FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
WM VARIABLE TRUST
INTERNATIONAL GROWTH FUND
EFFECTIVE AS OF [________] [___], 2006
Capital Guardian Trust Company
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Ladies and Gentlemen:
WM Advisors, Inc. ("WM Advisors"), a corporation organized under the laws
of the state of Washington, hereby agrees with Capital Guardian Trust Company,
(the "Sub-Advisor"), a trust company organized under the laws of the state of
California, as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
WM Advisors desires to employ the capital of the International Growth Fund
(the "Fund"), a series of WM Variable Trust (the "Trust"), by investing and
reinvesting in investments of the kind and in accordance with the limitations
specified in the Trust's Master Trust Agreement, as amended, and in the
Prospectus and Statement of Additional Information relating to the Fund as in
effect and which may be amended from time to time, and in such manner and to
such extent as may from time to time be approved by the Board of Trustees of the
Trust. Copies of the Fund's Prospectus and Statement of Additional Information
and the Trust's Master Trust Agreement, as amended, have been or will be
submitted to the Sub-Advisor. WM Advisors agrees to provide copies of all
amendments to the Fund's Prospectus and Statement of Additional Information and
the Trust's Master Trust Agreement to the Sub-Advisor on an on-going basis. WM
Advisors desires to employ and hereby appoints the Sub-Advisor to act as
investment sub-advisor to the Fund. The Sub-Advisor accepts the appointment and
agrees to furnish the services described herein for the compensation set forth
below.
2. SERVICES AND INVESTMENT SUB-ADVISOR
Subject to the supervision of the Board of Trustees of the Trust and of WM
Advisors, the Fund's investment adviser, the Sub-Advisor will, to the extent
related to the scope of its duties reasonably contemplated under this Agreement,
(a) act in conformity with the Trust's Master Trust Agreement, the Investment
Company Act of 1940 (the "1940 Act"), the Investment Advisers Act of 1940 (to
the extent applicable to the Sub-Advisor) and the Internal Revenue Code of 1986,
as the same may from time to time be amended; (b) make investment decisions for
the Fund in accordance with the Fund's investment objectives and policies as
stated in the Fund's Prospectus and Statement of Additional Information as in
effect and, after notice to the Sub-Advisor, and which may be amended from time
to time; (c) place purchase and sale orders on behalf of the Fund to effectuate
the investment decisions made; (d) maintain appropriate records with respect to
the securities transactions of the Fund and will furnish to the Trust's Board of
Trustees such periodic, regular and special reports (including presentations by
the Sub-Advisor's personnel primarily responsible for the day-to-day management
of the Fund's portfolio) as the Board may reasonably request; (e) provide WM
Advisors and its affiliates with such support with respect to the Fund as they
may reasonably request; and (f) treat confidentially and as proprietary
information of the Trust, all records and other information relative to the
Trust and prior, present or potential shareholders; and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Trust, which approval shall not be unreasonably
withheld and such records may not be withheld where the Sub-Advisor may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Trust. In providing those services, the Sub-Advisor will
supervise the Fund's investments and conduct a continuous program of investment,
evaluation and, if appropriate, sale and reinvestment of the Fund's assets. In
addition, the Sub-Advisor will furnish the Fund or WM Advisors with whatever
market, economic, and transactional information that the Trust or WM Advisors
may reasonably request relating to the investments that the Fund may hold or
contemplate purchasing.
3. BROKERAGE
In executing transactions for the Fund and selecting brokers or dealers,
the Sub-Advisor will use its best efforts to seek the best overall terms
available and shall execute or direct the execution of all such transactions in
a manner permitted by law and in a manner that is in the best interest of the
Fund and their shareholders. In assessing the best overall terms available for
any Fund transactions, the Sub-Advisor will consider all factors it deems
relevant including, but not limited to, breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer and the reasonableness of any commission for the specific
transaction and on a continuing basis. Pursuant to its investment determinations
for the Fund, in placing orders with brokers and dealers, the Sub-Advisor will
attempt to obtain the best net price and the most favorable execution of its
orders. Consistent with this obligation, when the execution and price offered by
two or more brokers or dealers are comparable, the Sub-Advisor may, in its
discretion, purchase and sell portfolio securities to and from brokers and
dealers who provide the Trust with research advice and other services.
4. INFORMATION PROVIDED TO THE TRUST
The Sub-Advisor will keep the Trust and WM Advisors informed of
developments materially affecting the Fund, and will on its own initiative,
furnish the Trust and WM Advisors on at least a quarterly basis with whatever
information the Sub-Advisor believes is appropriate for this purpose.
