Exhibit (d)(ix)
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
This Investment Sub-Advisory Agreement ("Agreement") is made as of the 15th day
of March, 2000 by and between Wilshire Associates Incorporated, a California
corporation ("Adviser") and Xxxxxxx X. Xxxxxxxxx & Co., Inc., a New York
corporation ("Sub-Adviser").
Whereas Adviser is the investment adviser of the Xxxxxx Xxxx Mutual Funds
(the "Fund"), an open-end diversified, management investment company
registered under the Investment Company Act of 1940, as amended ("1940
Act"), currently consisting of seven separate series or portfolios
(collectively, the "Fund Portfolios") including the Xxxxxx Xxxx Growth
Fund, the Xxxxxx Xxxx Income Fund, the Xxxxxx Xxxx Balanced Fund, the
Xxxxxx Xxxx Short-Term Investment Fund, the Xxxxxx Xxxx Socially
Responsible Fund, the Xxxxxx Xxxx International Equity Fund, and the Xxxxxx
Xxxx Small-Cap Growth Fund;
Whereas Adviser desires to retain Sub-Adviser to furnish investment
advisory services for the Fund Portfolio(s) as described in Exhibit 1 -
Fund Portfolio Listing, as may be amended from time to time, and Sub-
Adviser wishes to provide such services, upon the terms and conditions set
forth herein;
Now Therefore, in consideration of the mutual covenants herein contained,
the parties agree as follows:
1. Appointment Adviser hereby appoints Sub-Adviser to provide certain sub-
investment advisory services to each Fund Portfolio for the period and on the
terms set forth in this Agreement. Sub-Adviser hereby accepts such appointment
and agrees to furnish the services set forth for the compensation herein
provided.
2. Sub-Adviser Services Subject always to the supervision of the Fund's Board
of Trustees and Adviser, Sub-Adviser will furnish an investment program in
respect of, and make investment decisions for, such portion of the assets of
each Fund Portfolio as Adviser shall from time to time designate (each a
"Portfolio Segment") and place all orders for the purchase and sale of
securities on behalf of each Portfolio Segment. In the performance of its
duties, Sub-Adviser will satisfy its fiduciary duties to the Fund and each Fund
Portfolio and will monitor each 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 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
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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 it were a regulated investment company thereunder;
(c) to the extent directed by Adviser in writing, will execute purchases
and sales of portfolio securities for each Portfolio Segment through
brokers or dealers designated by management of the Fund to Adviser for the
purpose of providing direct benefits to the Fund, provided that Sub-Advisor
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 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 each 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 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 each 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
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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 eligible 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 the 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 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
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(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 the Portfolio Segment.
6. Affiliated Broker In connection with the purchase or sale of securities or
other investments for each Portfolio Segment, Sub-Adviser may act as broker or
Sub-Adviser may allocate orders for purchase and sale transactions to any
broker-dealer affiliated with Sub-Adviser ("Affiliated Broker"), and may cause
each Portfolio or each Fund to compensate Sub-Adviser or 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 Investment
Company Act of 1940, as amended; (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. 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.
Adviser of 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 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
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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, and (e) will promptly notify Adviser of the occurrence of
any event that would disqualify it from serving as an investment adviser to an
investment company pursuant to Section 9(a) of the 1940 Act. In addition, Sub-
Adviser represents that it has provided Adviser with copies of each of the
following documents: (i) Sub-Adviser's Form ADV as filed with the Securities
Exchange Commission; and (ii) separate lists of persons who Sub-Adviser wishes
to have authorized to give written and/or oral instructions to Custodians of
Fund assets for the Portfolio. Sub-Adviser will furnish Adviser from time to
time with copies, properly certified or otherwise authenticated, of all material
amendments of or supplements to the foregoing, if any. Such amendments or
supplements as to items (i) through (ii) will be provided within 30 days of the
time such materials became available to Sub-Adviser.
8. Books and Records Sub-Adviser will maintain, in the form and for the period
required by Rule 31a-2 under the 1940 Act, all records relating to each
Portfolio Segment's investments that are required to be maintained by the Fund
pursuant to the requirements of paragraphs (b)(5), (b)(6), (b)(7), (b)(9),
(b)(10) and (f) of Rule 31a-1 under the 1940 Act. Sub-Adviser agrees that all
books and records which it maintains in connection with its management of the
portfolio segments 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.
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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, 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 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.
