Exhibit (d)(iii)
FORM OF INVESTMENT SUB-ADVISORY AGREEMENT
This Investment Sub-Advisory Agreement ("Agreement") is made as of the 1st day
of March, 1999 by and between Wilshire Associates Incorporated, a California
corporation ("Adviser") and Xxxxxxx Xxxxxx Investments, a Delaware corporation
("Sub-Adviser").
WHEREAS Adviser is the investment adviser of the Xxxxxx Xxxx Mutual Funds
(the "Fund"), an open-end diversified, management investment company
registered under the Investment Company Act of 1940, as amended ("1940
Act"), currently consisting of seven separate series or portfolios
(collectively, the "Fund Portfolios") including the Xxxxxx Xxxx Growth
Fund, the Xxxxxx Xxxx Income Fund, the Xxxxxx Xxxx Balanced Fund, the
Xxxxxx Xxxx Short-Term Investment Fund, the Xxxxxx Xxxx Socially
Responsible Fund, the Xxxxxx Xxxx International Equity Fund, and the Xxxxxx
Xxxx Small-Cap Growth Fund;
WHEREAS Adviser desires to retain Sub-Adviser to furnish investment
advisory services for the Fund Portfolio(s) as described in Exhibit 1 -
Fund Portfolio Listing, as may be amended from time to time, and
Sub-Adviser wishes to provide such services, upon the terms and conditions
set forth herein;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties agree as follows:
1. APPOINTMENT Adviser hereby appoints Sub-Adviser to provide certain
sub-investment advisory services to each Fund Portfolio for the period and on
the terms set forth in this Agreement. Sub- Adviser hereby accepts such
appointment and agrees to furnish the services set forth for the compensation
herein provided.
2. SUB-ADVISER SERVICES Subject always to the supervision of the Fund's Board of
Trustees and Adviser, Sub-Adviser will furnish an investment program in respect
of, and make investment decisions for, such portion of the assets of each Fund
Portfolio as Adviser shall from time to time designate (each a "Portfolio
Segment") and place all orders for the purchase and sale of securities on behalf
of the Portfolio Segment. In the performance of its duties, Sub-Adviser will
satisfy its fiduciary duties to the Fund and each Fund Portfolio and will
monitor a Portfolio Segment's investments, and will comply with the provisions
of the Fund's Declaration of Trust and Bylaws, as amended from time to time, and
the stated investment objectives, policies and restrictions of each Fund
Portfolio as set forth in the prospectus and Statement of Additional Information
for each Fund Portfolio, as amended from time to time, as well as any other
objectives, policies or limitations as may be provided by Adviser to Sub-Adviser
in writing from time to time.
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Sub-Adviser will provide reports at least quarterly to the Board of Trustees and
to Adviser. SubAdviser will make its officers and employees available to Adviser
and the Board of Trustees from time to time at reasonable times to review
investment policies of each Fund Portfolio with respect to each Portfolio
Segment and to consult with Adviser regarding the investment affairs of each
Portfolio Segment.
