Exhibit (d)(3)
INVESTMENT SUB-ADVISORY AGREEMENT
This Investment Sub-Advisory Agreement ("Agreement") is made as of the 29th day
of September, 2004 by and between Wilshire Associates Incorporated, a California
corporation ("Adviser") and Xxxxxxx Xxxxx Asset Management, L.P., a Delaware
limited partnership ("Sub-Adviser").
WHEREAS Adviser is the investment adviser of the Wilshire Mutual Funds,
Incorporated (the "Fund"), an open-end diversified, management investment
company registered under the Investment Company Act of 1940, as amended
("1940 Act"), currently consisting of five separate series or portfolios
as described in Exhibit 1- Fund Portfolio Listing (each, a "Fund
Portfolio", and collectively, the "Fund Portfolios");
WHEREAS Adviser desires to retain Sub-Adviser to furnish investment
advisory services for the Fund Portfolios,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.
Adviser authorizes the Sub-Adviser to open accounts and execute documents,
indemnities and representation letters in the name of, binding against and on
behalf of the Adviser and the Fund for all purposes necessary or desirable in
the Sub-Adviser's view to effectuate the Sub-Adviser's responsibilities under
this Agreement.
2. SUB-ADVISER SERVICES Subject always to the supervision of the Fund's Board of
Directors 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 each Portfolio Segment. In the performance of its duties, Sub-Adviser will
manage each Portfolio Segment in accordance with applicable Federal Securities
laws and, to the extent each of the following has been furnished to the
Sub-Adviser, the provisions of the Fund's Articles of Incorporation and By-laws
, 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
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Adviser to Sub-Adviser in writing from time to time; provided however, that any
policy addressing governing portfolio transactions executed by affiliated
persons of the Fund or the Adviser shall continuously reflect the current
updated list of affiliates (other than affiliates of the Sub-Adviser) to be
covered by such policies.
Sub-Adviser will provide reports at least quarterly to the Adviser in a form and
containing information to be mutually agreed-upon by the parties. Sub-Adviser
will make its officers and employees, as appropriate, available to Adviser and
the Board of Directors 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 are
required to provide services to fiduciary accounts;
(b) will seek to comply with all applicable provisions of the 1940 Act and
rules and regulations of the Securities and Exchange Commission in all
material respects and in addition will seek to conduct its activities
under this Agreement in accordance with any laws and regulations of any
governmental authority directly applicable to the Sub-Adviser's investment
advisory activities. In this connection, the Sub-Adviser will conduct
subchapter M diversification testing on each Portfolio Segment (as if it
were a stand-alone Investment Company) based on records maintained by the
Sub-Adviser recognizing that such records are not the official books and
records of the Portfolio Segment of the Fund:
(c) to the extent directed by Adviser in writing and to the extent
permitted by law, 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 one or more
broker/dealers so designated providing direct benefits to the Fund],
provided that Sub-Adviser determines that such brokers or dealers will
provide best 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 the relevant Fund Portfolio. Adviser and the Fund understand
that the brokerage commissions or transaction costs in such transactions
may be higher 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, dealers or futures
commission merchants 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
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selection, Sub-Adviser is directed to use its best efforts to obtain best
execution, which includes most favorable net results and execution of each
Portfolio Segment's orders, taking into account all appropriate factors,
including, but not limited to, price, dealer spread or commission, size
and difficulty of the transaction and research or other services provided.
With respect to transactions under this paragraph (d), 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 any Fund Portfolio,
or be in breach of any obligation owing to the Fund or in respect of each
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, a
broker or a dealer a commission for effecting a securities transaction of
a Fund Portfolio in 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 a Fund and one
or more other clients' accounts participate simultaneously in a buy or
sell program involving the same security, such transactions will be
allocated among each Portfolio Segment and such other clients in a manner
deemed equitable and fair, over time, by Sub-Adviser. Pursuant to its
internal policies and procedures, and subject to applicable law,
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 eligible client accounts or
portfolios managed by Sub-Adviser. Adviser and the Fund understand that
Sub-Adviser 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 covered by Sub-Adviser's internal trade
aggregation policies. and may be higher or lower than those paid or
received by other accounts or portfolios of Sub-Adviser;
(f) will report regularly in a form and with information mutually agreed
upon by the parties to Adviser and to the Board of Directors and will make
appropriate persons available for the purpose of reviewing with
representatives of Adviser and the Board of Directors 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, stock market and 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
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Board of Directors such periodic and special reports as the Board or
Adviser may reasonably request;
(h) will vote all proxies with respect to securities in each Portfolio
Segment pursuant to its internal proxy voting policies and procedures, and
shall not be required to seek instructions from the Adviser, the Fund, or
a Fund Portfolio; 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.
