follows:
1. ADMINISTRATIVE SERVICES PROVIDED. WRL Services shall provide
supervisory, administrative, and transfer agency services to each
Portfolio of the Fund. Subject to the overall supervision of the
Board of Directors of the Fund, WRL Services shall furnish to each
Portfolio:
/bullet/ The services of personnel to supervise and perform all
administrative, clerical, recordkeeping and
bookkeeping services for the Fund, including acting as
registrar for the Fund and recording the ownership of
Fund shares and changes in or transfers of such
ownership;
/bullet/ To the extent agreed upon by the parties hereto from
time to time, monitor and verify Investors Bank &
Trust Company's daily calculation of net asset values;
/bullet/ Preparation and filing of all returns and reports in
connection with federal, state and local taxes;
/bullet/ Shareholder relations functions, including preparation
of notices to shareholders;
/bullet/ Regulatory reporting and compliance, including
preparation of any required amendments, supplements or
renewals of registration statements, qualifications or
prospectuses under the Securities Act of 1933 and the
<PAGE>
securities laws of any states or territories
subsequent to the effectiveness of the initial
registration statement under the Securities Act of
1933;
/bullet/ All other matters relating to the operation of the
Portfolios, other than investment management and
distribution functions;
/bullet/ Supervise and coordinate the Fund's custodian and its
dividend disbursing agent and monitor their services
to each Portfolio;
/bullet/ Assist each Portfolio in preparing reports to
shareholders; and
/bullet/ Provide office space, telephones and other office
equipment as necessary in order for WRL Services to
perform administrative services to the Fund as
described herein.
2. OBLIGATIONS OF EACH PORTFOLIO OF THE FUND. Each Portfolio shall
have the following obligations under this Agreement:
(a) to provide WRL Services with access to all
information, documents and records of and about each
Portfolio that are necessary for WRL Services to carry
out the performance of its duties under this Agreement;
(b) to furnish WRL Services with a certified copy of any
financial statement or report prepared for any Portfolio
by certified or independent public accountants, and with
copies of any financial statements or reports made by
such Portfolio to its shareholders or to any
governmental body or securities exchange; and
(c) to reimburse WRL Services for the services performed
by WRL Services pursuant to Section 1 of this Agreement
during its term, on a costs incurred basis. WRL Services
shall be responsible for providing all personnel,
materials, and other resources necessary in order for
WRL Services to perform its obligations under Section 1
of this Agreement. The Fund will in turn reimburse WRL
Services for the expense of such personnel, materials,
and other resources by paying to WRL Services an amount
equal to the cost of such personnel, materials and other
resources, as incurred by WRL Services in a calendar
month, within fifteen calendar days following the end of
such calendar month. In the event that this Agreement
shall be effective for only part of a calendar month,
the amount to be paid by the Fund to WRL Services with
respect to such calendar month will be based on costs
incurred during the term of effectiveness. Expenses
reimbursed by the Fund pursuant to this Section 2(c)
shall be paid by each Portfolio in relative proportion
to the accumulation value or cash value of the variable
contracts held by owners of variable life insurance and
variable annuities allocated to the investment options
funded by such Portfolio.
3. INVESTMENT COMPANY ACT COMPLIANCE. In performing services
hereunder, WRL Services shall at all times comply with applicable
provisions of the Investment Company Act of 1940, as amended (the
"1940 Act") and any other federal or state securities laws. In
addition, and without limiting the foregoing, this Agreement is
subject to the 1940 Act and rules thereunder; to the extent that
any provision of this Agreement would require a party to take any
action prohibited by the 1940 Act and rules thereunder, or would
preclude a party from taking any action required by the 1940 Act
and rules thereunder, then it is the intention of the parties
hereto that such provision shall be enforced only to
2
<PAGE>
the extent permitted under the 1940 Act and rules thereunder; and
that all other provisions of this Agreement shall remain valid and
enforceable as if the provision at issue had never been a part
hereof.
4. RECORDS. WRL Services recognizes and agrees that, pursuant to
Rule 31a-3 under the 1940 Act, records required to be maintained
by the Fund pursuant to Rule 31a-1 and/or Rule 31a-2 under the
1940 Act that are maintained by WRL Services, for and on behalf of
the Fund, are the property of the Fund; shall be maintained,
updated, preserved, and made available in accordance with the 1940
Act and rules thereunder; and will be surrendered promptly to the
Fund upon request.
5. TERM AND TERMINATION.
(a) This Agreement shall continue in effect until terminated
pursuant to provisions hereof.
(b) This Agreement may be terminated at any time, without
penalty, by the Fund by giving 60 days' written notice of
such termination to WRL Services at its principal place of
business; or may be terminated at any time by WRL Services
by giving 60 days' written notice of such termination to the
Fund at its principal place of business.
6. AMENDMENTS. This Agreement may be amended only by written
instrument signed by the parties hereto.
7. PRIOR AGREEMENTS. This Agreement supersedes all prior
agreements between the parties relating to the subject matter
hereof, and all such prior agreements are deemed terminated upon
the effectiveness of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
Attest: WRL SERIES FUND, INC.
________________________ By: _______________________________
Priscilla I. Hechler John R. Kenney, Chairman of the Board
Assistant Vice President and President
and Assistant Secretary
Attest: WRL INVESTMENT SERVICES, INC.
_________________________ By: _______________________________
Thomas E. Pierpan Kenneth P. Beil, President and
Secretary, Vice President and Treasurer
General Counsel
3
EXHIBIT 11
CONSENT OF PRICE WATERHOUSE LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting part of this Post-Effective
Amendment No. 25 to the registration statement on Form N-1A (the "Registration
Statement") of out report dated July 31, 1996, relating to the financial
statements and financial highlights appearing in the December 31, 1995 Annual
Report of the WRL Series Fund, Inc., which is also incorporated by reference
into the Registration Statement. We also consent to the incorporation by
reference in the Prospectus and Statement of Additional Information for the
C.A.S.E. Growth portfolio (a portfolio of the WRL Series Fund, Inc.)
constituting part of the registration Statement of our report dated January 31,
1996, relating to the financial statements and financial highlights appearing in
the December 31, 1995 Annual Report of the C.A.S.E. portfolios of the WRL Series
Fund, Inc., which is also incorporated by reference into the Registration
Statement. We also consent to the references to us under the heading
"Independent Accountants" in each Prospectus constituting part of the
Registration Statement.
/s/ Price Waterhouse LLP
Kansas City, Missouri
October 17, 1996
EXHIBIT 15
PROPOSED PLAN OF DISTRIBUTION
<PAGE>
WRL SERIES FUND, INC.