Sub-Adviser agrees that it:
(a) will use the same skill and care in providing such services as it uses
in providing services to fiduciary accounts for which it has investment
responsibilities;
(b) will conform with all applicable rules and regulations of the
Securities and Exchange Commission in all material respects and in addition
will conduct its activities under this Agreement in accordance with any
applicable regulations of any governmental authority pertaining to its
investment advisory activities, including all portfolio diversification
requirements necessary for each Portfolio Segment to comply with subchapter
M of the Internal Revenue Code as if it were a regulated investment company
thereunder;
(c) to the extent directed by Adviser in writing, will execute purchases
and sales of portfolio securities for each Portfolio Segment through
brokers or dealers designated by management of the Fund to Adviser for the
purpose of providing direct benefits to the Fund, provided that Sub-
Adviser determines that such brokers or dealers will provide reasonable
execution in view of such other benefits, and is hereby authorized as the
agent of the Fund to give instructions to the Fund's custodian as to
deliveries of securities or other investments and payments of cash of each
Portfolio Segment to such brokers or dealers for the account of each Fund
Portfolio. Adviser and the Fund understand that the brokerage commissions
or transaction costs in such transactions may be higher, and that the Fund
may receive less favorable prices, than those which the Sub-Adviser could
obtain from another broker or dealer, in order to obtain such benefits for
the Fund;
(d) is authorized to and will select all other brokers or dealers that will
execute the purchases and sales of portfolio securities for each Portfolio
Segment and is hereby authorized as the agent of the Fund to give
instructions to the Fund's custodian as to deliveries of securities or
other investments and payments of cash of each Portfolio Segment for the
account of each Fund Portfolio. In making such selection, Sub-Adviser is
directed to use its best efforts to obtain best execution, which includes
most favorable net results and execution of a Portfolio Segment's orders,
taking into account all appropriate factors, including price, dealer spread
or commission, size and difficulty of the transaction and research or other
services provided. It is understood that Sub-Adviser will not be deemed to
have acted unlawfully, or to have breached a fiduciary duty to the Fund or
in respect of the Fund Portfolio, or be in breach of any obligation owing
to the Fund or in respect of a Fund Portfolio under this Agreement, or
otherwise, solely by reason of its having caused a Fund Portfolio to pay a
member of a securities exchange,
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a broker or a dealer a commission for effecting a securities transaction of
a Fund Portfolioin excess of the amount of commission another member of an
exchange, broker or dealer would have charged if Sub-Adviser determined in
good faith that the commission paid was reasonable in relation to the
brokerage and research services provided by such member, broker, or dealer,
viewed in terms of that particular transaction or Sub-Adviser's overall
responsibilities with respect to its accounts, including the Fund, as to
which it exercises investment discretion;
(e) is authorized to consider for investment by each Portfolio Segment
securities that may also be appropriate for other funds and/or clients
served by Sub-Adviser. To assure fair treatment of each Portfolio Segment
and all other clients of Sub-Adviser in situations in which two or more
clients' accounts participate simultaneously in a buy or sell program
involving the same security, such transactions will be allocated among each
Portfolio Segment and other clients in a manner deemed equitable by
Sub-Adviser. Sub-Adviser is authorized to aggregate purchase and sale
orders for securities held (or to be held) in each Portfolio Segment with
similar orders being made on the same day for other client accounts or
portfolios managed by Sub-Adviser. When an order is so aggregated, the
actual prices applicable to the aggregated transaction will be averaged and
each Portfolio Segment and each other account or portfolio participating in
the aggregated transaction will be treated as having purchased or sold its
portion of the securities at such average price, and all transaction costs
incurred in effecting the aggregated transaction will be shared on a
pro-rata basis among the accounts or portfolios (including each Portfolio
Segment) participating in the transaction. Adviser and the Fund understand
that SubAdviser may not be able to aggregate transactions through brokers
or dealers designated by Adviser with transactions through brokers or
dealers selected by Sub-Adviser, in which event the prices paid or received
by each Portfolio Segment will not be so averaged and may be higher or
lower than those paid or received by other accounts or portfolios of
Sub-Adviser;
(f) will report regularly to Adviser and to the Board of Trustees and will
make appropriate persons available for the purpose of reviewing with
representatives of Adviser and the Board of Trustees on a regular basis at
reasonable times the management of each Portfolio Segment, including
without limitation, review of the general investment strategies of each
Portfolio Segment, the performance of each Portfolio Segment in relation to
standard industry indices, interest rate considerations and general
conditions affecting the marketplace, and will provide various other
reports from time to time as reasonably requested by Adviser;
(g) will prepare such books and records with respect to each Portfolio
Segment's securities transactions as requested by Adviser and will furnish
Adviser and the Fund's Board of Trustees such periodic and special reports
as the Board or Adviser may reasonably request;
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(h) will vote all proxies with respect to securities in each Portfolio
Segment; and
(i) will act upon reasonable instructions from Adviser which, in the
reasonable determination of Sub-Adviser, are not inconsistent with
Sub-Adviser's fiduciary duties under this Agreement.
