EXPENSE LIMITATION AGREEMENT
EXPENSE LIMITATION AGREEMENT,
effective as of December 21, 2010 by and between ADVISORSHARES INVESTMENTS, LLC
(the "Adviser") and STRATEGIC INCOME MANAGEMENT, LLC (the "Sub-Adviser") (the
"Agreement").
WITNESSETH
WHEREAS, the Adviser and the
Sub-Adviser have entered into an Investment Sub-Advisory Agreement dated
December 21, 2010 (the "Sub-Advisory Agreement");
WHEREAS, pursuant to the
Sub-Advisory Agreement, the Sub-Adviser has agreed to provide investment
advisory services to those series of AdvisorShares Trust (the "Trust"), set
forth in Schedule A attached hereto (each a "Fund," and collectively, the
"Funds"), for compensation based on the value of the average daily net assets of
each such Fund;
WHEREAS, the Trust and the
Adviser have determined that it is appropriate and in the best interests of each
Fund and its shareholders to maintain the expenses of each Fund at a level below
the level to which each such Fund would normally be subject in order to maintain
each Fund’s expense ratios at the Maximum Annual Operating Expense Limit (as
hereinafter defined) specified for such Fund in Schedule A hereto;
WHEREAS, the Adviser and the
Sub-Adviser have determined that it is appropriate for the Sub-Adviser to
maintain each Fund’s expense ratios at the Maximum Annual Operating Expense
Limit;
NOW THEREFORE, the parties
hereto agree as follows:
1. Expense
Limitation.
1.1. Applicable
Expense Limit. To
the extent that the aggregate expenses of every character incurred by a Fund in
any fiscal year, including but not limited to investment advisory fees of the
Adviser (but excluding interest, taxes, brokerage commissions, acquired fund
fees and expenses, other expenditures which are capitalized in accordance with
generally accepted accounting principles, other extraordinary expenses
(including litigation) not incurred in the ordinary course of such Fund’s
business and amounts payable pursuant to any plan adopted in accordance with
Rule 12b-1 under the 0000 Xxx) and expenses for which payment has been made
through the use of all or a portion of brokerage commissions (or markups or
markdowns) generated by that Fund ("Fund Operating Expenses"), exceed the
Maximum Annual Operating Expense Limit, as defined in Section 1.2 below, such
excess amount (the "Excess Amount") shall be the liability of the
Sub-Adviser.
1.2. Maximum
Annual Operating Expense Limit. The Maximum Annual Operating
Expense Limit with respect to each Fund shall be the amount specified in
Schedule A based on a percentage of the average daily net assets of each Fund.
That Maximum Annual Operating Expense Limit for each Fund contemplates that
certain expenses for each Fund may be paid through the use of all or a portion
of brokerage commissions (or markups or markdowns) generated by that
Fund.
1
1.3. Method of
Computation. To determine the
Sub-Adviser’s liability with respect to the Excess Amount, each month the Fund
Operating Expenses for each Fund shall be annualized as of the last day of the
month. If the annualized Fund Operating Expenses for any month of a Fund exceed
the Maximum Annual Operating Expense Limit of such Fund, the Sub-Adviser shall
first waive or reduce its investment sub-advisory fee for such month by an
amount sufficient to reduce the annualized Fund Operating Expenses to an amount
no higher than the Maximum Annual Operating Expense Limit. If the
amount of the waived or reduced investment sub-advisory fee for any such month
is insufficient to pay the Excess Amount, the Sub-Adviser may also remit to the
appropriate Fund or Funds an amount that, together with the waived or reduced
investment sub-advisory fee, is sufficient to pay such Excess
Amount.
1.4. Year-End
Adjustment. If necessary, on
or before the last day of the first month of each fiscal year, an adjustment
payment shall be made by the appropriate party in order that the amount of the
investment sub-advisory fees waived or reduced and other payments remitted by
the Sub-Adviser with respect to the previous fiscal year shall equal the Excess
Amount.
2. Reimbursement of Fee Waivers
and Expense Reimbursements.
