UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14C
(RULE 14c-101)
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
o Preliminary information statement
o Confidential, for use of the Commission only (as permitted by Rule 14c-5(d)(2))
x Definitive information statement
DUNHAM FUNDS
(Name of Registrant as Specified in Its Charter)
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(1) | Title of each class of securities to which transaction applies: _____ |
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(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): _______________________________________ |
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(5) | Total fee paid:_____________________________________________ |
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
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Dunham & Associates Investment Counsel, Inc.
10251 Vista Sorrento Parkway, Suite 200
San Diego, CA 92121-2706
(858) 964-0500 Fax: (858) 964-0555
October 31, 2018
Dear Shareholders:
The enclosed document is purely for informational purposes. You are not being asked to vote or take action on any matter. During the Board’s annual review of the Sub-Adviser on December 19, 2017, at which the Board unanimously approved continuance of the Fund’s sub-advisory agreement with Pier Capital, LLC (‘Pier Capital”), the Board was informed by Pier Capital, which is 100% employee owned, of an ownership transaction that was scheduled to occur in 2018 (the “Transaction”). This is to inform you that the Transaction was completed on September 1, 2018. As a result of the Transaction, non-voting shares (B Shares) were converted to voting shares (A Shares) and the firm’s internal equity ownership broadened from one to eight employee/equity partners, none of whom is a controlling person who owns more than 25% of Pier’s Class A Shares. The Transaction has not resulted in any changes to the terms and fees under the Fund’s sub-advisory agreement with Pier Capital or in the investment strategies and portfolio management of the Fund.
As always, please feel free to call us at1-888-3DUNHAM (338-6426) with any questions you may have.
Sincerely,
Jeffrey A. Dunham
President
DUNHAM FUNDS
Dunham Small Cap Growth Fund
October 31, 2018
Principal Executive Office:
10251 Vista Sorrento Parkway, Suite 200
San Diego, CA 92121
INFORMATION STATEMENT
This Information Statement is being provided to the shareholders of the Dunham Small Cap Growth Fund (the “Fund”), a series of Dunham Funds (the “Trust”). This Information Statement is in lieu of a proxy statement, pursuant to the terms of an exemptive order that the Trust received from the U.S. Securities and Exchange Commission (the “SEC”) on September 26, 2006 (the “Order”). The Order permits the Trust’s investment adviser, Dunham & Associates Investment Counsel, Inc. (“Dunham & Associates” or the “Adviser”) to hire new unaffiliated investment sub-advisers and to make changes to existing sub-advisory agreements with the approval of the Board of Trustees of the Trust (the “Board of Trustees” or the “Board”), without obtaining shareholder approval. Under the conditions of the Order, the Board must provide notice to shareholders within 90 days of appointing a new sub-adviser or implementing any material change in a sub-advisory agreement.
At a meeting held on December 19, 2017 (the “Meeting”), the trustees, including all the trustees who are not “interested persons,” as that term is defined in the Investment Company Act of 1940, as revised (the “1940 Act”) (the “Independent Trustees”), unanimously approved the renewal of the sub-advisory agreement with Pier Capital, LLC (“Pier Capital” or the “Sub-Adviser”). At the Meeting, the Board was informed by Pier Capital, which is 100% employee owned, of an ownership transaction that was scheduled to occur in 2018 (the “Transaction”) and this is to inform you that the Transaction was completed on September 1, 2018. As a result of the Transaction, non-voting shares (B Shares) were converted to voting shares (A Shares) and the firm’s internal equity ownership broadened from one to eight employee/equity partners, none of whom is a controlling person who owns more 25% of Pier Capital’s Class A Shares. The Transaction has not resulted in any changes to the terms and fees under the Fund’s sub-advisory agreement with Pier Capital or in the investment strategies and portfolio management of the Fund. The Transaction has not had and is not expected to have any immediate impact on Pier Capital’s management, which is expected to continue to conduct day-to-day business activities, including Portfolio management. Pier Capital believes that the Transaction offers the potential to enhance its future ability to deliver quality investment advisory services.
This Information Statement is being supplied to the Fund’s shareholders to fulfill the notice requirement of the Order, and a notice regarding the website availability of this Information Statement will be mailed on or about October 31, 2018 to the Fund’s shareholders of record as of October 1, 2018 (the “Record Date”). As of the Record Date, there were issued and outstanding 561,305.323 Class A shares, 168,092.286 Class C shares, and 1,623,090.343 Class N shares of the Fund. As there will be no vote taken, no shares are entitled to vote on the matters discussed in this Information Statement.
NO SHAREHOLDER VOTE WILL BE TAKEN WITH RESPECT TO THE MATTER DESCRIBED IN THIS INFORMATION STATEMENT. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
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I. BACKGROUND
The Trust is an open-end management investment company, commonly known as a “mutual fund,” and sells and redeems shares every day that it is open for business. The Trust was organized as a Delaware statutory trust by a Certificate of Trust filed November 28, 2007, with the Secretary of State of Delaware, and is registered with the SEC under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund represents a separate series of beneficial interest in the Trust having different investment objectives, investment restrictions, investment programs and a different investment sub-adviser than the other series of the Trust.
The Adviser is located at 10251 Vista Sorrento Parkway, Suite 200, San Diego, California, 92121. Pursuant to an investment management agreement with the Trust on behalf of the Fund (the “Advisory Agreement”), the Adviser, subject to the supervision of the Board and in conformity with the stated policies of the Fund, manages the operations of the Fund, reviews the performance of the sub-advisers and makes recommendations to the Trustees with respect to the retention and renewal of sub-advisory agreements. The Advisory Agreement was most recently renewed by the Board of Trustees, including a majority of the Independent Trustees, at a meeting held on December 19, 2017.
As indicated above, the Adviser has obtained the Order from the SEC that permits the Adviser to enter into sub-advisory agreements with unaffiliated sub-advisers without obtaining shareholder approval. The Trust may rely on the Order provided the Fund is managed by the Adviser and complies with the terms and conditions set forth in the application for the Order. The Order also permits the Adviser, subject to the approval of the Board, to replace sub-advisers or amend sub-advisory agreements without shareholder approval (except in the case of affiliated sub-advisers) whenever the Adviser and the Board believe such action will benefit the Fund and its shareholders.
At a meeting held on December 19, 2017 (the “Meeting”), the trustees, including all the trustees who are not “interested persons,” as that term is defined in the Investment Company Act of 1940, as revised (the “1940 Act”) (the “Independent Trustees”), unanimously approved the renewal of the sub-advisory agreement with Pier Capital (the “Sub-Advisory Agreement”). At the Meeting, the Board was informed by Pier Capital, which is 100% employee owned, of an ownership transaction that was scheduled to occur in 2018 (the “Transaction”). The Transaction was completed on September 1, 2018. As a result of the Transaction, non-voting shares (B Shares) were converted to voting shares (A Shares) and the firm’s internal equity ownership was broadened from one to eight employee/equity partners, none of whom is a controlling person who owns more 25% of Pier Capital’s Class A Shares. The Transaction has not resulted in any changes to the terms and fees under the Fund’s sub-advisory agreement with Pier Capital or in the investment strategies and portfolio management of the Fund. The Transaction has not had and is not expected to have any immediate impact on Pier Capital’s management, which is expected to continue to conduct day-to-day business activities, including Portfolio management. Pier Capital believes that the Transaction offers the potential to enhance its future ability to deliver quality investment advisory services.
II. THE SUB-ADVISORY AGREEMENT FOR THE FUND
Pier Capital, a privately owned company located at 600 Summer Street Suite 203, Stamford, Connecticut 06901, acts as the sub-adviser to the Fund pursuant to the Sub-Advisory Agreement. Mr. Alex Yakirevich is responsible for the day-to-day management of the Fund and has served the Fund as Portfolio Manager since December 2008.
At a meeting held on December 19, 2017, the Board, including all of the Independent Trustees, approved the continuance of the Sub-Advisory Agreement for an additional year. The Sub-Advisory Agreement is attached hereto as Appendix A. At the Meeting, the Board was informed by Pier Capital, which is 100% employee owned, of an ownership transaction that was scheduled to occur in 2018 (the “Transaction”). The Transaction was completed on September 1, 2018. As a result of the Transaction, non-voting shares (B Shares) were converted to voting shares (A Shares) and the firm’s internal equity ownership was broadened from one to eight employee/equity partners, none of whom is a controlling person who owns more 25% of Pier Capital’s Class A Shares. The Transaction has not resulted in any changes to the terms and fees under the Fund’s sub-advisory agreement with Pier or in the investment strategies and portfolio management of the Fund. The Transaction has not had and is not expected to have any immediate impact on Pier Capital’s management, which is expected to continue to conduct day-to-day business activities, including Portfolio management. Pier Capital believes that the Transaction offers the potential to enhance its future ability to deliver quality investment advisory services.
