EXHIBIT A
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FORM OF
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the __ day of October
2001, by and between AZZAD FUNDS, a Massachusetts business trust (the "Company")
on behalf of its series the AZZAD INCOME FUND (the "Fund") and AZZAD ASSET
MANAGEMENT, INC., a Delaware corporation (the "Adviser" or "Azzad").
W I T N E S S E T H:
WHEREAS, the Company is an open-end management investment company,
registered as such under the Investment Company Act of 1940 (the "Investment
Company Act");
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940 and is engaged in the business of providing
investment advice to investment companies; and
WHEREAS, the Company, on behalf of the Fund, desires to retain the Adviser
to render advice and services to the Fund pursuant to the terms and provisions
of this Agreement, and the Adviser desires to furnish said advice and services.
NOW, THEREFORE, in consideration of the covenants and the mutual promises
hereinafter set forth, the parties to this Agreement, intending to be legally
bound hereby, mutually agree as follows:
1. APPOINTMENT OF ADVISER. The Company hereby employs the Adviser and the
Adviser hereby accepts such employment, to render investment advice and
related services with respect to the assets of the Fund for the period and
on the terms set forth in this Agreement, subject to the supervision and
direction of the Board of Trustees.
2. DUTIES OF ADVISER.
(a) GENERAL DUTIES. The Adviser shall act as investment adviser to the
Fund and shall supervise investments of the Fund in accordance with
the investment objective, policies and restrictions of the Fund as set
forth in the Fund's governing documents, including, without
limitation, the Company's Declaration of Trust, as amended, and
Bylaws, as amended, the prospectus and statement of additional
information; any limitations or restrictions imposed by Xxxxx`ah law
as interpreted by the Xxxxx Xxxxx`ah Board, and such other
limitations, policies and procedures as the
Trustees may impose from time to time in writing to the Adviser. In
providing such services, the Adviser shall at all times adhere to the
provisions and restrictions contained in the federal securities laws,
applicable state securities laws, the Internal Revenue Code, the
Uniform Commercial Code and other applicable law.
Without limiting the generality of the foregoing, the Adviser shall: (i)
furnish the Fund with advice and recommendations with respect to the investment
of the Fund's assets and the purchase and sale of portfolio securities for the
Fund, including the taking of such steps as may be necessary to implement such
advice and recommendations (i.e., placing the orders); (ii) manage and oversee
the investments of the Fund, subject to the ultimate supervision and direction
of the Board of Trustees and the Xxxxx Xxxxx`ah Board; (iii) vote proxies for
the Fund, file ownership reports under Section 13 of the Securities Exchange Act
of 1934 for the Fund, and take other actions on behalf of the Fund; (iv)
maintain the books and records required to be maintained by the Fund except to
the extent arrangements have been made for such books and records to be
maintained by the Administrator, Transfer Agent or another agent of the Fund;
(v) furnish reports, statements and other data on securities, economic
conditions and other matters related to the investment of the Fund's assets
which the Board of Trustees or the officers of the Fund may reasonably request;
and (vi) render to the Board of Trustees such periodic and special reports with
respect to the Fund's investment activities as the Board may reasonably request,
including at least one in-person appearance annually before the Board of
Trustees.
(b) BROKERAGE. The Adviser shall be responsible for decisions to buy and
sell securities for the Fund, for broker-dealer selection, and for
negotiation of brokerage commission rates, provided that the Adviser
shall not direct orders to an affiliated person of the Adviser without
general prior authorization to use such affiliated broker or dealer
from the Board of Trustees. The Adviser's primary consideration in
effecting a securities transaction will be execution at the most
favorable price. In selecting a broker-dealer to execute each
particular transaction, the Adviser may take the following into
consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of
and difficulty in executing the order; and the value of the expected
contribution of the broker-dealer to the investment performance of the
Fund on a continuing basis. The price to the Fund in any transaction
may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the
portfolio execution services offered.