5. STANDARD OF CARE
The Sub-Advisor shall exercise its best judgment in rendering the services
described in paragraphs 2 and 3 above. The Sub-Advisor shall not be liable for
any error or judgment or mistake of law or for any loss suffered by the Fund or
WM Advisors in connection with the matters to which this Agreement relates,
except (a) a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services (in which case any award of damages shall
be limited to the period and the amount set forth in Section 36(b)(3) of the
1940 Act), or (b) 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
breach, act or omission described in (a) or (b) shall be referred to as
"Disqualifying Conduct").
6. COMPENSATION
(a) In consideration of the services rendered pursuant to this Agreement,
WM Advisors will pay the Sub-Advisor on the first business day of each quarter a
fee for the previous quarter according to the schedule of fees detailed in Annex
A attached to this Agreement. The Sub-Advisor shall have no right to obtain
compensation directly from the Fund or the Trust for services provided hereunder
and agrees to look solely to WM Advisors for payment of fees due. Upon any
termination of this Agreement before the end of a quarter, the fee for such part
of that quarter shall be prorated according to the proportion that such period
bears to the full quarterly period and shall be payable upon the date of
termination of this Agreement.
(b) The Trust, on behalf of the Fund, shall pay directly to Sub-Advisor a
quarterly fee equal to the fee set forth in Section 6(a).
(c) Sub-Advisor shall not be entitled to any fees under this Agreement
other than the fee forth in Section 6(b) of this Agreement.
7. EXPENSES
The Sub-Advisor will bear all expenses in connection with the performance
of its services under this Agreement, which expenses shall not include brokerage
fees or commissions in connection with the effectuation of securities
transactions. The Trust will bear certain other expenses to be incurred in its
operation, including but not limited to: organizational expenses, taxes,
interest, brokerage fees and commissions, if any; fees of trustees of the Trust
who are not officers, directors or employees of the Sub-Advisor, WM Advisors, or
any of their affiliates; Securities and Exchange Commission fees and state Blue
Sky qualification fees; out-of-pocket expenses of custodians, transfer and
dividend disbursing agents and transaction charges of custodians; insurance
premiums; outside auditing and legal expenses; costs of maintenance of the
Trust's 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 shareholders; costs of shareholders' reports
and meetings of the shareholders of the Fund and of the officers or Board of
Trustees of the Trust; and any other operating expenses of the Fund. In
addition, the Fund may pay a distribution fee pursuant to the terms of a
Distribution Plan adopted under Rule 12b-1 of the 1940 Act.
8. SERVICES TO OTHER COMPANIES OR ACCOUNTS
WM Advisors understands that the Sub-Advisor 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 one or more other investment companies or
series of investment companies, and WM Advisors has no objection to the
Sub-Advisor so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Sub-Advisor have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures mutually believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. WM Advisors recognizes that in some cases this procedure may limit the
size of the position that may be acquired or disposed of for the Fund. In
addition, WM Advisors understands that the persons employed by the Sub-Advisor
to assist in the performance of the Sub-Advisor'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-Advisor or any affiliate of the
Sub-Advisor to engage in and devote time and attention to other business or to
render services of whatever kind or nature.
9. TERM OF AGREEMENT
This Agreement shall become effective as of the date first written above,
shall continue for a period of two years thereafter, and shall continue in
effect for a period of more than two years thereafter only so long as such
continuance is specifically approved at least annually by (a) the Board of
Trustees of the Trust or (b) a vote of a "majority" (as defined in the 0000 Xxx)
of the Fund's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board of Trustees who are not
"interested persons" (as defined in the 0000 Xxx) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. This Agreement is terminable, without penalty, on 60 days'
written notice, by WM Advisors, the Board of Trustees for the Trust or by vote
of holders of a majority of the Fund's shares, or upon 60 days' written notice
by the Sub-Advisor and will terminate automatically upon any termination of the
advisory agreement between the Trust and WM Advisors. In addition, this
Agreement will also terminate automatically in the event of its assignment (as
defined in said Act). The Sub-Advisor agrees to notify the Trust of any
circumstances that might result in this Agreement being deemed to be assigned.
10. REPRESENTATIONS OF WM ADVISORS AND THE SUB-ADVISOR
WM Advisors represents that (a) a copy of the Trust's Master Trust
Agreement, dated January 29, 1993, together with all amendments thereto, is on
file in the office of the Secretary of the Commonwealth of Massachusetts, (b)
the appointment of the Sub-Advisor has been duly authorized, (c) it has acted
and will continue to act in conformity with the 1940 Act and other applicable
laws, and (d) it is authorized to perform the services herein.
The Sub-Advisor represents that it is authorized to perform the services
described herein.