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Under the Sub-Advisory Agreement, Pier Capital receives a fulcrum fee from the Fund, with a base (or fulcrum) that varies based on Pier Capital’s performance as compared to the Fund’s benchmark index, the Russell 2000®Growth Index (the “ Index”) over a trailing 12-month period; provided, however that the performance adjustment to the Base Fee (as hereinafter defined) was calculated daily during the first twelve months based on the average net assets of the Fund from Fund inception to date, and the comparative performance of the Fund (based on Class N share performance) to the Index from Fund inception to date, on the day of calculation. Pier Capital is rewarded when performance exceeds the Index and is when performance is short of the Index. No adjustment is made to the sub-advisory fees if performance falls within the “null zone,” i.e., a range where performance differences are not meaningful.
The Fulcrum Fee is calculated using an annual base sub-advisory fee of a specified amount of the average daily net assets of the Fund (the “Base Fee”), adjusted by the Fund’s performance over a rolling twelve-month period (or, during the first twelve months, as described above), relative to the r Index. The Base Fee is 0.50%. The Fulcrum Fee could adjust the Base Fee up or down by as much as +/-0.50%, such that the sub-advisory fee could vary from 0.00% to 1.00%.
Pier Capital is compensated under the terms of the Sub-Advisory Agreement based on the Fund’s performance, and the Sub-Advisory Agreement includes a fulcrum fee arrangement as follows:
| Total Management Fee | Adviser’s Portion | Sub-Adviser’s Portion |
Dunham Small Cap Growth Fund | 0.65%-1.65% | 0.65% | 0.00% - 1.00% |
The sub-advisory fee is within the limits of the negotiable sub-advisory fee range of 0.00% - 1.30% pre-approved by the Fund’s shareholders on August 26, 2005.
For the fiscal year ended October 31, 2017, pursuant to the Fulcrum Fee arrangement, the Fund paid $103,052 in investment sub-advisory fees to Pier Capital.
The Sub-Advisory Agreement will continue in effect for successive annual periods provided such continuance is approved at least annually by (i) by the vote of a majority of those Trustees of the Trust who are not interested persons of any party to the Sub-Advisory Agreement, cast in person at a meeting called for the purpose of voting on such approval, and (2) by the Trustees of the Trust, or by the vote of a majority of the outstanding voting securities of the Fund (except as such vote may be unnecessary pursuant to relief granted by an exemptive order from the SEC). The Sub-Advisory Agreement terminates automatically in the event of its “assignment,” as defined under the 1940 Act. In addition, under the Sub-Advisory Agreement:
(a) Pier Capital shall indemnify the Adviser, the Trust and each series of the Trust, and their respective affiliates and controlling persons for any liability and expenses, including reasonable attorneys’ fees, which the Adviser, the Trust or a Series and their respective affiliates and controlling persons may sustain as a result of Pier Capital’s willful misfeasance, bad faith, gross negligence, reckless disregard of its duties hereunder or violation of applicable law, provided, however, that neither the Adviser, the Trust nor any Series shall be indemnified for any liability or expenses which may be sustained as a result of the breach by any one of them of the Sub-Advisory Agreement, willful misfeasance, bad faith, gross negligence, reckless disregard of its duties hereunder or violation of applicable law; and
(b) the Adviser shall indemnify Pier Capital, its affiliates and control persons (who are not shareholders of the Trust), for (i) any liability and expenses, including reasonable attorneys’ fees, howsoever arising from, or in connection with, the Adviser’s breach of the New Sub-Advisory Agreement or its representations and warranties herein, willful misfeasance, bad faith, gross negligence, reckless disregard of its duties hereunder or a violation of applicable law; provided, however, that Pier Capital shall not be indemnified for any liability or expenses which may be sustained as a result of Pier Capital’s willful misfeasance, bad faith, gross negligence, reckless disregard of its duties hereunder or violation of applicable law.
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Pier Capital, a Delaware limited liability company, is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940, as amended. Pier Capital is located at 600 Summer Street, Suite 203, Stamford, Connecticut 06901. Pier Capital had approximately $830 million in assets under management as of September 30, 2018.
Below is the name and principal occupation of each officer, director or controlling entity of Pier Capita. Unless otherwise noted, the business address of each person listed below is 600 Summer Street, Suite 203, Stamford, Connecticut 06901.
Name | Title and Principal Occupation |
Jan Parsons | Chairman |
Alexander Yakirevich | President and Chief Investment Officer |
Kathy Mienko | Chief Compliance Officer |
The fee table below illustrates the Fulcrum Fee methodology employed in the Sub-Advisory Agreement. The Performance Fee can adjust the Base Fee of 0.50% up or down by as much as +/- 0.50%, such that the sub-advisory fee can vary from the Minimum Fee of 0.00% to a Maximum Fee of 1.00%. In addition, the fee table illustrates a null zone of plus or minus 0.20%, and the sub-advisory fee moving (after clearing the null zone) at a rate of approximately 0.01% for each 0.04% of outperformance or underperformance of the Index.
ILLUSTRATIVE SUB-ADVISORY FEE RATES
Cumulative 12-Month Return | Performance Fee Adjustment | Total Fee Payable to Sub-Adviser | ||
Plus or Minus Return of Index | Plus or Minus | If Plus | If Minus | |
EVEN WITH INDEX | Base Fee | 0.60% | 0.60% | |
2.00% or more | 0.50% | 1.000% | 0.000% | |
1.90% | 0.48% | 0.975% | 0.025% | |
1.80% | 0.45% | 0.950% | 0.050% | |
1.70% | 0.43% | 0.925% | 0.075% | |
1.60% | 0.40% | 0.900% | 0.100% | |
1.50% | 0.38% | 0.875% | 0.125% | |
1.40% | 0.35% | 0.850% | 0.150% | |
1.30% | 0.33% | 0.825% | 0.175% | |
1.20% | 0.30% | 0.800% | 0.200% | |
1.10% | 0.28% | 0.775% | 0.225% | |
1.00% | 0.25% | 0.750% | 0.250% | |
0.90% | 0.23% | 0.725% | 0.275% | |
0.80% | 0.20% | 0.700% | 0.300% | |
0.70% | 0.18% | 0.675% | 0.325% | |
0.60% | 0.15% | 0.650% | 0.350% | |
0.50% | 0.13% | 0.625% | 0.375% | |
0.40% | 0.10% | 0.600% | 0.400% | |
0.30% | 0.07% | 0.575% | 0.425% | |
0.21% | 0.05% | 0.553% | 0.448% | |
0.20% | 0.00% | 0.500% | 0.500% | |
Even with Index | 0.00% | 0.500% | 0.500% | |
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FEE AND EXPENSE TABLE
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts on purchases of Class A shares if you and your family invest, or agree to invest in the future, at least $50,000 in the Fund.
Shareholder Fees (fees paid directly from your investment) | Class A | Class C | Class N |
Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) | 5.75% | None | None |
Maximum Deferred Sales Charge (Load) (as a % of the of the original purchase price for purchases of $1 million or more) | 0.75% | None | None |
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other Distributions |
None |
None |
None |
Redemption Fee | None | None | None |
Exchange Fee | None | None | None |
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) | |||
Management Fees | 0.94% | 0.94% | 0.94% |
Distribution and/or Service (12b-1) Fees | 0.25% | 1.00% | 0.00% |
Other Expenses | 0.42% | 0.42% | 0.42% |
Total Annual Fund Operating Expenses(1) | 1.61% | 2.36% | 1.36% |
(1) | Through a commission recapture arrangement a portion of the Fund’s expenses have been reduced. “Other Expenses” does not take into account this expense reduction and are therefore higher than the actual expenses of the Fund. Had the expense reduction been taken into account “Total Annual Fund Operating Expenses” for each class would have been as follows: Class A – 1.60%, Class C – 2.35% and Class N – 1.35%. |
Example:This Example in intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based upon these assumptions your costs would be:
Class | 1 Year | 3 Years | 5 Years | 10 Years |
Class A | $729 | $1,054 | $1,401 | $2,376 |
Class C | $239 | $736 | $1,260 | $2,696 |
Class N | $138 | ;$431 | $745 | $1,635 |
BOARD CONSIDERATIONS IN APPROVING CONTINUANCE OF THE SUB-ADVISORY AGREEMENT
On December 19, 2017, the Board of Trustees (the “Board”) of Dunham Funds (the “Trust”), a Delaware business trust, met to consider, among other things, the renewal of the Sub-advisory Agreement.