3. EXPENSES During the term of this Agreement, Sub-Adviser will provide the
office space, furnishings, equipment and personnel required to perform its
activities under this Agreement, and will pay all customary management expenses
incurred by it in connection with its activities under this Agreement, which
shall not include the cost of securities (including brokerage commissions, if
any) purchased for each Portfolio Segment.
4. COMPENSATION For the services provided and the expenses assumed under this
Agreement, Adviser will pay Sub-Adviser, and Sub-Adviser agrees to accept as
full compensation therefor, at a sub-advisory fee computed and paid as set forth
in Exhibit 2 - Fee Schedule
5. OTHER SERVICES Sub-Adviser will for all purposes herein be deemed to be an
independent contractor and will, unless otherwise expressly provided or
authorized, have no authority to act for or represent Adviser, the Fund or a
Fund Portfolio or otherwise be deemed an agent of Adviser, the Fund or a Fund
Portfolio. Adviser understands and has advised the Fund's Board of Trustees that
Sub-Adviser acts as an investment adviser or sub-investment adviser to other
investment companies and other advisory clients. Sub-Adviser understands that
during the term of this Agreement Adviser may retain one or more other
sub-advisers with respect to any portion of the assets of a Fund Portfolio other
than each Portfolio Segment.
6. AFFILIATED BROKER Sub-Adviser or an affiliated person of Sub-Adviser may act
as broker for each Fund Portfolio in connection with the purchase or sale of
securities or other investments for each Portfolio Segment, subject to: (a) the
requirement that Sub-Adviser seek to obtain best execution as set forth above;
(b) the provisions of the Investment Advisers Act of 1940, as amended (the
"Advisers Act"); (c) the provisions of the Securities Exchange Act of 1934, as
amended; and (d) other applicable provisions of law. Subject to the requirements
of applicable law and any procedures adopted by the Fund's Board of Trustees,
Sub-Adviser or its affiliated persons may receive brokerage commissions, fees or
other remuneration from the Fund Portfolio or the Fund for such services in
addition to Sub-Adviser's fees for services under this Agreement.
7. REPRESENTATIONS OF SUB-ADVISER Sub-Adviser is registered with the Securities
and Exchange Commission under the Advisers Act. Sub-Adviser shall use all
commercially reasonable efforts to remain so registered throughout the term of
this Agreement and shall notify Adviser immediately if Sub-Adviser ceases to be
so registered as an investment adviser. Sub-Adviser: (a) is duly organized and
validly existing under the laws of the state of its organization with the power
to own and possess its assets and carry on its business as it is now being
conducted, (b) has the authority to enter into and perform the services
contemplated by this Agreement, (c)
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is not prohibited by the 1940 Act or the Advisers Act from performing the
services contemplated by this Agreement, (d) has met, and will continue to seek
to meet for the duration of this Agreement, any other applicable federal or
state requirements, and the applicable requirements of any regulatory or
industry self-regulatory agency, necessary to be met in order to perform its
services under this Agreement, and (e) will promptly notify Adviser of the
occurrence of any event that would disqualify it from serving as an investment
adviser to an investment company pursuant to Section 9(a) of the 1940 Act. In
addition, Sub-Adviser represents that it has provided Adviser with copies of
each of the following documents: (i) Sub-Adviser's Form ADV as filed with the
Securities Exchange Commission; and (ii) separate lists of persons who
Sub-Adviser wishes to have authorized to give written and/or oral instructions
to Custodians of Fund assets for the Portfolio. Sub-Adviser will furnish Adviser
from time to time with copies, properly certified or otherwise authenticated, of
all material amendments of or supplements to the foregoing, if any. Such
amendments or supplements as to items (i) through (ii) will be provided within
30 days of the time such materials became available to Sub-Adviser.