Subject to such policies as the Board of Trustees may determine, the
Adviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer that provides (directly or indirectly)
brokerage or research services to the Adviser an amount of commission for
effecting a portfolio transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction, if the
Adviser determines in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular
transaction or the Adviser's overall responsibilities with respect to the Fund
or accounts for which the Adviser has investment discretion. The Adviser is
further authorized to allocate the orders placed by it on behalf of the Fund to
such brokers or dealers who also provide research or statistical material, or
other services, to the Fund, the Adviser, or any affiliate of either. Such
allocation shall be in such amounts and proportions as the Adviser shall
determine, and the Adviser shall report on such allocations regularly to the
Fund, indicating the broker-dealers to whom such allocations have been made, the
amount of such allocation and the basis therefor. The Adviser is also authorized
to consider sales of shares as a factor in the selection of brokers or dealers
to execute portfolio transactions, subject to the requirements of best price and
execution, i.e., that such brokers or dealers are able to execute the order
promptly and at the best obtainable securities price.
On occasions when the Adviser deems the purchase or sale of a security to
be in the best interest of the Fund as well as of other clients (to the extent
that the Adviser may, in the future, have other clients), the Adviser, to the
extent permitted by applicable laws and regulations, may aggregate the
securities to be so purchased or sold in order to obtain the most favorable
price and execution or lower brokerage commissions and the most efficient
execution. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Adviser in
the manner it considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to such other clients.
3. REPRESENTATIONS OF THE ADVISER.
(a) The Adviser shall use its best judgment and efforts in rendering the
advice and services to the Fund as contemplated by this Agreement.
(b) The Adviser shall maintain all licenses and registrations necessary to
perform its duties hereunder in good order.
(c) The Adviser shall conduct its operations at all times in conformance
with the Investment Advisers Act of 1940, the Investment Company Act
of 1940, and any other applicable state and/or self-regulatory
organization regulations.
4. INDEPENDENT CONTRACTOR. The Adviser shall, for all purposes herein, be
deemed to be an independent contractor, and shall, unless otherwise
expressly provided and authorized to do so, have no authority to act for or
represent the Fund in any way, or in any way be deemed an agent for the
Fund. It is expressly understood and agreed that the services to be
rendered by the Adviser to the Fund under the provisions of this Agreement
are not to be deemed exclusive, and the Adviser shall be free to render
similar or different services to others so long as its ability to render
the services provided for in this Agreement shall not be impaired thereby.
5. ADVISER'S PERSONNEL. The Adviser shall, at its own expense, maintain such
staff and employ or retain such personnel and consult with such other
persons as it shall from time to time determine to be necessary to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Adviser shall
be deemed to include persons employed or retained by the Adviser to furnish
statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to
technical and scientific developments, and such other information, advice
and assistance as the Adviser or the Board of Trustees may desire and
reasonably request.
6. EXPENSES. If the Adviser has agreed to limit the operating expenses of the
Fund, the Adviser shall also be responsible on a monthly basis for any
operating expenses that exceed the agreed upon expense limitation.
(a) With respect to the operation of the Fund, the Adviser shall be
responsible for (i) providing the personnel, office space and
equipment reasonably necessary for the investment management of the
Fund, and (ii) the costs of any special Board of Trustees meetings or
shareholder meetings deemed by the Board of Trustees at the time any
meeting is called to be convened for the primary benefit of the
Adviser.