11. INDEMNIFICATION
WM Advisors shall indemnify and hold harmless the Sub-Advisor and its
affiliates and their respective officers, directors and employees from and
against any and all claims, losses, liabilities or damages (including reasonable
attorneys' fees and other related expenses), howsoever arising from or in
connection with this Agreement or the performance by the Sub-Advisor or its
duties hereunder; provided, however, that nothing contained herein shall require
that the Sub-Advisor be indemnified for Disqualifying Conduct.
12. AMENDMENT OF THIS 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.
13. USE OF NAMES
a. It is understood that the name "Capital Guardian Trust Company," the
names of the Sub-Advisor's affiliates within The Capital Group
Companies, Inc. (including, but not limited to the American Funds Group
of mutual funds), and any derivative thereof or logo associated with
such names are the valuable property of the Sub-Advisor and its
affiliates and that the Trust and/or the Fund have the right to use
such name (or derivative or logo) in offering materials of the Trust
and/or Fund only with the prior written approval of the Sub-Advisor and
for so long as the Sub-Advisor is an investment sub-advisor to the
Trust and/or the Fund; provided that the Trust and the Fund may use
such name (or derivative or logo) without such prior written approval
in offering materials of the Trust to the extent that (i) such
materials simply list the Sub-Advisor as the Sub-Advisor to the Fund as
part of a listing of the investment sub-advisers to the series or
portfolios of the Trust with a pre-approved standard description of the
Sub-Advisor's experience and duties hereunder; (ii) such materials
include such name (or derivative or logo) and any related information
that has been previously approved by the Sub-Advisor or that is
required to be disclosed by applicable law or regulation, such as
information disclosed in the Trust's registration statement; or (iii)
such materials are intended for internal use by the Trust and WM
Advisors. In using information about the Sub-Advisor where pre-approval
is not required, it shall be WM Advisors' responsibility to seek
updates to such materials as it deems necessary. Such prior written
approval of the Sub-Advisor shall not be unreasonably withheld or
delayed. Upon termination of this Agreement, the Trust and the Fund
shall forthwith cease to use such name (or derivative or logo) as soon
as reasonably practicable.
b. It is understood that the names "WM Variable Trust," and "WM
Advisors, Inc." or any derivatives thereof or logos associated with
such names are the valuable property of the Trust and/or WM Advisors
and their affiliates and that the Sub-Advisor or its affiliates have
the right to use such names (or derivatives or logos) in marketing
materials of the Sub-Advisor or its affiliates only with the prior
written approval of WM Advisors or the Trust, as applicable, and for so
long as the Sub-Advisor is an investment sub-advisor to the Trust
and/or the Fund; provided that the Sub-Advisor or its affiliates may
use such names (or derivatives or logos) without such prior written
approval in marketing materials of the Sub-Advisor or its affiliates to
the extent that (i) such materials simply list the Trust or the Fund as
part of a listing of the investment companies advised by the
Sub-Advisor or its affiliates with a brief description of the Trust or
the Fund; (ii) such materials include such names (or derivatives or
logos) and any related information that has been previously approved by
the Trust or WM Advisors, as applicable, or that is required to be
disclosed by applicable law or regulation; or (iii) such materials are
intended for internal use by the Sub-Advisor. Such prior written
approval of WM Advisors or the Trust, as applicable, shall not be
unreasonably withheld or delayed. Upon termination of this Agreement,
the Sub-Advisor and its affiliates shall forthwith cease to use such
names (or derivatives or logos) as soon as reasonably practicable.
14. PROXY VOTING
Except as specifically instructed by the Trustees of the Trust or WM
Advisors, the Sub-Advisor shall exercise or procure the exercise of any voting
rights attaching to investments of the Fund on behalf of the Fund.
15. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto.
16. GOVERNING LAW
This Agreement shall be governed in accordance with the laws of The
Commonwealth of Massachusetts.
If the foregoing accurately sets forth our agreement, kindly indicate your
acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
WM Advisors, Inc.
Dated: By
-------------------------- --------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
Accepted:
Capital Guardian Trust Company
By Dated:
------------------------------ -------------------------
Name: Xxxxxxx Xxxxx
Title: Vice President
ANNEX A
1. STANDARD FEE
The minimum annual fee payable under this Agreement shall be $1,250,000
combined with respect to the International Growth Fund series of WM Trust II and
WM Variable Trust.