PROPOSED
PLAN OF DISTRIBUTION PURSUANT TO
RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940
WHEREAS, WRL Series Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "1940 Act") as an open-end
management investment company; and
WHEREAS, the Fund currently offers its shares of the Portfolios of the Fund
(the "Portfolios") for sale to separate accounts established by insurance
companies to fund the benefits under certain individual variable life insurance
policies and individual and group variable annuity contracts (collectively, the
"Separate Accounts"), and may distribute its shares to other offerees in the
future. The Separate Accounts may or may not be registered with the Securities
and Exchange Commission; and
WHEREAS, the Fund desires to adopt a Plan of Distribution (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act applicable to the shares of the
Portfolios during the continuous offering of such shares; and
WHEREAS, the Fund's board of directors (the "Board") has, pursuant to and in
accordance with Rule 12b-1, exercised reasonable business judgment and observed
its fiduciary duties under state law and under Section 36(a) and (b) of the 1940
Act in determining that there is a reasonable likelihood that the Plan will
benefit the Fund and its shareholders;
NOW THEREFORE, the Fund hereby adopts this Plan in accordance with Rule
12b-1 under the 1940 Act with respect to the shares of the Portfolios.
1. For the period commencing with the date on which this Plan shall first
become effective and ending on December 31 of that year and for each
twelve month period (or portion thereof) thereafter in which this Plan shall
continue in effect, the Fund on behalf of the Portfolios, as listed on Schedule
A of this Agreement, is authorized to pay to various service providers, as
direct payment for expenses incurred in connection with the distribution of a
Portfolio's shares, amounts equal to actual expenses associated with
distributing such Portfolio's shares, up to a maximum rate of 0.15% on an
annualized basis of the average daily net assets. Such fee shall be measured and
accrued daily and paid monthly.
2. Expenses permitted to be paid pursuant to this Plan shall include, but not
necessarily be limited to, the following:
(a) the cost for printing and mailing of Fund prospectuses and statements
of additional information, and any supplements thereto to potential
investors;
(b) the costs relating to the development and preparation of Fund
advertisements, sales literature, and brokers' and other promotional
materials describing and/or relating to the Fund;
(c) expenses incurred in connection with the presentation of seminars and
sales meetings describing the Fund attended by sales personnel and
potential investors;
(d) the development of consumer-oriented sales materials describing and/or
relating to the Fund; and
(e) expenses attributable to "distribution-related services" provided to
the Fund. "Distribution-related services" includes, but are not limited
to: salaries and benefits; office expenses; equipment expenses (I.E.,
computers, software, office equipment, etc.); training costs; travel
<PAGE>
costs; printing costs; supply expenses; computer programming time; and
data center expenses, each as they relate to the promotion of the sale
of Fund shares.
3. This Plan shall not take effect with respect to shares of a Portfolio until
it has been approved by a vote of at least a majority of the outstanding voting
securities (as defined in the 1940 Act) of such Portfolio.
4. This Plan, together with any related agreements, shall not take effect until
they have been approved, by a vote of the majority of the Fund's Board,
including a majority of those members of the Board who are not "interested
persons" of the Fund (as defined in the 1940 Act), and who have no direct or
indirect financial interest in the operation of this Plan or in any agreements
related to the Plan (the "Independent Directors"), cast in person at a meeting
called for the purpose of voting on this Plan and such agreements.
5. This Plan shall continue in effect for as long as such continuance is
specifically approved at least annually by the Board and Independent Directors
in the manner provided in paragraph 4.
6. Any person authorized to direct the disposition of monies paid or payable by
the Fund pursuant to this Plan or any related agreement shall provide to the
Fund's Board, and the Board shall review, at least quarterly, a written report
of the amounts so expended and the purposes for which such expenditures were
made, and shall furnish the Board with such other information as the Board may
reasonably request in connection with such payments in order to enable the Board
to make an informed determination as to whether the Plan should be continued.
7. This Plan may be terminated at any time with respect to a Portfolio by vote
of a majority of the Independent Directors, or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of such Portfolio.
8. Any agreement related to the Plan, including its implementation, shall be in
writing and shall provide:
(a) that such agreement, with respect to a Portfolio, may be terminated at
any time, without payment of any penalty, by vote of a majority of the
Independent Directors or by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of such Portfolio, on
not more than 60 days' written notice to the other party/parties to
such agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment.
9. This Plan may not be amended to increase materially the amount of
distribution expenses permitted to be paid by a Portfolio pursuant to paragraphs
1 and 2 without the approval of the shareholders of such Portfolio, and any
material amendment to the Plan must be approved by the Board and Independent
Directors in the manner provided in paragraph 4.
10. As long as the Plan is in effect, the selection and nomination of those
members of the Board who are not interested persons (as defined in the 1940 Act)
of the Fund shall be committed to the discretion of such disinterested directors
then in office.
11. The Fund will preserve copies of this Plan, and any related agreements and
reports, for a period of not less than six years from the date of those
documents, the first two years in an easily accessible place.
12. Any provision of this Plan that is invalid, illegal, or unenforceable in any
jurisdiction will, as to that jurisdiction, be ineffective to the extent of such
invalidity, illegality, or unenforceability, without affecting in any way the
remaining provisions of this Plan in such jurisdiction, or without rendering
that or any other provisions of this Plan invalid, illegal, or unenforceable in
any other jurisdiction.
2
<PAGE>
IN WITNESS WHEREOF, the Fund has executed this Plan on the day and year set
forth below in Largo, Florida.
Dated as of: January 1, 1997
ATTEST: WRL SERIES FUND, INC.
__________________________ By: __________________________________
Priscilla I. Hechler John R. Kenney
Assistant Vice President Chairman of the Board and
and Assistant Secretary President
3
<PAGE>
Schedule A
PARTICIPATING PORTFOLIOS AS OF JANUARY 1, 1997
Growth
Bond
Global
Money Market
Short-to-Intermediate Government
Emerging Growth
Equity-Income
Balanced
Aggressive Growth
Utility
Tactical Asset Allocation
Value Equity
C.A.S.E. Growth
C.A.S.E. Growth & Income
C.A.S.E. Quality Growth
Meridian/INVESCO Global Sector
Meridian/INVESCO US Sector
Meridian/INVESCO Foreign Sector
International Equity
U.S. Equity Portfolio
4
EXHIBIT 17
Financial Data Schedules
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. MONEY MARKET PORTFOLIO FOR THE PERIOD ENDED
DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 01