(b) The Fund is responsible for and has assumed the obligation for payment
of all of its expenses, other than as stated in Subparagraph 6(a)
above, including but not limited to: investment advisory and
administrative fees and expenses payable to the Adviser or
Administrator under the appropriate agreements entered into with the
Adviser or the Administrator, as the case may be; fees and expenses
incurred in connection with the issuance, registration and transfer of
its shares; brokerage and commission expenses; all expenses of
transfer, receipt, safekeeping, servicing and accounting for the cash,
securities and other property of the Fund including all fees and
expenses of its custodian, shareholder services agent and accounting
services agent; interest charges on any borrowings; costs and expenses
of pricing and calculating its daily net asset value and of
maintaining its books of account required under the Investment Company
Act; taxes, if any; a pro rata portion of expenditures in connection
with meetings of the Company's shareholders and Board of Trustees that
are properly payable by the Fund; salaries and expenses of officers
and fees and expenses of members of the Board of Trustees or members
of any advisory board or committee who are not members of, affiliated
with or interested persons of the Adviser or the Administrator;
insurance premiums on property or personnel of the Fund which inure to
its benefit, including liability and fidelity bond insurance; the cost
of preparing and printing reports, proxy statements, prospectuses and
statements of additional information of the Fund or other
communications for distribution to existing shareholders; legal,
auditing and accounting fees; trade association dues; fees and
expenses (including legal fees) of registering and maintaining
registration of its shares for sale under federal and applicable state
and foreign securities laws; all expenses of maintaining and servicing
shareholder accounts, including all charges for transfer, shareholder
recordkeeping, dividend disbursing, redemption, and other agents for
the benefit of the Fund; and all other charges and costs of its
operation plus any extraordinary and non-recurring expenses, except as
herein otherwise prescribed.
(c) The Adviser may voluntarily absorb certain Fund expenses or waive the
Adviser's own advisory fee.
(d) To the extent the Adviser incurs any costs by assuming expenses which
are an obligation of the Fund as set forth herein, the Fund shall
promptly reimburse the Adviser for such costs and expenses, except to
the extent the Adviser has otherwise agreed to bear such expenses. To
the extent the services for which the Fund is obligated to pay are
performed by the Adviser, the Adviser shall be entitled to recover
from the Fund to the extent of the Adviser's actual costs for
providing such services. In determining the Adviser's actual costs,
the Adviser may take into account an allocated portion of the salaries
and overhead of personnel performing such services.
7. INVESTMENT ADVISORY FEE.
(a) The Fund shall pay to the Adviser, and the Adviser agrees to accept,
as full compensation for all investment and advisory services
furnished or provided to the Fund pursuant to this Agreement, an
annual investment advisory fee at the rate set forth in Schedule A to
this Agreement.
(b) The investment advisory fee shall be accrued daily by the Fund and
paid to the Adviser on the first business day of the succeeding month.
(c) The initial fee under this Agreement shall be payable on the first
business day of the first month following the effective date of this
Agreement and shall be prorated as set forth below. If this Agreement
is terminated prior to the end of any month, the fee to the Adviser
shall be prorated for the portion of any month in which this Agreement
is in effect which is not a complete month according to the proportion
which the number of calendar days in the month during which the
Agreement is in effect bears to the number of calendar days in the
month, and shall be payable within ten (10) days after the date of
termination.
(d) The fee payable to the Adviser under this Agreement will be reduced as
required under any expense limitation applicable to the Fund.
(e) The Adviser voluntarily may reduce any portion of the compensation or
reimbursement of expenses due to it pursuant to this Agreement and may
agree to make payments to limit the expenses which are the
responsibility of the Fund under this Agreement. Any such reduction or
payment shall be applicable only to such specific reduction or payment
and shall not constitute an agreement to reduce any future
compensation or reimbursement due to the Adviser hereunder or to
continue future payments. Any such reduction will be agreed to prior
to accrual of the related expense or fee and will be estimated daily
and reconciled and paid on a monthly basis.
(f) Any fee withheld or voluntarily reduced and any Fund expense absorbed
by the Adviser voluntarily or pursuant to an agreed upon expense cap
shall be reimbursed by the Fund to the Adviser, if so requested by the
Adviser, no later THAN
THE THIRD FISCAL YEAR succeeding the fiscal year of the withholding,
reduction or absorption if the aggregate amount actually paid by the
Fund toward the operating expenses for such fiscal year (taking into
account the reimbursement) does not exceed the applicable limitation
on Fund expenses. Such reimbursement may be paid prior to the Fund's
payment of current expenses if so requested by the Adviser even if
such practice may require the Adviser to waive, reduce or absorb
current Fund expenses.