The Independent Trustees had requested and reviewed materials the Adviser and the Sub-Adviser provided prior to and during the Meeting and had reviewed a memorandum from Fund counsel that reviewed their fiduciary duties pertaining to renewal of investment management agreement and sub-advisory agreements (collectively, “Advisory Agreements”) and the factors they should consider in evaluating Advisory agreements.
Among other information, the Adviser and the Sub-Adviser provided information to assist the Independent Trustees in assessing the nature, extent and quality of services provided, information comparing the investment performance, advisory fees and operating expense ratio of the Fund to other funds, information about estimated
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profitability and/or financial condition and compliance and regulatory matters. The Board determined that, given the totality of the information provided with respect to the Sub-Advisory Agreement, the Board had received sufficient information to approve the Sub-Advisory Agreement.
The Independent Trustees and Fund counsel met in executive sessions to consider, among other renewals, the renewal of the Sub-Advisory Agreement. The Board also received information about the Fund throughout the year in connection with the regular quarterly Board meetings from the Adviser and the Sub-Adviser.
Based upon its review, the Board concluded that it was in the best interests of the Fund that the Sub-Advisory Agreement be renewed. In considering the renewal of the Sub-Advisory Agreement, the Board did not identify any single factor or group of factors as all-important or controlling, and considered a variety of factors in its analysis, including those discussed below. The Board did not allot a particular weight to any one factor or group of factors.
Nature, Extent and Quality of Services. In considering the renewal of the Sub-Advisory Agreement between the Fund and the Sub-Adviser, the Board considered the nature, extent and quality of services the Sub-Adviser provided under the Sub-Advisory Agreement. The Board reviewed the services the Sub-Adviser provided, the background of the investment professionals servicing the Fund, and the Sub-Adviser’s reputation, resources and investment approach. The Board also reviewed information provided regarding the structure of portfolio manager compensation, trading and brokerage practices, soft dollar usage, risk management and compliance matters.
Performance. The Board reviewed the Fund’s total return compared to the total returns of the Peer Group and the funds included in the Morningstar category. The Board also noted:
· | Dunham Small Cap Growth Fund: The Board noted that Pier Capital, has served as the Fund’s sub-adviser since December 10, 2004. The Board reviewed the Fund’s total return compared to the total returns of the Peer Group and the funds included in the Morningstar category. The Board noted that the Fund’s total return was higher than or in-line with the Peer Group, the Morningstar category and the return of the benchmark index for the one-year period, five-year period, ten-year period, and since Pier commenced serving as sub-adviser to the Fund. The Board concluded that the services Pier provided were satisfactory. |
· | Sub-Advisory Fees and Economies of Scale. The Board considered the Fund’s sub-advisory fee schedule and noted the fees charged to comparable portfolios, if any, that the sub-adviser managed. The Board considered that the fee schedule was negotiated between the Adviser and Sub-Adviser, an unaffiliated third party. |
· | The Board considered the base fee paid to the Sub-Adviser when the performance of the Fund is equal to that of a specific index plus or minus a “null” zone. The Board also reviewed the operation of the performance fee and the impact on fees and expenses based on various performance results. They discussed the unique nature of the performance fee, which results in higher fees when the sub-adviser delivers results, and how performance fees should be integrated into their analysis. |
· | The Board confirmed its belief that performance fees help ensure that any significant fee adjustments are attributable to the Sub-Adviser’s skill, rather than to random performance fluctuations, and the performance fee aligns the Sub-Adviser’s interest with those of Fund shareholders. The Board concluded that the Sub-Adviser’s fees were in a reasonable range. |
· | The Board reviewed the relevance of economies of scale in the context of a sub-adviser that receives a performance based fee. The Board agreed that the Adviser had successfully negotiated a favorable base fee with the Sub-Adviser, and that reductions based on asset growth, when coupled with the possibility of fee reductions based on performance, could hinder the Adviser’s ability to attract top sub-advisory talent. The Board agreed that pursuing breakpoints with the Sub-Adviser would not be in the best interests of Fund shareholders at this time. |
· | Profitability and Fallout Benefits. The Board considered information provided regarding the Sub-Adviser’s estimated profitability from providing sub-advisory services to the Fund. The Board noted that the sub-advisory fee schedule was negotiated between the Adviser and the Sub-Adviser, an unaffiliated third party. The Board reviewed materials provided as to any additional benefits the Sub-Adviser receives. |
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Conclusion. Based on all of the information considered and the conclusions reached, the Board determined that the continuation of the Sub-Advisory Agreement was in the best interests of the Fund.
III. OTHER MATTERS
The following table provides information about shareholders of record of the Fund as ofOctober 1, 2018 that own more than 5% of a share class.
Class | Name & Address | Percent of Class |
N | Dunham Trust Company/Client Omnibus Class N-Reinvest 241 Ridge Street STE 100 Reno, NV 89501-2055 | 83.96%
|
C | Dunham Trust Company/Client Omnibus Class C-Reinvest 241 Ridge St. STE 100 Reno, NV 89501 | 37.92% |
As of October 1, 2018, the Trustees and officers as a group owned less than 1% of the Fund’s outstanding shares.
The Trust will furnish, without charge, a copy of the Trust’s annual report for the fiscal year ended October 31, 2017 and semi-annual report for the period ended April 30, 2018, to a shareholder upon request. To obtain the Trust’s annual report, please contact the Trust by calling 1-888-3DUNHAM (or by writing to Dunham Funds, c/o Gemini Fund Services, LLC, 17605 Wright Street, Suite 2, Omaha, NE 68130).
The Trust is not required to hold annual meetings of shareholders, and therefore it cannot be determined when the next meeting of shareholders will be held. Shareholder proposals to be presented at any future meeting of shareholders of the Trust must be received by the Trust within a reasonable time before the Trust’s solicitation of proxies for that meeting in order for such proposals to be considered for inclusion in the proxy materials related to that meeting. The cost of the preparation, printing and distribution of this Information Statement is an expense of the Sub-Adviser.
Principal Underwriter, Administrator and Custodian. Dunham & Associates also serves as the Distributor for the shares of the Fund pursuant to a Distribution Agreement between the Trust, on behalf of the Fund, and Dunham & Associates. Gemini Fund Services, LLC (“Gemini”) provides administrative and fund accounting services to the Fund and acts as transfer, dividend disbursing and shareholder servicing agent to the Fund. Gemini’s administrative and fund accounting services are located at 80 Arkay Drive, Suite 110, Hauppauge, New York 11788 and Gemini’s transfer agency operations are located at 17605 Wright Street, Suite 2, Omaha, NE 68130. US Bank, N.A., which has its principal place of business at 425 Walnut Street, Cincinnati, OH 45202, serves as the Fund's custodian.
Delivery of Documents to Shareholders Sharing an Address. Only one Information Statement is being delivered to multiple shareholders sharing an address unless the Trust has received contrary instructions from one or more of the shareholders. Upon written or oral request, the Trust will promptly deliver a separate copy of this Information Statement to a shareholder at a shared address to which a single copy of the document was delivered. Contact the Trust by calling 1-888-3DUNHAM (338-6426) or writing to Dunham Funds, c/o Gemini Fund Services, LLC, 17605 Wright Street, Suite 2, Omaha, NE 68130. Shareholders at shared addresses can also contact the Trust to indicate their preference regarding receiving multiple or single copies annual or semi-annual reports, information statements or notices of internet availability of proxy materials at their shared address.
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APPENDIX A
THEDUNHAM FUNDS
SUB-ADVISORYAGREEMENT
AGREEMENTamongDUNHAM& ASSOCIATES INVESTMENT COUNSEL, INC., a California corporation (the "Adviser"),DUNHAMFUNDS,aDelawarestatutorytrust(the"Trust") onbehalfofitsseriesDunhamSmall Cap Growth Fund(the"Fund"),and PIER CAPITAL,LLC,aDelaware Limited LiabilityCorporation (the"Sub-Adviser")(each a"Party,"andtogether,the"Parties").