Sub-Adviser's ability to provide the services in this Section (2) is pursuant to
the Adviser's authority to delegate advisory duties under the Advisory Agreement
between the Adviser and the Fund, dated April 1, 2002. To the extent that the
terms of this Section (2) differ from the terms the Advisory Agreement, the
terms of the Advisory Agreement shall govern.
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. Sub-Adviser agrees to bear Fund expenses caused
directly by printing and mailing prospectus stickers or other fund documents
where the Sub-Adviser has materially changed its portfolio management team or
where such accommodation is necessary to correct a mistake in the prospectus
caused by the Sub-Adviser. The Fund shall bear all other expenses incurred in
the operation of the Fund and the portfolios, including without limitation
taxes, interest, brokerage fees and commissions, if any, fees of directors who
are not officers, directors, partners, employees or holders of 5 percent or more
of the outstanding voting securities of the Adviser or any Sub-Adviser or any of
their affiliates, Securities and Exchange Commission ("Commission") fees and
state blue sky registration and qualification fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance premiums,
outside auditing and legal expenses, costs of maintaining corporate existence,
costs of preparing and printing prospectuses and statements of additional
information or any supplements or amendments thereto necessary for the continued
effective registration of the Fund's shares ("Shares") under federal or state
securities laws, costs of printing and distributing any prospectus, statement of
additional information, supplement or amendment thereto for existing
shareholders of the Funds, costs of shareholders' reports and meetings, and any
extraordinary expenses. It is understood that certain advertising, marketing,
shareholder servicing, administration and/or distribution expenses to be
incurred in connection with the Shares may be paid by the Fund as provided in
any plan which may in the sole discretion of the Fund be adopted in accordance
with Rule 12b-1 under the 1940 Act, and that such expenses shall be paid apart
from any fees paid under this Agreement.
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 therefore, a sub-advisory fee computed and paid as set forth
in Exhibit 2 - Fee Schedule. Sub-Adviser agrees that any amendment to this fee
schedule will be upon the mutual written agreement between Adviser and
Sub-Adviser.
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If this Agreement is terminated prior to the end of any calendar month, the fee
shall be prorated for the portion of any month in which this Agreement is in
effect according to the proportion which the number of calendar days, during
which this Agreement is in effect, bears to the number of calendar days in the
month, and shall be payable within 10 days after the date of termination.
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 Directors
that Sub-Adviser may act as an investment adviser or sub-investment adviser to
other investment companies and other advisory clients, some of which may have
different objectives than those of the Fund and Fund portfolios. 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 the Portfolio Segment.
6. AFFILIATED BROKER In connection with the purchase or sale of securities or
other investments for a Portfolio Segment, Sub-Adviser may allocate orders for
purchase and sale transactions to any broker-dealer or futures commission
merchant affiliated with Sub-Adviser or Adviser ("Affiliated Broker"), may
purchase securities underwritten by Affiliated Broker, and may cause the Fund
Portfolio to compensate Affiliated Broker for effecting such transactions,
subject to: (a) the requirement that Sub-Adviser seek to obtain best execution
as set forth above; (b) compliance with procedures adopted by the Fund pursuant
to Rule 17e-1 and Rule 10f-3 under the 1940 Act; ; (c) the provisions of the
Investment Advisers Act of 1940, as amended (the "Advisers Act"); (d) the
provisions of the Securities Exchange Act of 1934, as amended; and (e) other
applicable provisions of law.