8. BOOKS AND RECORDS Sub-Adviser will maintain, in the form and for the period
required by Rule 31a-2 under the 1940 Act, all records relating to each
Portfolio Segment's investments that are required to be maintained by the Fund
pursuant to the requirements of paragraphs (b)(5), (b)(6), (b)(7), (b)(9),
(b)(10) and (f) of Rule 31a-1 under the 1940 Act. Sub-Adviser agrees that all
books and records which it maintains for each Fund Portfolio or the Fund are the
property of the Fund and further agrees to surrender promptly to the Adviser or
the Fund any such books, records or information upon the Adviser's or the Fund's
request (provided, however, that Sub-Adviser may retain copies of such records).
All such books and records shall be made available, within five business days of
a written request, to the Fund's accountants or auditors during regular business
hours at Sub-Adviser's offices. Adviser and the Fund or either of their
authorized representative shall have the right to copy any records in the
possession of SubAdviser which pertain to each Fund Portfolio or the Fund. Such
books, records, information or reports shall be made available to properly
authorized government representatives consistent with state and federal law
and/or regulations. In the event of the termination of this Agreement, all such
books, records or other information shall be returned to Adviser or the Fund
(provided, however, that Sub-Adviser may retain copies of such records as
required by law).
Sub-Adviser agrees that it will not disclose or use any records or confidential
information obtained pursuant to this Agreement in any manner whatsoever except
as authorized in this Agreement or in writing by Adviser or the Fund, or if such
disclosure is required by federal or state regulatory authorities. Sub-Adviser
may disclose the investment performance of each Portfolio Segment, provided that
such disclosure does not reveal the identity of Adviser, each Fund Portfolio or
the Fund or the composition of each Portfolio Segment. Sub-Adviser may, however,
disclose that Adviser, the Fund and each Fund Portfolio are its clients.
9. CODE OF ETHICS Sub-Adviser has adopted a written code of ethics complying
with the requirements of Rule 17j-1(b)and (c) under the 1940 Act and will
provide Adviser and the Fund with a copy of such code. Within 20 days of the end
of each calendar quarter during which this
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Agreement remains in effect, the Sub-Adviser shall certify to Adviser or the
Fund that SubAdviser has complied with the requirements of Rule 17j-1 during the
previous quarter with respect to the Portfolio Segment and that there have been
no violations of Sub-Adviser's code of ethics with respect to the Portfolio
Segment or, if such a violation has occurred, the nature of such violation and
of the action taken in response to such violation.
10. LIMITATION OF LIABILITY Neither Sub-Adviser nor any of its directors,
officers, stockholders, agents or employees shall have any liability to Adviser,
the Fund or any shareholder of the Fund for any error of judgment, mistake of
law, or loss arising out of any investment, or for any other act or omission in
the performance by Sub-Adviser of its duties hereunder, except for liability
resulting from willful misfeasance, bad faith, or negligence on Sub-Adviser's
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement, except to the extent otherwise
provided in Section 36(b) of the 1940 Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services.
Sub-Adviser agrees to indemnify and defend Adviser, its officers, directors,
employees and any person who controls Adviser (collectively, "Adviser
Indemnitees") for any loss or expense (including reasonable attorneys' fees)
arising out of or in connection with any claim, demand, action, suit or
proceeding relating to any actual or alleged material misstatement or omission
in the Fund's registration statement, any proxy statement, or any communication
to current or prospective investors in the Fund Portfolio, made by Sub-Adviser
and provided to Adviser or the Fund by Sub-Adviser, provided, however, that in
no case is Sub-Adviser's indemnity in favor of Adviser Indemnitees deemed to
protect such person against any liability to which any such person would
otherwise be subject by reason of willful misconduct, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement.