WHEREAS,theAdviser andtheSub-Adviser areregisteredwiththeSecurities and Exchange Commission("SEC") asinvestment advisers under the InvestmentAdvisers Act of1940,as amended (the"AdvisersAct") and engagein the businessofproviding investment managementservices; and
WHEREAS,theAdviserhasenteredintoanInvestmentAdvisory Agreement datedJanuary15,2008(the "Advisory Agreement") with the Trust, aDelaware businesstrust registeredwith the SEC as an open-endmanagement investmentcompanyunder the InvestmentCompanyActof1940,as amended(the"1940 Act"),currently consisting ofseveralseparateseriesofshares(each a“Series"), eachhaving itsowninvestmentobjectivesand policiesand whichisauthorizedtocreatemoreSeries, and eachofwhichmay be issued in oneormore classes;and
WHEREAS,theAdvisory Agreementpermitsthe Adviser,subject to thesupervision anddirectionoftheTrust's Board of Trustees,to delegate certain ofits duties under theAdvisory Agreement to otherinvestmentadvisers,subjectto therequirements ofthe 1940Act;and
WHEREAS,the Adviserdesires toretainSub-Adviser to assistit inthe provision ofacontinuous investmentprogramforthatportion oftheassets ofoneormoreoftheTrust'sSerieslisted on ExhibitAhereto(as thesamemaybeamended from timetotimebymutualwrittenconsentoftheParties) (each, a"Fund"; collectively,the"Funds"),whichassetstheAdvisermayfrom time to timeassignto theSub-Adviser (the "Sub-Adviser Assets"), andtheSub-Adviseriswilling to rendersuchservices subject to thetermsand conditionssetforthin this Agreement.
NOW, THEREFORE,inconsideration ofmutualcovenantsrecited below,theParties agree andpromiseas follows:
1. | Appointment as Sub-Adviser. The Adviserherebyretainsthe Sub-Adviser to act asinvestmentadviser for andto managethe Sub-Adviser Assets,subjectto thesupervisionof the Adviser and the BoardofTrustees of the Trust ("Board")andsubjecttotheterms ofthis Agreement; andthe Sub-Adviserherebyacceptssuchemployment. Insuch capacity,theSub-Advisershallberesponsiblefortheinvestment managementoftheSub-AdviserAssets.The Sub-Adviseragreestoexercisethesameskillandcare in performing itsservicesunderthisAgreement astheSubAdviserexercisesinperformingsimilarservices with respectto other fiduciary accountsforwhichtheSub-Adviser hasinvestmentresponsibilities. |
2. | Duties of Sub-Adviser. |
(a)Investments.The Sub-Adviserishereby authorized and directed andherebyagrees, subject to thestatedinvestment policies andrestrictionsof each Fund assetforthinsuchFund'sprospectusand statement of additionalinformationas currentlyineffectand assupplementedor amendedfromtime to time (collectivelyreferred toasthe"Prospectus")andsubjectto the directions of the Adviser and the Trust's Board of Trustees,asmay be amended from time to time,to purchase,holdand sellinvestmentsfortheSub-Adviser Assets andto monitoron a continuousbasis the performanceoftheSub-Adviser Assets.Inproviding theseservices,theSub-Adviser willconduct a continualprogram ofinvestment, evaluationand,if appropriate,sale andreinvestmentoftheSub-Adviser Assets.TheAdviser agreesto provide theSub-Adviserinformation concerningaFund,its assetsavailableor to becomeavailable forinvestment,and generally asto theconditions of a Fund's ortheTrust's affairs.
A-1 |
(b) Compliance with ApplicableLaws andGoverningDocuments.In theperformance ofits dutiesand obligationsunder thisAgreement,theSub-Adviser shallwithrespect toSub-Adviser Assets,actinconformity withthe Trust'sDeclarationof Trust andBy-Laws,the Prospectus(es),and withthe instructions and directions received inwritingfrom theAdviser ortheBoard and willconformtoand comply withthe requirementsof the 1940Act,theAdvisers Act,theInternalRevenueCode of1986,asamended(the "Code"), and allother applicablefederaland statelaws andregulations.The Adviser willprovidetheSub-Adviser with acopy of the minutes of the meetingsoftheBoard to theextenttheymayaffect a Fundor the dutiesoftheSub-Adviser, and withthe copiesof anyfinancialstatementsor reports made by aFundto itsshareholders, and anyfurther materialsorinformationwhichtheSub-Advisermayreasonablyrequest toenableit to perform its functions under thisAgreement.
The Adviser herebyagreesthat itwillcausetheTrusttoagree that no sharesofany Fund whose assets consist at any time of Sub-Adviser Assets willbemarketedorknowinglysoldtoanyplanestablishedorwhichistax-exempt underSection457 ofthe Code (GovernmentalPlans).
TheAdviserwillprovide theSub-Adviserwith reasonable(30days)advancenotice,inwriting, of any changeina Fund'sinvestmentobjectives,policiesandrestrictionsas statedin theProspectus,andtheSub-Advisershall,in the performanceofits dutiesand obligationsunder thisAgreement,managetheSub-Adviser Assets consistent with such changes,providedthe Sub- Adviserhasreceivedsuch prior noticeoftheeffectivenessofsuchchanges from theTrustor the Adviser. Inaddition tosuch notice,theAdvisershallprovide tothe Sub-Adviser a copyof a modifiedProspectus reflectingsuchchanges.TheSub-Adviserwillatalltimescomplywith alldisclosurerequirementsunderallapplicable federaland statelawsandregulationsrelating to theTrust or a Fund withrespecttotheSub-Adviser Assets,andastotheaccuracy ofmaterialinformationfurnished inwritingbytheSub-AdvisertotheTrust,to the Fund ortotheAdviserspecificallyforinclusion in the Prospectus.
The Sub-Adviser herebyagreestoprovidetothe Adviserina timelymanner,inwriting,such information relating to the Sub-Adviseranditsrelationship to,and actions for,aFund as maybe requiredtobecontainedintheProspectusorinthe Trust's registrationstatementon FormN-lA,asthesame maybeamended fromtimeto time ("Registration Statement").
TheAdvisershallprovide theSub-Adviser withcomplete copiesofeachRegistrationStatement,applicationforexemptiverelief,request for no-action reliefor anyorderorresponsethereaftermadewiththe SEC or theInternalRevenueService with respect totheTrust,Sub-Adviser Assets,oranyFund thathas Sub-AdviserAssets,promptlyafter eachfilingordocumentismadeorsubmitted.
(c) Voting ofProxies. TheSub-Advisershall havethepower tovote,either in personorbyproxy,allsecuritiesinwhich theSub-Adviser Assetsmaybe investedfromtime to time,andshall not berequiredtoseekinstructionsfromtheAdviser,theTrust or a Fund. Attherequestofthe Trust,the Sub-Advisershall provideitsrecommendationsasto thevotingofsuch proxies.Ifboth theSub-Adviserandanother entitymanaging assetsof a Fundhaveinvested in thesamesecurity,theSub-Adviser andsuchother entitywilleach have thepowertovotethose sharesofsuchsecurityoverwhichit hasinvestmentdiscretion. The Sub-Adviser agreestoprovidesuchassistance asmaybenecessaryorappropriatetoenabletheAdviser and the Trustto prepareandtimelyfile with theSEC anyrequireddisclosures of Sub-Adviser'sproxyvoting policiesand proceduresand Sub-Adviser's votingrecordwith respect toSub-Adviser Assets.
(d) Agent.Subjectto anyother writteninstructionsoftheAdviser ortheTrust,theSub-Adviseris hereby appointed theAdviser's andtheTrust's agentandattorney-in-fact forthelimitedpurposes ofexecutingaccount documentation,agreements,contracts and otherdocumentsastheSub-Advisershall berequested bybrokers,dealers,counterparties and otherpersonsinconnectionwith itsmanagementoftheSub-Adviser Assets,provided that the Sub-Adviser's actionsinexecutingsuch documents shallcomplywithfederal andstaterulesandregulations,this Agreement,and the Trust'sgoverningdocuments. The Sub-Adviser agreestoprovidethe AdviserandtheTrustwithcopiesof anysuchagreementsintendedto beexecutedonbehalf oftheAdviser ortheTrust,priorto the executionthereof.
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(e) Brokerage.TheSub-Adviserwillplaceorderspursuantto the Sub-Adviser'sinvestment determinationsfor a Fund eitherdirectly withtheissuerorwithanybrokerordealer including any affiliatedbroker-dealerof the Sub-Adviser; provided,however,thatinexecutingportfolio transactionsandselectingbrokersordealers,the Sub-Adviserwill useitsbesteffortstoseek onbehalf ofaFundthe bestoverall executionavailable.Inassessingthebestoverall termsavailable for anytransaction,theSub-Advisershallconsiderallfactorsthatitdeems relevant,includingthebreadthofthemarketin the security,theprice of the security,thefinancialconditionandexecutioncapabilityofthebrokerordealer,andthe reasonablenessofthecommission,ifany,bothforthe specifictransactionandon a continuingbasis.Inevaluating thebestoverall terms available,and inselecting thebroker-dealertoexecute aparticulartransactionthe Sub-Advisermayalsoconsider thebrokerage andresearchservices(asthoseterms aredefinedinSection28(e)oftheSecurities ExchangeAct of1934,asamended) provided toa Fundand/orotheraccounts overwhichtheSub-Advisermayexerciseinvestment discretion.The Sub-Adviserisauthorized,subjecttothe approvaloftheBoard, to pay toabroker or dealerwhoprovides suchbrokerage andresearchservices a commissionforexecuting aportfoliotransactionforanyoftheFundsthat isinexcess oftheamount of commissionanotherbrokerordealerwouldhave charged foreffectingthat transactionif,butonlyif,the Sub-Adviserdeterminesingood faith thatsuchcommissionwasreasonablein relationto thevalue ofthe brokerage andresearchservicesprovidedbysuch brokerordealerviewedintermsofthat particular transactionor intermsoftheoverall responsibilitiesofthe Sub-Adviser toa Fund.