In all such dealings, the Sub-Adviser and any of its affiliates shall be
authorized and entitled to retain any commissions, remuneration or profits which
may be made in such transactions. The Sub-Adviser shall, with respect to
transactions subject to Section 11(a) of the U.S. Securities Exchange Act of
1934, as amended, and Rule 11a2-2(T) thereunder (or any similar rule which may
be adopted in the future), use its best efforts to provide the Adviser with
information annually disclosing commissions, if any, retained by the
Sub-Adviser's affiliates in connection with exchange transactions for the Fund
Portfolio. The Sub-Adviser and its affiliates are also authorized to execute
agency and other cross transactions (collectively "Cross Transactions") for the
Fund Portfolio. Cross Transactions are inter-account transactions which may be
effected by the Sub-Adviser or its affiliates acting for both the Fund Portfolio
and the counterparty to the transaction. Cross Transactions enable the
Sub-Adviser to purchase or sell a block of securities for the Fund Portfolio at
a set price and possibly avoid an unfavorable price movement that may be created
through entrance into the market with such purchase or sell order. The
Sub-Adviser believes that such transactions can provide meaningful benefits for
its clients. However, the Adviser should note that the Sub-Adviser has a
potentially conflicting division of loyalties and responsibilities regarding
both parties to Cross Transactions and that the Sub-Adviser, or any of
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its affiliates if acting as broker may receive commissions from both parties to
such transactions. The Adviser understands that its authority to the Sub-Adviser
to execute Cross transactions for the Fund Portfolio is terminable at will
without penalty, effective upon receipt by the Sub-Adviser of written notice
from the Adviser, and that the failure to terminate such authorization will
result in its continuation.
Adviser understands that the Sub-Adviser is part of a worldwide, full-service
investment banking, broker-dealer, asset management organization, and as such,
the Sub-Adviser and its affiliates and their managing directors, directors,
officers and employees have multiple interests as more fully disclosed in the
Sub-Adviser's Form ADV Part II as may be amended from time to time.
Adviser or the Fund may revoke any or all of the consents and authorizations
given hereby at any time and without penalty by providing written notice to
Sub-Adviser.
7. REPRESENTATIONS OF SUB-ADVISER Sub-Adviser is registered with the Securities
and Exchange Commission under the Advisers Act. Sub-Adviser will use all
commercially reasonable efforts to remain so registered throughout the term of
this Agreement and will 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) 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, (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, and (f) will notify Adviser of any change in shareholders
of the Sub-Adviser within a reasonable time after such change.
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 Fund Portfolios. 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 will be provided within 30 days of the time
such materials became available to Sub-Adviser.
The execution, delivery and performance by the Sub-Advisor of this Agreement are
within the Sub-Advisor's powers and have been duly authorized by all necessary
action on the part of its Board of Directors, and no action by or in respect of,
or filing with, any governmental body,
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agency or official is required on the part of the Sub-Advisor for the execution,
delivery and performance by the Sub-Advisor of this Agreement, and the
execution, delivery and performance by the Sub-Advisor of this Agreement do not
contravene or constitute a default under (i) any provision of applicable law,
rule or regulation, (ii) the Sub-Advisor's governing instruments, or (iii) any
agreement, judgment, injunction, order, decree or other instrument binding upon
the Sub-Advisor;
8. REPRESENTATIONS OF ADVISER Adviser is registered with the Securities and
Exchange Commission under the Advisers Act. Adviser will use all commercially
reasonable efforts to remain so registered throughout the term of this Agreement
and will notify Sub-Adviser immediately if Adviser ceases to be so registered as
an investment adviser. 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) 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, (e) will promptly notify Sub-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, and
(f) will notify Sub-Adviser of any change in shareholders of the Adviser within
a reasonable time after such change.
In addition, Adviser represents that it has provided Sub-Adviser with copies of
each of the following documents: (i) Adviser's Form ADV as filed with the
Securities Exchange Commission; and (ii) separate lists of persons who Adviser
wishes to have authorized to give written and/or oral instructions to Custodians
of Fund assets for the Fund Portfolios. Adviser will furnish Sub-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 will be provided within 30 days of the time such materials became
available to Adviser. The Form ADV of the Advisor as provided to the Sub-Advisor
is a true and complete copy of the form as currently filed with the SEC and the
information contained therein is accurate and complete in all material respects
and does not omit to state any material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading.
