EXHIBIT (d)(1)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of April 1, 2002 between
WILSHIRE TARGET FUNDS, INC., a Maryland corporation (herein called the
"Company") and WILSHIRE ASSOCIATES INCORPORATED, a California corporation
(herein called the "Advisor").
WHEREAS, the Company is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Company wishes to retain the Advisor under this Agreement to
render investment advisory services to the portfolios of the Company known as
the Large Company Growth Portfolio, Large Company Value Portfolio, Small Company
Growth Portfolio, Small Company Value Portfolio, and Wilshire 5000 Index
Portfolio (the "Initial Funds"), together with any other Company portfolios
which may be established later and served by the Advisor hereunder, being herein
referred to collectively as the "Funds" and each individually as a "Fund"), and
Advisor wishes to render such services;
NOW THEREFORE, in consideration of the premises and mutual covenants set
forth herein, the parties hereto agree as follows:
1. APPOINTMENT OF ADVISOR.
(A) The Company hereby appoints the Advisor as the investment adviser
of each Fund on the terms and for the period set forth in this Agreement and the
Advisor hereby accepts such appointment and agrees to perform the services and
duties set forth herein on the terms herein provided. The Advisor may, in its
discretion, provide such services through its own employees or the employees of
one or more affiliated companies that are qualified to provide such services to
the Company under applicable law and are under common control with the Advisor
provided (i) that all persons, when providing services hereunder, are
functioning as part of an organized group of persons, and (ii) that such
organized group of persons is managed at all times by authorized officers of the
Advisor.
(B) In the event that the Company establishes one or more portfolios
other than the Initial Funds with respect to which it desires to retain the
Advisor to render investment advisory services hereunder, it shall notify the
Advisor in writing. If the Advisor is willing to render such services, it shall
notify the Company in writing whereupon such portfolio or portfolios shall
become a Fund or Funds hereunder.
2. INVESTMENT SERVICES AND DUTIES. The Advisor may recommend to the Board
of Directors one or more investment advisers who may or may not be affiliated
with the Advisor (herein referred to collectively as the "Sub-Advisors" and each
individually as a "Sub-Advisor")
to provide a continuous investment program for each Fund or a portion thereof
designated from time to time by the Advisor, including investment, research, and
management with respect to all securities and investments and cash equivalents
for the Fund or designated portion thereof. The compensation of each Sub-Advisor
shall be paid by the Advisor and no obligation may be incurred on any Fund's
behalf in any such respect. Upon approval of a Sub-Advisor by the Board of
Directors, and subject to any applicable requirement of shareholder approval,
the Advisor may enter into an agreement with such Sub-Advisor, in a form
approved by the Board of Directors, for the provision of such services, subject
to the supervision of the Board of Directors and the Advisor.
(A) The Advisor shall review, monitor and report to the Board of
Directors regarding the performance and investment procedures of each
Sub-Advisor and shall assist and consult with each Sub-Advisor in connection
with the continuous investment program of the Fund or portion thereof served by
such Sub-Advisor. The Advisor shall provide its services under this Section 2 in
accordance with the Funds' investment objectives, policies and restrictions as
stated in the Funds' then current registration statement and resolutions of the
Company's Board of Directors of which written notice has been provided to the
Advisor.
(B) Subject to direction from the Board or the Advisor, each
Sub-Advisor shall determine from time to time what securities and other
investments will be purchased, retained or sold by the Company with respect to
the Fund or portion thereof served by such Sub-Advisor. Each Sub-Advisor shall
vote all proxies with respect to such securities and other investments. The
Company acknowledges and agrees that, subject to the provisions of paragraph (A)
hereof, the Advisor shall not be responsible for any such determinations by any
Sub-Advisor. Each Sub-Advisor shall provide services to each Fund or portion
thereof served by such Sub-Advisor in accordance with the Fund's investment
objectives, policies and restrictions as stated in the Fund's then current
registration statement and resolutions of the Company's Board of Directors of
which written notice has been provided to the Advisor and such Sub-Advisor.
(C) Subject to direction from the Board or the Advisor, each
Sub-Advisor shall select brokers or dealers that will execute the purchases and
sales of portfolio securities for each Fund or portion thereof managed by such
Sub-Advisor. In making such selection, each Sub-Advisor shall use its best
efforts to obtain best execution, which includes most favorable net results and
execution of such Sub-Advisor's orders, taking into 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 Sub-Advisor will be deemed to have acted unlawfully, or to
have breached a fiduciary duty to any Fund or in respect of Fund assets, solely
by reason of its having caused the Fund to pay a member of a securities
exchange, a broker or a dealer a commission for effecting a securities
transaction of the Fund in excess of the amount of commission another member of
an exchange, broker or dealer would have charged, if such Sub-Advisor determined
in good faith that the commission paid was reasonable in relation to the
brokerage and research services provided by such member, broker or
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dealer, viewed in terms of that particular transaction or the Sub-Advisor's
overall responsibilities with respect to its accounts, including the Fund, as to
which it exercises investment discretion.