(f) SecuritiesTransactions.In noinstance,however,willanyFund's portfoliosecunt1esbepurchased from or soldto theAdviser,the Sub-Adviser,the Trust's principalunderwriter,or anyaffiliated personofeitherthe Trust,the Adviser,the Sub-Adviser orthe Trust's principalunderwriter,acting asprincipalinthetransaction,exceptto the extent permitted bythe SECand the1940 Act.
The Sub-Adviser,includingits AccessPersons (asdefined insubsection(e) of Rule17j-1 under the1940 Act),agreesto observe andcomply with Rule17j-1and itsCode ofEthics (whichshall complyinallmaterial respects withRule 17j-l), asthe same maybeamended fromtimeto time.Onatleastan annualbasis,theSub-Adviserwillcomplywiththe reporting requirements of Rule17j-1,whichmayincludeeither(i) certifyingto theAdviserthat theSub-AdviseranditsAccess Personshavecomplied withtheSub-Adviser'sCodeof Ethicswith respecttotheSub-Adviser Assets,or(ii)identifyinganyviolationswhich have occurredwith respect to theSub-AdviserAssetsand(iii)ce11ifyingthat it hasadoptedproceduresreasonablynecessaryto preventAccessPersonsfromviolatingtheSub-Adviser's CodeofEthics.TheSub-AdviserwillalsosubmititsCode of Ethicsforitsinitialapprovalbythe Boardof Trustees andsubsequentlywithinsixmonthsofanymaterialchange of thereto.
The Sub-Adviseragrees to observeand complywithRule 206(4)-7 oftheAdvisers Act andRule 38a-lofthe InvestmentCompany Act, asthesamemaybeamended from time totime.Onatleastanannual basis,theSub-Adviser will complywith thereviewrequirementsofRule 206(4)-7, whichmayincludeeither(i)certifyingtothe Adviser that theSub-Adviserhascompliedwith theit'sowncompliancepoliciesandprocedures,(ii)identifyinganyviolations which haveoccurredwith respect to theSub-Adviser's compliancepoliciesandproceduresand (iii)certifyingthatithasadopted or amendedthe policiesandprocedurestopreventfutureviolationsofthe Sub-Adviser'scompliancepoliciesand procedures.TheSub-Adviserwillalso submititscompliancepoliciesandproceduresforitsinitialapprovalbytheBoardandsubsequently withinsixmonthsofanymaterialchange ofthereto.
(g) BooksandRecords.The Sub-Adviser shall maintainseparatedetailed records of allmatterspertaining to theSub-Adviser Assets,including,withoutlimitation,brokerageand otherrecordsofallsecuritiestransactions.Anyrecords required to bemaintained and preserved pursuanttotheprovisionsofRule 31a-1andRule 31a-2 promulgatedunder the1940Act whicharepreparedormaintainedbytheSub-AdviseronbehalfoftheTrust aretheproperty oftheTrustandwillbe surrendered promptlytotheTrustonrequest.The Sub-Adviser furtheragreestopreserve forthe periodsprescribedinRule 3la-2under the1940 Act therecordsrequiredto bemaintained underRule 31a-1under the1940 Act.
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(h) InformationConcerning Sub-AdviserAssetsand theSub-Adviser.From timeto timeas the Adviser,andanyconsultantsdesignatedbythe Adviser,orthe Trustmayrequest,the Sub-Adviserwill furnishtherequestingparty reports on portfoliotransactions andreportsonSub-Adviser Assetsheldin theportfolio,allinsuch detailastheAdviser,its consultant(s)orthe Trustmayreasonablyrequest.TheSub-Adviser alsowill inform theAdviserinatimelymannerofmaterialchangesin portfolio managers responsibleforSub-AdviserAssets,any changesin the ownershipor managementoftheSub-Adviser, or ofmaterialchanges inthecontrol ofthe Sub-Adviser.Upon reasonablerequest, the Sub-Adviserwill make availableitsofficersandemployeestomeetwith the Trust'sBoard to reviewthe Sub-AdviserAssets.
TheSub-Adviser also willprovide suchinformationor performsuchadditionalactsas arecustomarilyperformedbya Sub-Adviserandmayberequiredfor a Fund or the Adviser tocomplywith theirrespectiveobligationsunderapplicablelaws,including, without limitation,the Code,the 1940Act,theAdvisers Act,theSecuritiesActof1933, asamended (the"SecuritiesAct") andanyfederalorstatesecuritieslaws,and anyruleorregulationthereunder.
(i) Custody Arrangements.TheSub-Adviser shallon eachbusiness dayprovide theAdviser,its consultant(s),and theTrust's custodian suchinformationastheAdviser, consultant(s)andthe Trust's custodianmay reasonablyrequest relating toalltransactionsconcerningtheSub-Adviser Assets.
(j) Historical Performance Information.To the extent agreeduponbytheParties,theSub-Adviser willprovide the Trustwithhistoricalperformanceinformationonsimilarlymanaged investmentcompanies or for other accounts tobe included in theProspectus orforany other usespermitted byapplicablelaw.
3. IndependentContractor.Inthe performance of itsduties hereunder,theSub-Adviser isandshallbean independentcontractor andunlessotherwise expresslyprovidedhereinor otherwise authorizedinwriting,shallhave noauthority to act for or represent a Fund,the Trustor the Adviserinany way or otherwisebe deemedan agentof a Fund,the Trustorthe Adviser.
4. Expenses.DuringthetermofthisAgreement,Sub-Adviser willpayallexpensesincurred byit inconnection withits activitiesunderthis Agreement otherthan thecosts of securities,commoditiesandotherinvestments (includingbrokeragecommissions and othertransactioncharges,ifany) purchased or otherwise acquired,or soldorotherwisedisposedof for a Fund. The Sub-Adviser shall, atitssole expense, employor associateitselfwith such persons asitbelievesto be particularlyfittedto assist it in theexecution ofits duties under thisAgreement. TheTrustortheAdviser, as the casemay be,shallreimburse theSub-Adviserforany expenses asmay be reasonablyincurredbytheSub-Adviser, attherequest of and on behalf of a Fund or the Adviser. The Sub-Advisershallkeep and supplyto theTrust andtheAdviser reasonable recordsof allsuch expenses.
5. Compensation. For theservicesprovided andtheexpenses assumed withrespect toa Fund pursuantto thisAgreement, the Sub-Adviserwillbeentitled to the feelistedfor the Fund(s) on Exhibit A. Such feeswillbecomputed dailyandpayableinarrearsnolater thantheseventh(7th) business day following the end of each month,fromtheTrust onbehalf of the Fund(s).
IfthisAgreementisterminated priortotheendofanycalendarmonth,thefeeshall beproratedfor theportion of any monthinwhichthisAgreementisineffectaccording totheproportion whichthenumber of calendar days, during whichthisAgreementisineffect,bearsto thenumber of calendardays inthemonth, andshallbe payablewithin10 days after the date of ter mination.
6. Representations and Warranties of the Sub-Adviser. The Sub-Adviser representsandwarrantstothe Adviserandthe Trustasfollows:
(a) The Sub-Adviserisandwill remainregisteredas anInvestmentAdviser under theAdvisersActto theextentrequired thereby;
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(b) The Sub-Adviser isaLimited LiabilityCorporationdulyorganized andvalidlyexistingunder thelawsof thestateof Delaware,with thepower to own and possessitsassetsandcarryonitsbusiness asitisnow being conducted;
(c) Theexecution,deliveryand performance bythe Sub-Adviserofthis Agreement arewithin theSub-Adviser'spowersandhavebeen duly authorizedbyallnecessaryaction on the part of itsBoard ofDirectorsandno action by or in respectof,orfilingwith,anygovernmentalbody,agencyor officialisrequiredonthe partof theSub-Adviser forthe execution,delivery andperformancebytheSub-Adviserofthis Agreement,andthe execution,delivery andperformancebytheSub-Adviserof thisAgreementdo notcontraveneorconstituteadefault under(i)anyprovisionof applicablelaw,ruleorregulation,(ii) theSub-Adviser'sgoverning instruments,or (iii) anyagreement,judgment,injunction,order,decree or otherinstrument bindingupon theSub-Adviser;and
(d) The FormADVoftheSub-Adviserpreviouslyprovided to theAdviser (a copy ofwhich is attachedas ExhibitBtothis Agreement)isa true andcomplete copyoftheform ascurrentlyfiledwith theSEC andthe informationcontainedtherein isaccurate andcompleteinallmaterialrespectsanddoesnotomit to state anymaterialfactnecessaryinorderto make thestatementsmade,in lightofthecircumstancesunderwhichtheyaremade,not misleading.The Sub-AdviserwillpromptlyprovidetheAdviserandtheTrust with a complete copy of allsubsequentamendmentsto itsFormADV.