Adviser agrees to indemnify and hold harmless Sub-Adviser, its officers,
directors, employees, any affiliated person of Sub-Adviser, within the meaning
of Section 2(a)(3) of the 1940 Act, and each controlling person of Sub-Adviser
(collectively, "Sub-Adviser Indemnitees"), against any and all losses, claims,
damages, liabilities or litigation (including reasonable legal and other
expenses), to which a Sub-Adviser Indemnitee may become subject arising out of
Adviser's responsibilities as investment manager of the fund (1) to the extent
of and as a result of the willful misconduct, bad faith or negligence by
Adviser, any of Adviser's employees or representatives or any affiliate of or
any person acting on behalf of Adviser, or (2) as a result of any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement [Prospectus, Statement of Additional Information]
including any amendment thereof or any supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statement therein not misleading, if such a statement
or omission was made other than in reliance upon and in conformity with written
information furnished by Sub-Adviser, or any affiliated person of Sub-Adviser
expressly for use in the Registration Statement or other than upon verbal
information confirmed by Sub-Adviser
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expressly in writing; provided, however, that in no case is Adviser's indemnity
in favor of the Sub-Adviser indemnitees deemed to protect such person against
any liability to which any such person would otherwise be subject by reason of
willful misconduct, bad faith or negligence in the performance of its duties
under this Agreement. It is agreed that Adviser's indemnification obligations
under this Section 10 will extend to expenses and costs (including reasonable
attorneys fees) incurred by Sub-Adviser as a result of any litigation brought by
Adviser alleging Sub-Adviser's failure to perform its obligations and duties in
the manner required under this Agreement unless judgment is rendered for
Adviser.
11. TERM AND TERMINATION This Agreement shall become effective with respect to
each Portfolio Segment on _________, 199_, and shall remain in full force until
_________, unless sooner terminated as hereinafter provided. This Agreement
shall continue in force from year to year thereafter with respect to a Fund
Portfolio, but only as long as such continuance is specifically approved for a
Fund Portfolio at least annually in the manner required by the 1940 Act and the
rules and regulations thereunder; provided, however, that if the continuation of
this Agreement is not approved for a Fund Portfolio, Sub-Adviser may continue to
serve in such capacity for a Fund Portfolio in the manner and to the extent
permitted by the 1940 Act and the rules and regulations thereunder.
This Agreement shall terminate as follows:
(a) This Agreement shall automatically terminate in the event of its assignment
(as defined in the 0000 Xxx) and may be terminated at any time without the
payment of any penalty by Adviser or by Sub-Adviser on sixty days written notice
to the other party. This Agreement may also be terminated by the Fund with
respect to each Fund Portfolio by action of the Board of Trustees or by a vote
of a majority of the outstanding voting securities of each Fund Portfolio (as
defined in the 0000 Xxx) on sixty days written notice to Sub-Adviser by the
Fund.
(b) This Agreement may be terminated with respect to any Fund Portfolio at any
time without payment of any penalty by Adviser, the Board of Trustees or a vote
of majority of the outstanding voting securities of a Fund Portfolio in the
event that Sub-Adviser or any officer or director of Sub- Adviser has taken any
action which results in a material breach of the covenants of Sub-Adviser under
this Agreement.
(c) This Agreement shall automatically terminate in the event the Investment
Management Agreement between Adviser and the Fund with respect to each Fund
Portfolio is terminated, assigned or not renewed.
Termination of this Agreement shall not affect the right of Sub-Adviser to
receive payments of any unpaid balance of the compensation described in Section
4 earned prior to such termination.
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12. NOTICE Any notice under this Agreement by a party shall be in writing,
addressed and personally delivered, mailed postage prepaid, or sent by facsimile
transmission with confirmation of receipt, to the other party at such address as
such other party may designate for the receipt of such notice.
13. LIMITATIONS ON LIABILITY All parties are expressly put on notice of the
Fund's Agreement and Declaration of Trust and all amendments thereto, and the
limitation of shareholder and trustee liability contained therein. The
obligations of the Fund entered into in the name or on behalf thereof by any of
its Trustees, representatives or agents are made not individually but only in
such capacities and are not binding upon any of the Trustees, officers, or
shareholders of the Fund individually but are binding upon only the assets and
property of the Fund, and persons dealing with the Fund must look solely to the
assets of the Fund and those assets belonging to each Fund Portfolio for the
enforcement of any claims.
