INVESTMENT SUB-ADVISORY AGREEMENT
This
Investment Sub-Advisory Agreement (“Agreement”) is made as of the 20th day of
September, 2007 by and between Wilshire Associates Incorporated, a California
corporation (“Adviser”), and Acadian Asset Management, Inc., a registered
investment adviser (“Sub-Adviser”).
Whereas Adviser is the
investment adviser of the Wilshire Mutual Funds, Inc. (the “Fund”), an open-end
diversified, management investment company registered under the Investment
Company Act of 1940, as amended (“1940 Act”), currently consisting of five
separate series or portfolios (collectively, the “Fund Portfolios”) including
the including the Large Company Growth Portfolio, the Large Company Value
Portfolio, the Small Company Growth Portfolio, the Small Company Value
Portfolio, and the Dow Xxxxx Wilshire 5000 Index Portfolio;
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 Directors and Adviser, Sub-Adviser will furnish an investment program
in respect of, and make discretionary 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 Articles of Incorporation and By-laws,
as amended from time to time, and the stated investment objectives, policies and
restrictions of each Fund Portfolio as set forth in the prospectus and Statement
of Additional Information for each Fund Portfolio, as amended from time to time,
as well as any other objectives, policies or limitations as may be provided by
Adviser to Sub-Adviser in writing from time to time.
Sub-Adviser
will provide reports at least quarterly to the Board of Directors and to
Adviser. Sub-Adviser will make its officers and employees available to Adviser
and the Board of Directors from time to time at reasonable times to review
investment policies of each Fund Portfolio with respect to each Portfolio
Segment and to consult with Adviser regarding the investment affairs of each
Portfolio Segment.
Sub-Adviser
agrees that it:
(a) will
use the same skill and care in providing such services as 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 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) with
full discretion 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 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. The Adviser may, from time
to time, engage other sub-advisers to advise portions of a Fund Portfolio other
than the Portfolio Segment. The Sub-Adviser agrees that it will not
consult with any other sub-adviser engaged by the Adviser with respect to
transactions in securities or other assets concerning a Fund
Portfolio,
except to the extent permitted by certain exemptive rules under the 1940 Act
that permit certain transactions with a sub-adviser or its
affiliates.
(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. Where markets permit and 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 Directors and will make
appropriate persons available for the purpose of reviewing with representatives
of Adviser and the Board of Directors on a regular basis at reasonable times the
management of each Portfolio Segment, including without limitation, review of
the general investment strategies of each Portfolio Segment, the performance of
each Portfolio Segment in relation to standard industry indices, interest rate
considerations and general conditions affecting the marketplace, and will
provide the Sub-Adviser’s standard monthly and quarterly reports from time to
time as reasonably requested by Adviser. Any custom reports that are
reasonably requested by the Adviser will be manually agreed upon by the Adviser
and Sub-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 Directors such periodic and special reports as the Board or
Adviser may reasonably request;
(h) will
vote, or retain a third party to research and 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;
(j) will
be responsible for filing 13F reports with the SEC for holdings in the
portfolio; and
(k) acknowledges
that it is not authorized to render legal advice or to initiate legal action,
including responding to class action notifications, on behalf of the Adviser or
the Fund Portfolios including, but not limited to, taking any action with
respect to securities or other investments, or the issuers thereof, which become
subject to any legal proceedings including, but not limited to, bankruptcies or
class action lawsuits.
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. Sub-Adviser agrees to bear any Portfolio expenses
caused by future changes at Sub-Adviser, such expenses including but not limited
to preparing, printing, and mailing to Portfolio shareholders of information
statements or stickers to or complete prospectuses or statements of additional
information.
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
Directors that Sub-Adviser may act 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 Directors, 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 as it is now being conducted,
(b) has the authority to enter into and perform the services contemplated
by this Agreement, (c) is not prohibited by the 1940 Act or the Advisers
Act from performing the services contemplated by this Agreement, (d) has
met, and will continue to seek to meet for the duration of this Agreement, any
other applicable federal or state requirements, and the applicable requirements
of any regulatory or industry self-regulatory agency, necessary to be met in
order to perform its services under this Agreement, (e) will promptly
notify Adviser of the occurrence of any event that would disqualify it from
serving as an investment adviser to an investment company pursuant to
Section 9(a) of the 1940 Act, and (f) will notify Adviser of any
change in control of the Sub-Adviser within a reasonable time after such
change.