7. RepresentationsandWarrantiesofthe Adviser.TheAdviser representsandwarrantsto the Sub-Adviserandthe Trustasfollows:
(a) | The Adviserisandwill remainregistered as aninvestment adviserundertheAdvisersActto theextent required thereby; |
(b) TheAdviser isa corporationdulyorganized andvalidly existing under the lawsoftheState ofCalifornia withthepowertoownandpossessits assetsandcarryonitsbusiness asit isnowbeingconducted;
(c) Theexecution,delivery andperformanceby the Adviserof thisAgreementare withintheAdviser'spowers andhavebeenduly authorized byall necessaryaction onthepart ofitsBoardofDirectors,and no actionbyorinrespect of, orfiling with,anygovernmentalbody,agency orofficial isrequired on thepart ofthe Adviserfortheexecution,delivery andperformancebythe Adviserof thisAgreement,andthe execution,deliveryand performancebythe Adviserofthis Agreement donotcontraveneor constituteadefault under (i)anyprovisionof applicablelaw,ruleor regulation,(ii)theAdviser'sgoverninginstruments,or (iii) anyagreement,judgment,injunction,order,decree or otherinstrument bindinguponthe Adviser;
(d) TheFormADVofthe Adviseras providedto theSub-Adviserisatrueand complete copy oftheform as currentlyfiledwith the SEC andtheinformation containedthereinis accurate andcompleteinallmaterialrespectsanddoesnotomittostateanymaterialfactnecessaryinordertomakethe statementsmade,in lightof the circumstancesunder whichtheyweremade,not misleading;
(e) TheAdvisershallprovide to theSub-AdviseracompletecopyofeachamendmenttoitsFormADV.
(f)TheAdviser confirmsthatnotless than forty-eighthours priortoenteringinto thisAgreement,the Sub-Adviser hasdelivered totheAdvisera document designated as "Form ADV-PartII(a copyofwhich isattached as ExhibitB)".The Sub-Adviserhas advised theAdviserthatit hasmadesuchdeliverypursuanttotherequirementof federal lawthat theSub-Adviserdelivera writtendisclosure statementofthisnatureto theAdviserprior to its executionofthisAgreement.
The Adviseracknowledgesthat it hasreviewedandunderstood the disclosureinsuchForm ADV-PartII;and
(g) The Adviser andtheTrusthavedulyenteredinto theAdvisory Agreementpursuant towhich theTrustauthorized theAdvisertoenterintothis Agreement.
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8. Use of Sub-Adviser's Nameand Logo.During thetermofthisAgreement,theAdviser andtheTrustshall havethe non-exclusiveandnon-transferable right to useSub-Adviser'snameandlogoinallmaterialsrelating to theFunds,includingallprospectuses,proxy statements,reports toshareholders, salesliterature and other writtenmaterialspreparedfordistribution toshareholders of theSeriesor the public.Neither theFundnor theAdvisershall usetheSub-Adviser'snameorlogoin promotionalorsalesrelatedmaterialsprepared byoronbehalfoftheAdviseror the Fund,withoutsubmission to the Sub-Adviser.Upontermination of thisAgreement,theFundandtheAdvisershallforthwithceaseto use suchnames(andlogo), except asprovided for herein.
9. SurvivalofRepresentationsandWarranties;DutytoUpdateInformation.Allrepresentationsand warrantiesmade bytheSub-Adviser and theAdviser pursuant toSections 6 and7,respectively, shallsurviveforthedurationofthisAgreement andthe partiesheretoshallpromptlynotify eachotherinwritinguponbecomingawarethatany oftheforegoing representationsand warranties arenolonger true.
10. | Liability andIndemnification. |
(a) Liability. ThedutiesoftheSub-Advisershallbeconfinedtothose expresslysetforthherein,with respect to theSub-AdviserAssets.The Sub-Advisershall notbeliablefor anylossarisingoutof anyportfolio investmentordisposition hereunder, exceptalossresultingfromwillful misfeasance,bad faith or grossnegligencein theperformanceofitsduties,orbyreasonofrecklessdisregardofitsobligationsanddutieshereunder,exceptasmayotherwise be providedunder provisionsof applicable statelaw whichcannotbewaived ormodified hereby.
(b) Indemnification.TheSub-AdvisershallindemnifytheAdviser,theTrust and each Fund,and their respectiveaffiliatesand controlling persons foranyliabilityandexpenses,includingreasonableattorneys' fees,which theAdviser, the Trust or aFundandtheirrespective affiliatesandcontrollingpersonsmay sustainas aresultoftheSub-Adviser'swillful misfeasance,badfaith,grossnegligence,recklessdisregardofitsdutieshereunderorviolationof applicablelaw. Notwithstandingany other provisionin thisAgreement,theSub-Adviser,inaddition to itsotherindemnificationobligations hereunder,will indemnifythe Adviser,the Trustandeach Fund,andtheirrespective affiliatesand controlling persons foranyliabilityandexpenses,includingreasonable attorneys' fees,towhichtheymaybe subjected as aresultof their relianceuponanduse ofthehistoricalperformance calculationsprovided bytheSub-Adviserconcerningthe Sub- Adviser's composite accountdata orhistoricalperformanceinformationonsimilarlymanagedinvestmentcompaniesor accounts, except that theAdviser,theTrust andeachFund andtheir respectiveaffiliated personsandcontrolpersons shallnot be indemnifiedfor aloss or expenseresultingfromtheirnegligence or willfulmisconductinusingsuchnumbers.
The Advisershall indemnifytheSub-Adviser,itsaffiliates anditscontrolpersons(who arenotshareholdersoftheTrust),foranyliabilityand expenses,includingreasonable attorneys' fees,howsoeverarisingfrom,orinconnectionwith,the Adviser'sbreach of this Agreement oritsrepresentationsand warrantieshereinor aviolationofapplicablelaw;provided,however,thattheSub-Advisershall notbeindemnifiedfor anyliabilityorexpenses which maybesustainedasa result of theSub-Adviser'swillful misfeasance,badfaith,grossnegligence,recklessdisregardofitsdutieshereunderorviolationofapplicablelaw.
11.Durationand Termination.
(a) Duration.This Agreement,unless soonerterminated as providedherein,shallremainineffectfromthedateof executionor,iflater,thedatetheinitialcapital toa Fund ofthe Trust isfirstprovided(the"EffectiveDate."),untiltwoyearsfrom theEffectiveDate, and thereafter,for periods ofone yearsolongassuchcontinuance thereafteris specifically approved atleastannually(1)bythevoteofamajorityofthose Trustees oftheTrustwhoarenot interestedpersons of anyPartytothis Agreement,cast inperson at a meetingcalledfor the purposeofvotingonsuchapproval, and(2)bythe Trusteesofthe Trust,orbythe vote of amajorityoftheoutstanding votingsecuritiesof eachFund(except assuchvotemaybeunnecessarypursuantto relief grantedbyanexemptiveorderfrom theSEC). Theforegoingrequirement thatcontinuance of this Agreement be "specificallyapproved atleastannually"shallbeconstrued ina mannerconsistentwith the1940Actandtherulesandregulationsthereunder.
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(b) Termination. ThisAgreement maybeterminatedastoanyFundat anytime, without thepayment ofanypenaltyby: (1)thevote of a majorityoftheTrustees oftheTrust orbythe Adviser, ineachcase, onnot lessthan30 daysnor morethan 60dayswritten notice totheSub-Adviser,or(2)byanyParty immediatelyuponwritten noticetotheotherPartyin theeventof abreachofanyprovisionto this Agreement bysuchotherParty,or(3)by the Sub-Adviser at anytimewithoutthepaymentof anypenalty,onnotlessthan30daysnormorethan60dayswrittennoticetothe Adviserand theTrust.