Each Sub-Advisor is authorized to consider for investment by each Fund
or portion thereof managed by such Sub-Advisor securities that may also be
appropriate for other funds and/or clients serviced by such Sub-Advisor. To
assure fair treatment of each such Fund and all other clients of a Sub-Advisor
in situations in which the Fund 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 and other clients in a
manner deemed equitable by the Sub-Advisor.
Notwithstanding the previous paragraphs, to the extent directed by
management of the Company in writing, the Advisor shall direct one or more of
the Sub-Advisors to execute purchases and sales of portfolio securities for any
Fund or portion thereof served by such Sub-Advisor through brokers or dealers
designated by management of the Fund to Advisor for the purpose of providing
direct benefits to the Fund, provided that such Sub-Advisor determines that such
brokers or dealers will provide reasonable execution in view of such other
benefits. The Company understands that the brokerage commissions or transaction
costs in such transactions may be higher, and that a Fund may receive less
favorable prices, than those which any such Sub-Advisor could obtain from
another broker or dealer, in order to obtain such benefits for such Fund.
(D) Subject to direction from the Board, with respect to any assets of
a Fund not being managed by a Sub-Advisor, the Advisor shall determine from time
to time what securities and other investments will be purchased, retained or
sold by the Company with respect to such assets. The Advisor shall vote all
proxies with respect to such securities and other investments not managed by a
Sub-Advisor. The Advisor shall have the same authority as a Sub-Advisor in
accordance with Paragraph (C).
(E) The Advisor shall maintain books and records with respect to its
services hereunder and furnish the Company's Board of Directors such periodic
and special reports as the Board may reasonably request. The Company
acknowledges and agrees that the Sub-Advisors will be responsible for
maintenance of books and records with respect to the securities transactions of
the Funds managed by them.
3. COMPLIANCE WITH GOVERNING INSTRUMENTS AND LAWS. In performing its
duties as Advisor for the Funds, the Advisor shall act in conformity with the
Company's Articles of Incorporation, Bylaws, prospectuses and statements of
additional information, and the instructions and directions of the Board of
Directors of the Company of which written notice has been provided to the
Advisor. In addition, the Advisor shall, with respect to assets not managed by a
Sub-Advisor, conform to and comply with the requirements of the 1940 Act, the
Rules and Regulations of the Commission, the requirements of subchapter M of the
Internal Revenue Code of 1986, as amended, and all other applicable federal or
state laws and regulations.
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4. SERVICES NOT EXCLUSIVE. The Advisor shall for all purposes herein be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Board of Directors from time to time, have
no authority to act for or represent the Company in any way or otherwise be
deemed its agent. The services furnished by the Advisor hereunder are not deemed
exclusive, and the Advisor shall be free to furnish similar services to others
so long as its services under this Agreement are not impaired thereby.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Advisor hereby agrees that all records which it
maintains for the Company are the property of the Company and further agrees to
surrender promptly to the Company any such records upon the Company's request.
The Advisor further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by it in connection
with its services hereunder by Rule 31a-1 under the 1940 Act.
6. EXPENSES ASSUMED AS ADVISOR. Except as otherwise stated in this
Agreement, the Advisor shall pay all expenses incurred by it in performing its
services and duties hereunder as Advisor (including without limitation all
compensation of Sub-Advisors to the Funds pursuant to its agreements with such
Sub-Advisors). The Company shall bear all other expenses incurred in the
operation of the Funds, including without limitation taxes, interest, brokerage
fees and commissions, if any, fees of directors who are not officers, directors,
partners, employees or holders of 5 percent or more of the outstanding voting
securities of the Advisor or any Sub-Advisor or any of their affiliates,
Securities and Exchange Commission ("Commission") fees and state blue sky
registration and qualification fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, outside auditing
and legal expenses, costs of maintaining corporate existence, costs of preparing
and printing prospectuses and statements of additional information or any
supplements or amendments thereto necessary for the continued effective
registration of the Funds' shares ("Shares") under federal or state securities
laws, costs of printing and distributing any prospectus, statement of additional
information, supplement or amendment thereto for existing shareholders of the
Funds, costs of shareholders' reports and meetings, and any extraordinary
expenses. It is understood that certain advertising, marketing, shareholder
servicing, administration and/or distribution expenses to be incurred in
connection with the Shares may be paid by the Company as provided in any plan
which may in the sole discretion of the Company be adopted in accordance with
Rule 12b-1 under the 1940 Act, and that such expenses shall be paid apart from
any fees paid under this Agreement.
7. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, the Company shall pay the Advisor a fee, computed
daily and payable monthly, at the annual rate as set forth in the attached fee
schedule based on the average daily net assets of each Fund determined as set
forth in the current prospectus and statement of additional information of the
Company with respect to the Fund as amended from time to time. Such fee as is
attributable to each Fund shall be a separate (and not joint or joint and
several) obligation of each such Fund. The Company shall reduce the advisory fee
to be paid by each Fund to the
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Advisor by the amount of any advisory fees paid indirectly by such Fund to other
investment companies as a result of the Fund's investment in such investment
companies' securities.
8. AFFILIATED BROKER. The Advisor or an affiliated person of the Advisor
may act as broker for the Funds or any portion thereof in connection with the
purchase or sale of securities or other investments for the Funds or any portion
thereof, subject to: (a) the requirement that the Advisor or Sub-Advisor seek to
obtain best execution as set forth above; (b) the provisions of the Investment
Advisers Act of 1940, as amended; (c) the provisions of the Securities Exchange
Act of 1934, as amended; and (d) other applicable provisions of the law. Such
brokerage services are not within the scope of duties obligated to be performed
by the Advisor under this Agreement. Subject to the requirements of applicable
law and any procedures adopted by the Company's Board of Directors of which
written notice has been provided to the Advisor, the Advisor or its affiliated
persons may receive brokerage commissions, fees or other remuneration from the
Funds for such services in addition to the Advisor's fees for services under
this Agreement.
9. Limitations of Liability; Indemnification.
(A) The Advisor shall exercise its best judgment in rendering the
services to be provided to the Funds hereunder. However, the Advisor shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Company or by any Fund in connection with the matters to which this
Agreement relates, except a loss resulting from a breach of the Advisor's
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from the Advisor's willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also an officer, director, employee or agent of the Advisor, who may
be or become an officer, director, employee or agent of the Company, shall be
deemed when rendering services to the Company or to any Fund, or acting on any
business of the Company or of any Fund (other than services or business in
connection with the Advisor's duties as Advisor hereunder or under any other
agreement with the Company), to be rendering such services to or acting solely
for the Company or Fund and not as an officer, director, employee or agent or
one under the control or direction of the Advisor even though paid by the
Advisor.
(B) The Company shall indemnify and hold harmless the Advisor from and
against all liabilities, damages, costs and expenses that the Advisor may incur
in connection with any action, suit, investigation or proceeding arising out of
or otherwise based on any action actually or allegedly taken or omitted to be
taken by the Advisor with respect to the performance of its duties or
obligations hereunder or otherwise as an investment adviser of the Company and
the Funds; provided, however, that the Advisor will not be entitled to
indemnification with respect to any liability to the Company or its shareholders
by reason of the Advisor's breach of fiduciary duty with respect to the receipt
of compensation for services or the willful misfeasance, bad faith or gross
negligence on the part of the Advisor in the performance of its duties, or by
reason of the Advisor's reckless disregard of its obligations and duties under
this Agreement.
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(C) Subject to paragraph (B), the Company shall also indemnify and
hold harmless the Advisor to the extent the Advisor may be required to indemnify
any Sub-Advisor pursuant to the terms of any sub-advisory agreement. Further,
except as set forth in paragraph (A), the Advisor shall not be liable for any
act or omission of any Sub-Adviser.
(D) The Advisor shall indemnify and hold harmless the Company from and
against all liabilities, damages, costs and expenses that the Company may incur
in connection with any action, suit, investigation or proceeding arising out of
or otherwise based on any action actually taken or omitted to be taken by the
Advisor with respect to the performance of its duties or obligations hereunder
or otherwise as an investment adviser of the Company, to the extent such
liability, damage, cost or expense results from the Advisor's breach of
fiduciary duty with respect to the receipt of compensation for services or the
willful misfeasance, bad faith or gross negligence on the part of the Advisor in
the performance of its duties, or from the Advisor's reckless disregard of its
obligations and duties under this Agreement.