14. ADVISER RESPONSIBILITY Adviser will provide Sub-Adviser with copies of the
Fund's Declaration of Trust, By-laws, prospectus, and Statement of Additional
Information and any amendment thereto, any objectives, policies or limitations
not appearing therein as they may be relevant to Sub-Adviser's performance under
this Agreement, and the resolutions of the Trustees selecting Adviser as
investment manager to the Fund and approving the form of Adviser's Management
Agreement with the Fund and the Code of Ethics of the Fund and of Adviser as
currently in effect; provided, however, that any changes or modifications to the
foregoing must be properly certified or otherwise authenticated and shall not be
binding on Sub-Adviser until it is notified thereof Such notification to
Sub-Adviser will be provided within 30 days of the time such materials became
available to Adviser.
15. ARBITRATION OF DISPUTES Any claim or controversy arising out of or relating
to this Agreement which is not settled by agreement of the parties shall be
settled by arbitration in Santa Monica, California before a panel of three
arbitrators in accordance with the commercial arbitration rules of the American
Arbitration Association then in effect. The parties agree that the such
arbitration shall be the exclusive remedy hereunder, and each party expressly
waives any right it may have to seek redress in any other forum. Any arbitrator
acting hereunder shall be empowered to assess no remedy other than payment of
fees and out-of-pocket damages. Each party shall bear its own expenses of
arbitration, and the expenses of the arbitrators and of a transcript of any
arbitration proceeding shall be divided equally between the parties. Any
decision and award of the arbitrators shall be binding upon the parties, and
judgment thereon may be entered in the Superior Court of the State of California
or any other court having jurisdiction. If litigation is commenced to enforce
any such award, the prevailing party will be entitled to recover reasonable
attorneys' fees and costs.
16. MISCELLANEOUS This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof and may be amended only by
written consent of both parties. The captions 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. If any
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provision of this Agreement is held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement will not be affected
thereby. This Agreement will be binding upon and shall inure to the benefit of
the parties and their respective successors.
17. APPLICABLE LAW THIS Agreement shall be construed in accordance with
applicable federal law and (except as to Section 10 above which will be
construed in accordance with Delaware law) the laws of the state of California.
Adviser and Sub-Adviser have caused this Agreement to be executed as of the date
and year first above written.
WILSHIRE ASSOCIATES INCORPORATED XXXXXXX XXXXXX INVESTMENTS
By ________________________ By ________________________
Title ____________________ Title _____________________
By ________________________ By ________________________
Title _____________________ Title _____________________
EXHIBIT I
FUND PORTFOLIO LISTING
Xxxxxx Xxxx Socially Responsible Fund
Xxxxxx Xxxx International Fund
EXHIBIT 2
FEE SCHEDULE
Adviser shall pay Sub-Adviser, promptly after receipt by Adviser of its advisory
fee from the Fund with respect to each Portfolio Segment each calendar month
during the term of this Agreement, a fee based on the average daily net assets
of each Portfolio Segment, at the following annual rate:
Xxxxxx Xxxx Socially Responsible Fund:
0.55% on first $20 million of assets under management
0.45% on next $20 million
0.30% on next $60 million
0.275% on the balance
Xxxxxx Xxxx International Fund:
0.70% on first $40 million of assets under management
0.50% on next $60 million
0.45% on the balance
Sub-Adviser's fee shall be accrued daily at 1/365th of the annual rate set forth
above. For the purpose of accruing compensation, the net assets of each
Portfolio Segment will be determined in the manner and on the dates set forth in
the current prospectus of the Fund with respect to each Fund Portfolio and, on
days on which the net assets are not so determined, the net asset value
computation to be used will be as determined on the immediately preceding day on
which the net assets were determined. Upon the termination of this Agreement,
all compensation due through the date of termination will be calculated on a
pro-rata basis through the date of termination and paid within thirty business
days of the date of termination.