This Agreementshallnotbe assigned andshall terminate automaticallyinthe eventofitsassignment,exceptas providedotherwiseby anyrule,exemptiverelief, orno-actionletterprovidedorpursuanttothe1940 Act,orupon the terminationofthe Advisory Agreement. In the event thatthereis aproposedchangeincontrolof the Sub-Adviserwhichwouldactto terminatethisAgreement,if a vote ofshareholderstoapprove continuation ofthisAgreement isatthat timedeemedbycounseltotheTrusttoberequiredbythe1940 Actoranyruleor regulationthereunder,Sub-Adviseragreestoassume all reasonablecostsassociatedwithsoliciting shareholders oftheappropriate Fund(s) oftheTrust,to approve continuationofthisAgreement.Suchexpensesincludethecosts ofpreparationand mailing of aproxy statement,and ofsolicitingproxies.
ThisAgreementshallextendto and bindthesuccessorsandpermittedassigns ofthe Parties.
12. Amendment.ThisAgreementmaybe amendedbymutualwritten consentofthe Parties,providedthat the terms ofanymaterialamendment shall beapprovedby:(a) the Trust's Board of Trustees and (b)thevote of amajorityofthose Trustees ofthe Trustwho arenotinterestedpersonsofanyPartytothisAgreementcastin personat ameetingcalledforthepurposeofvoting onsuchapproval,ifsuchapprovalisrequiredby applicablelaw, andunlessotherwisepermittedpursuanttoexemptiverelief granted bytheSEC orno-action positiongranted bytheSEC orits staff,byavote ofthemajority of a Fund's outstandingvoting securities.
13. Limitation of Liability. It is expresslyagreed that the obligationsof theFunds hereundershall not bebinding upon anyofthe trustees, shareholders,officers,agentsoremployeesofFundspersonally,butonlybind theproperty of theFunds,asprovided in the Trust'sDeclarationof Trust.
14. Confidentiality.Subject to theduties of the Adviser,the Trust(and each Fund),and theSub- Adviser tocomplywithapplicablelaw,includinganydemand of anyregulatoryor taxingauthorityhavingjurisdiction,thePartiesheretoshall treat asconfidential all information pertainingtoaFund and the actionsof theSub-Adviser,the Adviser,the Trust,andaFund in respect thereof. Inaccordance withSection248.11 of Regulation S-P(17 CFR248.1-248.30),Sub-Adviser will not directly,or indirectlythrough an affiliate,disclose, except aspermitted or requirebylaw,anynon-publicpersonal information,asdefined in Reg. S-P,received from theTrustor the Adviser,regarding any shareholder,to anyperson that isnot affiliatedwith theTrust orwith Sub-Adviser,and,provided that,any such information disclosed toan affiliate ofSub-Advisershall beunder thesamelimitationson non-disclosure.
15. Notice. Anynotice, adviceorreport tobegiven pursuant tothis Agreementshall bedeemedsufficient if delivered or mailed byregistered,certifiedorovernight mail,postageprepaid addressed bytheParty givingnoticeto theother Party at thelastaddressfurnished bythe other Party:
(a) If to theAdviser:
Jeffrey A.Dunham, President
Dunham& AssociatesInvestmentCounsel,Inc.
P.O. Box910309
San Diego, CA92191
Phone:(858)964-0500
(b) | Ifto the Trust: |
Denise S. Iverson,Treasurer Dunham
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Funds
P.O. Box910309
San Diego,CA 92191
Phone:(858) 964-0500
(c) If totheSub-Adviser: Jan Parsons,Partner
PierCapital,LLC
263 Tresser Blvd.,10111Floor
Stamford,CT 06901-3236
Phone: (203)425-1425
16. GoverningLaw. This Agreementshallbegovernedby theinternal laws of the StateofCalifornia,without regardtoconflictoflawprinciples;provided,howeverthat nothinghereinshall beconstruedas beinginconsistentwith the1940Act.Wherethe effectofarequirementofthe1940 Act reflected inany provision ofthis Agreement isalteredby a rule, regulationor orderofthe SEC, whetherofspecialorgeneralapplication,such provisionshallbedeemedtoincorporatethe effectofsuch rule,regulationororder.
17. Entire Agreement. This Agreement embodiestheentire agreement andunderstanding between the Parties,and supersedes allprioragreements andunderstandings relating to thisAgreement's subjectmatter.This Agreementmay beexecutedinanynumberof counterparts, each of which shallbe deemed to bean original,butsuch counterparts shall,together,constituteonlyone instrument.
18. Severability.IfanyprovisionofthisAgreement shallbe heldormade invalid bya courtdecision,statute,rule orotherwise,the remainderofthisAgreement shallnot be affected thereby.
19. CertainDefinitions.Forthe purposesofthisAgreement and except as otherwiseprovided herein,"interestedperson," "affiliated person,""affiliates," "controlling persons"and "assignment" shallhave their respective meaningsas setforth in the 1940Act,subject,however,to such exemptions asmay begrantedby theSEC.
20. | Captions. Thecaptions hereinareincludedfor convenience ofreferenceonlyandshallbe ignoredin the construction orinterpretation hereof. |
IN WITNESS WHEREOF, theParties hereto haveexecuted this Agreement as of January1,2009.
ADVISER
DUNHAM& ASSOCIATES INVESTMENT COUNSEL, INC.
By:/s/Jeffrey A. Dunham
Name:Jeffrey A. Dunham
Title: President
Date: 1/1/09,
TRUST
DUNHAM FUNDS
By:/s/ Denise S. Iverson
Name: Denise S.Iverson
Title:Treasurer
Date: 1/1/09
SUB-ADVISER
PIER CAPITAL, LLC
By:/s/ Jan Parsons
Name: Jan Parsons
Title: Partner
Date: 1/1/09
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EXHIBIT A TO
ADVISORYAGREEMENTAMONG
DUNHAM& ASSOCIATESINVESTMENT COUNSEL,INC.;DUNHAM FUNDS;
AND
PIERCAPITAL,LLC
Effectiveas ofJanuary 1,2009
DUNHAM SMALL CAP GROWTH FUND Class C
Ticker: DCDGX
DUNHAM SMALL CAP GROWTH FUND Class N
Ticker: DNDGX
DUNHAM SMALL CAP GROWTH FUND Class A
Ticker:DADGX
FEESCHEDULEICOMPENSATION
TheSub-Adviser shallbe paid a FulcrumFee,consisting of a"BaseFee"and a"Performance Fee"component.Definitions,along withthespecific methodsofcalculation,are described below | |
Base Fee | 50 Basis Points (0.50%) annually |
(one basis point “bp”equals one hundredth of one percent) | |
Performance Fee | The performance fee ratewillvary by up to +/-50 bps (0.50%) and thePerformance Feeshallbeaddedtoor subtracted fromtheBaseFee toarrive atthe total Fulcrum Fee.Thecomparativeindex istheRussell 2000 GrowthIndex(the"Index") over the applicablemeasurement period.Fund performance will be based on ClassNshare performance(netofall expenses). |
The performancefee rate willincrease/decrease by1 bp(0.01%)for each 4 bps (0.04%) of outperformance/underperformance oftheIndex;i.e., the performance fee rate willincrease/decreaseby approximately25%of thedifferenceinperformance.There willbenoadjustment totheBase Fee if theFundperformswithin the"nullzone,"defined as+/-20bps(0.20%)relative totheIndex. | |
It ispossible that the Fund could pay theSub-Advisermore than the Base Fee eventhough theperformance of both theFundandtheIndexis negative.Thismayoccurwhenthedeclineinthe performanceoftheIndexis greaterthan the decline in theFund's performance. |
A-9 |
Calculation method for the first year of the Agreement:
During the first twelve monthsof the Agreement,the Fundwillaccrue daily both the Base Fee and the Performance Fee. The Base Fee will be calculated attheannual rate disclosedabovebasedonthe average daily net assetsofthe Fund.The performance feeratewill be calculated based on the comparative performanceofthe Fund to the Index,accordingtothe terms discussedabove,for the period beginning from theinceptiondateoftheAgreement through thedateof calculation.The performance feerate willbe applied to the average daily netassetsof the Fund during the same measurement periodtocalculatethe Performance Fee.During the firstyear,theSub-Adviser willbe paidoutmonthlyonlyto the extent that the Base Fee less the maximum performance fee rate is greaterthan0.00% (the"MinimumFee"). Attheend ofthe first year,theSub-Adviser willbe paid alumpsumthat reflects the totalaccruedFulcrum Fee(Base Fee plusorminus Performance Fee) less any Minimum Fees paidoutduring the firstyear. | |
Calculation method beginning with the thirteenth month of the Agreement: | |
Base Fee | The Base Feewillbecomputeddaily at theannualratedisclosed aboveappliedto the Fund'saveragedaily net assets forthe most recent month |
Performance Fee | The performancefeeratewillbe derived from thecomparativeperformanceofthe Fund relativetotheIndex,according to the terms discussed above,over a trailing 12- month period.The Performance Fee to be paidwillbecalculatedby applying the annualizedperformancefee ratecalculated asof the most recent month end to the Fund's average daily netassetsduring the trailing 12-month period.ThePerformanceFeewill be accrued daily |