10. DURATION OR TERMINATION. This Agreement shall become effective as of
the date first written above and, unless sooner terminated as provided herein,
shall continue until March 31, 2004. Thereafter, this Agreement will be extended
with respect to each Fund for successive one-year periods ending on March 31of
each year provided each such extension is specifically approved at least
annually (a) by vote of a majority of those members of the Company's Board of
Directors who are not interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Company's Board of Directors or by vote of a majority of the outstanding
voting securities of such Fund. This Agreement may be terminated by the Company
at any time with respect to any Fund, without the payment of any penalty, by
vote of a majority of the entire Board of Directors of the Company or by a vote
of a majority of the outstanding voting securities of such Fund on 60 days'
written notice to the Advisor, or by the Advisor at any time, without payment of
penalty, on 90 days' written notice to the Company. This Agreement will
immediately terminate in the event of its assignment. As used in this Agreement,
the terms "majority of the outstanding voting securities," "interested persons"
and "assignment" shall have the same meanings as such terms have in the 1940
Act.
11. REPRESENTATIONS AND WARRANTIES.
(A) The Company represents and warrants to the Advisor that: (i) it is
a corporation duly organized and existing and in good standing under the laws of
the State of Maryland and is duly qualified to conduct its business in the State
of Maryland and in such other jurisdictions wherein the nature of its activities
or its properties owned or leased makes such qualification necessary; (ii) it is
a registered open-end management investment company under the 1940 Act; (iii) a
registration statement on Form N-1A under the Securities Act of 1933, as
amended, on behalf of the Funds is currently effective and will remain
effective, and appropriate state securities law filings have been made and will
continue to be made, with respect to all Shares of the Funds being offered for
sale; (iv) it is empowered under applicable laws and by its
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Articles of Incorporation and Bylaws to enter into and perform this Agreement;
and (iv) all requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
(B) The Advisor represents and warrants to the Company that: (i) it is
a corporation duly organized and existing and in good standing under the laws of
the State of California and is duly qualified to conduct its business in the
State of California and in such other jurisdictions wherein the nature of its
activities or its properties owned or leased makes such qualification necessary;
(ii) it is a registered investment adviser under the Investment Advisers Act of
1940, as amended; (iii) it is empowered under applicable laws and by its
Articles of Incorporation and Bylaws to enter into and perform this Agreement;
and (iv) all requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
12. 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.
13. NAMES. The Fund recognizes that from time to time directors, officers
and employees of the Advisor may serve as directors, trustees, partners,
officers and employees of other corporations, business trusts, partnerships or
other entities (including other investment companies) and that such other
entities may include the name "Wilshire" as part of their name, and that the
Advisor or its affiliates may enter into investment advisory or other agreements
with such other entities. If the Advisor ceases to act as the Fund's investment
adviser, the Fund agrees to take all necessary action to change the name of the
Fund as soon as practicable, and in no event longer than nine months, after
receipt of a request from the Advisor to do so, to a name not including
"Wilshire" in any form or combination of words.
14. NOTICES. Notices of any kind to be given to the Company hereunder by
the Advisor shall be in writing and shall be duly given if mailed or delivered
to the Company at the following:
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Xxxxxxx X'Xxxxxx
President and Chairman of the Board
Wilshire Target Funds, Xxx.0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000
With a copy to:
Xxxxxxx Xxxxxx
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
or at such other address or to such individual as shall be so specified by the
Company to the Advisor. Notices of any kind to be given to the Advisor hereunder
by the Company shall be in writing and shall be duly given if mailed or
delivered to the Advisor at:
Wilshire Associates Incorporated
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X'Xxxxxx
or at such other address or to the attention of such other individual as shall
be so specified by the Advisor to the Company.
15. MISCELLANEOUS. This Agreement sets forth the entire understanding of
the parties with respect to the subject matter hereof, supersedes any prior
agreement with respect to such subject matter, and may be amended only by
written consent of both parties, subject to any applicable requirement of
shareholder approval. 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 shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by California law (without regard to principles of conflicts of law);
PROVIDED, HOWEVER, that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or regulation of the Commission
thereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
WILSHIRE TARGET FUNDS, INC.
By: /s/ Xxxxxxx X'Xxxxxx
---------------------
President
Attest: /s/Xxxx Xxxxxxx
---------------
Secretary
WILSHIRE ASSOCIATES INCORPORATED
By: /s/ Xxxxxxx Xxxxxxx
-------------------
Senior Managing Director
Attest: /s/ Xxxx Xxxxxxx
----------------
Secretary
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FEE SCHEDULE
Company shall pay Advisor with respect to each Fund each calendar month
during the term of this Agreement, a fee based on the average daily net assets
of each Fund, at the following annual rate:
Wilshire 5000 Index Portfolio 0.10%
Large Company Growth Portfolio 0.75%
Large Company Value Portfolio 0.75%
Small Company Growth Portfolio 0.85%
Small Company Value Portfolio 0.85%
Advisor'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 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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