Exhibit (d)(6)
INVESTMENT SUB-ADVISORY AGREEMENT
This Investment Sub-Advisory Agreement ("Agreement") is made as of the 22 day of
December, 2004 by and between Wilshire Associates Incorporated, a California
corporation ("Adviser") and Kalmar Investment Advisers, a Delaware business
trust ("Sub-Adviser").
WHEREAS Adviser is the investment adviser of the Wilshire Mutual Funds,
Incorporated (formerly known as "Wilshire Target Funds, Incorporated"),
(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 Large Company Growth
Portfolio, the Large Company Value Portfolio, the Small Company Growth
Portfolio, the Small Company Value Portfolio, and the Wilshire 5000 Index
Portfolio;
WHEREAS Adviser desires to retain Sub-Adviser to furnish investment
advisory services for the Fund Portfolios 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 investment decisions for, such portion of the assets of each Fund
Portfolio as Adviser shall from time to time designate (each a "Portfolio
Segment") and place all orders for the purchase and sale of securities on behalf
of each Portfolio Segment. In the performance of its duties, Sub-Adviser will
satisfy its fiduciary duties to the Fund and each Fund Portfolio and will
monitor each Portfolio Segment's investments, and will comply with the
provisions of the Fund's 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 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
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Portfolio Segment and to consult with Adviser regarding the investment affairs
of each Portfolio Segment.
Reporting. Communications with Adviser, at a minimum, should include: (a)
monthly accounting statements including: portfolio holdings; portfolio income
and accruals; transactions (buys/sells); contribution/withdrawal activity;
reconciliation between month-end valuations of cash and positions provided by
the Custodian and Sub-Manager's own valuations of same, and itemizing and
explaining any differences; (b) monthly performance statements including: total
returns stated in gross- and net-of-fee terms; (c) quarterly written statements,
including actions taken in Portfolio, the current outlook, expected changes in
Portfolio, and performance results; (d) meetings with Adviser as determined by
Adviser; (e) reporting of pertinent changes in the firm as they occur, by phone
and in writing. [Pertinent changes include, but are not limited to, the
following: changes in ownership; changes in key personnel; major changes in
areas of responsibility of key personnel; changes in investment philosophy or
major strategies]; (f) quarterly affirmation statement of compliance with
investment guidelines; and (g) annual statement of market outlook and investment
strategy. To the extent available, Sub-Adviser will provide Adviser with an
electronic interface for account information.
Sub-Adviser agrees that it:
(a) will use the same skill and care in providing such services as are
required to provide services to fiduciary accounts;
(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 it
were a regulated investment company thereunder;
(c) to the extent directed by Adviser in writing, will execute purchases
and sales of portfolio securities for each Portfolio Segment through
brokers or dealers designated by management of the Fund to Adviser for the
purpose of providing direct benefits to the Fund, 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
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authorized as the agent of the Fund to give instructions to the Fund's
custodian as to deliveries of securities or other investments and payments
of cash of each Portfolio Segment for the account of each Fund Portfolio.
In making such selection, Sub-Adviser is directed to use its best efforts
to obtain best execution, which includes most favorable net results and
execution of each Portfolio Segment's orders, taking into account all
appropriate factors, including, but not limited to, price, dealer spread
or commission, size and difficulty of the transaction and research or
other services provided. With respect to transactions under this paragraph
(d), it is understood that Sub-Adviser will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Fund or in respect
of any Fund Portfolio, or be in breach of any obligation owing to the Fund
or in respect of each Fund Portfolio under this Agreement, or otherwise,
solely by reason of its having caused a Fund Portfolio to pay a member of
a securities exchange, a broker or a dealer a commission for effecting a
securities transaction of a Fund Portfolio in excess of the amount of
commission another member of an exchange, broker or dealer would have
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 a Fund and one
or more other clients' accounts participate simultaneously in a buy or
sell program involving the same security, such transactions will be
allocated among each Portfolio Segment and such other clients in a manner
deemed equitable by Sub-Adviser. Sub-Adviser is authorized to aggregate
purchase and sale orders for securities held (or to be held) in each
Portfolio Segment with similar orders being made on the same day for other
eligible client accounts or portfolios managed by Sub-Adviser. When an
order is so aggregated, the actual prices applicable to the aggregated
transaction will be averaged and each Portfolio Segment and each other
account or portfolio participating in the aggregated transaction will be
treated as having purchased or sold its portion of the securities at such
average price, and all transaction costs incurred in effecting the
aggregated transaction will be shared on a pro-rata basis among the
accounts or portfolios (including the Portfolio Segment) participating in
the transaction. Adviser and the Fund understand that Sub-Adviser may not
be able to aggregate transactions through brokers or dealers designated by
Adviser with transactions through brokers or dealers selected by
Sub-Adviser, in which event the prices paid or received by each Portfolio
Segment will not be so averaged and may be higher or lower than those paid
or received by other accounts or portfolios of Sub-Adviser;
(f) will report regularly to Adviser and to the Board of 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
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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, stock market and interest rate considerations and general
conditions affecting the marketplace, and will provide various other
reports from time to time as reasonably requested by Adviser;
(g) will prepare such books and records with respect to each Portfolio
Segment's securities transactions as requested by Adviser and will furnish
Adviser and the Fund's Board of Directors 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.