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. The costs related to such audit will be the sole
responsibility of the Adviser and/or the Fund. Adviser and the Fund
or either of their authorized representatives shall have the right to copy any
records in the possession of Sub-Adviser which pertain to each Fund Portfolio or
the Fund. Such books, records, information or reports shall be made
available to properly authorized government representatives consistent with
state and federal law and/or regulations. In the event of the
termination of this Agreement, all such books, records or other information
shall be returned to Adviser or the Fund (provided, however, that Sub-Adviser
may retain copies of such records as required by law).
Sub-Adviser
agrees that it will not disclose or use any records or confidential information
obtained pursuant to this Agreement in any manner whatsoever except as
authorized in this Agreement or in writing by Adviser or the Fund, or if such
disclosure is required by federal or state regulatory
authorities. Sub-Adviser may disclose the investment performance of
each Portfolio Segment, provided that such disclosure does not reveal the
identity of Adviser, 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 directors 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 under the 1940 Act and will
provide Adviser and the Fund with a copy of such code. Within 35 days
of the end of each calendar quarter during which this Agreement remains in
effect, the chief compliance officer 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 material 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. Nothing herein shall be any way constitute a waiver or
limitation of any rights which the Adviser or Fund may have under any such
relevant securities laws.
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 August 23, 2007, and shall remain in full
force until August 31, 2008, 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 with respect to any Fund
Portfolio 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 Directors or by a vote of a majority of the
outstanding voting securities of such Fund Portfolio (as defined in the 0000
Xxx) on sixty days 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 Directors or a vote of
majority of the outstanding voting securities of such Fund Portfolio in the
event that Sub-Adviser or any officer or director of Sub-Adviser has 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. The obligations of the Fund entered into in the
name or on behalf thereof by any of its directors, representatives or agents are
made not individually but only in such capacities and are not binding upon any
of the directors, 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 Articles of Incorporation, By-laws, prospectus, and Statement of
Additional Information and any amendment thereto, and any objectives, policies
or limitations not appearing therein as they may be relevant to Sub-Adviser’s
performance under this Agreement; 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 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. Confidentiality. To
the extent permitted by law and regulation, the Sub-Adviser shall regard as
confidential all information concerning the affairs of the Adviser and the Fund,
but shall be permitted to disclose to third parties the fact that the
Sub-Adviser is performing investment management activities on the Adviser’s
behalf. To the extent permitted by law and regulation, the Adviser
shall regard as confidential all information and recommendations furnished by
the Sub-Adviser to the Adviser.
17. Rights to Models and Use of the
Name. The Sub-Adviser retains all rights in and to any
investment models used by or on behalf of the Adviser and the Fund and any
models based upon or derived from them. In addition, the Adviser
acknowledges and agrees that it has no rights in or to the name
“Acadian.”
For
purposes of promoting the Fund, the Adviser shall be at liberty to make
reference to the name of the Sub-Adviser, use the Sub-Adviser’s trademark, and
describe the services provided by the Sub-Adviser, provided that the Adviser
provides the Sub-Adviser with a copy of any document or other form of written
public communication containing such references for review and approval prior to
public dissemination and agrees to revises such documents to reflect comments
received from the Sub-Adviser. The Sub-Adviser agrees to review and
comment upon such document only as it pertains to the Sub-Adviser within three
business days, and agrees not to unreasonably withhold its
consent. The Adviser shall deemed approved any document not commented
upon with three business days. The Sub-Investment Manager will
consider any public dissemination of any written documents referencing the
Sub-Investment Manager without Sub-Investment Manager’s prior review and
approval to be a material breach of this Agreement.
18. 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.
19. Receipt of Disclosure
Document. The Adviser acknowledges receipt, at least 48 hours
prior to entering into this Agreement, of a copy of Part II of the Sub-Adviser’s
Form ADV containing certain information concerning the Sub-Adviser and the
nature of its business.
20. Applicable
Law. This Agreement shall be construed in accordance with
applicable federal law and 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
By: /s/ Xxxxxxxx X.
Xxxxxxx
Print
Name: Xxxxxxxx X.
Xxxxxxx
Title: Senior Mg.
Director
|
ACADIAN
ASSET MANAGEMENT, INC.
By: /s/ Xxxx X.
Xxxxxxxx
Print
Name: Xxxx X.
Xxxxxxxx
Title: Executive Vice President and
Co-CIO
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EXHIBIT 1
FUND
PORTFOLIO LISTING
Large
Company Value Portfolio
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:
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.
