INVESTMENT SUB-ADVISORY AGREEMENT
This
Investment Sub-Advisory Agreement (“Agreement”) is made as of the________ day of
_________, 2008 by and between Wilshire Associates Incorporated, a California
corporation (“Adviser”), and MAXAM Capital Management LLC, 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 seven
separate series or portfolios (collectively, the “Fund Portfolios”) including
the Large Company Growth Portfolio, the Large Company Value Portfolio, the Small
Company Growth Portfolio, the Small Company Value Portfolio, the Dow Xxxxx
Wilshire 5000 Index Portfolio, the Wilshire Large Cap Core 130/30 Fund and the
Wilshire/MAXAM Diversity 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 Directors and Adviser, Sub-Adviser may recommend to the Board of
Directors one or more investment advisers who may or may not be affiliated with
Sub-Adviser (herein referred to collectively as the “Underlying Managers” and
each individually as a “Underlying Manager”) to provide a continuous investment
program for each Fund Portfolio or a portion thereof designated from time to
time by Sub-Adviser, including the investment, research, and management with
respect to all securities and investments and cash equivalents for the Fund
Portfolio or designated portion thereof. The compensation of each
Underlying Manager shall be paid by Sub-Adviser and no obligation may be
incurred on any Fund Portfolio’s behalf in any such respect. Upon
approval of an Underlying Manager by the Board of Directors, and subject to any
applicable requirement of shareholder approval, Sub-Adviser may enter into an
agreement with such Underlying Manager, in a form approved by the Board of
Directors, for the provision of such services, subject to the supervision of the
Board of Directors, Adviser and Sub-Adviser.
In the
performance of its duties, Sub-Adviser will satisfy its fiduciary duties to the
Fund and each Fund Portfolio 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 instructions and
directions as may be provided by the Board of Directors of the Fund or Adviser
to Sub-Adviser in writing from time to time, and resolutions of the Fund’s Board
of Directors of which written notice has been provided to
Sub-Adviser.
(A) Sub-Adviser
shall review, monitor and provide report to the Board of Directors regarding the
performance and investment procedures of each Underlying Manager and shall
assist and consult with each Underlying Manager in connection with the
continuous investment program of the Fund Portfolio or portion thereof served by
such Underlying Manager.
(B) Subject
to direction from the Board or the Sub-Adviser, each Underlying Manager shall
determine from time to time what securities and other investments will be
purchased, retained or sold by the Fund Portfolio or portion thereof served by
such Underlying Manager. Each Underlying Manager shall vote all
proxies with respect to such securities and other investments. The
Fund acknowledges and agrees that, subject to the provisions of paragraph (A)
hereof, Adviser and Sub-Adviser shall not be responsible for any such
determinations by any Underlying Manager. Each Underlying Manager
shall provide services to each Fund Portfolio or portion thereof served by such
Underlying Manager in accordance with the Fund Portfolio’s investment
objectives, policies and restrictions as stated in the Fund’s then current
registration statement, as well as any instructions and directions as may be
provided by the Board of Directors of the Fund, Adviser or Sub-Adviser to
Underlying Manager in writing from time to time, and resolutions of the Fund’s
Board of Directors of which written notice has been provided to the Sub-Adviser
and such Underlying Manager.
(C) Subject
to the direction from the Board or the Sub-Adviser, each Underlying Manager
shall select brokers or dealers that will execute the purchases and sales of
portfolio securities for each Fund Portfolio or portion thereof managed by such
Underlying Manager. In making such selection, each Underlying Manager
shall use its best efforts to obtain best execution, which includes most
favorable net results and execution of such Underlying Manager’s orders, taking
in account all appropriate factors, including, but not limited to, price, dealer
spread or commission, size and difficulty of the transaction and research or
other services provided. It is understood that no Underlying Manager
will be deemed to have acted unlawfully, or to have breached a fiduciary duty to
any Fund Portfolio or in respect of Fund Portfolio assets, solely by reason of
its having caused the Fund Portfolio to pay a member of a securities exchange, a
broker or dealer a commission for effecting a securities transaction of the Fund
Portfolio in excess of the amount of commission another member of an exchange,
broker or dealer would have charged, if such Underlying Manager 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 the Underlying Manager’s overall
responsibilities with respect to its accounts, including the Fund Portfolio as
to which it exercises investment discretion.
Each
Underlying Manager is authorized to consider for investment by each Fund or
portion thereof managed by such Underlying Manager securities that may also be
appropriate for other funds and/or clients serviced by such Underlying
Manager. To assure fair treatment of each such Fund and all other
clients of an Underlying Manager in situations in which the Fund Portfolio and
one or more other clients’ accounts participate simultaneously in a buy or sell
program involving the same security, such transactions shall be allocated among
the Fund Portfolio and other clients in a manner deemed equitable by the
Underlying Manager.
Notwithstanding
the previous paragraphs, to the extent directed by management of the Fund in
writing, the Sub-Adviser shall direct one or more of the Underlying Managers to
execute purchases and sales of portfolio securities for any Fund Portfolio or
portion thereof served by such Underlying Manager through broker or dealers
designated by management of the Fund to Underlying Manager for the purpose of
providing direct benefits to the Fund Portfolio, provided that such Underlying
Manager determines that such brokers or dealers will provide reasonable
execution in view of such other benefits. The Fund understands that
the brokerage commissions or transaction costs in such transactions may be
higher, and that a Fund Portfolio may receive less favorable prices, than those
which any Underlying Manager could obtain from another broker or dealer, in
order to obtain such benefits for such Fund Portfolio.
(D) Subject
to direction from the Board, with respect to any assets of a Fund Portfolio not
being managed by an Underlying Manager, the Sub-Adviser shall determine from
time to time what securities and other investments will be purchased, retained
or sold by the Fund Portfolio with respect to such assets. The
Sub-Adviser shall vote all proxies with respect to such securities and other
investments not managed by an Underlying Manager. The Sub-Adviser
shall have the same authority as an Underlying Manager in accordance with
Paragraph (C).
(E) 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 the
Fund Portfolio and to consult with Adviser regarding the investment affairs of
the Fund Portfolio.
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 or Underlying Manager 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 prior to 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. 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 disclose that Adviser, the Fund
and each Fund Portfolio are its clients; provided, however, that Sub-Adviser
will not advertise or market the relationship with Adviser or the Fund or issue
press releases regarding such relationships without the express written prior
consent of Adviser. 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 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 __________, 2008, and shall remain in full
force until August 31, 2009, 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 Portfolio 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. Fund 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. 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 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: ______________________________
Title: ______________________________
|
MAXAM
CAPITAL MANAGEMENT LLC
By: ______________________________
Title: ______________________________
|
EXHIBIT 1
FUND
PORTFOLIO LISTING
Wilshire/MAXAM
Diversity Fund
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:
_____________
Portfolio: ________%
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.