Sub-Adviser's ability to provide the services in this Section (2) is pursuant to
the Adviser's authority to delegate advisory duties under the Advisory Agreement
between the Adviser and the Fund, dated April 1, 2002. To the extent that the
terms of this Section (2) differ from the terms the Advisory Agreement, the
terms of the Advisory Agreement shall govern.
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 Fund
expenses caused by future highly material changes at Sub-Adviser, such expenses
including but not limited to preparing, printing, and mailing of stickers or
complete prospectus or statement of additional information. The Fund shall bear
all other expenses incurred in the operation of the Fund and the portfolios,
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 Adviser
or any Sub-Adviser 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 Fund's 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 Fund as provided in any plan which
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may in the sole discretion of the Fund 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.
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. Sub-Adviser agrees that any amendment to this fee
schedule will be upon the mutual written agreement between Adviser and
Sub-Adviser.
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, some of which may have
different objectives than those of the Fund and Fund portfolios. Sub-Adviser
understands that during the term of this Agreement Adviser may retain one or
more other sub-advisers with respect to any portion of the assets of a Fund
Portfolio other than the Portfolio Segment.
6. AFFILIATED BROKER In connection with the purchase or sale of securities or
other investments for a Portfolio Segment, Sub-Adviser may allocate orders for
purchase and sale transactions to any broker-dealer affiliated with Sub-Adviser
or Adviser ("Affiliated Broker"), may purchase securities underwritten by
Affiliated Broker, and may cause the Fund Portfolio to compensate Affiliated
Broker for effecting such transactions, subject to: (a) the requirement that
Sub-Adviser seek to obtain best execution as set forth above; (b) compliance
with procedures adopted by the Fund pursuant to Rule 17e-1 and Rule 10f-3 under
the 1940 Act; ; (c) the provisions of the Investment Advisers Act of 1940, as
amended (the "Advisers Act"); (d) the provisions of the Securities Exchange Act
of 1934, as amended; and (e) other applicable provisions of law.
Adviser or the Fund may revoke any or all of the consents and authorizations
given hereby at any time and without penalty by providing written notice to
Sub-Adviser.
7. REPRESENTATIONS OF SUB-ADVISER Sub-Adviser is registered with the Securities
and Exchange Commission under the Advisers Act. Sub-Adviser will use all
commercially reasonable efforts to remain so registered throughout the term of
this Agreement and will 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
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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 shareholders of the Sub-Adviser within a reasonable time after
such change.
In addition, Sub-Adviser represents that it has provided Adviser with copies of
each of the following documents: (i) Sub-Adviser's Form ADV as filed with the
Securities Exchange Commission; and (ii) separate lists of persons who
Sub-Adviser wishes to have authorized to give written and/or oral instructions
to Custodians of Fund assets for the Fund Portfolios. Sub-Adviser will furnish
Adviser from time to time with copies, properly certified or otherwise
authenticated, of all material amendments of or supplements to the foregoing, if
any. Such amendments or supplements will be provided within 30 days of the time
such materials became available to Sub-Adviser.
8. BOOKS AND RECORDS Sub-Adviser will maintain, in the form and for the period
required by Rule 31a-2 under the 1940 Act, all records relating to each
Portfolio Segment's investments that are required to be maintained by the Fund
pursuant to the requirements of paragraphs (b)(5), (b)(6), (b)(7), (b)(9),
(b)(10) and (f) of Rule 31a-1 under the 1940 Act. Sub-Adviser agrees that all
books and records which it maintains for each the Fund Portfolios 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, any 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. Adviser
may identify Sub-Adviser as a sub-adviser in connection with marketing its funds
management services, and Sub-Adviser hereby consents to being so identified.