The execution, delivery and performance by the Advisor of this Agreement are
within the Advisor's powers and have been duly authorized by all necessary
action on the part of its Board of Directors, and no action by or in respect of,
or filing with, any governmental body, agency or official is required on the
part of the Advisor for the execution, delivery and performance by the Advisor
of this Agreement, and the execution, delivery and performance by the Advisor of
this Agreement do not contravene or constitute a default under (i) any provision
of applicable law,
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rule or regulation, (ii) the Advisor's governing instruments, or (iii) any
agreement, judgment, injunction, order, decree or other instrument binding upon
the Advisor;
The Adviser agrees that the Sub-Adviser shall have no responsibility or
liability arising out of any non-compliance by the Fund or the Adviser with
anti-money laundering regulations. The Adviser hereby certifies that the Fund
has implemented an anti-money laundering program and a customer identification
program ("CIP") that each comply with the requirements of applicable law,
including the Bank Secrecy Act and U.S.A. PATRIOT of 2001 and the regulations
promulgated thereunder, and that the Adviser will perform the requirements of
such programs with respect to the investors in the Fund.
The Fund has policies and procedures designed to detect and deter disruptive
trading practices, including "market timing", and Advisor agrees that they will
continue to enforce and abide by such policies and procedures, as amended from
time to time, and comply with all existing and future laws relating to such
matters or to the purchase and sale of interests in the Fund generally.
9. 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 the Fund Portfolios 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 representatives shall have the right to copy any records in
the possession of Sub-Adviser 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, any 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. It is
understood that the name "Xxxxxxx, Xxxxx & Co." or "Xxxxxxx Sachs" or any
derivative thereof, and any tradename, trademark, trade device, service xxxx,
symbol or logo associated with those names, are the valuable property of the
Sub-Advisor or its affiliates and that the Adviser has the right to
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use to such name (or derivative or logo), in offering materials or promotional
or sales-related materials of the Fund, only with the prior written approval of
the Sub-Advisor, such approval not to be unreasonably withheld, and for so long
as the Sub-Advisor is Sub-Advisor of the Fund. Notwithstanding the foregoing,
the Sub-Advisor's approval is not required when (i) previously approved
materials are re-issued with minor modifications, (ii) the Advisor and
Sub-Advisor identify materials which they jointly determine do not require the
Sub-Advisor's approval and (iii) used as required to be disclosed in the
registration statement of the Fund. Upon termination of this Agreement, the Fund
and the Advisor shall forthwith cease to use such name (or derivative or logo),
although the Advisor may continue to use such name (or derivative or logo) as
permitted by other then current Sub-Advisory agreements which the Advisor and
Sub-Advisor have executed.
10. CODE OF ETHICS Sub-Adviser has adopted a written code of ethics complying
with the requirements of Rule 17j-1(b), (c), (d), and (e) 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 Agreement remains in effect,
the president or a vice president of Sub-Adviser shall certify to Adviser or the
Fund that Sub-Adviser has complied with the requirements of Rule 17j-1 during
the previous quarter; that Sub-Adviser has adopted procedures reasonably
necessary to prevent its access persons from violating such code; and that there
have been no violations of Sub-Adviser's code of ethics or, if any violation has
occurred, the nature of such violation and of the action taken in response to
such violation.
11. LIMITATION OF LIABILITY The Sub-Adviser shall be liable and shall indemnify
and hold harmless Wilshire, its affiliates, and their respective partners,
officers, directors and employees from and against any and all claims, losses,
liabilities or damages (including reasonable attorneys' fees and other related
expenses) ("Losses") arising as a direct result of an act or omission taken or
omitted by the Sub-Adviser during the term of this Agreement which constitutes
negligence or bad faith with respect to the Sub-Adviser's obligations to select
and execute transactions in accordance with the Investment Guidelines. Without
limiting the generality of the foregoing, the Sub-Adviser will not be liable for
any indirect, special, incidental or consequential damages or other losses
(regardless of whether such damages or other losses were reasonably
foreseeable). Without limitation, the Sub-Adviser shall not be liable for Losses
resulting from or in any way arising out of (i) any action of Wilshire or its
previous advisers or its trustees or custodians or other agents, following any
direction of Wilshire, or the Sub-Adviser's failure to follow any unlawful or
unreasonable direction of Wilshire, (ii) force majeure or other events beyond
the control of the Sub-Adviser, including without limitation any failure,
default or delay in performance resulting from computer or other electronic or
mechanical equipment failure, unauthorized access, strikes, failure of common
carrier or utility systems, severe weather or breakdown in communications not
reasonably within the control of the Sub-Adviser or other causes commonly known
as "acts of god", whether or not any such cause was reasonably foreseeable,
(iii) general market conditions unrelated to any violation of this Agreement by
the Sub-Adviser or (iv) the preparation, review, content and presentation of
marketing materials relating to the Portfolio, and presentations related thereto
("Marketing Materials").