2.1. Reimbursement. If in any year in
which the Sub-Advisory Agreement is still in effect and the estimated aggregate
Fund Operating Expenses of such Fund for the fiscal year are less than the
Maximum Annual Operating Expense Limit for that year, the Sub-Adviser shall be
entitled to reimbursement by the Adviser, in whole or in part as provided below,
of the investment sub-advisory fees waived or reduced and other payments
remitted by the Sub-Adviser to the Adviser pursuant to Section 1 hereof. The
total amount of reimbursement to which the Sub-Adviser may be entitled
("Reimbursement Amount") shall equal, at any time, the sum of all investment
advisory fees previously waived or reduced by the Sub-Adviser and all other
payments remitted by the Sub-Adviser to the Adviser, pursuant to Section 1
hereof, during any of the previous three (3) fiscal years, less any
reimbursement previously paid by the Adviser to the Sub-Adviser, pursuant to
this Section 2, with respect to such waivers, reductions, and payments; but in
no event will the Reimbursement Amount exceed the reimbursement amount paid to
the Adviser under the Expense Limitation Agreement between the Adviser and the
relevant Fund. The Reimbursement Amount shall not include any additional charges
or fees whatsoever, including, e.g., interest accruable on the Reimbursement
Amount.
2.2. Method of
Computation. To
determine each Fund’s accrual, if any, to reimburse the Sub-Adviser for the
Reimbursement Amount, each month the Fund Operating Expenses of each Fund shall
be annualized as of the last day of the month. If the annualized Fund Operating
Expenses of a Fund for any month are less than the Maximum Annual Operating
Expense Limit of such Fund, the Adviser shall pay the Sub-Adviser a sufficient
amount to increase the annualized Fund Operating Expenses of that Fund to an
amount no greater than the Maximum Annual Operating Expense Limit of that Fund,
provided that such amount paid to the Sub-Adviser will in no event exceed the
total Reimbursement Amount.
2
2.3. Payment
and Year-End Adjustment. Amounts accrued
pursuant to this Agreement shall be payable to the Sub-Adviser as of the last
day of each month. If necessary, on or before the last day of the first month of
each fiscal year, an adjustment payment shall be made by the appropriate party
in order that the actual Fund Operating Expenses of a Fund for the prior fiscal
year (including any reimbursement payments hereunder with respect to such fiscal
year) do not exceed the Maximum Annual Operating Expense Limit.
3. Term and Termination of
Agreement.
This
Agreement shall continue in effect with respect to each Fund for one year
following the effective date of the respective Fund’s registration
statement and shall thereafter continue in effect from year to year for
successive one-year periods, provided that this Agreement may be terminated,
without payment of any penalty, with respect to any Fund:
(i) by
the Adviser, for any reason and at any time; and
(ii) by
the Sub-Adviser, for any reason, upon ninety (90) days’ prior written notice to
the Adviser at its principal place of business, such termination to be effective
as of the close of business on the last day of the then-current one-year
period.
4. Miscellaneous.
4.1. No
Minimum Advisory Fee. The Adviser
hereby agrees not to charge monthly minimum advisory fees to the
Funds.
4.2 Captions. The captions in this
Agreement are included for convenience of reference only and in no other way
define or delineate any of the provisions hereof or otherwise affect their
construction or effect.
4.3. Definitions. Any question of
interpretation of any term or provision of this Agreement, including but not
limited to the investment advisory fee, the computations of net asset values,
and the allocation of expenses, having a counterpart in or otherwise derived
from the terms and provisions of the Advisory Agreement or the 1940 Act, shall
have the same meaning as and be resolved by reference to such Advisory Agreement
or the 0000 Xxx.
4.4. Enforceability. Any
term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to such jurisdiction be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining terms or provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any other
jurisdiction.
3
IN WITNESS WHEREOF, the
parties have caused this Agreement to be signed by their respective officers
thereunto duly authorized, as of the day and year first above
written.
|
ADVISORSHARES
INVESTMENTS, LLC
|
||
|
/s/ Xxxx Xxxxxx
|
||
|
Name:
Xxxx Xxxxxx
|
||
|
Title:
CEO
|
||
|
STRATEGIC
INCOME MANAGEMENT, LLC
|
||
|
/s/ Xxxxxxx X. Xxxxxx, CEO
|
||
|
Name:
Xxxxxxx X. Xxxxxx
|
||
|
Title:
Authorized Signatory
|
||
4
SCHEDULE
A
MAXIMUM
ANNUAL OPERATING EXPENSE LIMITS
This
Agreement relates to the following Funds of the Trust:
|
Maximum
Annual
|
||||
|
Name
of Fund
|
Operating
Expense Limit
|
|||
|
SiM
Dynamic Allocation Diversified Income ETF
|
1.40 | % | ||
|
SiM
Dynamic Allocation Growth Income ETF
|
1.40 | % | ||
5