<NAME> MONEY MARKET PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 80,487
<INVESTMENTS-AT-VALUE> 80,487
<RECEIVABLES> 0
<ASSETS-OTHER> 101
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 80,588
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 44
<TOTAL-LIABILITIES> 44
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 80,544
<SHARES-COMMON-STOCK> 80,544
<SHARES-COMMON-PRIOR> 93,081
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 80,544
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,943
<OTHER-INCOME> 0
<EXPENSES-NET> 466
<NET-INVESTMENT-INCOME> 4,477
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,477
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,477)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 114,390
<NUMBER-OF-SHARES-REDEEMED> (131,404)
<SHARES-REINVESTED> 4,477
<NET-CHANGE-IN-ASSETS> (12,537)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 422
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 468
<AVERAGE-NET-ASSETS> 84,351
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. BOND PORTFOLIO, FOR THE PERIOD ENDED
DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 02
<NAME> BOND PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 88,798
<INVESTMENTS-AT-VALUE> 95,763
<RECEIVABLES> 1,181
<ASSETS-OTHER> 85
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 97,029
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 58
<TOTAL-LIABILITIES> 58
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 97,521
<SHARES-COMMON-STOCK> 8,548
<SHARES-COMMON-PRIOR> 7,253
<ACCUMULATED-NII-CURRENT> 17
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7,532)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,965
<NET-ASSETS> 96,971
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,809
<OTHER-INCOME> 0
<EXPENSES-NET> 495
<NET-INVESTMENT-INCOME> 5,314
<REALIZED-GAINS-CURRENT> 2,182
<APPREC-INCREASE-CURRENT> 9,317
<NET-CHANGE-FROM-OPS> 16,813
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,296
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,426
<NUMBER-OF-SHARES-REDEEMED> (1,609)
<SHARES-REINVESTED> 478
<NET-CHANGE-IN-ASSETS> 25,908
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (9,713)
<OVERDISTRIB-NII-PRIOR> 23
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 410
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 503
<AVERAGE-NET-ASSETS> 82,361
<PER-SHARE-NAV-BEGIN> 9.80
<PER-SHARE-NII> 0.69
<PER-SHARE-GAIN-APPREC> 1.55
<PER-SHARE-DIVIDEND> (0.69)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.35
<EXPENSE-RATIO> 0.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. GROWTH PORTFOLIO, FOR THE PERIOD ENDED
DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 03
<NAME> GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 911,402
<INVESTMENTS-AT-VALUE> 1,195,604
<RECEIVABLES> 1,089
<ASSETS-OTHER> 34
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,196,727
<PAYABLE-FOR-SECURITIES> 624
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 928
<TOTAL-LIABILITIES> 1,552
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 905,020
<SHARES-COMMON-STOCK> 37,749
<SHARES-COMMON-PRIOR> 34,206
<ACCUMULATED-NII-CURRENT> 575
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,821
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 284,758
<NET-ASSETS> 1,195,174
<DIVIDEND-INCOME> 6,312
<INTEREST-INCOME> 11,008
<OTHER-INCOME> 0
<EXPENSES-NET> 8,469
<NET-INVESTMENT-INCOME> 8,852
<REALIZED-GAINS-CURRENT> 154,833
<APPREC-INCREASE-CURRENT> 210,731
<NET-CHANGE-FROM-OPS> 374,416
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,277
<DISTRIBUTIONS-OF-GAINS> (106,305)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,713
<NUMBER-OF-SHARES-REDEEMED> (3,795)
<SHARES-REINVESTED> 3,625
<NET-CHANGE-IN-ASSETS> 380,791
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (43,517)
<OVERDISTRIB-NII-PRIOR> 6
<OVERDIST-NET-GAINS-PRIOR> 1,237
<GROSS-ADVISORY-FEES> 7,848
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,482
<AVERAGE-NET-ASSETS> 985,596
<PER-SHARE-NAV-BEGIN> 23.81
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 10.97
<PER-SHARE-DIVIDEND> (0.24)
<PER-SHARE-DISTRIBUTIONS> (3.14)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 31.66
<EXPENSE-RATIO> 0.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. SHORT-TO-INTERMEDIATE GOVERNMENT PORTFOLIO,
FOR THE PERIOD ENDED DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 04
<NAME> SHORT-TO-INTERMEDIATE GOVERNMENT PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 22,642
<INVESTMENTS-AT-VALUE> 23,301
<RECEIVABLES> 300
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23,601
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13
<TOTAL-LIABILITIES> 13
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23,354
<SHARES-COMMON-STOCK> 2,265
<SHARES-COMMON-PRIOR> 2,094
<ACCUMULATED-NII-CURRENT> 4
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (430)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 659
<NET-ASSETS> 23,588
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,402
<OTHER-INCOME> 0
<EXPENSES-NET> 164
<NET-INVESTMENT-INCOME> 1,237
<REALIZED-GAINS-CURRENT> (188)
<APPREC-INCREASE-CURRENT> 1,625
<NET-CHANGE-FROM-OPS> 2,674
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,233)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,338
<NUMBER-OF-SHARES-REDEEMED> (1,287)
<SHARES-REINVESTED> 120
<NET-CHANGE-IN-ASSETS> 3,232
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (241)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 126
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 165
<AVERAGE-NET-ASSETS> 21,190
<PER-SHARE-NAV-BEGIN> 9.72
<PER-SHARE-NII> 0.60
<PER-SHARE-GAIN-APPREC> 0.70
<PER-SHARE-DIVIDEND> (0.60)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.42
<EXPENSE-RATIO> 0.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. GLOBAL PORTFOLIO, FOR THE PERIOD ENDED
DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 05
<NAME> GLOBAL PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 248,182
<INVESTMENTS-AT-VALUE> 293,330
<RECEIVABLES> 7,423
<ASSETS-OTHER> 39
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 300,792
<PAYABLE-FOR-SECURITIES> 8,387
<SENIOR-LONG-TERM-DEBT> 740
<OTHER-ITEMS-LIABILITIES> 2,159
<TOTAL-LIABILITIES> 11,286
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 243,100
<SHARES-COMMON-STOCK> 18,659
<SHARES-COMMON-PRIOR> 19,955
<ACCUMULATED-NII-CURRENT> (804)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 611
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 46,599
<NET-ASSETS> 289,506
<DIVIDEND-INCOME> 3,020
<INTEREST-INCOME> 1,480
<OTHER-INCOME> 0
<EXPENSES-NET> 2,559
<NET-INVESTMENT-INCOME> 1,941
<REALIZED-GAINS-CURRENT> 8,257
<APPREC-INCREASE-CURRENT> 43,682
<NET-CHANGE-FROM-OPS> 53,880
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (11,272)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,319
<NUMBER-OF-SHARES-REDEEMED> (4,341)
<SHARES-REINVESTED> 726
<NET-CHANGE-IN-ASSETS> 27,727
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (564)
<OVERDISTRIB-NII-PRIOR> 134
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,075
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,568
<AVERAGE-NET-ASSETS> 260,536
<PER-SHARE-NAV-BEGIN> 13.12
<PER-SHARE-NII> 0.10
<PER-SHARE-GAIN-APPREC> 2.91
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.61)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.52
<EXPENSE-RATIO> 0.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. EQUITY INCOME PORTFOLIO, FOR THE PERIOD
ENDED DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 06
<NAME> EQUITY INCOME PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 226,618
<INVESTMENTS-AT-VALUE> 258,825