The fees payable under this Agreement shall be determined by reference to
the following schedule based upon the average daily net assets of the Fund and
any other investment company advised by WM Advisors or any of its affiliates (as
determined by the Trust's accounting agent pursuant to the Fund's pricing
procedures) subject to reduction as described below:
On the first $25 million ............................ .80 of 1%
$25 million to $50 million........................... .65 of 1%
$50 million to $250 million.......................... .525 of 1%
Over $250 million*................................... .475 of 1%
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* This breakpoint will be applied to the extent the aggregate
non-U.S./global, regional, single country (excluding U.S.) equity, and
fixed-income (emerging markets) assets of (i) the Fund, (ii) any other
investment company advised by WM Advisors or any of its affiliates,
(iii) any pension or employee benefit plan sponsored by WM Advisors or
any of its affiliates or (iv) WM Advisors or its affiliates that are
managed by Sub-Advisor or its affiliates exceed $250 million.
2. Asset Fee Aggregation Policies
For fee purposes, asset aggregation will apply to all accounts of (i) the
Fund, (ii) any other investment company advised by WM Advisors or any of its
affiliates, (iii) any pension or employee benefit plan sponsored by WM Advisors
or any of its affiliates or (iv) WM Advisors or its affiliates that are managed
by Sub-Advisors or its affiliates, except for emerging market equity investments
and investments in other funds with internally charged fees ("Eligible
Accounts)". In order to achieve the benefit of asset aggregation, the combined
total of the minimum fee applicable to each Eligible Account.
For Eligible Accounts with the same investment objectives and guidelines,
all assets for these Eligible Accounts will be aggregated for fee calculation
purposes.
For Eligible Accounts with different investment objectives and guidelines:
o Each Eligible Account will be charged on the first $10 million at the
initial breakpoint rate for the appropriate mandate. Any incremental
assets over $10 million will be aggregated and charged at the
incremental rate for the appropriate mandate.
o Assets invested in commingled funds will be aggregated and charged at
the incremental rate for the appropriate mandate.
o The first additional account within a new country will be charged on
the first $15 million at the initial breakpoint rate for the
appropriate mandate. Any incremental assets over $15 million will be
aggregated and charged at the incremental rate for the appropriate
mandate.
For asset aggregation purposes, Eligible Accounts will be aggregated in the
following order: balanced, equity-developed markets, convertible, fixed-income
-- high yield, fixed-income - emerging markets, and fixed-income -- developed
markets.
The benefit from asset aggregation, if any, will be calculated by comparing
total aggregated fees to total unaggregated fees for all Eligible Accounts. The
resulting percentage discount will be applied to each Eligible Account's
unaggregated fees.
If all Eligible Accounts are not denominated in the same currency, the
local currency assets of each Eligible Account and the related fees calculated
on an unaggregated basis will be converted to U.S. dollars using the applicable
foreign exchange rate. The total of such fees will be compared to the Eligible
Accounts' total aggregated fees. The resulting percentage discount will then be
applied to each Eligible Account's unaggregated fee as determined in U.S.
dollars.
3. FEE DISCOUNTS AND ELIMINATION OF FREE BREAKPOINTS
The following fee discount will be applied based upon the total aggregated
fees paid by all accounts of (i) the Fund, (ii) any other investment company
advised by WM Advisors or any of its affiliates, (iii) any pension or employee
benefit plan sponsored by WM Advisors or any of its affiliates or (iv) WM
Advisors or its affiliates that are managed by Sub-Advisor or its affiliates:
Aggregated fees between $1.25 million to $4 million....5% discount
Aggregated fees between $4 million to $8 million... 7.5% discount
Aggregated fees between $8 million to $12 million... 10% discount
Aggregated fees over $12 million................... 12.5% discount
For this purpose, aggregated fees will include all fees from separate
accounts, commingled funds, and funds with internally charged fees managed by
Sub-Advisor and its affiliates (except for investments in American Funds' mutual
funds). The resulting fee discount percentage will be applied to each account's
fees (excluding fees related to investments in funds with internally charged
fees).
If total aggregated fees (before discounts) exceed $3 million, fee
breakpoints will be eliminated and each account will be charged at the lowest
marginal fee rate applicable to the account's fee schedule.
To determine the applicable fee discount level and breakpoint elimination
threshold, the total aggregated fees for the quarter will be annualized. For
this purpose, all local currency fees will be converted to a designated base
currency.
Fees related to investments in funds with internally charged fees will be
estimated by multiplying the quarter end value of the account (adjusted on a
prorated basis for any contributions or withdrawals during the quarter) by the
fund's effective fee. For this purpose, the effective fee will be based on the
value of the fund's quarter end assets and the fund's current fee schedule.
Applicable discount levels and the elimination of fee breakpoints will be
effective beginning with the first quarter a discount threshold is exceeded and
will remain in effect unless the total fees fall below the discount threshold
due to a significant withdrawal of assets. A decline in market values alone will
not cause the reinstatement of a lower discount level or fee breakpoints.
