EXHIBIT (D)(IV)
FORM OF INVESTMENT SUB-ADVISORY AGREEMENT
This Investment Sub-Advisory Agreement ("Agreement") is made as of the 1st day
of March, 1999 by and between Wilshire Associates Incorporated, a California
corporation ("Adviser") and Wellington Management Company, LLP, a Massachusetts
limited liability partnership and 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. 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 Portfolio, as amended from time to time, as well as any other
objectives, policies or limitations as may be provided by Adviser to Sub-Adviser
in writing from time to time.
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Sub-Adviser will provide reports at least quarterly to the Board of Trustees and
to Adviser. 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 rules and regulations of the
Securities and Exchange Commission in all material respects and in
addition will conduct its activities under this Agreement in accordance
with any applicable regulations of any governmental authority
pertaining to its investment advisory activities, including all
portfolio diversification requirements necessary for each Portfolio
Segment to comply with subchapter M of the Internal Revenue Code as if
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 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 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 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 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
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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
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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
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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, 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
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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 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 _________, 199_, and shall remain in full force until
___________, unless sooner terminated as hereinafter provided. This Agreement
shall continue in force from year to year thereafter with respect to 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
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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 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
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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 WELLINGTON MANAGEMENT COMPANY
By______________________________ By_________________________________
Title___________________________ Title______________________________
By______________________________ By_________________________________
Title___________________________ Title______________________________
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EXHIBIT 1
FUND PORTFOLIO LISTING
Xxxxxx Xxxx Growth Fund
Xxxxxx Xxxx Balanced Fund
Xxxxxx Xxxx Income Fund
Xxxxxx Xxxx Short-Term Investment 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 rates:
Growth Fund and the Equity Portion of the Balanced Fund:
First $50 million 0.325%
Next $150 million 0.275
Next $300 million 0.225
Over $500 million 0.175
For the twelve months beginning 3/1/99, the above schedule will be subject to a
15% discount.
Income Fund and the Fixed Income Portion of the Balanced Fund:
First $100 million 0.25%
Next $100 million 0.20
Over $200 million 0.15
There will exist a permanent waiver on a portion of the Income Fund's fee, so
that the assets in the Income Fund are effectively charged the marginal fee
rate on the fixed income assets of the Balanced Fund.
Short-Term Investment Fund:
First $100 million 0.125%
Next $100 million 0.100
Over $200 million 0.075
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.
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