<RECEIVABLES> 1,265
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 260,090
<PAYABLE-FOR-SECURITIES> 3,071
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 213
<TOTAL-LIABILITIES> 3,284
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 224,031
<SHARES-COMMON-STOCK> 19,962
<SHARES-COMMON-PRIOR> 16,864
<ACCUMULATED-NII-CURRENT> 18
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 550
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 32,207
<NET-ASSETS> 256,806
<DIVIDEND-INCOME> 5,095
<INTEREST-INCOME> 3,524
<OTHER-INCOME> 0
<EXPENSES-NET> 1,901
<NET-INVESTMENT-INCOME> 6,717
<REALIZED-GAINS-CURRENT> 9,894
<APPREC-INCREASE-CURRENT> 31,506
<NET-CHANGE-FROM-OPS> 48,117
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,701)
<DISTRIBUTIONS-OF-GAINS> (6,702)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,064
<NUMBER-OF-SHARES-REDEEMED> (2,025)
<SHARES-REINVESTED> 1,059
<NET-CHANGE-IN-ASSETS> 72,938
<ACCUMULATED-NII-PRIOR> 1
<ACCUMULATED-GAINS-PRIOR> (2,642)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,746
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,901
<AVERAGE-NET-ASSETS> 219,002
<PER-SHARE-NAV-BEGIN> 10.90
<PER-SHARE-NII> 0.37
<PER-SHARE-GAIN-APPREC> 2.33
<PER-SHARE-DIVIDEND> (0.37)
<PER-SHARE-DISTRIBUTIONS> (0.37)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.86
<EXPENSE-RATIO> 0.87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. EMERGING GROWTH PORTFOLIO, FOR THE PERIOD
ENDED DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 07
<NAME> EMERGING GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 228,073
<INVESTMENTS-AT-VALUE> 296,444
<RECEIVABLES> 1,008
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 297,466
<PAYABLE-FOR-SECURITIES> 8,681
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 266
<TOTAL-LIABILITIES> 8,947
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 219,381
<SHARES-COMMON-STOCK> 17,758
<SHARES-COMMON-PRIOR> 15,817
<ACCUMULATED-NII-CURRENT> 17
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 750
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 68,371
<NET-ASSETS> 288,519
<DIVIDEND-INCOME> 1,230
<INTEREST-INCOME> 926
<OTHER-INCOME> 0
<EXPENSES-NET> 2,092
<NET-INVESTMENT-INCOME> 64
<REALIZED-GAINS-CURRENT> 35,451
<APPREC-INCREASE-CURRENT> 52,134
<NET-CHANGE-FROM-OPS> 87,649
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (49)
<DISTRIBUTIONS-OF-GAINS> (11,919)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,438
<NUMBER-OF-SHARES-REDEEMED> (2,236)
<SHARES-REINVESTED> 739
<NET-CHANGE-IN-ASSETS> 105,870
<ACCUMULATED-NII-PRIOR> 2
<ACCUMULATED-GAINS-PRIOR> (22,781)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,839
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,099
<AVERAGE-NET-ASSETS> 231,225
<PER-SHARE-NAV-BEGIN> 11.55
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 5.42
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.73)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.25
<EXPENSE-RATIO> 0.91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FR0M THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. AGGRESSIVE GROWTH PORTFOLIO, FOR THE PERIOD
ENDED DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 08
<NAME> AGGRESSIVE GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 138,411
<INVESTMENTS-AT-VALUE> 160,311
<RECEIVABLES> 520
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 160,831
<PAYABLE-FOR-SECURITIES> 2,143
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 154
<TOTAL-LIABILITIES> 2,297
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 137,067
<SHARES-COMMON-STOCK> 11,965
<SHARES-COMMON-PRIOR> 3,938
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (433)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 21,900
<NET-ASSETS> 158,534
<DIVIDEND-INCOME> 344
<INTEREST-INCOME> 284
<OTHER-INCOME> 0
<EXPENSES-NET> 1,143
<NET-INVESTMENT-INCOME> (515)
<REALIZED-GAINS-CURRENT> 4,512
<APPREC-INCREASE-CURRENT> 20,073
<NET-CHANGE-FROM-OPS> 24,070
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (4,186)
<DISTRIBUTIONS-OTHER> 1
<NUMBER-OF-SHARES-SOLD> 10,492
<NUMBER-OF-SHARES-REDEEMED> (2,781)
<SHARES-REINVESTED> 316
<NET-CHANGE-IN-ASSETS> 119,708
<ACCUMULATED-NII-PRIOR> 1
<ACCUMULATED-GAINS-PRIOR> (244)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 849
<INTEREST-EXPENSE> 162
<GROSS-EXPENSE> 1,143
<AVERAGE-NET-ASSETS> 107,057
<PER-SHARE-NAV-BEGIN> 9.86
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> 3.96
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.51)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.25
<EXPENSE-RATIO> 1.07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. BALANCED PORTFOLIO, FOR THE PERIOD ENDED
DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 09
<NAME> BALANCED PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 27,751
<INVESTMENTS-AT-VALUE> 30,904
<RECEIVABLES> 2,403
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 33,307
<PAYABLE-FOR-SECURITIES> 2,167
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 26
<TOTAL-LIABILITIES> 2,193
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 28,686
<SHARES-COMMON-STOCK> 2,926
<SHARES-COMMON-PRIOR> 2,103
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (727)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,153
<NET-ASSETS> 31,114
<DIVIDEND-INCOME> 629
<INTEREST-INCOME> 685
<OTHER-INCOME> 0
<EXPENSES-NET> 238
<NET-INVESTMENT-INCOME> 1,076
<REALIZED-GAINS-CURRENT> (304)
<APPREC-INCREASE-CURRENT> 3,757
<NET-CHANGE-FROM-OPS> 4,529
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,074)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,309
<NUMBER-OF-SHARES-REDEEMED> (591)
<SHARES-REINVESTED> 105
<NET-CHANGE-IN-ASSETS> 11,692
<ACCUMULATED-NII-PRIOR> 1
<ACCUMULATED-GAINS-PRIOR> (422)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 195
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 238
<AVERAGE-NET-ASSETS> 24,548
<PER-SHARE-NAV-BEGIN> 9.24
<PER-SHARE-NII> 0.44
<PER-SHARE-GAIN-APPREC> 1.38
<PER-SHARE-DIVIDEND> (0.43)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.63
<EXPENSE-RATIO> 0.97
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. UTILITY PORTFOLIO, FOR THE PERIOD ENDED
DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 10
<NAME> UTILITY PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<INVESTMENTS-AT-COST> 22,135
<INVESTMENTS-AT-VALUE> 24,680
<RECEIVABLES> 100
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24,782
<PAYABLE-FOR-SECURITIES> 157
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18
<TOTAL-LIABILITIES> 175
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,034
<SHARES-COMMON-STOCK> 2,212
<SHARES-COMMON-PRIOR> 1,128
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,545
<NET-ASSETS> 24,607
<DIVIDEND-INCOME> 843
<INTEREST-INCOME> 118
<OTHER-INCOME> 0
<EXPENSES-NET> 172
<NET-INVESTMENT-INCOME> 789
<REALIZED-GAINS-CURRENT> 282
<APPREC-INCREASE-CURRENT> 2,876
<NET-CHANGE-FROM-OPS> 3,947
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (789)
<DISTRIBUTIONS-OF-GAINS> (191)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,789
<NUMBER-OF-SHARES-REDEEMED> (796)
<SHARES-REINVESTED> 91
<NET-CHANGE-IN-ASSETS> 14,125
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (96)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 129
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 187
<AVERAGE-NET-ASSETS> 17,283
<PER-SHARE-NAV-BEGIN> 9.30
<PER-SHARE-NII> 0.46
<PER-SHARE-GAIN-APPREC> 1.93
<PER-SHARE-DIVIDEND> (0.46)
<PER-SHARE-DISTRIBUTIONS> (0.11)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.12
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. TACTICAL PORTFOLIO, FOR THE PERIOD ENDED
DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 11