9. CODE OF ETHICS Sub-Adviser has adopted a written code of ethics complying
with the requirements of Rule 17j-1(b), (c), (d), and (e) under the 1940 Act and
will provide Adviser and the Fund with a copy of such code. Within 20 days of
the end of each calendar quarter during which this Agreement remains in effect,
the president or the managing director or the chief
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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; that Sub-Adviser has adopted procedures reasonably necessary to prevent
its access persons from violating such code; and that there have been no
violations of Sub-Adviser's code of ethics or, if any violation has occurred,
the nature of such violation and of the action taken in response to such
violation.
10. LIMITATION OF LIABILITY Neither Sub-Adviser nor any of its directors,
officers, members, partners, 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.
Sub-Adviser specifically acknowledges that the Fund is a third party beneficiary
of this Agreement and that the Fund is entitled to bring a lawsuit against the
Sub-Adviser for breach of this Agreement or any other duty in any court of
competent jurisdiction. Also Sub-Adviser acknowledges that the Fund is not
subject to or bound by any of the provisions of paragraph 14 of this Agreement.
Sub-Adviser agrees to indemnify and defend Adviser, the Fund, and their
representative 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 any Fund Portfolio, if such material
misstatement or omission was made in reliance upon and in conformity with
written information furnished by Sub-Adviser to Adviser or the Fund.
11. TERM AND TERMINATION Unless otherwise agreed in writing, this Agreement
shall become effective with respect to each Portfolio Segment on December 30,
2004, and shall remain in full force until March 31, 2006, 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 ▇▇▇▇ ▇▇▇) 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 prior written notice to the other
party. This Agreement may also be terminated by the Fund with respect to
any Fund Portfolio at any time without the payment of any penalty
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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
▇▇▇▇ ▇▇▇) on sixty days prior written notice to Sub-Adviser by the Fund.
(b) This Agreement may be terminated with respect to any Fund Portfolio at
any time upon written notice 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 breached any representation or
warranty in this Agreement or 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 such Fund Portfolio is terminated, assigned
or not renewed.
Termination of this Agreement shall not affect the right of Sub-Adviser to
receive payments of any unpaid balance of the compensation described in Section
4 earned prior to such termination.
12. NOTICE Any notice under this Agreement by a party shall be in writing,
addressed and personally delivered, mailed postage prepaid, or sent by facsimile
transmission with confirmation of receipt, to the other party at such address as
such other party may designate for the receipt of such notice.
13. ADVISER RESPONSIBILITY Adviser has provided and will continue to 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, and the Advisory
Agreement between the Fund and the Adviser, and the resolutions of the Directors
selecting Adviser as investment manager to the Fund and the Code of Ethics of
the Fund and of Adviser as currently in effect; provided, however, that such
documents are provided to the Adviser by the Fund, and provided further that no
changes or modifications to the foregoing shall be binding on Sub-Adviser until
it is notified thereof. The Adviser represents that it is authorized to appoint
the Sub-Adviser and to execute and deliver this Agreement and that all
shareholder and Board action on the part of the Fund and the Adviser required to
be taken to make such appointment and enter into this Agreement has been taken.
14. 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, agreed to between the parties, 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
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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.
15. 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. Subject to the provisions of Section 11, this Agreement will be binding
upon and shall inure to the benefit of the parties and their respective
successors.
16. APPLICABLE LAW This Agreement shall be construed in accordance with
applicable federal law and the laws of the state of California, without regard
to principles of conflict of laws.
Adviser and Sub-Adviser have caused this Agreement to be executed as of the date
and year first above written.
WILSHIRE ASSOCIATES INCORPORATED KALMAR INVESTMENT ADVISERS
By______________________________ By_________________________________
Title___________________________ Title______________________________
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EXHIBIT 1
FUND PORTFOLIO LISTING
Wilshire Mutual Funds, Incorporated:
Small Company Growth Portfolio
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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 daily net assets of each
Portfolio Segment, at the following annual rate:
Annual Management Fee Rate 85 bps. (0.85%)
Sub-Adviser's fee shall be accrued daily at 1/365th of the annual rate set forth
above (or 1/366th of the annual rate in a leap year) and be paid monthly. 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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