(g) The Adviser may agree not to require payment of any portion of the
compensation or reimbursement of expenses otherwise due to it pursuant
to this Agreement. Any such agreement shall be applicable only with
respect to the specific items covered thereby and shall not constitute
an agreement not to require payment of any future compensation or
reimbursement due to the Adviser hereunder.
8. NO SHORTING; NO BORROWING. The Adviser agrees that neither it nor any of
its officers or employees shall take any short position in the shares of
the Fund. This prohibition shall not prevent the purchase of such shares by
any of the officers or employees of the Adviser or any trust, pension,
profit-sharing or other benefit plan for such persons or affiliates
thereof, at a price not less than the net asset value thereof at the time
of purchase, as allowed pursuant to rules promulgated under the Investment
Company Act. The Adviser agrees that neither it nor any of its officers or
employees shall borrow from the Fund or pledge or use the Fund's assets in
connection with any borrowing not directly for the Fund's benefit. For this
purpose, failure to pay any amount due and payable to the Fund for a period
of more than thirty (30) days shall constitute a borrowing.
9. CONFLICTS WITH THE FUND'S GOVERNING DOCUMENTS AND APPLICABLE LAWS. Nothing
herein contained shall be deemed to require the Fund to take any action
contrary to its Declaration of Trust, as amended, Bylaws, as amended, the
principles of Xxxxx`ah law as interpreted by the Xxxxx Xxxxx`ah Board, or
any applicable statute or regulation, or to relieve or deprive the Board of
Trustees of its responsibility for and control of the conduct of the
affairs of the Fund. In this connection, the Adviser acknowledges that the
Trustees retain ultimate plenary authority over the Fund and may take any
and all actions necessary and reasonable to protect the interests of
shareholders.
10. REPORTS AND ACCESS. Upon reasonable notice, the Adviser agrees to supply
such information to the Administrator and to permit such compliance
inspections by the Administrator as shall be reasonably necessary to permit
the Administrator to satisfy its obligations and respond to the reasonable
requests of the Trustees. Any such information supplied by the Adviser, and
any such compliance inspections conducted by the Administrator, shall be
supplied or conducted, as the case may be, at a mutually agreed upon time.
11. SHAREHOLDER LIST. The Adviser shall have access to a current list of
shareholders of the Fund at any time to solicit proxies on behalf of its
Fund.
12. ADVISER'S LIABILITIES AND INDEMNIFICATION.
(a) The Adviser shall have responsibility for the accuracy of the
statements in the Fund's offering materials (including the prospectus,
the statement of additional information, advertising and sales
materials) relating to the Adviser's business, and shall have no
liability for information supplied by the Administrator or the Fund or
another third party for inclusion therein. The Adviser shall be given
reasonable time to review and comment upon any such offering
materials.
(b) The Adviser shall be liable to the Fund for any loss (including
brokerage charges) incurred by the Fund as a result of any investment
made by the Adviser that is not in accordance with the Fund's
objectives and policies as set forth in the Fund's offering documents
or in violation of any applicable securities laws.
(c) In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the obligations or duties hereunder on the part
of the Adviser, the Adviser shall not be subject to liability to the
Fund or to any shareholder of the Fund for any act or omission in the
course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any
security by the Fund.
(d) Each party to this Agreement shall indemnify and hold harmless the
other party and the shareholders, directors, trustees, officers and
employees of the other party (any such person, an "Indemnified Party")
against any loss, liability, claim, damage or expense (including the
reasonable cost of investigating and defending any alleged loss,
liability, claim, damage or expenses and reasonable counsel fees
incurred in connection therewith) arising out of the Indemnified
Party's performance or nonperformance of any duties under this
Agreement provided, however, that nothing herein shall be deemed to
protect any Indemnified Party against any liability to which such
Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith or negligence in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
under this Agreement.