<NAME> TACTICAL PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 113,368
<INVESTMENTS-AT-VALUE> 119,605
<RECEIVABLES> 1,014
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120,619
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 88
<TOTAL-LIABILITIES> 88
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 114,034
<SHARES-COMMON-STOCK> 10,488
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 10
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 250
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,237
<NET-ASSETS> 120,531
<DIVIDEND-INCOME> 675
<INTEREST-INCOME> 1,889
<OTHER-INCOME> 0
<EXPENSES-NET> 507
<NET-INVESTMENT-INCOME> 2,057
<REALIZED-GAINS-CURRENT> 2,438
<APPREC-INCREASE-CURRENT> 6,237
<NET-CHANGE-FROM-OPS> 10,732
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,046)
<DISTRIBUTIONS-OF-GAINS> (2,188)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,464
<NUMBER-OF-SHARES-REDEEMED> (1,347)
<SHARES-REINVESTED> 371
<NET-CHANGE-IN-ASSETS> 120,531
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 434
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 507
<AVERAGE-NET-ASSETS> 54,728
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.41
<PER-SHARE-GAIN-APPREC> 1.93
<PER-SHARE-DIVIDEND> (0.41)
<PER-SHARE-DISTRIBUTIONS> (0.44)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.49
<EXPENSE-RATIO> 0.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. C.A.S.E. GROWTH PORTFOLIO, FOR THE PERIOD
ENDED DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 12
<NAME> C.A.S.E. GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 2,936
<INVESTMENTS-AT-VALUE> 2,983
<RECEIVABLES> 4
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,987
<PAYABLE-FOR-SECURITIES> 407
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2
<TOTAL-LIABILITIES> 409
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,526
<SHARES-COMMON-STOCK> 221
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 47
<NET-ASSETS> 2,578
<DIVIDEND-INCOME> 9
<INTEREST-INCOME> 9
<OTHER-INCOME> 0
<EXPENSES-NET> 7
<NET-INVESTMENT-INCOME> 11
<REALIZED-GAINS-CURRENT> 81
<APPREC-INCREASE-CURRENT> 47
<NET-CHANGE-FROM-OPS> 139
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11)
<DISTRIBUTIONS-OF-GAINS> (76)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 214
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> 2,578
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 31
<AVERAGE-NET-ASSETS> 1,106
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.12
<PER-SHARE-GAIN-APPREC> 2.49
<PER-SHARE-DIVIDEND> (0.12)
<PER-SHARE-DISTRIBUTIONS> (0.83)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.66
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. C.A.S.E. GROWTH & INCOME PORTFOLIO, FOR THE
PERIOD ENDED DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 13
<NAME> C.A.S.E. GROWTH & INCOME PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,153
<INVESTMENTS-AT-VALUE> 1,229
<RECEIVABLES> 3
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,232
<PAYABLE-FOR-SECURITIES> 148
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1
<TOTAL-LIABILITIES> 149
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,007
<SHARES-COMMON-STOCK> 96
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 76
<NET-ASSETS> 1,083
<DIVIDEND-INCOME> 11
<INTEREST-INCOME> 6
<OTHER-INCOME> 0
<EXPENSES-NET> 4
<NET-INVESTMENT-INCOME> 13
<REALIZED-GAINS-CURRENT> 6
<APPREC-INCREASE-CURRENT> 76
<NET-CHANGE-FROM-OPS> 95
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (13)
<DISTRIBUTIONS-OF-GAINS> (6)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 95
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 1,083
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 28
<AVERAGE-NET-ASSETS> 665
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.21
<PER-SHARE-GAIN-APPREC> 1.38
<PER-SHARE-DIVIDEND> (0.21)
<PER-SHARE-DISTRIBUTIONS> (0.10)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.28
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. C.A.S.E. QUALITY GROWTH PORTFOLIO, FOR THE
PERIOD ENDED DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 14
<NAME> C.A.S.E. QUALITY GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,242
<INVESTMENTS-AT-VALUE> 1,267
<RECEIVABLES> 3
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,270
<PAYABLE-FOR-SECURITIES> 119
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1
<TOTAL-LIABILITIES> 120
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,121
<SHARES-COMMON-STOCK> 106
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26
<NET-ASSETS> 1,150
<DIVIDEND-INCOME> 9
<INTEREST-INCOME> 5
<OTHER-INCOME> 0
<EXPENSES-NET> 5
<NET-INVESTMENT-INCOME> 9
<REALIZED-GAINS-CURRENT> 46
<APPREC-INCREASE-CURRENT> 26
<NET-CHANGE-FROM-OPS> 81
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9)
<DISTRIBUTIONS-OF-GAINS> (43)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 101
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> 1,150
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 29
<AVERAGE-NET-ASSETS> 725
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.14
<PER-SHARE-GAIN-APPREC> 1.50
<PER-SHARE-DIVIDEND> (0.14)
<PER-SHARE-DISTRIBUTIONS> (0.66)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.84
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. MONEY MARKET PORTFOLIO FOR THE PERIOD ENDED
JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 01
<NAME> MONEY MARKET PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 97,798
<INVESTMENTS-AT-VALUE> 97,798
<RECEIVABLES> 208
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 98,006
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 47
<TOTAL-LIABILITIES> 47
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 97,959
<SHARES-COMMON-STOCK> 97,959
<SHARES-COMMON-PRIOR> 80,544
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 97,959
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,407
<OTHER-INCOME> 0
<EXPENSES-NET> 227
<NET-INVESTMENT-INCOME> 2,180
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,180
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,180)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 78,191
<NUMBER-OF-SHARES-REDEEMED> (62,956)
<SHARES-REINVESTED> 2,180
<NET-CHANGE-IN-ASSETS> 17,415
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 202
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 228
<AVERAGE-NET-ASSETS> 86,587
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEUDLE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. BOND PORTFOLIO, FOR THE PERIOD ENDED JUNE
30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERNCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 02
<NAME> BOND PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 89,661
<INVESTMENTS-AT-VALUE> 90,741
<RECEIVABLES> 5,763
<ASSETS-OTHER> 7,233
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 103,737
<PAYABLE-FOR-SECURITIES> 4,867
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,220
<TOTAL-LIABILITIES> 12,087
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 98,853
<SHARES-COMMON-STOCK> 8,668
<SHARES-COMMON-PRIOR> 8,548
<ACCUMULATED-NII-CURRENT> 348
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,630)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,080
<NET-ASSETS> 91,650
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,091
<OTHER-INCOME> 0
<EXPENSES-NET> 261
<NET-INVESTMENT-INCOME> 2,830
<REALIZED-GAINS-CURRENT> (1,098)
<APPREC-INCREASE-CURRENT> (5,885)
<NET-CHANGE-FROM-OPS> (4,153)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,500)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,069
<NUMBER-OF-SHARES-REDEEMED> (1,186)
<SHARES-REINVESTED> 238
<NET-CHANGE-IN-ASSETS> (5,322)