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The Sub-Adviser gives no warranty as to the performance or profitability of the
Portfolio or any part thereof, nor any guarantee that the investment objectives,
expectations or targets described in this Agreement and/or in the Investment
Guidelines or any Client Policy Statements will be achieved, including without
limitation any risk control, risk management or return objectives, expectations
or targets. The Portfolio may suffer loss of principal, and income, if any, may
fluctuate. The value of Portfolio investments may be affected by a variety of
factors, including, but not limited to, economic and political developments,
interest rates and issuer-specific events, market conditions, sector
positioning, and other factors. The Sub-Adviser shall not be responsible for the
performance by any person not affiliated with the Sub-Adviser of such person's
commercial obligations in executing, completing or satisfying such person's
obligations. The Sub-Adviser shall not be responsible for any Losses incurred
after termination of the Portfolio. The Sub-Adviser shall have no responsibility
whatsoever for the management of any other assets of Wilshire and shall incur no
liability for any Losses which may result from the management of such other
assets. U.S. federal and state securities laws impose liabilities under certain
circumstances on persons who act in good faith; nothing herein shall constitute
a waiver or limitation of any rights which Wilshire may have, if any, under any
applicable U.S. federal and state securities laws. The rights of Wilshire under
this clause shall be the exclusive remedy of Wilshire for any breach of the
Sub-Adviser under this Agreement.
The Sub-Adviser shall indemnify and hold harmless Wilshire, its
affiliates, and their respective partners, officers, directors and employees
from and against any and all Losses arising out of or relating to any Marketing
Materials to the extent such Losses relate directly to a material misstatement
in information provided in writing by the Sub-Adviser to Wilshire expressly for
use in such Presentations and Materials.
Wilshire and its affiliates shall indemnify and hold harmless the
Sub-Adviser, its affiliates, and their respective partners, officers, directors
and employees from and against any and all Losses arising out of or relating to
any Marketing Materials, except to the extent such Losses relate directly to a
material misstatement in information provided in writing by the Sub-Adviser to
Wilshire expressly for use in such Presentations and Materials.
This provision shall survive the termination of this Agreement.
12. TERM AND TERMINATION Unless otherwise agreed in writing, this Agreement
shall become effective with respect to each Portfolio Segment on [DATE TBD], and
shall remain in full force until September 30, 2005 , unless sooner terminated
as hereinafter provided. This Agreement shall continue in force from year to
year thereafter with respect to each Fund Portfolio, but only as long as such
continuance is specifically approved for each 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
such 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:
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(a) This Agreement shall automatically terminate in the event of its
assignment (as defined in the 0000 Xxx) and may be terminated with respect
to any Fund Portfolio at any time without the payment of any penalty by
Adviser or by Sub-Adviser on sixty days prior written notice to the other
party. This Agreement may also be terminated by the Fund with respect to
any Fund Portfolio at any time without the payment of any penalty by
action of the Board of Directors or by a vote of a majority of the
outstanding voting securities of such Fund Portfolio (as defined in the
0000 Xxx) on sixty days prior written notice to Sub-Adviser by the Fund.
(b) This Agreement may be terminated with respect to any Fund Portfolio at
any time upon written notice without payment of any penalty by Adviser,
the Board of Directors or a vote of majority of the outstanding voting
securities of such Fund Portfolio in the event that Sub-Adviser or any
officer or director of Sub-Adviser has breached any representation or
warranty in this Agreement or 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 with respect to a Fund
Portfolio in the event the Investment Management Agreement between Adviser
and the Fund with respect to such 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.
13. 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:
(a) If to the Advisor:
Xxxxxxx X. Xxxxxx, Xx.
