Exhibit(d)(viii)
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
This Investment Sub-Advisory Agreement ("Agreement") is made as of the 24th day
of March, 2000 by and between Wilshire Associates Incorporated, a California
corporation ("Adviser"), and Western Asset Management Company Limited, a
registered investment adviser ("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 each Portfolio Segment. Within its portion of the
Portfolio Segment also managed by its affiliate Western Asset Management
Company, Sub-Adviser will make all investment-related decisions for those
investments not denominated in United States dollars, subject to any constraints
outlined in further guidance provided to Sub-Adviser by Adviser. Sub-Adviser
agrees that the non-dollar portion of the Portfolio Segment shall not exceed 15%
of the Portfolio Segment's market value. 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 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
1
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.
Sub-Adviser will provide reports at least quarterly to the Board of Trustees and
to Adviser. Sub-Adviser 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 provisions of the 1940 Act and 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 laws and 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 and Section 817(h) of the Internal Revenue Code
as if each were a regulated investment company thereunder;
(c) to the extent authorized by Adviser in writing, and to the extent
permitted by law, will execute purchases and sales of portfolio securities
and other investments 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 best execution in view of all
appropriate factors, 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 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. With respect to transactions under sub-paragraph (c) or
this sub-paragraph (d), it is understood that Sub-Adviser will not be
deemed to have
2
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 any 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 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 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 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
3
Board of Trustees 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; 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, 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 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
4
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, 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.
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 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, 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. Notwithstanding the foregoing, Sub-Adviser may disclose (i) the
investment performance of each Portfolio Segment to Fund officers and trustees
and other service providers of the Fund, and (ii) any investment performance
that is public information to any person.
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 Agreement remains in effect, a
partner 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 and that there have been no violations of Sub-Adviser's code of
ethics or, if any
5
violation has occurred that is material to the Fund, 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 partners,
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 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 each Fund
Portfolio, made by Sub-Adviser and provided to Adviser or the Fund by Sub-
Adviser.
11. Term and Termination This Agreement shall become effective with respect to
each Portfolio Segment on March 24, 2000, and shall remain in full force until
October 31, 2000, 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:
(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 any Fund Portfolio by action of the
Board of Trustees 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 written notice to Sub-Adviser by the Fund.
(b) This Agreement may be terminated with respect to any Fund Portfolios
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 such
Fund Portfolio in the event that Sub-Adviser or
6
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 with respect to a Fund
Portfolio in the event the Investment Management Agreement between Adviser
and the Fund with respect to that 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.
12. Notice Any notice under this Agreement by a party shall be in writing,
addressed and 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, and any objectives, policies or
limitations not appearing therein as they may be relevant to Sub-Adviser's
performance under this Agreement; provided, however, that no changes or
modifications to the foregoing shall be binding on Sub-Adviser until it is
notified thereof.
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.
7
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. 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 WESTERN ASSET MANAGEMENT CO. LIMITED
By______________________________ By_________________________________
Title___________________________ Title______________________________
8
EXHIBIT 1
FUND PORTFOLIO LISTING
Xxxxxx Xxxx Income Fund
9
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 Fund Portfolio 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 rates:
Income Fund:
------------
On assets under management 0.20 %
Sub-Adviser's fee shall be accrued daily at 1/365th of the annual rates 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.
It is understood that Adviser shall compensate Sub-Adviser's affiliate, Western
Asset Management Company, directly for investment management services inclusive
of fees associated with those services provided by Sub-Adviser. Sub-Adviser
will in turn be compensated by its affiliate for services rendered to Adviser as
deemed appropriate by the affiliate.
10