<ACCUMULATED-NII-PRIOR> 18
<ACCUMULATED-GAINS-PRIOR> (7,532)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 235
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 261
<AVERAGE-NET-ASSETS> 94,521
<PER-SHARE-NAV-BEGIN> 11.35
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> (.82)
<PER-SHARE-DIVIDEND> (0.29)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.57
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. GROWTH PORTFOLIO, FOR THE PERIOD ENDED JUNE
30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 03
<NAME> GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 1,011,256
<INVESTMENTS-AT-VALUE> 1,437,373
<RECEIVABLES> 4,266
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 123,112
<TOTAL-ASSETS> 1,564,751
<PAYABLE-FOR-SECURITIES> 3,807
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 124,696
<TOTAL-LIABILITIES> 128,503
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 962,885
<SHARES-COMMON-STOCK> 39,429
<SHARES-COMMON-PRIOR> 37,749
<ACCUMULATED-NII-CURRENT> 5,047
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 41,019
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 427,298
<NET-ASSETS> 1,436,248
<DIVIDEND-INCOME> 4,265
<INTEREST-INCOME> 8,134
<OTHER-INCOME> 0
<EXPENSES-NET> 5,427
<NET-INVESTMENT-INCOME> 6,971
<REALIZED-GAINS-CURRENT> 36,198
<APPREC-INCREASE-CURRENT> 142,540
<NET-CHANGE-FROM-OPS> 185,709
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,500)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,991
<NUMBER-OF-SHARES-REDEEMED> (1,380)
<SHARES-REINVESTED> 69
<NET-CHANGE-IN-ASSETS> 241,074
<ACCUMULATED-NII-PRIOR> 575
<ACCUMULATED-GAINS-PRIOR> 4,821
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,188
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,428
<AVERAGE-NET-ASSETS> 1,317,853
<PER-SHARE-NAV-BEGIN> 31.66
<PER-SHARE-NII> 0.18
<PER-SHARE-GAIN-APPREC> 4.65
<PER-SHARE-DIVIDEND> (0.06)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 36.43
<EXPENSE-RATIO> 0.82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. SHORT-TO-INTERMEDIATE GOVERNMENT PORTFOLIO,
FOR THE PERIOD ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 04
<NAME> SHORT-TO-INTERMEDIATE GOVERNMENT PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 25,684
<INVESTMENTS-AT-VALUE> 25,550
<RECEIVABLES> 298
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1,060
<TOTAL-ASSETS> 26,908
<PAYABLE-FOR-SECURITIES> 994
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,078
<TOTAL-LIABILITIES> 2,072
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,025
<SHARES-COMMON-STOCK> 2,426
<SHARES-COMMON-PRIOR> 2,265
<ACCUMULATED-NII-CURRENT> 263
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (319)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (133)
<NET-ASSETS> 24,836
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 742
<OTHER-INCOME> 0
<EXPENSES-NET> 83
<NET-INVESTMENT-INCOME> 658
<REALIZED-GAINS-CURRENT> 111
<APPREC-INCREASE-CURRENT> (793)
<NET-CHANGE-FROM-OPS> (24)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (400)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 732
<NUMBER-OF-SHARES-REDEEMED> (609)
<SHARES-REINVESTED> 39
<NET-CHANGE-IN-ASSETS> 1,248
<ACCUMULATED-NII-PRIOR> 4
<ACCUMULATED-GAINS-PRIOR> (430)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 72
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 83
<AVERAGE-NET-ASSETS> 24,103
<PER-SHARE-NAV-BEGIN> 10.42
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> (0.29)
<PER-SHARE-DIVIDEND> (0.17)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.24
<EXPENSE-RATIO> 0.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. GLOBAL PORTFOLIO, FOR THE PERIOD ENDED JUNE
30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 05
<NAME> GLOBAL PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 359,586
<INVESTMENTS-AT-VALUE> 442,529
<RECEIVABLES> 16,882
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 46,774
<TOTAL-ASSETS> 506,185
<PAYABLE-FOR-SECURITIES> 15,783
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 45,362
<TOTAL-LIABILITIES> 61,145
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 332,217
<SHARES-COMMON-STOCK> 23,870
<SHARES-COMMON-PRIOR> 18,659
<ACCUMULATED-NII-CURRENT> 710
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 27,322
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 84,790
<NET-ASSETS> 445,040
<DIVIDEND-INCOME> 3,146
<INTEREST-INCOME> 433
<OTHER-INCOME> 0
<EXPENSES-NET> 1,665
<NET-INVESTMENT-INCOME> 1,914
<REALIZED-GAINS-CURRENT> 26,712
<APPREC-INCREASE-CURRENT> 38,191
<NET-CHANGE-FROM-OPS> 66,817
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (400)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,587
<NUMBER-OF-SHARES-REDEEMED> (397)
<SHARES-REINVESTED> 22
<NET-CHANGE-IN-ASSETS> 155,534
<ACCUMULATED-NII-PRIOR> (804)
<ACCUMULATED-GAINS-PRIOR> 611
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,449
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,667
<AVERAGE-NET-ASSETS> 367,728
<PER-SHARE-NAV-BEGIN> 15.52
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> 3.05
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.64
<EXPENSE-RATIO> 0.91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. EQUITY INCOME PORTFOLIO, FOR THE PERIOD
ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 06
<NAME> EQUITY INCOME PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 265,573
<INVESTMENTS-AT-VALUE> 303,066
<RECEIVABLES> 2,225
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 10,326
<TOTAL-ASSETS> 315,617
<PAYABLE-FOR-SECURITIES> 2,243
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10,638
<TOTAL-LIABILITIES> 12,881
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 253,598
<SHARES-COMMON-STOCK> 22,160
<SHARES-COMMON-PRIOR> 19,962
<ACCUMULATED-NII-CURRENT> 1,863
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,782
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 37,493
<NET-ASSETS> 302,736
<DIVIDEND-INCOME> 2,859
<INTEREST-INCOME> 2,156
<OTHER-INCOME> 0
<EXPENSES-NET> 1,170
<NET-INVESTMENT-INCOME> 3,845
<REALIZED-GAINS-CURRENT> 9,232
<APPREC-INCREASE-CURRENT> 5,286
<NET-CHANGE-FROM-OPS> 18,363
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,000)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,959
<NUMBER-OF-SHARES-REDEEMED> (908)
<SHARES-REINVESTED> 147
<NET-CHANGE-IN-ASSETS> 45,931
<ACCUMULATED-NII-PRIOR> 18
<ACCUMULATED-GAINS-PRIOR> 550
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,117
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,170
<AVERAGE-NET-ASSETS> 281,408
<PER-SHARE-NAV-BEGIN> 12.86
<PER-SHARE-NII> 0.18
<PER-SHARE-GAIN-APPREC> 0.71
<PER-SHARE-DIVIDEND> (0.09)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.66
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. EMERGING GROWTH PORTFOLIO, FOR THE PERIOD
ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 07
<NAME> EMERGING GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 274,331
<INVESTMENTS-AT-VALUE> 388,597
<RECEIVABLES> 3,465
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 36,644
<TOTAL-ASSETS> 428,706
<PAYABLE-FOR-SECURITIES> 3,971
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37,159
<TOTAL-LIABILITIES> 41,130
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 264,416
<SHARES-COMMON-STOCK> 20,205
<SHARES-COMMON-PRIOR> 17,758
<ACCUMULATED-NII-CURRENT> (214)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,109
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 114,265
<NET-ASSETS> 387,576
<DIVIDEND-INCOME> 613
<INTEREST-INCOME> 543
<OTHER-INCOME> 0
<EXPENSES-NET> 1,387
<NET-INVESTMENT-INCOME> (231)
<REALIZED-GAINS-CURRENT> 8,359
<APPREC-INCREASE-CURRENT> 45,894
<NET-CHANGE-FROM-OPS> 54,022