Senior Managing Director
Wilshire Associates
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000
(b) If to the Sub-Advisor:
Xxxxxxx Sachs Asset Management, L.P.
00 Xxx Xxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxxx
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14. ADVISER RESPONSIBILITY Adviser has provided and will continue to provide
Sub-Adviser with copies of the Fund's Articles of Incorporation, By-laws,
prospectus, and Statement of Additional Information and any amendment thereto,
and any objectives, policies or limitations not appearing therein as they may be
relevant to Sub-Adviser's performance under this Agreement, and the Advisory
Agreement between the Fund and the Adviser, and the resolutions of the Directors
selecting Adviser as investment manager to the Fund and the Code of Ethics of
the Fund and of Adviser as currently in effect; provided, however, that such
documents are provided to the Adviser by the Fund, and provided further that no
changes or modifications to the foregoing shall be binding on Sub-Adviser until
it is notified thereof. The Adviser represents that it is authorized to appoint
the Sub-Adviser and to execute and deliver this Agreement and that all
shareholder and Board action on the part of the Fund and the Adviser required to
be taken to make such appointment and enter into this Agreement has been taken.
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 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
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. Subject to the provisions of Section 11, 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 the laws of the state of California, without regard
to principles of conflict of laws.
18. Communications with Wilshire, at a minimum, should include:
Monthly accounting statements including:
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Reconciliation between month-end valuations of cash and positions provided
by custodian and Sub-Advisor's own valuations of same, itemizing and
explaining any difference. No aspect of the Sub-Adviser's service in this
regard shall be viewed or construed as placing valuation responsibility on
the Sub-Adviser.
Portfolio Holdings
Portfolio income and accruals
Transactions (buys/sells)
Contributions/withdrawal activity
Monthly performance statements including:
Total returns stated in gross of fee and net of fee terms
Quarterly written statements, including actions taken in the portfolio, the
current outlook, expected changes in the portfolio and performance results
Teleconference meetings with Sub-Adviser as determined by Adviser on a
reasonable basis
Pertinent changes in the Sub-Advisor should be reported as they occur, by phone
and in writing. Pertinent changes include, but are not limited to, the
following:
Changes in ownership Changes in key Portfolio Management personnel with senior
responsibilities over the account Major changes in areas of responsibility of
key Portfolio Management personnel with senior responsibilities over the account
Adviser and Sub-Adviser have caused this Agreement to be executed as of the date
and year first above written.
WILSHIRE ASSOCIATES INCORPORATED XXXXXXX XXXXX ASSET MANAGEMENT, L.P.
By______________________________ By_________________________________
Title____________________________ Title______________________________
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EXHIBIT 1
FUND PORTFOLIO LISTING
Wilshire Mutual Funds, Incorporated:
Large Company Growth Portfolio
Large Company Value Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
Wilshire 5000 Index Portfolio
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EXHIBIT 2
FEE SCHEDULE
Adviser shall pay to the Sub-Adviser as remuneration for its services under the
Agreement an annual investment management fee consisting of a fixed fee
("Management Fee") pursuant to the schedule as set forth below. For the term of
this Agreement, Management Fees will be paid quarterly in arrears, promptly
after receipt by Adviser of its advisory fee from the Fund.
Management Fee
The Management Fee will be calculated by the Sub-Adviser based upon the average
net assets of each Portfolio Segment at each month ending valuation date during
the quarter and will not be less than one quarter of the minimum annual
Management Fee as set forth below. Management Fees will be prorated as
appropriate for the initial calendar quarter and upon termination.
Annual Management Fee Rate 28 bps, (0.28%)
Quarterly Management Fee = Average Month End Valuation of the each Portfolio
Segment * Annual Fixed Fee Rate * (1/4)
Minimum annual Management Fee: USD 45,000 per calendar year. This will be
prorated for the initial calendar year and for the year of termination.
Valuation of each Portfolio Segment will reflect realized and unrealized gains
and losses on all Portfolio Segment investments plus income both received and
accrued.
The Average Month End Valuation of each Portfolio Segment will reflect a
day-weighted adjustment for cashflows that occur during each month.
Cashflows will include all contributions and withdrawals into and out of each
Portfolio Segment.
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