(e) No provision of this Agreement shall be construed to protect any
Trustees of the Company or officer of the Fund, or officer or director
of the Adviser, from liability in violation of Sections 17(h) and (i)
of the Investment Company Act.
13. NON-EXCLUSIVITY; TRADING FOR ADVISER'S OWN ACCOUNT. The Adviser may act as
investment adviser for any other person, and shall not in any way be
limited or restricted from having, selling or trading any securities for
its or their own accounts or the accounts of others for whom it or they may
be acting, provided, however, that the Adviser expressly represents that it
will undertake no activities which will adversely affect the performance of
its obligations to the Fund under this Agreement; and provided further that
the Adviser will adhere to a code of ethics governing employee trading and
trading for proprietary accounts that conforms to the requirements of the
Investment Company Act and the Investment Advisers Act of 1940 and has been
approved by the Company's Board of Trustees.
14. TERM. This Agreement shall become effective on the effective date of the
Fund's prospectus filed with the SEC and shall remain in effect for a
period of two (2) years thereafter, unless sooner terminated as hereinafter
provided. This Agreement shall continue in effect thereafter for additional
periods not exceeding one (1) year so long as such continuation is approved
for the Fund at least annually by (i) the Company's Board of Trustees or by
the vote of a majority of the outstanding voting securities of the Fund and
(ii) the vote of a majority of the Trustees of the Company who are not
parties to this Agreement nor interested persons thereof, cast in person at
a meeting called for the purpose of voting on such approval. The terms
"majority of the outstanding voting securities" and "interested persons"
shall have the meanings as set forth in the Investment Company Act.
15. TERMINATION; NO ASSIGNMENT.
(a) This Agreement may be terminated by the Fund at any time without
payment of any penalty, by the Board of Trustees of the Company or by
vote of a majority of the outstanding voting securities of the Fund,
upon sixty (60) days' written notice to the Adviser, and by the
Adviser upon sixty (60) days' written notice to the Fund. In the event
of a termination, the Adviser shall cooperate in the orderly transfer
of the Fund's affairs and, at the request of the Board of Trustees,
transfer any and all books and records of the Fund maintained by the
Adviser on behalf of the Fund.
(b) This Agreement shall terminate automatically in the event of any
transfer or assignment thereof, as defined in the Investment Company
Act.
16. OWNERSHIP OF THE NAME OF THE FUND. The parties to this Agreement hereby
acknowledge that the prefix to the name of the Fund, "Azzad", is the
exclusive property of the Adviser and is not the property of the Fund. In
the event that this Agreement is terminated by either party to this
Agreement, the Fund, to the extent that it continues to exist, shall
discontinue the use of the name "Azzad" and change its name within thirty
(30) days of such termination.
17. MERGER INTO SERIES OF NEW INVESTMENT COMPANY. The Fund acknowledges that
the Adviser may in the future recommend that the Fund solicit a proxy of
shareholders to approve a merger of the Fund into a newly-created series of
an Azzad registered investment company. The Fund agrees to take reasonable
steps to obtain board approval of any such solicitation.
18. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute or rule, or shall be otherwise
rendered invalid, the remainder of this Agreement shall not be affected
thereby.
19. CAPTIONS. The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof
or otherwise affect their construction or effect.
20. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Virginia without giving
effect to the conflict of laws principles thereof; provided that nothing
herein shall be construed to preempt, or to be inconsistent with, any
federal law, regulation or rule, including the Investment Company Act and
the Investment Advisers Act of 1940 and any rules and regulations
promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all on the day and year first
above written.
AZZAD FUNDS AZZAD ASSET MANAGEMENT, INC.
on behalf of its series,
Azzad Income Fund
By: By:
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Xxx Xxxx Xxxxxx Xxxxx
President President
SCHEDULE A
ANNUAL FEE RATE
Azzad Income Fund: 1.00% of average daily net assets