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,498
<NUMBER-OF-SHARES-REDEEMED> (1,052)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 99,057
<ACCUMULATED-NII-PRIOR> 17
<ACCUMULATED-GAINS-PRIOR> 750
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,302
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,387
<AVERAGE-NET-ASSETS> 332,352
<PER-SHARE-NAV-BEGIN> 16.25
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 2.93
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.00)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.18
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. AGRESSIVE GROWTH PORTFOLIO, FOR THE PERIOD
ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 08
<NAME> AGRESSIVE GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 165,371
<INVESTMENTS-AT-VALUE> 190,327
<RECEIVABLES> 1,241
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 11,613
<TOTAL-ASSETS> 203,181
<PAYABLE-FOR-SECURITIES> 2,362
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11,821
<TOTAL-LIABILITIES> 14,183
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 158,527
<SHARES-COMMON-STOCK> 13,489
<SHARES-COMMON-PRIOR> 11,965
<ACCUMULATED-NII-CURRENT> (95)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,610
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 24,956
<NET-ASSETS> 188,998
<DIVIDEND-INCOME> 387
<INTEREST-INCOME> 259
<OTHER-INCOME> 0
<EXPENSES-NET> 741
<NET-INVESTMENT-INCOME> (95)
<REALIZED-GAINS-CURRENT> 6,044
<APPREC-INCREASE-CURRENT> 3,056
<NET-CHANGE-FROM-OPS> 9,004
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,718
<NUMBER-OF-SHARES-REDEEMED> (2,194)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 30,464
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (433)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 695
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 741
<AVERAGE-NET-ASSETS> 176,348
<PER-SHARE-NAV-BEGIN> 13.25
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 0.77
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.00)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.01
<EXPENSE-RATIO> 0.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. BALANCED PORTFOLIO, FOR THE PERIOD ENDED
JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 09
<NAME> BALANCED PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 37,717
<INVESTMENTS-AT-VALUE> 40,489
<RECEIVABLES> 385
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 4,072
<TOTAL-ASSETS> 44,946
<PAYABLE-FOR-SECURITIES> 1,175
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,117
<TOTAL-LIABILITIES> 5,292
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 36,212
<SHARES-COMMON-STOCK> 3,630
<SHARES-COMMON-PRIOR> 2,926
<ACCUMULATED-NII-CURRENT> 306
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 364
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,772
<NET-ASSETS> 39,654
<DIVIDEND-INCOME> 285
<INTEREST-INCOME> 424
<OTHER-INCOME> 0
<EXPENSES-NET> 155
<NET-INVESTMENT-INCOME> 554
<REALIZED-GAINS-CURRENT> 1,091
<APPREC-INCREASE-CURRENT> (381)
<NET-CHANGE-FROM-OPS> 1,263
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (250)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 971
<NUMBER-OF-SHARES-REDEEMED> (290)
<SHARES-REINVESTED> 23
<NET-CHANGE-IN-ASSETS> 8,540
<ACCUMULATED-NII-PRIOR> 2
<ACCUMULATED-GAINS-PRIOR> (727)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 141
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 155
<AVERAGE-NET-ASSETS> 35,594
<PER-SHARE-NAV-BEGIN> 10.63
<PER-SHARE-NII> 0.18
<PER-SHARE-GAIN-APPREC> 0.19
<PER-SHARE-DIVIDEND> (0.07)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.93
<EXPENSE-RATIO> 0.87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. UTILITY PORTFOLIO, FOR THE PERIOD ENDED JUNE
30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 10
<NAME> UTILITY PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 27,395
<INVESTMENTS-AT-VALUE> 30,040
<RECEIVABLES> 228
<ASSETS-OTHER> 3,659
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 33,927
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,551
<TOTAL-LIABILITIES> 2,551
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27,815
<SHARES-COMMON-STOCK> 2,718
<SHARES-COMMON-PRIOR> 2,212
<ACCUMULATED-NII-CURRENT> 254
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 661
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,645
<NET-ASSETS> 31,375
<DIVIDEND-INCOME> 531
<INTEREST-INCOME> 48
<OTHER-INCOME> 0
<EXPENSES-NET> 126
<NET-INVESTMENT-INCOME> 453
<REALIZED-GAINS-CURRENT> 666
<APPREC-INCREASE-CURRENT> 100
<NET-CHANGE-FROM-OPS> 1,220
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (200)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 906
<NUMBER-OF-SHARES-REDEEMED> (418)
<SHARES-REINVESTED> 18
<NET-CHANGE-IN-ASSETS> 6,768
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (4)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 105
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 126
<AVERAGE-NET-ASSETS> 28,409
<PER-SHARE-NAV-BEGIN> 11.12
<PER-SHARE-NII> 0.18
<PER-SHARE-GAIN-APPREC> 0.33
<PER-SHARE-DIVIDEND> (0.08)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.55
<EXPENSE-RATIO> .88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. TACTICAL PORTFOLIO, FOR THE PERIOD ENDED
JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 11
<NAME> TACTICAL PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 174,936
<INVESTMENTS-AT-VALUE> 183,228
<RECEIVABLES> 6,548
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 8,374
<TOTAL-ASSETS> 198,150
<PAYABLE-FOR-SECURITIES> 4,709
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,284
<TOTAL-LIABILITIES> 11,993
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 174,047
<SHARES-COMMON-STOCK> 15,539
<SHARES-COMMON-PRIOR> 10,488
<ACCUMULATED-NII-CURRENT> 1,414
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,404
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,292
<NET-ASSETS> 186,157
<DIVIDEND-INCOME> 821
<INTEREST-INCOME> 2,245
<OTHER-INCOME> 0
<EXPENSES-NET> 663
<NET-INVESTMENT-INCOME> 2,403
<REALIZED-GAINS-CURRENT> 2,154
<APPREC-INCREASE-CURRENT> 2,056
<NET-CHANGE-FROM-OPS> 6,612
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,000)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,202
<NUMBER-OF-SHARES-REDEEMED> (1,235)
<SHARES-REINVESTED> 84
<NET-CHANGE-IN-ASSETS> 65,626
<ACCUMULATED-NII-PRIOR> 10
<ACCUMULATED-GAINS-PRIOR> 250
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 632
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 663
<AVERAGE-NET-ASSETS> 159,505
<PER-SHARE-NAV-BEGIN> 11.49
<PER-SHARE-NII> 0.18
<PER-SHARE-GAIN-APPREC> 0.38
<PER-SHARE-DIVIDEND> (0.07)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.98
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. C.A.S.E. GROWTH PORTFOLIO, FOR THE PERIOD
ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 12
<NAME> C.A.S.E. GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 5,050
<INVESTMENTS-AT-VALUE> 5,109
<RECEIVABLES> 9
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2,234
<TOTAL-ASSETS> 7,352
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5
<TOTAL-LIABILITIES> 5
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,122
<SHARES-COMMON-STOCK> 590
<SHARES-COMMON-PRIOR> 221
<ACCUMULATED-NII-CURRENT> 17
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 149
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 59
<NET-ASSETS> 7,347
<DIVIDEND-INCOME> 24
<INTEREST-INCOME> 13
<OTHER-INCOME> 0
<EXPENSES-NET> 20
<NET-INVESTMENT-INCOME> 17
<REALIZED-GAINS-CURRENT> 144
<APPREC-INCREASE-CURRENT> 12
<NET-CHANGE-FROM-OPS> 173
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 382
<NUMBER-OF-SHARES-REDEEMED> (13)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,769