10. Limitation of Liability Neither Sub-Adviser nor any of its directors,
officers, stockholders, agents or employees shall have any liability to Adviser,
the Fund or any shareholder of the Fund for any error of judgment, mistake of
law, or loss arising out of any investment, or for any other act or omission in
the performance by Sub-Adviser of its duties hereunder, except for liability
resulting from willful misfeasance, bad faith, or gross 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. Sub-Adviser specifically
acknowledges that the Fund is a third party beneficiary of this Agreement and
that the Fund is entitled to bring a lawsuit against the Sub-Adviser for breach
of this Agreement or any other duty in any court of competent jurisdiction.
Also Sub-Adviser acknowledges that the Fund is not subject to or bound by any of
the provisions of paragraph 15 of this Agreement.
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, if such material misstatement or omission was made in reliance upon
and in conformity with written information furnished by Sub-Adviser to Adviser
or the Fund.
11. Term and Termination This Agreement shall become effective with respect to
each Portfolio Segment on March 15, 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
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Agreement may also be terminated by the Fund with respect to each Fund
Portfolio by action of the Board of Trustees or by a vote of a majority of
the outstanding voting securities of each Fund Portfolio (as defined in the
0000 Xxx) on sixty days written notice to Sub-Adviser by the Fund.
(b) This Agreement may be terminated with respect to each Fund Portfolio
at any time without payment of any penalty by Adviser, the Board of
Trustees or a vote of majority of the outstanding voting securities of such
Fund Portfolio in the event that Sub-Adviser or any officer or director of
Sub-Adviser has taken any action which results in a material breach of the
covenants of Sub-Adviser under this Agreement.
(c) This Agreement shall automatically terminate in the event the
Investment Management Agreement between Adviser and the Fund with respect
to a 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 personally delivered, mailed postage prepaid, or sent by facsimile
transmission with confirmation of receipt, to the other party at such address as
such other party may designate for the receipt of such notice.
13. Limitations on Liability All parties are expressly put on notice of the
Fund's Agreement and Declaration of Trust and all amendments thereto, and the
limitation of shareholder and trustee liability contained therein. The
obligations of the Fund entered into in the name or on behalf thereof by any of
its Trustees, representatives or agents are made not individually but only in
such capacities and are not binding upon any of the Trustees, officers, or
shareholders of the Fund individually but are binding upon only the assets and
property of the Fund, and persons dealing with the Fund, with respect to a Fund
Portfolio, must look solely to the 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 such arbitration
shall be the exclusive remedy hereunder, and each party expressly waives any
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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. This Agreement will be binding upon and shall inure to the benefit of
the parties and their respective successors.
17. Applicable Law This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 10 above which will be
construed in accordance with Delaware law) the laws of the state of California.
Adviser and Sub-Adviser have caused this Agreement to be executed as of the date
and year first above written.
WILSHIRE ASSOCIATES INCORPORATED XXXXXXX X. XXXXXXXXX & CO., INC.
By_______________________________ By_________________________________
Title____________________________ Title______________________________
By_______________________________ By_________________________________
Title____________________________ Title______________________________
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EXHIBIT 1
FUND PORTFOLIO LISTING
Xxxxxx Xxxx Growth Fund
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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 rate:
0.20% of assets under management
Sub-Adviser's fee shall be accrued daily at 1/365th of the annual rate set forth
above. For the purpose of accruing compensation, the net assets of each
Portfolio Segment will be determined in the manner and on the dates set forth in
the current prospectus of the Fund with respect to each Fund Portfolio and, on
days on which the net assets are not so determined, the net asset value
computation to be used will be as determined on the immediately preceding day on
which the net assets were determined. Upon the termination of this Agreement,
all compensation due through the date of termination will be calculated on a
pro-rata basis through the date of termination and paid within thirty business
days of the date of termination.
Adviser and Sub-Adviser hereby acknowledge that as of February 16, 2000, the
value of the Portfolio Segments to be served under this Agreement was
approximately $307.5 million, representing approximately 40% of the Funds served
under this agreement.
The following conditions must be met to apply the fee schedule specified above:
2-1. The Target Policy Weighting for Sub-Adviser's Portfolio Segments will be at
least 40% of the Funds served under this Agreement. Adviser will maintain the
actual Portfolio Segment weighting to within 2% of the Target Policy Weighting,
a range designed to accommodate market movements.
2-2. Adviser may reduce the Target Policy Weighting below 40% if the resulting
value of the assets served under this Agreement after such reduction exceeds
$300 million.
If any of the above conditions is not met, the following annual rate will apply,
subject to the accrual process described above, for each day that the condition
is not met:
.600% of the first $10 million of assets under management;
.500% on the next $15 million of assets under management;
.400% on the next $25 million of assets under management;
.300% on the next $50 million of assets under management;
.250% on the next $50 million of assets under management;
.225% on the next $50 million of assets under management;
.200% on the next $50 million of assets under management;
.175% on the next $50 million of assets under management; and
.150% of assets under management thereafter.
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