Fulcrum Fee | Thetotal Fulcrum Fee(Base Feeplusor minus Performance Fee) will be paid monthly |
Byvirtue ofusingaveragedaily net assetsover a "rolling"12-month period for purposes ofcalculatingthe Performance Fee while usingaveragedaily net assetsforthe most recent month for purposesof calculatingthe Base Fee,theactualtotal Fulcrum Fee paid by the Fund to theSub-Advisermaybehigherorlowerthanthe maximum orminimumannual ratesdescribed aboveifthe averagedaily netassetsdonot remainconstant duringthe rolling12-month period.If the Fund issignificantly underperformingversustheIndex andtheFund'snetassetshavedeclinedsignificantly,themonthlytotalFulcrum Fee can be anegative number(although the performance feeratecanneverbe negative,the Performance Feecanbe negative).Insuchinstances,ifthenegative Fulcrum Fee is notearnedbackor offset thefollowing month,theSub-Adviser mustreimbursetheFund theamount ofthenegative Fulcrum Feewithin90days.Likewise, in thecase wherethe Fund hassignificantlyunderperformedversus theIndexbut netassetshave increasedsignificantly,the monthly total FulcrumFee canbe positive although the performancefeeratemaybe 0.00%. Again,this is due to the fact thatdifferentperiodsareused as abasis fordeterminingthe average netassetsused to calculate boththeBaseFeeandthePerformance Fee.Insuchinstances,the Fund willpaytheSub-Adviser themonthlyFulcrumFee. | |
TheFeeTablebelow illustrateshowthe performancefeerateis calculated |
A-10 |
Cumulative Twelve Month Return Versus Index | PerformanceFeeRate |
2.00% or more greaterthanindex | 0.50% |
1.90%greater than index | 0.48% |
1.80%greater than index | 0.45% |
1.70%greater than index | 0.43% |
1.60%greater than index | 0.40% |
1.50% greater than index | 0.38% |
1.40%greaterthanindex | 0.35% |
1.30% greater than index | 0.33% |
1.20%greater than index | 0.30% |
1.10%greater than index | 0.28% |
1.00%greater than index | 0.25% |
0.90%greater than index | 0.23% |
0.80%greater than index | 0.20% |
0.70%greater thanindex | 0.18% |
0.60% greater thanindex | 0.15% |
0.50%greater than index | 0.13% |
0.40%greater than index | 0.10% |
0.30%greater than index | 0.08% |
0.21%greater than index | 0.05% |
0.20% greater than index | 0.00% |
Even with Index | 0.00% |
0.20% less than index | 0.00% |
0.21%lessthan index | -0.05% |
0.30%lessthan index | -0.08% |
0.40%lessthan index | -0.10% |
0.50%less thanindex | -0.13% |
0.60%lessthanindex | -0.15% |
0.70%less thanindex | -0.18% |
0.80%less than index | -0.20% |
0.90%lessthan index | -0.23% |
1.00%less thanindex | -0.25% |
1.10%less thanindex | -0.28% |
1.20%less thanindex | -0.30% |
1.30%less thanindex | -0.33% |
1.40%lessthanindex | -0.35% |
1.50%lessthanindex | -0.38% |
1.60%less thanindex | -0.40% |
1.70%lessthanindex | -0.43% |
1.80%less than index | -0.45% |
1.90%lessthan index | -0.48% |
2.00% ormorelessthanindex | -0.50% |
A-11 |
EXHIBITB
PIERCAPITAL,LLC FORMADV
A-12 |
AMENDMENT TO THE SUB-ADVISORY AGREEMENT
This Amendment is made effective as of the 16th day of December 2014, (the “Effective Date”) to the Sub-Advisory Agreement by and among DUNHAM & ASSOCIATES INVESTMENT COUNSEL, INC., a California corporation (the “Adviser”), DUNHAM FUNDS, a Delaware statutory trust (the “Trust”) and PIER CAPITAL, LLC, a State of Connecticut Limited Liability Company (the “Sub-Adviser”) (each a “Party,” and together, the “Parties”) dated January 1, 2009 (the “Agreement”).
WHEREAS, the Trust desires to engage in transactions with sub-advisers affiliates and to explicitly state the sub-adviser’s obligations to make certain regulatory filings.
WHEREAS, the Parties wish to amend Section 2 of the Agreement to reflect this change;
NOW, THEREFORE, in consideration of mutual covenants recited below, the Parties agree and promise as follows:
1. | Section 2 of the Agreement shall be amended to add the following subsections: |
(k) Sub-Advisory Affiliates. The Sub-Adviser is, along with its affiliated persons, permitted to enter into transactions with the other funds of the Trust and affiliated persons of those other funds of the Trust (collectively, the “Other Funds”). In doing so, the Sub-Adviser is prohibited from consulting with the Adviser or the sub-advisers of these Other Funds concerning securities transactions of the Fund except for the purpose of complying with the conditions of Rule 12d3-1(a) and (b) under the 1940 Act.
(l) Regulatory Filings. The Sub-Adviser will be responsible for meeting its regulatory obligations, including the preparation and filing of such reports with respect to the assets of the Fund reflecting holdings over which the Sub-Adviser or its affiliates have investment discretion as may be required from time to time, including but not limited to Schedule 13G, Form 13F and Form SH.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the Effective Date by their representatives thereunto duly authorized.
ADVISER
DUNHAM & ASSOCIATES INVESTMENT COUNSEL, INC.
By:/s/ Jeffrey A. Dunham
Name: Jeffrey A. Dunham
Title: President
TRUST
DUNHAM FUNDS
By:/s/ Denise S. Iverson
Name: Denise S. Iverson
Title: Treasurer
SUB-ADVISER
PIER CAPITAL, LLC
By:/s/ Jan Parsons
Name: Jan Parsons
Title: CIO
A-13 |
DUNHAM SMALL CAP GROWTH FUND
a series of Dunham Funds
10251 Vista Sorrento Parkway, Suite 200
San Diego, CA 92121
(888) 3DUNHAM (338-6426)
IMPORTANT NOTICE OF INTERNET AVAILABILITY OF INFORMATION STATEMENT
This communication presents only an overview of theInformation Statement that is available to you on the internet relating to the Dunham Small Cap Growth Fund (the “Fund”), a series of Dunham Funds (the “Trust”). We encourage you to access and review all of the important information contained in the Information Statement.
The Information Statement describes a recent transaction, which may be construed as a change of control, relating to the Fund’s sub-adviser, Pier Capital, LLC (“Pier Capital”). Specifically, at a meeting held on December 19, 2017, (the “Meeting”), the Board of Trustees of the Trust, including all of the Trustees present at the Meeting who are not “interested persons” as that term is defined in the Investment Company Act of 1940, as amended, unanimously approved continuance of the Fund’s sub-advisory agreement with Pier. Also at the Meeting, the Board was informed by Pier Capital, which is 100% employee owned, of an ownership transaction that was scheduled to occur in 2018 (the “Transaction”). This is to inform you that the Transaction was completed on September 1, 2018. As a result of the Transaction, non-voting shares (B Shares) were converted to voting shares (A Shares) and the firm’s internal equity ownership broadened from one to eight employee/equity partners, none of whom is a controlling person who owns more than 25% of Pier Capital’s Class A Shares. The Transaction has not resulted in any changes to the terms and fees under the Fund’s sub-advisory agreement with Pier or in the investment strategies and portfolio management of the Fund.
The Trust has received an exemptive order (the “Order”) from the U.S. Securities and Exchange Commission that allows certain sub-adviser changes to be made without shareholder approval. The Order instead requires that an information statement be sent to shareholders of the Fund. In lieu of physical delivery of the Information Statement, the Fund will make the Information Statement available to you on the Trust’s website.
This Notice of Internet Availability of the Information Statement is being mailed on or about October 31, 2018 to shareholders of record of the Fund as of October 1, 2018. The Information Statement will be available on the Trust’s website at https://www.dunham.com/FA/FundInfo/SmallCapGrowth until December 17, 2018. A paper or e-mail copy of the Information Statement, as well as a copy of the Trust’s most recent annual report may be obtained, without charge, by contacting the Trust at (888) 3DUNHAM (338-6426), visiting the website at https://www.dunham.com/FA/FundInfo/SmallCapGrowth or emailing the Trust at askdunham@dunham.com.
.
If you want to receive a paper or e-mail copy of the Information Statement, you must request one. A copy of the Information Statement may be obtained upon request and without charge.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.