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 5
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 16
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 35
<AVERAGE-NET-ASSETS> 4,209
<PER-SHARE-NAV-BEGIN> 11.66
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.74
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.45
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. C.A.S.E. GROWTH & INCOME PORTFOLIO, FOR THE
PERIOD ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 13
<NAME> C.A.S.E. GROWTH & INCOME PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 1,353
<INVESTMENTS-AT-VALUE> 1,456
<RECEIVABLES> 5
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 309
<TOTAL-ASSETS> 1,770
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2
<TOTAL-LIABILITIES> 2
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,584
<SHARES-COMMON-STOCK> 145
<SHARES-COMMON-PRIOR> 96
<ACCUMULATED-NII-CURRENT> 12
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 69
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 103
<NET-ASSETS> 1,768
<DIVIDEND-INCOME> 17
<INTEREST-INCOME> 4
<OTHER-INCOME> 0
<EXPENSES-NET> 9
<NET-INVESTMENT-INCOME> 12
<REALIZED-GAINS-CURRENT> 68
<APPREC-INCREASE-CURRENT> 27
<NET-CHANGE-FROM-OPS> 107
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 52
<NUMBER-OF-SHARES-REDEEMED> (3)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 684
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 24
<AVERAGE-NET-ASSETS> 1,476
<PER-SHARE-NAV-BEGIN> 11.28
<PER-SHARE-NII> 0.10
<PER-SHARE-GAIN-APPREC> 0.81
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.19
<EXPENSE-RATIO> 1.33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. C.A.S.E. QUALITY GROWTH PORTFOLIO, FOR THE
PERIOD ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 14
<NAME> C.A.S.E. QUALITY GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 1,323
<INVESTMENTS-AT-VALUE> 1,389
<RECEIVABLES> 3
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 157
<TOTAL-ASSETS> 1,549
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2
<TOTAL-LIABILITIES> 2
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,449
<SHARES-COMMON-STOCK> 136
<SHARES-COMMON-PRIOR> 106
<ACCUMULATED-NII-CURRENT> 7
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 25
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 66
<NET-ASSETS> 1,547
<DIVIDEND-INCOME> 13
<INTEREST-INCOME> 2
<OTHER-INCOME> 0
<EXPENSES-NET> 8
<NET-INVESTMENT-INCOME> 7
<REALIZED-GAINS-CURRENT> 22
<APPREC-INCREASE-CURRENT> 41
<NET-CHANGE-FROM-OPS> 70
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 39
<NUMBER-OF-SHARES-REDEEMED> (9)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 397
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 24
<AVERAGE-NET-ASSETS> 1,428
<PER-SHARE-NAV-BEGIN> 10.84
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.49
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.38
<EXPENSE-RATIO> 1.33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. MERIDIAN/INVESCO GLOBAL SECTOR PORTFOLIO,
FOR THE PERIOD ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 15
<NAME> MERIDIAN/INVESCO GLOBAL SECTOR PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 1,125
<INVESTMENTS-AT-VALUE> 1,120
<RECEIVABLES> 5
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 829
<TOTAL-ASSETS> 1,954
<PAYABLE-FOR-SECURITIES> 81
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1
<TOTAL-LIABILITIES> 82
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,880
<SHARES-COMMON-STOCK> 187
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 4
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5)
<NET-ASSETS> 1,872
<DIVIDEND-INCOME> 1
<INTEREST-INCOME> 6
<OTHER-INCOME> 0
<EXPENSES-NET> 3
<NET-INVESTMENT-INCOME> 4
<REALIZED-GAINS-CURRENT> (8)
<APPREC-INCREASE-CURRENT> (5)
<NET-CHANGE-FROM-OPS> (8)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 191
<NUMBER-OF-SHARES-REDEEMED> (4)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,872
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6
<AVERAGE-NET-ASSETS> 1,519
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> (0.05)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.98
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. VALUE EQUITY PORTFOLIO, FOR THE PERIOD ENDED
JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 18
<NAME> VALUE QUITY PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 2,793
<INVESTMENTS-AT-VALUE> 2,803
<RECEIVABLES> 5
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1,030
<TOTAL-ASSETS> 3,838
<PAYABLE-FOR-SECURITIES> 551
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1
<TOTAL-LIABILITIES> 552
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,271
<SHARES-COMMON-STOCK> 326
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 5
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10
<NET-ASSETS> 3,286
<DIVIDEND-INCOME> 4
<INTEREST-INCOME> 3
<OTHER-INCOME> 0
<EXPENSES-NET> 2
<NET-INVESTMENT-INCOME> 5
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 10
<NET-CHANGE-FROM-OPS> 15
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 326
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,286
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6
<AVERAGE-NET-ASSETS> 2,398
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.04
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.07
<EXPENSE-RATIO> .52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. MERIDIAN/INVESCO FOREIGN SECTOR PORTFOLIO,
FOR THE PERIOD ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 17
<NAME> MERIDIAN/INVESCO FOREIGN SECTOR PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 975
<INVESTMENTS-AT-VALUE> 983
<RECEIVABLES> 2
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 27
<TOTAL-ASSETS> 1,012
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1
<TOTAL-LIABILITIES> 1
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 999
<SHARES-COMMON-STOCK> 100
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 4
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8
<NET-ASSETS> 1,011
<DIVIDEND-INCOME> 4
<INTEREST-INCOME> 2
<OTHER-INCOME> 0
<EXPENSES-NET> 2
<NET-INVESTMENT-INCOME> 4
<REALIZED-GAINS-CURRENT> (1)
<APPREC-INCREASE-CURRENT> 8
<NET-CHANGE-FROM-OPS> 11
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 100
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,011
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9
<AVERAGE-NET-ASSETS> 1,008
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0.07
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.11
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WRL SERIES FUND, INC. MERIDIAN/INVESCO US SECTOR PORTFOLIO, FOR
THE PERIOD ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000778207
<NAME> WRL SERIES FUND, INC.
<SERIES>
<NUMBER> 16
<NAME> MERIDIAN/INVESCO US SECTOR PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 433
<INVESTMENTS-AT-VALUE> 425
<RECEIVABLES> 1
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 66
<TOTAL-ASSETS> 492
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 500
<SHARES-COMMON-STOCK> 50
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (8)
<NET-ASSETS> 492
<DIVIDEND-INCOME> 1
<INTEREST-INCOME> 1
<OTHER-INCOME> 0
<EXPENSES-NET> 1
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (8)
<NET-CHANGE-FROM-OPS> (8)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 50
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 492
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5
<AVERAGE-NET-ASSETS> 502
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> (0.17)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.84
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
